November. 28, 2017 Japan Real Estate Institute (JREI) JREI-kenkyu-madoguchi@imail.jrei.jp Summary of JREI Global Property Value/Rent Indices (No. 9, Oct. 2017) We are pleased to release a summary of the result of the seventh JREI Global Property Value/Rent Indices (as of October 2017). Survey Results at a Glance (in Comparison with Survey No.8, Change Rate from Apr. 2017 to Oct. 2017 in Parentheses) ( Office Market Hong Kong witnessed the highest growth rate in office building value at +6.5% during the last six-month period among the monitored cities. A tight investment market remained in Hong Kong with robust demand, especially from mainland China, for office buildings and constrained supply. Some office buildings were sold at a level more than most market participants expected. Tokyo and Osaka were ranked in the top-five cities with large positive change rates in office building value. Cap rate compression continued in the country amid the extra easy monetary policy of the Bank of Japan. The latest growth rate in office building value was reported nearly zero for New York. In the States, most investors maintained their wait-and-see stance as they pay close attention to the Federal Reserve s policy of gradual rate hikes. saw another decline in office building value in the latest survey as investors set eyes on the UK s uncertain political situations, including the Brexit negotiations with the EU. However, the decreasing rate was reduced to an insignificant number. The office investment market stayed firm in thanks to strong interests from foreign buyers, especially those from Asian nations, who attempted to capitalize on the weakened pound sterling. Some experts anticipate that the value of office buildings will bottom out soon. Condominium Market Hong Kong was also ranked No. 1 for the growth rate in condominium value among the surveyed cities. Beijing s change rate in condominium value shrank to below 1% after considerable growth rates in previous surveys. The Chinese government s stringent policy for controlling housing price, which was implemented prior to the National Congress of the Communist Party of China in last October, put the brakes on further appreciation in condominium value. Office Building Value Change Office Building Rent Change Condominium Value Change Condominium Rent Change H/O/H H/O/H H/O/H H/O/H Hong Kong +6.5% Hong Kong +2.3% Hong Kong +5.2% Hong Kong +3.1% Osaka +4.8% Osaka +1.6% Seoul +3.1% Shanghai +2.1% Bangkok +3.5% HCMC +1.2% HCMC +1.8% HCMC +1.0% HCMC +3.4% Tokyo +0.8% Shanghai +1.6% Tokyo +0.9% Tokyo +3.1% Bangkok +0.6% Bangkok +1.5% Beijing +0.8% Seoul +1.6% Singapore +0.3% Jakarta +1.1% Bangkok +0.8% Beijing +1.6% Beijing +0.2% Osaka +0.9% Taipei +0.3% Singapore +0.9% Seoul +0.1% Tokyo +0.6% Seoul +0.2% Jakarta +0.9% Shanghai +0.1% Beijing +0.6% Osaka +0.1% Shanghai +0.1% Taipei +0.0% Singapore +0.1% NY -0.3% NY +0.1% NY +0.0% KL -0.9% -1.0% Taipei -0.1% -0.4% Taipei -1.1% KL -1.2% KL -0.5% KL -0.5% NY -1.2% Jakarta -1.5% -0.9% Jakarta -2.2% -1.6% Singapore -1.9% 1
1. Half-Year Growth Rate of Value/Rent Index by 1-1. Growth Rate of Office Building Value Index (From April 2017 to October 2017) Figure 1-1 shows the half-year growth rate of the office building value index in each surveyed city. As of October 2017, the growth rate was highest in Hong Kong (+6.5%) followed by Osaka (+4.8%). Osaka experienced a larger growth rate than Tokyo because greater cap rate compression occurred in Osaka, where the investment yields of office buildings are higher than those in Tokyo. Figure 1-1: Comparison of Half-Year Growth Rate of Office Building Value Index 8% 6% 4% Apr-17 Oct-17 2% 0% -2% -4% Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York Apr-17 1.8% 3.7% 1.5% 2.0% 0.6% 2.2% -0.1% -0.6% -1.1% 2.2% 0.4% 3.2% 0.3% -1.6% Oct-17 3.1% 4.8% 1.6% 1.6% 0.1% 6.5% -0.1% 0.9% -0.5% 3.5% 0.9% 3.4% 0.1% -0.9% 1-2. Growth Rate of Office Building Rent Index (From April 2017 to October 2017) Figure 1-2 shows the half-year growth rate of the office building rent index in each surveyed city. As of October 2017, the growth rate was highest in Hong Kong (+2.3%) followed by Osaka (+2.0%). In Singapore, a positive rate was reported for the first time during the last two years. The leasing market picked up as some of the massive vacant office space of newly-developed buildings, which came onto the market up to last year, were absorbed in the city state. Figure 1-2: Comparison of Half-Year Growth Rate of Office Building Rent Index 8% 6% 4% 2% 0% -2% Apr-17 Oct-17-4% Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York Apr-17 1.5% 1.6% 0.3% 0.1% 0.3% 2.2% 0.3% -3.5% -1.1% 1.8% -2.4% 1.7% 0.7% -0.5% Oct-17 0.8% 1.6% 0.1% 0.2% 0.1% 2.3% 0.0% 0.3% -0.5% 0.6% -2.2% 1.2% 0.0% -0.4% 2
1-3. Growth Rate of Condominium Value Index (From April 2017 to October 2017) Figure 1-3 shows the half-year growth rate of the condominium value index in each surveyed city. As of October 2017, the growth rate was highest in Hong Kong (+5.2%) followed by Seoul (+3.1%). In Singapore, a positive rate was reported for the first time during the last three and a half years. The housing price in the city state bottomed out after trending downward during the recent years due to the government s price suppression policy. Figure 1-3: Comparison of Half-Year Growth Rate of Condominium Value Index 24% 20% 16% 12% 8% 4% 0% Apr-17 Oct-17-4% Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York Apr-17-0.1% 1.7% 0.5% 20.0% 8.8% 6.0% -1.3% -1.0% -0.5% 0.9% 1.1% 1.5% -1.0% -0.5% Oct-17 0.6% 0.9% 3.1% 0.6% 1.6% 5.2% -1.1% 0.1% -0.9% 1.5% 1.1% 1.8% -1.2% -1.6% 1-4. Growth Rate of Condominium Rent Index (From April 2017 to October 2017) Figure 1-4 shows the half-year growth rate of the condominium rent index in each surveyed city. As of October 2017, the growth rate was highest in Hong Kong (+3.1%) followed by Shanghai (+2.1%). Traditionally, strong demand for apartments and relatively limited supply created a continual renter s market in the territory. This situation constantly pushed up residential rent in Hong Kong Figure 1-4: Comparison of Half-Year Growth Rate of Condominium Rent Index 8% 6% 4% 2% 0% -2% Apr-17 Oct-17-4% Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York Apr-17 0.6% 0.1% 0.2% 2.0% 3.2% 0.7% 0.3% -2.4% -0.9% 0.9% -1.5% 1.4% -0.5% -1.0% Oct-17 0.9% 0.1% 0.2% 0.8% 2.1% 3.1% 0.3% -1.9% -1.2% 0.8% -1.5% 1.0% -0.3% -1.0% 3
2. Value/Rent Trend by (October 2010 =.0) Figure 2-1: Office Building Value/Rent Indices (October 2010 =.0) [ Tokyo ] [ Osaka ] 1 1 144.1 130.1 113.6 105.9 1 [ Seoul ] [ Beijing ] 204.9 1 134.9 167.0 108.4 [ Shanghai ] [ Hong Kong ] 1 151.8 1.2 143.8 132.4 [ Taipei ] [ Singapore ] 1 1 148.1 114.5 110.1 92.7 4
Figure 2-1: Office Building Value/Rent Indices (October 2010 =.0) [ Kuala ] [ Bangkok ] 1 1 137.6 113.7 109.5 119.5 [ Jakarta ] 199.9 [ HCMC ] 1 1 155.2 148.8 108.9 [ New York ] [ ] 188.2 1 1 168.5 151.2 137.0 5
Figure 2-2: Condominium Value/Rent Indices (October 2010 =.0) [ Tokyo ] [ Osaka ] 1 1 113.7 115.0 104.3.6 [ Seoul ] [ Beijing ] 214.4 1 1 173.4 102.1 98.3 [ Shanghai ] [ Hong Kong ] 1 172.5 1 165.5 150.4 129.0 [ Taipei ] [ Singapore ] 1 1 114.5 111.0 111.9 93.0 6
Figure 2-2: Condominium Value/Rent Indices (October 2010 =.0) [ Kuala ] [ Bangkok ] 1 1 139.8 122.2 104.8 111.3 [ Jakarta ] [ HCMC ] 1 179.0 135.8 1 89.6 85.9 [ New York ] [ ] 1 151.3 1 161.5 123.3 112.1 7
3. Value and Rent Comparison among Surveyed Cities (October 2017) 3-1. Value Comparison of Prime CBD Office Buildings Figure 3-1 shows the index number of the value per leasable square meter for a prime office building in the CBD of each surveyed city (Tokyo s Marunouchi/Otemachi District =.0). The value of the building in the local currency of each foreign city was converted to the value in the Japanese yen and indexed. (The same method was also applied to the office building rent comparison.) Figure 3-1: Value Comparison of Prime CBD Office Buildings 179.4 (Tokyo's Marunouchi/Otemachi District as of October 2017 =.0) 150.0 50 44.9 29.6 35.4 48.5 57.7 39.8 46.8 64.6 8.0 7.7 13.2 12.6 0 Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York (*) Index number by city for the prime CBD office building value per square meter of each surveyed city (Tokyo s Marunouchi/Otemachi District as of October 2017 =.0) 3-2. Rent Comparison of Prime CBD Office Buildings Figure 3-2 shows the index number of the rent per leasable square meter on the typical floor of a prime office building in the CBD of each surveyed city (Tokyo s Marunouchi/Otemachi District =.0). Figure 3-2: Rent Comparison of Prime CBD Office Buildings 182.0 (Tokyo's Marunouchi/Otemachi District as of October 2017 =.0) 150 118.0.0 96.8 50 45.6 52.6 60.9 68.8 34.4 53.5 30.3 38.0 17.6 17.4 0 Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York (*) Index number by city for the prime CBD office building rent per square meter of each surveyed city (Tokyo s Marunouchi/Otemachi District as of October 2017 =.0) 8
3-3. Value Comparison of High-End Condominium Units Figure 3-3 shows the index number of the high-end condominium unit value per square meter of each surveyed city (Tokyo s Moto Azabu District in Minato Ward =.0). The value of the unit in the local currency of each foreign city was converted to the value in the Japanese yen and indexed. (The same method was also applied to the apartment rent comparison.) Figure 3-3: Value Comparison of High-End Condominium Units 250 (Tokyo's Moto Azabu District as of October 2017 =.0).6 187.1 150.0 105.8 132.6 122.3 110.2 119.7 50 53.3 63.1 24.2 24.2 21.3 10.0 0 Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York (*) Index number by city for the high-end condominium value per square meter of each surveyed city (Tokyo s Moto Azabu District as of October 2017 =.0) 3-4. Rent Comparison of High-End Condominium Units Figure 3-4 shows the index number of the high-end condominium rent per square meter of each surveyed city (Tokyo s Moto Azabu District in Minato Ward =.0). Figure 3-4: Rent Comparison of High-End Condominium Units 300 (Tokyo's Moto Azabu District as of October 2017 =.0) 250 224.0 243.9 169.0 150 127.5 50.0 86.0 55.3 67.8 76.0 64.3 33.2 41.3 55.8 23.0 0 Tokyo Osaka Seoul Beijing Shanghai Hong Kong Taipei Singapore Kuala Bangkok Jakarta HCMC New York (*) Index number by city for the high-end condominium rent per square meter of each surveyed city (Tokyo s Moto Azabu District as of October 2017 =.0) 9
Global Property Value/Rent Indices In order to investigate the real estate market trend of some major cities in the world, we compiled the value/rent indices of surveyed assets, which were appraised by JREI staff valuers. Survey at a Glance Surveyed Cities : Tokyo, Osaka, Seoul, Beijing, Shanghai, Hong Kong, Taipei, Singapore, Kuala, Bangkok, Jakarta, Ho Chi Minh (HCMC), New York, and (14 cities) Use : Office and condominium No. of Surveyed Assets : Six assets in each city (three office buildings and three condominiums) Survey Method : We compiled indices based on the appraised value or rent per square meter of each asset by assuming that the subject asset would be newly developed and sold or leased as of either April 1 st or October 1 st each year. 10