Performance of sub-sectors
The property sector may be having a greater impact on equities than we realise. For instance, commercial real estate (CRE) lending comprises between 25% and 30% of the loan portfolio of local banks. Similarly, in China, property and CRE is a large part of Chinese banks’ loan portfolio.
Much has been written about the stress in US CRE, in particular, the office sector. Asia-Pacific CRE is not in the same state as the US, the pundits say. However, there is a slowdown. According to the latest Asia Pacific Capital Trends webinar by MSCI Real Assets, trading of commercial property slumped in the 1Q2023 to the lowest total in over a decade, extending the downturn seen in the 2H2022 due to rising interest rates and an unsettled picture on pricing.
