5 reasons for the real estate boom (and why it’s not over yet)

Like most parts of the world, Asia has seen a significant spike in real estate prices in the later stages of the pandemic.

So what has led to the surge?

In this article, Asia Markets gives you seven reasons why residential housing is hot property and might continue to be throughout 2022.

Residential real estate markets are a calculated hedge against the volatility of other investments during the pandemic, according to Peter Young, CEO of Singapore-based private equity firm Q Investment Partners.

“The solid fundamentals behind residential living assets mean that they have successfully acted as a hedge against the disruption faced by other asset classes during the pandemic,” Mr Young said.

“This is due to one simple factor: people will always need a bed to sleep in and a home to live in.

“While other assets suffered (either directly or indirectly) from changing consumer spending habits, market volatility or tech-related disruption, residential living remained defensive throughout 2021.

“This is expected to continue throughout 2022.”

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Peter Young, CEO of Q Investment Partners

2. Changes in living habits present new opportunities

Chedli Boujellabia, managing partner at real estate investment firm Alyssa Partners, says changes in how we live, work and play are offering new opportunities for intelligent real estate investors in 2022.

“The reality of what “residential living” means has changed dramatically over the past 24 months, particularly as the boundaries between work and home continue to blur,” Mr Boujellabia said.

“Although the fundamentals will likely remain, change is constant, and investors and developers in the housing market should remain agile and adaptable to deliver what end tenants need the most, particularly as ways of living change.

“For Japan in particular, investments into multi-family-housing continue to deliver low volatility at attractive risk-adjusted returns making it a must-have asset class in any private or institutional investor’s portfolio.”

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Chedli Boujellabia, managing partner / CEO at Alyssa Partners

3. Institutional investors are on the prowl

Paddy Allen, head of capital markets at investment management company Colliers, says institutional investors will likely increase their allocation to residential housing in 2022.

“Many institutional investors are looking for long-term, risk-adjusted assets to meet their needs, and therefore will continue to pivot to institutional-grade residential housing,” Mr Allen said.

“Once viewed as a risk several years ago, the granular income streams associated with this sort of investment are now viewed as an opportunity to mitigate risk.

“Residential real estate investments also meet various criteria required by institutional investors, including being compliant with Environmental Social and Governance (ESG) metrics, which will drive greater allocation. 

“With many developed markets being fundamentally undersupplied of good quality, institutional-grade residential assets, compelling demand and supply metrics promote strong investment opportunities in the space.”

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Paddy Allen, head of capital markets at Colliers.

4. Some regions ripe for growth

Mr Boujellabia says Japan is an example of an area which offers opportunities to protect against inflationary pressures faced by other markets, such as the United Kingdom.

“Historically, inflation in Japan has been very limited or non-existent for about two decades and we don’t expect that to change drastically in the foreseeable future,” he said.

“While Japan may see a limited impact from global inflation on imported goods, such as petroleum and certain construction materials, generally everything else will be marginally impacted.

Mr Boujellabia says investors should look to regional hubs where there is economic and population growth, such as Greater Osaka, Nagoya, Fukuoka and Sendai.

5. Digitisation of assets will drive new demand

Mr Allen says advances in technology are making the sector more accessible to investors, with new platforms being created to allow fractional ownership of property, either via traditional ownership of via peer-to-peer lending platforms.

“Technology is increasingly becoming intertwined into the fibre of our daily lives, and how we interact with our properties is becoming increasingly digitised,” he said.

“Also, advances in technology are making the sector more accessible to investors, with new platforms being created to allow fractional ownership of property, either via traditional ownership or via peer-to-peer lending platforms.

“This allows investors to take a slice of the debt secured against a property investment.

“Giving smaller investors access to high quality and professionally managed assets, reduces barriers to entry and allows them to further diversify their portfolios.”