SE Asia's Real Estate: Thriving Amid Turmoil
The early months of 2023 have seen global turbulence with a raging war in Europe, and the collapse of the Silicon Valley Bank in the United States and Credit Suisse in Switzerland.
Yet despite the headwinds, one region has managed to navigate the treacherous conditions well: Southeast Asia. In fact, it is not only surviving but even thriving. According to an International Monetary Fund report, ASEAN’s economy is expected to improve by 4.6 per cent this year, making it one of the world’s fastest-growing regions. This spells good news for its real-estate market.
“The region continues to demonstrate strength amidst global economic vulnerabilities and geopolitical instability,” said Ms Sigrid Zialcita, who was giving a presentation at the Sands Expo and Convention Centre titled Economic Outlook ASEAN-3. She looked at the growth prospects for three countries: Singapore, Malaysia, and Thailand.
While the Chief Executive Officer of real estate investment advocacy Asia Pacific Real Assets Association noted that it is too early to tell if the global economic malaise will spread to the region, ASEAN is prepared for it. High regulatory standards and sound capital adequacy have made it a pillar of economic stability. “Strong government support can also help mitigate any impact should the worst happen,” she said.
She was speaking on the final day of the Southeast Asia Property Investment Show (SEAPIS) organised by PropertyGuru. The two-day event saw industry leaders and analysts gathered at the Sands Expo and Convention Centre to share how real estate investors can capitalise on new opportunities in the region’s burgeoning property market.
Indeed, she noted that ASEAN is at the centre of Asia’s urbanisation boom, with the United Nations estimating that there will be a staggering 1.2 billion new urban dwellers in the region alone by 2050. “Never has the pace of urbanisation been so rapid. This will continue to buoy the demand for real estate in Southeast Asia,” she said.
China Unleashed
In the short term, ASEAN’s optimistic economic outlook for the year ahead can be attributed to one key factor: China is back in business. “The reopening of China is expected to support the growth in the region,” said Ms Zialcita.
To illustrate China’s impact, she highlighted Thailand’s property performance as an example. Since 2018, Chinese buyers have traditionally been the country’s biggest foreign property purchasers. The investments are immense – data from Thailand’s Real Estate Information Centre showed that Chinese buyers acquired more than 3,500 condominium units for S$711 million in the first nine months of 2022.
Condominium sales are expected to further improve this year. “Developers are gaining more confidence following the reopening of China, which will likely stir more inbound investments,” she said.
Further down south, Malaysia and Singapore have also performed well on the property front. In a sign of rising demand for homes, loan applications for the purchase of residential properties have surpassed pre-pandemic levels in Malaysia. Across the Causeway, Ms Zialcita also noted that Singapore’s Real Estate Investment Trusts (REITs) has also been one of the top performers in the region. “It should be the same story for this year,” she said.
Seizing The Opportunity
As ASEAN economic machine charges ahead, it also has to go hand-in-hand with infrastructure development. The Asian Development Bank has estimated that the region will need about S$245billion worth of infrastructure investments annually – making it a lucrative investment prospect.
For those looking to jump on the seemingly profitable property train, Ms Zialcita has some advice. “Investors like yourself still need to do your homework and be cognisant of the risk of unfavourable returns,” she said. “You also need to manage currency risk.”
Finally, while rising interest rates may have been a bugbear of businesses and consumers alike, she noted that it may actually be a good time to open the wallet on a property investment.
“The environment that may be pushing rates today is one that can benefit real estate in the form of higher rents,” she said, adding that this could act as a buffer against inflation.
“History has shown that the direction of the economy and sharp growth tends to have a greater impact on your returns than rising interest rates,” she said.
Note: Article content was written based on the speaker’s insights from Southeast Asia Property Investment Show (SEAPIS) event which was held on 25-26 March 2023.
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