Interest rates, government policy and the shifting of supply and demand will impact residential real estate markets around Asia. Prospects takes a peek at the outlook for the year ahead in some of the region’s major markets.

The outlook for the China residential market remains mixed and uncertain. China is a vast market, and different regions are experiencing varied dynamics, says James Macdonald, Head of Research at Savills China.

Lower-tier cities are still struggling with oversupply and weak demand, though lower property prices mean greater affordability. Local governments are providing incentives to attract residents, encouraging relocation and property purchases.

However, in higher-tier cities, supply and demand are more balanced, with some pent-up demand. However, affordability is a concern, and restrictions are tighter. “The recent relaxation of buyer restrictions and developer price caps seems to be driving more foot traffic to showrooms,” says Macdonald.

“National stimulus measures, largely focused on monetary policy, are helpful, but ultimately it’s about economic confidence. Without job security, salary increases, or bonuses, people are less likely to feel confident about taking on a significant mortgage, even if rates have dropped.”

Japan multifamily residential has been at the top of global investor’s sector picks for the Asia Pacific region for some time, however at present there is something of a bifurcation between those who are still targeting acquisitions and those on the sidelines.

“The prospects depend on the outlook for rental growth,” says Tetsuya Kaneko, Head of Research & Consultancy at Savills Japan.” Some foreign investors expect strong rental increases, while others seem to be taking a wait-and-see approach. If rental growth remains strong, interest in residential properties should hold up, even in a rising interest rate environment.”

Population growth and a booming economy sent Australia’s residential market rocketing prior to the rising interest rate cycle, but it is becoming more stable, says Paul Savitz, Director, Operational Capital Markets, Savills Australia.

“After experiencing the most significant and prolonged residential rental surge on record, all state capitals have now reached their growth peaks and are experiencing a return to normalised growth.”

Nonetheless, the larger cities remain firmly a landlords’ market, with residential vacancy rates uniformly below 2%. This persistently low rental vacancy environment is exacerbated by lower supply, which has faltered due to rising construction costs.

The past year saw multifamily transaction volumes tick up, with several notable deals including the purchase of the Arklife portfolio by Hines and Ontario Teachers – consisting of 354 units across two assets in Brisbane (pictured above) – for a reported A$350 million ($218 million).

Further reading:
Savills Asian Cities Report H2 2024

Contact Us:
James Macdonald | Tetsuya Kaneko | Paul Savitz