Emerging Trends in Real Estate®

Asia Pacific 2018

  • Affordable housing gains traction due to high price of conventional residential properties and government initiatives to open up the market for large-scale construction.

  • Ho Chi Minh City ranked highest in terms of rental and capital value growth, although size of opportunity tend to be relatively small.

  • Currently, Japan is a sought-after destination for yield investors due to the healthy spread between current cap rates and the country’s super-low sovereign bond prices.

Emerging Trends in Real Estate® Asia Pacific is a trends and forecast publication now in its 12th edition, and is one of the most highly regarded and widely read forecast reports in the real estate industry. Emerging Trends in Real Estate® Asia Pacific 2018, undertaken jointly by PwC and the Urban Land Institute, provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the Asia Pacific region.

The interviewees and survey participants represent a wide range of industry experts, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants. ULI and PwC researchers personally interviewed more than 110 individuals and survey responses were received from almost 600 individuals.

Lead buy/hold/sell ratings for the various asset classes:
Action Office Residential Retail Industrial/Distribution
Buy Ho Chi Minh City Ho Chi Minh City

Ho Chi Minh City

Ho Chi Minh City

Sell Taipei Seoul Taipei
Taipei

Key findings

Transactions slow in major markets

Another byproduct of today’s low-interest-rate, high-liquidity markets is that—paradoxically—they create less incentive for property owners to sell, especially when the asset is a core holding in a major market.

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Core buyers take more risk

As competition increases, cap rates flatten, and the number of available assets declines, more core investors are opting to migrate up the risk curve in search of yield, most obviously via development projects.

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Data centres

Insti­tutional funds are considering investment in data centers due to Asia’s data center market is quite fragmented, creating scope for merger-and-acquisitions (M&A) activity. Further, India, Hong Kong, China and Singapore identified as potential data center markets with projected IRRs of 13% to 15%.

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The coworking juggernaut

Few trends within the commercial real estate world have taken off as quickly as coworking. Only 24 months ago, most people in the industry had never heard of it. Today, it is taking the office sector by storm, with coworking operators the biggest source of demand for new office space in many major cities both in Asia and throughout the world.

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India and Vietnam stand out

India stands out in anticipation of high and long-term economic growth and Vietnam for similar expectations regarding economic growth combined with a lower base and the vast scale of investment opportunities on offer.

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Residential markets shrug off cooling measures

Governments have been trying for years to slow the steady rise of residential property prices, usually by imposing a regime of punitive sales taxes and higher mort­gage down payments. On the whole, however, their efforts have failed, with prices in most markets continuing to grind upward.

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  • "As a country, India continues to be relied upon for sustainable rental growth in the range of 3-5%. This is reflective of the large deals in core assets that were consummated in the past year. While asset owners' expectations of cap rates has started moving toward single digit, their chance of securing a good bargain continues as there are limited number of Grade A properties with substantial quantum of capital waiting to be invested in such assets."

    Anish Sanghvi
    Partner - Tax and Regulatory, PwC India

  • "With most high-quality pre-existing assets already accounted for, international funds are turning increasingly to build-to-core projects, affordable housing and other opportunistic investments. There is a trend, which is picking up at a pace never seen before in unconventional assets classes, specifically, coworking spaces. Recent investments in modern logistics assets, driven by the increasing demand from e-commerce and recent tax reforms, have a gold rush feel to it."

    Bhairav Dalal
    Partner - Tax and Regulatory, PwC India

Contact us

Frank D’Souza
Corporate and International Tax
Leader, PwC India
Tel: +91 22 6689 1144
Email

Tanya Tandon
Associate Director, Real Estate and Private Equity, PwC India
Tel: +91 124 330 6854
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