9 August 2010, Asia- The Asian real estate investment market showed signs of continuing to make steady improvement in the first half of 2010 with direct real estate investment in the region rising 136% year-on-year during the period to be recorded at an estimated US$30 billion.
Although activity levels rose significantly in virtually every Asian market as measured on a yearly basis, investment volume fell by 22% quarter-on-quarter in the second quarter as investors turned more cautious following the implementation of various measures by governments around the region intended to curb speculative activity. Worries over the fragility of the global economic recovery and the eurozone sovereign debt crisis also negatively impacted investor sentiment in the second quarter according to the CB Richard Ellis’s Asia Investment MarketView report covering the first half of 2010.
Japan was the most active market in terms of volume, accounting for 29% of total investment in the region. The US$8.8 billion worth of transactions completed in the country during the first six months of the year, a rise of 62% year-on-year, was only slightly below the all-time high recorded in the first half of 2007. There was a steady flow of small and medium sized transactions involving the acquisition of assets in Tokyo as the period witnessed growing interest on the part foreign investors looking to return to the market and expand their Japanese portfolios.
Land acquisition by developers increased significantly in the second quarter in Thailand. Buyers were condominium developers and AIA purchased a site from the Stock Exchange of Thailand to build an office building. Two completed buildings, the Future Park Bangkae and Fenix Tower were sold to local investors. There was no decrease in prices despite the unrest in Bangkok in April and May. The appetite from developers to acquire sites and investors to buy building increased in June. The Thai property market continues to be dominated by local investors and developers with very little foreign interest.
Hong Kong, South Korea and Taiwan all posted a strong quarter-on-quarter increase in transaction volume in the second quarter, rising by 33%, 81% and 79% respectively, as high net worth individuals and domestic buyers continued to display a strong appetite for prime investment property. Hong Kong recorded US$3 billion and US$4 billion of real estate investment transactions in the first and second quarter respectively, such that the aggregate total for first half year was approximately US$7 billion.
Korea witnessed a tepid start to the year but enjoyed a more active second quarter as a number of major acquisitions of office assets were completed in Seoul, collectively accounting for 95% of transaction volume. Total investment concluded during the second quarter reached US$1.5 billion, up 81% from the preceding quarter. In Taiwan, end-users and local insurance companies completed a significant number of acquisitions within the same time frame, with investment sales totalling US$951 million in the second quarter, up 79% from the US$532 million recorded in the first quarter.
In contrast to other major investment destinations in Asia, China registered a sizeable decline in transaction volume of 87% quarter-on-quarter in the second quarter as a series of cooling measures implemented by the government to expand housing supply and squeeze speculators.
The relatively small flow of deals which were completed during the period were largely accounted for by domestic investors.
“The region is experiencing an uneven recovery and the persisting mismatch between sellers’ expectations and buyers’ risk tolerance will continue to restrict market activity in the second half of 2010,” said Mr. Andrew Ness, Executive Director of CBRE Research Asia.
“However, the relatively steady level of activity witnessed in the first half could potentially be matched in the second half and total investment volume in Asia for 2010 could therefore reach around US$60 billion,” added Mr. Ness.
That said, the high level of outstanding corporate and government debt remains a cause for concern and continues to be viewed within the region as a potential downside risk. Nevertheless, the steady level of acquisition activity by both institutional investors and REITs, which jointly accounted for over US$5.6 billion or 43% of the total investment recorded during the second quarter, demonstrates that the Asian real estate investment market remains generally buoyant, although expanding at a slower pace than originally forecast.
Asian Direct Real Estate Investment Volume
Notes to Editors
1. Asia property investment sales volume/value is based on surveys carried out by CBRE Research Asia on major notable property transactions in major Asian cities.
2. CBRE Research Asia has adopted relevant measurements and definitions in calculating real estate investment capital flow figures in Asia (i.e. we only track publicly announced deals above a minimum threshold which are converted to US dollars using exchange rates recorded during each survey period.)
3. Investment volume excludes development site transactions.
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