The global real estate market is awash with cash, and prices continue to rise month on month. Real estate remains in fashion with investors, and development plans across Asia and the Middle East are multiplying. Cities as diverse as Shanghai, Hyderabad, Singapore, Bahrain and Amman are demonstrating real potential for property investment, whether residential or commercial.
New international property hot spots seem to be appearing every year. The pace of development in Asia and in the Gulf area is truly astonishing, whether that is in terms of the size or the speed with which new projects are being undertaken.
China continues to offer attractive residential and commercial investment opportunities. Although developments tend to be centred around Shanghai, China’s business and trading hub, and Beijing, which has been boosted by both the Olympic Games in 2008 and the 2010 World Expo, attention is now switching to second-tier population centres such as Wuhan, Chongqing and Chengdu as the Chinese real estate boom moves to the next level.
According to China’s national bureau of statistics, overseas investment soared by 52% to reach $8.23bn in 2006 and China’s recent decision to instil private property rights looks set to encourage continued strong growth.
India, Asia’s other emerging giant, is also the scene of a real estate boom. With a population of more than one billion and growth rates now approaching Chinese levels, its potential is staggering. Dubai-based Emaar Group has been a leading investor in India, with projects worth a total of $100m planned for Hyderabad, and high-profile companies from the US, UK, Japan, Canada, Singapore, Malaysia and Indonesia have all committed millions of dollars to property development projects in the main cities of Mumbai, Bangalore and New Delhi.
Moving away from tradition
Traditionally, the potential for property investment in Thailand has lain in the tourism industry and most property investors have tended to focus on Phuket, with its excellent infrastructure and quality property developments. However, since the tsunami in 2005, investor and tourism interest has shifted to other resort destinations, such as Hua Hin and Lanta Island.
Sri Lanka, like Thailand, offers a mix of the exotic and the vibrant and, like Thailand, it is a popular tourist destination. About 400,000 people visit each year.
The importance of tourism to the domestic economy has finally been recognised and the Sri Lankan government is seeking to attract increased foreign investment to help restore neglected residential accommodation, tourism accommodation, infrastructure and amenities.
For the traditional property stalwarts of Hong Kong and Singapore, most major analysts agree that both will continue to demonstrate rapid growth in the next two-to-three years.
Hong Kong remains a competitive property market because it has an attractive taxation system and it is strategically well-located in the region. The city’s luxury grade property rental rates are expected to rise by 10% this year and capital values could grow by about 20%, buoyed by strong local demand and the fact that an increasing number of international and Chinese companies are establishing a presence there. The commercial market is also set to benefit, in the short-term at least, from the limited supply of new properties that have helped to increase both underlying prices and rental yields.
There were record levels of investment activity in Singapore last year. Rental rates for prime commercial space expanded significantly and prices for luxury, high and medium-end residential stock rose strongly. Land prices continue to increase and investors in residential and commercial property markets continue to enjoy healthy returns.
Singapore is expected to remain a strong market for at least the next 24 months with the possibility that expansion, boosted by the development of the integrated resorts at Marina Bay Sands and Resorts World Sentosa, could continue through to early 2010.
Malaysia offers political and social stability, and provides a much lower cost entry point into the regional market than either Hong Kong or Singapore. The Malaysian government has sought to promote FDI in the real estate sector by making it far easier and more attractive for foreign buyers to purchase property.
Elsewhere in the region, 2007 is lining up to be a very positive year for the property market in Vietnam. The government made significant changes to real estate investment laws last year and offered ownership concessions to Vietnamese citizens living abroad. Overseas investment has jumped on the back of ongoing efforts to improve the transparency of the property buying and ownership process, and as a direct result of these efforts, strong inward investment is flowing into property in the country.
Vietnam still has some way to go to reach the level of development seen in neighbouring Thailand, but there has been a significant increase in both tourist numbers and the value of property.
According to Taiwan-based Central Trading and Development Corporation, Arab investors are targeting Asia – with China, India and Vietnam the three most popular countries for their investment interest. In the next five years there will be increasing and substantial financial commitment from the Arab world into property related projects.
Middle East still booms
Although the Arab investor community is looking beyond the Middle East, the property market there continues to boom and new hot spots are appearing. From Casablanca to Amman, huge new urban developments are changing the face of many Arab cities.
In Bahrain, the property market continues to go from strength to strength. Conservative industry expectations are predicting at least a further three years of strong property price growth in the residential market, with 30%-35% growth in the next two years a commonly cited possibility.
Investment activity in Bahrain is being boosted by the King Fahd Causeway, which has linked Bahrain to Saudi Arabia and has fast become a key commuter route for Western expatriates who are working in Saudi. Bahrain is intensifying its efforts to diversify its industrial base and, as the first Gulf state to put a free trade agreement in place with the US, it is fast becoming the central hub in the Gulf for multinationals that want to do business in the region.
Bahrain has learned a great deal from the successes and failures of Dubai. While Dubai, with its skyscrapers to the Palm islands and all the countless commercial and residential projects in between, remains one of the most glamourous and desirable spots for real estate developments in the world, it is fast maturing and turning into a well-rounded property market. Investors rather than speculators will soon become the main drivers of growth.
Dubai is now believed to be home to up to a quarter of the world’s cranes, according to a recent report from Morgan Stanley. The emirate continues to astound all expectations and the property boom is set to roll on well into the next decade with Dh1700bn of real estate projects planned by 2015.
Projects include Emaar’s Burj Dubai, which has already become the tallest building in the Middle East and Europe, and the Palm Jumeirah from Nakheel, which is a third completed with 2300 shoreline apartments and 1600 villas due to be delivered from this November.
Joining Bahrain and Dubai is Jordan, which remains in its boom phase with construction projects dotting the Amman skyline. There is a buzz of activity across the kingdom as regeneration projects press ahead and property developers step in to attract investors to their ever-glitzier developments.
High demand for housing, office space and leisure time in luxury resorts means prices are soaring. According to analysts a large part of this demand is being driven by the troubles in the surrounding region, mainly Iraq and Lebanon. According to the Department of Land Statistics, in 2005 sale of land to non-Jordanians officially amounted to $208m, of which 67% came from Iraqis and 13% from Gulf Co-operation Council (GCC) states.
Abu Dhabi’s real estate scene is also firing on all cylinders as it continues to channel its abundant energy revenues into a wealth of real estate projects: $12.8bn is earmarked for projects over the next two years.
However, investors and developers are looking beyond Dubai and Abu Dhabi as the building boom ripples out across the United Arab Emirates. Projects are being developed across the region as demand for upscale lifestyle properties increases. In the northern, mountainous emirate of Ras Al Khaimah, for example, there is a building boom. Numerous new factories and projects are under construction, which in turn are attracting plenty of commercial investor interest. Projects worth more than Dh20bn ($5.4bn) are already under way.
Boom times indeed, but a word of warning. Bust often follows boom and years of frantic development have raised concerns that too many economies may be over-extending themselves.