This may not seem to be the best time to think about investing abroad in the property market, but there are some who believe that opportunities are good in times of uncertainty and when prices start to slide.
Both of the above conditions apply in many property markets in Asia, so any investment needs to be undertaken with caution, given the presence of a major external threat in the form of the European debt drama.
The fact remains, though, that many regional developers from Hong Kong, Singapore and even Malaysia are venturing beyond home turf to benefit from diversifying their portfolios.
The Asean+4 region is home to nearly 50% of the world’s population. Rising urbanisation, an expanding middle class and rising disposable incomes are music to the ears of any developer looking to tap a growth market.
In addition to huge potential demand for low- and middle-income housing, opportunity exists at the top end of the market. That explains why global global hospitality chains, such as Ritz Carlton Residences, St. Regis and Waldorf Astoria, are tying up with local partners to offer best-of-the-best services.
More mature markets are witnessing saturation and limitations to future growth, and developers in these countries need to find new sources of revenue. A good example is Malaysia’s SP Setia Bhd group, which still has room to grow at home but at a slower pace. As a result, it has been expanding beyond its home market to places such as Vietnam, where it’s building housing projects on a massive scale.
Some of the regional players have today become multinational companies, having presences in many countries. Singapore-based CapitaLand has invested in China, Australia, and Vietnam in addition to its home base. Other companies from Hong Kong and Singapore have poured funds into condominium projects in Thailand.
How about Thai developers? What are their positions in Asia Pacific currently?
Given the huge demand for housing that needs to be met across Asia over the coming years, it will be a long time before the market can be considered mature. For this reason, there should be ample room for many developers to find profitable niches.
In China, for example, despite the recent slowdown in property prices, experts foresee a recovery soon. The trick is knowing where to invest. Rather than focusing only on Beijing or Shanghai, developers need to look to secondary markets. China has 300 cities with more than 1 million people each (the United States has nine). The sheer scale of underlying demand in China will drive new supplies soon, resulting in increasing prices in the near future.
Indonesia, where the property market is one of the best performers in Asia at the moment, is a similar story when it comes to scale (240 million population) and future demand.
Volume aside, quality accommodation is also needed across Asia Pacific, and this is an area in which Thai developers have a good reputation. Yet few of them are looking abroad.
Supalai president Prateep Tangmatitham said early this year that his company was studying possible investments in Asean and Sri Lanka. Investment laws and cultures have to be taken into account, and talk of a concrete plan would be premature, the company says.
Pruksa Real Estate Plc is one Thai developer that has gone regional, mainly in India and Vietnam, but its investments have not lived up to its expectations yet. CEO Thongma Vijitpongpun admitted earlier this year that the company had missed targets abroad, having encountered problems with local laws, land acquisition, and low pre-sales.
Pruksa, the country’s biggest developer by sales, has opted to focus on its home market for now, saying post-flood property demand in Thailand will keep it busy.
For Thai developers, it may come down to a question of will. For the largest ones, capital is not a problem but management and preparedness may be. There’s no reason why experienced Thai developers of quality housing could not thrive in markets like Indonesia and China. They just need to take that first step.
