4 real estate challenges facing the AEC


What needs to be improved before the ASEAN Economic Community kicks in

A new report has examined how the integration of ASEAN (Association of South East Nations) by the end of 2015 will impact the property markets of the 10-member organisation.

Let’s have a look at the difficulties faced by the member states’ property markets as integration looms.

1. Some markets need more transparency 

Global consultancy firm CBRE’s ‘ASEAN Economic Community: A boost to South East Asian real estate‘ noted that conducting business in each member country is different. While it’s generally transparent and relatively easy in to do business in Singapore and Malaysia, other countries like Myanmar, Lao and Cambodia have a lot of catching up to do in terms of creating a more conducive environment for businesses.

2. Lack of skilled labour

CBRE highlights the possibility of an ill-managed institutional supply pipeline which has the potential to make retail rents volatile and deter retailers from significant expansion in the region.

The lack of skilled labour is posing a challenge to the office and industrial sectors, threatening to hamper the sectors’ expansion in the region. Disparity between skill sets across the member states is also apparent and could limit the positive effects from the ‘free flow of skilled labour’ initiative of ASEAN. http://creba.ph/2015/09/30/4-real-estate-challenges-facing-the-aec/The services industry may take a wait-and-see approach as they observe how ASEAN deals with ensuring the development of more skilled labour, which will slow the speed at which industrial and office markets could take off.

3. Pro-investment policy issues 

There is also a lack of complementary real estate policies in the region to encourage investment and the free flow of capital. Restrictions on foreign land ownership and short lease durations in many of the member states deter real estate investors from making purchases in the region.

CBRE suggests a pro-investment environment is necessary to ramp upForeign Direct Investment even further and improve the development landscape in the region.

4. Restrictive ownership policies

How can ASEAN markets attain a pro-investment approach? CBRE suggests an extensive review of each member state’s land ownership policy with regard to foreign property investment. Extending lease ownerships could also work in favour of some markets, which is something that authorities could explore.

Although it’s easier said than done, especially in a large, combined market covering hundreds of millions of citizens, the liberalisation of individual markets could prove beneficial for the each member state.

Desmond Sim, CBRE head of research for Singapore and Southeast Asia, believes that the AEC plays a key role in achieving this. Time can only tell if the promises of the AEC will be realised when it finally commences at the end of 2015.

Watch this space for the opportunities that could impact the real estate sector within the AEC.


Image is by Gunawan Kartapranata and is used under a Creative Commons licence


Property Report | September 25, 2015