The realty investment market in Asia is growing in more ways than one. While core markets such as Hong Kong, Singapore, Japan and China continue to hold strong, even in tough years for the realty segment, there are also new markets emerging, in countries such as Cambodia, Vietnam and the Philippines, catering to buyers across budgets.
“Asia is a dynamic market for both commercial and residential real-estate,” says Somil Agrawal, a senior director at realty consultancy Cushman & Wakefield India. “Across the region, changing demographics, rapid urbanisation and growing economies are making the region an attractive destination for real-estate investment. Rapid improvements in infrastructure promise to boost these markets further.”
While core markets in developed economies such as Singapore, China and Japan have a timeless appeal, Agrawal adds, new markets are attracting mid-segment buyers with their relatively low entry points and promise of short- and long-term gains.
A recent report titled ‘The rise of alternative real-estate in Asia-Pacific’ by realty advisory JLL states that that the region offers alternative sectors such as data centres, student housing and aged-care to invest in. “There is a growing number of options here as a result,” says Rohit Hemnani, head of alternatives for Asia-Pacific at JLL. This is among the factors driving the growth of investment in Asia.
“Tokyo, for instance, is home to 1.5 million undergraduate students but is only now starting to build student housing to global standards,” says Hemnani. “Similarly, there are data centres coming up in Indonesia and senior housing across the region.”
Equally important, prices are relatively low in these emerging markets and appreciation rates, relatively high.
A report released last month by realty consultancy Knight Frank found that commercial property in this region continued to see rates appreciate even in troublesome 2017, particularly in cities such as Manila (capital of the Philippines), Jakarta (the capital of Indonesia) and Phnom Penh (Cambodia’s capital). Manila saw growth in 2016 too, a rough year for real-estate worldwide. And in Phnom Penh, entire new business districts are being built to meet growing demand.
“It also helps that Asian currencies have stabilised or appreciated against the US dollar,” says Neeraj Sharma, director at the Grant Thornton realty consultancy. “As these countries improve on the business sentiment index, yields in the commercial segment have improved significantly.”
For the retail investor, the second-homes markets offer promise too. “A beach property in Thailand or Cambodia comes at a relatively low price tag and has scope for excellent returns even in a few years,” says Pankaj Kapoor, CEO, Liases Foras, a real-estate consultancy
Cities such as Taipei in Taiwan and Kuala Lumpur in Malaysia have seen an increase of 5% in office rental rates over the past year, says Nicolas Holt, head of research for Asia-Pacific at Knight Frank.
Every country has a different risk profile, adds Agrawal of Cushman & Wakefield. “Due to a strong focus on development in emerging countries, for instance, these markets tend to have excess supply, especially in residential development. Norms vary too. Residential projects in the Philippines and Thailand have a threshold on foreign ownership while in Vietnam and Indonesia, foreigner investors can own limited real-estate assets and get shorter land tenures.”