REAL estate investment volumes in Asia-Pacific in 2016 are set to outperform 2015 as the search for long-term yield overshadows short-term macro-economics and political threats.
In its Global Investor Outlook for 2016, Colliers International Group Inc, which surveyed over 600 investors across the risk spectrum in the Americas, EMEA and Asia-Pacific regions, notes that investor sentiment towards real estate remains positive globally.
"In spite of this increasingly challenging environment, a majority of investors think direct real estate investment will continue to grow in 2016,'' the report says.
The global investment community is particularly bullish about the Americas and specifically the US, with 54 per cent anticipating an increase in volumes. This figure drops only marginally for EMEA (48 per cent). On the other hand, a majority of investors think volumes will decline in Asia-Pacific (40 per cent), although nearly 50 per cent of investors from Asia-Pacific think volumes can still go up in their region.
More than half of the respondents with multi-asset portfolios said that they would increase their real estate allocations in the next 12 months into 2016. The US will be a preferred destination for global capital.
"2016 will see a greater emphasis on secure income and asset management to drive performance. For some investors 'overcrowded' core markets are being seen for longer-term investments rather than short-term trading,'' according to the report.
Global gateway cities like London, Paris, New York, San Francisco, Tokyo and Sydney remain the primary target for global cross-border investors over the next 12 months. These markets have the advantage of offering large lot sizes and volume of stock that appeal to global mandates.
Increasingly, investors are looking to partner with local expertise to provide greater confidence in overseas diversification.
While geopolitical events and economic volatility caused by further interest rate hikes in the US, or Chinese economic uncertainty may have a short-term impact on risk appetites, long-term strategies remain driven by market fundamentals. Hence, prices for matching assets will rise further, especially in safe haven markets.
In 2016, more investors will use debt to finance their acquisitions, despite increased interest rates in some territories. This suggests that the equity phase of the cycle is giving way to the debt phase.