Expert Insight: The State of the Asia Pacific Real Estate Market
A joint report published by PwC and the Urban Land Institute at the end of 2019 concluded that “Asia Pacific real estate continues to produce strong returns,” but added, “caution is increasingly embedded into investor strategies.” The authors could hardly have foreseen the tumultuous events of 2020, but their nod towards caution now seems prescient—the pandemic has led to mixed results for the diverse housing markets within the region. However, the majority of real estate insiders we spoke to agree: investors may be proceeding carefully, but they are also cautiously optimistic.
Those insiders include K.S. Koh, chief executive and founder of Landscope Christie’s International Real Estate in Hong Kong; Sonny Seiichi Saito, CEO of Japan Capital Realty, Inc. in Minato-Ku and Tokyo, Japan; Michael Liu, founder and CEO of Jubon Assets Management in Taipei City; Tim Skevington, managing director of Richmont’s Luxury Real Estate in Bangkok, Thailand; Ken Jacobs, founder and managing director of Ken Jacobs in Sydney, Australia; and Sean Cussell, principal of Prestige Homes of Victoria in Victoria, Australia.
Read on to find out how their brokerages have adapted in the wake of COVID-19, and their outlook for this quarter and beyond.
The countries within the Asia Pacific region have handled the current health crisis in vastly different ways. Taipei City set up a home quarantine system using geofencing technology, both Hong Kong and Japan eschewed full lockdowns, while Thailand and Australia adopted them with varying degrees of intensity. But interestingly, the mixed results reported by brokerages in the region seem to have been a broader effect of the pandemic itself and not, as might have been expected, the stay-at-home orders.
For example, the housing market in Japan “has pretty much halted since COVID-19,” says Saito. We’ve received many inquiries on listings, but since foreign nationals cannot visit Japan, we are in a holding pattern. Domestic investment is also on hold, as investors are not willing to travel within the country.”
In Hong Kong, Koh reports a similar effect on Landscope Realty’s 2020 turnover. “We’ve seen a below-average performance this year, although it is similar to our 2019 results—but for different reasons. Last year it was social unrest, now it’s the pandemic and political uncertainties.”
On the other hand, real estate in Bangkok seems to be experiencing something of a boom. “Our sales in the luxury segment—$1m and above—have more than doubled in 2020 when compared with 2019,” Skevington says. “Sales to foreign buyers have outperformed those to Thai buyers, but the ratio of increase has been the same for both sets of demographics.”
It’s a trend that Liu has noticed in Taipei City, too. “Remarkably, inquiries for homes and commercial property have increased this year, and we’re also seeing an increase in transaction volume. This may be due to the government’s highly effective COVID‐19 response. Many businesses have returned to our shores, which has stimulated industrial real estate demand and further driven commercial and residential real estate transactions.”
Similarly, Sydney is seeing a notable upswing in demand. “We’ve just come out of our strongest winter sales period ever,” says Jacobs. “While there’s a shortage of quality stock, and there is certainly buyer and seller apprehension, we’ve set several suburban, regional, and rate-per-square-meter records.”
Meanwhile, for Cussell in Melbourne—which has only recently started to emerge from its 112-day lockdown—things are looking optimistic. “Interest rates are at an all-time low in Australia and that, combined with the welcome spring weather and the easing of COVID-19 restrictions, means that buyers are highly motivated,” he says. “There also isn’t a lot on the market at this time, as sellers are cautiously watching sales trends, and so prices are generally up.”
Change in Buyer Behavior
Many of the real estate experts we spoke to have noticed interesting shifts in buyer behavior—and not only due to the pandemic.
For Liu, it’s the increase in buyers that is most notable in his marketplace. “Real estate values in Taipei City have increased for much of the past decade, driven mostly by low interest rates, which have made mortgages increasingly affordable for both owner-occupiers and property investors,” he says. “This is in stark contrast to the high cost of living and rent, which has risen fiercely. The result is that we have a large number of buyers in the market, because purchasing a property is viewed as a way to fight inflation. It’s a trend that I believe will only become more obvious in the future.”
“We’re seeing a definite swing towards buying new, move-in-ready luxury projects,” Skevington explains of Bangkok. “In the past, the vast majority of sales were for off-plan developments, which completed within two to three years. That has all changed, especially as some newly completed developments have offered discounts in response to COVID-19.”
In Sydney, much like in many other parts of the world, a desire to move away from urban areas is evident. “The ability to work from home during lockdown has made second homes and holiday properties all the more appealing to many,” Jacobs says. “It’s a trend we believe can be divided into two subgroups: there are those who want to leave city centers entirely, and then there are those who have deep urban roots but want the bonus of a more secluded property with recreational options. Both groups are reassessing their priorities and seeking homes that offer better life balance.”
Cussell agrees: “Coastal and rural properties are the most in demand on the market at the moment. Travel between states is still heavily restricted in Australia, but buyers are seeking a significant lifestyle change and in some highly sought-after towns like Byron Bay and Port Douglas, they are even willing to buy a property ‘unseen.’”
However, in Hong Kong, changes in buyers’ attitudes are not necessarily translating into gains for its domestic market, says Koh. “Those in the market for luxury property aren’t confident of the future, and many are planning to divest to overseas markets,” he explains. “And those buyers who are taking advantage of this sentiment are bidding at 20-30 percent discount to market. As a result, luxury residential sales prices have declined by 15-25 percent.”
For some brokerages, the inability to hold viewings during lockdown, and the socially distanced home tours that followed, have also led to new innovations. For example, Landscope Christie’s is now using Zoom more frequently for meetings with clients and is spending more on virtual tours and social media content, explains Koh.
Of the situation in Thailand, Skevington says: “We’ve adapted by hosting online webinars, which update buyers on the state of the market, and we’re also featuring more online news stories and blog posts. On the sales side, we have more listings with 3D virtual tours on our website and we frequently take foreign clients on walkthroughs of properties via video call.”
Connecting with Clients
At the other end of the scale, Ken Jacobs is “adopting a more back-to-basics approach” by offering to accompany its clients through every step of the buying or selling process. “The majority of people, at all levels of wealth, are feeling vulnerable and are looking for a credible perspective on the impact of COVID-19 on the property market,” Jacobs explains. “The ability to receive nuanced insights and quality advice is what clients are craving right now.”
Jubon Assets Management has also prioritized its connection with clients, but has chosen to use art as its platform. “We used a combination of arts, architecture, and aesthetics to connect with our clients and build new relationships with potential buyers during this intense period. For instance, from April to July 2020, we hosted an exhibition with two renowned local artists—A-Sun Wu and Paloma Chang—at one of our listings. To us, there is strong connection between art and real estate.” Investment Opportunities
Both Koh and Saito believe that smart investment opportunities abound for those buyers who are willing to play the long game. “There are several new high-end condominium developments in Tokyo,” says Saito. “With the current drop in demand, cash buyers can take advantage of the situation. It’s a buyer’s market.” Koh agrees, adding that in Hong Kong, it makes sense to invest in high-end residential properties—”but with the view of holding onto them for the long term.”
In Thailand, Skevington recommends seeking out branded residences and luxury riverside developments. “That’s where I would put my money at the present time.”
Liu points to the increasing commercial interest in Taipei City as a reason to invest now. “Our country boasts leading scientific and technological expertise and, because it is located in the central area of Asia Pacific, also offers certain geographical advantages. For these reasons, companies such as Google, Microsoft, and IBM have all established extensive research and development bases here—a factor that not only drives the demand for commercial real estate, but for residential properties too.”
Investing in the luxury property market in Australia also remains a good option. “Country and coastal properties are currently receiving strong interest and should continue to do so,” Jacobs says. “Farms and holiday homes within a two-hour drive of the city are in short supply and high demand,” Cussell adds. “We expect these properties to show high capital appreciation in line with the high demand to work from home.”
The Rest of 2020, and Beyond
So, what’s the outlook on real estate for the remainder of this year, and into the next? For Skevington it’s resoundingly positive. “Thailand is gradually reopening to foreign travelers, and we have a list of clients who have been impressed by the country’s approach to containing COVID-19, and who are waiting to visit luxury properties with a view to securing a second home,” he says. “Going forward, we’re optimistic that this demand will continue and that prices will remain resilient into 2021.”
Liu is also optimistic. “We are very confident about Taipei City’s real estate market for the remainder of 2020 and next year. The government’s outstanding work has minimized the impact of COVID-19 on the economy, and so we anticipate even higher levels of interest from international investors.”
Koh, however, is more cautious: “The current downtrend may continue, and we forecast that prices could slide a further 10-15 percent before bottoming out in 2021.” Similarly, Saito believes that the market “will get even slower as we near the Japanese fiscal year end in March, but I foresee new progress in Q2 of 2021.”
Even with the effects of a prolonged lockdown fresh in mind, Cussell believes the outlook for Victoria is good thanks to Australia currently experiencing the lowest interest rates on record. “We expect strong demand in the final quarter of this year and the start of next, and for prices to increase as a result.”
Jacobs is a little more circumspect. “Travel restrictions in Australia have not yet been lifted, and so the true impact of the pandemic on the market is yet to be measured. But we’ve seen an increase in interest from expat buyers who are planning to return to Australia, as well as foreign buyers wishing to relocate. And the majority of people in those categories don’t want to simply move from one international city to another, they want the lifestyle experience—which Australia can definitely offer. Watch this space.”
(via Christie's International Real Estate)