What you need to know before investing in Asia’s real estate market?
If you travel around Asia frequent enough, you’ll notice that every month, another towering building is being erected in every business district from the newest multi-use complex for offices and retail to massive residential developments. Even across provinces and suburban areas, more and more land areas are being developed non-stop. More and more families are now aiming to own at least 2-3 properties for investment and recreation in the B to C markets across Asia. Despite this seemingly booming industry, we asked the team of List Sotheby’s International Realty what they thought of the market conditions:
Philippine Tatler: Amongst the Philippines (Manila), Hong Kong, Malaysia (Kuala Lumpur), Japan (Tokyo), Singapore, and Thailand (Bangkok), can you rank the most expensive to least expensive cost per square metre?
Sotheby’s: Based on the table of average residential prices below, the most expensive Asian city among the six cities is Hong Kong, while the least expensive is Manila in the Philippines.
Philippine Tatler: In the next five years, what are key markets that can be expected to grow? Why these markets?
Sotheby’s: According to Emerging Trends In Real Estate 2018 by PwC-ULI, real estate continues to attract capital, demonstrating its appeal over other asset classes in an otherwise uncertain investment horizon that is seeing signs of nervousness over inflation and rising interest rates.
Of all the factors that have combined to shape recent investment flows into Asian real estate, the one that really stood out is liquidity. The other key driver is the rise of high-net-worth individuals (HNWI) in the region, which is more dramatic than anywhere else in the world. These HNWI are also major players in the real estate space and are typically long-term buyers of prime and luxury homes with strong balance sheet and holding power. Their purchases often include factors such as quality, uniqueness, lifestyle and investment considerations such as suitability, wealth preservation, legacy planning and portfolio balancing needs, apart from just the price and cost of purchase.
Increasingly, investors are also looking to make money from working their assets rather than via leverage or rental growth. Fund managers are now considering data centres, healthcare assets, affordable housing projects, build-to-rent facilities, student accommodation, and senior housing. Co-working is also a trend which is taking the office sector by storm and looks set to remain so for a few more years.
Philippine Tatler: What are the main challenges in real estate investment in Asia?
Sotheby’s: Real estate is continuing to evolve into something that is less about ownership and more about access – or services and outcomes. We are seeing a relative value-shift from the passive “bricks and mortar” component to a more dynamic, operational business. This is important for investors – who either need to find innovative and cost-effective ways of accessing operational expertise and innovation, or face diminishing returns.
Another challenge for investors who wish to invest in an overseas market is the sporadic implementation of cooling measures, which typically include some restrictions that apply to foreign buyers. These measures are usually in place to ensure that there is no “overheating” of the market, and that there is a positive and sustainable price appreciation for the longer term. According to List Sotheby’s International Realty, Singapore, from a luxury property perspective, foreign investors who want to buy property will make comparison with other overseas markets before making their decision. Such considerations may include geo-political stability, foreign exchange, growth prospect of the local property market, taxation laws and others. We encourage people who are interested in such investments to seek the services of a professional real estate agent to know the intricacies of buying a property in different countries.
Philippine Tatler: What are the expected opportunities in Asia that will develop the real estate industry?
Sotheby’s: More people are recognising the need to adapt to the disruptive change that technology is bringing to the real estate industry. For example, PropTech is driving a change in the mind-set of real estate players towards consumers with regard to the design and construction of buildings and cities. Houses can be built by using modules that are produced in the factory and only installed on site. This will be a more cost-effective construction method going forward. Technology will also change the way that marketing and transaction management are carried out in terms of convenience, process and reach, especially with the digitisation of many legal paperwork and the use of new digital media to view properties from around the world. Case in point is that, with our global network, clients of List Sotheby’s International Realty can have their listings being seen by people in more than 70 countries and territories worldwide.
Another trend that will continue to shape the real estate industry is the open skies policy which has changed the way businesses are conducted. With more and cheaper traveling options, not only are there more business owners and corporate leaders travelling often within the region, the number of people travelling for leisure has also increased tremendously as people take shorter holidays but on a more frequent basis throughout the year. This has and will continue to mean that more people will look for investment opportunities not just in their own markets but in the region to grow income as well as for wealth preservation and portfolio balancing etc. This includes the purchase of second homes, as well as investing in “condotels” and holiday villas.
See amazing listings across Asia and around the world through List Sotheby's International Realty.