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London’s Loss is Asian’s gain as property funds seek safe havens

“The world recognizes Japan as a safe haven. Because of that, Asian money that has been looking to invest in Europe will come to Japan. As uncertainties unfold in Europe and spread out to global markets, Japan would, relatively, be considered as a predominant place to be.”
Mr Takeshi Akagi, National director at real estate firm Jones Lang LaSalle

SINGAPORE — London may have shed its safe haven property market tag following Britain’s vote to break from the European Union, and that will benefit real estate markets in Asia such as Singapore, analysts said yesterday.

The property markets in Singapore, Hong Kong and Australia may enjoy foreign fund inflows as investors f lee to safer assets amid heightened market volatility, according to global commercial real estate services firm CBRE Group.

“Capital will look for safe havens —countries that offer stability. Mature, developed markets will look attractive again,” said Mr Henry Chin, the Sing Singapore- based head of research for Asia- Pacific at CBRE.

Even before the Brexit shock last week, Singapore has been enjoying strong inflows of foreign liquidity seeking prime office assets in the Republic’s Central Business District, said property firm Cushman & Wakefield.

High-profile acquisitions in Singapore by foreign firms this year include Qatar Investment Authority buying Asia Square Tower 1 for S$3.4 billion and Indonesian tycoon Tahir’s purchase of Straits Trading Building for S$560 million.

In Singapore’s residential space, big-ticket deals this year include the S$638 million Shunfu Ville acquisition by China’s Qingjian Realty and the purchase of 9 Cuscaden Road for S$145 million by Hong Kong’s Shun Tak Holdings.

Britain’s vote to secede from the EU wiped almost US$4 trillion (S$5.4 trillion) off the value of global equities, Bloomberg data showed, with investors selling riskier assets amid concerns that trade snarls and political paralysis will disrupt the recovery in an already-fragile world economy.

Japan, a shelter in times of crisis, may also benefit from the Brexit fallout. The yen soared as much as 7.2 per cent on Friday to a near three-year high at 99.02 versus the United States dollar, and was trading near 102.00 late yesterday in Tokyo.

“The world recognises Japan as a safe haven. Because of that, Asian money that has been looking to invest in Europe will come to Japan. As uncertainties unfold in Europe and spread out to global markets, Japan would, relatively, be considered as a predominant place to be,” said Mr Takeshi Akagi, national director at real estate firm Jones Lang LaSalle.

Commercial property values in the UK could fall about 10 per cent over the next year, led by declines in oversupplied central London, asset management firm BlackRock said in a note to clients. Reduced tenant demand and a shift towards shorter lease terms are anticipated, while overseas investors are set to demand a larger risk premium for holding UK assets, said BlackRock.

London office rents could fall 18 per cent within two years of Article 50 — which would set in motion the process to extricate the UK from the EU — being invoked, said Mr Mike Prew, an analyst at financial services firm Jefferies. International businesses could move 100,000 jobs out of the UK following the vote as they may lose their passporting rights, he warned.

That is bad news for developers, who plan to build the equivalent of 50 skyscrapers the same size as the Gherkin, the iconic London office tower, in the next four years, he said.

“Investor sentiment will deteriorate further, subduing capital flows in the short to medium term. London sectors remain most vulnerable to a correction given current keen pricing and their multinational occupier base,” said Mr Chris Ireland, CEO for the UK at Jones Lang LaSalle.

-Today-29 June 2016

Point to ponder: If the property funds really flow into Singapore, will this boost up our weak property market and drive up the prices?

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