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GENERAL PROPERTY

Big year ahead as China heads in the REIT direction

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2019 will be a landmark year for property sector in Asia Pacific with the imminent listing of Chinese REITS (C-REITs), which has an estimated US$2.5 trillion worth of properties that can be securitised — representing more than third quarters of the current global real estate AUM total of US$3.2 trillion.

The Asia Pacific Real Estate Association (APREA) said using Japan as a benchmark, China’s REIT market could conservatively be worth up to US$400-600 billion in market capitalisation, which will make it the region’s largest.

The global total real estate assets under management (AUM) grew by 12% from US$2.8 trillion in 2017 to US$3.2 trillion in 2018, according to the latest ANREV / INREV / NCREIF Fund Manager Survey.

With urbanization still in full swing and the pace of GDP growth remaining solid at 6.0-6.5%, China could outstrip the over one-trillion US market eventually.

APREA CEO Sigrid Zialcita said APREA’s vision of establishing a single funds passport to real estate investment in the region is a step closer to realisation.

“The first Indian REIT debuted this year and we are excited that plans already in motion in China and the Philippines will herald a new era for the region. The REIT framework remains crucial to the sustained development of the region’s emerging economies. The Asian Century cannot happen without a REIT revolution,” she added.

Zialcita said REITs in China constitute possibly the single biggest opportunity to occur in the region in recent times.

In addition, Cushman & Wakefield’s Beijing head of valuation and advisory Chris Yang with the role of professional fund managers, as asset managers and financial custodians, critical in facilitating the development of REITs, levels of capabilities within the asset management institutions will also be raised.

“The advent of C-REITs will be a game changer that will elevate the listed property sector in the region to the next level. While competition among bourses will heat up, there will also be benefits as more capital will be attracted to the region’s real estate assets.

“With the globalization of real estate investments, there will be positive spill over effects,” Yang said.

Chairman of APREA China Board and senior executive president of China Summit Capital Chen Lijian said having an additional conduit for the sector to recycle capital will not only speed up urban growth but will create stability in the real estate market.

“With a visible exit strategy, domestic and even foreign players will be more confident at pursuing expansion opportunities. Given China’s economic size and influence, C-REIT’s coming of age will certainly help attract both retail and institutional investors allocate more capital into real estate,” Chen said.

Australian Property Journal