APAC's property market hit record $45b of investments in Q1

Growth was driven by China where real estate investments surged to $17b.

Asia Pacific continued to shatter records as investment activity jumped 14% YoY to a new Q1 high of $45b, a report by JLL revealed.

The Global Capital Flows Q1 2019 report, which assessed global commercial real estate markets, found that driving this regional performance was China, where quarterly investment surged to an all-time high of $17b due to an increase in cross-border capital inflows and large-scale transaction activity. This, in addition to strong liquidity in South Korea and Singapore, was more than enough to offset declines in some of the region’s other major markets such as Australia, Japan and Hong Kong.

South Korea maintained its momentum from 2018, increasing investment volumes 28% YoY, whilst Singapore registered a 71% uptick in volumes YoY, driven by investment across a range of sectors including industrial, hotel and retail.

A flurry of activity in Q1 2019 saw Shanghai jump up the ranks to become the second most liquid real estate market globally after Tokyo. Investment was bolstered by an uptick in large-scale acquisitions as a reported seven transactions over $200m closed in Q1. Whilst domestic groups, particularly corporate users, remained active, foreign buyers invested $2.6b in the market, making Shanghai the second largest recipient of cross-border capital.

According to Lauro Ferroni, JLL’s research director, whilst domestic investment is elevated, due mainly to a few large deals, foreign investment has increased, not only in Shanghai but across China as a whole, for three main reasons.

“Firstly, the central government’s focus on deleveraging has impacted the availability of credit for local borrowers. Secondly, the deleveraging drive has pushed some local owners to divest assets in order to reduce debt. Finally, the continued progress made by China in opening its financial markets provided confidence to foreign investors, and facilitated greater cross-border flows into the market,” he explained.

Looking ahead, the environment for domestic investors is likely to improve as monetary policy is expected to be loosened, and some investors, particularly larger developers, are expected to see their access to credit improve relative to 2018.

“The situation is similar in Shenzhen which is now the ninth most liquid market globally, and tenth most liquid in terms of cross-border inflows,” Ferroni said, adding that large-scale acquisitions by domestic and foreign groups alike brought total Q1 investment to $3.4b, the highest quarterly volume on record.