New Star property fund benefits from Asian property markets

Strong forecasted economic growth, high levels of demand and low levels of expected supply to drive Singapore, Japan, Hong Kong and broader Asian commercial property markets.

Since launch, the New Star International Property Fund has been actively seeking assets in the Asia Pacific region. With economic prospects strong and investor confidence growing, Asia has become an attractive centre for prime property investment.

The direct commercial property market in Asia remains brisk, with both the number and value of purchases by overseas investors increasing. Rental performance in the region has been strong, with Singapore leading the way, generating a 53.6% year-on-year rental increase.

Strong rental growth is forecast to continue in these markets as a scarcity of supply and high levels of demand drive rents higher. New Star is well placed to exploit this strong forecasted rental growth having recently purchased the Parakuo building in Singapore’s Central Business District.

Grade A occupancy rates in Singapore have reached a peak of 99.5%. It is forecast that over the next six years (2007-2012), annual average supply is expected to be 1.25 million sq ft, considerably lower than the previous 10-year average of 1.53 million sq ft. Gross domestic product (GDP) is forecast to grow 7.7 % this year, well above the past 10-year average of 5.15%. As a result, prospects look attractive for property owners in this core market.

In the first half of 2007, the average capital value of prime property in Hong Kong rose 8%. With GDP increasing from 5.7% in the first quarter of 2007 to an estimated 6.9% in the second quarter of 2007, the outlook for Hong Kong is attractive. Prospects for Japan are arguably even more attractive because Japan is at an earlier stage in its property cycle. The country’s expected economic resurgence makes it an attractive centre for investment, with key cities, where land is at a premium, such as Tokyo and Osaka, set to benefit.

The broader Asia Pacific region has benefited from this strong growth in Central Asia. New Zealand’s property market for example has been resilient, with rents rising, yields firming and vacancy rates falling. Office vacancies in Auckland’s Central Business District are now at the lowest level since the 1980s.

New Star has recently acquired a further three prime buildings in Japan and is actively seeking further assets to purchase in the Asia Pacific region.

Roger Dossett, Head of Property Fund Management, New Star, says: “With sustained growth and a positive economic outlook, Asia is well positioned to generate healthy returns for investors in the New Star International Property Fund.”