After the subprime collapse in 2007 that kick-started the global financial crisis, real estate was seen by many in the pension, sovereign wealth and insurance industry as something of a pariah; however, this is changing with asset managers being encouraged to take another look at what is described as prime real estate due to the low interest rates on high-quality government bonds.
Due to the enormous value found in sovereign wealth funds, estimated to be worth $4 trillion, and pension funds cover, which is worth more than $30 trillion, even the smallest of shifts could see billions of dollars moved away from more volatile assets that are lower-yielding.
Properties located in Bangkok and London are growing in demand and the recent figures, which show that the US property market is starting to bottom out, are luring investors back into the market as they snap up homes that have been foreclosed in order to rent them out.
Speaking about the news, JP Morgan Asset Management's head of sovereign and institutional strategy in Asia, Andrew Economos, said: "Sovereign wealth funds are looking for positive yields and they are finding anywhere between 5% and 7% in real estate. They are getting yield on purchase as well as capital appreciation. They are diversifying across real estate into commercial, trophy properties as well as REITs."
Investors are starting to tap into the real estate market via stocks as well as real estate investment trusts that are providing far larger dividend yields. According the MSCI real estate index, dividend yields in this area can reach almost 7%.
