Knight Frank today releases the Prime Asia Development Land Index for H1 2015. The index derives the price of prime residential (apartment or condominium) and commercial (office) development land in 13 major cities across Asia.
Report highlights:
- The index shows the price growth of prime residential sites in the region slowing to 1.1% in H1 2015 from 3.0% in the previous six months. Meanwhile, the prime office development land index gained momentum, rising 3.6%, up from 2.6%.
- Phnom Penh recorded the strongest increase in both residential and office land prices in H1 2015.
- Extra cooling measures introduced in Hong Kong targeting mass residential market appeared to have channel demand to luxury sector. Office space continued to see strong leasing demand from financial Institutions amid limited supply, Hong Kong recorded the 2nd strongest increase (9.3%) in office land prices in H1 2015.
- Local governments in China have reduced land supply and maintained aggressive pricing. H1 2015 saw land sales volumes in China plummet by 54.8% year-on-year. As a result, developers in China face a double whammy of high land prices and weak sales. With the recent stock market crash, their ability to raise capital is further restricted.
- The dearth of new supply in China in In H1 2015 has led development land investment volumes in Asia to plunge by 51.3% year-on-year. However, Chinese insurance companies such as Ping An are taking on more development risk. Their land investment swelled by 234.3% year-on-year and 83.2% over the previous six months to reach US$3.3 billion.
- Political deadlock, especially when it comes to the contentious reform on land acquisition act, has resulted in 64.1% less investment year-on-year in India as well.
- While foreign purchase of land in the region as a whole also slowed, that in Southeast Asia saw a fourfold jump.
Nicholas Holt, Head of Research for Asia Pacific, says, “While our index shows prime development land markets have lost some of their upward price momentum in the ASEAN region, overseas developers continue to be attracted to the region’s development markets.
“The first six months of the year saw Australia’s Lend Lease make two significant investments in Singapore and Malaysia, while Chinese developers remain active in the region, partly due to the more difficult conditions in mainland China.”
David Ji, Director and Head of Research & Consultancy of Greater China at Knight Frank, says, “Both residential and commercial lands enjoyed robust capital appreciation in Hong Kong. There has been a stable market demand amidst government’s latest cooling measures introduced in February 2015 targeting the mass residential market, and transaction volume has rebounded in the past few months. Meanwhile, in the Grade-A office market, sustained demand for office space and low vacancy rates will continue to drive up Grade-A office rents in Hong Kong.”