Savills Research & Consultancy aims to offer objective advice to clients in order to help them make well-informed real estate related decisions and realise pre-defined goals.
Viet Nam is an attractive destination for both domestic and international tourists due to its natural landscapes, particularly its long and beautiful coastline and world heritage sites. In 1H/2014, there were 27.7 million visitors, up 9% year on year, at 61% of the target for 2014. International visitors have significantly increased since 2010, at 13% per year on average. In 2013, there were 7.6 million international visitors, surpassing 7 million for the first time, up 11% year on year. Asian visitors dominate with 45% share, followed by Europeans at 34%. With an increase in direct flights and a 15-day visa exemption offered since 2009, Russian visitors have increased sharply by 77% per year on average since 2009, reaching approximately 300,000 visitors in 2013.
The Taiwan tourism market continued to enjoy fast growth of inbound visitors in 2013. More than 8 million international travellers were recorded last year, representing a 10% increase year-on-year (YoY) and, furthermore, the rate of growth accelerated in the first six months of 2014, with international travellers reaching 4.6 million, up 27% compared with the same period in 2013. This was driven mainly by travellers from China and Japan, with a 38% and 19% increase YoY respectively. Apart from that, several popular South Korean variety shows being shot in Taiwan also helped promote the Taiwan tourism market and led to an 80% increase in visitors from South Korea. According to a survey from the Taiwan Tourism Bureau, independent travel is gradually becoming preferred by international visitors, with the proportion of visitors joining group tours declining from 42% in 2011 to 31% in 2013. This can largely be attributed to the increase of independent travellers from China, whose total number in the first half of 2014 had almost reached the full previous year’s level. The changing travel style has also resulted in the emergence of boutique and business hotels. The government is further allowing residents from another ten Chinese cities to take independent trips to Taiwan by mid-2014, and the Taiwan Tourism Bureau expects that international travellers could easily reach 9 million by the end of 2014 and potentially 10 million in 2015.
Tianjin is a municipality in northern China and the fourth largest city in the country. As part of the Bohai economic rim, it is the largest coastal city in northern China. Bordering Heibei province and Beijing municipality, it is considered “the Pearl of the Bohai Sea”, becoming the transport hub of North China and the gateway to Beijing. By the end of 2013, Tianjin’s population reached 14.72 million, of which 4.41 million were migrants. Its growing migrant population largely accounted for a recent 81.2% increase in the municipality’s population, which was a main driver of demand in the residential property market.
Shenzhen was the nation’s first Special Economic Zone and, due to its proximity to Hong Kong, an important gateway to China. Shenzhen is also the most popular immigrant city in the country. By the end of 2013, the population had reached 10.6 million, of which the non-resident population accounted for 71%. A large migratory population allows constant new demand to enter Shenzhen’s residential market. In 2013, Shenzhen’s GDP per capita reached RMB136,947, up 9.6% year-on-year (YoY) and first among top-tier cities. The strong purchasing power of residents has also accelerated the development of Shenzhen’s real estate market.
Affected by the slowing economy, retail sales growth rates in Shanghai continued to slow to less than 10% in the first six months of 2014. Additionally, the city is faced with an average annual supply influx of 1.0 million sq m over the next three years, placing downward pressure on city-wide rental levels. Since 2H/2013, Shanghai’s overall rental growth has continued to slow. Although a select number of leading projects were able to achieve an annual rental growth rate of around 5%, other projects, especially new ones, are finding it more difficult to reach previous expectations. As a result, large space mainstream fashion retailers are now seeing a trend of paying purely based on turnover rates with no base rents.
Investment in real estate is usually defined as taking a long term position in physical property for the purpose of reaping rental income during the holding period and capital gains at the end of that period. Although the investment decisions may appear rather intuitively straightforward for many, that is perhaps only for the individuals or those engage in crowd funding where the investment quantum is rather small and thus the decision making process need not jump through too many hoops. However, for institutional investors, their decision making is process driven. Not only must the financial returns meet their expectations, but due diligence on the physical building plays an important role as well. In this piece, we will look at investment decisions taken by institutions and the focus will be on office developments. For the majority of institutional funds, their focus is usually on income generating properties. That means the real estate is completed. Most do not have the mandate or much latitude to invest in properties under development. This is because many of the funds are derived ultimately from pension bodies which adopt a lower risk profile and have the need to achieve an actuarial return target by certain dates.
The Philippines’ economic performance has remained robust as it posted a 6.4% GDP growth for the second quarter of the year. Its growth decelerated from 7.2% in 2013, a result of the super typhoon last November which decreased agricultural production and damaged critical infrastructure. However, the economy is expected to benefit from the massive reconstruction plans by the end of the year. The country’s move towards a more business-friendly climate also remains on track and it has advanced by seven places from last year to 52nd in the WEF Global Competitiveness Index, climbing 33 spots since 2010. Much of the current progress is due to the Good Governance and Anti-Corruption efforts as well as Public Private Partnership (PPP) reforms. These reforms are laying the foundation for execution of much needed investment in the country, ensuring competitiveness in the future. Moreover, this progress together with political and economic stability has been emphasised by the recent credit rating upgrades from international agencies such as Standard and Poor’s (now BBB with Stable outlook), which is expected to positively impact the property market.
Macau’s economy grew at a brisk rate of 10.2% in Q2/2014, 2.8 percentage points (ppts) above that of China (7.4%) and 8.0 ppts over Hong Kong. The rebound in external demand as well as capital investment in tourism and gaming facilities are the main drivers of this rapid growth. Given the strong economic performance, the median monthly income of residents rose to a record-breaking level of MOP13,000 per month in Q2/2014 and the overall unemployment rate in Macau registered a record low of 1.7% over the same period. Meanwhile, the tourism and gaming sector is still expanding; visitor arrivals and gross gaming revenue up to August 2014 grew by 7.9% and 8.1% respectively, compared with the same period in 2013. Supported by growth in the domestic employment market, as well as the tourism sector, the Macau retail market continues to gain ground, with retail sales up by 9.4% over first half of 2014.
Consumer sentiment in 1H/2014 improved compared with 2H/2013. The consumer sentiment index in 2H/2014 is also believed to have improved since 1H/2014, considering the weaker domestic consumption experienced since the ferry sinking off the southern coast of South Korea in April. Direct shopping from overseas online retailersOverseas credit card spending grew 15.4% in 2013, outpacing the increase in domestic spending of 3.2%, according to the Bank of Korea. Imports through e-commerce sites rose 47% in 2013 to about $1 billion, according to the Korea Customs Service.
According to the Japan National Tourism Organization (JNTO), the number of international tourists visiting Japan in 2013 totalled a record 10.36 million, up by 24.0% from 8.36 million in 2012. Between January and March this year, the number of overseas arrivals reached an estimated 2.87 million – equivalent to approximately 28% of 2013’s total or 11.5 million on an annualised basis. This growth has been driven principally by Japan’s rising popularity among Asian tourists. In order to promote inbound tourism, the government initiated the Visit Japan campaign in 2003, adopting an initial target of attracting more than 10 million overseas visitors to the country by 2010. Although this target was achieved three years later than expected, pushed back firstly by the global financial crisis (GFC) in 2009 and then by the disasters in northeast Japan in 2011, the total number of arrivals almost doubled between 2003 and 2013.