Schroders, the private bank and investment house, has struck a generally positive tone in its forecasts for the big Asian property markets this year.

Property markets are well supported, despite a sluggish global economic
backdrop, owing to forthcoming supply shortages, liquid Asian markets and
access to cheap debt capital, said asset management firm Schroders in its 2013
outlook, giving an overview of the Chinese, Hong Kong
and Japanese markets.

Schroders, which is oversees a total of $327 billion of assets (as of 30
September last year), gave its views on the following jurisdictions markets:

China

“2012 was a
strong year for quality Chinese residential developers, with share prices up
50-130 per cent – albeit from a low base. The high-quality companies hit their
full-year sales targets as early as September in 2012, and sales data remained
strong into the year end,” said Jim
Rehlaender, global property securities fund manager at the firm.

He added that there are visible indicators suggesting further increased
demand from Chinese buyers, namely, improved Chinese economic data and
continuous efforts from the country’s government to stimulate growth.
Consequently, Rehlaender predicts 10-15 per cent upside in Chinese property stocks in
2013.

Hong Kong

Hong Kong property share price gains however, have been less
fruitful compared to the neighbouring mainland as a result of the recent
introduction of a special stamp duty in an attempt to cool escalating high-end
residential property prices. Despite expecting a recovery in the residential
sector, Schroders focused on commercial property.

“The big risk
for Hong Kong (and by extension, China) in 2013 is if US interest
rates rise. If the Federal Reserve increases interest rates it will have a
direct impact on mortgage rates in Hong Kong,”
said Rehlaender.

However, as
there would have to be robust evidence of economic growth in the US before the
Fed would raise rates, such a move would not be negative for the property
sector overall, Schroders said, and the firm does not expect increased interest
rates before 2013. 

Japan

Turning its
attention to Japan,
Schroders said the country’s property sector continues to benefit from a steady
decline in supply and a shift away from earthquake prone buildings to A-quality
properties.

“While the
markets outside of Tokyo are stagnating from the
weight of an overall sluggish economy, Tokyo is
recovering and the Japanese development companies are leading the charge,” said
Rehlaender.

He added that
with no major additions to supply on the horizon, rental rates are predicted to
rise steadily throughout the coming year, regardless of the pace of domestic
economic growth. Japanese companies are currently trading at 25 per cent below
net asset value, which Schroders believes is 10 per cent over discounted.

In should also
be noted that Asian investors are increasingly looking beyond domestic markets
for property investments.  For instance, The Central London Market Q3 2012 report by real estate specialist, Jones Lang
LaSalle, said that overseas purchasers accounted for a record 80 per cent of
city office transactions in 2012, compared with 63 per cent in 2011, and a long
term average of 57 per cent.