Breakthrough in US-China trade war is good news for southeast Asian property markets, say developers

By Louise Moon

/ SCMP |

January 14, 2020 4:00 PM SGT

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A stabilisation in relations between the US and China after almost two years of their bruising trade war will help bolster Southeast Asia's property market in 2020, according to industry players attending a conference in Beijing.

Uncertainty over the future of US-China relations amid the ongoing trade spat has destabilised emerging markets, pushing many Asian currencies down over the past year and a half. This has deterred overseas property investors, who worried that further depreciation would devalue their investment.

But in December a potential phase-one deal between Washington and Beijing was announced, which looks set to be signed this week. This will help bring back some stability to southeast Asian economies, and their real estate markets, according to developers.

"We all know in terms of the macro economy, the trade war with the US caused concern and, with that, emerging-market currencies were a little bit vulnerable last year. With that looking to resolve itself at the end of last year, I think that puts Southeast Asia in a really good spot, because all of the currencies have started to stabilise," said James Kibble, co-founder of Selo Group, which develops and manages real estate on Lombok island, Indonesia.

By the end of this year Selo Group's first development, Selong Selo Residences and Resort, is scheduled for completion, offering 60 high-end villas.

"[This year] we are very positive ... that in Southeast Asia there is a really strong capital appreciation," he said at a real estate summit held in the Chinese capital on Saturday.

While most Asian currencies declined last year, dragged down by uncertainties in the global market, there were some exceptions, such as the Thai baht, which is seen as a safe haven helped by a strong current account surplus and foreign fund inflows.

In October Thailand's currency reached its strongest level since May 2013, at 30.187 per dollar. Such a strong appreciation was actually detrimental to the property market, making purchasing more expensive for foreign buyers, according to Precha Suphapetiporn, vice-president of Thai Real Estate Sales and Marketing Association (RESAM).

"The international market [buying into Thailand] was not so good because the baht appreciated, and because of the trade war," he said. "Some buyers couldn't make the final transfer because they have to pay more, almost up to 15 per cent."

Suphapetiporn said he expects the property market in Thailand to improve in 2020 as developers adapt properties to appeal to demand from both domestic and international buyers.

Other factors likely to boost the sector across the region include population and gross domestic product (GDP) growth, an influx of Chinese capital and stronger political stability, according to developers speaking at the conference, organised by cross-border real estate transaction platform Uoolu, which was founded in Beijing in 2015.

Just over half of the population of the 10 Association of Southeast Asian Nations (Asean) countries will be "middle class" by 2030, according to the US-Asean Business Council that cites data from the Organisation for Economic Cooperation and Development (OECD). It classifies middle class as households with a daily expenditure of between US$10 and US$100 per person.

Meanwhile, GDP in the region is expected to grow by an annual average of 5.2 per cent from 2019 to 2023, according to the OECD.

"It has been obvious the region is growing fast in terms of the economy so things are very inviting," said Ismael Taib, manager of Chinese business relations for SM Development Corporation, a Philippine residential real-estate builder.

This increase in purchasing power, combined with expected foreign investment, particularly from "the influx of the Chinese" buying property and building infrastructure, is helping to boost the Philippine real estate market, he said. SM Development aims to deliver 50,000 units this year to cater to this increase of foreign direct investment.

Still, challenges remain in the region.

According to Taib, over-urbanisation in pockets of the region, like the Philippines' capital Manila, means many foreign investors think only certain areas would provide lucrative investments. While this may be true for the moment, more areas need to be developed "to facilitate the demand," he said. "We cannot put them in a region that is already over-populated."

Meanwhile, restrictions on foreign direct investment in some Southeast Asian countries limit capital coming into the real estate market, and must be relaxed if higher inflow is to be generated, developers said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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