Investment volumes in Asia this year have hit fresh record highs, with more investors piling into real estate. 

Asia Pacific real estate transaction volumes hit US$42 billion in the second quarter, up 26% from the same period in 2017, according to JLL’s latest Global Capital Flows research. First-half volumes were at US$81 billion, up 29% from a year earlier, and the highest level on record. 

The pace of deal-making in APAC has raced ahead of other world regions, which started their recovery from the previous cyclical downturn earlier. The boost from APAC has had an impact on global volumes, which in the first half of 2018 rose 13% to US$341 billion. That total was 13% higher than 2017 and the best first-half performance since 2007.

Transaction volume growth in Asia Pacific is being driven by “a continued cyclical recovery in developed markets such as Australia and Japan alongside secular growth – from a low base – in developing markets,” says Pranav Sethuraman, from JLL’s global capital research team. Nearly all Asia Pacific’s largest markets recorded positive investment growth in the first half, with Hong Kong, South Korea and Australia emerging as top performers with a combined average growth rate of 110% over 2017. And despite double-digit declines in the second quarter, overall activity was up by 3% and 7% in China and Japan respectively due to their strong start to the year.

However, the biggest potential for growth comes from the more immature markets where a number of factors – such as lack of transparency – are playing a role in impeding investment, says Sethuraman. 

Many of Asia’s markets have a full house of positive factors for the long-term growth of real estate as an investment class. For example, India, Indonesia and Vietnam have populations of 1.3 billion, 261 million, and 93 million respectively and all have a growing middle class, rapid urbanisation, a youthful demographic and improving governance and real estate transparency.

According to Stephen Wyatt, Country Head of JLL Vietnam, says “Vietnam continues to attract significant interest from foreign investors in all sectors of the property market. The market is becoming more attractive recently on the back of a rise in purchasing power, growth in consumer retail spending, and an expansion in urban population and young demographics.” Furthermore, as JLL’s Global Real Estate Transparency Index (GRETI) 2018, it is noticed that Vietnam is moving towards the cusp of the next tier of transparency. Vietnam has now the essential components that enable the country to move forward and reach their full potential for sustainable development in the future.

Developed Asian markets, especially Australia, Hong Kong and Japan, have attracted significant cross-border capital from within and without the region and the cycle in each seems to have further to go.

Despite modestly rising interest rates, JLL believes there is further room for yield compression for prime real estate as, throughout the current cycle, yields appear to be more dependent on market fundamentals rather than interest rates. With Asia Pacific’s positive fundamentals, it has the best prospects for performance and for attracting more investment.

Source: JLL

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