Asia’s Real Estate Market Braces for Market Correction
While the success of Asia Pacific governments in containing the spread of COVID-19 has helped limit its impact on local real estate markets, there are growing concerns that a correction may be on the cards next year, according to the 2021 Emerging Trends in Real Estate® Asia Pacific report by the Urban Land Institute (ULI) and PwC.
The report names three markets where stress seems likely to surface. Firstly China, where a liquidity squeeze is creating bank financing challenges for smaller developers. Secondly India, where the implosion of local non-bank finance companies has created opportunities for foreign private equity funds. And lastly Australia, where the economic impact has been most acute and greater market transparency is likely to open up more buying prospects.
Singapore, Tokyo and Sydney continue to rank as the top three markets for investment and development prospects in the region. These markets are each promising a sense of safe harbour in an increasingly hostile global environment, both in terms geopolitical and economical risks. Seoul rose steeply in this year’s investment prospects rankings as South Korea enjoys the benefit of a deep domestic economy that allows assets to be brought or built with a view to serving domestic demand rather than outwardly facing geopolitical risk. Ho Chi Minh City, once again is seen as the sole emerging market city with the best prospects for growth, boosted by its successful containment of the pandemic and a rapidly growing economy spurred by the escalating China/ US trade tensions.
The report highlights that logistics will probably be the asset class that emerges from the pandemic strongest as it continues to witness sustained demand, driven by a number of cyclical and structural drivers, in particular the robust growth in e-commerce. Meanwhile, residential sectors in the Asia Pacific region have remained surprisingly resilient to the impact of COVID-19, despite threats of economic downturns. In an environment of uncertainty, this upbeat consumer sentiment, together with an equally reliable long-term mortgage and rent payment track record, earmark the residential sector as a defensive asset class that investors in the region are now targeting.
The Emerging Trends Asia Pacific report is based on a survey of 391 real estate professionals, as well as 134 interviews, including investors, developers, property company representatives, lenders, brokers and consultants.