Where students go, real estate follows

STUDENT POWER: Worldwide, there is a discernible trend towards students attracting real estate investments

According to a recent Jones Lang LaSalle report entitled “International student destinations redefining the world of real estate investment”, the nine top destinations in the world for international students are also tops in terms of being real estate investment destinations for both residential and commercial properties.

1. London: London’s international student population is diverse, with a growing proportion coming in from Asia. China and India alone represent 22 per cent of the international student population in the UK. The abundance of good educational institutions coupled with the diversity and style that London exudes make the city a prime target for real estate investment..London is viewed by many global players as a safe haven of wealth. International buyers including American, Middle Eastern, German and Asian investors represented well over 50 per cent of the total investment volumes in Central London in 2009 and 2010. In 2011, these volumes showed no signs of slowing down, with an increasing number coming from Asia. We expect house prices to grow by about 4 per cent in 2012 followed by 8 per cent per annum by 2014. On an annual basis, rental growth is expected to slow down, from about 12 per cent in 2011 to 7 per cent in 2012 and towards 5 per cent by 2014. The low levels of supply in London, however, ensure that prices and rents in the city remain stable.

2. New York: In 2010, 46 per cent of the international student population in the US came from China, India, and South Korea. Growth was primarily driven by a 30 per cent increase in Chinese student enrollment between 2009 and 2010, making China the leading source for foreign students. The city is home to some of the best  universities in the world such as Colombia and Cornell University. As a result, overseas buyers are growing in presence.

3. Tokyo: Japan hosts a large population of international students from Asia, with China making up 61 per cent of the total number, followed by South Korea and Taiwan. The city’s rich culture and proximity to other Asian cities presents a win-win scenario for many students. University of Tokyo and the Tokyo Institute of Technology rank 25th and 57th respectively in world rankings.

Things are looking up for Japan in 2012 as the gross domestic product (GDP) is expected to improve significantly due to reconstruction related demand from last year’s tsunami and earthquake disaster.

4. Singapore: The Singapore commercial and housing property markets expect to see short-term rent and price corrections of 10-20 per cent between 2012 and 2015, presenting investors with a good opportunity to buy in at the bottom end of the cycle. Lower population growth and high future supply are expected to induce a further decline in home prices, with over 11,000 private residential units scheduled for completion over the next five years. In turn, the supply pressure on the market is likely to be highest in 2014 and 2015. Moreover, net lettable area in office and business parks is expected to grow by 4 per cent in 2012. In spite of this, the local property market is often described as ‘resilient’, as it has strong underlying market fundamentals.

5. Shanghai: China’s steady economic rise paralleled with an increase in demand for Mandarin language skills has rendered the country an attractive destination for students from Asia and beyond. China has seen a 10 per cent increase in the number of international students between 2009 and 2010, with the majority coming from South Korea, Japan, and Vietnam. Notable
universities in Shanghai include Fudan and Jiao Tong University. In recent years, the rapid economic growth in China’s city centres, particularly
Shanghai, has fuelled a substantial hike in housing prices.

A number of government measures, including property taxes, have since been applied to cool the market and these are expected to continue into 2012. We are seeing some improvement in the availability of mortgage financing, as well as lower interest rates for first time home buyers.

Sale prices and rents for high-end apartments remained relatively stable in Q4 2011, on the back of steady supply and limited demand. With this view in mind, annual sales for the high-end segment are likely to recover moderately in the second half of 2012. Pudong and Puxi markets in Shanghai will remain tight due to limited new supply.

6. Los Angeles: Los Angeles is the third-largest city economy by GDP in the world, behind only Tokyo and New York. The city’s glamourous entertainment industry and diversified economic landscape are big incentives for Asian students. California hosts the largest number of international students in the US, with Los Angeles having the largest concentration. The University of California and the University of Southern California rank among the top universities in the world.

The market’s downturn has helped its apartment rental market, as more households choose to rent. Assuming steady job growth in 2012, the residential market is poised to gain ground. Apartment vacancy is likely to further drop, supporting rent increases.

7. Toronto: Toronto has one of the largest Chinatowns in North America. Nearly 30 per cent of Canada’s international student population comes from China, followed by India and South Korea. Canada’s universities are highly ranked with McGill ranking 17th, The University of Toronto at 25th spot and the University of British Colombia at 51st.

Toronto’s office market continues to drive central Canada’s performance as sustained demand from tenants solidifies over the short term.

8. Sydney: Sydney has long had a high profile on the global stage, largely due to the perfectly balanced lifestyle it claims to offer, ranging from its beaches and water sports, food and wine to its strong cultural heritage. It has gained popularity among Asian high net worth families in recent years. Popular universities include The University of Sydney and the University of New South Wales, which are both ranked in the top 50 universities globally.

Residential property in Sydney is considered to be a stable and high-quality investment choice, although the city’s undersupply of accommodation and high migration are likely to keep prices the highest of any Australian city.

9. Melbourne: For the first time in almost a decade, Melbourne has replaced Vancouver as the most livable city among 140 cities around the world. In 2010, 48 per cent of international students in Australia came from China, India, and Malaysia. Migration will continue to play a big role, putting pressure on the supply of residential dwellings and investment property prices.

 

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