At a first glance, taking a look at the recent Asia Pacific GDP growth statistics you could be forgiven for thinking that there are storm clouds on the horizon. Across the board, since September last year all the major countries in AP have had their GDP forecasts revised downwards.
Looking at China, the market pundits are certainly flapping! The “engine of world growth,” announced just last week that they are lowering their growth target for 2012 – 7.5% versus the usual 8%! Also, the import numbers released certainly took commentators by surprise. China imports outstripped exports by a not unsubstantial US$31.5bn, the biggest trade deficit since 1998, not insignificant in an export led economy like China.
Should the alarm bells be ringing and should AP real estate investors be concerned?! Let’s ignore headline grabbing sound bites and cut to facts. The bottom line is AP aggregate GDP growth is actually set to increase over 2012. Regional growth in 2012 will improve on the back of increased growth rates in Japan and China. In China we expect to see fiscal and monetary policy stimulating the economy, whilst in Japan rebuilding activities post last years earthquake will help to improve the economic outlook.
For investors, the rest of 2012 is likely to bring good opportunities to acquire assets. The Japanese market in particular is certain to present interesting options. At the height of the GFC downturn, we initially expected to see a number of distressed Japanese assets getting pushed onto the market, but that just didn’t happen, banks were more lenient than expected and rolled over loan covenants to accommodate their borrowers. However, now that we’re seeing conditions improving, we do expect to see these banks starting to put more pressure on their borrowers to push these out to the market and these assets will present excellent opportunities for the cashed up international investors.
Asia Pacific is interesting for international investors because it offers a good balance of opportunities. For Core investors, transparent mature markets such as Australia and Singapore are available to tap into, whilst Hong Kong still remains attractive, all be it that year to date it’s been a very locally driven investment market. On the flipside, more interesting opportunistic high yielding plays are there for the taking in the fast growing but opaque markets of Indonesia and Vietnam.
To sum up, are there storm clouds on the horizon? Well, if you’re sitting in Asia Pacific, I suggest you pull up a deck chair and enjoy the weather. For those investors in a strong position, the opportunities and growth in 2012 will very much be there for the taking. If international real estate investors are to deliver the types of returns their unit holders are looking for, with snail pace economic growth in EMEA and a sluggish America, investors will need to look to Asia Pacific real estate to deliver their numbers and now’s a pretty good time to be doing so.
