Market Outlook

Over the past 12 months, the addition of gross office space has been significantly constrained in the Melbourne CBD. This has led to a supply shortage, notably for larger occupiers, and driven pent-up demand from tenants who are coming to the market to satisfy their requirements

The GPR/APREA AsiaPac Performance Snapshot tracks the dynamics of listed real estate securities (including REITs) across 12 AsiaPac countries/regions and eight sectors, over multiple time horizons.

• Government bonds posted the highest total return in March 2018.
• Equities and listed real estate were the strongest performers over the past five years.
• On a ten-year basis, REITs outpaced rival asset classes, followed by listed real estate.

Singapore’s economy grew by 3.6% in 2017, a significant improvement over the growth of 2.4% in 2016…

Singapore’s economy grew by 3.6% in 2017, a significant improvement over the growth of 2.4% in 2016. The strong performance was supported by the finance & insurance sector, which grew by 4.8%. Economists expect 2018 GDP growth to come in at around 3%.

Results for Q4 2017:

Knight Frank’s Asia-Pacific Prime Office Rental Index increased 0.7% quarter-on-quarter and 1.1% yearon-year in the last quarter of 2017.

The increase in the index was the result of rising rents in 12 of the markets over the quarter, with rental declines experienced in four of the 20 markets tracked.

Over the next 12 months, we expect rents in 16 cities out of the 20 tracked to either remain steady or increase, which is the same as our previous forecast.

We expect Singapore’s property market to stabilize and strengthen over 2018, supported by broad-based GDP growth and an expected multi-year upcycle in the office and residential markets.

Physical supply in office, residential and industrial sectors is also easing from the oversupply situation of past years. Capital flows should remain buoyant as we expect interest rates hikes to be benign, and yield spreads are relatively attractive. Barring external shocks, we project a general uplift in rents and capital values over 2018, primarily driven by the office and residential sectors.

This note highlights the key investment themes for 2018:

1. Economic growth accelerates, appreciating currencies: The Malaysian and Indonesian economies grew faster than expected in 2017 and we expect more positive surprises from these countries in 2018.
2. We expect a strong recovery in office markets in Singapore, Jakarta: Rents fell 20-30% over last three years, but expected to increase 10-25% over next three years. 
3. Residential prices could surprise on the upside in Singapore, Kuala Lumpur and Ho Chi Minh City.
4. Infrastructure spending accelerates in Malaysia and Indonesia: We expect the infrastructure projects, some of which are part of China’s Belt and Road Initiative, to support employment and growth.
5. Monetary policies expected to stay neutral-toaccommodative, supportive of growth: While advanced economies are wound down monetary easing in 2017, Southeast Asian governments surprised the markets by cutting policy rates amid inflation in 2017 to boost growth.
6. REIT changes to expand capital sources in Southeast Asia: We expect ten new REITs and potentially the first independent REIT in Thailand over the next two years.
7. Intra-regional capital flows likely to step up: There is rising interest from Japan, China and Korea investors for Southeast Asia assets; while Philippines, Thai and Malaysian groups are seeking to invest within Southeast Asia.
8. Malaysia, Indonesia and Vietnam likely to continue to attract strongest capital inflow: In 2017, Malaysia was the top receiver of capital in Southeast Asia, with US$421million in foreign investment, followed by Vietnam and Thailand.

The GPR/APREA AsiaPac Performance Snapshot tracks the dynamics of listed real estate securities (including REITs) across 12 AsiaPac countries/regions and eight sectors, over multiple time horizons.

•  Government bonds posted the least negative return in February 2018.
•  Equities and listed real estate were the strongest performers over the past five years.
•  On a ten-year basis, REITs outpaced rival asset classes, followed by listed real estate.

This article will investigate Investment into real estate – China

1. Legal Landscape
2. Foreign investment
3. Common foreign investment structure
4. Recent de-regulation of real estate FIEs
5. Other recent developments
6. Our observations on market

Just 160,000 square metres (sq. m.) of new and major refurbished supply is expected across Australia’s eastern seaboard markets of Sydney, Melbourne and Brisbane in 2018, representing less than 1.5% of existing stock. Of this space, the majority will be in Melbourne and has already been pre-committed. With business confidence in positive territory, we anticipate the uptake of stock to continue, despite limited availability in both Sydney and Melbourne. As a result, we expect vacancy to compress in all three markets, with Sydney forecast to be the tightest at approximately 3% by the end of 2018, the lowest level in over 25 years.

Occupier demand in the CBD reached the highest in 11 quarters in 4Q17, bring ing the full year CBD net absorption to the highest in three years.

Residential market remained optimistic in 4Q17. Transaction volume pf strata units in the prime districts eased slightly 1-o-1 due to the year-end holiday period. 

Retail sales excluding motor vehicles recorded over two consecutive quarters of growth, likely a result of the seasonal timed sales.

Amid stable stock and as tenants physically moved into their new premises, the business park vacancy rate eased for the sixth consecutive quarter in 4Q17.