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Last updated: Monday, September 25, 2017

 

Asia-Pacific Real Estate Market Appeals to Foreign Investors

Posted: Thursday, May 18, 2017


The Asia-Pacific real estate market in general and the Vietnamese market in particular are still a hotspot for investors in the world. According to Cushman & Wakefield’s latest The Atlas Summary 2017; real estate investment volume in Asia-Pacific is expected to hit US$611 billion in 2017 and Vietnam is still one of the hottest places.

According to the report, while this amount is only a marginal 1.6 per cent increase over 2016 (US$601 billion), it accounts for 44 per cent of the total global real estate investment volume expected for 2017, of US$1.39 trillion.

Ms Sigrid Zialcita, Managing Director of Asia-Pacific Research at Cushman & Wakefield, said, “Record deals for office buildings and land sites punctuated the Asia Pacific investment landscape last year, with notable deals sealed by developers mainly in the core markets, demonstrating continued strong appetite for assets and build-to-core opportunities.”

In 2016, developers paid top prices in Singapore and Tokyo, while Mainland Chinese developers continued to push price boundaries in China’s top tiered cities and Hong Kong. Chinese developers also tightened its grip over development opportunities in the territory, accounting for over 50 per cent of land sales since 2016.

“This positive investment momentum in Asia-Pacific is expected to continue in 2017, with good economic performance sustaining investor interest and delivering a steady increase in demand for modern commercial space from local, regional and global investors. However, given the uncertain economic environment, it means that global diversification in core real estate should remain a favoured strategy even as some investors grow bolder in experimenting in new markets,” Ms Sigrid added.

In 2017, the office sector in core markets such as Sydney, Melbourne and Tokyo remain favoured. Core and core plus strategies will continue to target Japan and Australia, but with supply limited in these markets, the interest is likely to shift to other investment targets such as core cities in China, Singapore and South Korea, as well as core-plus markets in the secondary cities of core countries. Outsourcing trends will continue to push demand in the leading tech hubs while co-working will add to demand in gateway cities. Some of the leading emerging market opportunities will be found in Asia, particularly if economic conditions stabilise and reforms continue. The Asia-Pacific region overall is in a stronger position than in past cycles with economic resilience generally up.

Patterns of performance will however polarise further as a function of macroeconomic risks. The changing and polarising nature of the monetary cycle and quantitative easing will add to uncertainty. Investors need to focus on the fundamentals and on what makes a city and a property work for its occupiers. Hence, the current pressures on the market are only going to increase: be that the pressure to find stock, the pressure to raise prices or the pressure to find new areas of opportunity.

“The changing monetary cycle is an added dynamic that will likely define the investment scene in the region this year. The weight of capital chasing core assets will remain undiminished and investors will have to broaden their approaches and diversification strategies to take into account opportunities that reflect changing trends in demographics, technology, mobility and urban function. Next core strategies and counter-cycle investing will gain credence as the region is set to enter a new phase in the investment cycle,” said Ms Zialcita.

Mr Ben Gray, Head of Capital Markets Department, Cushman & Wakefield Vietnam, said, “In 2016, Vietnam witnessed record capital inflows into the real estate market as investors placed high expectations on margins in this market. Such margins were driven by existing assets originated from emerging markets with the strongest macroeconomic fundamentals in the region. We expect that Vietnam will continue to attract investment capital in 2017, evidenced by FDI pledged and disbursed in the first quarter of 2017 rising 27 per cent over the same period of 2016 to reach US$3.4 billion. The investor confidence in the Vietnamese market is rising and the market is considered one of the attractive destinations for investment flows.”

Luong Tuan

 








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