This year has been one to remember with Brexit, the U.S. presidential election and, most recently, China’s announcement that it is monitoring capital outflows all making headlines. Despite these possible volatile events, the real estate sector remains strong, according to a recent report from JLL.
“There has been a lot of capital around in 2016, with new investors attracted to Asia whether they are large sovereign funds, pension funds or Chinese insurance companies. These investors are allocating capital to real estate,” Stuart Crow, JLL’s Head of Asia Pacific Capital Markets, says.
In particular, Chinese investors look to stay active even if the government’s move to curb outbound investment slows this trend in the short-term. China overtook the United States to become the largest cross-border real estate investor earlier this year having invested nearly USD 18 billion into commercial property assets internationally.
“Investing overseas is a strategic move for most Chinese investors,” Crow states. “While there may be some short-term slow-down or delay, we expect few long-term structural changes. The trend of Chinese capital going out for real estate is not stopping. If anything, it is going to gather momentum due to the enormous capital base in China.”
Investors from China and further afield are looking at Southeast Asia for 2017 with Vietnam being a market of real interest. The country’s real estate sector saw a 12 per cent year-on-year increase in investment and JLL notes it is forecast to grow with favourable conditions such as greater market transparency and a projected GDP growth of about 6 per cent. Plenty of other countries in Southeast Asia are also attractive.
“Investors like Australia because of its transparency and higher yields,” Crow says. “For Singapore, in what has traditionally been a volatile market, investors are seeing the current entry point as an attractive one.”
Deals will also continue to grow in size after 2016 saw several significant, record setting transactions: Qatar Investment Authority buying Asia Square Tower 1 and Century Link complex in Shanghai’s Pudong district being sold for USD 2.96 billion to Beijing-based insurance company China Life were just a few of the impressive sales.
“There is every indication that this trend for big ticket deals will continue into 2017,” Crow notes. “The prospect of most central banks keeping interest rates low for an extended period means capital continues to be deployed into real estate investment.”
