Property asset disposals to see US$10b shortfall in China as funds expire

The property industry in the Asia-Pacific region faces a wave of asset disposals by real estate funds over the next two years that could see about US$10 billion of saleable assets - most of them on the mainland - left on the shelf.

Property consultants doubt that will be much of a blow to the vast mainland property market, where investors have been chasing prime assets in first-tier cities.

But David Hand, international director of capital markets at JLL, said non-prime assets on the mainland would "need to work harder or adjust pricing expectations to attract appropriate buyers".

Between 2005 and 2008, a heady mix of liquidity saw around US$91 billion of capital raised by 184 private real estate funds mainly focused on investing in Australia, China and Japan.

Ninety-one per cent were close-ended funds and international property consultant CBRE estimates that about 84 were scheduled to terminate between last year and 2016.

"There will be a peak in fund termination in 2015 and 2016, when about 50 funds with a gross asset value of about US$40 billion will expire," said Ada Choi, a senior director at CBRE Research. But the Asia-Pacific market would only be able to absorb around 75 per cent or US$30 billion of that - leaving a US$10 billion shortfall.

In a review of the assets available for disposal by funds approaching termination, CBRE said 24 per cent were on the mainland, 26 per cent in Japan and 15 per cent in Australia, with the remaining 35 per cent in other markets such as Hong Kong, Singapore and Taiwan.