JLL reveal 2016 saw a growth in purchasing power of domestic investors, particularly in China and Korea

SINGAPORE- Domestic investors were active across most Asia Pacific real estate markets in 2016, as many looked to purchase real estate assets at home amid global political and economic volatility.

Chinese investors ploughed a total of USD29.1bil into domestic real estate assets, a 50 percent increase year-on-year, while domestic investment in South Korean real estate surged 75 per cent to USD12.4bil.

“Looking at the figures, it’s clear that investors flexed their domestic purchasing power in 2016,” JLL Asia Pasic Capital Markets research director Myles Huang said.

“In China, Hong Kong, Korea and Japan, we saw an increase in the volume of domestic deals in 2016, spurred by strong in-country opportunities as well as many institutional investors allocating more money to the real estate asset class in general.

“Chinese investors, however, were also strong cross-border players in 2016 as they diversified overseas.But with the government’s increase scrutiny on outbound capital, the domestic investment trend is likely to sustain throughout 2017,” Huang added.

Mixed picture for inbound and outbound capital flows

Inbound investment to Singapore surged 441 percent year-on-year in 2016 on the back of mega deals such as the JLL-brokered Qatar Investment Authority purchase of Asia Square Tower 1 for USD2.45bil. The city-state however, experienced a decrease in domestic real estate investment with a 16 percent dip in 2016.

“Domestic investor were quiet as they focused on diversifying exposure overseas .S-REIT were also less active as they have already completed many transactions in recent year,”JLL Singapore head of research Tay Huey Ying said.

“Foreign investors’ appetite remained robust as the price gap between buyers and sellers in Singapore has narrowed the following recent price corrections, and many seized opportunities to purchase assets in the office sector at lower prices.

“Investor continue to be keen on Singapore’s prime office and sub-urban retail assets, which are closely held and rare to access,” Tay added.

Like Singapore, South Korea’s inbound investment swelled in 2016 with a number of major deals, including China Investment Corporation (CIC) and Brookfield Asset Management’s acquisition of IFC Seoul from AIG Global Real Estate for USD2.3bil.

The country registered a 282 percent increase in domestic real estate investment year-on-year, driven by yields looking attractive on a global and regional basis, in addition to the domestic base rate at a record low level of 1.25 percent.

South Korea’s investment in overseas property decreased by 21 percent in 2016, partly due to 2015 being record year for Korean outbound transactions, and a shift in focus to offshore debt deals with investors preferring those over higher-priced offshore equity deals.

In Hong Kong, real estate investment activity remains robust with an 18 percent year –on-year increase in domestic transaction volumes in 2016, driven by local investors and corporate end users investing in Grade-A offices and strata retail units.

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