The impact of novel coronavirus (COVID-19) on Asia Pacific real estate

We analyze the potential impact the current situation has on Asian property markets.

Feb 19, 2020 | Invesco Real Estate

The novel coronavirus outbreak is making its impact felt on markets in Asia. The number of infected people and the death toll have already exceeded that of another outbreak, SARS, in the early 2000s. In this note, we share our views on the potential impact the current situation has on property markets across Asia in the near to medium term.


We expect declines in investment transactions across the region, with the most notable drop in China and Hong Kong. However, this could open up possibilities; we may see some distressed or heavily discounted opportunities in China and Hong Kong. We think China will engage in large-scale fiscal spending and monetary easing to reignite its economy. This could support real estate pricing in the medium term.

Going by sectors across the region, we see the impact as:


  • Relatively more resilient - supported by B2C e-commerce
  • Full impact of disrupted supply chain due to halted manufacturing activities, and sharp reduction of road, rail and air traffic
  • Technology such as automation and Internet of Things could be more widely adopted


  • Weaker occupier demand due to weaker corporate profit
  • Delayed real estate decisions due to uncertainty
  • China and Hong Kong could be most affected
  • Flexible work arrangements (e.g., work from home) may speed up office space transformation


  • Households delay real estate decisions in China, Hong Kong and Singapore
  • Strata-titled sales sector and high-end for lease sector are likely to be affected
  • Less affected in Australia and Japan


  • Sharp decline in retail and F&B sales is likely in China, Hong Kong and Singapore
  • In Hong Kong, prime street shop vacancies are rising
  • Footfall and spending in prime streets of key cities in Australia, Japan and South Korea could plummet due to a sharp drop in Chinese tourist arrivals


Source: Oxford Economics, CBRE, Invesco Real Estate, February 2020.

We now turn our attention to China, where the economic impact is the greatest. It’s worth looking back at how the SARS outbreak has affected its economy to see where the current outbreak may lead.

During the SARS outbreak, the economic impact in China was brief, though retail, entertainment and tourism sectors were hard hit. However, structural tailwinds, including China’s accession to the World Trade Organisation and urbanization, supported the economy’s sharp rebound afterwards.

This time, the retail, entertainment and tourism sectors are also the ones suffering suffer the most. A rebound is likely to be milder amidst a structural slow down and high debt levels. Fiscal spending and monetary easing are likely to cushion some downside risks. We stress that structural growth drivers have not changed.

In terms of impact on real estate, a sharp slowdown in occupier and investment demand is very likely across all sectors, with retail and hotel affected most, in 1H 2020. However, monetary easing could support real-estate pricing. We also see new trends on the horizon. With wide adoption of home quarantine measures, more and more will be working and living “online” (e.g., shopping, education, office, medical consultation). In addition, the rollout of the 5G network will facilitate the growth in property technology and may bring about a new generation of real estate and drive growth in the logistics sector. There will also be a greater focus on healthcare and related infrastructure.

Hong Kong

Source: Oxford Economics, RCA, Invesco Real Estate, February 2020.

During SARS, the territory’s Q2 2003 GDP contracted by 0.6% and unemployment rate rose to a decade high of 8.5%1. Retail, entertainment and tourism sectors were hard hit. The impact was severe but short lived. The subsequent sharp rebound was driven by closer integration with China via a free trade agreement Closer Economic Partnership Arrangement (CEPA), and allowing individual tourist visas to be issued. During this time, transaction volumes fell 10 to 20% over 1H 2003, and then rebounded strongly2.

Now, retail, entertainment and tourism sectors are also the ones suffering the most amid the novel coronavirus outbreak. However, a rebound is likely to be milder as China is in a structural slow down.

We are likely to see a sharp decline of occupier and investment demand for discretionary retail, hotel, office and residential in 1H 2020 in the city. Given the business disruptions over the past eight months, business continuity plans are becoming a high priority for most corporates; faster adoption of “flex office” is likely to drive further decentralization.

Australia, Japan and Singapore

Source: Oxford Economics, February 2020.

In Australia and Japan, the direct impact of SARS was relatively limited. According to the World Health Organisation, there were six cases found in Australia and none in Japan. Even though GDP growth decelerated in Australia in 1H 2003, this could be attributable to weaker global and Asia Pacific growth. GDP growth in Japan was relatively stable throughout 2003.

This time round, the impact of the novel coronavirus could be more noticeable, however, given the growing significance of China in the regional economy. In particular, the prime retail and hotel sectors could be hit with the sharp decline of Chinese visitors.

Turning to Singapore, the two outbreaks’ impact on the supply chain of goods is clear. The impact of SARS on Singapore was more prominent, with 238 cases reported and 33 deaths3. Q2 2003 GDP contracted by 0.3%4 followed by a strong rebound, which was largely driven by integrated resort related investments.

In the real estate market, office absorption in Q2 2003 in Singapore was negative, with vacancy peaking at around 12%5. It is, however, difficult to single out the direct impact of SARS on real estate pricing as the market had been in a down cycle since 2001. Today, the potential impact on Singapore again could be larger especially in the retail and hotel sectors.

^1 Source: Oxford Economics, February 2020.
^2 Source: Real Capital Analytics, February 2020.
^3 Source: World Health Organisation, data as of February 16, 2020.
^4  Source: Oxford Economics, February 2020.
^5  Source: Real Capital Analytics, February 2020.

Related articles

Important information

This document has been prepared only for those persons to whom Invesco has provided it for informational purposes only. This document is not an offering of a financial product and is not intended for and should not be distributed to retail clients who are resident in jurisdiction where its distribution is not authorized or is unlawful. Circulation, disclosure, or dissemination of all or any part of this document to any person without the consent of Invesco is prohibited.

This document may contain statements that are not purely historical in nature but are "forward-looking statements", which are based on certain assumptions of future events. Forward-looking statements are based on information available on the date hereof, and Invesco does not assume any duty to update any forward-looking statement. Actual events may differ from those assumed. There can be no assurance that forward-looking statements, including any projected returns, will materialize or that actual market conditions and/or performance results will not be materially different or worse than those presented.

The information in this document has been prepared without taking into account any investor’s investment objectives, financial situation or particular needs. Before acting on the information the investor should consider its appropriateness having regard to their investment objectives, financial situation and needs.

You should note that this information:
•    may contain references to amounts which are not in local currencies;
•    may contain financial information which is not prepared in accordance with the laws or practices of your country of residence;
•    may not address risks associated with investment in foreign currency denominated investments; and
•    does not address local tax issues.

All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. Investment involves risk. Please review all financial material carefully before investing. The opinions expressed are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

The distribution and offering of this document in certain jurisdictions may be restricted by law. Persons into whose possession this marketing material may come are required to inform themselves about and to comply with any relevant restrictions. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation.