Concerns about the Asia-Pacific region’s vulnerability to the global energy crisis abound. In a report on May 15, JPMorgan said that “the impact from the situation in the Middle East has evolved from a supply shock to a cost shock” as “rising input costs are now propagating through the entire supply chain – from upstream feedstocks to end-market consumer goods”.

The fallout from the energy crisis, which has been more severe in Asia because of the region’s heavy dependence on oil and gas imports from the Middle East, has rippled through financial markets. Last week, the Indian rupee dropped to a new low of nearly 97 to the US dollar, heaping pressure on the country’s central bank to raise interest rates.

In Japan, Prime Minister Sanae Takaichi reversed course on May 18 when she called for a supplementary budget to fund emergency relief measures in response to the surge in energy prices. The prospect of heavier bond issuance helped drive the yield on Japan’s 30-year bond to just over 4 per cent, the highest level since 1999. The Bank of Japan is expected to raise interest rates to the symbolically important level of 1 per cent next month.

However, Asia’s real estate sector has so far withstood the energy crisis. Since the eruption of the Covid-19 pandemic, the industry has faced a succession of global economic and financial shocks. Although some Asian countries’ housing markets have suffered more than others, the sector as a whole has proved more resilient than the US and European markets.

This is particularly apparent in the luxury residential and premium office segments, the most dependable sources of resilience in Asian property.

According to Knight Frank’s prime international residential index, which tracks the performance of luxury property markets globally, Asian cities accounted for five of the 10 fastest-growing high-end residential markets last year. Moreover, Tokyo was the second-best-performing market after Dubai in the past five years, with prices up 159 per cent, underpinned by scarcity, low interest rates and strong demand from the Asia-Pacific.