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Asia Pacific investment markets have not been immune to the global volatility, most recently with the eurozone debt crisis. In the Asia Pacific region, Hong Kong, Singapore, Japan, and Australia all saw transactions slow in Q3 2011, although China’s volume for both commercial property and land continued to increase, but at a far slower pace.

There have been some major governmental interventions through tighter property regulations over the last 12 months in places like Singapore, Hong Kong and China. These regulations have primarily been directed to control spiraling residential values and reduce speculation. Such policies include restrictions on the number of properties one family can own in one city, larger down payment requirements, higher stamp duty (tax) on the seller if the property is traded within three to five years of acquisition, as well as the introduction of annual property taxes. As a result, there has been some cooling on the transactional volumes of residential properties in all three markets. Anecdotally, there is some evidence of residential prices beginning to drop in China and there have been several cases of early buyers protesting developer price discounts to newer buyers. Hong Kong is beginning to see some softening in residential values, albeit after the last two years of major rises in value, and Singapore has been able to basically hold values to date. None of these government regulations have been directed toward the commercial property sector, which in markets like China, has residential developers moving into commercial development.

Aside from residential and commercial markets, key hotel markets in Asia have seen excellent growth. Best performing markets in Asia, which are projected to achieve double digit growth in RevPAR for 2011, include Singapore, Beijing and Hong Kong with continued but slower growth in 2012.

Singapore has seen some of the highest levels of supply growth in the region with a lot more in the pipeline. Beijing is forecasted to have the highest level of demand growth in 2011, whereas Hong Kong is expected to finish the year with the highest level of ADR growth. The ability to get debt financing for new hotel construction is becoming more difficult in China.

Office

As the eurozone sovereign debt crisis has evolved, rapid rental rate increases have ceased in Singapore and Hong Kong and are now in a downward mode, with these markets having clearly peaked. Tokyo, Kuala Lumpur, Seoul, Ho Chi Minh City and Taipei are at or approaching the bottom of declining rent phases and will start to see higher rates. Jakarta, Manila, Shanghai and Beijing have already seen healthy rental increases but are forecast to see slower growth in 2012.

Retail

There are early signs of rental growth in Singapore and Hong Kong. Tokyo, Jakarta and Shanghai have reached the bottom and should start to see stronger, rising rents. Manila, Kuala Lumpur and Beijing retail rents have already seen reduced growth in recent quarters, and we expect further slowing.

Industrial

Rental rates in Singapore and Hong Kong appear to have peaked, with a softening of rates forecast for 2012. In contrast, Tokyo industrial rates are close to the bottom with some increases anticipated over the coming quarters. Beijing and Shanghai have achieved some good rental growth and will likely see growth projection scale back in the coming period.

Investment

While the Americas and Europe still have higher annual transaction volumes for commercial property sales above US $10 million, there is a rising trend in commercial property transaction volumes in Asia and a sleeping giant (land sale transactions) that is not reflected in commercial building sales figures. The chart above displays transaction volumes in recent years. The high land transaction volumes in Asia reflect the high cost of land in major, developed, urban centers in Asia as well as the land sale activity to meet the urbanization of populations and the resulting huge demand for new real estate developments in growing, developing countries like China. In addition, Asia grabs 13 of the top 20 spots for the most active global property markets in the last 12 months (as of November 2011).

Major Trends in China

China now has the highest annual GDP growth rate of any major global economy (9.1%), the largest foreign currency reserves in the world (US $3.2 trillion), the second largest economy in the world (almost US $7 trillion), the largest standing military in the world (2.25 million), the largest population in the world (almost 1.34 billion) and was the winner of the most gold medals in the 2008 Olympics (51 gold medals).

European financial ministers must now kowtow to China for Chinese financial support to invest in the €1 trillion European Financial Stability Fund (EFSF) bond fund, needed to rescue Greece and the eurozone. US Treasury Secretary Timothy Geithner traveled to China to encourage the Chinese government to purchase US debt. It is difficult to miss how dramatically the global economic cards have turned in favor of the Chinese in the last few years.

The Chinese economy is predicted to grow 8.5% in 2012, the slowest growth rate in a decade. The world’s second biggest economy is cooling as weakness in developed nations softens exports, the property market cools and smaller businesses experience a credit squeeze. Unrest in the eurozone spells trouble for China, as Europe is now China’s largest overseas export market.

The 2012 Global Market Report is a unique tool that reviews and summarizes the real estate activities of the past year on more than 200 property markets worldwide. As a reference tool, it reviews values, economies, social factors and other conditions that impact a market.

Each analysis was completed by the NAI Global Member representing the given market. These local professionals are expert at reviewing their markets, identifying trends and reporting market activity. The NAI Global Member making the analysis for each market is identified and may be contacted for additional information. Most of the data in the Global Market Report was collected during the fourth quarter of 2011.