Foreign ownership restrictions relaxed, increasing interest from international investors, property industries go mobile – these are just some of the developments that are on the cards for frontier real estate markets in 2015.
As 2014 draws to a close, we look at five key trends to watch out for in emerging market real estate in the new year.
1. Changes to foreign ownership laws
In many emerging markets, foreigners are prohibited from buying property. In the Philippines, for example, the country’s constitution bans non-Filipinos from owning land. However, there are signs this may be about to change. 2015 will see countries in the Association of Southeast Asian Nations (ASEAN) merge to form a single market. The establishment of the ASEAN Economic Community is expected to boost foreign direct investment in the Philippines and also in untapped markets across the region, putting pressure on lawmakers to amend these ownership restrictions. In 2015, foreign ownership laws will also come into focus elsewhere in Asia, with debate set to continue in Indonesia and Myanmar about opening up the countries’ property sectors to international investors.
2. Increasing investor interest
Foreign direct investment (FDI) in emerging countries has recently hit record highs and this trend is expected to continue for 2015. Africa’s share of global FDI projects has also been increasing steadily over the past decade. A recent report from the African Development Bank, the United Nations Development Program and the Organization for Economic Cooperation and Development forecast that FDI in the continent would hit a record $80 billion in 2014, with real estate a major contributor. In May, Ernst & Young’s Africa attractiveness survey revealed that FDI projects in the real estate, hospitality and construction sector had increased by 63 percent, making the sector the fifth most attractive for foreign investors.
3. Growing middle classes boost demand
Countries such as Indonesia have seen significant growth of their middle class. On the back of strong economic growth in the country, the number of middle class and affluent Indonesians is expected to reach more than 140 million people by 2020, according to research from the Boston Consulting Group. The impact of this trend cannot be underestimated, as it continues to be felt in 2015. As people become more affluent, they also become better educated, more career-minded and have more purchasing power – including within the property market. They buy houses earlier and more often, leading to increasing turnover and demand for property.
4. Mobile internet transforms property industries
Across the emerging markets, more and more people are switching online every year. But the internet revolution in emerging countries has been different to the digital wave that already swept the developed world. For many people in these regions, the first time they access the web they will be using a mobile device or smartphone. This trend has been particularly pronounced in Latin America. Over the past six months, more than 1.1 million sessions on the Lamudi Mexico website were carried out using mobile devices. In Colombia, over half (51.25 percent) of new sessions on the Lamudi.com.co website come from mobile devices. For those working in the real estate industry, this means their focus for 2015 must switch to mobile for marketing their properties and reaching the maximum number of potential customers.
5. High growth – and optimism – continues
In a recent online survey conducted by Lamudi, real estate agents across the emerging markets predicted high growth for their national property sectors in the coming year. In Saudi Arabia, nearly a quarter (23 percent) of agents believe there will be growth of eight to 10 percent over the next year. Similar results were seen elsewhere in Asia and the Middle East. In Sri Lanka, where the real estate sector has expanded rapidly since the country’s civil war ended, more than half the agents surveyed by Lamudi forecast growth of eight percent or above for the coming year. The survey also recorded high levels of optimism among property agents, with 65 percent brokers in Pakistan, Sri Lanka, Myanmar and Indonesia describing their outlook as positive for 2015. Optimism among brokers in the Philippines is particularly high – nearly 93 percent of those surveyed were positive about the coming year.