Property sales set to flatten out in Asia Pacific

PUBLISHED : Wednesday, 01 June, 2011, 12:00am
UPDATED : Wednesday, 01 June, 2011, 12:00am


Property sales in the Asia Pacific - half of which are accounted for by the mainland market - are expected to be flat this year after hitting record levels in 2010.

In its latest edition of its Money into Property report, property consultancy DTZ estimates that investment in property in the Asia Pacific more than doubled last year to an estimated US$158 billion to overtake European sales and account for 46 per cent of total global transactions.

'It was a record and a fantastic year for property in the Asia Pacific,' said Hans Vrensen, global head of research at DTZ.

But that positive picture has changed and policy measures aimed at curbing speculative investment demand, as well as the earthquake in Japan, will mean that sales are likely to show little or no growth this year.

Vrensen said: 'The Japan disaster will be a setback for the market to some extent, and we think growth in transactions will probably be delayed by one or two quarters. That's why we forecast that volume in Asia will be flat this year.'

Property transaction value amounted to US$20.5 billion in Japan last year, which was 13 per cent of the Asia Pacific.

Vrensen said this forecast had nothing to do with the fundamentals of the region which remained positive, and China - where transaction values reached US$90 billion last year, accounting for 57 per cent of Asia Pacific sales - would help offset the slowdown in the wider region.

Also helping to offset a slowdown in residential demand would be increased investor appetite for mixed-use and retail investment, said Francis Li, head of investment for Greater China at DTZ. 'Residential continued to dominate the market in 2010, but in the face of increasing policy controls to cool the housing market, investors are showing a greater interest in mixed-use and retail investment. Given ongoing economic development and a maturing property market we expect that the share of investment in commercial properties will grow,' said Li.

While investment in the Asia Pacific was likely to show little or no growth, global investment transaction volumes are expected to grow by 9 per cent this year to US$372 billion. That would follow a 76 per cent increase to US$342 billion last year.

It estimated that there was some US$986 billion of capital available for investment in commercial property over the next three years.

'We foresee continued recovery in Europe as further supply of stock is provided to meet the ample demand,' said DTZ in its report. It expects a 20 per cent rise in European property sales to US$164 billion; United States sales are forecast to rise by 6 per cent to US$50 billion.

According to CB Richard Ellis, Japan was the most active market in terms of volume in the first quarter this year, accounting for 37 per cent of total investment in the Asia Pacific.

While the March 11 earthquake is expected to slow investment activity in the short term, CBRE says it has seen no change in investment policies and few deals have been cancelled.

In the first quarter, transaction volume in the Asia Pacific fell 2.4 per cent to US$14.4 billion, CBRE's Asia Pacific Capital Markets report said.

'We have seen that core real estate assets are still in strong demand across the Asia Pacific,' said Greg Penn, CBRE executive director of investment properties in Asia.

'Global real estate investors including private equity, pension funds and real estate investment trusts (reits) are taking advantage of the still low financing costs on prime assets and continue to tap into the growing pool of capital looking to secure or increase presence in the Asia Pacific region.'