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Asia Market Snapshot | Q3 2018

REGIONAL OVERVIEW

Market sentiment has become more cautious in some key markets due to more adverse economic and policy conditions. In Hong Kong, policymakers recently raised the key lending rate; Singapore has introduced more cooling measures targeting the residential sector; and authorities in Beijing unveiled new policies during the quarter tightening development restrictions in core areas. Nonetheless, we expect developers and investors to remain cautious overall rather than retreat from the market completely.

From regulatory changes that promise to pave the way for further investment in the retail sector in Myanmar and the Philippines, to planned mega mixed-use developments in Thailand and the opening of the Guangzhou-Shenzhen-Hong Kong Express Rail Link in the Pearl River Delta, there is a steady pipeline of opportunities emerging that will continue to draw interest even in a more challenging regional climate.

 

REGIONAL TRENDS

 

> JAPAN CONTINUES TO DRAW INVESTORS

A wider yield gap continues to attract overseas investors; moving forward, focus will continue to be Tokyo’s office market

> Acquisition activity surges in Seoul

15 major deals transacted in Q3 with an expected aggregate value of over KRW12 trillion (USD11.4 billion)

> Hong Kong industrial market shows strength

Industrial transaction volumes jump 117% quarter-on-quarter

> Infrastructure improvements enhance appeal of Pearl River Delta

Total transactions climb 15% from previous quarter to USD1.38 billion

> Vietnam emerges as an investment hotspot

USD5.5 billion foreign direct investment in the property sector in the first half of 2018 exceeds combined 2016-2017 total

Market Overview

Beijing

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Three transactions were recorded in Q3 2018 totalling USD396 million. Due to the encouraging policy environment in the rental apartment market, investors also actively explored opportunities in this sector in Q3 2018.

Chengdu

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As one of China’s national central cities, Chengdu has continuously increased investment in urban infrastructure. Investors continued to focus on development projects as the top priority in the Chengdu market, with both transactions falling into this category and completed by domestic developers.

Shanghai

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A total of 16 transactions were recorded in Q3 2018, totaling approx. USD1.14 billion. The rental apartment sector has been quite active during this period. The office sector, together with business parks, remained the focus with 7 transactions, or 49.5% of the total transaction value, in Q3 2018.

PRD

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Urban renewal projects and infrastructure investment continued to be the major accelerators for the Greater Bay Area’s (GBA) development, including in the Pearl River Delta (PRD) area. There were 10 transactions totalling USD1.38 billion in Q3 2018, a 15% increase over the previous quarter.

HONG KONG

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The office and industrial sectors show no signs of slowing, with persistent investment interest in core and decentralised markets among investors and end-users alike.

Taipei

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Land transactions remained active, recording total volume of TWD43.4 billion (USD1.45 billion) in Q3. The land transaction volume in the first three quarters of 2018 totalled TWD137.2 billion (USD4.57 billion) exceeding last year’s total volume.

Singapore

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The commercial and industrial sectors dominated Singapore’s investment market in Q3 2018. REITs and private funds continued to enhance their existing portfolios through acquisitions and divestments. The residential sector took a back seat as developers focused on launching their projects and looking at the encouraging take-up rates.

INDIA

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Institutional funding has gained momentum in the commercial real estate sector in particular, attracting over 60% of investments. Warehousing realty is also becoming attractive, and there are also early signs of recovery in the residential segment.

Indonesia

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Despite a short-term slowdown in apartment sales (all classes) and fewer new office and apartment construction projects, foreign developers and investors continue to pursue new opportunities to establish joint ventures and lower-risk market entry strategies. Foreign developer interest is concentrated in the residential apartment space.

Myanmar

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The retail market remains one of the strongest sectors in Yangon with a 90% occupancy level sustained over recent years. Lease rates have also consistently increased, albeit at marginal levels. Destination retail establishments geared towards recreation and entertainment will bode well for the market as these appear to be an attractive offering to many locals.

Philippines

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Total office transactions for the first three-quarters of the year have already reached nearly 900,000 sq m. Given the current trend, net take-up is expected to breach 1 million sq m by the end of 2018. Office space demand for the remainder of the year will be sustained by strong pre-leasing activities.

Seoul

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We’re seeing a positive trend in transactions this year. In the third quarter of 2018, 15 major deals were transacted. There is a risk that current sales negotiations may drag on; however, if the expected sales are completed successfully this year, the aggregate transaction size is expected to exceed KRW12 trillion (USD11.4 billion).

Vietnam

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Vietnamese real estate developers are seeking foreign capital and we expect the already record levels of FDI into the real estate sector to increase further. The USD$5.5 billion invested in the first two quarters of 2018 has already surpassed the total FDI committed in 2016 and 2017 combined (USD$3.7 billion).

JAPAN

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Most market indicators remain strong with some exceptions in the retail and residential segments. Market sentiment remains cautiously optimistic due to the central bank’s near zero interest rate policy. A wider yield gap relative to other markets will continue to attract steady overseas capital.

Thailand

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Thailand’s investment market remains active with the highest levels of capital being deployed in the Bangkok CBD and along key mass transit routes. There is a strong focus on residential development, and opportunities in the hospitality sector.

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OUR INSIGHTS

Asia Market Snapshot | Q2 2018

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Robust economic growth and positive geopolitical signals sustain activity in the regional property markets

ASIA MARKET SNAPSHOT | Q1 2018

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In Q1 2018, robust growth and forward-looking government policies boost Asia's overall property sector.

ASIA MARKET SNAPSHOT | Q4 2017

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In yet another display of Asia’s dynamism, 2017 ended with a flurry of activity across the region that showed few signs of abating as we entered the new year.

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