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Investing in a Singapore condo offers numerous advantages, and one of them is the opportunity to leverage its value for future investments. It’s a common practice among investors to use their condos as collateral to secure additional funding for new investments, which in turn, allows them to grow their real estate portfolio. While this approach can potentially amplify returns, it also carries certain risks. Therefore, having a solid financial plan in place and carefully considering the possible impact of market fluctuations is crucial.
BlackRock: Focus on Liquidity and Niche Asset Classes for Asia Pacific Real Estate
According to Hamish MacDonald, head and chief investment officer of APAC Real Estate at BlackRock, investors are showing more interest in deploying capital into Asia Pacific real estate markets that have high levels of liquidity. He predicts that the property sectors that will benefit from economic tailwinds this year are accommodation, logistics, and alternative assets. MacDonald further explains that the markets with abundant liquidity this year include Australia, Japan, Singapore, and Auckland in New Zealand, which coincidentally also represent the order of focus for BlackRock.
He observes that investor sentiment this year is likely to be more bullish compared to 2023 and 2022. As a result, institutional investors will start discussions about deploying and recycling capital in selective Asia Pacific real estate markets. In Singapore, BlackRock has been concentrating on acquiring serviced apartment properties, such as the Citadines Raffles Place, which was purchased for about $290 million in October 2021 in partnership with YTL Corp. They also teamed up with Hong Kong-based accommodation operator Weave Living to acquire Citadines Mount Sophia for $148 million in February 2024. As of this week, the Weave Living-operated property has reopened as the 175-room Weave Suites – Hillside.
MacDonald says that their recent acquisitions in Singapore reflect the belief that there is a shortage of new serviced apartment developments, yet there is a high demand for this type of accommodation. He also adds that they are not looking to build a large portfolio, but rather to target specific deals. They prefer to work with partners to refurbish and reposition existing properties and add new amenities to increase their value.
MacDonald notes that Singapore continues to attract significant capital inflows and a highly skilled workforce, which contributes to the country’s strong business growth. As such, they maintain a positive outlook on investment opportunities in Singapore. He adds that Japan will remain a target for many real estate investors this year. BlackRock’s analysis of domestic pricing power, wage growth, and corporate reform has led them to be bullish on the Japanese economy, which supports growth in real estate. Daigo Hirai, head of Japan real estate at BlackRock APAC, agrees that there has been a strong rental uplift in the Japanese residential market in recent quarters, thanks to a combination of factors such as wage increases and higher construction costs. He expects a 7% to 8% increase in residential rents across major Japanese cities like Tokyo and Osaka this year. Hirai points out that tenants prefer larger apartment units over compact studios, and as such, BlackRock is looking to acquire assets close to train stations in residential-commercial neighbourhoods like Osaka’s Namba district.
BlackRock plans to partner with an experienced accommodation operator to manage a hybrid residential investment strategy that caters to both inbound tourist accommodation needs and domestic rental demand. This will allow them to deepen their investment presence in tourist-dominated cities like Kyoto and Fukuoka. Hirai adds that smaller developments with up to 50 units near train stations in residential-commercial neighbourhoods are assets that fit this strategy. The firm will consider acquisitions in the range of JPY1 billion ($8.93 million) to JPY3 billion to accommodate its exit strategy.
According to MacDonald, their key strategy in Japan is to deploy specialist ground teams that can identify potential acquisition deals at a significant discount. BlackRock’s focus in Japan is mainly on residential assets. Meanwhile, long-term population growth estimates support positive long-term growth across most sectors in the Australian real estate market, says Ben Hickey, Head of Australia Real Estate at BlackRock. He notes that most property sectors in Australia are typically characterized by under-supply and low vacancy rates. Hickey concludes that any investment strategy in Australia should consider whether rental growth can exceed inflation, the ongoing long-term supply-demand imbalance, and a favorable exit strategy. Consequently, BlackRock is focusing on niche asset classes in Australia such as childcare properties, last-mile logistics assets, life science real estate, and self-storage properties.
Hickey explains that these four asset types will benefit from Australia’s long-term population growth and are “chronically undersupplied” compared to the broader regional markets. This allows BlackRock to generate outsized returns with limited risks, and they cannot rely on a favorable interest rate outlook to generate real estate returns.