JAKARTA (TheInsiderStories) – The impact of the COVID-19 pandemic on the property market in the Asia Pacific was stronger in the second quarter of 2020 compared to the previous quarter, according to the latest JLL data. This can be seen in the decrease in investment volume and rental prices in most commercial asset classes in the first half of this year.
According to the agency, the volume of investment in the first half of 2020 has fell 32 percent in annual basis with a weakening of 39 percent in the second quarter and a decline of 26 percent in the first quarter. The decline in investment volume continues with the introduction of large-scale social restrictions and travel restrictions.
This condition was affected a number of short-term investment plans in Asia Pacific. Singapore (-68 percent) and Hong Kong (-65 percent) recorded the biggest annual investment decline in the second quarter. While the decline in investment in Australia (-58 percent), South Korea (-45 percent) and China (-15 percent) was offset by the resumption of a number of activities at the end of the second quarter.
Investment activities in Japan (-20 percent) continue to run with transaction support in the multi-family sector and strong domestic liquidity. According to JLL, transaction activity which declined sharply in the second quarter reflected a lack of business interest and uncertainty about market recovery.
“Liquidity is still very high, and we expect transaction activity to start recovering in the second half with further reopening of economic activity and adjusting price estimates in certain markets,” said Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL.
He added, the Asia Pacific office sector reported the highest investment volume, thanks to the strong interest of institutional investors in key markets. Defensive assets as well as the main for operational activities – logistics centers, education and data centers also steal the attention of investors, so that the flow of funds and new joint ventures. Retail and hotel transaction activities remained stagnant in the first half of this year.
With loan interest rates falling in most major markets, data from JLL showed that prime yields and bond yields are in safe limits in most sectors in the Asia Pacific. This creates an attractive market for outside investors who want to place around US$40 billion in cash in the region.
In the Asia Pacific region, office rentals are generally depressed in the first semester. Only certain countries recorded quarterly price increases compared to last year. Office rent in the Central District of Hong Kong recorded the deepest decline (-9.3 percent) due to increased vacancies and weak demand.
Then, Beijing (-4.1 percent), Melbourne (-3.9 percent), Sydney (-3.5 percent) and Singapore (-3.3 percent) also reported a significant reduction in rental prices. In contrast, offices in Osaka and Seoul experienced an increase that exceeded the target in the second quarter, with rental prices rising 1-2 percent.
“Office rental activity was relatively halted in the second quarter in the main Asia Pacific market, as economic uncertainties affected decision-making as well as regional quarantine which caused difficulties for inspections. Although there are several opportunities in certain areas, the market remains unpredictable and all parties will be watching closely when the second semester opens, “said Jeremy Sheldon, Head of Markets, Asia Pacific, JLL.
Retail was the sector most affected by regional quarantine, travel restrictions and social restrictions, cutting demand in the second quarter. The Hong Kong retail rental market (-13.3 percent) recorded the deepest decline among the main markets in the Asia Pacific. Rental costs also declined in most of Southeast Asia, such as Singapore (-8.5 percent) which recorded the most significant price reductions.
The logistics and industrial sectors were the most resilient in the region during the second quarter. Rental growth remained positive in Shanghai (+1.2 percent) and Sydney (+1.0 percent) and most of the moves were stable in Singapore, Beijing, Sydney and Melbourne.
“There is still uncertainty about the prospects for growth and recovery amid the pandemic. Supply and demand will remain the main drivers for rental performance. But every country is still going through the regional quarantine stage and this will certainly have a direct impact on demand,” added Roddy Allan, Chief Research Officer, Asia Pacific, JLL.
The impact of COVID-19 will still be felt, but the results of the JLL study show that investors will return to the market in the second half with optimism. They believes investment will increase faster in early 2021.
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