In Plain Sight
Investors need not search too hard for alternative investment locations in APAC.
Tokyo, Bangkok, Singapore and Melbourne will never go out of investment style, but the Asiapacific region is a big place, with plenty of locations ripe for investigation by creative investors. Here are a few spots that are worth consideration for emerging from the shadows or entering into a renaissance.
Designing Vietnam
Vietnam continues to benefit from a strong economy (growing over 7% last year) and massive foreign direct investment, welcoming over US$ 2.5 billion in January and February of 2019. With institutional investors showing no signs of losing interest, the real estate sector remains healthy, and international residential designer YOO Worldwide believes now is the time for Vietnam to embrace the branded residence. On the heels of YOO opening its Southeast Asian office (in Bangkok), the Uk-based boutique developer with 81 projects in 36 countries is setting its sights on Vietnam. As YOO sees it, a strong economy, rising affluence, solid domestic demand, and favourable tourist arrival projections make Vietnam the regional star.
“YOO is very excited about the potential for growth in Vietnam. [It's] a highly populous country with a burgeoning middle class and a government that is creating positive conditions for investment and development,” said Rich Millar, YOO Worldwide's vice president of business development for APAC in a statement. “We see huge opportunities for YOO'S cutting edge concepts among Vietnamese investors, who are increasingly seeking innovative, design-led brands.”
For the immediate future, YOO is partnering with Onyx Hospitality on two hotel brands (YOO Collection and Yoo2) but residential developments are not far off. Branded residences are one of the fastest growing hospitality sectors and, as YOO sees it, a lifestyle product that is on the verge of taking off in Vietnam.
Silicon Valley V3.0
Shenzhen as an investment location isn't really news so much as its staying power is. However, “Shenzhen's property market has been dominated by domestic investors and strata-title sales. The depth of Shenzhen's market for international investors is still lagging behind Shanghai and Beijing,” theorised Colliers International in its April research. “The development of the Greater Bay Area and the current liquidity tightening make this a good time for international investors to enter Shenzhen, which is a new gateway city in China.”
This is not to say that investing in Shenzhen is easy. The office, industrial and long-term residential rental sectors are wise options but the city is less developed for offshore investment when compared to Beijing or Shanghai, never mind the legalities of who can buy and what they can buy. Despite that, the dominance of the global technology sector has raised office demand in Shenzhen and underpinned its evolving economy. “After four decades of economic expansion, Shenzhen is now internationally recognised as South China's technology and innovation epicentre, inevitably drawing comparisons with Silicon Valley. The strong and sustained growth that the city's tech industry is currently experiencing is set to form an important source of office demand in coming years,” says JLL Shenzhen managing director, Edward Xia. Offices and tech jobs mean occupiers and tenants, making a strong case for investment into Shenzhen.
Take a Gamble
One of Asia Pacific's most consistently underrated and under-the-radar investment locations is the other SAR: Macau. One of Macau's greatest strengths is the character of old Taipa, Coloane and even Macau peninsula itself and one of the city's most desirable assets is the regenerated tong lau.
Though finding them demands patience and foresight, small, rental-friendly properties in the neighbourhood for HK$4 million are still out there in the shadow of massive tower developments. “Some imagination, a modest budget for face-life, and furniture plus a desire to inject a bit of charm and love into these places will undoubtedly earn you a handsome capital gain over even a couple of years,” wrote Suzanne Watkinson of Macau-based Ambiente Properties in
Macau Lifestyle late last year.
Though the all-important gaming industry has been on a bit of a roller coaster since 2014 and the unresolved trade dispute between the US and Macau is having an adverse effect, Macau has proven resilient due to continued support from imported labour at all levels of gaming and infrastructure—like the ongoing development on Hengqin Island. JLL forecast price corrections of up to 10% for Macau in 2019, and it faces similar hurdles as Hong Kong does in upgrader restrictions (a 60% LTV ratio and an additional 5% stamp duty), a secondary market subsequently hamstrung by that and an MOP8 million threshold for LTV breaks for first-time buyers. But record levels of foreign workers in 2018 drove rental rates up by 17.2% in the highend and 12.2% in the mass sector. With no changes on the horizon, that makes Macau a hidden property investment gem.
Fringe Taiwan
Finally, Taiwan is experiencing improved market sentiment among institutional investors and rising home prices after a Hong Kong-style spike and two years of doldrums. Demand is up as are construction starts. A strong economic outlook underpinned by economy-first election wins in November 2018 has bolstered the commercial sector in Taipei's CBD as well as second-tier markets in Taichung and Kaohsiung.
But also like Hong Kong, despite price recoveries and end-user demand, affordability remains an issue. Prices in Taipei skyrocketed 187% between 2001 and 2017; in Kaohsiung it was 164% and in Taichung a whopping 224%. As commercial investors reconsider the CBD and flirt with decentralisation, Taipei's outlying business districts in Dazhi, Neihu, Nangang and New Taipei City gain traction, theorises Colliers in Taiwan. As such, potential returns may be waiting for savvy investors in Taipei's outskirts.