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Property special report: the insider

David George of CB Richard Ellis on the winners and losers in the regional property game

By Philip Heijmans
The property market is a volatile and complicated place, especially in Southeast Asia. The region is considered a beacon for economic growth and prosperity, but realtors are worried about how economies abroad are affecting some of the region’s most promising markets.

Photo by Sam Jam.
David George, 30, became the country manager of CBRE Cambodia after acquiring a degree in property planning and development from Nottingham Trent University in the United Kingdom. He specialises in property acquisitions and disposals, consultancy and valuations.

In Bangkok, long seen as one of Southeast Asia’s most stable property markets, an increasing number of advertisements pleading for tenants to occupy units, as well as economic troubles in the West, have experts worried about a possible property bubble.
The once-vibrant Vietnamese economy – with access to seemingly endless credit for new projects – is currently getting to grips with a devastating oversupply of office units and condominiums resulting in numerous stalled projects.
In contrast, a number of large-scale development projects are set to break ground in Cambodia for the first time since the property bubble burst in 2009.
It all seems enough for property experts to think twice about over-speculating what has proven an erratic environment, but fresh from London, CB Richard Ellis’ new country manager David George believes he has a handle on things.
“The UK is a really flat market and if you exclude London it’s a completely dead market, so it is very different to here,” he says. “Regionally, Bangkok seems to have done reasonably well and did not suffer a big downturn from China doing badly.” He added that developers in Thailand should focus on building office units to meet a growing demand.
“Vietnam, however, is doing particularly badly in terms of office rents, condo developments and occupancies – the whole market is really struggling.”
According to CBRE data, office vacancies in Vietnam’s major cities, Ho Chi Minh City and Hanoi, are among the highest in the region, at 36% and 22% respectively. Only 14% of Bangkok’s total office units remain vacant.
“Five years ago, Vietnam was seen as the darling of Asia and the place where you go to put your money with help from huge credit from the Chinese money train, but that has slowed and now there is oversupply,” George says.
The picture in Vietnam becomes more bleak when considering it has only a fraction of the supply of Thailand. Bangkok has roughly 8m office units in total, while Ho Chi Minh City and Hanoi have about 1.9m units
together. Meanwhile Yangon has just 60,000 square-metres of office space in the entire city, and despite recent economic reform and heavy investor interest, the market will take years to become profitable for foreign developers, George says.
“You pick up the papers and they talk about Myanmar because it’s a real headline grabber, and even though there is going to be a lot of people looking to invest there now, I don’t see where they are going to be making millions, let alone billions,” he says.
George said that as a country opening up to new investments, over-ambitious investors with no real knowledge of the Myanmar marketplace could end up pouring too much capital into projects that may create a speculation-driven property bubble.
“There is demand there, and there will be developments over the next five to ten years, but you won’t get the 30- to 40-storey skyscrapers jumping in very quickly, and if you do, it would be a mistake,” he says.
However, there is at least one market expected to perform well in the coming years. Cambodia is now moving forward with several multi-million dollar satellite city projects, factories and high-end condo projects, while at least three large retail projects are set to come online in the next three years.
“The GDP [gross domestic product] has been a great guide for what’s going to happen here. In the last three years, there has been between 6% and 7% growth so you can see that wealth is coming and it’s very stable and that’s great for the economy,” George says.
“Then you have a young population that is expanding and that’s great for a number of reasons because you now have a large consumer base on the way over the next five to ten years and investors are starting to see that, so if you have a recognisable brand you have about ten years to come in and make your profits.”
Phnom Penh’s skyline is considered to be 20-30 years behind that of Bangkok or Ho Chi Minh City, giving it value as an untapped market. In fact, according to CBRE data, Phnom Penh has only about 1,700 condo units, compared to 310,000 in Bangkok and 81,000 in Ho Chi Minh City, making it a potential growth area.
Download our complete Property Special Report here: Southeast Asia Globe – Property Special Report

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