By Andrei Skvarsky.
Emerging markets-focused online real estate trader Lamudi forecasts greater investment activity, including foreign investment, in the real estate sectors of emerging market countries in 2016.
The ASEAN Economic Community (AEC), an integration project due to be formally completed by December 31, 2015, is expected to give a boost to foreign direct investment into ASEAN’s 10 member nations, Lamudi said in a statement.
According to ASEAN, in 2014 AEC was collectively the third largest economy in Asia and the seventh largest in the world.
Foreign investment in Tunisia is expected to double by 2020 as a result of a planned law in the Arab country, the Lamudi statement said.
The Mexican government has announced a strategy to stimulate international investment and make the country’s economy more competitive and productive. The strategy focuses on six sectors, including transport, urban development and tourism, the Berlin-headquartered dot-com property company, which does business in 34 countries, said in its statement.
The last 12 months have seen the emergence in the developing world of more real estate investment trusts (REITs) – schemes for the ownership and management of income-generating real estate.
In October, the Kenyan Capital Markets Authority approved the country’s first REIT, set up by Johannesburg-headquartered asset manager STANLIB. Pakistan’s first REIT came into being in June.
Sri Lanka is expected to set up its first REIT soon, Lamudi said.
Second- and third-tier cities are gaining prominence in developing countries’ real estate markets as business opportunities in capital cities are shrinking because of the latter’s rapid population growth, higher property prices because of land scarcity and higher building costs.
Developers and investors will continue to avoid capital cities in 2016, Lamudi predicted.
“In 2016, we will see the development of smaller cities in the emerging markets, as they invest in themselves to improve transport services, water and electricity supplies, and develop their infrastructure. This is essential if these cities want to compete with bigger markets, both locally and internationally,“ said Lamudi co-founder and managing director Paul Philipp Hermann.
“By shifting focus from capital cities to smaller areas, investors get more for their money due to lower costs of land, resources and building materials, and developers have more space for construction.”
As one more trend, mobile apps play an increasing role in real estate trade in developing countries, Lamudi said. In many of those countries Internet services are expensive and so mobile apps are an increasingly popular form of interaction with online companies.
“Internet users in these countries are skipping the traditional desktop usage, and moving straight to mobile. While 2015 saw more emerging markets-focused companies developing their Internet presence, 2016 will see real estate professionals turning their attention to apps,” it said.
The Internet spreads rapidly into suburban areas and second-tier cities, and this pushes mobile charges and SIM card prices down, Lamudi said.