Asian property allocations slump 50% in Q1, more price cuts likely

Allocations to regional real estate halved in the first three months of 2023, with those to China down one-third.
Asian property allocations slump 50% in Q1, more price cuts likely

Allocations to Asian property markets slumped by 50% in the first quarter of 2023 -- to $27.2 billion -- the lowest level of activity in any quarter for more than a decade, according to the latest APAC Capital Trends report for Q1, published by MSCI Real Assets (formerly Real Capital Analytics).

The report said that significant price falls would be required to lure investors back to the Asian market.

“Plummeting deal volumes point to the fact that further price corrections may be necessary to resuscitate an ailing market,” it said.

Ben Chow, vice president and head of Real Assets Research, Asia, for MSCI, emphasised that price cuts were a prerequisite for a rebound in transaction volumes, and pointed to a handful of bellwether deals currently in the pipeline, which held the key to the APAC market’s recovery.

“Delaying write-downs in asset values could be even more deleterious for the market as a whole, and push investors away from the Asia-Pacific real estate market,” he said.


Henry Chin, global head of investor thought leadership and head of research for Asia-Pacific at CBRE also pointed to imminent price falls across the region.

“A large supply pipeline could render more significant repricing among industrial and logistic assets in markets such as mainland China and [South] Korea,” he said.

The worst performing market in percentage terms was South Korea, where allocations fell 78%, to $2.7 billion, followed by Australia, down 72%, to $2.9 billion. China and Japan, the region’s two largest markets, also fell, with China down 33%, to $7.7 billion, and Japan down 43%, to $6.7 billion.

However, Chow added that the scale of the price cuts required to get the market moving again varied significantly, depending on where and which sector in Asia one considered.

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“The office markets in South Korea and Singapore are in a much stronger position compared with some of the other global markets," he said. "For a spate of retail mall deals in Singapore this year, yields were in the 4.5% to 5.5% range, which are not too far off long-term averages for the sector.” 

The fall in investor flows into APAC’s property market was less severe than drops of 56% in the US and 62% in Europe.

And the report noted that investment activity in Asia had been buoyed by China and Japan, markets in which interest rate policies had bucked the global tightening trend and where activity fell by less than the regional average in Q1.

However, Chow warned that although China appeared to be ahead of the curve in its recovery compared to many other major Asian markets, impediments remained, notably a reluctance among Western investors to transact.  

“Domestic institutional appetite has begun to pick up, and regional investors – notably from Singapore and Hong Kong – have continued to invest, but global investors from Europe and North America remain noticeably absent,” Chow said.

Across the region, cross-border investment reached $8 billion for the quarter, slipping 38% compared to a year ago, significantly less than the 53% decline in domestic investment. As a result, the share of overseas investment over the past 12 months crept higher, to just under 30%.


Singapore led the pack for cross-border investment and was the largest cross-border investor of any country in the world. Its $15 billion in cross-border investments was larger than the combined allocations of the three next-largest countries – the US, Canada and China. Singapore's allocations were dominated by GIC, which was comfortably the largest buyer of global property in Q1.

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Singapore also saw the largest investor inflows of any Asian market, absorbing $3.7 billion in Q1, followed by Japan with $3.5 billion and Hong Kong with $2.6 billion. In addition to activity by GIC, Hong Kong-based Link REIT spent more than $1.6 billion on two assets, helping to push Singapore deal volume to a new record for the first quarter of a year.

Dominated by flows into retail property, investments in Singapore represented a 40% increase on a year earlier, making it the fifth most popular metropolitan area in the world for allocations, and one of only three major cities, besides Toronto and Hong Kong, where allocations increased during the quarter.

London’s office market proved particularly popular for Asia-headquartered buyers, most of whom have sparse track records in the British capital.

“Collectively, Asia-based buyers accounted for more than 50% of the first-quarter investment in London offices, the largest share since 2019,” the report said.

Asian cross-border allocations contrasted starkly with those by investors from the US, which plummeted to $4.9 billion, the slowest period for overseas acquisitions by US-headquartered firms since 2010.

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