Property Investors Taking Refuge in Asia-Pacific

Ring-a-ding-ding. Shanghai has replaced Tokyo atop a new list of the top Asia-Pacific cities for real estate investment by Jones Lang LaSalle (JLL) this week.

The Japanese capital ceded its position to China’s largest city as the region’s strongest-performing real estate investment market in Q4 2016. Worldwide, Shanghai now placed at number five, sits just behind New York, London, Los Angeles, and Paris.

So why the shake-up? Industry pundits put a sizeable chunk of Shanghai’s 'step-up' performance down to a steady stream of high-profile sales at the close of 2016. These include the biggest single-asset property transaction in Asia Pacific last year: the October acquisition of the Century Link complex by ARA Asset Management for USD2.91 billion.

Political upheavals such as Brexit and the surprising U.S. election result have added further grist to the mill with an increasing number of investors opting to channel perceived 'safer bet' prospects in Asia Pacific - specifically keynote cities in China. Domestic capital however still remains the main driver of real estate transaction volumes in this region, with local investors often outbidding foreign investors in many transactions. That said - China – particularly Tier 1 cities – is poised to grow its foreign investor foot print as the market matures.

China is also sitting pretty as the biggest driver of real estate activity in Asia Pacific, with USD15.5 billion in transaction volume last quarter. South Korea and Japan followed with transaction volumes of USD7.4 billion and USD7.2 billion, respectively. Real estate transaction volumes in the region have also risen 21% year-on-year last quarter.

Further afield, continued appetite for real estate is also expected to see investment volumes hold up in core markets such as Sydney and Singapore. Stronger activity in Indian real estate too, with investors manoeuvring their way into Southeast Asian countries such as Vietnam and the Philippines bode well for rental growth prospects.