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Asia Pacific, of course, is a large geographic area and it’s unfair of you to think about it as one geographic area. So within Asia Pacific some countries have fared very well, others have found it more difficult. Japan, for instance, property prices have struggled whereas we’ve seen other markets become quite attractive and liquid, such as Australia. China has remained strong. So within the region there have been a number of countries which have fared in different ways but I think, as a general comment, Asia has fared better than Europe or the US have fared.
We’ve seen a lot of interest in Australia. Australia is a market and an economy that has performed quite well despite the financial crisis. It’s an economy in which property was tightly held and the financial crisis has seen more liquidity in the market so properties are available more than they were before. We’ve seen a lot of interest in China and property prices in China have held up well. But there are restrictions on property acquisition in China it has become more difficult to deploy capital there. Some particular funds have continued to focus on India, but it has not been as much focus as perhaps it was immediately prior to the financial crisis. And there are other countries which of course people are showing interest in, such as Indonesia, but the restrictions on ownership by foreigners make it very difficult to go into those markets. So it’s largely been Australia, China, India and now we’re seeing some interest in Japan again.
I think the first issue you need to be able to identify quality properties and so you need to be in a position often where you’re working in a market with a joint venture partner. That joint venture partner and the relationship with that joint venture partner are very, very important. When it comes to matters around tax, there are a number of problems that investors face in the region. A number of countries have sought to dampen down property prices. For instance, Singapore and Hong Kong have both introduced stamp duties to try and just take some of the heat out of their property markets. You’ve got uncertainties. There’s a number of uncertainties in investing in China, for instance, in the way certain taxes apply. There are changes and there have been changes in a number of markets. Japan has made changes to the TMK, which is the traditional structure that a lot of people have used to invest in property to see more taxation paid in Japan than historically was paid. So I think the issue for investors is that in the taxation era there is constant change.
There are also some wider issues which are affecting the thinking around taxation, such as the OECD’s approach. It is looking to push the position that tax should be paid in one jurisdiction or another jurisdiction, that you shouldn’t be able to get away with not paying tax in any jurisdiction. Of course with funds this is very difficult because ultimately there may be someone paying tax in another jurisdiction but that may be several layers removed from the actual country in which the property is located.
I think the future is bright. There are still super inundation funds throughout Asia which are not as heavily weighted in property as old hemisphere counterparts are. There is also interest from the northern hemisphere and that continues in terms of capital being raised there and deployed here. There is a lot of interregional capital now being deployed. So Asians are buying Asian property. Perhaps one of the threats is that the northern hemisphere markets are becoming more attractive. There are some that believe the bottom is nigh or has been reached and some capital is now being deployed in those markets that might otherwise been focused towards Asia. But on the upside, Asian investors are now more interested in northern hemisphere so we are seeing capital raisings within Asia for investment into northern hemisphere property.
So for Asian property I think the future is good. I think capital will continue to flow. The challenge will be getting quality properties.
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