This list (ranked in no particular order) is compiled by Asian Property Review based on various sources in particular the real estate forecast jointly published by the Urban Land Institute (ULI) and PwC.
Singapore is ranked as the second top real estate investment market in Asia Pacific as the city-state continues to rebound from cyclical lows since the last few years. Office rents have been rising strongly due to a lack of supply and a revival in tenant demand. Co-working and other flexible office space operators have become amongst the biggest lessors of office space, while tech firms have also been active in the market.
Singapore will continue to favour landlords in 2019
before new supply in 2020 rebalances the scales, opines
The residential market in Singapore continues to
be resilient, despite cooling measures in place for
Meanwhile, solid economic growth and high visitor numbers have supported rents and yields for prime retail space in 2018, following years of poor performance as Singapore landlords struggle to adapt to new models of retailing.
The logistics market remains plagued by oversupply. This has suppressed rents, although there are signs excess space is now being taken up, with rents predicted to improve slightly in 2019.
Its pro-business environment and the growth in crowd data also has placed the republic as one of the more attractive markets for data centres; an alternative asset class with higher yields.
HO CHI MINH CITY
HCMC continues to be the top emerging market,
and is particularly strong in the development stakes,
ranking second behind only Melbourne. It is also
the hottest market for acquisitions in virtually every
sector: office, retail, and residential, while second
behind only 2020 Olympics host Tokyo for hotels.
The population is young, incomes are on the rise,
and growth is forecast at an annual 6.6 per cent for
each of the next three years by Standard & Poor’s.
Vietnamese gross domestic product (GDP)
growth of 6.8 per cent is the highest in the
region, with strong activity from both Chinese
and Japanese manufacturers.
Housing has historically been the focus for foreign
investors in Vietnam, usually in partnership with a
local developer. In addition, a number of deals have
occurred over the last year, with foreign investors
buying into the platforms of local developers.
Market segmentation has now shifted from the high
to the middle part of the spectrum, as urbanisation
leads to ongoing demand for housing in large urban
centres. Ho Chi Minh City alone has projected
demand for new housing amounting to some
400,000 units per year.
Worker-focused housing has widespread appeal,
therefore. Homes that cost around US$80,000 are
Incomes are three times the national average, so housing affordability is much higher, encouraging aggressive investors to target mass-market, middle- class homes.
Modern office space is in short supply, too, leaving
rents far higher than, for instance, Bangkok, and
encouraging investment into commercial property,
which investors say has great potential.
There is basically no logistics space countrywide
that’s up to international standards, but this is a
sector investors are watching since there’s also little
indication that the economics work for the rents
such facilities could charge at this stage.
The Vietnamese government encourages foreign
investment, and imposes comparatively fewer
barriers to foreign participation. Foreign capital is
supplemented by the reshoring of money by Viet
Kieu, the overseas Vietnamese population.
Vietnam has always been a strong tourism destination, and is witnessing a boom in visitors from neighbouring China, leading to extensive hotel development along the coast. Phu Quoc in particular is witnessing an unprecedented boom in hotel openings in 2018 with many more in the pipeline.
The occasional military coup does not seem to derail
the Thai economy or frighten tourists, but it does
tend to discourage cross-border real estate investors.
That said, the city has risen in popularity this year and
remains one of Asia’s most vibrant and liveable cities.
Bangkok is also set to benefit from a huge wave of infrastructure investment, which is expected to transform public transport and open up a number of new locations for real estate investment and development.
Low vacancy and limited new supply of office space
are creating a market biased in favour of landlords.
Office rents climbed 9 per cent in the 12 months to
June 31, 2018, with solid demand from the financial
services and fast-moving consumer goods (FMCG)
sectors. Less than 250,000 square metres is due to
be added to office stock by 2023, only 5 per cent of
Knight Frank on the other hand opines that
Bangkok’s growth will be kept in check with new
supply from 2020.
Retail, on the other hand, is seeing substantial new
supply, with close to 700,000 square metres slated
for 2018 alone. Nonetheless rents have risen, albeit
marginally, in the 12 months to mid-2018, with
demand supported by increased visitor numbers.
In November, Southeast Asia’s biggest mall, Iconsiam opened. Built at a cost of US$1.65 billion, the 750,000 square meter riverside complex is made up of retail, dining, entertainment and residential spaces. Iconsiam’s developer has invested in its own BTS Skytrain elevated rail line to alleviate traffic issues, called the “Gold Line,” but it won’t start running until 2020. Prices of surrounding properties have already surged with more hotels, hostels and shops opening in anticipation of more visitors.
There is a growing population of professional expats
in Bangkok that is supporting growth in the city’s
serviced office market. Increased visitor numbers
means the hotel sector has performed well, with
stock expected to increase by 27 per cent by 2023.
New residential supply was high in 2017, slowing
the market somewhat and prompting developers
to delay launch of new projects. They are also
increasingly targeting foreign buyers, as residents
from Hong Kong and Singapore look for cheaper
cities to invest savings.
Knight Frank adds that residential in 2019 should see a slowdown following the introduction of tighter lending rules but the prime market should be less affected given its buyers have stronger balance sheets.
Hong Kong is the most expensive real estate market in the world, with residential and office values at their highest-ever levels and retail space that is still expensive despite two years of falling rents and values. High prices make it hard for investors to get the underwriting to add up, but there is a core of regional and international investors that has been active throughout the current cycle, either carefully timing strata office acquisitions or taking on value add office, retail, and mixed-use projects.
While Hong Kong’s prime Central offices are
tightly held and attracting world-record rents, the
city has a seemingly inexhaustible supply of B- and
C-grade offices ripe for improvement.
At the top of the market, Mainland China
financial services companies continue to move to
Hong Kong and to demand the best space, while
multinationals find themselves moving to fringe or
Coworking operators, both international and home
grown, are also taking more office space. Given
their lower profitability, a number of hotels are
now being converted to office space. Some hotels
are also being converted to co-living spaces for
students or young professionals.
The retail sector appears to be bottoming after two years of plummeting rents and values, and a number of foreign private equity investors have already
bought into the recovery. Rents are not yet rising,
however, and it remains to be seen if Mainland
spending will support the city’s many luxury
There are growing signs of weakness in the
residential market, with developers cutting asking
prices of new launches. However, underlying
demand remains strong in the mass market. The
U.S.-China trade war might subdue appetite for
super-luxury properties in the short term.
In a worst-case scenario, JLL predicts prices might fall by up to 25% in 2019 if trade tensions worsen between the US and China, the stock market continues to slide and the government does not adjust its property cooling measures.
Indonesia has been on the radar of emerging-market
investors for years, with Jakarta nominated as the
survey’s number two investment prospect destination
as recently as 2015. Its stock has fallen more recently,
however, as a result of an ongoing glut of office and
A fourth year of record new supply in the Jakarta office
sector continues to depress fundamentals. While the
higher quality of new supply means it will usually draw
tenants (with coworking operators especially active),
the impact overall is strongly negative, with office
vacancies approaching an extraordinary 35 per cent in
mid-2018, according to JLL.
As a result, Jakarta is the only major city in the Asia
Pacific to see significant declines in capital values and
rents in the year to mid-2018, continuing a trend in
place since the beginning of 2015.
Knight Frank adds that the traditional quiet season
leading up to 2019 April Presidential elections is also
contributing to the market correction.
Not only is the market generally tightly held, but local
owners are reluctant to take a haircut on values even if
declining rents and capital values imply they should.
Residential markets are also suffering from
oversupply, especially at the top end, and transactions
remain soft. A healthy market has sprung up in
the affordable housing sector, however, with strong
demand and construction of new supply booming.
“Jakarta’s residential in 2019 will remain quiet in the
first half with the April elections and May’s Ramadan
season before picking up as long-term fundamentals
remain sound,” says Knight Frank.
With the moratorium on new retail supply still
in place, there is little activity in this sector either,
resulting in a quiet market all round.
Private-equity investors continue to show interest in Indonesia, however, and are looking at various options. One possibility is to buy bulk lots of unsold residential stock that developers continue to hold on their books with a view to converting it to serviced apartments. A number of deals of this type were struck in 2018. Another option is to convert these units to co-living facilities on the premise that slowing job creation and wage growth will lead to further softness in residential sales and a corresponding increase in demand for rentals.
Fundamentals continue to be strong despite a steep
fall in sentiment.
Office rents and capital values have risen relentlessly,
vacancies have fallen to a low 2 per cent, yields are in
the area of 8 per cent, and strong absorption of new
stock continues based on activity from the online
gaming and BPO industries.
At the same time, however, foreign investors are
deterred by domestic political concerns, regulatory
barriers to entry that restrict foreign equity
interests in local property assets to a maximum
of 40 per cent, and most recently by potential
economic consequences of capital outflows caused
by rising interest rates both domestically and in the
What’s more, one fundamental issue that has long acted as an indirect barrier for foreign capital remains in place—local asset markets are overflowing with cheap domestic capital. Foreign players who demand risk-adjusted returns in the high teens are therefore priced out of the market by local banks offering financing at 2.75 per cent.
Still, local developers are now increasingly open
to working with foreign players in order to
leverage operational expertise as well as their
international connections. In addition, good
opportunities are increasingly available for
investors able to find reliable local partners and
to think out of the box, in particular by targeting
alternative or emerging sectors.
While growth in the BPO industry has now
levelled off as automation and artificial intelligence
(AI) technologies eat into market share, new
opportunities are opening up in other areas. The
government’s infrastructure push is one theme.
Another is the logistics and industrial park sectors,
not only because of the shortcomings of existing
facilities, but also because Chinese manufacturers are
increasingly moving operations into Asian emerging
markets in an effort to avoid the fallout of an
impending trade war with the United States.
Knight Frank is of the view that 2019 will be a positive year for Manila residential given its stable economic fundamentals and prices face upside pressure on the back of the government’s aggressive infrastructure policy.
Taipei has now been consigned to the bottom of the survey table of ULI/PwC for several years, largely as a result of a domestic investment environment that forced local institutional investors to channel their capital into domestic assets, pushing yields down to some of the lowest in Asia and taking most investable properties off the market.
While that scenario has now changed—local institutions are now compelled to invest offshore— the longstanding repercussions to the domestic investment landscape remain in place. Taipei therefore remains unpopular with cross-border investors, who prefer not to compete with local
institutions whose buying keeps yields at around
2.5 per cent.
Transactions of any sort were thin on the ground in
2018, with most buyers being owner-occupiers. With
rental growth predictions of around 2 to 3 per cent in
2018, there has been little to interest investors.
Regardless, the Taiwan economy has been fairly strong, with GDP growth of 3 per cent expected for 2018 and unemployment below 4 per cent. Office demand comes mainly from the financial and technology sectors.
Authorities recently announced a number of
public/private partnership projects involving both
new development and regeneration located on
government-owned land near major transit hubs in the capital. These projects may offer a rare opportunity for foreign investors to participate in the local market.
A surge in visitors from Mainland China in 2016
has not been maintained. As a consequence, the
hotel sector has suffered and Taiwan is now trying
to promote itself as a MICE (meetings, incentives,
conferences and exhibitions) destination and also to
boost US visitor numbers.
However, with the November surprise election victory by the Mainland-friendly Kuomintang party, relations with China is set to reach unprecedented new levels of cooperation. It is anticipated that this will attract more visitors and investments from China, as well as raise demand for its property in 2019.
Kuala Lumpur office rents have been falling in 2018
and with 20 million square feet of new supply due
to hit the market by 2020, the short-term outlook
remains gloomy. Demand is weak, but there has
been some interest from both local and global co-
Prime retail rents continue to increase, although modestly, due to the effect of huge supply. There is a gulf in rental performance between established prime malls and new centres. In 2017, five new malls totalling close to 3 million square feet of retail space were opened and there is a significant number of large shopping centres and boutique malls currently being constructed.
A number of overseas developers are active in the retail and mixed-use development space. The residential market has also been affected by politics; however, a rising population, low unemployment, and fairly robust growth mean underlying demand is strong. Supply was high up to 2017 but has slowed in 2018 and observers expect a modest upturn if 2019 sees a return to political stability after the historic change in government in May.
In November, one of Malaysia’s top developers, Sime Darby Property Bhd announced that it is undertaking a “tactical price review” of all unsold inventories particularly the completed development units. Low absorption rates due to the current economic uncertainties and tight lending conditions have resulted in very competitive marketing promotion and price discounting by property developers. It is anticipated that if Sime Darby drops its prices, other developers would follow suit, thus depressing prices further in 2019. On the flipside, the lower prices will present great buying opportunities.