The sub-prime crisis has intensified the necessary corrections in the property market. But according to Henderson Global Investors, there's an upside to it.
The asset management firm, which has some $117 billion worth of assets under its wing, is positive on the medium term outlook for the global property sector. The likelihood of a US recession and the current global credit crisis is hurting investor sentiment, and is expected to have an impact on the property sector in the region.
In its latest report on the global property outlook, Henderson Global Investors noted that price increases are cooling off in Singapore, Hong Kong and China. But office rentals are still expected to climb, albeit at a slower pace.
Over the next 12 months, Henderson said growth will be led by retail properties and retail space. It remains positive on Singapore REITs such as CapitaMall Trust and Ascendas REIT.
"In terms of industrial and retail space, we think these companies (Singapore REITS) can still benefit from very solid rental growth and good yield offered for the unit-holders. Our pick is strong companies such as CMT, CapitaMall and also Acendas REIT. The reason is, the price corrections have offered us very good entry opportunity," said Frankie Lee, a fund manager with Henderson Global Investors.
On the private residential market, Henderson said caution needs to be exercised in the next two to three years.
It projects some 19,000 apartments to come on stream during that period, and it's uncertain if demand will be sufficient. For this year, it expects prices of private residential properties to weaken by up to 10 percent.
Henderson is also less positive about the UK property sector, which it expects will underperform other markets.
As for the US market, Henderson projects yields from REITs there to come in at the high single digits. - CNA /ls
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