5 reasons for the housing boom (and why it’s not over yet)
Like most parts of the world, Asia has seen a major spike in property prices in the later stages of the pandemic.
So what led to the outbreak?
In this article, Asia Markets gives you seven reasons why residential housing is a hot property and could continue to be so throughout 2022.
Residential property 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 strong fundamentals behind residential life assets mean they have acted successfully as a hedge against the disruptions faced by other asset classes during the pandemic,” Mr Young said.
“This is due to a simple factor: people will always need a bed to sleep in and a house to live in.
“While other assets have suffered (directly or indirectly) from changing consumer spending habits, market volatility or technology-related disruptions, residential living has remained defensive throughout 2021.
“This is expected to continue throughout 2022.”
2. Changes in lifestyle offer new opportunities
Chedli Boujellabia, managing partner at real estate investment firm Alyssa Partners, says changes to the way we live, work and play are providing new opportunities for smart property investors in 2022.
“The reality of what ‘residential life’ has changed significantly over the past 24 months, particularly the lines between work and home continue to blur,” Mr Boujellabia said.
“While the fundamentals are likely to remain, change is constant, and housing market investors and developers must remain nimble and adaptable to deliver what end tenants need most, especially as lifestyles change. .
“For Japan in particular, investments in multifamily housing continue to offer low volatility at attractive risk-adjusted returns, making it a must-have asset class in any private or institutional investor’s portfolio.”
3. Institutional investors are on the prowl
Paddy Allen, head of capital markets at investment management firm Colliers, said institutional investors are likely to increase their allocation to residential housing in 2022.
“Many institutional investors are looking for long-term, risk-adjusted assets to meet their needs, and so will continue to look to institutional-grade residential housing,” Allen said.
“Previously seen as a risk several years ago, the granular income streams associated with this type of investing are now seen as an opportunity to mitigate risk.
“Residential real estate investments also meet various criteria required by institutional investors, including compliance with environmental, social and governance (ESG) measures, which will result in greater allocation.
“With many developed markets being fundamentally undersupplied with good quality, institutional-grade residential assets, compelling demand and supply metrics support strong investment opportunities in the space.”
4. Some areas ripe for growth
Boujellabia says Japan is an example of a region that offers opportunities to hedge against inflationary pressures faced by other markets, such as the UK.
“Historically, inflation in Japan has been very limited or non-existent for about two decades and we don’t expect that to change dramatically in the foreseeable future,” he said.
“While Japan may see a limited impact from global inflation on imported goods, such as oil and some building materials, generally everything else will be slightly affected.
Mr Boujellabia says investors should look to regional centers where there is economic and population growth, such as Greater Osaka, Nagoya, Fukuoka and Sendai.
5. Digitization of assets will lead to new demand
Mr Allen says advances in technology are making the sector more accessible to investors, with new platforms being created to enable fractional ownership of assets, either through traditional ownership or through peer-to-peer lending platforms.
“Technology is increasingly woven into the fiber of our daily lives, and the way we interact with our properties is increasingly digitized,” he said.
“Additionally, advances in technology are making the sector more accessible to investors, with new platforms being created to enable co-ownership, either through traditional ownership or through peer-to-peer lending platforms.
“This allows investors to take a share of the debt secured by a real estate investment.
“Giving retail investors access to high-quality, professionally managed assets lowers barriers to entry and allows them to further diversify their portfolios.”