The state of the residential market in Southeast Asia
Lagging vaccination rates and a protracted infection wave sparked by the Delta variant have held back sentiment in Southeast Asia, particularly its emerging markets.
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Conditions in Kuala Lumpur’s housing market have been particularly challenging with prices contracting 5.7% Y-o-Y. However, with infection rates starting to come under control and the government’s recent effort in re-opening more economic sectors following acceleration in vaccine drive, housing demand is expected to recover in 2022 and we could see the light at the end of the tunnel for the city’s residential market over the coming 12 months.
For Bangkok’s condominium market, buying sentiment is still downbeat, even in the high-end segment where traditionally the domestic demand from the high-net-worth buyers is relatively strong. With the pandemic continuing in full force, uncertainties still cloud the outlook of Bangkok’s recovery from COVID-19 with homebuyers pulling back purchases. It remains challenging for developers to stay positive, and many are delaying project launches by at least another 6-9 months.
Outlook
Long seen as a safe haven, Singapore’s properties have remained resilient through the pandemic with prices rising 13% on average over the last two years to outperform the rest of the region. Residential prices in Manila, Kuala Lumpur, and Penang, however, are still 3-7% below pre-pandemic levels while those in Jakarta are largely flat.
Except for Singapore, property markets in the rest of Southeast Asia are still in the late stages of a downcycle. 2022 will be an inflection point as prices bottom out and stabilise. However, there are some events that have happened that we can be optimistic about.
We are positive about the introduction of REITs in the Philippines, which has got off to a roaring start with five new listings in less than two years – a pace much faster than what has been seen in India. The country can benefit from the introduction of REITs in the long term as it raises fundamentals in its real estate sector to a whole new level.
Recovery momentum in Vietnam is also encouraging. Its residential market is gaining ground with foreign investors. About 20% of units in CapitaLand’s high-end project in HCMC, which reportedly sold out within two hours of a preview were bought by non-residents. This is telling as Knight Frank recently established a new subsidiary in the country’s business hub in the south.
On the road to recovery
The economic recovery has already kicked in and we expect growth will be on firmer ground in 2022. What is lacking now is confidence, but this will gradually return as activity revs up. While the pace could vary across countries, we expect the revival of the region’s property market to become evident in the latter half of 2022.