And looking into 2015, the report picks Tokyo as its favourite for investment. The Japanese metropolis is ranked first for investment and development by the report, chalking up its potential to the government’s “massive economic stimulus plan” that has catalyzed property purchases in anticipation of rapidly rising prices.

The report, called Emerging Trends in Real Estate Asia Pacific 2015, says China’s slowing economy and caution in the face of a likely interest rate rise, plus government cooling measures, have weighed on Hong Kong prices recently.

Hong Kong aside, real estate markets throughout Asia are expected to remain robust despite weakening economic fundamentals during 2015, as capital continues to flow into the industry from a variety of investment sources, both domestic and international, the report said.

“Currently, Asia’s real estate markets are beset by an abundance of riches. Whether derived from new sources of institutional capital, or from almost six years of global central bank easing, a seemingly endless stream of money is now pointed at real estate assets across virtually all jurisdictions and asset classes. This is pushing up prices and further compressing yields,” John Fitzgerald, chief executive, ULI Asia Pacific, said.

“As a result, we are seeing fewer transactions, a growing shortage of investment-grade properties, a search for alternatives to core products, and a general pullback from assets in secondary locations. We can expect this to continue over the next several months,” he said.

“Our report finds that most investors prefer to remain in gateway cities, where they have more confidence in the resilience of pricing and liquidity. This is especially so in Australia. In China, likewise, many buyers are avoiding secondary locations because of a spate of over­building,” Fitzgerald continued.

“Japan is the exception. Competition from local REITs is forcing investors to branch out to cities other than Tokyo,” KK So, Asia Pacific Real Estate Tax Leader, PwC, added. “The report also finds that institutional capital from sovereign wealth funds, pension funds and insurance companies is playing an increasingly important role in real estate, with a big increase in the money directed into both regional and global real estate markets.”

Other findings from the report include that investors are opting not to buy and transaction volumes across Asia fell 24 per cent year-over-year in the third quarter of 2014, compared with significant gains in the US and Europe. Although much of the decline is due to fewer land sales in China, transactions have dropped in other Asian markets with the notable exception of Australia. The report also found that there is a structural shortage of investment-grade assets across the region; the issue is made worse by growing volumes of capital held by local institutions and the lack of incentive to sell, given that relatively little commercial real estate is held by investment funds that tend to recycle their assets into the market after a few years.

The report said that emerging markets are losing some appeal. Although growing markets such as the Philippines and Indonesia remain on investors’ radars, the attraction has dimmed this year as investors become cautious over the potential for capital outflows in the wake of upcoming US interest rate hikes.