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Wednesday, November 14, 2007

Broker: Asia safe haven for property investors

Tokyo By Night: Japan remained the dominant market in Asia for international investors in the first half of the year, says Jones Lang LaSalle

HONG KONG: Asia provides a "safe haven" for property investors as returns decline on US and European assets because of subprime mortgage losses, said Jones Lang LaSalle Inc, the world's second-largest commercial real estate broker.

"The region could be a beneficiary of the fallout as investors reallocate funds from the US and Europe toward Asia Pacific in search of higher growth opportunities on a risk- adjusted basis," Jane Murray, Asia Pacific head of research at Jones Lang LaSalle, said yesterday in an e-mailed report.

The world's biggest banks and securities firms wrote down US$45 billion (US$1 = RM3.35) of assets this year and cut 10,000 jobs because of the collapse of the market for mortgages made to borrowers with poor credit.

Commercial real estate transactions fell in the UK and the US after defaults on subprime pushed up borrowing costs, creating turmoil in financial markets.

Global direct real estate investment in Asia gained 14 per cent to US$54 billion in the first half of the year, compared with the year-earlier period, LaSalle said in the report. Asian deals are about a third of the volumes in the Americas or Europe.

"Although regional investment volumes are still a comparatively low proportion of global direct property investment, interest levels are very high and we foresee the continuation of rapid growth in volumes," said Murray.

Japan remained the dominant market in Asia for international investors in the first half, accounting for more than half of investment in the region, Jones Lang LaSalle said.

Capital values gained 8.7 per cent in Japan during the quarter to 3.96 million yen (100 yen = RM3.05) per square metre (sq m), Jones Lang LaSalle said.

Goldman Sachs Group Inc, the world's largest securities firm, bought the building that houses Tiffany & Co's flagship store in Tokyo in August for 37 billion yen, or about 54.45 million yen per sq m, the highest price paid since the burst of the bubble economy in the early 1990s, according to Jones Lang LaSalle.

"Limited supply, coupled with robust demand, is expected to sustain the rising tend of rentals. Investment yield is anticipated to increase," said the report.

By Bloomberg

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