Asia Pacific investment fell by over 40 per cent in the first quarter of 2012, revealed the latest CB Richard Ellis report.
The Capital Markets MarketView report, published by the global real estate services firm reported that investment fell 42 per cent quarter-on-quarter to US$ 11.6billion.
The downturn in investment can be correlated with calendar holidays during New Year. The removal of several assets from the market also contributed to the decrease in capital investment.
All markets across Asia Pacific saw a slump in investment volume. Hong Kong’s market was the only anomaly in the results. Investment there surged 100 per cent, quarter-on-quarter, due to an improved lending market.
Despite the investment downturn, investment volume is predicted to increase in the coming quarters through continued investor interest in non-core assets, and relaxations upon lending practice.
The stiff lending position in Asia Pacific began to lax in Q1 of 2012 as banks across the region adjusted monetary policy.
In order to aid a smooth recovery of economic activity whilst simultaneously controlling inflation, the Bank of Thailand maintained its policy rate at three per cent.
“The lending environment improved in Q1 2012 and the trend is like to continue,” commented Mr Gregg Penn, executive director CBRE Investment Properties, Asia.
“The further easing of inflation will provide extra room for interest rate cuts, a move which could rejuvenate buying activity as investors are given access to lower borrowing rates.
“Many developers in India and China continue to face liquidity challenges. This will provide opportunities for investors to provide capital and acquire asset portfolios.”
Domestic capital was the driving force behind the market, as cross border investment declined. Internal investment accounted for 86 per cent of the total investment in Q1.
Asia REITs, domestic private investors and end-users deals climbed eleven per cent between the last quarter of 2011 and the first quarter of 2012, comprising 55 per cent of the total investment.
The CBRE research reported a dramatic downturn in foreign acquisitions, falling 69 per cent quarter-on-quarter to US$1.6 billion. Cross border investment accounted for just 14 per cent of the total investment volume.
Investors focus direction has moved from core office assets to other sectors offering more attractive yields. Attention has switched from core office assets on account of the slow leasing market and a lack of quality products for sale.
Investment volume for office assets was half of that recorded in Q4 2011.
Volume in the retail sector remained steady, down four per cent quarter-on-quarter. Demand in this area is expected to increase as domestic consumption grows and international retailers expand across the region.
The Capital Markets Marketview report concluded that demand from local investors should remain firm in the coming months due to strong interest in retail and logistics assets. Combined with the easing of the lending environment, should result in positive effect upon the market, over the coming year, confirmed the CB Richard Ellis report.
By Laura Neve Tacey
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