Savills Research May, 2024: Asia Pacific Q1/2024 Investment Quarterly
Asia Pacific’s real estate markets remained muted in the first quarter of 2024. Regional investment volumes fell 18.6% compared to the same period in 2023. China’s ongoing debt issues and low consumer confidence hindered investment activity. Additionally, interest rates are unlikely to reset to 2019 levels in the near term, and bid-ask spreads remain wide. Nonetheless, emerging markets in Southeast Asia, including Vietnam and Malaysia, performed well. With the election cycle coming to a close, political stability should be a positive influence in the coming quarters.
China Looks to Temper Ongoing Property Crises with Policy
Despite weak consumer sentiment and low investor confidence, China posted strong GDP growth in 2023. The debt and real estate crises, however, continued into Q1/2024. Recent policy initiatives offer some positivity for the sector. Rates were cut in February, and access to loans for domestic developers was expanded. The Ministry of Housing and Urban-Rural Development of the People’s Republic of China and the National Financial Regulatory Administration coordinated mechanisms for urban real estate financing. Roughly 6,000 projects are underway. Offices faced headwinds in Q1, but retail, multifamily, and hotel investments reported growth.
South Korea and Japan Shine in Q1
Among the bright lights in APAC in Q1 were Japan and South Korea. In Japan, logistics continued to attract investment and residential rentals benefited from positive demographics. Hotels continued to thrive on the strength of solid tourist arrivals. After the BoJ normalised monetary policy, expectations are for increased volumes in the coming quarters.
South Korea’s office sector was one of APAC’s best performing of Q1. With an occupancy rate of approximately 96%, leasing and investment activity was robust. Over 70% of transactions were in the office sector. Investor sentiment continued to improve and volumes surged. Additionally, the bid-ask spread between vendors and purchasers narrowed. Taken together, these factors suggest volumes will rise in the coming months.
Emerging SEA Markets Continue to Show Resilience
APAC’s emerging markets beyond India continued the economic and investment resilience they started in Q4/2023. Malaysia carried its momentum in to Q1 and posted the highest transaction values the quarter since 2021.
Indonesia’s apartment sector remained under pressure and the Jakarta office market was impacted by an increase in supply. Despite this, most market segments posted modest growth in Q1. A stable economy, steady interest rates and VAT DTP incentives underpinned the market and cultivated positive sentiment.
Vietnam remains the star among emerging markets, and the of the world’s fastest growing economies. Its GDP is forecast to grow as much as 6.5% in 2024. Foreign direct investment rose 58% y-o-y, an indication of investor confidence and a strong industrial sector.
The Region’s Mature Markets Lead Major Investment Transactions
Though transaction volumes fell in Q1, several markets posted strong total transaction values. Japan and Australia led the region with US$1.6 billion worth of in transactions each. In Japan, the standout sale was a portion of Shibuya Sakura Stage for US$662 million. Burra Park in western Sydney led the way in Australia, selling for US$562.7 million. Elsewhere, Singapore posted US$1.3 billion in sales across six assets. South Korea recorded US$1.2 billion worth of transactions, led by Arc Place in GBD for US$588 million.
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