Top Five Opportunities for Property Investment in Emerging Markets

Property investment in emerging markets looks bright in 2010 as real estate prices return to attractive levels. Asian countries such as China and South Korea plus Brazil and Saudi Arabia offer the best investment potential.

The A.T. Kearney "Recovering Markets, Revised Ambitions" report evaluates real estate investment opportunities in 50 emerging markets around the world. According to the report, the property investment markets in these nations are "gearing up for a comeback".

The report, which doubles as the 2010 Real Estate Global Opportunity Index, looks at construction spend, construction growth, country risk and ease of doing business in emerging markets. Based on these criteria, the top five property investment opportunities for 2010 are China, South Korea, India, Saudi Arabia and investment in Brazil.

Asian countries have traditionally dominated the top ten positions (six out of ten highest-ranking countries are in Asia). Brazil is a new-comer to the top five and has climbed nine places since the previous Index when it ranked in 14th position.
According to A.T. Kearney, global management consultancy experts, Brazil, India and China are the top three countries for high opportunity in real estate investment. Reasons behind their exceptional potential are "government stimulus, infrastructure investment and resumption of lending".

The report's objective is to provide advice for developers planning property investment in emerging markets. A.T. Kearney believes that Asia constitutes an "unstoppable real estate engine" since growth in the property market runs parallel to the high economic growth in the region (led by China and India).

The report claims that China is "witnessing a frenzy of land acquisition at unprecedented prices". South Korea offers excellent opportunities for foreign investment and the residential real estate market has recovered from its recent downturn. A.T. Kearney predicts a "residential boom on the horizon" for India where there is huge demand for affordable housing. However, the report cautions that the Indian market "can be difficult" for foreign investors.

In the Middle East, Saudi Arabia represents the largest real estate market and here, unlike the neighbouring UAE, demand for property investment is driven by the local population.

As regards property investment in Brazil, the Real Estate Opportunity Index reports that "the residential market is benefiting from rapid population growth and a demand backlog". These factors plus government stimulus programmes and investment in infrastructure explain Brazil's top five position in the rankings. Other Latin American countries come considerably further down the table - Argentina ranks in 13th place with Chile and Mexico in 29th and 31st respectively.

The report earmarks low-cost housing as a niche market to watch, particularly in countries where large sectors of the population have low incomes. This is the case in China, India, Brazil and the Middle East. A.T. Kearney believes that "low-cost housing is the new frontier for developers".

The Real Estate Opportunity Index concludes that "real estate prices are back to attractive levels in most emerging countries". It predicts that property markets will rise as long-term institutional investors make more cash available for property investment.

Obelisk in-house research concurs with these findings. However, Obelisk points out that at an individual level, property investment opportunities in India, China and Saudi Arabia are limited due to foreign-ownership restrictions. Because of this, Obelisk believes that Brazilian real estate represents the best investment for foreigners looking at emerging markets with the best potential.

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