There is a lot of speculation about which President-elect Trump’s campaign promises will be enforced when he takes office. Take for example, the withdrawal of the Trans-Pacific Partnership (TPP) Agreement. Whilst a withdrawal will affect the level of US investment in Asian markets, there is still heavy reliance on Chinese capital in markets such as Malaysia, Vietnam and Sri Lanka, so these countries may stay resilient to any restrictions or trade tariffs imposed by the US.
In any case, Trump has also stated that he will still endeavour to agree on bilateral trade deals with nations, as he views one-on-one deals being more beneficial to both parties. So, there is a possibility that key elements of the TPP will not be acted upon with selected nations.
Another example is Trump’s promise to increase domestic spending, and debt, which as a result, will lower the value of the US Dollar and impact investments in the Asian property markets that are hedged to the currency.
Nevertheless, regardless of Trump’s policies, I believe the countries below present great upside potential for investors in 2017. They are (in no particular order):
With a combination of a weakening economy, declining demand and excess supply of real estate, especially in the residential and office markets, Singapore stands out as a country with huge potential for those who have been looking for an entry point into a market with a very stable government and transparent means of doing business. Taking on investment or development opportunities in Singapore should be viewed with a mid to longer term view.
Recent transactions that underpin this positive sentiment are the sale of the Asia Square Tower 1 in June 2016 and the more recent record bid for a white development site on Central Boulevard to IOI Properties Group for $2.57 bil. In all, the tender saw a collective $14 bil in bids from a total of 7 bidders.
Malaysia is currently experiencing an influx of foreign direct investment (FDI), perhaps due to the fall in the ringgit currency. Most notable of the foreign investors are the Chinese with recent announcements across two major infrastructure projects for the 620km East Coast Rail Link by the China Communication Construction Company (CCCC) for US$18.3 bil and the US$14 bil investment for the Melaka Gateway project by PowerChina International.
Both of these projects may create opportunities for complementary real estate developments such as logistics, manufacturing and industrial parks, master planned communities, mixed-use developments and Transport Orientated Developments, if driven by a sustainable transport strategy.
The Kuala Lumpur-Singapore High Speed Rail, which will connect 7 cities in Malaysia to Singapore, will also be another catalyst for complementary real estate development when it is due to commence construction in 2017.
There is still a large amount of foreign capital interested in investing in China real estate. However, due to a changing economic backdrop and an increased amount of domestic capital competing for the same opportunities, it has become even more difficult for foreign investment to be placed.
The residential market has become less attractive, as local investors and developers who are well entrenched in this market do not need foreign investment. Recognising a gap in international knowledge and skill set to support the commercial and/or retail markets, there is an opportunity for foreign investors and developers to partner with local investors and developers.
With the world’s largest e-commerce network established in China, investors should also look to logistics as an asset class.
For pioneering investors and developers who are looking for a relatively new market with huge first-mover advantage, the opportunities in Sri Lanka should not be overlooked. The Government of Sri Lanka has recently announced its Western Region Megapolis Planning Project (WRMPP), which is aimed at creating a Megacity to rival the likes of Singapore whilst also solving its emerging market issues such as environmental pollution and lack of infrastructure.
The China Harbour Engineering Company-led development of Port City Colombo is at the heart of this master plan. It will provide opportunities for third-party developers and investors to enter the market across a variety of property asset classes and take advantage of investing in a country, which has a new government that is pro-active in driving regulatory change.
Vietnam is one of the fastest growing economies in Southeast Asia with a GDP growth year-on-year of 7.5% in the first half of 2016. With a current oversupply of condominiums, investors should look to the office market, in particular, Ho Chi Minh City, with current yields at 7% to 8%, which has limited supply coming to the market in the next few years.
RICK HANCOCK is Director (Southeast Asia) of Faithful+Gould, a management consultant for the property industry.