Savills Asia Pacific recently released ‘Impacts’ with an article by Simon Smith, Head of Asia – Pacific Research on real estate investment tips in Asia Pacific in 2020. Against a backdrop of geopolitical tensions, regional uncertainties linger. India and Vietnam are future bright spots
Asia-Pacific’s investable real estate universe is fast growing and extremely diverse. Differing cycles are creating varying pockets of risk and opportunity, while the emerging asset classes provides investors with a much broader range of options and strategies.
Vietnam is a future bright spot (Ho Chi Minh City, above), with strong economic growth and a youthful demographic profile. But, investable assets remain scarce. Administrative hurdles continue as anti-corruption measures bite, in turn reducing liquidity and delaying development progress. However, over the medium term, this will establish sound governance and a better business environment, benefiting investors.
Neil MacGregor, Managing Director – Savills Vietnam commented: “We are seeing continued strong appetite from regional investors in all sectors of the market, given the attractive yields on offer in Vietnam and the extent of yield compression elsewhere. Of note is rapidly growing investor demand across the industrial and logistics space, where we expect to see a steady increase in transaction activity. The traditional tight supply of office and residential development opportunities is likely to continue, however for those investors able to enter the market, returns look attractive.”
India, whose population is forecast to overtake China’s in the next five years, offers longer-term opportunity. The government has taken measures to boost the economy by reducing corporate taxes and re-capitalising banks. The central bank lowered the benchmark interest rate five times during 2019. These measures will drive occupier demand for traditional asset classes such as offices, but there are also real opportunities in alternatives. Co-living is one such example, supported by India’s huge millennial population.
Australia has experienced the worst and earliest bush fires in its history. Although still ongoing, the current damage to businesses and property is expected to have a near-term negative impact on GDP, mainly from a fall in farm production, private investment and tourism, albeit somewhat offset by government aid and unprecedented donations. Financial markets have also increased their expectation of an interest rate cut, but these are already at historic lows and there are doubts that they are still positively impacting the economy.
At a regional level, uncertainties still linger against a backdrop of geopolitical tensions, US trade relations and slowing economic growth. This has meant the emergence of a degree of downside risk to some countries in the region in 2020, particularly export-orientated economies, as investors remain more inclined to invest in real estate markets viewed as better insulated from such risks.