Investors Regain Optimism in South East Asia

Certain South East Asian markets have seen investor confidence dip in recent months. For two consecutive quarters, the volume of property investment in this region fell. Now, however, these levels are once again on the up as investor confidence in the region returns.

Investment in Singapore’s, Malaysia’s and Thailand’s property markets increased quarter-on-quarter by a respectable 9.3% in the second quarter of 2014. This brought the total volume of property investment in these regions to US$4.8 billion. Investment in homes, offices and hotels led the rise.

The value of individual transactions also increased. In the first quarter of the year, the average transaction value was US$73 million. In the following three months, this average rose to US$109 million.

However, both quarters taken together still represent a year-on-year drop compared to the first half of 2013. Standing at US$9.2 billion, total investment in these markets was 15% lower than in the same period last year.

Sales of residential properties in Singapore are currently slow, partly due to cooling measures put in place by the government. However, non-residential sales are helping to keep the market ticking over, along with the role of Real Estate Investment Trusts (REIT). In the next quarter, the Singapore market is expecting to continue along similar lines.

Property investment in Malaysia registered a significant drop quarter-on-quarter, from US$343 million to just US$48 million. Nonetheless, many investors and analysts are of the opinion that the market will pick up in the coming months. This optimism is fueled by the country’s general economic strength at present and the fact that a number of major deals are due to close. Nonetheless, a coming increase in the country’s interest rates and a perceived real estate oversupply call for a note of caution.

Despite ongoing political issues, Thailand saw an increase in property transactions and was a notable contributor to the increase. The Thai property market performed poorly in the first quarter under pressure from the unrest in the country, but in the second quarter this pressure eased and the market improved. The change of direction was brought about partly by the decision of the military junta controlling the government to raise funds for expansion and make payments to the country’s rice farmers. Long-term and generally increasing levels interest in Thai property from investors within and outside the country also promise to support future stability in the market.

On the whole, it is expected that real estate investment in the South East Asia region will continue to pick up over the coming months but ultimately fail to match the strength of last year’s performance. A number of factors are contributing to this expectation of a year-on-year drop. These include coming increases to interest rates and a growing trend for investors within the region to look for higher returns from overseas opportunities.

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