_Asia-Pacific residential development hotspots
Despite a slowdown during the Global Financial Crisis and its aftermath, cross-border residential land buying activity in Asia-Pacific has been on an upward trajectory over the past decade. When comparing 2016 to 2007, the number of acquisition of residential development sites from overseas investors more than doubled, with volumes hitting more than US$42 billion last year. Although domestic buyers remain the majority group in all Asia-Pacific countries, the increasingly cross-border nature of development activity has been one of the most striking trends of the last few years.
In this edition of Asia-Pacific Residential Review, we discuss the diversity of residential development land buyers across Asia-Pacific - analysing the most active developers, their origin, the most popular markets, the type of residential land and the most significant deals. We also provide a localised analysis of land deals done in the past five years in selected countries. When studying the drivers behind this trend, both pull and push factors are equally important. Evidently, the buyer’s profile is an interesting mix – from institutional investors to private developers – and they venture into foreign markets with sometimes differing motivations. In some markets, such as Singapore and Hong Kong, obtaining developable land for domestic players is increasingly a challenge due to limited land supply, strict financing rules, comprehensive cooling measures, slowing population growth and sometimes ironically, increasing competition from foreign buyers. Thus, many have taken the steps to manage their exposure to a tough domestic market by venturing abroad.
On the other hand, some developers make their foray into a relatively mature market for the transparency in legal frameworks, protection of property rights and stability of economic fundamentals. A good case study includes developers from mainland China, the most active cross-border residential land buyers in Asia-Pacific from 2012 to 2016. In Australia, some of these developers have been willing to take the risk to build a first-time bespoke development at a minimal profit margin to help build their brand in overseas markets. Furthermore, driven by a need to diversify their portfolio, many for the first time have been venturing into foreign markets after becoming a household name in homeland China. However, the recent capital controls imposed by the Chinese authority may impact such overseas development activities.
As many residential markets mature over time, the hunt for the next high-yielding property development opportunities may happen in selected developing countries such as Cambodia, the Philippines and Indonesia. Investors and developers will find these locations attractive given the consistently high economic growth, huge young population, rapid urbanisation rate combined with the rising need for different housing types. Similarly, developers may also choose to invest in selected hot spots in mature economies such as Kyoto in Japan, suburbs near major cities in Australia and the city fringe in Singapore. With all the above reasons, it is not hard to understand why developers and investors go abroad to seek more opportunities. Consequently, this gives birth to a diverse array of buyers in various Asia-Pacific markets with each of them bringing their expertise, adding vibrancy to the local residential property scene.
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