This year is an excellent time to plan for your next property investment in Southeast Asia, as most of the countries are opening up to international travel and their real estate market is making a comeback. The region is home to the best emerging economies in the world and you can certainly find the country that suits your investment goal, whether it’s short-term or long-term. With that said, we’ve prepared a brief overview of the countries that have high potential for investment to give you an idea of what to expect from each.
Here’s our roundup of the best Southeast Asian countries for real estate investment in 2022.
Gross Rental Yields in 2021
Source: Global Property GuideÂ
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1. Indonesia
The country is often overlooked by foreign property investors due to ownership limitations, even though Indonesia has a strong economic growth and a steadily growing real estate market. US News named Indonesia as the second-best country in the world to invest in 2021 because the country ranked highly for its comparatively favorable tax environment and skilled labor force in their survey. The average yield of apartments in Jakarta is around 7% per year, which is among the highest in Asia. Luxury apartments in Central and South Jakarta are highly desirable among expats and upper class locals alike due to their vicinity to business centers and international facilities.
Meanwhile, Bali’s tourism-driven rental market continues to thrive and the small town of Canggu in particular was named as the 4th best place to live and invest in the world by Forbes back in 2019. Villas in Southern Bali (ie. Seminyak, Canggu, Uluwatu) are excellent to invest in as the vacation rental industry is flourishing with the ROI being between 8-12% and there’s still plenty of room for supply growth in the 1 and 5+ bedroom segment that are in high demand right now.
The government is actively promoting less popular regions such as Lombok as the next hit tourist destination, especially with the opening of Mandalika Street Circuit which opens up a plethora of investment opportunities in the region.
Pros:
- Highest rental return in Asia
- Multiple prime locations for investment
Cons:
- Foreigners cannot own freehold title without a company
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2. The Philippines
One of the fastest-growing economies in Asia, the Philippines' housing market was booming thanks to the government’s pro-investment policies. The country is reported to have the highest yields for property investments in Southeast Asia, and the recent price decline of condos presents a golden opportunity to buy one at a discount. Similar to Thailand, foreigners are forbidden from owning freehold land but can buy freehold apartments or condos as long as they don’t own more than 40% of the units in a building.
The price of condos in Manila fell by 10% in early 2021, presenting a golden opportunity to snatch a condo at a discount. Bonifacio Global City is an excellent neighborhood to invest in, where the price of condos are between $3.800 to $5.500 per square meter and the rental yield is around 4.5% and 5.5%. Legaspi Village is a great alternative that offers similar yield and price, thus you can’t go wrong with either area from the rental perspective.Â
With affordable prices as well as high yields, it’s easy to see that the Philippines is amazing for property investment. Up-and-coming cities such as Cebu and Davao are also desirable while the property prices are still low.
Pros:
- Second highest rental yield in Asia
- Comparatively low property prices
Cons:
- Limited option of prime locations for investment
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3. Thailand
Thailand benefits from well-developed infrastructure, a liberal market economy and pro-investment government policies which enables it to become Southeast Asia’s second largest economy. Thailand is the most popular choice among real estate investors worldwide for a number of reasons, not only due to its strategic location but also because the nation is fairly welcoming to foreign investment. It is one of the few countries on this list where you can open a bank account with only a tourist visa.
The primary choice for real estate investment in Thailand are freehold condos, with the great majority of condo buildings located in Bangkok and the return yield is around 5%. While one bedroom apartments enjoy better yields compared to larger units, the city is already in oversupply right now and investing in two or three-bedroom condos is better as renting them out is much easier.Â
Chiang Mai is an excellent alternative for property investment because the city’s market is better suited for short-term rental thanks to tourism and offers slightly higher rental yield at a lower buying price than Bangkok.
Pros:
- Moderate rental yield with larger condos generating higher returns
- Foreigners can open a bank account with a tourist visa
Cons:
- Oversupply of one bedroom apartments in Bangkok
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4. Malaysia
Malaysia is special because it is the only country in Southeast Asia that allows foreigners to legally own freehold properties including land and houses instead as well as condos. In addition, the country is well known for its affordable yet high quality living standards and very welcoming towards foreigners as reflected by the Malaysia My Second Home (MM2H) program that grants foreigners a renewable multiple entry visa valid for 10 years.
Due to low rental yield (around 3% in Kuala Lumpur and Penang) and high taxes on properties sold within a 5-year timeframe, Malaysia is better suited for long-term appreciation at the moment rather than property rental or flipping for immediate returns. This may change in the near future considering that tourism in Kota Kinabalu is rapidly developing and could drive an increase in occupancy rate and rental returns.
Kuala Lumpur is often overlooked but it actually has the most open and competitively priced real estate market. The price of condos in the city is affordable and very stable, between $1.800 to $2,000 per square meter.
Pros:
- Foreigners can own freehold land and houses
- Affordable condo prices
Cons:
- Low rental demand and yields
Each of the 4 countries listed above offers different prospects for property investment, with some better suited for long-term goals while others are excellent for quick rental returns. In addition, all those countries are now open for international travel and you can visit them immediately if you wish. If you have any questions on Indonesia’s real estate market or plan to buy a property in Bali or other islands, do not hesitate to contact us.
Disclaimer: The content of this publication is provided as general information only and does not constitute legal, financial, tax, or other professional advice from Bali Home Immo. Past performance is not indicative of future performance and should not be relied upon as a basis for an investment decision. Some of the information provided on this publication is obtained from a third-party source and we do not guarantee that the content of this publication is accurate, complete or up to date.