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Interest in Asia Pacific continues to rise

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Do you consider foreign trade policies when evaluating property investment decisions?

Despite traditionally strict trade barriers in the Asia Pacific region (APAC), foreign investment continues at a steady pace. With office rents in Hong Kong skyscrapers dominating globally, it is not surprising that foreign investors are interested in Asia Pacific real estate.

In light of growing foreign interest, are these policies on track to be reversed?

Trade in APAC high despite barriers

"Asia Pacific's real estate provides investors with superior risk-adjusted returns."

APAC has recorded secure global investment, according to research undertaken by CBRE. Its latest data reveals that investment turnover rose by 9 per cent year-on-year to US$13 billion for the first half of 2015 alone.

CBRE Capital Markets APAC Managing Director Richard Kirke states that return on investment is contributing to this growth rate.

"Asia Pacific's real estate is continuing to demonstrate strong, sustained fundamentals. Relative to the volatility being witnessed in global equity markets, APAC real estate provides investors with superior risk-adjusted returns," says Mr Kirke. 

However, there have been policies introduced with the aim of reducing investor interest in the region.

What are these preventative measures?

In order to limit foreign investment interest, real estate levies are playing a larger role in various APAC markets. Understanding these preventive measures is key to ensuring a property development plan is adjusted to the area.

In it's report, CBRE outline some of these policies that have been imposed recently or are set to affect future investment decisions. 

  • In 2013, Singapore's duty tax was increased to 50 per cent on international property investments.
  • Japan will further increase its consumption tax to 10 per cent by 2017.
  • China has committed to include a wider range of property-related services under its value added tax.

However, these measures have been combated with policies that invite foreign investment in APAC.

APAC cities are proving to bring high retun on property investment.APAC cities are proving to bring high return on property investment.

De-regulation measures

In contrast, some APAC nations have introduced measures to encourage foreign investment.

Vietnam has allowed full foreign ownership of properties. Similarly, Indonesia has permitted full ownership of luxury residential condominiums.

Despite previous legislation dictating otherwise, India and China are introducing more flexible foreign investment policies. This includes lowering the minimum capital required for investment and easing exit norms.

"The policy shift of some governments to more open foreign investment policies sends a clear and positive signal to international investors. Given these additional incentives, coupled with many global funds still being relatively underweight in APAC, it is not surprising that capital seeking real estate is at record levels," says Mr Kirke.

CBRE predicts that the upcoming years will see a decrease in trade barriers for direct foreign investment in APAC. However, taking into consideration local policies and legislation is essential to accurately determining property feasibility as part of a precise property development plan.

Date Published: 22 Oct 2015
Category: General News

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