A promising conclusion to 2017 for Asia Pacific commercial property markets

Results from the Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor for Q4 2017 are now available, indicating property market sentiment remains positive in most key Asia and Pacific markets, with both rents and capital values expected to rise in 2018.

In New Zealand markets, this sentiment was even stronger, with both occupier and investment sentiment indexes rising (as seen in chart one below). Wellington and Auckland lead the way in terms of market demand versus supply (see chart two), with rents and capital values expected to rise in the year ahead (see chart three).

Chart One: RICS occupier, investment sentiment indexes

Chart two: Demand minus supply in Asia-Pacific markets

Chart three: 12 month rent, capital value expectations

RICS Economist, Sean Ellison summarised that “although market sentiment remains generally upbeat, there remain some risks on the horizon. Namely, a significant share of respondents in Oceania and top tier Chinese markets have seen credit conditions deteriorate over the past quarter, as shown in chart four below. Add to this the view that many markets are later in the cycle (refer to chart five), then there may be reason to dampen some optimistic expectations for property performance over some Asia-Pacific markets in 2018.”

This dampening of expectations was evident in Auckland, where over 70% of respondents felt the market was at its peak (refer to chart five). However, according to the full report, most respondents saw valuations above fair value.

Chart four: Respondents’ views on credit conditions

Chart five: Perceptions on the phase of the property cycle

 

Demand for industrial space remains strong, despite a decline in foreign enquiries

Headline demand in New Zealand remained steady during the fourth quarter, providing some optimism for the year ahead. However, as shown in chart six, foreign demand for Auckland commercial property has slowed throughout the year, and respondents reported a further lull in enquiries in the final quarter. 45% of respondents reported tighter credit conditions (chart three), a factor that could have implications for the momentum of the sector in 2018.

Chart six: foreign investment enquiries

CLICK HERE TO VIEW THE FULL REPORT

 

About the RICS New Zealand Commercial Property Monitor

In 2017, Property Council partnered with the Royal Institution of Chartered Surveyors (RICS) to ensure the local commercial property sector was represented in the RICS Global Commercial Property Monitor. This partnership provides robust research and benchmarking for our members and promotes discussion within the sector.

Approximately 1700 organisations and individuals associated with commercial property across the world contribute to RICS’ quarterly guide to the trends in commercial property investment and occupier markets. The report is utilised by investors, economic commentators, government and international bodies such as the IMF to monitor the commercial property market.

The global sentiment survey has proven to be an accurate leading indicator of a number of metrics measuring commercial property markets globally, including volumes, rents, and capital values, as well as broader macroeconomic trends. The survey covers more than 30 countries globally and can be broken down to the regional or city level for many jurisdictions.