The $90 Trillion Asian Opportunity for Online Marketplaces

New data reveals that Asian residential real estate assets are in aggregate now worth approximately US$90 trillion. That means Asia is home to about 45 cents of every dollar of residential real estate value located anywhere in the world. That's why I believe Asia is an attractive post-COVID opportunity for online marketplaces and technology companies.

We have based our $90 trillion estimate on the piecing together of Asia-wide numbers from more fragmented data looking at smaller jurisdictions. Asia accounts for some 45% of worldwide residential property value despite average purchase prices that are on the whole lower than in Europe or North America. 

Cross-Border Transactions

While calculating the total value of Asian residential real estate assets, we also tried to make a reasonable estimate of cross-border residential real estate transactions. Unfortunately, cross-border transactions are more difficult to measure. No useful data exists, except in the case of mainland China. 

Juwai IQI's best estimate is that Chinese buyers alone acquired some US$202.8 billion of overseas residential real estate in the years 2015 to 2020. By logical extension, scaling this up to account for acquisitions originating in every Asian country (and not just China) would result in a considerably higher total.

At Juwai IQI, we take all of Asia to be our home market. That means we are trying to serve a region with a population of about 4.5 billion. To enable us to scale, we have had to put technology at the centre of everything we do.

Economic Rebound in Asia

Asian residential property has weathered the pandemic with surprising resilience. In part, this reflects the pandemic-driven change in homeowner preferences, which has created new demand. 

As in parts of Europe and North America, many Asian consumers are shifting from smaller residences in more central locations to more peripheral areas that offer the benefits of space and a better quality of life. High savings rates, a cultural affinity for real estate investment, and persistent undersupply problems have also supported the residential market.

The recently signed Regional Comprehensive Economic Partnership ("RCEP") is another factor in the positive outlook for Asian residential real estate. As the pact comes into force, it will also drive new investment in residential property.

RCEP is one reason we believe the ASEAN nations will be among those seeing the most rapid recovery of cross border real estate investment through 2022. Although the pact does not regulate property investment, its spillover benefits will boost the real estate sector.

Independent research suggests RCEP will raise global incomes by an annual US$186 billion, expand member trade by US$428 billion, and lead to its member nations generating half the world's global economic output by 2030.

Asia's wealth-creation machines have already begun to bounce back from their early-2020 doldrums. While the pandemic is far from beaten, it no longer has the paralysing effect it once did.

The pandemic has also produced some clear winners. The population of the Asian super-rich is multiplying and the Asia-Pacific region has the world's largest population of ultra-high net worth individuals accounting for 38% of the world’s ultra-high net worth individuals. By contrast, the Americas hold 35%, while 27% are in Europe, the Middle East and Africa.

Impact of COVID-19

Why didn't COVID-19 have a more significant impact on Asian cross-border residential investment? One factor that tempered the losses was the rapid implementation of technology. The industry compressed ten years of innovation into just six months.

As a result, both local and cross-border buyers found it possible and even easy to purchase overseas, including during the most restrictive lockdowns. Companies like Juwai IQI successfully deployed technology to enable buyers to research, inspect, negotiate for, purchase, and manage overseas properties — entirely online.

Data from Asia's largest economy supports the conclusion that investment fell much less than expected in 2020. China's Ministry of Commerce and State Administration of Foreign Exchange reported outbound all-sector direct investment was down by just 3% in 2020. That is minimal, given the seizures that paralysed the global economy last year.

Economic Situation in China

Because of China's role as the keystone economy for the region, its rapid emergence from the pandemic is a good sign for future Asian residential market growth.

Nomura bank's latest data shows that in 2020, the U.S. GDP fell by 2.3% while China's grew by 2.3%. That means China may now overtake the U.S. as the world's largest economy as early as 2026.

Other analysts report that Chinese consumer spending will likely more than double in 10 years, hitting $12.7 trillion by 2030. That's about the same amount that American consumers currently spend and more than double the $5.6 trillion Chinese consumers spent in 2019.

That's one reason why the South China Morning Post dedicated a long article this week to the special promotions developers around the world are using to attract Chinese and other international buyers during the Chinese New Year holiday, which begins on the 12th of February.

Luxury real estate agent Jamie Mi told the Post that her team recently sold several top-end homes in Melbourne, Australia to international buyers whose key family members are still overseas. 

Her agency, Kay & Burton, is celebrating the Year of the Ox by offering its personalised concierge service to all potential international buyers who make an inquiry from 12 February to 14 March.

"To make a decision is not always easy," said Mi, who is partner and head of International Division at Kay & Burton. "We can organise a chauffeur service, personal interior stylists or lawyers to help them with home purchases."