Asian real estate market sentiment softened considerably in the third quarter of 2008 as the worsening state of global financial markets further impacted capital flows into the sector. Preliminary data shows investment volume down across the region, according to CB Richard Ellis? Asia Investment Market View Report for the third quarter of 2008.
Overall the regional investment market is changing from being a buyer?s to a seller?s market as rising number of sellers come under pressure to dispose of real estate assets in exchange for cash in order to shore up balance sheets and replenish liquidity. Highly-leveraged investors have largely stepped out of the region?s investment markets, while core investors including pension and sovereign wealth funds have been hesitant to increase their exposure to commercial property under the present market conditions. The outlook for the investment markets is therefore expected to be difficult but opportunities remain for buyers looking for distressed sales.
In India, the real estate investment market continued to remain subdued amid economic worries. Anshuman magazine chairman & managing director, CB Richard Ellis, South Asia said, ?Domestic credit control measures have impacted the availability of funds for developers and delayed project timelines and schedules. At the same time, high interest rates and inflation have negatively affected investor demand.?
Transaction volumes in the residential, office and retail sectors, which had already begun to slow earlier in the year, further tapered off during the third quarter.
Japan endured a continued slowdown in real estate investment activities in the third quarter. While the tougher lending environment has forced many opportunistic funds to retreat from the market, core and core plus funds continued to acquire quality properties. However, the total number of acquisitions by J-REITs during July-September fell 70% in comparison to the same quarter in the preceding year.
The Singapore property investment sales market suffered a further fall in the third quarter, with a total of S$3.17 billion worth of investment transactions recorded. This was 34.6% lower than the S$4.85 billion recorded in the second quarter of 2008. The amount is also a fraction of the S$16.51 billion recorded in the same period last year and marks the fourth consecutive quarter that investment transactions have dropped substantially.
The downside risk to Hong Kong?s near-term economic outlook has increased, mainly reflecting the deterioration in the external environment that affects available liquidity in the market. The total quarterly sales volume of investment properties worth over $100 million was down 61% y-o-y. However, the decline in asset prices to date is not especially severe when viewed in context of the rapid increase in rents and capital values in the years preceding the credit crunch.
In China, despite the overall success of the Olympic Games, investment sentiment softened dramatically in response to significant corrections in the stock market and the sizeable drop in transaction volumes in the residential sales market. The quarter saw a number of developers forced to discount their asking prices to encourage sales.
Despite impressive third quarter sales volumes in Taiwan, the adverse impact of the ongoing global financial turmoil was reflected in the investment turnover for August and September, which fell 47% from the same period in 2007. August also saw the Taiwanese residential market begin to show signs of downturn, forcing a number of developers to postpone their pre-sale housing projects scheduled to be launched in late September, a traditional high season for the residential market.
In South Korea, local investor sentiment was hit by the global financial crisis and prospective investors adopted a cautious approach in comparison to the optimism which had been evident over the past few years.