2013-01-31

According to the Asia Real Estate 2013 Forecast released by Colliers International, the real estate markets across Asia are set to advance in 2013.  Average rents and prices in the industrial, office, residential and retail sectors are expected to continue to enjoy growth at 2-5 per cent in 2013, albeit at a milder rate compared to the 5-9 per cent in 2012.       

Meanwhile, investment yields will continue to decrease in 2013, but the degree of compression will be much slower at between flat and 10 basis points.  

Mr Simon Lo (盧永輝), Executive Director of Research & Advisory | Asia at Colliers International says, “Occupiers are expected to take advantage of the prevailing low interest rate environment to acquire real estate for long-term occupation rather than leasing.  Additionally, with more support by most banks and other lending institutions on real estate financing, investors, who were previously constrained by limited loan-to-value ratios, are anticipated to take on more risks to commit to purchases.”

Singapore

In 2013, rental movements across all sectors – industrial, office, residential and retail – are expected to be moderate.  Landlords and/or property owners across all the sectors will face increased competition for tenants due to a continued inflow of new supply.

Ms Chia Siew Chuin(谢岫君), Director of Research & Advisory at Colliers International, says, “Additional challenges will loom in the retail and industrial sectors, as a more difficult business and operational environment – including slower economic growth, manpower shortage and increasing business costs – will weigh down on the demand for space.” 

Ms Chia continues, “Meanwhile, real estate will remain an obvious investment choice for investors – given that the world is now awash with central bank-created liquidity, and interest rates remain low.  The Singapore property market, reputed to be a safe investment haven, is likely to continue to see an influx of funds.  Local buyers, alike, will continue to source for avenues in the real estate market to park their funds.” 

Price levels in the office and retail strata-titled markets are expected to remain healthy in 2013, with demand stemming from end users and those looking for investment opportunities – particularly those who are diverted from the heavily-regulated residential property market.  

Despite the Sellers’ Stamp Duty to remove short-term speculation in the industrial market, prices in the industrial strata-titled market are expected to remain relatively stable – supported by demand from end users and investors with a longer term view.  

In the luxury non-landed residential segment, the latest measure of increasing the Additional Buyers’ Stamp Duty to 15 per cent will undoubtedly make property investment less attractive to some foreigners. 

Nonetheless, there will also be some foreigners who view the latest measures as another one-time property tax which they are willing to pay – given that Singapore remains attractive by being stable and safe from natural disasters, providing good protection of property rights, and having little currency risk.  

Hence, on a balanced view, foreign participation in this segment is likely to moderate by some extent from the current level and prices are expected to marginally slip by some five per cent.  

Office Sector in Asia

Amid the current supply cycle of the Asia office sector, individual occupiers see opportunities to relocate and upgrade their offices to buildings of better quality.  However, this also creates downward pressure on the average rent over the short term – with office rents in India, Singapore and Vietnam predicted to edge down.

In terms of office rental growth forecast in 2013, Jakarta – which benefits from the buoyant leasing demand from overseas companies engaged in banking and finance – leads in Asia with a rental projection of a 35-per-cent increase. 

Beijing, which witnesses office relocation and expansion by both domestic firms and MNCs, takes the second spot with an expected rental growth of 11 per cent in 2013.  Bangkok, which lacks new supply in the CBD, comes in third with the average office rents anticipated to rise 10 per cent.

Residential Sector in Asia

In 2012, residential prices across most Asian markets registered buoyant performance – ranging from a flat growth to a more-than-26-per-cent upsurge.   

To prevent the residential sector from developing into an asset bubble, the government in Singapore and Hong Kong has introduced buying and lending restrictions in an attempt to cool local residential prices.

Nevertheless, the residential sector in most Asian cities are expected to hold its fort, due to genuine demand from the growing number of local residents – on the back of an on-going increase in natural birth rates and migration of residents into urban centres. 

The top three outperforming markets in Asia in 2013 are Beijing, NCR (Delhi, NOIDA and Gurgaon) in India and Jakarta; for which, the average residential prices are projected to rise 17 per cent, 12 per cent and 11 per cent, respectively.

Meanwhile, Hanoi, Singapore and Hong Kong are the only three markets anticipated to see a downtrend in their residential prices this year.

Retail Sector in Asia

Closely linked to the population growth trend and limited land supply in the urban core area, retail rents in Asia largely experienced growth in 2012. 

In 2013, Jakarta is expected to see the most significant retail rental increase at 20 per cent, followed by Pakistan and Kazakhstan, at 10 per cent each. New supply in the form of community shopping malls are in the pipeline in decentralised locations outside the city core. 

Relatively, the retail real estate markets in Singapore and Vietnam – Ho Chi Minh City and Hanoi – are weaker, in which rents are predicted to edge down in 2013.

Industrial Sector in Asia

Following a positive year in 2012, the industrial sector in Asia is expected to continue to perform,  as the government of China – widely perceived as the engine for the region’s growth – has made massive investments in a number of infrastructure projects since 3Q 2012, and is determined to revive the economy by boosting domestic consumption. 

In particular, industrial logistics warehousing will benefit from the demand by private enterprises – including those engaged in the fast-moving consumer goods (FMCG) sector, which will continue to outsource logistics functions to third-party logistics operators to save costs.

Beijing is likely to be the star performer of the industrial sector in Asia, with its industrial prices expected to rise 13 per cent in 2013.  Jakarta bags the second spot with average prices predicted to increase 11 per cent, while Hong Kong comes in third with an anticipation of a 10-per-cent growth.

In contrast, Seoul and Taipei are predicted to undergo short-term downward adjustments, both edging down by 5 per cent.