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Emerging Housing Markets: Three Promising Areas

 4 min read / 

Cross-border investments in real estate transactions are expected to reach $500bn by 2020. Despite a healthy moderation in the economic growth of major developed corridors across the world, global investors continue to earmark a sizable part of their funds for emerging markets.

Many emerging outposts of the world – that had been – almost unknown a few decades ago, now hold prominent placement among the international investor fraternity. The steady rise of investment inflow into emerging real estate is attributable to accelerated economic growth, an explosive rise in urbanization, and the mushrooming of the middle class.

As global capital continues to diversify in its quest for higher returns, investors will move up the risk curve and put their monies into the emerging market real estate. In the following post, we will discuss three major emerging housing markets that international investors can consider in 2018.

Warsaw

The Polish economy has been growing incessantly since 1991, defying numerous regional and global economic downturns. As the capital and commercial hub of one of the fastest growing CEE markets, Warsaw is a natural favourite among European and other western investors. Further, some Asian and South African based investors are also betting big on the Warsaw market.

From 2007 to 2017, average wages in the city have increased annually by around 11%, fueling high demand for quality accommodation. As per the data revealed by Frontera Land, a research advisory focused on Emerging Market Real Estate, the Warsaw residential index has appreciated by over 82% between 2007 and 2017.

Although price growth has eased in recent times, high transaction volume continues on the back of massive demand. Roughly 21,000 units have been launched in 2016, and the uptake has been almost equal, indicating strong demand in the market.

Source: Frontera News

 

An attractive rental yield of over 6% is further magnetizing local investors to put their capital into rental units, rather than keeping it with banks, where the current interest rate is very low. As there is no indication of any possible slowdown in the market in near future, Warsaw will continue to be an attractive investment opportunity.

Bangalore

The demonetization drive against black money during November 2016, followed by the implementation of the Real Estate Regulatory Act (RERA), have together resulted in the mellowing down of the Indian real estate market. However, driven by a large IT/ ITeS workforce, residential markets in Bangalore continue to be a safe bet, especially in the mid-priced segments.

Despite the fact that average year-on-year prices in Bangalore have corrected by an average of around 2-4% in the first half of 2017, 14,000 new units have entered the market during the same period; this is second highest across the major metropolitan cities of India. Projects situated near the employment bases have better chances of being picked up.

As Indian real estate continues to bottom out, a sudden upturn in prices is far-fetched. However, demonetization and RERA will provide more structure and transparency to an otherwise unstructured market that was often led by unorganized intermediaries. As current prices are relatively subdued, entering the market with a three to five-year time frame can ensure better results. Many regional and international PE players such as KKR, Blackstone, and HDFC Realty are realizing the potential of the Bangalore housing market and deploying more funds across entity and project level deals.

Manila

Once called the “sick man of Asia”, the Philippines’ economy has come a long way over the previous six years. Strong macroeconomic fundamentals, a rising middle class, and low-interest rates have significantly strengthened the housing market in recent times. During 2007-2017, Manila’s residential index has gained 294 points, as per the Frontera research. Though international ownership is not absolute, condominiums can be owned by foreign buyers.

The rate of new launches has eased out in 2017 due to a current inventory of around 150,000 units, but the housing prices will continue to showcase an attractive rise, especially in the peripheral areas, driven by the rising demand.

Source: Frontera News

 

Manila still has an unemployment rate of around 7%, ahead of other major Asian economies such as Thailand, India, and China. However average wages have doubled during 2007-2017. Moreover, as the Philippines is making a mark on the international travel stage, with a rise of 12.7% in tourist arrival in H1 2017, condominium sales among the international investors will further pick up.

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