Bond maturities are being postponed by Chinese developers, and debt is expected to peak in 2020. property qatar
As several interest rate cuts were reported across the region, debt financing became more active while the equity funding market slowed, according to CBRE's second edition of Four Quadrants Asia Pacific, a study that provides a comparative analysis on the 'four quadrants' of private equity, public equity, private debt, and public debt.
After a record-breaking year in 2015, when real estate companies in Asia Pacific issued $55.7 billion in bonds, the strong momentum continued in the first five months of 2016, when $24.2 billion was issued, accounting for 43 percent of the total for the year.
REIT fund raising (excluding IPOs) totaled $2 billion during the same time, a 23 percent decrease year over year, owing to stock market uncertainty at the start of the year. Closed-ended real estate fund raising in the private equity quadrant totaled $9 billion, up from $3.2 billion in the same timeframe last year. However, two logistics developments in China and Japan, which raised $3.5 billion in total, skewed the total sum raised.
"The debt market in Asia Pacific is overall showing increased activity, mainly due to more monetary easing from central banks, with six countries—Australia, India, Indonesia, Japan, New Zealand, and Taiwan—cutting their rates in the first five months of the year," Ada Choi, Senior Director, Research, CBRE Asia Pacific, said. "The active real estate bond market was primarily fueled by Japan's negative interest rate and China's onshore bond market opening. " While the Japanese bond market increased by $3.2 billion during the review period, Chinese developers continue to be the largest source, accounting for over 70% of the total $24 billion in public bonds sold, mainly in mainland China." Government bond yields in Japan have turned negative as a result of the Bank of Japan's negative interest rate strategy, rendering bond offerings a more appealing fundraising tool for investors. This increased bond-raising activity in the market, particularly among J-REITs, who became more involved in accessing capital from the bond market due to the low cost of capital. Although in China, due to a weaker RMB and more lenient government approval procedures, Chinese developers became more involved in the domestic bond market, issuing more onshore bonds than offshore bonds. As opposed to offshore bonds, developers can get money from the domestic bond market at a lower interest rate "Ms. Choi continued.
Nonetheless, recent bond default cases involving state-owned enterprises have harmed investor sentiment against Chinese bonds. As a result, some developers have placed bond issuance on hold, resulting in slower bond issuance for the remainder of the year. Chinese developers, on the other hand, are under less pressure to repay their debt in the near term since their debt maturity has been pushed back to 2020, with about $28 billion scheduled to be settled by developers.