What’s hot, what’s not in Asian real estate

0
15

High-rise housing estates in Singapore, currently Southeast Asia's hottest property market. Photo: iStock

Singapore is again Southeast Asia’s hottest real estate market after four years in the doldrums, but investors are also parking their money in one of the region’s less-fashionable business centers, Ho Chi Minh City.

Sales volumes rose by 50.0% in Singapore in the first half of the year to US$5.8 billion as traditional rivals Hong Kong and Tokyo struggled with excess stock, soaring prices and economic uncertainty. Hong Long’s sales rose by a meagre 5.0% to U$8.2 billion while Tokyo slipped by 33.0% to US$6.2 billion.

PricewaterhouseCoopers’ latest emerging trends report, produced with the Urban Land Institute, gives an optimistic picture on housing and industrial-logistics markets in 2018, but is more cautious on office demand.

The outlook for retail property is also clouded by a drift toward online purchases, though shopping malls are still drawing investment.

Much of the region remains over-supplied, especially with office space, but investors are generally optimistic of Southeast Asia’s prospects because of consistently strong economic growth, rising incomes and urbanization. European and Asian investors are projected to account for most new capital inflows.

Respondents to the annual PwC survey expect Singapore to attract most attention in 2018 because government stimulus measures are absorbing surplus offices and housing, lifting demand for the first time since 2013. It is the second most-affordable Asian residential market behind Tokyo, the survey said.

The facade of a Public Housing Flat at Kampong Kayu Road, Singapore. Over 82% of the island nation's population lives in publicly developed and managed housing. Photo: Getty Images

A public housing flat at Kampong Kayu Road, Singapore. Over 82% of the island nation’s population lives in publicly developed and managed housing. Photo: Getty Images

“Singapore has been the only market in Asia in which government efforts to contain price rises have actually been successful,” the report notes. “Notably, the main difference between Singapore and elsewhere in Asia is the government’s tight control over the land sales process …”

The republic is ranked the first choice for investment in 2018, ahead of Shanghai, and third in the Asia-Pacific behind Sydney and Melbourne, but slips to fourth behind Asian cities for its development prospects – largely because land is becoming scarce for big housing and office projects.

Conditions are much the same in Tokyo and Hong Kong, prompting more investors to tap into emerging markets like Vietnam, the Philippines, Indonesia and India, or to move into secondary cities in traditional markets.

For instance, sales volumes surged by 566% in Yokohama in the first six months, and cash is reportedly pouring into Bangalore, Nanjing, Fukuoka and Wuhan.

Vietnam is being compared to China’s market 10-15 years ago, with a host of regulatory difficulties but steady long-term economic growth and a swelling consumer base.

Ho Chi Minh City, the country’s commercial hub, is ranked third for its investment prospects within Asia in 2018 and first for development opportunities (Sydney leads both indices in the Asia-Pacific).

Ho Chi Minh City, Vietnam - Jul 9, 2014: City skyline aerial view and foggy pollution at sunset with colourful cloud and skyscrapers of city central on July 9, 2014

A skyline view of Ho Chi Minh City along the Saigon River. Photo: iStock

South Korean and Japanese investors, who are also heavily involved in Vietnam’s manufacturing industries, have largely pioneered the market, but regional developers and private equity funds are also moving in.

Housing and office prices have been rising for three years and these two property segments will continue to attract most investment. Office rents in Ho Chi Minh City are expected to leap by 6.19% in 2018, the fastest rate in Asia. Sydney (6.5%) and Melbourne (6.2%) lead Asia-Pacific forecasts.

Rents for A grade offices averaged US$465 a square meter in the second quarter, making Ho Chi Minh City more expensive than Jakarta (US$270), Bangkok (US$226) and Kuala Lumpur (US$126). Hong Kong (US$1,925 per sqm) is still the priciest Asian city, ahead of Beijing (US$994 per sqm) and Shanghai (US$830 per sqm).

Interest in Indonesia has cooled because of saturated office and housing markets, but there are still openings for premium projects, analysts say. Jakarta is ranked only 14th for investment prospects and 12th for development on the PwC survey.

The Philippines has also slipped back due to political unrest and concerns over the potential impact of rising US interest rates, which could draw capital back to more mature markets. Nonetheless, it will remain on investors’ long-term radar due to its enormous untapped development potential.

Likewise, political problems have diverted funds from Thailand, but money is still flowing into residential condominiums along the routes of planned infrastructure upgrades, mostly from Japan, China, Hong Kong and Singapore.

Bangkok is ranked only 16th out of 22 assessed cities in the PwC survey for both its investment and development prospects.

A man walks in Bangkok's central business area in a May 22, 2015 file photo.  Photo: Reuters/Chaiwat Subprasom

A man walks in Bangkok’s central business area in a 2015 file photo. Photo: Reuters/Chaiwat Subprasom

Residential growth is being underpinned by demand for affordable housing, an increasing need for senior housing as populations age and a scarcity of student accommodation in some of the more mature markets, as well the effects of migration from rural regions to major cities.

Data centers, shared/serviced offices and business parks are driving investment in office segments, along with industrial/logistics systems. Analysts say the trickiest market to read is retail, which is starting to move online as consumers become more digitally proficient – though not quickly enough to threaten existing plazas for a decade or more.

Euromonitor International, a London-based business intelligence firm, forecasted in April that only 9.0% of Singapore’s retail trade would be conducted online in 2021, 3.0% in Malaysia and Indonesia, 2.0% in Thailand and Vietnam and 1.0% in the Philippines. By then 31.0% of retail in South Korea will be online and 25.0% in China, the business intelligence outfit projected.

Kuala Lumpur, which trails in most other Asian real estate categories, is expected to see the highest return on retail assets in 2017-22, at a compound annual rate of 7.4%. Singapore’s suburban assets are forecast to return 5.2% and its prime assets 4.8%. Seoul is second overall at 7.0%, according to Euromonitor’s projections.

Source

LEAVE A REPLY

Please enter your comment!
Please enter your name here