PwC RATES INDIAN CITIES AS TOP TWO CONTENDERS
A report from international business news agency Bloomberg cites India as not only the fastest growing economy in the world, but also a market that will offer the best real estate investment deals in the year ahead.
A global survey has ranked Bangalore and Mumbai as the Asia’s top picks, putting both cities at the top of a table that includes 22 top Asian markets.
The survey, compiled by the Urban Land Institute with input from PricewaterhouseCoopers LLP (PwC), found that a boom in business process outsourcing (or BPO) and IT firms that are driving demand for new office space in the Asian region, with these two cities benefitting the most.
The report stated that there was “little doubt that catering to the expansion requirements of the Indian BPO industry has delivered big profits to investors who arrived early on the scene … today it remains a compelling story.”
Interestingly, the two cities only ranked 12th and 13th last year. In fact, they were close to the bottom as recently as 2014.
However, it should be noted that the survey was conducted before India’s government scrapped 86 per cent of its currency notes in circulation. PwC didn’t comment as to how this may affect the real estate market.
The same survey found that Tokyo fell from first place in 2016’s rankings to 12th position. This is due to the apparent growing discontent with the “Abenomics” effect on a long-stagnant market.
Declining economic prospects are hurting short-term prospects for office rental growth in the country, despite low vacancy rates. Negative interest rates were also cited as a factor, as they lead to a lack of willing sellers.
Closer to home, Singapore, which ranked first in the survey in 2011 and 2012, fell to 21st position from 11th in 2016. PwC said this was a result of a “perfect storm” for the local property market. That includes 12 straight quarters of declining prices in the residential market, as well as a sputtering economy that contracted in the third quarter.
Singapore’s government has also been steadfast in its commitment to cool the housing market, maintaining real-estate curbs rolled out since 2009. However, recent news suggests that the country may soon ease up on these harsh regulations.
However, the news is not all good for India. The survey highlighted that Asian investors are currently looking to diversify their property exposure outside of the region, especially into markets such as New York and London, driven by demand from China.
Chinese buyers have rushed to snap up bargain London properties in the wake of Brexit, as well as cast their nets wider across the globe for any available real-estate investment opportunity. This has been motivated by the weaker yuan, surging housing costs and the desire to secure offshore footholds. This too may come to an abrupt end if China’s recently applied capital controls turn out to be a long-term policy.
PwC estimated that insurers would need to spend US$240 billion (RM1.06 trillion) to increase their foreign property allocation from 1 per cent to 15 per cent, which is the average that their United States counterparts hold.