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HONG KONG, Oct 18 (Reuters): Institutional investors want to buy more commercial buildings in Asia in the next two years, with China, Australia and Hong Kong overtaking Japan as the most popular destinations, according to a survey by consultants DTZ.
The survey of 180 banks and fund managers in Asia, Europe and North America found that 40 per cent intended to increase their cross-border property holdings in Asia in 2006 and 2007.
Head of global research at property services firm DTZ, Joe Valente, predicted the value of cross-border property transactions in Asia would jump to around $15 billion in 2006 from around $4.95 billion in 2004.
The main sources for new investment would be Singapore, Hong Kong, Australia, the United States and Germany.
"There's no shortage of capital," Valente told Reuters by telephone from Singapore, where he presented the survey to clients. "What there is, is a shortage of investment grade stock."
Nearly 70 per cent of property in the Asia-Pacific region is held by owner-occupiers. And in Japan in particular, competition for assets is bubbling between property trusts, new local private equity funds and domestic pension and insurance firms.
Separate research by DTZ found that investment grade buildings accounted for around 44 per cent of the combined $4.8 trillion worth of commercial property in Australia, China, Hong Kong, Japan, Malaysia, Singapore, Taiwan and Thailand.
Japan is home to around half of the region's investment grade buildings, with $1.1 trillion worth, followed by China with $468.6 billion and Australia with $168.2 billion.
Institutional investors were looking to Asia because of its strong economic growth, which is driving up property capital values and rents at a time when markets are on the decline in much of Europe, Valente said.
Although Japan still draws investment with its rock-bottom borrowing rates, high quality buildings and signs of a property market revival, it has slipped down investors' priority lists.
"Japan's still very attractive for most international investors, and they want to increase exposure," Valente said. "But the rise in interest in places like Shanghai and Singapore is faster."
But some investors were taking big risks in China, Valente said. Many analysts complain about China's lack of market transparency, complex tax system and confusion over land titles.
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