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News Release

Shanghai

JLL Comment: An end to QE and the impact on real estate in Asia Pacific

Economic recovery in the US will continue to benefit real estate markets in Asia Pacific as the Central Bank’s Quantitative Easing (QE) programme comes to an end


SHANGHAI, 12 Nov 2014 – The United States Federal Reserve has announced an end to its six-year quantitative easing (QE) programme, which sought to inject money into the US economy through large-scale asset purchases, in the aftermath of the Global Financial Crisis (GFC).

Dr Megan Walters, Head of Research, Asia Pacific Capital Markets, JLL, said: "The implementation of QE programmes in advanced economies produced a significant spill-over effect on to developing markets, with strong capital flows from advanced economies. Global interest rates have been driven lower and investors have been deploying additional capital into real estate in the search for yield."

"In Asia Pacific, these two factors created a wave of investment in real estate that led governments in Hong Kong and Singapore to implement regulations to cool real estate markets, primarily focused on residential property. The ending of US QE will be another step towards these governments deciding to lift or ease their cooling measures. The impact of potential interest rate rises from the end of US QE and any effect on commercial real estate yields should be off-set by the expectation of rising rents in most major office markets in the region."

She continued: "The weight of capital targeting real estate will continue as the global economy and, in particular, the US economy, recovers. In the first nine months 2014, the global and inter-regional capital flows of investment into Asia Pacific commercial real estate (from global, US and Europe investors) exceeded last year's total by 35 percent. Continuing economic recovery in the US appears to be providing US and global investors with the funds to deploy in Asia Pacific and we expect that picture to continue in the medium term."

"Investors will continue to see core real estate as a highly attractive asset class and Asia Pacific will remain attractive as international investors continue to diversify their portfolios."

Analysing the impact on China's real estate markets, Michael Klibaner, Head of Research for JLL Greater China, said: "Global investors in commercial real estate remain attracted to the China growth story, and in spite of the increase in flows to real estate, they continue to be under-allocated to Asia generally and China specifically. We do not expect the cessation of QE in the US to have a material negative impact on Chinese real estate, especially in light of recent action by the ECB and Bank of Japan."