The Wealth Report 2022 –Asia Pacific’s Performance, Q&As with Christine Li

The Prime International Residential Index has performed exceptionally strongly this year with markets in the US and Australasia key hotspots, but some Asian markets are lagging - why do you think this is?

We note that much of the laggards in the index comprised emerging markets in Southeast Asia as well as India, which have borne the brunt of a protracted infection wave sparked by the Delta variant. This has impacted buying sentiment and held back launches in these markets. A number of these markets also are less transparent with various restrictions on foreign ownership. The impact of lower liquidity can be expected to hit harder in times of economic uncertainty.

Was there anything that surprised you in this year’s results?

The strength of the price increases is clearly notable with an average of over 8% growth in the index’s markets. This shows the ample liquidity facilitated by loose monetary policies worldwide and the continued appeal of real estate investments to the high net worth.

Singapore was one of the very few markets to take steps to cool the housing market in 2021, do you expect more markets to follow in its footsteps?

Monetary policy in Singapore is conducted through influencing the strength of the country’s currency rather than the more common interest rate route seen in other economies. As such, this necessitates the need for direct intervention in property markets which is unique to Singapore. Hong Kong, which also uses currency as its main monetary policy tool, also has aspects of such measures. In Chinese Mainland, the conduct of monetary policy is more complex and where housing is viewed more as a social good, the direct intervention has arguably been more stringent. Such measures are unlikely to be replicated widely across the rest of the region due to different market dynamics and where the interest rate mechanism serves as a policy tool.

Hong Kong’s market saw record prices in areas such as The Peak in 2021, this was despite Chinese mainland buyers, a key source of demand, being absent from the market due to border closures, why is HK’s market still registering strong price growth?

Hong Kong remains one of the world’s premier residential markets and a safe haven for global investors to park funds in. Its long-term economic outlook remains well anchored by its proximity to Chinese mainland and a well-developed financial sector. The scarcity of land also means that demand will continually outstrip supply. For a lot of investors, the city ticks all the right boxes. In addition, Hong Kong SAR is entering its third decade of low-interest rates and monetary policy continues to underpin liquidity and low debt in the market that continues to sustain favourable conditions.

We predict that 2022 will be a record year for cross-border investment in commercial real estate. Where do you see Asian investors deploying capital this year?

There remains a strong flight-to-safety trend to ride out the pandemic-induced volatility as well as concerns over looming inflation headwinds. As such, capital will remain attracted to the core markets in the region, and gateway cities, such as Singapore, Seoul, Tokyo as well as the Australian state capitals, will be prominent locations in 2022.

Are there any specific sectors of interest?

Investors should look to target specific sectors in each of the region’s markets countries to leverage the strengths that each present. Asia Pacific is an economically diverse region, that necessitates a multi-faceted approach. However, conditions in Australia’s property markets are generally favourable, and we are bullish on its logistics sector given the geographical expanse of the country. The multifamily sector in Japan is also in for an extended growth cycle, given migration trends. Investors should broaden their scope to its regional cities as opportunities in its capital will be challenging to access. There will also be opportunities to ride on the reopening and recovering themes across the region.