Buy real estate, property funds: Aberdeen

Investors should buy real estate assets and funds that invest in property in the UK and Asia because a potential rebound in prices and economic growth will counter inflation risks, Aberdeen Asset Management Plc said.

While UK properties offer ‘attractive’ yield, real estate in Asia is supported by the strength of the region’s economic growth, Michael Turner, head of global strategy and asset allocation at Aberdeen, said on Tuesday.

He recommended buying into real-estate investment trusts and funds that hold property, without giving specific names.

‘People should allocate more money than they do now in real estate as a hedge against inflation,’ Mr Turner said. ‘Real estate, whether or not there’s inflation as a result of macro policy, is attractive in its own way.’

China, India and Australia have tightened monetary policy to curb inflation as the global economy recovers from the worst recession since World War II. Interest rates in advanced economies can remain accommodative for an ‘extended period’, while policy in ‘a number of emerging economies’ may have to be tightened ‘relatively soon’ because of signs of accelerating inflation or credit booms, the International Monetary Fund said in a Jan 19 staff note.

Minutes from the Australian central bank’s March meeting, released on Tuesday, said that policymakers raised borrowing costs this month for the fourth time in five meetings because the risk of faster economic growth stoking inflation outweighed the potential for renewed financial market turmoil.

In the US, where the housing market is still flat, the Federal Reserve on Tuesday repeated its pledge to keep its main interest rate near zero for an ‘extended period’.

It is a different story in Asia and Britain. UK house prices rose in February at the fastest pace in more than seven years, research group Acadametrics Ltd said on March 12. Nine of 10 Britons say that buying a home is a ’sensible investment’ even after the nation’s worst housing slump in three decades, a survey by YouGov Plc published on March 2 showed.

In Asia, property prices have risen as economic growth in the region outpaces the rest of the world’s. Hong Kong’s home prices surged almost 30 per cent last year, Centaline Property Agency Ltd said this month. Australian home prices jumped 13.6 per cent in 2009.

The World Bank forecast in January that the global economy would expand 2.7 per cent this year. China’s economy, the world’s third biggest, will top last year’s 8.7 per cent growth rate in 2010, the nation’s central bank estimated this month.

Singapore’s gross domestic product is forecast by the government to grow between 3 per cent and 5 per cent this year.

Source : Business Times – 18 Mar 2010