Playing safe: 77% of Asian investors won’t risk buying properties

In Asia, 65 per cent of the investors remained keen to expand their portfolios as part of their investment strategies in the next six months.

Mr Piers Brunner, Chief Executive Officer of Colliers International Asia, comments, “Office, residential and industrial/logistics properties are popular acquisition targets by investors in Asia. In particular, industrial/logistics assets in Singapore are being targeted by both institutional investors and property companies. Other property types that are being favoured by investors in Asia include office assets in Beijing and Shanghai, and residential properties in India.”

Nonetheless, despite their willingness to buy, only 23 per cent of the investors in Asia are willing to take on more risks to achieve superior returns. The other 77 per cent of the respondents indicated their preference to stay put on their risk curve.

Mr Dennis Yeo, Managing Director of Colliers International Singapore and Investment Services | Asia, says, “35 per cent of the respondents in Asia cited the global economic uncertainty as their key concern, while 31 per cent of the respondents highlighted a lack of supply of suitable ‘For Sale’ properties that could commensurate with the required target return.”

Mr Yeo adds, “It is noteworthy that more than 75 per cent of the investors in Asia indicated that they typically aim for a 15-per-cent internal rate of returns (IRR) or higher for investments. This is an indication that investors in Asia are still cautious and are looking to invest only in properties which are able to generate returns that are high enough to offset any possible negativity.”

The tightening of credit and an increase in cost of debt for investors in Asia also partly explains the lower level of risk that investors are willing to take.

69 per cent of the investors in Asia felt a tightening of credit compared to six months ago and an even higher 77 per cent experienced an increase in the cost of debt during the period. 54 per cent of the respondents also indicated that the maximum loan-to-value ratio has decreased over the past six months.