Colliers International (NASDAQ: CIGI; TSX: CIGI), a global leader in commercial real estate services recently released its 2018 Asia Pacific Property Outlook, which unveils the firm’s latest predictions on the property sector for the year ahead. In contrast to past years’ annual outlook reports, which were market-by-market and sector-based, this year’s report is a regional forward-looking review of 10 key themes focused on opportunities and risks in Asian real estate in 2018.
Andrew Haskins, Asia Head of Research at Colliers International, commented: “China, Japan, South Korea, Hong Kong and Singapore all saw GDP growth accelerate in 2017, with only mild slowdowns likely in 2018; momentum in India is now also picking up rapidly. US interest rates are set to continue rising, putting upward pressure on benchmark interest rates in Asia. Nonetheless, we expect Hong Kong to enjoy negative real (i.e. inflation-adjusted) interest rates until early 2020, with real interest rates also set to remain low or even fall in Japan, Singapore, India and China. In terms of prime grade offices, we anticipate that rents will rise further in 2018 in Hong Kong, Singapore and tech-driven cities in India; in large Chinese cities, rents should remain stable or drop slightly due to new supply.”
Top 10 Property Predictions
- Firm economic growth and persistent low real interest rates will continue to drive occupier and investment property markets in Asia. 2017 has seen the highest global real GDP growth since 2010; and in Asia growth momentum has strengthened in China, Japan, Hong Kong and Singapore, with India now also picking up. Since monetary conditions in most of Asia are very loose, we expect interest rate increases over 2018-2019 to have only a modest impact on property markets.
- Reflecting firm growth and low real interest rates, property investment volumes in Asia will remain strong and yields may shrink even further. The chief risk to this view is not weak demand or availability of capital, but a shortage of high-quality properties available for sale.
- Office rents in major centres will continue to rise or remain reasonably stable in 2018.
- Flexible workspace will strengthen further as a major source of new office leasing demand, particularly in Hong Kong, Singapore and Tier 1 & 2 cities in China; we also expect significant growth in India, Jakarta and Bangkok.
- Technology companies will strengthen their presence in the CBD and CBD fringe of major Asian cities in order to attract and retain top talent.
- Higher trade flows and e-commerce will continue to drive industrial and logistics property in China, Hong Kong, Singapore and India with industrial property emerging as a key organised asset class across Asia.
- The business and industrial park market will strengthen in Shanghai and Singapore, and take off over the next several years.
- Retail property rents will recover in Hong Kong after several years of weakness, though Singapore is less certain.
- Residential property prices will rise further in Hong Kong and Singapore. Firm demand, limited supply, persistent negative real interest rates and promotional efforts by developers in the primary market are supporting prices in Hong Kong, while in Singapore we believe that the current wave of collective sales will continue rising through 2018 and into 2019, and that prime luxury residential sites will gain favour soon.
- Black swan events: In our view, the greatest risk to property markets in Asia is a global or regional financial downturn prompted by high equity valuations–notably for US and Chinese technology stocks, and Chinese property developers. Other risks include faster than expected replacement of human roles by artificial intelligence within large enterprises, reducing demand for leased space, and geopolitical conflicts in Asia.
By Courtesy of Mingtiandi