THE volume of real estate transactions in Asia is predicted to increase in the coming year, as investors will be lured into the region by attractive yields, according to a report by Colliers International.
Colliers said it sees cross-border investments to remain center-stage in Asia, but noted that although investment capital will continue to go overseas, yields in the Western markets are compressing, which makes investment-grade assets in core locations hard to find.
Colliers said yields in Asia would moderately increase in 2016, as market players in the region are gradually pricing higher and adjusting to the concern of further economic slowdown in China.
“Long-term investment funds looking for higher yields will be lured back to the region due to favourable fundamentals and more-attractive yields,” said Colliers.
Colliers noted that volume of intra-regional flows within Asia jumped by 20.7 percent year-on-year to $33.5 billion.
“Together with the lower cost of funding expected in markets like China, and the relaxation of cooling measures in a number of countries, Colliers expects intra-regional flows to improve further in 2016,” said the report.
Colliers also noted that sales transactions in Asia have remained resilient, as the region remained a top choice for offshore real estate capital.
This is mainly driven by the ongoing urbanization in the region and the rapidly expanding middle class, the report said.
Colliers added that investment volumes across all asset classes in Asia slightly increased in the first three quarters of 2015 at $40.2 billion vis-à-vis the $37.1 billion registered in the same period last year.
“This represents a slight uptick in sales transactions, with several sizeable deals taking place in Shanghai, Beijing, and Hong Kong, primarily office properties,” said Colliers. “Given the positive sentiment towards property investment in Asia, similar investment levels are likely to continue in 2016.”
The report also mentioned that U.S. interest rates would likely edge up gradually in 2016.
It noted that real estate yields would likely increase in markets like Hong Kong and Singapore, as the interest-rate cycle is due to kick in.
Meanwhile, Colliers said cost of funding would head into the south markets, such as China and India, as their governments continue to make pre-emptive adjustments in their monetary policies to stimulate growth.
“With the prevailing price gap narrowing, and developers expected to pitch more projects at reasonable prices, a number of Asian governments are likely to review existing cooling measures (e.g. stamp duties and bank-lending restrictions),” Colliers reported.
Colliers said this would cause market sentiment to likely pick up again, increasing the volume of sales transactions in the region.