Picturising the future of residential real estate

    • As the corporate world is envisioning their post-covid strategies there has been a lot of buzz about the effects of work from home practices on the office sub sector and e-commerce in the retail sector but the residential real estate sector appears to be uninterrupted especially in Asean (Association of South-east Asian Nations) countries owing to mind blowing demographic and urbanization trends
    • As the show galleries were closed due to circuit breaker measures, developers started reaching out to prospects through digital marketing channels such as virtual tours.
    • Particularly, a developer in Vietnam launched its e-commerce portal through which prospects can view complete project details along with secure purchasing options.
    • It is believed that real estate agencies will be important in short term facilitation of residential sales. However, on a long term basis, adoption of technology clouds threats of elimination surrounding real estate agencies due to the vanishing role of a middleman.
    • Urbanization has been the global mega trend for the last 7 decades and has been associated increase in revenue and job opportunities solely due to the efficiency of concentrating economic activities, physical assets and infrastructure. However, it is being assumed that Covid-19 aftermath can raise concerns on the negative impact of high population densities in cities.
    • The widespread use of flexible working arrangements during the circuit breaker may also inevitably change the demand and attractiveness of homes surrounding work areas and city centres, particularly when considering congestion, environmental issues and affordability of housing and this could possibly lead to the shrinkage of pricing gap between properties in city centres and outside city centres.
    • Despite a great deal of uncertainty surrounding the pace and speed of post-Covid economic growth, exposure to liquidity and cash flows will be crucial to both households and companies. However, home ownership will probably require a large proportion of household assets to be kept tied to their primary residence, with mortgages being a corresponding source of liability.
    • Amid this pandemic, with home possession being a key origin of monetary distress for family units, the apparently undeniable predominance of home proprietorship as a model could be tried.
    • With home proprietorship persistently rising among the ASEAN countries, Vietnam at 91 per cent and Singapore at 90 percent are the leading nations respectively whereas usaually the Organisation for Economic Co-activity and Development (OECD) is 68 per cent.
    • On the other hand, the nations within the OECD having the least house proprietorship are Switzerland and Germany with 38 per cent and 44 per cent respectively.
    • It is believed that the major aspects that have contributed in affecting the home possession rates in these areas were cultural aspects and the government policies.
    • With an increasing trend in the rise of private property costs across the neighbouring nations, it is however estimated that there has been a steep decline in the housing of the ASEAN economy of the most recent decades. Meanwhile, with a rise in the home prices that has resulted in amassing for the house proprietorship of young generation, it is believed that this can be an issue for the working youths in terms of affordiability.
    • The profits that are earned from home possession are many a times been portrayed as alluring whereas leasing those houses is often observed as a waste of money. However, compared to leasing, home possession may not be a financially better choice considering both are dependant on its base scenario being used.
    • More prominent market versatility should be uplifted to aid the high demand for a powerful economy.
    • It is observed that, in the competition between private rentals and the individual property holders, there is a huge opportunity for private properties to expand in the investable real estate world.
    • We see substantial potential of residential property to extend in the investable real estate universe in line with our view of a greater position for residential rentals versus individual property ownership.
    • To make the difference between ensuring affordability of housing and increasing net worth of households more visible it is necessary to separate the investment and housing roles that one’s primary residence plays today. With a large and rising housing stock, it is believed that Asean markets have tremendous potential to securitise ownership of residential land.
    • With 44 Reits (Real Estate Investment Trust) and property trusts and and a total market cap of around S$94 billion, Singapore is believed to have the potential to become the market leader however, Singapore or the Asean region do not have residential Reits till date.
    • Households will benefit from improved financial liquidity, skilled portfolio management, enhanced risk pooling and diversification if the residential reits achieve success in the long term.

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