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News Release

Bangkok

Stable Outlook for APAC Despite Varied Performance Across Region

Real estate transaction volumes in Asia Pacific dipped slightly in the second quarter


While investment volumes in the region dropped 8 percent year-on-year in the three months to June to US$28.3 billion, according to JLL’s latest global capital flows data, H1 volumes totalled US$54 billion, largely stable compared with the same period in 2015. The second quarter’s number was 12 percent higher compared with the first three months of the year, skewed by strong performance in Singapore.

“Cross-border investors remained active on both sides of the ledger, accounting for around one-third of volumes during the quarter, however inter-regional flows have fallen,” says Dr Megan Walters, JLL’s Head of Asia Pacific Capital Markets Research. ​

​Inter-regional purchaser capital flows or Asia Pacific purchases by investors based outside of the region fell by 21 percent in the quarter to US$4.4 billion, after some investors postponed their transactions in light of economic uncertainty.

Meanwhile, intra-regional buyer transaction volumes (cross-border purchases in APAC by investors based in the region) rose to US$3.1 billion in the second quarter from US$2.9 billion in Q2 2015, as Asian investors preferred markets closer to home.

“In some real estate markets in the region, falling global bond yields are pushing Grade A yield spreads towards record highs – despite low cap rates,” says Dr. Walters, “Going forward, we expect financial market volatility will likely enhance the attractiveness of some Asia Pacific markets as preferred destinations for global capital.”

The second quarter numbers do not reflect the impact of Brexit. “It is probably too early to see the direct impact from the Brexit vote on real estate investment regionally,” Walter added.

Singapore’s volumes doubled

In Singapore, transaction volumes in the quarter more than doubled, compared with the same period a year ago, helped by the US$2.45 billion sale of Asia Square Tower 1, the largest ever single-tower transaction in Asia Pacific.

Japan, the region’s biggest market, saw transaction volumes climb 16 percent on the same quarter last year in US dollar terms, but volumes were up just 4 percent in Yen terms. Fewer large deals have made their way into the market because of an ongoing scarcity of assets. Landlords were mostly unmotivated to sell with some vendors preferring to pursue cheap refinancing and hold onto their assets.

“With the strengthening Yen and increasing purchasing power, we are starting to see more Japanese investors chasing yield and diversification in offshore markets,” says Walters. “Sharp increases in the currency could also prompt the Bank of Japan to move deeper into negative interest rates and initiate further quantitative easing.”

Australian volumes stable, Greater China flows fall

Australian transaction volumes were generally stable year-on-year but climbed 32 percent quarter-on-quarter to US$4.4 billion. Foreign buyers accounted for around 47 percent of total transactions as sellers were unwilling to offload assets given limited reinvestment opportunities.

Deal flows were lighter in China with volumes down 24 percent from the same quarter last year but up 96 percent compared with the first quarter. There were limited products on the market in the period following the sale of many office assets last year. Core assets trading within a tight yield level have also discouraged investors.

Investment activity in Hong Kong was down 59 percent in the quarter. This came off the back of two strong quarters, which saw some high-profile trades. Despite slower sales, Stuart Crow, JLL’s Head of Asia Pacific Capital Markets expects China outbound capital remained active in the coming 12 months.