At the Real Estate Investment World conference in Singapore this week we had an interesting mix of views on how investors should be managing the risks from the global macro environment, and what that means for investing in real estate in Asia Pacific.

On the first morning we heard from Dr Marc Faber from Hong Kong, famous for his perennially pessimistic outlook that in the end we are all doomed. His take was that we should buy a 30 year US treasury certificate and have it framed, and buy a gold coin every year. Then one would be able to pass the gold coins to ones’ grandchildren and the treasury certificate as a historical curiosity as the US Government will have devalued their currency through inflation by printing money.

I hasten to add that I am in reporting mode here, before my US colleagues suggest I am talking down the US market. But there are two more serious points related to Dr Faber’s view. First, the current low interest rate environment and the debt over-hang in many countries are likely to cause instability in the currency markets. Second, the combination of low interest rates and high inflation will push investors in to real assets such as gold or real estate.

What matters to investors diversifying into real estate outside their home markets, is the combination of currencies and total returns from property. For example what return does a Japanese yen investor get on a one year total return basis when placing his or her money in the Sydney office market? For is a UK pound investor who buys into the Singapore market- what is his return once the round trip is made from pounds into Singapore dollar real estate and then back into pounds? We have crunched the numbers for total returns for office markets in ten cities in Asia Pacific in five currencies, US dollars, Yen, Euro, Pound Sterling and for fun the Remenbi and compared them against the returns a local currency investor would have got. The results make interesting reading, and the results can be seen here in our new Investor website.

Bottom line is the rising returns from Asia Pacific real estate, and appreciating Asia Pacific currencies, mean excellent returns for international investors into hard real estate assets in this part of the world.

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