This is review of current developments in key real estate market in Asia Pacific with deep insights into the following twelve regions: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Singapore, Thailand and Vietnam. For each market, there is a macroeconomic perspective and an overview of the office market, the retail market and residential market.
Australia: Strong performance leading to market recovery
China: Accepting slower growth
Hong Kong: Lower rate of unemployment leading to economic growth
India: Decoding the government’s vision of ‘Housing for all by 2022’
Indonesia: Increasing domestic consumption and urbanization stimulates growth
Japan: The continuous expectation of market recovery and the favorable financing environment
Korea: A cautious year for recovery
Malaysia: Interesting yet challenging times ahead
New Zealand: Robust outlook resulting from continuing economic growth and inbound migration
Singapore: Population growth driving the real estate market
Thailand: Political and economic recovery expected to drive real estate growth
Vietnam: Signs of recovery seen through uncertainties
The Australian property market experienced a very active year in 2013, with commercial property recovering to pre-global financial crisis levels. Activity levels in 2014 continue to remain buoyant, with increasing levels of interest in properties being marketed.
The GDP growth rate in China continued to slow in the first quarter of 2014. Nationwide demand for office space rebounded in early 2014 and rents flattened out. Affected by tightened lending market, the volume of newly built apartments in the residential market decreased in the first quarter of 2014.
The economy grew 2.5 percent year-on-year in the first quarter of 2014 with a tight labor market.1 During this period, Hong Kong Island’s leasing market showed improvement with an increase in net absorption of net free space. Activity, though, in the retail leasing marketing was strained, particularly in the street shop segment. The price index for mass market residential market showed a slight increase while prices in the luxury sector declined 1-2%.2
Demographic trends suggest that India is on the verge of large-scale urbanization over the next few decades. India’s urban population is expected to reach 810 million by 2050.3 Housing plays an important role in accommodating the strong urban growth in India. Encouraging private sector participation in developing affordable urban housing requires a coordinated effort by the central and state governments.
The largest economy in Southeast Asia and one of the world’s emerging market economies, Indonesia is experiencing rapid growth in the property market, supported by soaring domestic consumption. The retail market has been experiencing steady sales of 5-6 percent for over a decade, prompting international retailers to expand their footprint in the country.4 With the steady growth in visitors, the hotel market in Jakarta has had increased business activity as well.
The Japanese economy is expected to continue growing as a result of the lax monetary policy and fiscal stimulus put in place to revitalize the Japanese economy. The rent in prime office market properties has increased 2.3 percent between first quarter 2013 and first quarter 2014 according to Mitsubishi Estate. The expected yield on shopping center premium retail stores was hovering above 6 percent.
The economy recovered steadily in the first quarter of 2014. Rent of grade A offices in Seoul increased about 1% in the first quarter of 2014.5 Specialty store retailers are driving growth in the retail market. Since entering the Korean retail market, ZARA Korea (2008) experienced annual growth of 56 percent, while H&M (2010) and UNIQLO (2006) saw 55 percent and 81 percent growth respectively.6 The hotel market is experiencing increased investment as institutional investors seek alternative real estate investment to diversify their portfolio.
With increasing income levels, strong foreign direct investment and the government’s plan to increase the population of Kuala Lumpur to 10 million from the current 6 million by 2020, the commercial real estate sector in Malaysia has an overall positive outlook. Nevertheless, the real estate sector is a challenging one, with increased competition, higher construction costs, tighter fund lending regulations and higher logistics costs. The sector is made even more challenging by the recent imposition of new regulations to curb property speculation such as higher real property gains tax (RPGT), the implementation of goods and services tax (GST) and the banning of interest capitalization schemes.
Following real GDP growth of 3.3 percent in the period up to March 2014, 3.8 percent growth is forecast in the year to March 2015.7 The overall scenario in the office market is positive, with rents for both prime and secondary offices expected to rise due to the limited number of developments. There has been a decline in vacancy rates, indicating greater demand for office space. The nationwide median housing price hit NZD440,000 in March 2014, before dropping to NZD416,000 in July 2014.8
In the first quarter of 2014, a stronger export demand supported economic expansion, with real GDP growth at 4.9 percent year over year.9 With a shortage of grade A office space, the average rent for grade A properties was 5.5 percent higher at SGC9.9 per square foot in first quarter 2014, compared to fourth quarter 2013.10 Driven by a strong and increasing demand for new retail space, the total supply of retail space in Singapore is likely to increase to 5.65 million square feet by the end of 2017.11
In 2013, Thailand’s economy grew at 2.9 percent,12 with exports, household consumption, investment and government spending all witnessing sluggish activity.13 The ongoing political conflict has had a detrimental impact on business, thereby negatively affecting the office market.
Total GDP growth in 2013 was estimated at 5.42 percent, marginally lower than the 5.5 percent target set by parliament, but still higher than the 2012 rate of 5.25 percent.14 To stimulate the property market and resolve the bad debt situation, the government announced a new loan scheme for homebuyers and property developers to borrow at an annual maximum 6 percent interest rate for a period of at least 10 and 5 years respectively.15
1 ‘First Quarter Economic Report 2014’, Government of the Hong Kong Special Administrative Region, May 2014
2 ‘Property Times: Hong Kong Q2 2013 – Strong interests in en-bloc offices’, DTZ, 15 July 2014
3 ‘World Urbanization Prospects: The 2014 Revision’, United Nations, Department of Economic and Social Affairs, Population Division (2014), July 2014; KPMG in India analysis
4 ‘Retail Sales Survey’, Bank Indonesia, May 2014
5 ‘Seoul MarketView – Q1 2014’ CBRE
6 ‘Spotlight – Seoul Retail Market, 1Q 204’, Savills
7 ‘Pre-election Economic and Fiscal Update 2014’, New Zealand Treasury
8 ‘Market Facts Graph – National’ Real Estate Institute of New Zealand, 14 August 2014
9 ‘Labour Market, 2013’, Ministry of Manpower, 14 March 2014
10 ‘Marketbeat Office Snapshot – Singapore Q1 2014’, Cushman & Wakefield
11 ‘Monthly Digest of Statistics Singapore’, Urban Redevelopment Authority, June 2014
12 ‘Thailand: 5-year Forecast table’, EIU, 27 August 2014
13 ‘Thailand Economic Monitor’, The World Bank, February 2014
14 ‘Vietnam’s top 10 economic events of 2013’, Tuoi Tre News, 6 January 2014
15 ‘2013 inflation rate to be kept at 8 percent’, Voice of Vietnam, 2 December 2012