Asia and Brazil offer best potential in next five years for real estate investment, it is claimed

Friday, 18 December 2009 13:33

Investors considering looking at international real estate as part of their portfolio may have missed the boat but some analysts see emerging markets like China and Brazil as still offering good potential.

After a dismal year, the S&P Global Property Index has more than doubled from its lowest point in March and higher property valuations worldwide are making real estate securities less attractive, while Dubai's debt problems highlight the sector's risks.

Some investors will want to keep global real estate to a minimum and stick to broad based funds rather than country or region-specific offerings but experienced investors say there are still values to be found in Asia, Australia, Europe, and selected emerging markets such as Brazil.

They also point out that there is the chance to get in on distressed investments and to buy stronger real estate operators as they position themselves to acquire weaker rivals.
‘The recovery is starting in Asia and working its way to Europe and the US. We don't believe there will be as much distress as people believed, but the opportunities will be large,’ according to Thomas Bohjalian, a global real estate portfolio manager at New York based Cohen & Steers, which manages $23 billion.
Michael Winer, manager of Third Avenue Real Estate Value Fund, which buys in the US and overseas, has long looked toward Asia, and especially Hong Kong, for real estate investment trusts. His top tips include Henderson Land Development in Hong Kong which is also building in mainland China.
China Resources Land, a Chinese residential developer listed in Hong Kong, is recommended by Bruce Eidelson, director of real estate securities at Tacoma based Russell Investments. ‘You're seeing a lot of activity in China because of the need for upgraded housing stock. The Hong Kong market, while it has performed exceptionally well, should still benefit from growth in China,’ he explained.

While markets in Asia are expected to do well, experts recommend staying clear of Japan where the economy is still stagnant and real estate is still trading at big discounts. Bohjalian. Said that he expects Japan's real estate market recovery to lag behind that of Hong Kong and Singapore so it is not worth considering until late 2010 or even 2011.

Samuel Lieber, manager of Alpine International Real Estate, bets heavily on emerging markets and especially on Brazil, which represents 26% of his $754 million fund's assets. The Brazilian stocks Lieber likes include MRV Engenharia, which builds affordable housing, shopping mall developer Iguatemi and Cyrela Commercial Properties. ‘Our international fund is heavily in emerging markets because that's where the opportunities are,’ he said.
With Brazil scheduled to host the World Cup in 2014 and the Olympics in 2016, experts agree there is huge potential growth over the next five years.