GLOBAL - Asian property markets are spearheading the resurgence in rental values ahead of Western markets, while interconnected cities are best placed to perform globally, PRUPIM believes.
The real estate fund manager's latest International Real Estate Perspective report found a marked difference across regions, with rental growth in the Asian markets continuing to outstrip that of Europe and North America.
Meanwhile, locations with strong global connections are performing better than smaller cities that are more reliant on their domestic economy, particularly within Europe and the US, it added.
PRUPIM deputy head of research Richard Gwilliam said: "Macroeconomic and demographic forces point to continued rental growth in Asian markets, with the risk of some overheating as investors may be overpaying for prime property; a north-south divide in Europe, where the south will continue to be a no-go-area for core investors, and slower growth in the US.
"However, as the property market becomes increasingly global and transparent, we are seeing a ‘polka dot effect', where assets in globally-linked cities are performing better than neighbouring locations.
Increasingly, it may be that performance will tend to be as much a function of interconnectedness, as of national or even regional threats and opportunities."
PRUPIM said property around the globe continues to be perceived as an attractive place for investors' money, offering relatively high yields but with less risk than equities and better returns than government bonds or cash.
However, concern over the robustness of the global economy is leading investors to focus on prime assets with secure income and avoid secondary and tertiary property in non-core locations, it added.
The report predicted 2011 will see growing investment in quality assets in core markets such as Germany, France and Scandinavia as debt and currency issues continue to cause problems in the peripheral European markets, which will remain no-go areas for institutions.
The firm remains relatively positive about Asia Pacific however, claiming the region's economic growth is underpinned by buoyant domestic demand, capital inflows and demographic change.
Gwilliam added: "From an investment standpoint, the case for investing in global property remains powerful given the anaemic returns on offer from bond yields, turbulent equity markets and property's strength as a diversifier and protection against inflation."
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