“We find Singapore a little bit controversial on our risk matrix. [Although] it looks quite good on the risk matrix, we are a little bit more cautious,” said Andrew Jackson, head of wholesale and listed real estate funds, speaking at Fund Selector Asia’s Alternatives Forum in Singapore.
“There are constant policy changes, which make it very difficult for long-term real estate investors. That does concern us about the Singapore market,” he added.
An informal poll of fund selectors who attended the forum revealed a similar trend. None of the polled fund selectors saw value in making investments in Singapore and Hong Kong’s real estate sector.
Instead, the property sector in Europe received 46% of the votes, followed by the US with 38%.
In an attempt to rein in surging property prices, the Monetary Authority of Singapore began introducing housing-market curbs in 2009. Some of the strictest measures were implemented in 2013, including a cap on debt at 60% of a borrower’s income, higher stamp duty on home purchases and an increase in real-estate taxes.
Recently, Ravi Menon, managing director of MAS, mentioned that real estate prices in Singapore “remain at elevated levels” and it is too early to ease the cooling measures.
As regards other Asian countries, Standard Life finds Vietnam a risky investment on its risk matrix spectrum, but believes markets such as Hong Kong, Sydney, and Japan are “fairly low down” on the risk spectrum scale and offer a number of attributes that look attractive to real estate investors.
In Japan, the government’s quantitative easing policy is expected to boost demand for real estate, he added.
Jackson said the fund house has turned “a little bit” more confident about Hong Kong’s office sector, but cautious on the country’s residential sector.
He added that Standard Life is somewhat wary about investing in Europe’s real estate sector due to uncertainty over sustainable GDP growth.
The Ireland-domiciled Standard Life Investment Global Real Estate Fund seeks to offer income as well as capital appreciation by diversifying investments in global property markets through both direct and indirect investments.
As of 31 July, the scheme had highest allocation to US with 17% weighting in the portfolio and a similar allocation to and Central and Eastern Europe direct retail assets, followed by Australia and Japan with 13% and 11% weighting, respectively.
Out of the total portfolio, roughly 60-70% is invested directly and 25% is deployed in listed securities.