Knight Frank Asia Pacific Insights: December 2020

Australasia 

Australian home prices on the rise again 

Home prices in Australia rose 0.4% in the month of October 2020 (3.9% YoY) according to CoreLogic - the first rise since April post the onset of the pandemic. Looking at the cities specifically, Melbourne was the only market to record a decline (-0.2% MoM) as it regains its footing following the recent easing of lengthy lockdown measures. Going forward, with low interest rates expected to continue for several years and limited new supply coming on line, housing prices are on a strong footing to weather further economic challenges ahead.  

Healthy cross border investor appetite for Australia commercial continues in November 

Several notable Australian commercial assets changed hands with cross border investors in the past month most notably where: 

1. AEW’s A$155mn office acquisition on Little Collins Street, Melbourne.
2. A Chinese investor’s A$925mn acquisition for a half stake in Grosvenor Place, Sydney.
3. A Hong Kong investors acquisition of 60 Miller Street, Sydney for A$273mn.

Going forward, Australia is expected to remain one of the main beneficiaries of cross border capital seeking ‘safe havens’ within the Asia-Pacific in 2021 given its market depth, relative transparency, and upside potential from further cap rate compression. 

Southeast Asia  

Singapore’s new home sales stalls following technical curbs 

Singapore’s Oct new home sales took a breather in Oct with 642 private homes transacted, down from 1,329 units in Sept. A key driver behind this was the government’s clamp down of re-issuing of options by developers, a technical loophole that was closed, and a lack of new launches during the month. However since then the market has picked up steam again with healthy take up seen at recent launches in Nov, The Linq sold 115 out of 120 units over its initial weekend launch in mid Nov, and sizable new launches such as 640 unit Clavon launched in late Nov. Going forward, with Singapore on the cusp of Phase 3 of its circuit breaker and the return of international leisure travel, the sector is poised to benefit from healthy demand in the coming year.  

Malaysia’s housing market cools further 

Housing prices across Malaysia contracted 1.30% QoQ in Q3 2020, retracing from the 0.35% rise recorded in the previous quarter. The decline was driven mainly by the reimposed conditional movement control order (CMCO) across most states in Malaysian on a resurgence of COVID-19 cases. House price in Kuala Lumpur market dropped by 1.11% QoQ, while other two major markets, Penang and Johor registered the contraction of 1.27% and 0.95% respectively. On the positive note, the National Budget 2021 announced in November offers full stamp duty exemption with conditions for first home buyers hoping to spur the housing market moving into 2021.

East Asia 

Underlying fundamentals for Chinese Mainland housing market remains robust 

October new home prices across the 70 major cities in the Chinese Mainland rose 4.3% YoY, decelerating from the 4.6% rise in Sept, with 45 cities recording price increases, down from 55 previously. While on the surface this might look like a slowdown in Oct, overall real estate investments by value was up 12.7% YoY, accelerating from the 12% result seen last month. When we look at property sales by floor area, that was up 15.3% YoY, the highest growth seen in over three years. The contraction in new home prices is expected given the scrutiny regulators have imposed on the sector to keep it in check to ensure further bubbles are not formed. However, the growth in real estate investments and floor area sales does highlight that demand remains robust which is a positive sign heading into the seasonal slow winter sales period.   

Singapore investor inks largest commercial in South Korea 

Singapore’s ARA acquired Parc1 Tower II recently for c.US$897mn, making it the single largest commercial transaction in South Korea this year. The asset is Seoul’s fifth tallest office tower and is a third anchored by NH Investments and Securities. With the office sector still in a relatively healthy state, core office assets in Seoul have been prime targets for cross border investors this year. Total commercial transactions for Seoul as at end-Nov stood at US$17bn, up 1.6% YoY, making it one of the few markets that have recorded commercial transaction growth this year. Going forward, with investors expected to focus more on ‘safe haven’ markets in 2021, Seoul’s commercial sector is expected to see more interest in the coming year.