New Year, New Real Estate Daily BlogsJanuary 9, 2017 / By
Welcome to the first blog entry of the year. Looking ahead in 2017, the outlook for the real estate sector in Asia Pacific remains bright as it continues to benefit from demand from both investors for stock, and occupiers for space to use. Global growth may surprise on the upside with a brighter outlook in Asia Pacific and fiscal stimulus expected from outside the region.
As we discussed in APPD 3Q 16, the IMF expects Asia Pacific growth to remain robust amid heightened uncertainty. Since then, industry experts have forecast an uplift in the outlook for the U.S. from expected government spending. Other large G7 economies, notably the UK, also appear to have survived the recent bout of turbulence and are delivering economic growth in excess of expectations, immediately post-Brexit.
Positive trend in rental growth last quarter
Our preliminary data for 4Q 16 from around the region indicates positive growth, where rents rose around 22 percent in Sydney across 2016, 13 percent in Melbourne, and 9.7 percent in Hong Kong. Rents in Manila rose by 8.3 percent, and 8.8 percent in Bangalore, demonstrating the fairly wide distribution of economic activity across various markets. Singapore saw the rate of rent declines slow in the last quarter to -1.2 percent, bottoming following the -2.4 percent fall in the previous quarter. Rents in Singapore dipped around 11 percent, however, capital values are down just -5 percent with investors looking past the current dip.
New reports coming your way
Look out for new reports later this week as we release our Capital Markets Outlook for 2017. With rising growth rates, interest rates may rise in tandem. However, inflation is also expected to pick up, which will leave real rates much where they are now. This will maintain the spread between real estate yields and real risk-free rates – right now historically wide – keeping real estate investment opportunities attractive.
Currency volatility will be a factor this year, and Nicholas Wilson, Associate Director, Japan Capital Markets Research, will discuss this for Japan in his blog post tomorrow.
Investors in our region will increasingly seek value in off-market deals, newer and secondary cities, as well as newer sectors. The weight of capital versus a shortage of stock continues to drive investment towards the development end of the spectrum, and into newer locations and newer products such as self-storage and data centres.
We have an upcoming paper delving into how cities in Asia Pacific are currently benefiting from technology occupational demand, out later this week, which you will also receive if you are a subscriber of our news daily.
Also out soon is our City Momentum Index. A combination of economic growth and increasing real estate investment and development is seeing cities like Hanoi and Ho Chi Minh of interest to both our corporate and investor clients – to occupy and to build/own spaces respectively.
We are finalising our Global Market Perspective data now including global capital flows numbers, which will be followed by JLL’s Asia Pacific Property Digest (APPD). If you wish to access further insights on our subscription service – or if there is anything else we can help you with in 2017, please let me know.
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