ASIA - Real estate markets in Asia outperformed their counterparts in Europe and the US during the most recent market cycle, according to Investment Property Databank (IPD).
The latest IPD Pan Asia Return Research (PARR) report shows that total returns for Asia remained positive over the past five years, with an average annual return of 6.4%, while Europe and US experienced negative returns, averaging returns of 3.5% and 2.3% respectively.
That said, the US outperformed Asia in 2011, posting a return of 14.5% versus Asia's 8.4%, although Asia remained above Europe which delivered 6.6% (all in local currencies).
IPD's Asia databank (which excludes Australia and New Zealand) is heavily influenced by Japan, which represents 50%; if this market is stripped out, the total return for 2011 rises to 13.9%, while the five-year annual return increases to 11.3%.
IPD is working to increase the depth of data underpinning PARR with the intention of eventually creating a formal benchmark for the Asia region.
The company recently announced an agreement with the Pension Real Estate Association (PREA) to launch a real estate fund index for the US. Both projects are part of IPD's ongoing objective to create a global real estate fund benchmark.
One of the biggest challenges for IPD in Asia will be increasing the coverage of the real estate market in China, which currently represents 4% of the Asia databank (9% once reweighted). It is discussing with fund managers and investors what proportion China should represent.
Unlike its databank in Europe, IPD has supplemented its "high quality data from our usual sources" with information available in the public domain, "which has sometimes required assumptions to complete our core data fields", it stated in a research note.
Chinese real estate returned 18% in 2011, outperforming the rest of the Asian markets measured by IPD, apart from Hong Kong, which posted 22.3%.
Kevin Swaddle, managing director at IPD Asia, said: "While most of Asia's property investment markets improved a little last year, the Chinese markets soared with a return of 18.0%. Still, there was a wide range of returns included in the 2011 Pan Asia composite, from a high of 22.3% for Hong Kong to 3.4% for Japan. The continuing poor performance in Japanese property, the largest segment of the index, will be of little surprise to investors.
"Some markets are up on last year, and a few down. But the key finding is that the top three markets are all influenced by China: Hong Kong, the Mainland itself and Taiwan."