At Propeterra, we’ve leveraged our significant expertise in frontier markets real estate investment to provide our clients with comprehensive and insightful market research. Alongside our flagship annual Mongolia Real Estate Report released by our parent company APIP, our country analysts produce in depth guides for real estate investment in a variety of emerging and frontier destinations.
With its principal operations in Ulaanbaatar and Hong Kong, Propeterra has a strong focus on the emerging Asia-Pacific region. Additionally, we offer research on a wide range of real estate markets, including those in developed markets and in special situations.
Our reports offer a complete package: they include political and economic forecasts alongside micro-level analysis of a the market’s real estate sector. We can provide you with the knowledge to make informed investment decisions in some of the world’s most exciting emerging markets.
Mongolia
Blessed with extensive natural resource wealth, Mongolia has enjoyed phenomenal growth rates in recent years. The country came to the attention of foreign investors in 2011, when it achieved 17.1% growth rates, making it the world’s fast growing country at the time.
The influx of foreign capital into the country’s mining sector has dramatically raised incomes, as well as attracting expatriate workers to the capital, Ulaanbaatar. The combination of a rising business-class and wealthy expatriate demand has made the city’s real estate market a hugely exciting opportunity for investors looking to gain exposure to this frontier market.
Economy
Mongolia is overwhelmingly a natural resource based economy. Having struggled in between 2013-2016, buoyant copper and coal prices have led the Mongolian economy to bounce back dramatically, with growth forecast at 6.1% in 2018. The government has set out an ambitious reform program with the help of the IMF, which aims to increase the Central Asian country’s competitiveness and diversify the economy away from natural resource dependence.
Legal & Tax Systems
Mongolia’s legal and tax systems are among the most favourable in the region - there is no legal discrimination against foreigners buying property, and the legal institutions are strong and investor friendly. Mongolia’s tax environment is also pro-investor, with low income tax and no capital gains tax. The combination of a pro-business environment and strong fundamentals make Mongolia extremely appealing to frontier market investors.
International Cooperation:
Landlocked between Russia and China, Mongolia’s is poised to benefit from cooperation with both countries to establish a North Asian economic corridor. This promises to dramatically increase the country’s competitiveness.
Myanmar
Myanmar’s rapid economic and political transformation presents an enticing opportunity for investors looking to gain exposure to one of Asia’s most frontier destinations. Emerging from decades of isolation, the country has a number of attributes that have drawn investor attention. With a high population and substantial natural resource wealth, Myanmar looks set to capitalise on its location at the juncture of India and China, and has the potential for rapid development.
Since the dissolution of the military junta in 2011, reform in Myanmar has seen marked developments in the country’s economic and political situation. Foreign direct investment has surged to over from USD1.9 billion to USD9.4 billion in the wake of these reforms. FDI inflows, an increasingly pro-business environment and favourable demographics mean that Myanmar could prove to be a star-performer in amongst the region’s emerging markets.
Political Analysis & Risk Mitigation:
Democratic reform has installed an elected-civilian government in Myanmar and has significantly reduced the influence of the military in politics. Emerging from more than fifty years of authoritarian rule, internal forces, supported by external actors, are making tentative steps towards opening the country’s economy to international investment. The Thilawa SEZ, south of Yangon, is a flagship project being developed in cooperation with the Japanese government. From April to July 2018, foreign investments in the zone hit USD150 million. The current president, U Win Myint, is a former political prisoner who has pledged to stamp out corruption and to strengthen key institutions such as the courts and legislature. The Asian Development Bank expects Myanmar to grow by 6.8% this year, and 7.2% in 2019.
Legal:
The combination of burgeoning residential demand from expatriates and liberalising property ownership laws is an exciting prospect for foreign real estate investors. The January 2016 Condominium Law is the first step will be the first step in enabling foreign investors to access this market. There are a series of provisions and the legislation is yet untested, however, it offers hope to those interested by Myanmar's growth story.
Regions:
Our analysis focuses on the regions of Yangon (formerly Rangoon), Mandalay and Bagan. We focus particularly on Yangon - Myanmar’s largest city and commercial centre with a population of over 7 million. Interest is also growing in Mandalay, partly due to direct air travel from India and China. Bagan, meanwhile, is a popular tourist destination with potential for UNESCO designation, and the hotel sector merits analysis. Our report also looks at Naypyidaw, the new capital that sprung up as recently as 2002.
Kazakhstan:
A massive landlocked state in the heart of Central Asia, Kazakhstan enjoys abundant hydrocarbon reserves and a strategically valuable location at Eurasia’s crossroads. Coming out of the Russian financial crisis, Kazakhstan developed rapidly. The economy grew at an average of almost 8% per annum in real terms between 2000 and 2013, buoyed by the strength of its extractive industries.
Kazakhstan is the largest economy in Central Asia, and been the primary destination for investors seeking to enter this frontier region. Having slowed down in recent years due to lower oil prices and exchange rate volatility, Kazakhstan’s real estate market is beginning to regain momentum. The completion of oil megaprojects such as the Kashagan field and active cooperation between Astana and Beijing in China’s ‘One Belt One Road’ initiative suggest that Kazakhstan will see renewed and impressive growth in the coming years.
Macroeconomy & Politics:
Kazakhstan is recovering from the instability of the mid-2010s, and enjoys increasingly competent economic governance. The central bank has moved toward a system of inflation-targeting and has prioritised enhancing its credibility. Meanwhile, the government has initiated a major push toward privatisation, and to diversify the economy away from hydrocarbons. Kazakhstan has also taken steps to try and boost foreign investment and trade by joining Russia and Belarus in the establishment of a Custom Union in 2010. Kazakhstan was listed in the 2017 Bloomberg Innovation Index as one of the top 50 innovative economies in the world.
Legal System and Business Environment:
The legal system of Kazakhstan allows foreign investment in real estate and ownership titles to property are guaranteed by law. Following the Land Code of 2003, foreign nationals can purchase land in Kazakhstan, with the exception of agricultural land. Kazakhstan is undemocratic, but scores well ahead of its neighbours in terms of openness to business, and was ranked 36th worldwide in the 2018 World Bank Ease of Doing Business Index.
Regions:
Kazakhstan is a vast country, with most foreign investment activity focused in Almaty, Astana and Caspian oil fields. Our report analyses at the different sectors of the real estate markets in Almaty and Astana, and contextualises them in light of recent developments such as the 2017 Astana Expo.
Russia:
Following the dissolution of the Soviet Union, Russia experienced a period of crisis followed by rapid economic growth. With a vast territory, the Russian economy is supported by immense natural resource reserves.
Despite recent difficulties, Russia remains a major player geopolitically and economy. Although negative growth, increased inflation, and hindered foreign investment, most companies with existing investments are not planning to reduce their presence. Moreover, the investment climate in regional Russia has improved, while Moscow maintains its position as the principal property market.
Economy:
Coming out of the 1998 financial crisis, Russia enjoyed a decade of impressive economic growth. Growth rates turned around from -5.3 % in 1998, to 6.4% in 1999. In recent years, Russia has entrenched its international influence and foreign investment has been stimulated by rising commodity prices. Following two years of economic contraction, the World Bank predicts Russian GDP to grow by between 1.5-1.8% in 2018-2020. The government’s new fiscal consolidation rule, designed to insulate the budget and exchange rate against external volatility, underscores its commitment toward structural reform and macro-stabilisation.
Legal:
International property investors have begun to reconsider Russia’s potential. Thorough due diligence and flexibility remain important considerations when trying to succeed in the Russian property market. Russian real estate is attractive for investment as legislation is simple and foreign legal entities or individuals can own real estate in Russia without notable restrictions.
Regional Analysis:
Russia has significant real estate transactional activity in Moscow and St Petersburg. Moscow, the country’s political and economic epicentre, is notably dynamic in sectors analysed by Propeterra. At the same time, St Petersburg also merits attention. Regional cities, meanwhile, have special situations, including Sochi on the Black Sea, and these may be worth considering for investors interested by the overall economic story unfolding in Russia.
China:
Now the world’s largest economy by purchasing power parity, China’s rapid growth since 1978 has fundamentally altered the dynamics of the global economy. China continues to urbanise, with Beijing aiming to reach 70% urbanisation by 2030. This continues to present opportunities for foreign investors looking to access the world’s largest market.
Properties in booming cities are some of the strongest investment vehicles available for domestic and foreign investors. Property developers have been flooding into the rapidly-emerging megacities in China. The country is home to world-class Special Economic Zones (SEZs), including Shenzhen, Shantou, Xiamen, and others, major import-export havens, logistics and e-commerce centers, transnational transportation hubs, and rising tourist destinations with skyrocketing demand for high-end apartments, star-rated hotels, Grade A offices, and prime retail plazas.
Economy:
Despite decelerating in recent years, China is still expected to grow by around 6.8% this year. China remains a developing country with a host of reforms and adjustment policies yet to be completed - the most recent 13th Five Year Plan sets out an ambitious agenda to make growth more sustainable and more inclusive. China’s middle and upper income classes continue to expand, and he country’s residential real estate market presents ample opportunity to foreign investors.
Legal:
China is a deeply bureaucratic society and the law does present obstacles to foreign investors: not least that foreigners in China are not legally permitted to be landlords or to own property for investment purposes. Despite this, foreign investment into the real estate market thrives via partnering with Chinese agents or investing in developers, who in turn invest directly into Chinese real estate. Our report provides an guidance on how to navigate this complex legal landscape.
Regions:
The Chinese real estate market presents myriad opportunities that extend far beyond obvious destinations like Beijing and Shanghai. In this report, we bring you a deep analysis and outlook on the real estate market of China’s eight main metropolitan regions:
Sri Lanka
Sri Lanka has prospered since the end of its civil war in 2009, establishing a major tourist industry and growing at an average of 5.8% per year. Now, Sri Lanka is trying to transition from a lower-middle income, predominantly rural society into an upper-middle income urbanised society. This process, alongside a vibrant hospitality sector, offers a range of opportunities for real estate investors.
Economy:
Sri Lanka’s economy is predicted by the World Bank to grow at around 4.5% for the next few years, driven by investment and private consumption. In the short term, risk arises from political uncertainty - Sri Lanka needs to push through important reforms despite the election cycle.
Future reforms will likely target the country’s competitiveness to bring in more FDI. The economy is fueled by rice, tea, rubber, coconut, and fisheries production. Other economic drivers include growth in the construction sector, remittances from the Sri Lankan diaspora, along with a sharp increase in tourism.
Legal:
Rule of law is generally effective in Sri Lanka and investor interests are largely respected. There are restrictions on foreign ownership of real estate, however, requiring investors to consider different legal mechanisms. These measures are meant to protect immovable assets such as land and property so nationals maintain access to these limited commodities. A 15% tax on buying leases is imposed on foreigners up to a duration of 99 years.
Regions:
Urban development in Sri Lanka has been focused on five regions: Colombo, Jaffna, Hambantota, Kandy, and Galle. Our research report delivers thorough economic and real estate analysis on these areas.
Thailand
Thailand’s explosive growth over the last 30 years has been hailed as a major economic success story. The country has continued to grow despite global economic headwinds and political instability, and is now the second largest economy in the region. With a diversified export base, favourable demographics and integration into the ASEAN block, Thailand is a major investment destination in the region.
Thailand’s real estate market is exciting to foreign investors - the country’s vibrant tourist industry provides a wide range of opportunities in retail, hospitality and residential projects. Most recently, a surge in Chinese tourism and overseas property investment into the country has continued to push the market upward. Commitments from foreign investors have, and will, continue to take Thailand forward.
Economy
Thailand's status as the second-largest economy in Southeast Asia has led many investors to consider it a key emerging market, as well as an anchor economy for neighbouring countries like Laos and Myanmar. After a take-off period in the 1990s which saw annual GDP growth average sustain and average of 12.4%, the growth has moderated to more sustainable levels. In 2018, the economy is expected to grow by 4.2% in 2018.
Legal
For foreigners, direct ownership of land in Thailand is near impossible. Historically, some foreign investors overcame this obstacle by joint ventures with Thai nationals, but authorities have recently cracked down on such arrangements. An alternative is investment in so-called target industries. Under these rules, it may be possible to attain 100% ownership of property and land in specified areas.
Regions
Thailand’s diverse economic base means that there are opportunities across the country. Bangkok’s position as regional commercial and financial hub offers potential in retail, residential and office sectors, whilst strong tourism revenues have buoyed the hospitality sector in Chiang Mai and Phuket.
Cambodia
Since emerging from decades of conflict and isolation under Khmer Rouge and subsequent Vietnamese regime, Cambodia is been in a world leader in poverty reduction, and has been branded one of the last frontier markets in the region. During the last two decades, the Cambodian economy has grown rapidly, attracting the interest of many foreign investors.
Economy
Cambodia is considered one of ASEAN’s fastest-growing economies after Myanmar and Laos. Rapid economic expansion in Cambodia has stemmed from its textile and tourism industries. Average annual GDP growth was 8.3% in the 15 years since 2000 and FDI reached USD3 billion by the end of 2018. Growth for this year has been projected at 6.9%. Cambodia’s real estate market is developing at a fast pace with rising prices and foreigners driving the majority of the demand for high-end-high-yield properties.
Politics
Officially a multi-party democracy, Cambodia is in reality more of a one-party state, ruled by Prime Minister Hun Sen and the Cambodian People’s Party. Hun Sen, a former Khmer Rouge official, has been in power since 1985 and has vowed to rule into he turns 74. He most recently won the July 2018 election, securing his time in office until 2023. The country is a constitutional monarchy, where the Prime Minister is the head of the government and the monarch is the head of state.
Regions
Cambodia is divided into 24 provinces and five municipalities. Each province is divided into districts (srok), and each district into communes (khum). Phnom Penh is the capital city and considered one of the main tourist attractions of the country, along with Siem Reap. The city is the most populous city in the country, with a population of more than 4.2 million.
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