Supply shortages drive the region's strongest markets

Tokyo was the standout performer, with prime capital values rising 7.0% over the six months to June 2026 and 20.4% year-on-year. Growth is driven by structural rather than cyclical factors: Tokyo continues to benefit from both domestic and international migration, while an acute shortage of prime housing stock supports pricing. New condominium supply remains constrained by rising land, labour and construction costs. Against this backdrop, demand has held firm, reinforcing Tokyo's position at the top of global prime residential markets.

Seoul also delivered a strong performance, with capital values and rents increasing by 4.1% and 4.4%, respectively. Some buyers in South Korea's capital have brought forward decisions in anticipation of further price growth, while expectations of future supply shortages continue to support both sales and rental markets despite tighter lending conditions.

Sydney presented a more mixed picture. Prime capital values fell -3.3%, while rents rose 2.8%. Broader housing market conditions remain relatively healthy, particularly within the mainstream market, which has outperformed the prime market, where higher borrowing costs continue to weigh on activity.

Stable growth across Singapore, Mumbai and Kuala Lumpur

Singapore delivered modest but steady growth, with capital values rising 0.4% and rents increasing 1.7%. The narrowing price gap between prime and mainstream markets is expected to support renewed interest from buyers over the coming year.

Mumbai also recorded stable performance, with capital values increasing 1.4% and rents rising 1.2%. End-user demand remains healthy, although buyers are becoming more selective following several years of especially strong capital growth.

In Kuala Lumpur, capital values increased 2.0%, and rents rose 2.9%. Activity is supported by affluent owner-occupier demand and a limited supply of high-quality prime stock. Market fundamentals remain positive, with further growth expected through the remainder of 2026.

China's residential markets remain under pressure

Chinese cities continued to underperform relative to the wider region. Four of the five Chinese cities tracked recorded capital value declines in H1 2026. Demand remains concentrated in the new-build sector, where buyers favour modern developments with premium specifications and locations. Secondary market pricing has weakened as purchasers increasingly view high-quality new stock as a more effective store of value amid concerns over inflation and wider property market depreciation.

Guangzhou recorded the sharpest declines, with capital values falling -4.2% and rents decreasing -2.2%. Capital values and rents also softened in Beijing, while Shenzhen was broadly stable. Shanghai also experienced a modest decline in capital values (-0.6%), but delivered a strong rent increase of 3.9%. More tenant-friendly policies and demand from the technology sector supported leasing activity despite a softer sales market. More broadly, pricing across China's major cities continues to be affected by demographic headwinds, cautious buyer sentiment and ongoing efforts to reduce risk within the property sector.

Hangzhou was a notable exception, with capital value growth of 1.7% in H1 2026. Despite varying performances, Chinese cities continue to record some of the lowest yields in the index, reflecting historically high capital values relative to rental income.

Hong Kong remained broadly flat over the first six months, although rental growth of 5.2% over the year contributed to a 14.3 bps increase in yields, the strongest yield expansion across the index.

Bangkok challenges

Bangkok's prime residential market saw some challenges in the first half, with capital values and rents both falling by more than 5%. The downturn reflects subdued demand and the repricing of several major projects, rather than a broader deterioration in underlying market fundamentals. The market did, however, accrue the second strongest yield in APAC at 3.8%.