Looking forward to the year ahead in a hopeful way, we can learn from both the successes and the alarm bells of 2016. A new US Presidency on the horizon may bring uncertainty for global real estate investments in some markets. However, other events from the last two years will surely be encouraging, especially where Asia is concerned. Here, we explore the likely highs and lows of the year ahead for emerging real estate markets in Asia and we look at how the internet is changing these markets.
The AEC bodes well for real estate in ASEAN in 2017
The formation of the ASEAN Economic Community (AEC) back in 2015 had a tremendously positive impact on foreign investment in ASEAN in 2016. The good news is that it looks as though the AEC will continue boost real estate investment between Asian countries both in 2017 and beyond. Its formation has removed certain trade barriers between countries in the Association of Southeast Asian Nations (ASEAN). According to aseanbriefing.com, real estate investment in the AEC “is poised to continue growing at impressive rates in the coming years as restrictions on foreign investors are eased and the region’s emergent middle class exercises increased spending power.” This effect will apply to emerging markets (e.g. Indonesia, the Philippines, and Myanmar) as well as more established markets.
FDI is already increasing steadily in the AEC
Trading Economics estimates that FDI in the Philippines will reach PHP 150 000 million by the end of this quarter. The same time last year, figures were below PHP 100 000 million. In the long-term, FDI “is projected to trend around PHP 197 000 million PHP in 2020”. The difference between 2015’s FDI results and 2016’s is less prominent in Indonesia and Myanmar. However, 2017 could make all the difference with new businesses flooding into emerging countries now that the AEC is more mature. In addition, 2017 will witness ramped up urbanization in ASEAN countries, further growing the profitability of real estate projects in the region.
Governments relaxing laws on foreign ownership of property
2016 also saw some promising results with some Asian governments taking steps to relax laws governing foreign investment in real estate. Indonesia is the prime example; those who wish to own property on one of the archipelago’s beautiful islands now can (as long as they meet certain wealth requirements).
REITs to promote a healthy real estate landscape in Asian countries
To add to the positive trends predicted for 2017 in Asia, it is definitely worth mentioning real estate investment trusts. Countries such as Sri Lanka are moving towards introducing real estate investment trusts (REITs) in the coming years, possibly even as soon as 2017. This was announced in Sri Lanka’s budget plans last year and other emerging markets are likely to follow in their footsteps. The benefit of real estate investment trusts is that they own and finance income-producing real estate. The introduction of REITS can lead to a healthier real estate landscape, containing a range of housing for different budgets. This bodes very well for foreign investment and the real estate outlook of the country as a whole.
Internet penetration is on the rise in emerging markets
According to survey results from 2015, 50% of house-hunters in Pakistan now use real estate websites and apps to search for property. This is likely to be a direct result of increased internet penetration in Pakistan. Similar trends can be observed in Bangladesh, and elsewhere in Asia. In the Philippines, internet penetration grew by 26% between 2014 and 2015 and it now stands above 45%. This increase in internet usage has led to property hunters becoming more and more reliant on the internet for their house hunt. As a result of this, real estate professionals are now spending more on digital than ever before.
According to a Lamudi.ph market report, 88% of real estate agents have noticed the internet being used very frequently during the house-hunting process in the Philippines. This trend is common all over Asia, and so we can observe that consumer behaviour is changing when it comes to searching for a home. Social media is becoming more important than ever. Indeed, in Sri Lanka, 42.9% of local real estate agents rated social media apps as being ‘very important’ to the house-hunting process. How will this trend pan out for real estate in 2017? Well, it is likely that users’ dependency on technology will increase and that property portals and apps will become practically indispensable both for property seekers and agents.
Increased usage of online advertising across emerging markets
Data collected in 2015 showed that 92% of homebuyers used the internet as an information source, 65% of Internet homebuyers drove by or viewed a home they saw online, and 44% of buyers first found their home on the Internet. (source 2015 NAR Profile of Homebuyers and Sellers, Item #186-45-15). Many of these homebuyers will have used social media to lead them on their search and their ultimate property discovery. This effect is only going to get stronger in 2017. This trend will ultimately lead to increased social media usage for real estate, both among buyers and sellers.
Developers and agents are finding out that increasing their brand’s visibility and boosting quality traffic through social media is boosting their sales. Not only is social media boosting sales, it is boosting sales tremendously. This is partly because property is more visible to international buyers searching online than ever before.
Virtual reality is making waves in real estate
Virtual Reality (VR) s already transforming the face of real estate, just as it has in so many other sectors since VR goggles were first released. Today’s home buyers want more than photos, and with VR technology, buyers can now experience their prospective home in a 360° environment from home or while on the move. Thanks to this revolutionary new technology, real estate markets are now opening up to international buyers. In September 2016, property portal Lamudi hosted the Philippines’ first VR real estate expo. It is highly likely that further real estate expos will be held in 2017 and beyond, bringing a whole new dimension to looking for property.