Credit crisis not slowing capital into Asia, but credit controls are tightening

A second report this month has suggested there is continued appetite for Asia real estate but that tougher financing conditions prevail amid the credit crunch.

The credit crisis has not slowed the inflow of capital into Asia, a report by KPMG, FTSE Group and the Asian Public Real Estate Association says.

Instead, it is accelerating the flow of capital into the region due to a combination of opportunistic and increasingly longer-term investments, according to the report, 'Real Estate Investment in Asia Pacific: Migrating capital.'

“In recent months, a number of European pension funds have been looking to Asia in search of stable returns. There has been continued interest from Australian funds and even opportunistic US funds in search of distressed assets. Alongside huge Asian pension funds from markets such as Singapore, interest hasn't been this high for a long time,” it says.

However, the report also suggests there is caution in the region as traditional sources of debt from US and European banks have all but dried, and some Japanese and Australian banks are delaying loans. Further, credit controls are tightening which is slowing the financing process rather than bringing it to a halt.

The findings seem to generally chime with another report on Asia real estate published earlier this month. The Asia investment intentions survey by the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the Asian Real Estate Association said the effects of the credit crunch were expected to be less than in Europe and the US.

It said while the credit crunch was impacting on the Asia real estate market because of more limited availability of debt and the potential re-pricing of assets, the financial crisis might actually turn out to be a positive thing for Asia because some respondents thought this could mean more capital would be directed towards Asian real estate that was originally allocated to other markets.