Extract from View From Asia, fDi magazine, Financial Times, London, Jan 2018
Colliers International reported that Asia property sector has been driven by economic growth and low real interest rates. Higher trade flows and e-commerce will continue driving industrial and logistics property in China, Hong Kong, Singapore and India, with industrial property emerging as a key organised asset class across Asia. Risks to this sector is a financial downturn affecting equity and bond markets, as well as reduced demand for leased CBD office space from large financial tenants due to faster than expected adoption of artificial intelligence and consequent workforce reduction programmes.
Forbes ranking of top 10 Asia cities for real estate investment in descending order are Singapore, Shanghai, Hong Kong, Beijing, Guangzhou, Ho Chi Minh City, Tokyo, Taipei, Jakarta and Kuala Lumpur.
Several trends are emerging in Asia, reported Urban Land Institute. Excess liquidity, where local sovereign and institutional funds are increasing their investment in property, is increasing the competition in assets. This in turn increases the competition in value add space, shared workspaces and previously less focused asset classes like data centers, affordable housing projects, build-to-rent (or co-living) facilities, and student and senior housing. Logistics assets remain top favourite asset type due to Asia’s long term structural under supply.
Vietnam and India are top investment destinations due to expected high economic growth. China, biggest source of regional property investment outflows, has experienced regulatory restrictions, particularly in Australia. Sydney and Melbourne continue to offer significant rental growth while Tokyo still offer high yields. Singapore, with its hitting bottom on office and residential sectors, has seen renewed investor interest and is currently SE Asia’s hottest property market.
As for Asian retail property sector, some retailers address e-commerce challenge and mall failure risk by changing tenant mix and investing in neighbourhood retailing facilities.
In capital markets, banks are also beginning to tighten lending requirements in some markets, in particular in Australia and China.
Asia Pacific Real Estate Association wrote that due to Asia’s 44% urbanisation and a growing middle class consumer powerhouse, the implications for Asia real assets remains positive.
So long as the regional economy remains robust with workforce reduction programmes growing slowly, the Asia property sector will continue to perform well.
