_Knight Frank Asia Pacific research wrap up: November 2019
India approves INR250 billion fund to revive housing market
The Indian Government approved a INR250 billion fund last month to revive projects that have stalled or delayed due to financing concerns. In total the fund is expected to benefit 1,600 projects with around 0.5 million units.
Our thoughts: With the revised terms that allows NCLT and NPA marred projects to become eligible for this financing, the fund has been very much welcomed by the market as it acts as a lubricant for developers facing a credit crunch. However, its overall impact is expected to be limited given that the sector has unsold inventory alone to the tune of INR 2,640 billion and many projects are currently facing delays and waiting in anticipation of a prolonged execution as the fund takes time to screen eligible projects.
South Korea adopts housing price cap policy
The South Korea government introduced a presale price cap policy this past month in an effort cool its housing market. The price cap will put be calculated on a project by project basis based on the land price paid by developers and taking other basic cost assumptions. The policy will also only apply to four area in Gangnam South Seoul and North Seoul each initially while the authorities monitor other non-affected markets.
Our thoughts: Housing prices in certain prime areas of Seoul were recording price growth in excess of 15% year-on-year as developers rushed to redevelop older buildings to cash in on rapidly rising homes prices fueled by low interest rates and ample liquidity. Going forward, the strong handed move is expected to rapidly cool speculation in the market and reign in the growing bubble.
China’s housing prices continues to slow
Housing price growth in China slowed to 7.8% year-on-year in October with 50 cities out of 70 monitored by the National Bureau of Statistics recording price gains; this was down from the 8.4% year-on-year growth recorded in the previous month which saw 53 cities recording gains.
Our thoughts: Prices continue to contract as developers continue to ramp up their promotional efforts to meet their year-end sales targets. However, with the recent shot of liquidity from the recent RRR and interest rate cuts, the rate of price decline is expected to slow towards the year end and into start of 2020 leading up to the Chinese New Year holidays.
GIC acquires Parramatta Grade A office
A GIC and Charter Hall JV acquired the landmark Grade A Jessie Street Centre in Sydney’s Parramatta CBD for A$415 million from Brookfield Property Partners. The 53,900 sqm 15 floor building is 99.9% let and tenanted out mainly to government agencies such as the Australian Tax Office and various other NSW Government Services.
Our thoughts: Continued low interest rates and relative attractive yields continue to make Australian commercial assets an attractive proposition; Jessie Street was quoted to be transacted at a 5% cap rate. Going forward, with healthy growth prospects for the office sector in Sydney, boosted by favorable supply and demand fundamentals, and continued lower interest rates, the prospects for compressing yields will continue to draw investors searching for high quality assets in a low interest rate environment.