IPD: Asia property transparency moves a step closer (HK)

The unleveraged local currency total return on Asian commercial property was -0.2% in 2009, according to new research by IPD Asia.

Total returns in 2009 in local currencies

Source: IPD Asia

The first-of-its-kind pan-Asian research – based on pooling real estate data from Japan, Hong Kong, China, Korea, Malaysia, Singapore and Thailand – draws on property valuations for 3,363 assets with a total value of US $169.8 bln. as at the end of 2009.

According to the research, the headline -0.2% total return for 2009 is comprised of a -5.4% capital return and a 5.5% income return. The total returns for the seven national markets included in this research are shown in the chart.

Global real estate return comparisons by currency

Source: IPD Asia, IPD European Index and IPD US Property Annual Index

Currency impacts
The annual local currency total return is purely academic as investors' final return is always subject to exchange rate fluctuations. Taken into account, the Asia composite return is marginally weakened when converted into US dollars, at -0.5%, but rises to a positive 2.2% for the Japanese yen investor.

Over a three-year period, the effects of currency are much more pronounced. On a local currencies basis, the total return from Asia property was 5.5% per annum, -1.1% for yen investors and 9.7% when converted into US dollars.

Sector performance
Office property, which represents just under 52% of the Asia databank, was the worst performing sector over both one year and the last three years, returning -2.2% and 5.1% on a local currency basis.

Retail property was the best performer over both periods – at 5.1% and 10.0%, over one and three years respectively. The industrial/ logistic sectors returned 2.7% in 2009 and 7.0% per annum over the last three years.

Global comparisons
From a global perspective, the performance of Asia real estate would rank in the lower half of the countries for which IPD published property returns in 2009. However, it was better than the -7.3% local currency return of the IPD Global Index. Regardless of investor currency, the Asia composite return was lower than pan-European composite but better than the US, as is shown in the following chart.

Asia databank composition

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