According to CBRE, investment in Asia's property sector turnover grew 12% quarter-on-quarter in Q2 2015 to US$21 billion, despite a 21% year-on-year decline in investment turnover against a strong 2014.
Cross-border transactions increased 31% from the same time last year to US$7 billion, while cross-border investment sentiment remained firm throughout the period, with an increase in inquiries and transactions in tier-one cities like Shanghai in China. Despite short-term investor concerns, the Greek debt crisis and China's stock market volatility are expected to have no lasting repercussions in the Asia Pacific real estate investment environment.
CBRE Asia Pacific Research Senior Director Ada Choi commented, "This quarter, the Asia Pacific investment environment suffered from a persistent lack of investible stock and firm pricing by landlords amidst the ongoing low interest rate environment. While these factors have largely moderated capital flow across the region, overall transaction volumes showed an improvement from the previous quarter. Meanwhile, significant cross-border activity was also observed from institutional investors. In the drive for global diversification, three major transactions were closed in three different markets--Singapore, Hong Kong and Australia--across a variety of asset classes such as office, hospitality and developments, reinforcing the optimistic sentiment of large institutional players in the region's long-term investment potential.
Interest rate cuts in five major Asia Pacific markets and the weaker currencies in the region are expected to attract more foreign and US dollar-denominated capital seeking attractive opportunities, while moderating currency fluctuations in the coming years will further boost international investor confidence. Furthermore, we witnessed robust fund raising activity by experienced fund managers, with successful closures by managers reflecting healthy investor appetite. Successful fundraising, together with continued capital disposals from fund expiries, will translate to a steady stream of capital deployment over the course of 2015 and well into 2016."
Other key APAC investment highlights include:
Japan and Australia led investment momentum for the quarter. China, which recorded further improved investor sentiment in Q2 2015, also saw robust activity, whilst interest picked up in India from selected private equity funds.
Large institutional investors dominated cross border acquisitions in the region, specifically Middle East sovereign wealth funds. Three sizable transactions completed by the Abu Dhabi Investment Authority (ADIA) and the Qatar Investment Authority (QIA) amounted to a total value of over US$4 billion.
The hotel sector recorded strong activity, with investment volume totaling over US$5 billion for the quarter. Hospitality assets in Japan and Australia were in high demand due to robust tourist spending in these markets.
Factors that could affect investment activity include the pricing gap between vendors and buyers and intense competition for assets, and while the China stock market rout is not predicted to greatly impact real estate investment in the region, it may nevertheless cause short-term delays in decision-making and purchasing activities by commercial investors.