Asia Pacific property market softens in third quarter; China bucks the trend with 28pc growth

PUBLISHED : Tuesday, 08 November, 2016, 4:33pm
UPDATED : Tuesday, 08 November, 2016, 7:58pm

Commercial real estate investment in Asia Pacific has seen a general slowdown across the region but appetite for mainland Chinese real estate remains robust, according to analysts.

Completed sales of properties in the region, excluding development sites, totalled US$30.4

billion in the third quarter of this year, 1.1 per cent weaker than the same period a year earlier, according to data from research and consulting firm Real Capital Analytics (RCA ).

The region saw fewer active buyers and completed deals in the July to September period, the result of investor caution and a mismatch in pricing expectations between buyers and vendors.

For the first nine months of the year investment declined 18 per cent year on year to US$84.3 billion.

“High asset prices as well as economic, financial and political concerns, that caused a slowdown in activity in the first half of the year, continued to impact investment decisions in the Asia Pacific region,” said Petra Blazkova, RCA’s senior director of analytics for Asia Pacific.

China, however, bucked the trend as it outperformed all other markets in the region during the third quarter, overtaking Australia as the second most active market by transaction volume, he said.

There were US$10 billion in direct real estate transactions recorded in the third quarter, representing 28 per cent year on year growth.

Total transaction volume in Hong Kong reached US$2.8 billion during the quarter, thanks to purchases by mainland Chinese investors.

Property consultant JLL said deal volumes in China in the third quarter were 56 per cent higher compared with levels in the previous quarter.

“Throughout this quarter mainland Chinese corporates dominated transactions and investors continued to favour en-bloc office properties, with Chinese demand supporting rents,” said Joseph Tsang, JLL’s managing director and head of capital markets for Hong Kong.

“What’s more, high pricing recorded in recent land sales and office deals will likely lead to a reset of sales pricing benchmarks in the near term,” he said.

JLL expects the region’s markets to stay resilient and real estate assets to remain attractive compared to other asset classes, especially in times of political and economic uncertainty.

“We see continued institutional appetite for real estate in the region. From a business perspective, we expect steady deal flows in the next 12 months but ongoing stock shortage,” says Stuart Crow, head of Asia Pacific capital markets at JLL.