Asia-Pacific has overtaken Europe to become the world’s biggest real estate investment market for the first time, thanks to largely to the booming Chinese property industry.
This rapid growth is triggering a wave of high-rise construction, with the number of super-tall 300m plus buildings tripling in less than a decade.
Half of the world’s tallest buildings were constructed in the past four years, and 90 per cent of these are in China, southeast Asia or the Middle East, insurer Allianz says. Nearly a third of the world’s tallest buildings are now in China.
The Asia-Pacific market – up 9 per cent year on year – pushed the global value of commercial real estate stock held by investors to a record $12.9tn in 2013, property advisory company DTZ found.
The Asia-Pacific market is worth $4.6tn, overtaking Europe, which grew only 2 per cent to reach $4.4tn, DTZ found. The Chinese market – which has grown by a compound annual rate of 32 per cent in the past decade – has overtaken Japan to become the largest in Asia-Pacific. This has taken it from the world’s tenth largest market to the second, behind only the US.
The activity is fuelling a surge of tower building: half of the world’s 100 tallest buildings are in Asia-Pacific, three times the number in North America, according to Allianz.
The construction shift eastward is being driven by investor demand for flagship real estate assets, growing populations and low labour costs, Ahmet Batmaz, Allianz global head of engineering risk consultancy, said. “These buildings are prestige objects to show the power and wealth of these areas and regions.”
Fears have grown about the levels of debt in the Chinese real estate market, particularly as property prices have begun to wobble. However, the average gearing of Chinese investors was “well below those of Europe or the US” at 54 per cent, said Hans Vrensen, DTZ global head of research.
“There is a very large pipeline of new developments which will trigger a rise in vacancy rates,” he warned. “But the problems in China will not be as severe as in Europe, because the leverage ratios are not the same.”
He said de-gearing could open the Chinese market up to international distressed-debt investors, offering “a massive opportunity”.