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Southeast Asia: The Emerging Choice Market for Real Estate Industry

by on | Categories: Articles, Investments, Real Estate Industry

Often overshadowed in the past by its giant neighbors in Asia – Japan, South Korea, and China, Southeast Asia as a region is now making its presence felt as an economic force to reckon with. With the unprecedented economic growth of some of its members outpacing the rest of the world, Southeast Asia is the rising star of the global market today. The impressive progress of the region impacts positively on its real estate industry, with condominiums in Southeast Asia increasingly becoming a sound investment prospect.

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Photo courtesy of Vampa via Flickr

Young population, increasing urbanization, growing middle class boosting real estate market

Southeast Asia’s huge population of over 600 million people – with a great segment comprising a productive, young labor, and talent pool – makes it a magnet for strong foreign direct investments both online and offline. The economic progress also results to rapid urbanization in many countries in Southeast Asia, and as more and more citizens move from rural areas to urban cities, the demand for all kinds of real estate likewise increases. With progress also comes the growth of the middle class and the trend shows that with more young people gaining better purchasing power, they are also deciding to move out of the family home, creating a bigger demand for the housing market. There is also an increase in individuals with high net worth who are becoming more interested in investing part of their wealth in the residential market, including condominiums in Southeast Asia.

5 Southeast Asian countries among the top real estate markets in Asia

A survey made by Price Waterhouse Coopers and the Washington-based Urban Land Institutes reveals that five countries in Southeast Asia made it to the Top 15 Asian Investment Prospects for 2013, with Jakarta, Indonesia taking the top spot; Singapore clinching number 3; Kuala Lumpur, Malaysia and Bangkok, Thailand claiming number 5 and 6 respectively; and Manila, Philippines making it to number 12. The survey covered the whole of Asia Pacific, which includes other economic heavyweights such as China, South Korea, Japan, Taiwan, and Australia, among others.

Foreign investments driving demand for condos, real estate properties in Southeast Asia

Foreign investments continue to boost the market for condominiums in Southeast Asia, with greater demand for business office space rental as seen in the consistently stable economy of Singapore, Asia’s financial and commercial hub, and the emerging economies of Indonesia, Thailand, Malaysia, and the Philippines.

General occupancy rates for office buildings are expected to stay healthy in Singapore. Thailand, as a popular tourist destination, also offers one of the cheapest real estate rates in the region, attracting huge number of expatriates and foreign retirees to invest in housing properties, including condominiums. On the second quarter of 2013 alone, four residential condominium projects, including high-end and luxury ones, were launched in the country.

Indonesia jumped 10 spots from its 11th place ranking in 2011 to claim its current position as Asia’s top real estate market. This could be best attributed to the country’s strong GDP growth at around 6.5% annually. Foreign investors came in huge numbers contributing to a healthy leasing activity across all sectors of the real estate market, with office rents increasing the past year by 29%. Condominium sales also went up due to a growing expatriate market and with the rising wealth of its own working population leaning towards condo living. Even the market for luxury condominiums enjoyed robust demand. Three new high-end condominium projects are expected to be completed this year.

The Philippines, Malaysia, and Vietnam have all been showing good economic growth within the range of 4.5 – 5.7% in the past couple of years. “Strong growth in the economy means healthy demand for infrastructure and part of that is the real estate market”, says Christopher Fossick, Managing Director of Jones Lang La Salle for Singapore and Southeast Asia.

The Philippines’ Offshoring and Outsourcing (O&O) industry is not only boosting the economy, but driving the demand for real estate in the country’s capital starting with condominium office space rental. Three new projects were completed this year, offering office space mostly for the O&O industry while more completed projects are expected in the coming months.

From renters to buyers, condominiums as high yield investments

There is also a growing trend in the market for condominiums in Southeast Asia where previous renters are becoming buyers to instant real estate millionaires. In the Philippines, for instance, many foreign businessmen and expatriates, realizing the high yields of 5-8%, are opting to buy condominiums instead of just renting, and selling the properties for a profit once they need to move out of the country.

In contrast to the uncertainties faced by other economies in the world, Southeast Asia is expected to maintain its strong growth, resulting into bullish prospects for the real estate market in the region.

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