[Sponsored Article] Both historically and internationally, it has long been said that investing in real estate is not only the best way, but also the quickest and safest way to become wealthy. It is believed that Mark Twain said it best: “Buy land—they aren’t making anymore of it.” And for generations now, real estate has been the asset class of choice for savvy Hong Kong investors; providing both a stable rental income over the short and medium term, plus the excellent prospect of capital growth over the long term. However, during a worldwide pandemic which has resulted in a recession across much of the planet it is understandable that wise investors will tread the property market with care. Indeed, according to the latest Hong Kong Property Monitor report, released in January by global real estate services firm JLL, Grade A office vacancies rates for Hong Kong’s Central District rose to 7.3 per cent in December 2020, surpassing 7 per cent for the first time since 2004. What’s more, another respected global real estate service provider, Savills, notes that the Hong Kong residential leasing registered annual rental declines of slightly over 10 per cent in 2020 across segments. It must be added, however, that sophisticated real estate investors constantly look further afield for a more balanced portfolio and investment opportunities. Some world-class cities in the Asia-Pacific region look promising for investors who make the most of various investment vehicles. Singapore and Australia are excellent examples. The property market of the two countries is fast attracting the attention of overseas investors, including those from Hong Kong. Singapore shares much of the basic fundamentals with Hong Kong that have attracted foreign investors. These include an outward looking and free economy with little restriction in capital and investment flow, the rule of law, excellent connectivity, and political stability and so on. Despite the challenges brought about by the Covid-19 pandemic, Singaporeans are optimistic about the state’s property outlook. According to Singapore’s Urban Redevelopment Authority (URA), the overall price index of private homes in 2020 has registered net increases for two consecutive quarters, in Q3 and Q4. Market sentiment quickly improved merely a quarter after the “circuit breaker” measures introduced in Q2 to contain the spread of the pandemic. This is in line with the optimistic findings at the Property Ownership Aspirations Survey 2020-21, conducted by the country’s property portal EdgeProp Singapore, and Institute of Real Estate and Urban Studies at the National University of Singapore. There are added reasons for the city’s property market to continue a long-term upward trend. Private news broadcaster CNA (previously known as Channel NewsAsia) expects to see a decline in the supply of private homes after 2023, whereas CBRE notes the four-year average low of 0.49 million square feet addition of retail spaces expected from 2019 to 2022, representing a sharp drop from 1.55 million square feet recorded from 2014 to 2018. Elsewhere in Asia-Pacific, Australia’s leading mortgage lenders—including the Commonwealth Bank and ANZ Bank, generally expect “strong growth” in property prices across regions and cities in the country in this coming year, according to business intelligence company CoreLogic, as of February 2021. This expectation follows a net Australian home values growth of 3 per cent year-on-year in the CoreLogic Hedonic Home Value Index at the end of December. Investors know that properties are not limited to residential properties. Relevant investments in industrial and data centre are looking good for their association with the demand induced by the worldwide digitalisation trend, whereas those in the retail and hospitality sectors will look particularly promising upon the anticipated post-pandemic economy opening. While the pandemic has resulted in a minor correction in certain cities for the moment, what has truly contributed to the bullish real estate market is the growth in economy, and perhaps more significantly over the recent years—the prevailing low interest rates. The subdued interest rates are conducive to lofty equity valuations across major exchanges, while driving down bond yields. The ten-year US bond yield stood at a lowly 1.4 per cent as of February 26, 2021, a figure lower than the 10-year average of 2.1 per cent recorded between the period February 2011 and February 2021, according to Bloomberg. Bloomberg consensus, meanwhile, estimates an annualised dividend yield of 5.1 per cent for Asia-Pacific REITs as of February 26, 2021, easily beating not only various bond yields, but also the dividends of the region’s major stock markets. In fact, it is better than the 1.9-2.4 per cent rental investment yield of Hong Kong’s private residential property during 2011-2020, according to Rating and Valuation Department. For sure, real estate investment comes with its pros and cons. On the one hand, there are the obvious advantages associated with a historically resilient market, relatively stable returns, and a generally bright outlook for asset appreciation. On the other hand, one does need to consider the required level of investment threshold for property investment in a diverse range of properties. Investing in a residential apartment in suburban Brisbane is vastly different from buying a Grade A office building in Hong Kong’s Central District or Singapore’s Marine Bay. There are as well other costs associated with property owners, including insurance, maintenance, taxes, and the income-less periods of vacancy. The investment vehicle Real Estate Investment Trusts (REITs), most of which are required by applicable regulations to deliver to investors dividends generated from income by leasing of properties, may hold the key for sound property investment decisions. In fact, REITs feature additional advantages compared to holding physical properties. Some factors worth considering include investment diversification associated with a balanced portfolio, relatively low investment threshold, professional management, and hence a hassle-free investment experience. Investors can rest assured of no worrying calls from a distracted tenant in the middle of the night for a faulty air-conditioning system. In fact, various Asia-Pacific REITs offer a diverse collection of sound investible properties, and hence the true benefits of diversified risks. But there is still the same question of where to put your investments? For investors who do not wish to concern themselves with investing insights, tools, and news, and yet who are interested in investing in REITs, REIT fund may be the answer. Manulife Investment Management’s Asia-Pacific REIT investment strategy is to go beyond regular REITs. Manulife Investment Management offers investors the true diversity of a selection of REITs by professionals across markets. In addition, there is the flexibility of investment amounts. And all the while allowing investors to enjoy the stable stream of passive income associated with monthly dividends. So, investors looking for the investments that meet their objectives may be wise to take a closer look at REIT in Asia Pacific now, at a time following market corrections. As the brilliant billionaire investor Warren Buffet has sagely said: “Be fearful when others are greedy and greedy when others are fearful.” Meanwhile, be sure to get the industry’s professional advice by checking out the Manulife Investment Management AP REIT strategy. Investment involves risk. Investors should not make investment decisions based on this material alone and should read the offering document for details, including the risk factors, charges, and features of the product. This material has not been reviewed by the Securities and Futures Commission. Issued by Manulife Investment Management (Hong Kong) Limited.
