By Petra Blazkova on November 7th, 2018
Transaction activity in Asia Pacific lost strength in the third quarter of 2018, with China and Japan registering deal volume declines, the latest edition of Asia Pacific Capital Trends shows. In several markets investors were unwilling to push yields, which are already at record levels, any lower.
Volume in China, the largest market for income-producing assets in the region, slipped 16% year-over-year, based on 12-month rolling data. Activity in Japan slipped 4%. Hong Kong, which had previously been the runaway market in terms of volume growth, also lost some steam. South Korea continued to be a bright spot. Transaction activity grew 23% year-over-year and it is the fifth largest market in the region. Activity in Australia was flat.
Continuous yield compression combined with interest rate increases has pushed commercial real estate spreads to government bonds to the narrowest ever levels in many markets. In Hong Kong, Seoul and Melbourne yields continued to compress in the past quarter, while in Sydney and Tokyo quarterly average yields moved out for the first time in three years.
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