Trends in the Asia Pacific Real Estate Market

Trends in the Asia Pacific Real Estate Market

Despite some economic struggles last year, Asia has managed to remain strong on the real estate market, occupying one of the leading spots with good rates and rising transaction volumes. This year, a new competitive trend is expected to take place, as the signs have already appeared, in the struggle investors have to get the best rated assets, going for the niche areas instead of the mainstream.

A general trend

A new move made by the large institutional investors is partnering with the big developers in China to build core assets. The capital flows in Asia have remained stable in 2013 despite a threat from the U.S. economic side. Bond and equity prices have dropped from recent peaks, but the real estate market hasn’t been affected that much, as it was sustained by the increase in sovereign wealth and institutional capital aimed at Asian markets. Another reason would be the fact that, for the first time, the markets in the West are attracting large flows of Asian capital of all types (sovereign wealth, institutional, insurance company and private money) in volumes never seen before and they are still expected to keep rising.

Japan

You won’t find that many foreign funds on the real estate market in Japan, even though Tokyo seems to be a preferred destination for international investors, as it hits a level so low it has never been seen before. The Japanese are very active on the market and are having the public equity markets up, the Japanese REITs are at their best to the net asset value, so there’s no doubt about it – the Japanese investors are in with the cash and they’re buying.

South Korea

There isn’t much news here, as the market for commercial property is large and liquid and if you don’t have someone you know inside the business, it’s difficult to get into this market. The domestic capital is high from life insurance companies and pension funds. There is no rental growth, so the cap rates have gotten to 5% and the interest rates are low. So, the situation is similar to the one in Japan, as there isn’t much room for foreign investors.

Hong Kong, Singapore and China

There are many foreigner investors in Hong Kong, but they don’t really get into the real estate business, as it seems that the situation resembles the one in South Korea. As Singapore is presently one of the best-developed countries, foreign investors are more keen to invest here as it seems a safer and more stable environment financial center. As the gross domestic products keeps changing and rising, so does the demand for commercial space, given the size of Singapore and everyone seems to want a piece of it. As far as China is concerned, the real estate market isn’t doing that well as there aren’t that many well-leased assets and if you find a good one, it’s too expensive. Maybe this is one of the reasons that Chinese investors have started branching out so much in the last years. Still, there are some foreign funds willing to compete with Chinese funds for the core assets in cities like Shanghai even at high prices.

Posted by Melanie Mendoza on Saturday May 24 2014, 8:34 AM EDT. All trademarks acknowledged. Filed under Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0