Friday Asia Digest – Emerging Markets Lead Asian Supremacy

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Thailand, Indonesia, Malaysia – Asia’s Trailblazers

Still hot on the heels of last week’s released financial figures, summing up the first two quarters of Asian property market performance, deeper analysis now reveals that prime property prices in the region have risen %3.4 since the beginning of 2012 – a trend led mostly by Thailand and Indonesia. In Bangkok alone (pictured on right), prices have risen by an astounding %29 in the last 12 months, as global investors starved for higher returns in the stagnating or outright failing European and US markets continue to send their money overseas. A research paper published by Ferguson Partners Ltd., a global executive recruitment consultancy, in partnership with the Asia Pacific Real Estate Association (APREA), reveals that international investors are seeing far more prospects in Asia in 2013, as opposed to the USA, which is sluggishly trying to fight its way out of recession, and Europe, which is currently battling with the very same recession.

And while China generally dictates investors sentiments for the entire region, it’s reduced but still attractive %7.5 GDP growth, forecasted for 2013, is still enough of a driving force in the moneyflow trend which, surprisingly, finds its way not only to China, Hong-Kong and Singapore, the region’s usual property market powerhouses and top investment destinations, but to emerging markets such as the two mentioned above – and also to the Philippines, Malaysia, and Japan, which in recent months is actually re-emerging as the region’s preferred investment destination.

High-Rollers, Millionaires and Mining Moguls

This week’s news items chart an interesting path for all that money, however, which, surprisingly, isn’t finding its way to the coffers of large investment firms and REIT’s, as one would expect. Asian money, for one, is swiftly flying out of the hands of the bigger players, as Citibank, HSBC and other leading global investment giants admit that more and more of their Asian-based customers are taking their money into their own hands. Deutsche Bank AG, among the top 10 private bankers in Asia, reported recently that profit at its asset and wealth management division dropped 85 percent in this year’s second quarter. Interviews with high net-worth individuals confirm that affluent families are no longer allowing banks and investment corps to manage their funds, with one particular Singapore-based millionaire, Easaw Thomas, being quoted referring to the banks investment arms as “secretaries” who, at best, can assist administrationally with a particular purchase one wishes to make – but certainly no longer in a position to control their clients investment on their own – a philosophy which seems much more common in European-based cultures than in Asia these days. Other millionaires, as well, have been expressing disappointment at returns and practices provided by more “traditional” fund managers and investment arms of international banks, particularly post-2008-crisis, preferring to minimize the percentage of their wealth placed under external management.

Another unexpected destination appearing on Asian investment maps this year is Manila, capital of the Philippines, where recent government legislation allowing for the construction and operation of up to 10 casinos opened the door to an increased influx of foreign cash investment. The Philippines’ economy, workforce and property markets are expected to receive a super-charged boosting stimulus from this decision, with the country shaping up to be a serious threat to nearby Macau, the world’s largest gambling Mecca – the fact that the Philippines is far more lenient as far as taxes are concerned is drawing some very serious high-rollers, casino operators and investors to Manila, and personnel/recruitment wars are raging between the two countries, with Filipino nationals possessing casino experience and know-how being courted by their home country to return and participate in the up and coming economic boom.

Mining moguls from Australia, similarly, are voting with their dollars, as they purchase more and more properties in Singapore, Hong-Kong and Japan. Gina Rinehart, Australia’s richest person and the world’s richest woman, purchased two condominium units costing 45.6 million USD in Singapore’s most luxurious district. Along with Rinehart, coal magnate Nathan Tinkler is also rumoured to have put off his plans for a 13.6 million USD beachfront home in Newcastle, and “shipped his family off to Singapore,” as his spokesman testifies. Tinkler’s principal place of residence would now be Singapore, as “he just wants to be closer to the markets, to Asia”, claims the spokesman – but the real reasoning behind this growing trend is more likely the fact that Singapore is the world’s lowest in personal taxes rate, with a cap of 20 percent, compared to Australia’s 46.5 percent top tax rate (!!!)

Global Gossip

* While Thailand’s more familiar luxury destinations, the bustling metropolis of Bangkok and beach-heavenly Phuket, have been drawing foreign investments for years, the new up and coming spot in the fast-strengthening country may well be Pattaya, where attractive residential properties can still be purchased for as low as 30,000 USD – but most likely not for long, as prices in the capital, rising at a stellar speed as mentioned, have been driving more and more investors and home owners further south – in the process transforming Pattaya from a secondary, internationally obscure city, to one of the country’s most sought after residential destinations.

* Rumors of up and coming government land leases to be offered in Hong-Kong, where all land is owned by the city-state, have local developers and real estate moguls selling “non-core assets”, as they prepare for the ensuing rush to expand their territories. Land is a highly desirable commodity in Hong-Kong, where a decade-long rise in population and property prices has cemented positioned Hong-Kong’s positioning as the world’s most expensive property market – a position which is prompting the government to offer more lands to the public on new 99 year leases – the idea being that this added inventory, when introduced into a property-starved market, will help curb further expansion of the city’s unsustainable property price bubble.

Real Estate in India* In India, where property prices have more than doubled in the last 6-8 years, experts warn of an anticipated slump, particularly in Mumbai (pictured on right). And while the rising trend will most likely continue in the second half of this year, analysts warn against banking on Mumbai’s property market, pointing to a stagnant supply of land, in some cases up to 40 months on the market (up to 8 months generally considered the standard baseline of a healthy property market).

(Sources – “World Property Channel“, “Bloomberg“, “Property Abroad“, “Property Report – Asia“, “NDTV Profit India“, “Asian Correspondent“)

(Pic 1 – Bangkok Skyline / Evoflash, Pic 2 – Mumbai Street Signs/ Ruffin Ready)

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About Author

Ziv Magen (G+) is an Australian, and has been living alternately in Japan and Australia for the past decade. "Born and bred" an IT project manager, he has made the transition to full-time real-estate investing several years ago, and subsequently opened a buyers' and proxy agency - assisting others in remotely capitalising on Asia's booming property market.

7 Comments

  1. I can say those new casinos being built here in the Philippines have made a huge positive impact for me. One of the properties I helped market for a friend was acquired by a contractor working on one of those buildings at the “Solaire” gaming and hotel complex in Manila that will start operations early 2013. My buyer has a huge pipeline of projects (and revenue) which is why he had no problem buying my friend’s property… very nice!!!

    By the way, “Philippino nationals…” should be “Filipino nationals…”. ;-)

  2. Ziv Magen

    Thanks for the input, Jay, I also believe the Philippines is one of Asia’s up and coming investment destinations…although, truth be told, the poor/rich gap and corruption are still a bit of a concern. Doing better, but from an international risk averse investors point of view, not quite there yet…

    • Thanks Ziv, I would have to agree with you that corruption is a big concern, but in fairness, I believe our President is trying his best to live up to his promise that by fighting corruption, poverty can be lessened and the same goes for the great divide between the rich and the poor. If you think about it, real estate investing can also be the great equalizer…

      Yes… not quite there yet, but it’s getting there, I believe. :-)

      • Still much to be done, Jay. A country can’t present itself to the world as an international real-estate and business hub with hunger statistics growing from year to year – with the considerable amounts of money flowing in the Philippines, particularly Manila, as it gears up for the casino and related infrastructures construction, these kind of headlines point a some very basic management issues – http://blogs.wsj.com/searealtime/2012/10/12/hunger-plunges-everywhere-in-southeast-asia-except-the-philippines/

        • I would rather say there are still “so much more” things left to be done. :-)

          The gap is big, and studies like those done by the UN show it very clearly, which should serve as a wake up call not just for those in government, but also for every Filipino to do our part to help make things better not just for ourselves but for the country.

          A long way to go, but there is hope, especially with things looking brighter, people just need to get their acts together…

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