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Real estate investment in Q2 hits $5bn in China

Real estate market activity levels in the Asia Pacific region continue to remain high.

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Property specialist Jones Lang LaSalle (JLL) said in the August issue of its Asia Pacific Capital Markets Bulletin, that sound domestic demand for real estate by occupiers and investors, combined with relatively strong corporate/household sector and high savings rates is expected to continue to drive short term real estate markets’ performance for the remainder of the year.

The report found investment volumes were up 11.1% year-on-year in the second quarter at $19bn, with domestic deals chalking up $11.2bn alone. Cross-border Asia money accounted for $4.5bn, while inter-regional funds made up the sum at $3.3bn, said JLL. The company added that total investment volume for the region is expected to reach $100bn by the end of 2011.

Stuart Crow, head of Asia Pacific capital markets at JLL said: “Investors who are interested in diversification of their portfolios are likely to be attracted to real estate in the region, based on cash flow from rent with the potential to keep pace with inflation. We have seen a series of institutional investors increase their allocations to real estate, sustaining market volumes.”

Australia emerged as the favorite for inter-regional investors, with investors drawn by its good fundamentals of transparent real estate markets and economic links to the rest of Asia and the fact it is one of only two AAA-rated countries in Asia Pacific. JLL said several sizeable deals with buyers from Canada, Switzerland, the US and global funds pushed the total inter-regional inflow to Australia to $1.2bn, a 442.1% increase year on year.

“Our team advised on the sale of 50% of Northland Shopping Center in Melbourne which was sold to the Canada Pension Plan Investment Board for $484m at a yield of 6.3% in May this year,” said John Talbot, head of Australia Capital Markets for Jones Lang LaSalle.

“This illustrated the level of interest by international investors in Australia, attracted by our strong growth prospects amidst a global slowdown.”

JLL said that last quarter, China recorded the largest volume of transactions in the region, with a little over $5bn. The company also said, while historically Japan has been the largest market in terms of volume and had managed to regain this title in the first quarter of 2011 having seen China usurp it in the fourth quarter of last year, China was again the biggest market last quarter and is likely to continue to be in the long term.

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