Asia’s emerging markets sold off in the wake of the surprise win for now U.S. president-elect Donald Trump, but the region’s property investments may actually benefit, according to analysts at Colliers.
“Emerging market financial assets, including property, have been unpopular ever since the global financial crisis, whereas developed market assets, in particular U.S. assets, have been in strong demand,” Andrew Haskins, executive director of the global real-estate services company, said last week.
“Now, the combination of Brexit and Mr. Trump’s election in the U.S. over the medium term should [serve] to remind investors that you can have surprises in developed as well as emerging markets,” he said. “That should mitigate long-standing political and economic concerns about Asia.”
He expected that the premium returns that investors demand for the perceived higher level of risk in Asia should come down, boosting appetite for assets in the region.
But while Trump’s election win was broadly unexpected, Haskins said Colliers wasn’t significantly changing its generally positive economic forecasts for Asia Pacific.
“Growth in China and Hong Kong so far this year has exceeded expectations. Growth in India has been very strong. Growth in Australia is strong,” he said. “So we are optimistic about the overall direction of Asia Pacific economies.”
But he added that it wasn’t yet clear whether Trump’s policies would prove expansionary or contractionary for the U.S. economy, with knock-on effects for Asia.
Among the regional property markets Colliers covers, India could become an interesting investment target, Haskins said.
“On a three-to-five year view, India is going to be a very exciting market,” he said. “Restrictions on foreign investment in India are gradually easing and the government has passed the real estate regulation act which should raise the standards of the Indian real estate sector towards international norms. “
While the government’s move to “demonetize” the 500 and 1,000 rupee notes could hurt liquidity in the property market in the near term, it’s probably positive in the longer term, he said.
Colliers was also positive on the Singapore market, despite the recent economic concerns. Revised gross domestic product (GDP) data for Singapore, due on Thursday, were expected to show the economy contracted 2.5 percent on-quarter, according to a Reuters poll.
“The economy has been under pressure, but the long term attractions of Singapore — a world-class market economy, very high regulatory transparency — are very clear,” Haskins said. “Prices have not moved up as they have elsewhere in Asia so Singapore, relatively speaking, is better value. And that has been reflected in strong investment interest.”
Singapore’s residential property prices have been hit by the government imposing a series of cooling measures starting from 2011. Those measures included an additional buyers’ stamp duty (ABSD), which adds much as an additional 15 percent to the purchase price for foreign buyers and Singaporeans with more than one property. Prime and luxury residential property prices have dropped around 15-25 percent since the market hit a peak in 2011.
The city-state’s commercial property has also faced headwinds, with demand for retail space lagging amid sluggish consumer spending and competition from ecommerce. At the same time, the office segment has faced both a drop in demand and surging completions of new buildings.
Despite widespread concerns that Australia’s property market has entered bubble territory, Colliers took a more sanguine view of the outlook.
“The Australian economy has been robust, particularly in the southeast, so around Sydney and Melbourne. And interest in Australia remains high,” he said. “However, at least in office property, which is where we concentrate, it’s increasingly difficult to find good assets. There is an increasing shortage of stock, so it’s increasingly difficult to find assets to buy.”
Source: CNBC
