Property investors eye China, Australia

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CHINA and Australia are seen as good bets in the Asia-Pacific for real
estate investments, according to two recent reports.

A survey of 73
investors, fund managers and fund of funds managers showed that they rank
China, Australia and Japan as the three most appealing locations.

Singapore, on the other hand, was ranked last among seven places in terms of
preferred location - after China, Australia, Japan, South Korea, Hong Kong and
India. The survey was conducted by the Asian Real Estate Association (AREA)
together with its partners.

Investors were especially bullish on the
residential and retail sectors in China, as well as the Australian office
market.

In the same vein, property firm DTZ said in a report that it
expects continued weakness in property markets across the region through 2009
and into 2010, but a divergent profile of recovery - with Australia and China
ahead of other key markets.

While total returns are forecast to be
negative in 2009 across the region, China and Australia will be back in
positive territory in 2010, ahead of Japan, Hong Kong and Singapore, DTZ's June
24 report predicted.

'2009 will continue to be a difficult year for
investor and occupier markets,' said David Green-Morgan, head of Asia-Pacific
research at DTZ. 'We see fair-value opportunities emerging in Australia and
China towards the end of 2009 and 2010 as the two economies embark on a period
of recovery.'

In 2008, the Asia-Pacific felt the full effects of the
global downturn - and property markets were not spared.

'The value of
the invested real estate stock in the Asia-Pacific declined in 2008, for the
first time since 2001,' DTZ said. The fall in value amounted to 8 per cent in
local currency terms, but a more moderate one per cent in US dollar
terms.

Transaction volumes almost halved in 2008 from 2007.

AREA's survey, conducted in April this year, also showed a downturn in
sentiment over the past 12 months. In the 2008 survey, all respondents -
institutional investors, fund managers and fund of funds managers - indicated
that they wanted to increase their activity in Asian non-listed real
estate.

Since then, there has been a big drop in the number of investors
who intend to allocate funds to Asian non-listed real estate in the short term. The percentage has fallen from 88 per cent of respondents in 2008 to just 24
per cent in the latest survey.

However, the respondents are more upbeat
about mid-term prospects for Asian real estate. Twice as many intend to
increase allocations to non-listed real estate over the medium term - three to
five years - versus the short term. This is consistent with most investors'
expectations of a market recovery in 2010.

DTZ reckons that things are
beginning to look up for the key property markets in the Asia-Pacific.
Opportunistic deals are continuing to occur across the region and a broad
'hunting season' should emerge over the next 12-18 months. Looking at specific
markets, Sydney is expected to reach 'fair value' in the second half of 2009,
followed by Shanghai in early 2010.

However, some concerns remain.
'While we will start to see value returning to markets in the Asia-Pacific,
funding remains a concern, and may become a bottleneck for the recovery of
activity in the commercial property markets both in Asia-Pacific and
worldwide,' said DTZ's Mr Green-Morgan.

Investors should not lose
sight of the fact that economic growth across the region is expected to be
lower in 2009 and still below trend growth in 2010, DTZ warned. 'The
implications for property markets, through below-trend occupational demand and,
in some cases, the required clearing of excess supply, will translate into
continued weakness in the near-term,' it said.

Likewise, in the AREA
survey, respondents said that obstacles remain when it comes to investing in
Asian non-listed real estate funds. Market conditions were identified as the
top challenge faced. This was followed by 'transparency and market information
on non-listed vehicles' and 'availability of suitable products'.

DTZ
also said that it may be too soon to call a bottom as research shows that the
historic series is volatile. 'We need to see a few more quarters of data
before we can call the bottom of the market,' Mr Green-Morgan said.

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