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Asia Market Snapshot | Q4 2018

REGIONAL OVERVIEW

While 2018 ended on an unsettled note for many investors, cautious optimism continues to prevail in the face of economic and geopolitical uncertainty. Japan emerges this quarter as a market to watch, while liquidity and real estate demand in Hong Kong remains high. In Vietnam, industrial properties are high demand; Singapore sees robust tourism numbers boosting the hotel sector; and real estate activity in Taipei is expected to be concentrated on commercial properties.

From decentralization themes across Tokyo, and Beijing, to India, Indonesia and Thailand supporting recent reforms and improvements to infrastructure that have helped retain investor interest, the property markets across the region remain relatively vibrant, diverse and opportunistic.

 

REGIONAL TRENDS

 

> Japan emerges as market to watch

Period of continued optimism in real estate markets across the country is expected to remain stable, with foreign investors continuing to seek investments

> Higher interest rates cast a pall over the Hong Kong market

The Hong Kong Monetary Authority’s third base rate hike in 2018 pushed the benchmark interest rate to a 10-year high

> Seoul sets major milestone

Q4 2018 saw South Korea’s single largest real estate transaction ever - the acquisition of the Centropolis Tower in central Seoul for KRW1.18 trillion (USD1 billion)

> Taipei clocks new highs

Total commercial property transaction volumes rose to TWD80.9 billion (USD2.7 billion) in 2018, the highest since 2014, while land transaction volumes hit five-year highs at TWD182.2 billion (USD6.07 billion)

> Non-residential segments remain in focus in Singapore

Developer and investor interest has shifted to non-residential opportunities, in the wake of state-implemented cooling measures, coupled with the absence of government land sale tenders and collective sale transactions in the residential market.

Market Overview

Beijing

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There were 8 transactions recorded in Q4 2018 totalling USD4 billion. The office market continued to be the most active sector in Beijing, with 3 transactions totalling USD1.97 billion and representing 49% of total transaction volume in Q4.

Chengdu

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In Q4 2018, the overall vacancy rate of Grade A office buildings declined to 17.3%, dropping 2.7% q-o-q, and average rent rose 0.2% to RMB106.3 per sqm per month. While investors continued to track the market, there were no transactions in Q4.

Shanghai

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The office sector remained the top choice for investors as 19 (of the 23 deals) in Q4 were office projects or mixed-use projects with large office components, totalling USD8.08 billion and accounting for 92% of total transaction volume in Q4.

PRD

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Nine transactions in Shenzhen and Guangzhou with a total value of USD2.3 billion closed in Q4. The PRD's rapid development and the influx of new talent have made it the fastest-growing region among Tier I cities in terms of overall consumption power, appeal to investors to retail properties.

HONG KONG

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Sentiment in Hong Kong has been dampened by rising interest rates, with HIBOR (Hong Kong Inter-bank Offered Rate) reaching a 10-year high of 2.39%, and falling stock market. However, liquidity remains robust and demand is expected to remain high in 2019.

TaiWAN

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The office sector remained the key market driver in Q4. Office and industrial buildings contributed to approximately 75% of total transactions. Due to limited stock, office buyers considered not only existing stock but also forward purchase opportunities.

Singapore

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The investment market in Singapore continues to be led by the office market, as state-implemented cooling measures, coupled with the absence of government land sale tenders and collective sale transactions, contributed to a relatively quiet residential market. This in turn resulted in a shift in developer and investor interest to non-residential opportunities.

INDIA

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New government reforms and policies in India’s residential real estate market increased affordability and transparency among buyers, stabilizing the market to a certain extent in Q4. Co-working continues to gain momentum, while private equity investors maintained a bearish stance.

Indonesia

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Despite sluggish home sales due to the upcoming presidential election in April 2019, middle-low to low-cost landed housing and apartment projects proved to be the most positive sectors of Q4 2018, with infrastructure forming the source of primary investment activity.

Myanmar

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Further liberalization of Myanmar’s insurance sector will continue to boost the country’s office market. Despite an expected increase in stock, rental rates are expected to remain stable. The retail sector continues to remain as a highly viable investment option, as city-wide occupancy rate reaches an average of more than 90%.

Philippines

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The Philippines remains one of the fastest growing economies in Asia, with sustained growth spilling over into segments such as office and residential. Office space continues to be fueled by demand from outsourcing firms and flexible workspace operators, as both local and foreign investors drive residential demand in key business districts and peripheral areas.

KOREA

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Amid concerns of macroeconomic uncertainty and declining occupancy rates, investors are seeking safe properties with long-term leases. Apart from focusing on core office buildings, value-add remains the main strategy to counter falling returns hit by increased interest rates.

Vietnam

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Industrial land in the surrounding areas of Ho Chi Minh City remains a hot pick for investors, as the construction and industrial sectors continue to be the main contributors to Vietnam’s GDP, growing at 8.61% and 6.78% y-o-y respectively.

JAPAN

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Japan emerges as the market to watch, as investors pursued suitable opportunities in Q4 2018 in the wake of continued optimism and belief in the stability of the country. This positive momentum is expected to trickle through to Q1 2019.

Thailand

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The strong infrastructure foundation built by the Thai government in recent years has provided a good platform for growth, as interest in inward investment remains high. Strong market sentiment is expected across commercial sectors such as office, hospitality and residential.

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OUR INSIGHTS

Asia Market Snapshot | Q3 2018

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Market sentiment has become more cautious in some key markets due to more adverse economic and policy conditions.

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.

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