For an indication of the volatility in Asia’s listed real estate markets in the second half of this year, look no further than the S&P Asia Pacific Reit Index, a gauge of the performance of real estate investment trusts (Reits) in several markets including Australia, Japan and Singapore.

As a rally in global bond markets gathered steam during the summer in anticipation of the start of the US Federal Reserve’s monetary easing cycle, the index surged 18 per cent between July 1 and September 27. But since then, the gauge has lost over 14 per cent. The dramatic shift in sentiment attests to mounting concerns over the inflationary impact of Donald Trump’s economic policies when he takes over as US president.

The Fed’s decision on December 18 to signal half as many reductions in interest rates in 2025 as it had forecast in September have put interest rate-sensitive sectors, especially property, under renewed pressure. Its acknowledgement that the prospect of punitive tariffs and a draconian crackdown on immigration under Trump had changed the outlook for monetary policy has done likewise.

One of the big trends to watch in Asian real estate next year is the Trump effect. Asia is acutely vulnerable to trade and financial shocks. Stronger trade linkages with China and the United States and greater sensitivity to shifts in US monetary policy increase the risk that sentiment in the region’s residential and commercial property markets could deteriorate sharply if Trump’s second term leads to economic and financial instability.

JPMorgan warned last week that “fears of financial instability” in Asian emerging markets “will prevent needed easing to support growth”. If the region’s central banks are forced to keep borrowing costs at current levels, mortgage rates will stay higher for longer, putting further pressure on affordability and dampening demand, especially in housing markets that are already slowing, such as Australia and South Korea.

The Trump effect could be more pronounced in Asian commercial property markets, where a recovery in transaction volumes has gathered pace in recent quarters. MSCI says the Fed’s decision in September to begin easing policy was a “pivotal point” for the region’s investment markets.