Brexit Creates Bargains for Global Investors
Editor's Note: This article was originally published on Real Money at 8 a.m. on July 6.
The Brexit shock has created plenty of uncertainty in global markets. For Asia, it's been a hard decision to make sense of. A very local decision has had worldwide implications.
Hong Kong, Malaysian, Singaporean and Chinese investors will be rubbing their hands with glee at the sharp depreciation in the pound. As I said in my column immediately after the decision, they love new-built real estate and actually dominate that market. They will redouble their efforts to explore opportunities.
Now it seems Japanese investors will join them. They have not been particularly big players in Britain since the real-estate bubble of the 1980s. But they will be reassessing their holdings.
"We expect that Brexit may accelerate Japanese investors' overseas real estate investment rather than slowing down," said Yukihiko Ito, managing director of Asterisk Realty & Placement Agency. The chance to pick up major-city assets at a discount will propel them, Ito believes.
The Japanese yen has strengthened from a low of ¥198 to the pound in August 2015 to ¥130 now -- a gain of 34%. And negative interest rates within Japan are one major factor finally forcing large institutions to seek international exposure.
Most Japanese investors, many of which may be new to global real estate, weren't affected by the Brexit decision. They had very limited exposure to British real estate. However, they are likely interested in checking the market out now that it is trading at a huge discount to before the Brexit referendum, thanks to the huge currency plunge.
Japanese investors are generally very conservative with overseas real estate. But thanks to internal pressures, they are being pushed to engage in outbound capital deployment. Those pressures will only increase thanks to the stronger yen.
Ito at Asterisk says that Japanese capital will likely target U.S. and Australian markets first. But since those are already getting tapped out or driven to unreasonable prices, they will likely have to shift their focus towards Europe. Both the United Kingdom and the European Union will be "impossible" to pass up, Ito said.
"Japanese investors need to invest in overseas real estate right now, and cannot stay conservative for a long time," Ito said.
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