The global real estate market seems to be on the build right now, and the ground zero for all the activity seems to be the Asian market. Primed for foreign investment, real estate in Asia appears to be on an all-time high in terms of market growth. Major cities are shaking up their respective real estate sectors in a bid to inject some new life into the relatively slow-paced market of the last few years. Let’s have a look at the cities that are topping the charts in Asia.
Sydney has always been a top contender as a tourist hotspot. It has enjoyed international spotlight via tourism promotional campaigns as well. However, the city has no plans of stopping when it comes to cutting deeper pockets. The market is obscenely rich financially as it is, and is looking to cash in further on its real estate assets that come with a more-than-average yield of 4-5%. As per a PwC report, Sydney is the foremost city likely to garner the maximum rental growth out of all the Asian cities.
In the ongoing year, Sydney has further catalyzed its real estate sector with an active rentals market. The net increase in real estate assets in Sydney over the next three years is projected to be about 5% per annum. International investment is at an all-time high, making up for 1/3rd of the total transactions in the first half of the previous year.
Singapore may not have it as bright as Sydney, but things are certainly looking up for the residential sector in the real estate market over there. For the first time in 4 years, the city is exhibiting signs of a spike in pricing. Singapore has enough exposure to its name as an open market and conditions permitting had pounced in on the opportunity to market its development sites.
The momentum at present suggests an increase in customer demand from the international market in the coming years. Land auction prices have been skyrocketing since last year with Chinese developers spearheading the demand. Thanks to the massive Government Land Sales (GLS) programme which has evoked tremendous interest from real estate developers from across the world.
The country still needs to relook its stamp duty rates on residential properties charged at 3-4% – a rate which is higher than the other global markets. Plus the loan-to-value (LTV) ratios on mortgages are also on the higher side. But according to industry estimates, Singapore is projected to clock an Internal Rate of Return (IRR) at 13-15% in the coming years.
Shanghai is a global business powerhouse and has been so for China and the world for decades. Its steady and paced climb as a dark horse contestant in the global financial market could not have come at a more opportune time. Investors have backed the growth in the rentals market. With an influx in capital paving the way for a positive market yield graph in the years ahead, China now looks to throw the doors of the ‘bazaar’ open for bigwigs to swoop in on the build-to-core real estate assets. Foreign core industrial investors are steadily buying into the Shanghai market.
Of late, Chinese banks raised the interest rates on home loans by 10 per cent, in order to contain overheating in the real estate markets, taking the average interest rates above 5.6 per cent a year. It is now widely believed in the real estate industry that the authorities may further tighten the market regulations in order to rule out speculation and promote core demand.
The city is indeed amongst the top 5 global real estate destinations in terms of attracting foreign investment, studies corroborate.
Prime Minister Shinzo Abe’s quantitative easing program of 2013 seems to be paying off dividends for the Tokyo real estate market in the long term. A sustained rise in rental values and asset prices in the last half of a decade have been documented. However, Tokyo’s recent rise as a real estate honeypot is due to investors looking to earn from the spread between the yield on the property and that available on Japan’s sovereign bond. The value of the latter is currently around zero. Regardless of how small a spread the investors get to cover, it beats the idea of investing in the sovereign itself, for them.
Meanwhile, the real estate markets are slated to experience a fresh lease of positivism, thanks to the Summer Olympics which the nation is going to host in 2020. As per reports, rental values are increasing further and the capital inflows from the global market is also on the upsurge, mainly on the back of this global sporting extravaganza complemented by the improving economic environment.
Mumbai has witnessed a drop in quoted residential buy-in prices. The weighted average prices were down by 5% in the transition from ’16 to ’17. This has enabled the clogged market to become a sweet spot for buyers to settle on. Given the hand-in-hand add-ons offered with the deals by the developers, such as rent-assurance for two years to stamp duty waivers, no charges in floor rises, etc. The cumulative discounts are enough to attract a swarm of buyers since.
While these cities maybe ruling the roost as the Top 5 in the Asian real estate market, others such as Melbourne, Seoul, Hong Kong, Shenzhen, Osaka, Bangalore and Kuala Lumpur, are not far behind in giving them stiff competition with rehashed, improved real estate plans and policies shaping up ever international hub!
Girish Bindal is the Head of Content at Housing.com, Makaan.com & PropTiger. He draws from more than a decade of cross-industry experience and has worked for brands in the Real Estate, Recruitment and Consulting domain. In his current capacity, Girish is known to gel the news, numbers and opinion to drive the content consumption. With an analyst’s approach and a sharp focus on numbers, Girish has been organically progressing the brand to build a growing base of audience. An audience who are keen to buy property.