Starting from end 2019 and all through 2020, COVID-19 had rained terror across the globe. While its impacts to the economy have been cushioned by the government aids, many fear that once these financial supports from governments run dry, the economic avalanche would eventually happen. With all these uncertainties surrounding the global economy, investors are looking for safe havens to park their money.
In a recent report jointly written by PwC and the Urban Land Institute, an in-depth analysis was done on the real estate industry in Asia Pacific. In summary, 5 key trends in 2020 were identified and would have great impacts to the real estate industry in 2021. They are as follow:
Topping the chart of real estate investors' preference is Singapore, with Tokyo and Sydney just behind in that order.
Steep decline in year-on-year real estate transaction volumes. Key factors contributing to this decline are global border closures which prevented buyers from travelling and also sellers' refusal to reduce prices due to them hoping rapid markets rebounds to happen upon delivery of vaccine.
Decrease in cross-border capital flows, with exceptions observed in South Korea and Japan. This is mainly fuelled by investors' risk adverse sentiments and direct their money to markets with deep local demands that are less susceptible to geopolitical risk.
Despite growing trade tensions, foreign capital still sees China as an important destination, resulting in the significant influx of cross-border investment into China.
Investment prospect rankings revealed that regional gateway cities which offer liquidity, stability and reliable sources of domestic demand are hot favourites amongst investors.
Quoting Yeow Chee Keong, Real Estate & Hospitality Leader, PwC Singapore:
“2020 is a challenging year for all investments including real estate. Due to COVID-19 travel restrictions, there is a significant decline in cross-border investments. But with current liquidity, Singapore's stable market with good quality assets has helped the country maintain its position as the city of choice for investment prospects. With the economic uncertainties leading into 2021, investors will remain cautious. In Asia Pacific, I believe selected asset classes will generally fare better compared to the rest of the world. So investors should be opportunistic when evaluating the risk-return profile.”