Savills has released its latest Asia Pacific Investment Quarterly for second quarter 2018. Here are just some of the highlights for developed countries and locations:
Australia
Now in the country’s 26th consecutive year of economic growth, Australia’s direct property market performance has extended its gains over equities markets (based on MSCI data). During the past five years, the nation’s commercial property sector has delivered an average unlevered total return of 72.4 percent (income and capital returns), while Australian equities posted 42.9 percent over the same period.
“We are now at a point in the commercial property sector, where we are seeing a shift in focus to income growth,” states the report. “Over the last three years, capital returns have accounted for the majority of total returns, with record capital value appreciation, particularly in Sydney and Melbourne’s office markets, driving market yields to record low levels.”
Hong Kong
In Hong Kong, “mainland money remains the dominant force and the focus this year has been on the office market while a recovering retail sector is gaining appeal,” notes the report.
Prime street retail rents rebounded in second quarter 2018, with investors demonstrating renewed interest in such assets in core locations. This rebound signals the end of a nearly four-year down cycle and a 50 percent correction. But investors remain cautious on prime street retail as spending habits by tourists from mainland China trend toward more affordable luxury and necessity items.
Japan
Continued loose monetary policy in Japan is likely to encourage steady growth in the nation through 2020, particularly as central banks around the world tighten their monetary policies and raise interest rates. With this and strong property fundamentals, investors continue to display confidence in Japan by targeting first- and second-tier cities.
But preliminary data for second quarter 2018 shows lower total investment volume than expected, with buyers uncomfortable with higher asking prices as the cycle continues to expand, as well as with the looming potential of trade wars.
Singapore
The city-state’s property market saw S$10.59 billion ($7.77 billion) in transaction volume during second quarter 2018, 5.3 percent more than the S$10.06 billion ($7.38 billion) recorded during the first quarter. Investment sales of residential land and homes came in at S$6.88 billion ($5.05 billion) in deal volume during the second quarter, a drop of 14.5 percent quarter-on-quarter, likely due to property market cooling measures implemented in July.
Even with this decline, this sector continued to account for the majority of total sales value (65.0 percent) during the second quarter.
South Korea
During second quarter 2018, South Korea’s property market was more active than ever, with first-half 2018 transaction volume already at 70 percent of the investment volume posted during fiscal year 2017, which was the nation’s most active year.
Total office deal volume reached KRW 3.8 trillion ($3.4 billion) in the second quarter, nearly triple the 10-year average for the same period. Transactions of core, stabilized buildings with roughly 90 percent occupancy rate were prevalent, leading to higher unit prices for those sales. In addition, a number of assets broke pricing records in their districts.
