November 2007 VOL. 2

Foreign Investment

Shanghai, Singapore and Tokyo rank as the three most promising Asia Pacific cities in terms of real estate investment prospects, according to the Emerging Trends in Real Estate Asia Pacific 2008 report recently published by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP. The three cities also received high ratings for development potential, reflecting their status as prominent global gateways.

"It is expected that even greater amounts of capital will be flooding Asia Pacific real estate markets in 2008," says KK So, Asia Pacific real estate tax leader of PricewaterhouseCoopers. "The real challenge for investors will lie in finding the right assets against the backdrop of yield compression and scrutiny by regional governments and tax authorities."

Sentiment was strong among survey participants to either buy or hold all types of properties in Shanghai, Singapore and Tokyo, rather than sell properties, illustrating the cities' strong popularity with the investment community.

Shanghai, which topped the list for investment prospects, edged up from its second-place ranking last year. Still, despite its characterization as an elite city for the real estate industry, some concern was expressed regarding a growing oversupply of some properties in Shanghai. The greatest number of "buy" recommendations in Shanghai went to the industrial/distribution sector.

Singapore received the highest rating of any of the cities included in the report in terms of overall risk. Singapore is one of the markets in the area that provides a very stable legal and tax environment, and property rights that are beyond question. The strongest sentiment for buying in Singapore is in the apartment residential/rental sector.

Like Singapore, Tokyo was cited as presenting very low overall risk as an investment market. Survey respondents consider Tokyo as a city with a tight inventory supply and low vacancy rates, and it is a market that is starting to draw more institutional money, in addition to the opportunistic funds that have been invested over the past five years. The strongest sentiment for buying in Tokyo is in the office sector.