This article is from the Australian Property Journal archive
THE global recovery in real estate markets is ready to take off. According to ING, it will be led by the United Kingdom and Asia with Australia following closely behind.
ING Real Estate Investment Management, which has over €64 billion euros (approximately $A102 billion) of assets under management, has predicted the markets have bottomed.
The ING REIM Global Vision 2010 flagship study of 45 property markets, said large investment capital flowing into commercial real estate worldwide, attracted by depressed pricing, are helping to stabilise major markets.
ING REIM’s global head of research Tim Bellman identified the UK and in key markets in Asia, excluding Japan, poised to take off.
He also said parts of Continental Europe and Australia appear to be close behind.
However, Bellman believes the United States market is weighed down by the volume of its real estate debt and is still stuck on the launch pad for the time being.
The US real estate capital market is expected to stay weak a little longer than other major markets. Pending the US recovery ING REIM believes that some investors may find the strong income return in the US attractive in the year ahead.
Bellman cautioned that the rebound in investment interest in real estate is to some extent being fuelled by liquidity, due to a scarcity of alternative high yielding investment opportunities.
“We expect that weak and fragile economic growth worldwide over the next few years is likely to lead to a generally ‘jobless recovery’ with commercial real estate demand correspondingly remaining subdued for an extended period.
“If banks also decide not to refinance real estate debt as it falls due, or they choose to tackle their mounting volumes of non-performing loans backed by property collateral, then there is the prospect of distressed assets coming onto the market in increasing numbers and choking off the emerging recovery,” he warned.
But if the banks remain loyal to investors, ING REIM expects the industrial and retail property sectors to deliver the strongest returns with less risk over the next year or two, but after that the more cyclical office sector should perform better as employment levels start to recover.
“We believe forward looking investors should seek a balance between a focus on real estate capital markets, with the prudent use of generally low levels of debt, and a focus on property market fundamentals,” he concluded.
Propertyreview.com.au
