Traditional wisdom tells us that there’s no such thing as a safe bet. But when it comes to the real estate market, we really think Asia is it (or as close as you’re going to get, anyway!). And we’re going to give you the reasons why.
Growing (Real Estate) Market
Put simply, the focus of the world’s economic power is shifting to the East. According to Oxford Economics, Asia will surpass both Europe and the United States within two decades. Based on 2017 figures, Asia-Pacific accounted for approximately 40% of nominal GDP. And this figure is expected to keep growing.
The wider economic growth has also translated to a vibrant real estate market. Investment volume records are being broken on a regular basis. In 2018, the number of real estate transactions was up 26% compared to the previous year. So-called ‘immature’ markets, such as Indonesia, India, and China, have plenty of growth left in them.
We can’t go into detail for every country we’ve mentioned, so as a mini case study, let’s explore India’s real estate market. The sector is growing rapidly, with the market value expected to reach a value of $1 trillion USD. This is projected to represent a hefty 13% of the country’s GDP. For comparison, the market size stood at $120 billion in 2017.
The Indian government deserves plaudits for its forward-thinking approach to the growth of commercial real estate in particular. Initiatives such as Make in India and Smart Cities, for example, make India an attractive investment option. The authorities are also increasingly focusing on non-IT avenues, with telecom, healthcare, biotech, and other sectors experiencing increased investment and a resultant upward trend in demand for
office space.
Presence of Big Name Companies
Global Fortune 500 companies used to be predominantly western. Asia is taking over, however. Based on the 2016 list, the continent now features more companies from this prestigious list (197) than North America (145) and Europe (143). India alone has an impressive 7 of them. The rest of the world? Only 15.
This not only reflects the unprecedented growth that Asia is going through, but also a cultural shift in how business is done. China, for example, no longer only offers state-owned companies to the Fortune 500 list. Tech giants such as Huawei also make the cut. This represents the opportunities offered for external investors, and how Asia is becoming an enticing place to direct your money towards.
Increasing Urbanization, Middle Class
The UN has estimated that over the next three decades, 60% of urbanization will occur in Asia. China, traditionally a rural country with a handful of hubs, will become a country that’s 60% urbanized. With 80% of GDP generated by cities, the future looks bright.
Asia will feature a large portion of the world’s future so-called mega-regions. These are essentially a conglomeration of settlements that merge together into a single urban entity. Oxford Economics estimates that the Tokyo Nagoya-Osaka-Kyoto-Kobe mega-region will feature a population of 60 million. It’s expected that Asia will feature 28 new megacities, all with populations of over 10 million.
Urbanization is also bringing the ascension of the Asian middle class. They bring with them huge spending power, a thirst to develop and grow businesses, and a burgeoning demand for real estate of all kinds. By 2030, expect to see 1.8 billion people in this socioeconomic bracket.
Wider Investment Options
Real estate investment in the United States and Europe is severely lacking frontier markets. That doesn’t mean there are no investment opportunities, but it’ll be a little harder to stake your claim in the big time.
And while Africa and South America offer plenty, they don’t have the economic growth or infrastructure to warrant the investment. It’s simply not quite as secure as you’d want it to be.
You know where we’re going with this. Asia offers the investor the whole pie. You have developed financial hubs, populous countries that are becoming increasingly urbanized, and infrastructure that makes investment easy. Economic growth is clearly going only one way for the next few decades, which means you’ll be putting your money on a relatively secure horse.
We end with perhaps an obvious disclaimer. If you choose to invest in Asia, do so at your own risk. We think it’s a good bet, but what we’re not saying is that every single investment in the continent is going to churn out exponential profits. When it comes to an individual investment, due diligence is up to you.
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