Singapore a bright spot as APAC property deal activity slows in Q2: MSCI
Vivienne Tay
REAL estate investment in the Asia-Pacific region fell 24 per cent on the year to US$45.1 billion in the second quarter, dragged by higher borrowing costs and economic headwinds.
Singapore, however, “went against the grain” as the only economy to register a record-high level of investment for the first half of the year, according to a MSCI report released on Wednesday (Aug 10).
Investment volume in Singapore rose 74 per cent to reach US$5.6 billion in the second quarter – the highest tally ever for a single quarter. In the first half, overall transaction volume stood at US$7.8 billion, up 53 per cent year on year.
Global investors were the main drivers behind the Republic’s performance, with offices being the most sought-after property type.
“While the broader regional slowdown has largely been attributable to fall-off in smaller deals, Singapore’s institutionally-dominated market has shrugged off the macroeconomic headwinds,” said MSCI head of Asia real assets research Benjamin Chow.
On top of a decline in investment volume, the number of Asia-Pacific deals and active buyers also fell during the quarter by “slightly larger margins”, indicating that liquidity in the region has taken a hit, MSCI said.
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Notably, the region recorded a “sharp decline” in trades of individual properties, which totalled only US$33.1 billion in Q2, compared with the average of over US$40 billion per quarter for most of 2021.
Chow said the rising interest rate environment has taken its toll on deal activity in a number of core markets.
“Rising borrowing costs have squeezed out smaller buyers, as evidenced by the fact that deals under US$50 million fell the most across all measures of activity,” Chow noted.
In contrast, big global institutions and cross-border players, which were relatively less affected by these headwinds, remained much more active in the second quarter.
Other than Singapore, India and Malaysia registered gains in investment volumes in Q2, raking in US$1.5 billion and US$200 million respectively. For the 6 months ended June, investment volume in Malaysia rose 22 per cent to US$300 million, but India was down 9 per cent to US$2.4 billion.
On the other hand, China and Hong Kong saw the biggest contraction in activity, as lockdowns and financial distress in the listed financial sector weighed.
China investment volume tumbled 42 per cent on the year to US$9 billion in Q2 and declined 26 per cent to US$19.9 billion in the first half. Hong Kong, meanwhile, slid 50 per cent to US$2.3 billion in Q2, and fell 25 per cent to US$4.7 billion in H1.
By asset type, the biggest loser in the region was the industrial sector. Q2 transaction volume tumbled 62 per cent on the year to US$7.2 billion. Deal volume for the first half was also down 42 per cent to US$17.1 billion.
The retail sector also disappointed, falling 26 per cent to US$9.6 billion in Q2 and dropping 24 per cent to US$16.3 billion in H1. Purchases of shopping centres slipped 30 per cent versus the year before, although deal volume for shops saw a marginal decline.
The focus has shifted back to the office sector, with the majority of the region’s biggest investors piling into the asset class this year, said MSCI head of real assets research David Green-Morgan.
Investment volume for offices was up 9 per cent to US$22.1 billion in Q2 and up 3 per cent to US$42.1 billion in H1 2022.
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