Jones Lang LaSalle's International Property

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Region maintains growth

Emerging Southeast Asian nations brighten gloomy global picture, writes Peta Tomlinson

PUBLISHED : Wednesday, 17 October, 2012, 12:00am
UPDATED : Monday, 22 October, 2012, 12:23pm

There has been far more bad news than good for property owners in most global markets for a long time. Even though real estate is a cyclical business, the present slump seems to go on and on, with little sign of an upturn.

And there's not much joy in the latest Global Property Guide house price trends index. Although United States housing markets inched up by 1.12 per cent in the second quarter of this year - contrasting with an 8.76 per cent decline in the corresponding period last year - there were "alarming price falls" in European countries. Values in Ireland, Spain, Greece, Portugal and the Netherlands are each down more than 10 per cent, while Poland and Cyprus "seem also to be slipping into the abyss", the report says.

For investors who by now must be wondering where on earth to invest their real estate dollars, Southeast Asia holds comparative appeal. As the Global Property Guide notes, while the region's countries are now feeling the pinch of the global economic downturn, and a number of hitherto "hot" markets have also slowed due to government cooling measures, their dip is nowhere near as dramatic, nor expected to be as long-lasting.

According to its data, house prices are down this year in Singapore (-3.28 per cent), Taiwan (-0.74 per cent), Thailand (-3.59 per cent), Indonesia (-0.78 per cent) and Shanghai (-3.44 per cent). Hong Kong house prices gained 3.01 per cent, but this was noted as a sharp slowdown from the 20.64 per cent annual increase during the same period last year. Notable, though, is that all of these dips are coming off a strong growth period.

Further putting these results into context is a report by Knight Frank listing the best-performing property markets around the world. In its ranking, based on the highest average growth in housing prices in the five-year period from 2006 to 2011, Southeast Asian countries occupied five of the top 10 places.

The mainland is in top place with close to 111 per cent growth, led by Beijing and Shanghai; Hong Kong second with 93.7 per cent growth; Singapore fourth (+ 50.5 per cent); Taiwan sixth (+30 per cent); and Malaysia ninth, with 28.5 per cent growth. Jump forward a year to the five-year period ending the second quarter of this year, and the region's markets still dominated the top five: Hong Kong first with 98.8 per cent growth; the mainland second +71.2 per cent; Singapore in fourth +32.2 per cent; and Taiwan fifth with 31 per cent growth.

Beyond those high-profile markets in the region, it is the emerging Southeast Asian cities that earn a tick in Jones Lang LaSalle's index of capital growth in luxury residential property. By its ranking, Jakarta led the way with a 19.2 per cent yearly jump to the second quarter of this year, followed by Manila, with 10.5 per cent growth.

Chua Yang Liang, Jones Lang LaSalle's head of research Southeast Asia, says the region, led by Indonesia and the Philippines, is enjoying a growth spurt on the back of commodity demand and offshoring and outsourcing activities. "How the Southeast Asia region would respond to the slowing global demand remains uncertain, but the strong underlying domestic demand could mitigate this downside risk," he says.

In top-performing Jakarta, growth in the high-end residential sector is being fuelled by strong wage and employment growth, low interest rates and high consumer confidence, says Todd Lauchlan, head of Jones Lang LaSalle Indonesia. "We expect this upward trend to continue for the rest of the year, in line with projections that Jakarta will see the strongest price growth in the luxury residential space in 2012."

It seems that this macro view of the region's markets carries weight with investors. According to Nicholas Holt, research manager for Knight Frank Asia-Pacific, property investment is likely to increase across Southeast Asia as a result of the Asean Economic Community, planned for 2015.

"The 10 countries of Southeast Asia are working on a plan to integrate more, in a similar way to the European Union [or what predated the EU, the EEC in 1957]. The aim is to have free movement of goods, services and capital, plus skilled labour, by 2015," Holt says.

This should make the whole region more attractive as an economic bloc, he says. "The opportunities for intra-Asean investors and for external investors looking for exposure into this growing market are significant. They will extend beyond the transparent and liquid Singaporean market, which has been seen as a relative 'safe haven' when compared to some of the risks elsewhere."

Holt says the present dip in the region's property markets is a blip. Underlying drivers, such as GDP growth and urbanisation in developing Asia, are still driving demand for residential property, while the developed markets of Hong Kong and Singapore, having continued to benefit from uncertain world economic conditions, are still seen as safe havens, he says. "With an upturn elsewhere, Asia will recover quickest and for longest."



One-of-a-kind homes

Tanah Teduh (pictured above) in Jalan Wahid, Jati Padang Raya, south Jakarta, is the kind of property foreign investors are keen on, according to Jones Lang LaSalle. The 20,000-square-metre gated community has 20 one-of-a-kind houses designed to reduce electricity consumption, conserve water and promote an environmentally-friendly lifestyle. The designers' vision to create "an amiable living experience" incorporates plenty of sunlight, open ventilation and existing tree plots. The project, with gymnasium, children's playground and floating pool is located in a sought after area of Jakarta with one of the highest capital yields, says Luke Rowe of JLL Indonesia.