The diversity of Asia Pacific real estate markets means there is always the possibility of unexpected developments and 2025 is likely to provide its own. Recent shocks have tended to be of a geopolitical nature and generally unwelcome, however there could be surprises on the upside too.

Even the most stable nations can suffer political upheaval, as South Korea’s brief period of martial law demonstrates. However most observers are expecting something novel to emerge from the new US administration.

“A new Trump presidency means investors are inclined to expect the unexpected in 2025,” says Simon Smith, Head of Research & Consultancy, Asia Pacific at Savills. “However, it can also be argued that Trump has set out his stall quite clearly and that his presidency will build on his earlier term. Perhaps the biggest surprise next year will be a lack of surprises.”

In recent months there has been a perception that global investors may prefer to take advantage of wider pricing disparities in Europe and the US, rather than invest in Asia Pacific. However, Smith suggests: “We could see a lot more investment activity from global players next year, particularly those focused on long-term structural growth. This region still offers the best prospects based on demographics and growing wealth, what we used to refer to as ‘the Asian Growth Story’.”

Investors in China real estate will be looking for good news but many people are resigned to the prospect of challenging market conditions in the coming years, so a positive surprise could come from a much larger stimulus package designed to reinvigorate the economy, says James Macdonald, Head of Research at Savills China, although he says this seems unlikely, or a significant devaluation of the renminbi.

“On the property side, the outlook appears less promising. There’s a risk of financial contagion affecting the banking sector, especially with the recent rise in non-performing loans,” says Macdonald. However, he adds: “There are rumours suggesting we might get some clarity on what will happen at the end of commercial land tenures, which could play a key role in revitalising, repurposing, upgrading, or making some of the older downtown stock more sustainable.”

The office real estate sector has been struggling in many markets since the pandemic, but investors in Australia should be braced for an upturn, says Chris Naughtin, National Director, Capital Markets Research at Savills Australia & New Zealand. “Don’t rule out well-located prime CBD offices. Early indicators suggest that some super and pension funds are positioned to capitalise on the anticipated growth cycle in core CBD markets where there is low supply and tenant demand is accelerating.”

Paul Craig, CEO of Savills Australia, adds: “The balance of risk is now shifting toward capital deployment, fuelled by asset repricing and the onset of a new growth cycle that has already stimulated transaction activity.”

Meanwhile, Hong Kong’s economy and real estate market has been struggling for some time yet could surprise on the upside, says Smith. “Restrictions on travel from Shenzhen have been lifted, so we should see more visitors from China next year. Furthermore, Coldplay have sold out the new Hong Kong stadium in Kai Tak and are adding another night. The new venues at the old airport site could herald a new wave of regional scale events in the city…”

Further reading:
Japan retail report

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