The second quarter of 2025 alone contributed USD 31.2 billion to regional investment volumes, representing a 15% year-over-year (YoY) increase, despite extended due diligence timelines amid ongoing uncertainties.

Japan remained APAC's strongest performer, leading the region with USD 7.6 billion in Q2, driven by a bullish office sector. The living sector also surged in activity as J-REITs and foreign buyers maintained strong interest in multifamily assets. The strongest quarterly growth came from South Korea where investment volumes surged by 72% YoY to USD 6 billion. Sellers sought to divest office ahead of new supply while cross border capital zeroed in on industrial and living sectors. Investment in China reached USD 5.2 billion, with private capital from insurers providing crucial liquidity. Hong Kong's investment volumes grew 32% YoY, boosted by a sizable office acquisition. Investment activity in Australia softened though momentum remains robust at USD 4.9 billion dominated by industrial and logistics trades. Singapore trading was subdued as bid-ask gap widened following rate declines.

Chances of a Fed rate cut at the July 30 FOMC meeting are slim but expected in September as economic growth slows (U.S. GDP contracted 0.5% QoQ in Q1 2025 — the first quarterly contraction in three years) and unemployment rises. Overall U.S. CPI increased 2.7% YoY in June 2025 and the Fed’s June report noted import taxes due to tariffs have already started feeding into inflation for goods.

While the number of forecast cuts has decreased in the U.S., it has increased elsewhere since tariff announcements. APAC central banks have been on a reduction spree — In Australia, RBA cut rates in Feb and May 2025 to 3.85% from 4.35%. In India, RBI made its third rate cut since Feb, with policy rates reaching 5.5%, the lowest level since Aug 2022. Similarly in Korea, policy rates are at the lowest since Aug 2022 at 2.5%, after its fourth cut in May 2025. In China: 1-year and 5-year LPR was cut by 10bps to 3% and 3.5% respectively.​

YTD Cost of debt has come down by ~30bps in Korea, ~45-70bps in Australia and Singapore, and by ~200bps in Hong Kong in Q2. Interest rate cuts in 2H 2025 remains where growth is revised downwards for all economies. Australian futures markets have priced in a cash rate of circa. 3% by the end of 2025 which would imply potentially another 85 bps of potential rates cuts from current levels (3.85%).

In early May, the Hong Kong dollar (HKD) strength led the HKMA to sell HKD and buy the greenback to maintain its currency peg, injecting HKD supply into the banking system, reducing HIBOR to its lowest level since 2022. Subsequently in June, lower HIBOR and capital outflows from the carry trade weakened HKD and triggered the opposite intervention. HKMA bought HKD and sold USD, draining liquidity causing the HIBOR to start rebounding. The lower acquisition/refinancing debt may spur investment activity for a window, as HIBOR will likely reach parity with USD SOFR after intervention stabilises. ​

Japan 10Y bond yields touched its highest level since 2008 in July 2025, as markets focused on Japan’s fiscal concerns amidst high debt/GDP ratio. The uptick shows the vulnerability of its bond market after the BOJ gradually started trimming its balance sheet and scaling back its bond purchasing program. The country’s central bank owns more than half the nation’s sovereign notes and other buyers have not stepped in enough to fill the gap. The better than expected 15% tariff on trade with U.S. gives the BOJ more leeway to increase rates causing bond yields to rise further. Although this could potentially lead to higher cap rates and downward pressure on valuations, CRE fundamentals remain strong.