Knight Frank report: Asia-Pacific to remain world’s fastest growing despite ongoing challenges
19 Dec 2022
The Asia-Pacific region is set to remain the world’s fastest-growing region despite ongoing stressors exacerbated by the Russia-Ukraine conflict and global financial volatility, according to Knight Frank’s latest report, Asia-Pacific Outlook Report 2023: Pivoting Towards Opportunities.
The report said even as growth momentum continues to normalise across much of the region, domestic-oriented economies such as emerging Southeast Asia and India are forecast to remain supportive of overall regional growth in the upcoming year.
Asia Pacific head of research Christine Li said with much of the known risks largely priced in and likely to have overshot on current negativity, there remains scope for fundamentals to surprise on the upside, underpinned by the marginal easing of zero-COVID strategy and the lower-than-expected terminal interest rates.
Chinese authorities have currently lowered the duration of quarantine for inbound travellers, a step in the right direction that could set the tone for more calibration and an eventual exit in 2023/2024.
“We can afford to be sanguine given that nascent signs of inflation peaking have crept into the Federal Reserve’s data watch. While it remains to be seen if these can be sustained, the prevailing macroeconomic and policy uncertainties, once rolled back, will narrow bid-ask gaps and pave the way for higher investment activity,” she said.
At a sector level, the report predicts that the market conditions in 2023 will continue to favour tenants as high-amenities office buildings with sustainable credits are being completed and ready for occupancy.
Rents in the logistics sector are forecast to increase by 5.5 per cent, while office rents will rise by 2 per cent across the region.
Overall, real estate offers good diversification benefits with a relatively low correlation to equities and bonds.
Therefore, risk-adjusted returns for direct real estate are unlikely to re-price to the same extent as indirect, it said.
Meanwhile, Knight Frank Malaysia group managing director Sarkunan Subramaniam said the global macroeconomic headwinds will impact upon Malaysian markets.
“However, we are still hopeful that the newly-elected unity government will be able to outline clear and consistent policies in driving economic investments into our country, and encourage all direct measures to revitalise and sustain the growth of the property sector.
“Malaysia needs to bring back investors’ trust and faith in our economic growth, in order to see recovery across all sectors,” he said.
The independent global property consultancy firm also hoped the government will introduce green incentives to property buyers, landlords and developers who are aligned with the nation’s target of becoming a net zero nation by 2050.
It added that it encourages an extension of existing incentives to incorporate tax reliefs or grants to industry players who include green features into their developments, especially renewable energy like solar panels and water harvesting as well as sustainably-built properties from timber and low-carbon cement in place of high-emission materials.