MIPIM Asia 2008 Releases Asia-Pacific Investment Report China...
For the third year, MIPIM Asia partners with the internationally-respected property consultants, Cushman & Wakefield, to produce the 2008 Asia Pacific Investment Report. MIPIM Asia 2008, the world's property market in Asia Pacific, will be held at the Hong Kong Convention and Exhibition Centre from November 19 to 21.
China – Relatively unaffected by global economic uncertainty
While the rest of the world continues to struggle with the credit crisis, China's real economy looks relatively unaffected, and it appears that the country is ready to assume its role as the main driver of global economic growth. Estimates for China's 2008 GDP growth have been reduced, but are still robust at 9.4%, with slowing exports to the U.S..
While property developers are currently affected by less readily available financing, we expect the pace of development to continue unabated this year with 2.4 billion sq.m. of residential space currently under construction and many more projects under planning. Early signs show that growth in investment transactions is slower in 2008, with a majority of completed transactions with foreign investor being offshore share-based transactions, rather than onshore asset-based transactions.
- Rental growth in the luxury rental market segments of Shanghai and Beijing has been strong over the last 12 months, with rents in Shanghai up 13.61% in June 2008 compared to a year ago and rents in Beijing up 7.96%.
- Gross yields in the luxury residential market range between 4% and 8%, while in the overall market gross rental yields are as low as 3%.
- Rental growth in the Grade A office market in Shanghai this year has been strong. Shanghai, with a continuing shortage of high quality space and vacancy rates of just 2.2% has seen 18.9% rental growth in the 12 months to June 2008. Beijing has performed better than anticipated over the year in the face of huge volumes of new Grade A office supply.
- Demand for Beijing offices has proved strong, keeping vacancy rates at 14.6%. Meanwhile, Grade A rentals have fallen 15.3% over the year to June 2008.
- China's major shopping streets have experienced strong rental growth with rents on Beijing's Wangfujing and Shanghai's Nanjing Road reaching $200 per sq.m. per month and $212 per sq.m. per month respectively.
- Strong retail sales continue to drive the market, and the latest figures show retail sales growth at 21.1% in the year to May 2008. The top 100 chain stores' sales now account for 11.2% of overall sales in 2007.
Hong Kong – Economy currently more dependent on China and less on U.S.
In the first quarter of 2008, GDP grew at a better-than-expected rate of 7.1% y-o-y fuelled by increases in private consumption and gross domestic fixed capital formation. Negative real interest rates are being brought about by a depreciating USD. As a result, these interest rates, coupled with rising inflation, are persuading people to shift their monetary investments from deposits to tangible and value-preserving goods like commodities and real estate.
Local GDP growth in the second half of the year is expected to slow due to the cumulative effects of the weakening U.S. economy, three brutal natural calamities less than five months apart and rising inflation across the world caused primarily by soaring oil prices. Negative interest rates will likely continue to prevail in the near term while the downward bias of the local stock market will dampen investment sentiment.
- Yields are around 3.5% per annum on average.
- Number and consideration of sales and purchase agreements for residential units have been steadily declining since February 2008, mostly due to future uncertainties in the local economy.
- Yields around 4.84% per annum on average.
- Large sales and purchase transactions of strata-titled offices are most active in Central and Tsim Sha Tsui.
- Yields are around 6.53% per annum on average.
- Well known international brands are setting up flagship stores in Hong Kong as they recognize that its popularity as a tourist destination is increasing. This is particularly true as the weak local currency will make it cheaper for tourists, especially from the Mainland, to buy retail goods.
Gaw Capital Partners President Kenneth Gaw acknowledges: "Our organization focuses in identifying real estate investment opportunities in the Greater China region, we strongly believe that the expansion of the middle class in China, their increase in spending power and affordability level will be key drivers for growth in the various real estate segments. While the current global crisis will have a soft landing effect in China, we also believe that this will create an attractive window to invest in the China real estate market".
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