Asset yields across Asia Pacific face further compression in 2021, with tightening expected across various real estate asset classes and pricing adjustments in major metropolitan areas. Interest rates in Asia Pacific have fallen sharply over the last four years, between 30 basis points and 250 basis points. According to JLL, this backdrop provides a conducive environment for real estate investments and support for capital values, but while asset yields have compressed to some extent, current low rates have not been fully priced in.
JLL Research noted that, while bond yields in Australia, Singapore and Hong Kong retraced 70 basis points year-to-date, borrowing costs in these countries remain 60 basis points to 125 basis points lower than 2018 levels. Furthermore, analysis shows that select markets have priced in some rate increases, with investors more cautious about the rental outlook in Sydney but more comfortable with rents bottoming out in Hong Kong.
“A low-rate
