Knight Frank launches the Asia-Pacific Property Value Movement Report which tracked the real estate asset values across 22 major Asia-Pacific markets with an overall decline in values year to date. The unprecedented crisis of the pandemic has exerted huge pressure on property asset values across the region, despite asset values have had a 10-year growth amidst a low-interest environment. While value declines are a concern for existing holdings, on the flip side, this could represent treasure hunting opportunities for investors looking for long-term investments.
Despite the economic outlook not looking optimistic this year, market consensus expects a U-shaped or V-shaped rebound in key economies next year. As such we remain cautiously optimistic outlook on asset values.
Our report provides an overview for real estate asset values in prime residential, prime office, prime retail, high-tier industrial and high-end hospitality across Asia-Pacific markets.
Highlights:
- About 60% of Asia-Pacific Real Estate Sectors saw values decline as of H1 in 2020.
- Prime residential values across major gateway cities were resilient in H1 with 60% of them recording either stable or higher values. Hong Kong's residential values generally remained stable, down by 4% compared to the peak in 2019, despite economic recession and the local socio-political situation, mainly well supported by strong purchasing power.
- Prime office experienced a tough first half as most of the region was under some form of lockdown or movement restriction amidst the coronavirus outbreak, dampening economic activities. Leasing activities mainly comprise of downsizing or relocation of offices, hence softening leasing momentum, which led to a fall in asset values.
- Twenty of the 22 markets we tracked saw their asset values in prime retail sector declined in H1, as a result of a triple whammy of city-wide lockdowns, social distancing and the downfall of international visitor arrivals. While the retail sector will remain clouded by the pandemic, regions where COVID-19 showed solid signs of containment should see earlier recovery, this is particularly evident in Chinese Mainland. On the other hand, due to the pandemic, there has been a structural change in how consumers shop, and online shopping has become the ‘new normal’. It is expected that this behaviour will have a long-term impact on traditional retail demand and leasing strategy.
- High-tier Industrial, such as logistics and data centres, had the strongest value performance in H1 among all asset classes in nearly all key gateway cities. City lockdown, social distancing measures and the need of domestic biomedical production have significantly increased the importance of the sector across the region, supporting its value during this period.
- High-end hospitality not surprisingly has been the hardest hit sector across the commercial real estate sector given the reliance on business and leisure travel. In most markets, activities have pretty much come to a standstill over the past six months. It is expected that the hospitality sector will see recovery in the 1H of 2021 should the pandemic be successfully contained.
Thomas Lam, Head of Valuation & Advisory, Asia-Pacific at Knight Frank, says, “Despite current challenges, our outlook for asset values is positive over the mid-to-long term as steady investment appetite remains in most markets. This is particularly the case in recovering markets such as Chinese Mainland and traditional safe havens like Australia and Singapore. We do not expect a dramatic drop in Asia-Pacific asset values, with the QE in short term, low interest rate environment to stimulate the economy, we believe the investors to look for valuable high-quality properties in the meantime.”