The report, called Emerging Trends in Real Estate Asia Pacific 2014, says the fundamentals of the real estate market will remain strong next year across the region, arguing that unlike some other assets, property has been broadly unaffected by moves by the US Federal Reserve to taper, or reduce, monetary stimuli.

In a ranking of city investment prospects for 2014, with 23 cities in total, Tokyo is first, followed by Shanghai, Jakarta, Manila, Sydney, Guangzhou, Singapore, Beijing, Osaka and Shenzhen. Hong Kong is ranked at 18^th.

“While Asia’s robust market has been accompanied by higher prices and lower yields for core products, investors have reacted not by pulling away from real estate in Asia, but by finding new ways to make the numbers work, including a focus on specialised property types such as senior care or logistics, and on opportunities in emerging markets,” said ULI North Asia chairman Raymond Chow.

“We do expect some headwinds as rising interest rates compress yields further, but overall, we are very encouraged by the optimistic view reflected in the report,” he said.

“If we look at new ways to enhance returns, we can see investors are trying to enter at the development level and an increasing number of co-invested development deals are now being struck,” said K K So, the Asia Pacific real estate tax leader at PwC Hong Kong. 

“Several large institutional players that have opened offices in Asia in order to gain access to direct deals have opted to co-invest in development sites as a means of securing core assets that would otherwise be unavailable or be too expensive. This is something of a departure from normal practice at institutional funds, but is being driven mainly by necessity. Besides, we also see a trend towards lower opportunistic returns and investors are opting for longer investment windows,” he said.