Investors in the Asia-Pacific region were more cautious during the second quarter, but it's thought this is mainly due to short-term weaker market sentiment rather than any fundamental long-term change, according to a report from Alternative Ownership Conference Hotels and Resorts-Asia Pacific (AOCAP).
The decline of 39% from Q1 to Q2 follows the earthquake and tsunami in Japan, and the recent economic troubles in the Eurozone and the US. The Pacific region is recovering from a slow start to the year, and increased by a massive 228% quarter on quarter, while transactions in Asia dropped by 52% quarter on quarter.
Australia currently accounts for 24% of total investment in the Asia Pacific region, and proved particularly attractive to investors looking for core quality buildings in established markets. Investors included Asian buyers who were keen to capitalize on the Sydney office market, especially as demand for premium office space is expected to increase over the next few years.
Income producing properties are also proving particularly popular as the Sofitel Silom Hotel in Thailand was recently sold to an owned associate of The Pioneer Global Group. However market interest is also focused on strategically located sites, and REITs and other listed property companies continued to purchase properties both within their own borders and in other countries. They accounted for 27% of all commercial real estate transactions.
Real estate experts have commented that even though activity has fallen, there is still a significant volume of investment capital and a real shortage of better quality assets for sale. The market is also affected by the limitations imposed on lending in China and Hong Kong which has led to buyers expecting discounts to offset their increased borrowing costs.
Most analysts think the Asian real estate market is still well positioned to deal with the current global uncertainty, remaining an attractive medium-term investment. In general, the Pacific region expects an improvement in economic growth over the next year, depending on the global economy, and investors are expected to continue focusing attention on quality Australian commercial property.