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Strong recovery for Asia real estate markets across all sectors

Investment turnover bottomed out in the first quarter but improved thereafter as confidence gradually returned, underpinned by the strong rebound in the equity markets, the persistence of low financing costs and a stabilizing trend in price levels across key markets, says the report from CB Richard Ellis.
Direct real estate investment in Asia jumped 56% year-on-year in the second half of 2009 to an estimated US$25 billion. However, overall transaction volume was still 22% lower in 2009 compared with the previous year, the Asia Investment Market View report for the second half of 2009 shows.
Property markets in Greater China were at the forefront of the recovery, with China, Hong Kong and Taiwan accounting for 57% of total investment volume in Asia in the second half of 2009. The US$15 billion worth of transactions completed in Greater China during the review period was 169% higher than the amount recorded in the corresponding period in 2008.
Japan, Singapore and Korea also witnessed a strong rebound in investment activity in the second half of 2009, accounting for 17%, 9% and 8% of the total volume respectively.
Investment activity was largely driven by domestic and intra-regional investors, which accounted for 83% and 15% of total volume respectively.
Prime office properties continued to attract the most interest, accounting for over US$10 billion of investment in the second half of 2009, 41% of the total volume recorded. Prime office properties accounted for eight of the ten largest transactions witnessed during the period.
Residential properties accounted for 20% of total transaction volume, with the retail sector comprising 16%. Despite the relatively low transaction volume in the hospitality sector, a total of seven hotel transactions worth a combined total of US$380 million were concluded during the second half of 2009, surpassing the US$270 million recorded in the first half of the year.
Transactions involving industrial properties also rebounded strongly in the second half of 2009, climbing 155% compared to the first six months, and accounting for a combined total of US$1.8 billion.
‘Local buyers and domestic real estate funds dominated transaction activity in the second half but the period also saw a small number of core international institutional investors return to the Asian property market,’ said Andrew Ness, Executive Director of CBRE Research Asia.
‘Investment volume and prices across most sectors, particularly in the residential and office markets, have increased considerably. However, there are concerns that a number of residential markets appear to be in the early stages of transitioning from a state of recovery to a situation where they are in danger of overheating due to the high liquidity and a surge of capital inflows to the region,’ he added.
Looking ahead, Asian governments can be expected to gradually adjust their monetary policies and impose certain policy measures to tighten property lending as they look to prevent the formation of a new asset bubbles. Nevertheless, core international institutional investors are expected to gradually return to Asian real estate markets in 2010, the report concludes.