All-property Asia-Pacific capital values fell at a slower rate of 3.4% y/y in Q1, driven by smaller declines in Australia and Hong Kong. But looking ahead, we expect the upturn in both investment activity and capital values will be weaker than in any previous cycle, predominantly due to risk-free rates staying elevated at “new normal” levels in the coming years, alongside an only steady growth outlook.
Over the next 12 months, Australia’s retail and residential markets as well as Japan’s office sector are set to deliver the strongest total returns, driven by tight vacancy and solid demand. We think Hong Kong will remain the laggard across all sectors, with industrial in Korea also facing value declines, while retail in Singapore and Korea may see modest rent falls.
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