2018 Emerging Real Estate Trends: Asia
Top 5 Markets for Investment and Development for 2018
Singapore, which was second to last in the top commercial markets in 2017, had two years of a sluggish economy with too much supply and not enough demand. It is now the top market for 2018. PwC is forecasting that rents are going to raise. Singapore is also sixth in development.
Shanghai is second in investment and development. The demand from domestic buyers has increased, thus Shanghai's real estate market trend is rising since those domestic buyers are not able to export capital and core funds have been flushed with new capital.
Ho Chi Minh City came in third in investment but second in development. Vietnam has the interest of large regional developers and more developers with private equity funds who are willing to invest in the country. Many believe that Vietnam will repeat China's performance when it comes to inflation on property prices.
Jakarta and Bangkok, respectively, have the next highest rents after Ho Chi Minh City and have moved above Hong Kong and Tokyo on the top five list for commercial development.
Property Outlook
Some types of properties have better emerging real estate trends for 2018 than others, depending on the country and its market.
The Commercial Market
Because more people are able to purchase what they need or want online, the retail property market is clouded, though shopping malls are still showing an increase in investment. The “cloud” over the retail market is slowing the trend, but not stopping it. Some investors look at what happened with the retail market in the United States – eCommerce ate away the market shares of shopping centers. However, many investors believe conventional retail will be able to fend off growing eCommerce because capital values and rents are continuing to trend upward, or at the least, stay flat, instead of showing a downward trend.
Furthermore, some market areas that are not doing as well, such as Singapore and Hong Kong, are showing a flat trend because of lower tourism. Since the retail market is growing and changing fast, there is the potential for some of the more experienced investors to create something different enough so that eCommerce doesn't affect growth.
Office Space
Much of Asia is over-supplied with office space, however, investors are optimistic that the trend for 2018 will continue to row, particularly in Southeast Asia. The area has rising urbanization and incomes, and strong economic growth, which allow for new capital inflows. Additionally, demand for office space has increased for the first time since 2013, especially in Singapore, which is the most affordable market second only to Tokyo.
Alternative Assets
An investor may boost returns by investing in unconventional assets because there is much less competition and the yields are higher. PwC shows more growth in niche investments for 2018. These assets include data centers, affordable housing, multifamily units, student housing and senior housing. The risk has declined in many of these unconventional assets due to the higher demand for them.
Alternative assets are particularly popular in Singapore and show an upward trend because of the change in risk vs. return and investors with changing expectations or returns. Locals with accumulated cash are also investing in these unconventional markets, which creates competition for these types of assets. That in itself creates a change for the better in investment patterns.
The Residential Market
Though governments throughout Asia have been trying to slow increasing property prices by requiring higher down payments on mortgages and more sales tax, the market continues to grow, due to demand. Most regions have a housing shortage, and with the continued high demand, the prices will continue to rise, regardless of what the governments do. In some cases, though property prices are high, they are still lower than other Asian markets. Even with shrinking apartment footprints – some were smaller than 200 square feet – the residential market continues to show an upward trend.
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