An Emerging Region: ASEAN Countries to Watch
The desire to own real estate is universal but the how and why often varies country to country. Recently, Leading Real Estate Companies of the World® (LeadingRE) and Luxury Portfolio International® hosted an Immersion Conference in Singapore and Kuala Lumpur, Malaysia to learn more about the exciting things happening in, and the current real estate climate of, this fast-growing market of 625 million people.
ASEAN is the Association of Southeast Asian Nations, a regional grouping of countries that promotes economic, political and security cooperation among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. This region has one of the fastest growing economies in the world, with an increasing appeal to investors from both within the region as well as outside, and growth in the high-end of the market
During the event, LeadingRE members (real estate brokerages and agents) from 17 countries were treated to an overview of how real estate is conducted in this range of countries, insights into the growth of the region, an understanding of how to market to and invest in the region, what buyers are looking for and much more. A few key trends emerged.
Buying before completion
In the U.S., buying into a project before breaking ground became less popular after the real estate doldrums of the 2000’s when a lot of planned projects were abandoned before completion. As Richard Teoh, a Hong Kong-based real estate project marketing expert noted: “It’s in our blood, our culture, to buy off-plan.” High-net-worth Asian buyers prefer to be offered the first opportunity to buy into a new development during the planning stages to get first-mover advantage. Once a development is launched, it becomes less appealing. In markets such as Bangkok, Thailand, the market is sharply divided with Westerners purchasing existing stock, while Asian investors are focused on new construction.
A mobile life
Throughout much of the ASEAN region, 70-80% of traffic is mobile, mostly on the Android platform. People are online at least six hours a day, not including work, and many people own two or three phones. To reach these buyers, a mobile strategy is essential. However, these buyers also expect a physical presence. For developers looking to appeal to Asian and ASEAN buyers, it’s important to do a proper launch in a reputable hotel with respective local media exposure to position the development. These buyers prefer a property exhibition in front of multiple guests rather than a one-on-one presentation. For some investors, holding such exhibitions is also regarded as a show of intent and financial strength for the developer. This makes their buying decisions easier as such events are staffed not only by the developer, but often also lawyers, mortgage brokers and property managers who help answer serious queries from buyers.
Leasehold vs. Freehold
Many nations restrict land purchases to locals and in fact in some places, the buyer doesn’t even own the land at all. Known as leasehold properties, this is where you only own a property for a fixed time period. The buyer has a legal agreement with the landlord (sometimes known as the ‘freeholder’) called a ‘lease’ which determines how many years you’ll own the property (this is common in other places such as the UK and Hawaii as well).
In the ASEAN region, leasehold properties are common and offer a chance for investors to purchase. Because of the intricacies of the local laws and limitations, even when purchasing a unit in a development it’s crucial to work with local agents to understand the different types of properties available and the local regulations.
A few countries in the region have recognized the draw of freehold properties for foreign investors and have accordingly introduced laws to make this possible.
Speakers at the immersion conference also shared key insights on the countries within the ASEAN region that are seeing the most activity for high-end real estate.
Malaysia: During the ASEAN Immersion Conference, Malaysia happened to be experiencing an election that, for the first time ever, represents a shift away from previous leadership. The country has one of Southeast Asia’s most vibrant economies. Years of building have led to a bit of oversupply in the high-end of the market, but it is expected that will stabilize within several years. The Malaysian market is ripe with opportunity for real estate investors looking to capitalize on the current strength of the market, as well as its potential for future growth. Malaysia has one of the most liberal and friendly systems in Asia for foreigners who wish to purchase freehold property as, unlike others in the region, there are no limits on the number of properties and the threshold for property purchases by foreigners is fairly low at 1M Ringgit ($250,000). Foreign buyers are starting to expand into different areas including the East Coast and the south section of Johor which has been rebranded as Iskandar Malaysia with a master plan, industrial hubs, an air transport hub and more.
Singapore: One of the most mature markets in the region, with approximately 5.8 million people and increased growth on the horizon, Singapore has a fascinating, proactive approach. With no natural resources and limited space, the city-state actively meets to evaluates and re-evaluate their city planning every five years. Much of the real estate is new buildings however with an elaborate and generous public housing program the country makes it very easy for young families to buy real estate as a way to jump-start their investment and financial growth through offering significant housing subsidies to incent young, professionally-focused people (who may otherwise focus on career instead) to marry and have families as a way to grow the population.
Indonesia: The central city of Jakarta hasn’t seen a lot of international real estate investment yet but that is changing as this nation of thousands of islands finds its place in the global economy. You must have a stay permit in Jakarta to purchase, but one can also set up a business to invest and buy 20-30 units to then rent out. Another option is to buy land and work with a local developer on a collaborative project. Bali is another popular investment destination in Indonesia that has seen many foreign buyers enter the market for apartments and villas too – mostly making up the second home or holiday home category. While the laws don’t allow for easy ownership of property by foreigners, there are ways to get around this through an intricate system of multiple contracts and assignments. The need for a quality, local real estate expert is especially critical in Indonesia as navigating the complex market is especially difficult here.
Thailand: Bangkok was the most visited city in the world last year and as hotels pop up everywhere and the travel industry booms, it is competing with the development market for available land. Bangkok in particular has a large expatriate population, mostly living in apartments throughout the city. The market for homes is very small and highly confidential though once known, and unlike other countries in the region, Thailand makes it easy for outside investors by facilitating a fast transfer of property and openly allowing funds to be brought in from anywhere.
Emerging Markets: A newer luxury market than other nearby nations, Vietnam, both in the cities as well as the holiday/resort market has seen increased opportunity with developers coming in from Singapore and other areas in the region. In Vietnam, up to 30 percent of a building can be owned by foreigners and yet, many projects in the high-end of the market have struggled to reach even that. Last year, Vietnam attracted over $35 billion in foreign investment, but only 8% of that was in real estate, representing a real opportunity for growth in the future.
Another emerging market for luxury, Manila is also seeing a lot of construction, with expensive high-rises clustered throughout the city as well as sprawling developments on less expensive land that appeals to families. Foreign buyers come from the United States, Japan, India, Singapore and Hong Kong although recently interest has also picked up from China, Russia, Korea, and some parts of Europe, proving this region is truly becoming an international destination.
Overall, visiting the ASEAN region and learning about these dynamic countries was further proof of what we already know, that the world is getting smaller and that real estate is a big part of what is bringing us all together. While the global real estate map is always in flux, with regions falling in and out of favor and economic prominence, the vigorous growth of the ASEAN region is proof that the story of the global real estate market has just begun.
Click here to read the full article in the Volume 8, Issue 2 edition of Luxury Portfolio magazine.