Market sentiment across various real estate sectors in Asia Pacific remained subdued in Q2 2016, according to CBRE. The leading commercial real estate services firm has been monitoring the price and rental index in retail, industrial & logistics and luxury residential real estate on a quarterly basis. In general, the market sentiment in Asia Pacific was mixed as investors remained mindful of the Eurozone debt crisis.
Q2 2016 saw caution prevail in the Asian luxury residential market as economic growth in the region continued to decelerate. Tightening measures remained in force in most markets during the period. The overall lending environment was largely unchanged with banks in Hong Kong and Singapore remaining keen to provide finance for property acquisitions whilst loans in China, Vietnam and Malaysia were difficult to obtain and the cost of funding generally remained high.
Luxury home prices weakened further in Q2 2016 with the CBRE Asia Luxury Residential Price Index registering a fall of 0.4 percent q-o-q following the decline of 1.1 percent recorded in the previous quarter. Declines in prices were observed in five out of the eleven markets tracked. The most significant downward move was the 2.4 percent q-o-q fall in Singapore as demand for luxury continued to weaken following the implementation of the Additional Buyer’s Stamp Duty.
The CBRE Luxury Residential Rental Index increased by 0.8 percent q-o-q following a 1.8 percent q-o-q decline in Q1 2016 as Shanghai, Bangkok, Beijing, Hong Kong and Singapore all recorded a mild improvement in rents. However the slight improvement should not be considered a sustainable rebound. The short-term prospects for the leasing market remain downbeat as more international firms particularly those in the banking and finance sector put expansion plans on hold and cut housing allowances for expatriate staff amid the weaker economic outlook.
Going forward, overall demand is likely to remain subdued in 2H 2016 and buyers and investors could opt to stay on the sidelines and defer purchase plans. As demand continues to soften luxury residential prices and rents will weaken further. However sales volume may witness a slight improvement in selected markets as developers continue to offer price discounts to attract buyers. More bargain-hunting activity in response to lower prices will be witnessed across the region.