APR has classified the cities into 3 tiers, each with a different colour code and recommendation:

Asian Property Review evaluates top Asia-Pacific cities for their investment potential in 2016.

TIER 1

OSAKA & TOKYO

Why Invest?

In Tokyo and Osaka, the main reason for investing would be the availability of finance – major international banks are willing to loan against new/ish properties in the heart of both cities. Additionally, both cities have good speculative growth potential. In Fukuoka, while finance is not as readily available, speculative growth potential is also coupled with strong rental yield – something which is much harder to achieve in both Tokyo and Osaka.

What types of property?

As there are no limitations on property purchases by foreigners in Japan, it all depends on investment goals and criteria. Generally speaking, residential or multi-purpose condominium units are usually easier to manage remotely (less maintenance required), and provide higher, more stable rental yield. However, the larger land portion associated with houses provider higher speculative growth potential.

PROS • Strong rental market • Strongly pro-landlord • Stable political system • Low effective rental income tax

CONS • Weak economy • Low to moderate rental

MELBOURNE

Although prices in Melbourne have been rising at a breakneck speed, the demand for housing in Melbourne is still going strong. This is due to a shift in population which is expected to exceed four mil in 2020 or set to double by 2051. Due to shortages of qualified workforce, Melbourne’s building industry is unable to meet this demand thus prices of housing are expected to continue rising over the next 2-3 years before stabilising. According to David Brown, Managing Director of Meridien Group, in 2015, the city experienced a 9.9% median price growth with 3.65% increase in rental yield.[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5″ ihc_mb_template=”1″ ]
What types of property?
Apartments are usually preferred by the younger generation and first time home buyers because of its low entry cost, therefore if it’s well-located, the property will make for good investment. Pay attention to the middle and outer suburbs areas such as Ringwood, Croydon, Wantirna and Boronia in the east, and Sunshine, Deer Park and St Albans in the west.

PROS • Steadiest market so far • Low risk asset class • Strong rental yields • Strong track record of value growth • Neutral tenant protection laws • Still more affordable than Sydney • Population set to double by 2051 • Large government investment in infrastructure

CONS • Slowing growth • Moderate effective income tax rates • Oversupply in some areas

SYDNEY

Why Invest?
Sydney’s property market has had a long growth run for the past few years. Although the hype is expected to cool, experts believe that the subdued Sydney prices will lead the way for growth this year. The Commonwealth Games in 2018 set to take place in Gold Coast Australia will be a catalyst that will increase employment rate and help prices regain momentum. The Australian government’s commitment to improve the local infrastructure with projects such as the M5 widening, Westconnex and Badgerys Creek will all have a positive impact on prices.
What types of property?
Experts advise investors to invest in Gold Coast as well as the entire ‘ring’ around Sydney Harbour. The slew of state government urban renewal projects in southwest Sydney will create good growth opportunities for the southwest growth corridor. Avoid apartments in the CBD area and look for villas and terraces starting around AUD750 000.

PROS • Stable Economy • Low risk asset class • Strong rental yields • Strong track record of value growth

CONS • Slowing growth • Moderate effective income tax rates • Prices have risen too far, too fast • Tighter lending rules

BRISBANE

Why Invest?
Analysts forecasted growth in Brisbane median prices to outperform both Melbourne and Sydney over the next 3 years. David Brown says, “Now is the time to be looking to Brisbane for investment. Prices are affordable, rental yields are better and with high population growth, the demand for housing is strong and prices are on the uplift right now”.
What types of property?
Springfield in the Southwestern corridor is also one of Australia’s fastest growing regions. Over 1,000 people per week are moving into Southeast Queensland, but supply is limited so that can only lead to rising prices. What you don’t see in the headline numbers is the widening gap in values of houses (landed) and attached properties (villas, apartments, townhouses). Dig deeper and see how the underlying value of land is driving up the value of landed houses in Australia. Australian families love to live in houses, therefore there is constant demand for housing from ‘middle Australia’. It is a stable market with low risk of price adjustment, longer tenure of tenants, higher yields and better growth than apartments.

PROS • Stable Economy • Low risk asset class • Highest rental yields • Greater value for money • Strong track record of value growth • Neutral tenant protection laws

CONS • Weak population growth • High vacancy rate • Moderate effective income tax rate

AUCKLAND

Why Invest?
Auckland is one of the world’s top places to live in, thus it’s not surprising that it has been experiencing rapid inbound migration. Last year alone, there was an increase of about 165 immigrants per day to New Zealand’s population. This coupled with a shortage of supply in housing will drive demand and push prices up further.
What types of property?
The implication of this phenomena is a spill over effect to house prices in other regions of New Zealand. Currently, Waikato and Bay of Plenty are already feeling the effect. Auckland will expand and outlying territories like Silverdale, Hobsonville and south of Takanini to accomodate more development. Auckland is also expecting construction of apartment building in the CBD area to accelerate and increase to house another 30,000 residents projected over the next few decades.

PROS • Steady economy • Neutral tenant protection laws • Moderate transaction costs • Moderate rental income • Investor friendly investment policy • Low interest rates

CONS • Slowing market • Moderately strict buying rules

SHANGHAI

Why Invest?
As one of the largest cities in the world, properties in Shanghai are highly sought after by foreign investors. China has recently eased their foreign investment policy by allowing foreign individual investors and institutions across the country to purchase more than one property, particularly those with a Shanghai household registration—those without are allowed to buy only one property. In March 2015, the minimum downpayment for first-time buyers and upgrades was lowered which caused a pick-up in sales volume.
What types of property?
Look into investing in Xintiandi — there are currently more than 2,000 homes available (most of which are high-rise apartments) and this number is expected to more than double 10 years from now. Meanwhile, the highly integrated Taipingqiao Lake that consists of high-end dining, entertainment venues, luxury residential properties, office towers and hotels is still one of the most highly sought-after residential enclaves in Shanghai.

PROS • Fastest growing economy • Pro-landlord rental market • Investor friendly investment policy

CONS • Uncertainty over rules and laws • Property rights issues • Yields now very low

BEIJING

Why Invest?
Despite a dip in prices by 1.3% for the first time in two years, the market in central Beijing is still going strong. China Central Bank’s decision to slash interest rates has prices on the rise again. Non-Chinese citizens are no longer required to be resident in Beijing for a year in order to become eligible to purchase real estate—a legal work permit (and some money in the bank) is enough to own a property in Beijing.
What types of property?
Since lending measures have been loosened, the residential market is has been enjoying a positive trajectory. This had developers rushing in to meet the sudden increase in demand, particularly in the Grade-A apartments and high-end villa segments. Sales volumes increased by 25% over the last quarter. You can take advantage of the current surge of demand by tapping into the luxury, or look into the secondary market.

PROS • Pro-landlord rental market • Low transaction costs • No inheritance tax or estate duty • Investor friendly investment policy

CONS • Moderate rental yields • Softening market

TIER 2

HONG KONG

Why Invest?
Hong Kong´s residential property market has risen relentlessly with prices skyrocketing by 134% (now standing at USD1,416 per sq ft) in just five years. Due to its current low interest rates regime and non-existence of capital gains tax, the island is regarded as a safe haven for foreign investors. Record low borrowing costs is fuelling continued property demand.
What types of property?
Despite low rental yield, the demand for small-sized properties (159.9 sqm and below) is driving prices in this segment up with double-digit growth in 2015. The alternative to the luxury apartment sector is the relatively untapped townhouse market—despite the weak transaction volume last year, prices still rose by 4%. Investors should look outside of the island’s confine, and explore the luxury residential market in Kowloon and the New Territories which are generally more stable than the Island market.

PROS • Stable economy • Pro-landlord rental market • Low borrowing costs • Moderate rental income • No inheritance tax or estate duty

CONS • Introduction of a special Stamp Duty • Tighter mortgage lending policies

BANGKOK

Why Invest?
Bangkok is an up-and-coming investment destination as the city is undergoing rapid urban development and benefiting from extensive regeneration projects. Firstly, the Public Transport System (BTS Skytrain System and MRT Underground) is still undergoing expansion and numerous Bangkok neighbourhoods could soon benefit from modernization projects.
This presents an enormous “early movers’ opportunity” for investors, who can profit through the positive natural momentum of Bangkok’s urban development. On top of this, Bangkok is well positioned to benefit from economic growth, especially with the start of the AEC. The start of ASEAN could propel Bangkok into a regional investment and economic hub.
What types of property?
Thai Property Ownership Laws are clear in regards to Foreigners buying Property: Foreign Nationals can only purchase “Condominium Freehold Units” directly.
Therefore, foreigners looking to make hassle-free purchases of property in Bangkok, should restrict their choices to off-plan and/or second hand Condo Units.
Bangkok is a huge city with an overwhelming number of neighborhoods; however Foreigners looking for a reduced-level of risk should restrict themselves to the Central Business District comprising:
1. Sukhumvit Area
2. Silom and Sathorn Area
3. Ploenchit and Wireless Road Area

PROS • Pro-landlord rental market • Low transaction costs • High rental yield

CONS • Political uncertainties • Unstable economy • Foreigners are not allowed to buy land • Complicated buying process

SINGAPORE

Why Invest?
Investing in Singapore properties is considered a bluechip investment as they tend to appreciate in value over time. Political stability and good infrastructure are key ingredients to Singapore’s success. Singapore is a very cosmopolitan city with a strong local and expatriate community who are looking to rent.
What types of property?
Condominiums are a good investment product as they tend to appreciate in value over time and there is no restrictions to foreign buyers. Those located in prime districts like Marina Bay, Tanjong Pagar and Orchard Road are generally favoured and attract interest among expat renters. However, do note foreigners have to pay Additional Buyers’ Stamp Duty of 15% on the purchase price. There are plenty of good deals right now in the secondary market as sellers outnumber buyers.

PROS • Stable economy • Pro-landlord rental market • High rental income • Strong track record of value growth

CONS • Tight lending policies • Prices have risen too far, too fast • High transaction costs for under USD10 mil property

KUALA LUMPUR

Why Invest?
Two words—Ringgit depreciation. Although the number of transaction last year showed a decline, particularly in the luxury segment and prices have stagnated, local industry experts predicted that property value will start appreciating again in 2018 due to the slew of transformative megaprojects and transportation masterplan underway. Which means investors can take advantage of the current exchange rate and purchase real estate in the most prime locations and reap the appreciation reward later.
What types of property?
Except for the raised minimum foreign purchase price— RM1 mil for residential property (in general) —the city’s policies remain friendly to foreign investor. Keep an eye out for new residential projects in the vicinity of the anticipated Bandar Malaysia, Tun Razak Exchange (TRX), KL118 Tower and KL Metropolis. Meanwhile, the southern side of the city will experience a resurgence with the Sunway Velocity project, Bukit Bintang City Centre (BBCC) as well as the PJ central redevelopment

PROS • Neutral tenant protection laws • Moderate transaction costs • Depreciated currency • Moderate rental income • Investor friendly investment policy

CONS • Unstable economy due to political factors and low commodity prices • Oversupply in high end residential segment, retail and office

MANILA
Why Invest?
The increase of BPOs companies in Manila has increased the demand in residential properties. The CBD area became the focus of expatriates looking to buy or rent property within their office proximity. With the number of BPO sector workforce expected to double, now is a better time than any to invest in Manila.
What types of property?
Investors looking for rental yield should focus on high-end and luxury condominiums in and around central business districts. Development has also spread to the rural–urban fringe areas such as the Arca South in Taguig, Nuvali in Laguna, and the Mactan Newtown in Cebu among others where developers are embarking on mixed-use projects to be able to meet commercial, industrial, and residential needs. The growth in these fringe areas is indicative of the increased importance of these locations for those investing now or in the next year.

PROS • Pro-landlord system • Stable economy • Very high rental income in luxury market • Strong expatriate demand

CONS • High taxes • Corrupt system • Strict buying rules • Serious ownership limits • High transaction costs

HO CHI MINH CITY

Why Invest?
Vietnam is on the threshold of being the world’s next manufacturing powerhouse. With the conclusion of key trade agreements such as The Trans-Pacific Partnership, ASEAN Economic Community and EU-Vietnam Free Trade Agreement, Vietnam will be well integrated with the world’s biggest export economies; vastly improving its GDP, attracting loads of expatriate professionals and expediting the emergence of its middle class. These will fundamentally ensure the mid to long-term growth of the real estate industry. Investing in it now will bring about many benefits and success.
What types of property?
Residential real estate (be it apartments or landed housing) within a commercial housing project is the best for foreigners to invest in. Properties that are located in and around the CBD as well as hotspots where expatriates and rich locals choose to reside will provide for a good rental yield and capital appreciation. The existing Law on Housing is clear with regards to foreign ownership eligibility and rights on the above mentioned permitted residential properties; foreigners now have the same rights over such properties as their local counterparts

PROS • Strong economy • Pro-landlord rental market • Low transaction costs • High GDP growth • Foreign investor friendly

CONS • Moderate to low rental yields • High inflation

TIER 3

JAKARTA

Why Invest?
The centre area of Jakarta will have the largest amount of construction projects as these projects are aimed at people who want to live in close proximity to their work place and have great accessibility to public transport. This makes apartment leases a good investment strategy. As a result, many apartments will be built outside of the CBD and in the East and North Jakarta in the coming years. The plans to accelerate infrastructure projects in the capital city and surrounding regions (including the MRT projects, six new inner city toll roads, JORR 2, new seaports and airports in West Java) are expected to become catalysts for structural recovery in the property market.
What types of property?
With the first phase of the MRT line that connects to the city centre slated for completion in 2018, the areas around the metro stations are exploding in value. Small unit condominium projects in Jakarta outskirts within proximity of these stations will cater to the living needs of those working in the city. Areas around the west of Jakarta such as Serpong and Tangerang, and the eastern region of the capital city, which extends from Bekasi to Cikarang are the hotspots for new developments. To-date, land prices at the northern part of the new metro line have already shown a 30-40% price increase. The southern part of the metro line is expected to experience a similar price explosion.

PROS • Very high yields in the city • Tenant neutral rental market

CONS • Strict buying rules • Serious ownership limits • High rental income tax • High transaction costs • Overbuilding concerns

HO CHI MINH CITY
h
Why Invest?
Vietnam is on the threshold of being the world’s next manufacturing powerhouse. With the conclusion of key trade agreements such as The Trans-Pacific Partnership, ASEAN Economic Community and EU-Vietnam Free Trade Agreement, Vietnam will be well integrated with the world’s biggest export economies; vastly improving its GDP, attracting loads of expatriate professionals and expediting the emergence of its middle class. These will fundamentally ensure the mid to long-term growth of the real estate industry. Investing in it now will bring about many benefits and success.
What types of property?
Residential real estate (be it apartments or landed housing) within a commercial housing project is the best for foreigners to invest in. Properties that are located in and around the CBD as well as hotspots where expatriates and rich locals choose to reside will provide for a good rental yield and capital appreciation. The existing Law on Housing is clear with regards to foreign ownership eligibility and rights on the above mentioned permitted residential properties; foreigners now have the same rights over such properties as their local counterparts.

PROS • Strong economy • Pro-landlord rental market • Low transaction costs • High GDP growth • Foreign investor friendly

CONS • Moderate to low rental yields • High inflation

SEOUL

Why Invest?
Korea’s newly implemented low interest rates and new regulations to loosen permit requirements, are expected to boost Seoul’s lagging property market this year. Korea’s economic agenda for 2016 such as free trade agreements, free economic zones have made the country’s real estate investment quite appealing to foreign investors. On top of that, the decentralization of Seoul’s Office Market has created the emergence of new CBD districts such as Sangam Digital Media City (DMC), Pangyo Techno Valley, Songdo Business District, and Jamsil, Munjung and Yongsan.
What types of property?
In order to complement the emergence of the new CBD districts and help facilitate the decentralization trend in the office leasing market, the Greater Seoul metropolitan council has planned the construction of new transportation infrastructure which covers Seoul, Gyeonggi and Incheon. Investors planning to invest in Seoul best follow the decentralization pattern of the CBD and purchase real estate for the working professionals working in these companies.

PROS • Strong economy • Pro-landlord jeonsae system • Easy convertibility of capital. • Allows foreign property ownership • High rental yield • Low interest rates

CONS • High transaction costs • Prices have risen too high, too fast

BENGALURU

Why Invest?
The Indian city, formerly known as Bangalore, saw two significant changes in its real estate market last year—an increase in new launches and take-up rates. As of last year, India’s initiative in making Bengaluru its next manufacturing hub is spurring real estate growth. Additionally, the 6 stations of Namma Metro lines that are now serving various parts of the city, has opened up the market and spurred developers to build high-end residential projects which are mushrooming across parts of the city to meet demand.
What types of property?
Bengaluru’s flourishing IT industry has led to a steady demand for apartments among NRIs as well as natives of the city. Pay attention to the areas of Electronic City, Whitefield, the ORR corridor, and a few other areas in North Bangalore as well as areas accessible via the metro station. In terms of steady ROI and high capital appreciation, the preferred areas to buy residential property in Bangalore are Hebbal, Indira Nagar, Narasapura, Hennur, Yelahanka and Whitefield.

PROS • Rapid economic growth • High rental yields • Growing market • Promising transportation plan

CONS • Pro-tenant rental market • Not foreign-investor friendly • Moderate to high taxes & cost • Serious ownership limits

PHNOM PENH
Why Invest?
Currently there are a slew of construction going on in Phnom Penh to meet the demand for condominiums, offices and retail spaces. In the first nine months of 2015, investments in the real estate and construction sector in Cambodia had a combined worth of USD1.7 bil. A report by Knight Frank estimated condominium stock to increase by approximately 641% within the next four years. Since the market is getting competitive, developers are forced to offer attractive incentives in the form of upfront discounts, timed promotions, furniture packages and guaranteed rental returns.
What types of property?
The Phnom Penh market is unique in a sense where investors may have to wait in order to enjoy property “discounts”. Rental prices and value of condominiums, especially those in the luxury market in areas such as Chamkarmon, 7 Makara and Chroy Changvar are expected to fall by the time the majority of the future supply hit the market in 2018. Buyers who take advantage of the drop in prices will enjoy the yield in the long term as land becomes scarce around the city.

PROS • Pro-landlord rental market • Moderate to high rental yields • High GDP growth rate • Low transaction costs

CONS • Moderate rental income tax rate • Corrupt government • Serious ownership restrictions

NEW DELHI
Why Invest?
There are several factors at play behind Delhi’s rising property market. The upcoming NCR investment locations such as Neemrana, Sohna and Delhi’s J and L zones; the Yamuna Expressway that connects Noida to Greater Noida with Agra; and the proposed Metro rail-link that connects from city to city.
What types of property?
Focus on townships or plotted projects/group housing projects in areas that are connected by the Yamuna Expressway. Alternatively, areas in Delhi-J and L zone are more suitable for those who intend to purchase farmhouses or townhouses. For developments along the proposed Metro rail-link, check out Faridabad that is located only 25 kms from Delhi.

PROS • Rapid economic growth • Moderate to high rental yields • Growing market • Low interest rates • Promising infrastructural plan

CONS • Pro-tenant rental market • Not foreign-investor friendly • Moderate to high taxes & cost • Serious ownership limits • Corrupt system

TAIPEI

The Taiwanese government’s decision to curb speculative buying has put a damper on Taipei’s property prices. Taipei particularly saw a 6.64% drop in house prices in 2Q 2015 from the same period in 2014 with 3.3% drop in property transactions at 2,419 units. Why then should investors still buy in Taipei? The game changer, namely the Taiwan High Speed Rail (THSR). As rail has a far-reaching influence on the property market, the 345km line that is scheduled to open in July this year is expected to revitalise the property market along the west coast of Taiwan where the stations are located.
What types of property?
Taipei’s Nangang District could become the next hot spot for property investment, as funds aim to take advantage of a high-speed railway station opening next year. Taipei City Government has also unveiled an urban renewal program that involves USD 798 million investment in infrastructure, housing and industrial development over the next eight years to build upon the opening of Taiwan High Speed Rail Corp’s Nangang Station next year. The development is set to help support the district as the eastern entrance to Taipei and spur demand for new office and retail space, as well as residential homes. Look out for new small apartments along the west coast of Taiwan, from the national capital Taipei to the southern city of Kaohsiung.

PROS • Pro-landlord rental market • Low transaction costs • Strong & stable economy • Moderate rental income • No inheritance tax or estate duty

CONS • Low rental yields • Capital gains tax of up to 45%

[/ihc-hide-content]