Knight Frank Asia Pacific Insights: March 2021

Australasia 

Greystar raises a record $1.3b for build-to-rent in Multifamily venture 

US investor Greystar along with APG and Ivanhoe Cambridge have raised a A$1.3bn built-to-rent fund which is targeting to bring 5,000 dwellings to market. The fund currently has two seed properties in inner-city Melbourne which are slated for development this year, potentially delivering 1,300 dwellings. The institutional build-to-rent sector has been slower to emerge in Australia than in other countries, but there is now a growing pipeline of new developments focused on Melbourne and Sydney with other major players such as Mirvac and Oxford Properties also developing at large scales. Recent changes to the land tax regime in Sydney and Melbourne have made development more viable and changing market conditions over the past year are also motivating more investors to seek exposure to the sector. 

New Zealand introduces latest round of cooling measures 

In a move to rein in rapid housing price growth, the New Zealand government has reintroduced mortgage restrictions which from March 1 will require a 20% and 30% deposit for owner-occupiers and investors, respectively. Subsequently, on May 1 the deposit rates for investors will be raised to 40%. With housing prices up c.19% year-on-year in January, the move was widely expected as the government had sounded its concerns on over-leveraging. This move should take the wind out of the sail for the residential market and the rate of price growth should normalize over the coming months.   

East Asia 

Standard Chartered gives up multiple floors in Hong Kong offices 

Standard Chartered has announced plans to give up several floors in its main offices in Hong Kong. This is following in line with the trend of global banks accelerating cost saving efforts as the COVID-19 pandemic upends traditional work arrangements. The firm is looking to relinquish eight storeys worth of its lease in the Standard Chartered Bank Building in Central and is seeking to rent out three levels in its Kwun Tong office sometime between next month and April next year. Other notable foreign firms trimming their office space occupancy include BNP Paribas, Nomura Holdings and Macquarie Group. However, the newly surrendered space could see pick up from industries that have thrived through the pandemic, such as healthcare and medical sectors, and the market should still see some resilience through the dip in demand.  

Wharf-led consortium wins record-setting land bid for residential site at Peak 

A consortium led by a Wharf Holdings subsidiary won 54,541 sqft residential land site bid in the Peak, valued at HK$7.25 billion, and is primed for a luxury home development. The bidding price translates to HK$50,011 per sqft for the land plot, recording the highest ever for a residential site sold in a government tender. According to Knight Frank's Prime GLobal Cities Index, the market’s luxury home prices fell 6.9% year-on-year in 2020 amidst global cross-border travel restrictions. The unexpectedly high price for the land reflects a renewed confidence from the developers in the city’s luxury home market, as Wharf has also bought an adjacent residential site for HK$12 billion in December. 

Southeast Asia 

En bloc may see a comeback in Singapore as developers' landbank run low 

According to a survey by the Institute of Real Estate and Urban Studies in Q4 2020, more than half of developers in Singapore are keen to replenish their landbank. The en bloc market could garner more interest in 2021 as a result. Residential land parcels are the most likely to change hands, as opposed to commercial developments, with smaller quantum sites with a project potential of about 200 units and priced within S$200 million being favoured. Considering still-uncertain market conditions, developers would risk being unable to complete sales within the stipulated period. Overall, the currently depleting landbanks, the present low interest rates environment and positive economic recovery outlook due to the domestic control of the COVID-19 pandemic should provide some support for land sales in 2021.  

Indonesia moves to stimulate residential market 

The central bank has relaxed the loan-to-value (LTV) and financing-to-value (FTV) ratios to 100 percent, from the previous 85 to 95 percent depending on property type. These relaxations on policy are set to take effect starting from March to December this year. The Indonesian Ministry of Finance will also cut the Pajak Pertambahan Nilai (Value-added tax) for landed houses and low-cost apartments purchased between March 1 and Aug 31 2021. The tax will be cut 100% for houses priced below Rp 2 billion and 50% for houses priced between Rp 2 billion and Rp 5 billion. The regulation caps the incentive to one house per citizen and forbids owners from reselling the houses within a year of purchase. This has been put in place to encourage the sales of houses that were built by developers last year and this year but which have not yet been absorbed by the market. 

South Asia 

India’s Hyderabad office market sentiment boosted by recent deals 

Hyderabad’s HITEC City, a dedicated information (IT) zone within the state, recently saw Goldman Sachs signing up for a 150,000 sqft long term lease at Knowledge City, with an option to upsize to 500,000 sqft later. The property is fully furnished, and Goldman is expected to start operations by the middle of this year. This is also the company's first office in Hyderabad which will support its existing operations in Bengaluru. Separately, Singapore’s Ascendas India Trust recently paid INR5.06 billion for aVance 6 which is also located in HITEC City. The building is >98% leased by Amazon and has a GLA of 0.64 million sqft. These activities are a positive sign for the office market in Hyderabad and builds upon the bullish results seen at our recent Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Survey which showed expectations for office leasing activity to increase over the coming six months.