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Knight Frank launches Asia-Pacific Residential Review

25 May 2017

 

Knight Frank, the independent global property consultancy, launches the May 2017 issue of Asia-Pacific Residential Review, tracking cross-border residential land acquisition activity in Asia-Pacific.

Report highlights:

  • The report reveals that cross-border residential land investment activity in Asia-Pacific has risen by 136.9% over the last decade, hitting more than US$42 billion in 2016, compared to US$17.8 billion in 2007.
  • The main bulk of this cross-border capital originated from developers based in Hong Kong and mainland China, constituting 80.2% of the total money spent on acquiring overseas residential lands within Asia-Pacific. On the surface, Hong Kong developers alone are the front-runner with 74.5% of the market share but in fact the most acquisitive companies have roots in the mainland.
  • Singapore-based developers are trailing behind Hong Kong, snapping up 7.3% of the total cross-border volume as they actively pursue more overseas development opportunities. Other notable players include United States (3.2%), Japan (2.4%), Malaysia (1.7%) and United Arab Emirates (1.1%).

 

Trending: Growth in outbound activity by mainland Chinese developers

Developers from mainland China have been the most active cross-border residential land buyers in Asia-Pacific from 2012 to 2016. Transaction volumes were going from practically zero in 2009 to more than US$2.5 billion in 2016.

From 2012 to 2016, the favourite destinations for the Chinese developers was Australia (36.5%) along with other key markets including Hong Kong (23.7%), Malaysia (19.7%) and Singapore (15.4%).

Mr Nicholas Holt, Head of Research for Asia-Pacific, says, “Following the flurry of cooling measures introduced in major Chinese cities and the recently enforced capital controls, we expect Chinese developers to put more money into Hong Kong and smaller Tier-3 Chinese cities this year. Evidently, we saw that in the first quarter of 2017 alone, Chinese developers invested over US$5.1 billion in the region, with more than US$4.9 billion or 95% concentrated in Hong Kong.”

 

Cross-border investment activities continue to rise

Over the ten-year period between 2007 to 2016, Asia-Pacific developers demonstrated a strong preference for opportunities within their home region:

  • Close to a total of US$2.1 trillion (including both cross-border and domestic deals) was invested in Asia-Pacific residential land sites
  • Approximately 11%, amounting to US$230 billion, originated from cross-border deals
  • Looking at these cross-border deals, Asia-Pacific developers made up 94% of the buying activity for sites within Asia-Pacific and invested merely US$6 billion in residential land sites in Europe, the Americas and Africa.
  • Cross-border investment activity in Asia-Pacific continued to rise in Q1 2017, with close to US$10 billion in cross-border investments being recorded, representing 15.2% of the total sales volume in that quarter – the highest Q1 figure ever recorded since at least 2007.
  • Out of the $3.03 billion of investments in Asia Pacific by Singapore Investors in 2016, 86% went to China.
  • Within China, 44% of the funds went to Nanjing. Yanlord Land Group purchased Nanjing Eco Hi-Tech Island Land Plot for USD $1.14 billion.
  • Similar trends were seen in Q1 2017, where 88% of investments in development land flowed to China.
  • In 2016, SGD $2.64 billion worth of transactions was witnessed in the Singapore residential GLS scene.
  • Of this, 58% comprised Singapore players, while Japan investors made up 24%*.
  • 2017 Year-to-date (YTD), Hong Kong/ China overtook to contribute SGD $1.29 billion out of SGD $2.1 billion transacted in the residential GLS.

 

Holt emphasises, “The increasingly globalised nature of Asia-Pacific’s development markets will spread from the gateway cities to more secondary and niche opportunities, as land in some of the major cities becomes more scarce and developers become more familiar with these untapped markets.

“Along with the Chinese, Singaporean and Hong Kong players, we expect other developer nationalities – who up to now have not yet significantly ventured into offshore markets – begin to become more active, as diversification, brand building and the potential to ride out downswings in domestic markets encourage this outbound trend.”

Ms Alice Tan, Director and Head of Consultancy & Research, Knight Frank Singapore, comments, "Against the triple whammy of private home declines, property cooling measures and rising land prices back home, more Singapore-based developers have invested offshore to mainly gateway cities to pursue residential development opportunities.

“That said, the allure of investing in Singapore residential market remains intact especially from smaller local developers and foreign investors, as exhibited from the strong bidding interest for government land sale sites for the past 2 quarters. Along with emerging signs of recovery in Singapore, competition for residential land is set to heighten as both Singapore-based and foreign developers jump in the bandwagon, possibly prompting the unwinding of government land sale supply and spurring collective sale activities."

 

To download the report, please visit: http://www.knightfrank.com.sg/research/asia-pacific-residential-review-may-2017-4658.aspx