The fight to be first in ASEAN

Andrew BattApril 20, 2015

ASEAN

While Singapore is more than likely to be the main beneficiary from the economic growth as the ASEAN Economic Community continues apace, Bangkok’s residential and real estate markets are also expected to benefit, according to predictions from JLL.

According to the real estate firms upcoming research report titled The Emerging Powerhouse of Southeast Asia: What does it mean for Real Estate Investors? which will be released following the World Economic Forum East Asia meeting in Jakarta which ends tomorrow, Bangkok’s rising middle class, urbanisation and competitive labour costs will benefit Bangkok.

Chris Fossick, Managing Director JLL, Singapore and Southeast Asia said: “Singapore’s office markets have been buoyant for the past three years, as continuing regional growth has driven companies to establish a presence in the city state. This is reflected in the strong demand we are seeing for Grade ‘A’ office space, which is in turn driving construction. The strength of occupier demand, existing and forecast, means we are seeing a great deal of investor interest in office assets in Singapore, which is resulting in competitive bidding on investment transactions.”

This year marks the creation of the ASEAN Economic Community (AEC), a single market of more than 600 million people. This large economic and population bloc has already translated to significant opportunities through increased inter- and intra-regional trade, tourism, expanded financial and insurance services and higher demand for logistics, according to the report.
Southeast Asia, notably Vietnam, Myanmar and Thailand, has served as a low cost alternative to China. An additional more than 8 million people every year will be making the rural to urban migration across Southeast Asia by 2020, helping to push the urbanisation rate for the region to above 50 percent, from 47 percent today. The region’s middle class is expected to grow by another 70 million by 2020, as highlighted in the research document.

These trends are expected to lift demand for real estate, especially for retail space in Bangkok, offices in Manila and residential and logistics assets in Jakarta.

In Bangkok, a more stable political environment following the military coup in May 2014 has given property owners and occupiers greater motivation to renew their contracts. Despite an aging population, Thailand has a large middle class, which has strong buying power.

Elsewhere Myanmar‘s real estate is benefitting from booming visitor numbers. While there is interest from institutional investors with higher risk appetite, mainstream investors still find the political landscape and land ownership structure too challenging, according to the report.

Dr. Chua Yang Liang, Head of Research for JLL in Southeast Asia and author of the report commented: “While limited real estate assets across the region make direct investments challenging, investors have benefitted from the growth of the retail market through joint ventures with local partners or direct participation in the equity market.”

Fossick concluded: “In the short term, there are many enabling factors that will help shape the property markets across Southeast Asia. Amidst this potential, some ASEAN countries still face challenges of transparency, legal and political risks, and corruption. Nonetheless, selected areas have seen improvement in recent years and some risks can be mitigated.”

Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg

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