Tokyo easily tops the list of Asia-Pacific cities by volume of foreign direct real estate investment, with Singapore a distant second, ahead of Seoul, Sydney and fifth-placed Hong Kong, according to property services firm Jones Lang Lasalle (see tables below).
Meanwhile, Australasian cities attract the most property investment relative to their size, with Sydney and Auckland topping the list.
The analysis of direct capital flows over a three-year period relative to a city's economic size reveals that the top four locations are in Australasia (see list below). Sydney in Australia and Auckland in New Zealand are followed by Melbourne and Brisbane, with Tokyo and Hong Kong coming fifth and sixth.
Australia and New Zealand are the most transparent real estate markets in Asia Pacific, said Megan Walters, head of research for Asia-Pacific capital markets at JLL. She pointed to good market data availability, fair transaction processes and high standards of regulatory, accounting and corporate governance.
In addition, prime office yields in Adelaide, Perth, Auckland and Brisbane range between 7% and 8%, the highest among the top 10, making those locations highly attractive to investors, added Walters.
Tokyo attracts the highest volume of annual direct real estate investment in the region at $21.9 billion. However, as a proportion of each city's GDP, this represents 8%, compared to 13% for Sydney.
The JLL report shows that cross-border investment has played a key role in pushing Australasian cities to the top of the table. Walters said: “The share of cross-border investment is above the regional average in most cities in Australia and New Zealand, together with Tokyo, as they have few government restrictions relating to foreigners buying assets.”
The share of cross-border investment is also high in Beijing, Shanghai and Osaka. But it is low in Hong Kong and Singapore, despite their active investment markets and minimal restrictions on foreign ownership. This may be due to factors such as high prices, trophy assets being tightly held by landlords and government cooling measures, such as higher stamp duty, said JLL.
India and emerging Southeast Asia are under-represented among the top 20 cities. Direct real estate investment is generally difficult in those locations for foreigners who may need to go through routes such as debt deals and joint ventures with local partners, said JLL.
Asia-Pacific cities by three-year rolling investment volumes ($ billion)
Asia-Pacific cities by three-year investment volumes as % of GDP