Real estate investor sentiment in the Asia-Pacific property sector remains relatively positive, despite continuing global economic uncertainty, according to Emerging Trends in Real Estate? Asia Pacific 2013, a real estate forecast jointly published by the Urban Land Institute and PricewaterhouseCoopers.
However, while steady economic growth, rising incomes and stable or increasing property values are contributing to an overall sense of optimism, the outlook is tempered by concerns among investors that prime assets in key real estate markets in the Asia-Pacific region are becoming overpriced.
As a result, the report finds markets outside core cities are increasingly attractive for investment and development. This is reflected in Jakarta, Indonesia, being named the top choice for both investment and development prospects for 2013.
Secondary markets such as Kowloon in Hong Kong and second-tier Chinese cities are also experiencing increased interest from international buyers.
At the same time, core investment markets in many mature, Western cities are seeing a surge in demand from newly formed Asian Institutional Investors seeking to capitalize on the post-global financial crisis corrections there, said ULI Trustee and ULI North Asia Vice-Chairman Richard Price.
Shanghai's office market and retail market have proved mainstays for foreign funds looking to invest in Chinese real estate, the report showed. Both sectors remain popular, given the city's relatively user-friendly business environment, growing volume of institutional grade properties and historic market performance.
However, in spite of Shanghai's strong ranking, the city is not as appealing to foreign investors as it was a few years ago. Prices are considered to be relatively high, the market has become saturated and Chinese regulators have become less open to foreign investment, as they have increasing confidence in the ability of local real estate practitioners to finance and develop properties. While Shanghai will remain firmly on the radar of foreign funds with a mandate to invest in China, activity in the city will remain muted in the short term.
In addition to Shanghai, several other cities in China - including second-tier cities as well as Beijing - were placed in the top 10 listing for both investment and development prospects.
Despite concerns related to rapid growth and surging prices, the report points out that it is not unusual for emerging markets to witness unexpected price movements and that such shifts must be viewed within the context of local market conditions.