Global:
2010 was a turnaround year, as global stock and volumes returned to growth
But, the big opportunity in property is now behind us, forcing investors to become more selective going forward
The solid funding environment supports DTZ’s forecast of a continuation of the two-speed recovery.
Asia Pacific:
Asia Pacific (APAC) property markets had another great year in 2010 with growth in invested stock and record investment volumes. In fact, APAC has been the engine for a return to growth in global markets.
APAC showed 14% growth in contrast with no growth in the US and European stock, illustrating the two-speed global recovery. As a result, global stock increased by 3.4% in 2010 after a 3.0% decline in 2009, in fixed US dollar terms.
Within APAC, we also saw a two-speed recovery, as China grew by 22% while Japan declined by 4%, in local currencies. Both countries now have invested stock in excess of US$1 trillion.
For the first time, APAC passed Europe to become the most actively traded region, as volumes more than doubled in 2010. On the back of record APAC volumes, global transactions rebounded by 76%.
Despite last year’s strong growth, most APAC markets remain attractive across property types in both developed and developing countries.
This attractiveness is evident from the DTZ Fair Value IndexTM (FVI) score of 65 for APAC. Well over 80% of markets remain at or above fair value, with 45% HOT and 37% WARM. The Hong Kong markets are a notable exception and rated COLD.
In contrast, the big opportunity in property globally is behind us. The global FVI score of 50 implies that property is broadly at fair value across the markets.
China and India
China and India’s growth way out in front: The developing markets of China and India have led the growth rates in invested stock in Asia Pacific over the last decade. But each market remains at opposite ends of the invested stock size spectrum. China’s invested stock topped US$1 trillion in 2010, with India’s stock at only US$38 billion. This means that Indian growth rates are calculated from a low base and look very high.
Opportunities exist across the region: The Indian and Chinese cities have great opportunities as these developing markets continue to benefit from both capital and rental growth.
Prospects
Looking forward, we expect that in 2011 APAC will continue to perform well. Its invested stock is forecast to surpass the US by year-end 2011.
Stock and capital value growth is supported by a strong in-place development pipeline, the increase in available equity and the lack of legacy debt issues in the region.
Transaction volumes are expected to stay at record highs in APAC. But, its share of global volumes is projected to decline as US and European volumes continue to recover.
Deleveraging is anticipated to continue globally. But gearing levels in APAC continue to rise from a low base, with China leading the way. Property companies and developers, particularly in China and Hong Kong, are circumventing restrictive lending policies by issuing property bonds. This type of innovation is expected to further APAC markets’ momentum, especially in developing countries.
Investors are able to take advantage of market opportunities for some time to come. But, future re-pricing will render more markets COLD, joining Hong Kong and Taipei.
Read the complete report HERE.
Money into property is a flagship research report of TDZ for last 35 years. The report analyses invested stock and capital flows into real estate markets across the world including Asia-Pacific and measures the development and structure of the global investment market.
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