INVESTORS seeking the cheapest property stocks are buying in Japan, Germany and China after a two-year tumble in shares of United States home builders.
Japanese land prices are rising for the first time in 16 years, yet shares of developers trade at less than a third the global average, according to UBS AG.
The start of real-estate investment trusts in Germany is spurring demand for housing stocks valued at about half the worldwide mean.
China's new laws protecting home owners and Brazil's record-low mortgage rates are attracting money managers looking for the fastest growth, according to Bloomberg News.
Third Avenue Management LLC, ABN Amro Holding NV and Alpine Mutual Funds, which together oversee US$20 billion in real-estate stocks, bought shares of Mitsubishi Estate Co in Japan, Germany's IVG Immobilien AG and Cyrela Brazil Realty SA Empreendimentos e Participacoes for returns of as much as 22 percent this year.
In the US, real estate and home builder indexes dropped at least 4.7 percent on forecasts that housing prices will fall for the first time in 16 years.
"We're past the period of time where the rising tide has lifted all boats," said Sam Lieber, who oversees the US$1.75 billion Alpine International Real Estate Equity Fund. "Clearly we see better opportunities abroad."
Almost 90 percent of the fund's investments are outside the US, with the largest single country allocation in Japan. Lieber also has been adding to holdings in Brazil.
Investors seeking returns with a moderate amount of risk should put 33.5 percent of their real-estate stock holdings in Europe and 14.6 percent in Asia, said a study released yesterday by the National Association of Real Estate Investment Trusts in Washington and Chicago-based Ibbotson Associates Inc.
A model portfolio from 1990 to 2005 would have recommended 8.1 percent in Europe and 4.1 percent in Asia, the study said.
The National Association of Realtors said this month that the median prices of new US homes will drop this year for the first time since 1991.
Japanese and Hong Kong property developers will offer the highest returns over the next 12 months, at an estimated 19 percent and 16.6 percent, respectively, according to Zurich-based UBS, the biggest money manager for wealthy investors.
