Before the emergence of globalization, real estate investment was mostly focused on a localized platform. Buyers and sellers are now moving away from Western markets and focusing their attention on real estate in Asia. This shift is doing more for the global economy than most people think.
GDP, economy and real estate in Asia
GDP is an important factor when it comes to calculating real estate prices. Based on research, prices vary about 60% to 95% in relation to GDP per capita growth or decline. Real estate prices correlate with GDP in the long run records but in short term, the exact relation cannot be given at all points of time. In short and middle-term real estate investment several other factors like urbanization rates, demographic changes, building, and construction activity dominate the pricing instead of the country’s overall prosperity.
When it comes to real estate investment in Asia, a similar trend can be noticed along with the growing economies of the countries. Like Western markets, GDP and real estate display a correlation in Asia as well with many emerging markets that started flourishing in the continent.
A good example to explain this phenomenon is Hong Kong where the real estate prices appear to be basically just a proportional amplification with the GDP per capita of the country. Though real estate or property prices doesn’t match with GDP trends all the time instead they sometimes vary based on country’s social or even political status.
Factors leading to growth of Asia
There are plenty of factors that have led to the substantial growth of Asia in the last decade. This includes:
- Economy — The economy of most Asian countries is facing growth for the past few years. During the global financial crisis in 2008, which had a great impact on almost all developing and developed countries, many Asian countries kept the economy of the world above water, recovering quickly from the crisis and thus helping raise the global economy back up again.
- Urbanization — In Asian countries, rapid growth in developing industries and service sectors has been attracting many real estate investors. Technology is a probable reason for this rapid urbanization and the availability of mass communication throughout the world.
The global economy and real estate in Asia
Along with real estate commercial buildings and properties is also necessary for the development of a country or for entertainment purposes. Commercial buildings are mostly built by investors on one hand and by corporate companies or tenants. Just like real estate and residential buildings commercial buildings also demand the country’s as well as the world’s GDP per capita.
If we say simply, as an economy develops more commercial buildings become necessary to continue the country’s development. Also, when it comes to Asia, many multinational companies are willing to spread and grow their business and they love to set up their branches in Asian countries because of earning more sales from the most populated continent. That’s why commercial buildings are being established by investors for developing and growing their business.
Again, a well established commercial sector attracts more investors to build other commercial and residential buildings. As the global economy grows, FDI investments are contributing more to the GDP of Asian countries. The conversion from residential to commercial buildings or vice versa also links or ties the price of the two sectors with one string.
Which Asian countries to invest in real estate
Companies like MSCI, FSI, Russell Investments have kept Asia on the top list for any and all sorts of real estate investments. However, with the world economy changing year-by-year, the question remains, which country is best to invest in?
Southeast Asia has continued to be one of the region’s most interesting investment hub. Countries like Indonesia, Malaysia, Thailand are key targets for gaining huge amounts of profits. While many have said those aforementioned markets are slowly becoming saturated, countries like Vietnam and Cambodia are ripe for opportunity in the coming years.
Will Asia keep leading global economic growth?
The global economy and the Asian economy have now become correlated in some way as a large part of the global economy is dependent on Asia with countries like China, Japan, India dominating the global economy. That’s why when we link the world economy with Asian real estate we also have to keep in mind that the Asian economy also plays a part in maintaining the demands of real estate in the continent.
If we look at the global economic turmoil history, we will across that even in hard times, Asia stood strong showing not only the resilience of Asia but also displaying its diversification benefits in a global context. If things go as planned, Asia will persist to expand its significance as a global economic power.
If we look at the forecasts for real GDP growth rates in Asia, the GDP of most prosperous countries except Japan is expected to go above 5-7% in the near future. While the economies of European countries won’t experience such a high growth level.
Global economy and real estate growth go hand-in-hand. Without one, the other cannot survive. As the world continues to move forward into the digital and technological age, Asia is most likely to remain the world’s biggest growth driver in both GDP. As such, both now and in the coming future, it is interesting to keep an eye out for real estate investment in Asia.