Fresh flood of liquidity to spill into the real estate market

Thanks to the third round of quantitative easing by the US Federal Reserve.

Savills remains cautiously optimistic about the investment sales market in the near term as a slowdown is expected in the region’s economies, plus uncertainties arising from the eurozone continue to weigh down the global economy.

At the same time, policy risks have increased on the home front. For example, the government recently announced a new guideline on the number of homes in new residential projects aimed at limiting the number of “shoebox”apartments outside the Central Area.

This measure will have an impact on the private land sales market, particularly smaller sites, as developers will not be able to build as many shoebox units on these sites to maximise their profits.

In addition, the authorities are keeping a close tab on the commercial and industrial property markets in an effort toincrease transparency in marketing materials so as to help end-users and investors be well-informed and rational in their buying decisions.

In the medium term, following the unveiling of a third round of quantitative easing by the US Federal Reserve, a fresh flood of liquidity is expected to spill into the real estate market.

With the Fed pledging to keep interest rates at near-zero levels until at least mid-2015 and the greenback depreciating against other currencies, yield-driven investors could be motivated to commit to commercial/ industrial properties here, where the spread between rental yields and the cost of borrowing is expected to widen.

This should, in turn, drive prices up, causing yields to compress further down the road. 

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