Japan and Australia top spots for real estate investment in region, says survey
Smaller Chinese cities rank bottom
As the Asian real estate market heads into the seventh year of a bull run, investors are playing defensively, looking at core space in the region’s most developed and liquid markets such as Japan and Australia, while shying away from China’s oversupplied secondary cities, an industry survey has found.
Tokyo tops a list of 22 Asian cities for investment in the region next year, for the third straight year, while Chinese secondary cities, grouped as one, rank bottom for the second consecutive year, according to an annual report based on surveys and interviews with 343 real estate professionals by the Urban Land Institute and PwC.
Japan’s status is reinforced by Osaka’s continuing popularity, moving up to fourth from fifth in the previous survey, while Sydney’s ranking of second and third-placed Melbourne were evidence of the quest for asset quality and yield by investors, many of whom were now coming from China, a report on the survey, released on Thursday, said.
Investors continue to be skittish about assets in China
Hong Kong has languished in the survey’s ranking since 2011, but managed to improve from 21st to 15th this time, reflecting investors’ growing interest in the city. But an uptick in pessimism about the local economy and real estate market outside the central office sector has constrained its performance.
“Investors continue to be skittish about assets in China, with concern centred on an array of issues ranging from a soft economy, a depreciating currency, oversupply, high values and compressed cap rates,” the report said. “Shanghai is a shelter in the storm, however – its middling performance in our survey reflects its status as China’s only true gateway city, where prime assets will always be in demand.”
Shanghai’s ranking fell to 9th from 6th. It ranked top in 2008 and 2010 and second in 2007 and from 2011 to 2014.
“There are still some transactions happening in the market,” said KK So, PwC’s Asia-Pacific real estate tax leader: “I think people are just waiting for the right opportunities.”
