The global property market will enjoy a major boost by 2020 thanks to Asian institution investors, particularly those hailing from Hong Kong and mainland China.
According to a survey by CBRE, Asia Pacific institutional investors are expected to shell out $240 billion. As a matter of fact, about $260 billion has already been allocated by regional investors into the global property market.
Asia Pacific institutions, which include sovereign wealth funds, pension funds and insurance companies, are sitting on massive wealth that amounts to nearly $15 trillion as of the start of 2015.
Traditionally, pension funds and other institutional investors have channeled the funds into corporate and government bonds, among other investments. But as they seek greater diversification, the global property market became an attractive idea.
CBRE Research Asia Pacific Senior Director Ada Choi said, "We estimate Asian institutional investors today have real estate allocations of around 2 percent, which is more than it was three years ago, but still considerably below their own internal targets and much less than peers in The Organization for Economic Cooperation and Development countries which sits at 5 to 7 percent."
She added, "This allocation gap, combined with real estate's attractive risk-adjusted returns, is why we are seeing an acceleration of investment plans by institutional investors not just globally but regionally as well."
Choi also revealed that five of the top 10 global sovereign wealth and pension funds are from Asia Pacific. This includes institutions such as Exchange Fund in Hong Kong and SAFE from China. "A number of these institutions have announced plans to further increase their allocations to property investments," she said.
Currently, London continues to be the most attractive city for Asian investors. However, as Asian institution investors are planning to course their funds in the global property market, their investment interest is starting to shift to other European cities like Paris and Frankfurt.
