CapitaLand Investment, a leading Singaporean property investment manager, said that real estate investors are being careful and prudent in their deployment of capital.
In the first half of the year, CapitaLand Investment's profit fell 38% to $433 million Singaporean dollars, due to a lower pace of "capital recycling" this year, which the firm had adopted as a cautionary stance against.
Many of the company's peers are being very careful, patient and prudent, according to the CFO.
A lot of uncertainty is out there. Interest rates are rising rapidly across many countries in response to supply side and demand side inflation, which is something we haven't seen before.
We are so uncertain about what the next six to 12 months will hold on the macroeconomic side that many real estate and capital managers are being very careful about deployment of capital.Raffles City mall, operated by CapitaLand, in Chongqing, China, in 2019. CapitaLand Investment’s chief financial officer Andrew Lim said while revenue from properties in China has come off the boil, the company remains committed to investing in Chinese property.
The firms' capital deployment this year is expected to be less than last year's $12 billion.
According to economists, one sign of an economic downturn is the restraint that investors exercise over deployment of capital for new investments.
According to Oxford Economics, falling investments are often a key driver of downturns.
Around half of the decline in the Group of 7 gross domestic product in negative quarters came from investment, even though investment only averaged 20% to 22% of GDP.
Given the current concerns about a possible global recession, near-term trends in investment are important.
There is a risk of an investment freeze.
We can’t be a leading Asian real estate investment manager if we are not significantly invested in China. And we remain very constructive on China ... over the long term.
Business sentiment about future expansions of investments in Japan, the United States, and Germany have weakened even though some indicators show investment activity is still strong.
He said that the desire to invest in other economies has waned.
An investment freeze in the G7 later this year looks to be very real according to other indicators that hint at investment appetites.
There is a chance that a recession can be avoided.
While revenue from properties has come off the boil, CapitaLand Investment still intends to invest in Chinese property.
In the first half of the year, the company's returns from China suffered not just from slower asset recycling, but also from having to extend rental rebate to its retail property tenants.
We are starting to see a gradual change in the environment in China. In the long term, we are very confident, and we are long China.
If we aren't invested in China, we can't be a real estate investment manager. We are very constructive on China over the long term.