Asia boosts global property values

Increased transactional activity and borrowing in Asia during 2010 has helped increase the value of global real estate to more than $11 trillion, according to recently released research.

The value of the world’s investment grade real estate rose by 3.4 percent in 2010 due to large value increases across Asia offsetting flat growth in the US and Europe.

According to this year’s Money into Property report published Tuesday by property services firm DTZ, the value in dollar terms of the world’s investment grade real estate was once again more than $11 trillion. This was thanks largely to the value of Asia’s investment grade real estate increasing by 14 percent.

China provided much of Asia’s growth as its real estate increased in value by 24 percent, while the value of real estate in the US, on the other hand, remained flat, recording a growth rate of 0.3 percent. European real estate was down by 0.5 percent.

The results reflect an overall return to growth for global investment grade real estate after its value fell by 3 percent in 2009, DTZ said.

The overall valuation increase stems from increased transactional activity and this was reflected by DTZ’s finding that deal volumes had increased by 76 percent in 2010. Again, the firm pointed to Asia Pacific as home to most of that activity as transaction volumes there had more than doubled. In doing so, its transactional activity surpassed Europe for the first time, the firm said.

DTZ said it expected Asia’s increases to continue. It said: “In Asia Pacific, we forecast strong stock and capital value growth supported by a healthy in-place development pipeline, an increase in available equity and a lack of legacy debt issues.”

The firm also said that deleveraging had led to a 3 percent decline in the global leverage use to reflect a loan to value ratio of 61 percent. Within that figure, leverage use in the US and Europe was down but there was more borrowing in Asia Pacific.

“Gearing levels in APAC continue to rise, from a low base, with China leading the way. Property companies and developers, particularly in China and Hong Kong, are circumventing restrictive lending policies by issuing property bonds.”

“Momentum in this region is expected to continue offering investors a wide range of attractive markets, despite some re-pricing coming through.”