The Asian property has lost its shine but opportunities remain in niche segments, according to Pacific Star Group's recent "Asian Property Outlook and Strategy" report.
For the first time since the turn of the century, economic fortunes in the West and East have reversed. The composition of global growth has shifted from emerging economies to developed economies with stronger recovery momentum.
Investors have also flocked to developed countries that offer attractive entry points. Once a magnet for real-estate investments, Asia is finally losing some of its glitter.
Pacific Star Group, an investment house based in Singapore, takes the view that the reversal of growth prospects and investment activity is a natural progression as Asia comes of age. The group expects sustainable growth in Asia to be driven by economic integration, urbanisation, and rising incomes.
“We see little reason to alter our positive long-term prognosis of Asian real-estate markets,” said Lam Chern Woon, Pacific Star’s vice president for research and strategic planning.
“After an extended period of stellar growth, Asia has entered a consolidation phase in the near term. It is thus paramount to identify the growth opportunities before the markets pick up. Investors should actively lock themselves on to Asia’s long-term growth potential while keeping an active lookout for opportunities that are in line with the trends playing out.
“We recommend a core satellite investment approach where core investments will track the region’s medium-term growth prospects, while well-executed opportunistic investments will help bolster risk-adjusted returns,” Lam said.
Asia may no longer be an investment greenfield, but pockets of opportunities remain. In particular, the senior and youth populations are rising in dominance. Opportunities in both segments are largely untapped, and successful first movers will unlock a new paradigm of real-estate investment in Asia.
The report highlighted that the greying demographics in the region could see a greater number of retirement communities being developed to cater to this segment’s rising affluence and desire for an independent and active lifestyle. Such communities have been well received in the United States and Europe and the success could be replicated in Asia-Pacific countries, where the concept is still relatively new.
Young people in the new era are different from previous generations given rising affluence, higher educational standards and exposure to globalisation and technology. Retailers should adopt a careful mix of online marketing strategies, and focus on designer and new-to-market brands to engage this segment.
Developers can meet the desire for convenience, differentiation and experience by providing innovative mixed-use developments while keeping the quantum affordable.
The report also highlighted that Asia’s huge diversity in terms of development maturity will provide for a consistent flow of opportunities.
Quality commercial stock remains in structural undersupply while the relentless wave of urbanisation will drive sustainable demand for mass housing.