Revival starts in Asia's investment market

       The Asian property investment market enjoyed a stronger second quarter following a subdued start to the year, with direct real estate investment volume rising 41% from the first quarter, according to the international property consultants CB Richard Ellis (CBRE).
       The improved turnover was attributable to some extent to debt-funded owners compromising at current price levels and liquidating assets to service near-term obligations.
       However, transaction volume remained thin in the first half compared to the same period in 2008, falling 58% yearon-year to US$12.4 billion.
       Investor sentiment in the region generally turned more positive as the first half progressed. Hong Kong (up 302%),Singapore (up 297%) and Taiwan (up 151%) experienced the largest quarterly rebound in transaction volumes in the second quarter.
       Land acquisitions also rose in China as large local developers scrambled to snap up sites for future developments in anticipation of the imminent appreciation of land prices.
       Direct real-estate investment in the region was concentrated in a few countries, dominated by Japan which accounted for 44% of total turnover,China (18%) and Hong Kong (15%).
       Despite the significant contraction of total investment turnover in the first half of 2009, India and Taiwan ended the six-month period with positive yearon-year growth, surging by 339% and 12% respectively.
       The change in investor sentiment in Taiwan primarily resulted from the opening of the domestic market to mainland Chinese investment.
       In India, the formation of a stable government coupled with the utilisation of Qualified Institutional Placement (QIP)by real-estate companies to raise new funds provided a boost to the domestic property-investment market.
       The largest transaction was AIG's sale of its Tokyo headquarters, the AIG Otemachi Building, to Nippon Life for US$1.2 billion. Eight of the 10 largest deals in Asia during the first half involved domestic buyers.
       Overall, the amount of inter-regional cross-border investment accounted for only 8% of total volume in the first half,against 30% a year earlier, as global institutional investors and real estate funds largely remained on the sidelines.
       The largest cross-border transaction was completed in Tokyo with the sale of KDX Toyosu Gran Square by Kenedix to Carlyle Group and South Korea's National Pension Services for $363 million.
       Prime office properties continued to attract the strongest interest, accounting for 55% of total turnover for the six-month period, followed by the retail sector at 16%. The sale of the Sogo Shinsaibashi store in Osaka for $384 million was the largest retail transaction in the period.
       CBRE noted some price corrections in the second quarter as the strong rebound in prices in a number of Asian markets began to subside slightly. The CBRE Asian Office Yield Index - which reflects changes in prime office yields - edged down during the second quarter by 51 basis points to 4.59%, after rising for three consecutive quarters.
       The four cities with the largest yield declines were Hong Kong, Singapore,Bangkok and Taipei. The spreads between prime office yields and 10-year government bond yields narrowed significantly in these markets, which to a certain extent represents how the risk premiums and volatility associated with such investment properties alleviated.
       CBRE said that lenders remained cautious and demanded lower loanto-value (LTV) ratios for property financing and refinancing, in light of what they saw as a lack of evidence of property values amid the widespread correction in prices.
       Banks remained especially reluctant to provide finance for large transactions.
       However, as deleveraging by institutional investors gathers pace, particularly for those that have experienced some price corrections, CBRE expects more transactions over the second half of the year.