Asia Pacific real estate markets perform well despite difficult macroeconomic conditions including inflation, high-interest rates

Major real estate markets across the Asia Pacific continued to perform well in the third quarter of 2022, despite the loss of some growth momentum in the face of difficult macroeconomic conditions marked by high inflation and rising interest rates. According to a report by Colliers, investments in the commercial office sector In India saw a revival during January-September 2022, jumping 53% from the same period last year. Overall, total investments in Indian real estate touched US $3.6 bn during January-September 2022, registering a hike of 18% compared to the same period last year.

Rising absorption rates in the residential, office and logistics segments underlined the buoyancy in India’s real estate market. Investments in the office sector accounted for almost half of the total investments. India’s commercial office segment is back on investors’ radar led by increased occupier confidence in the market. 

“During 2022, office leasing is likely to cross 50 mn sq feet across the top six cities, surpassing the highs seen in 2019. At the same time, the residential sector too has performed well, led by a high inclination to own homes, comparatively low-interest rates and offers during the festive season. The industrial and logistics segments will be supported by the planned influx of nearly USD20 billion in investments into the manufacturing sector,” said the report.

Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India, said, “Trend in residential sales is reflective of positive long-term structural change in the sector. Investments in India are getting more broad-based with increased participation from domestic investors. The newer avenues are evolving like fractional ownership, AIFs, pooled investment structures are being developed providing depth to both investors and developers.” 

Vimal Nadar, Senior Director, Research, Colliers India says “Overall, domestic investors have become more active in the market, accounting for about 18% of the investments between January-September 2022, from 14% share last year. At the same time, global investors continue to dominate funding activity with higher participation in entity-led deals. However, global investors are on a wait-and-watch mode until recessionary pressures persist.”

As in the previous quarter, transactions in China’s major cities were dominated by deals in the office segment. In Beijing, office assets accounted for 84% of the nearly RMB4.1 billion (USD577 million) in transactions, and it is expected that value-add and core plus office investment opportunities in central areas of the capital will draw domestic and foreign investors.

The quarter witnessed 25 major deals worth HKD34.2 billion (USD4.38 billion) – a QOQ jump of 93% – in Hong Kong with most of the deals involving industrial assets. We expect sentiment to pick up in Q4 on expectations that Hong Kong, which continues to offer plenty of opportunities to domestic and global investors, will further relax border control measures.

In Singapore, the strong momentum achieved in the first half of the year was restrained by high inflation and rising interest rates. However, investment volumes reached a year-to-date total of SGD23.93 billion (USD16.7 billion) in investments or 85% of the total figure for 2021.