What will happen in the wake of the pandemic when people begin to look again at investing in luxury residential properties?

While our fight against COVID-19 continues, changes in buyers’ behaviour over the past 12 months have already begun to reshape the luxury real estate market.

Encouraged by the need for social distancing and the rise of remote working, an increasing number of people living and working in major cities now split their time between home and ‘away’ – a long stay in a holiday destination or a second home.

The trend toward purchasing second homes reflects this shift. According to Knight Frank’s Global Buyer Survey – undertaken in June 2020 across 44 countries – over 26 percent of respondents said they were more likely to buy a second home as a result of the pandemic.

The pandemic has also underscored the importance of nature and space, wellness and wellbeing, and quality time spent with family.

Within the luxury segment in Asia, we are seeing a trend towards multi-generational real estate purchases – with pooled investment being made in residences that can be used by grandparents, parents and children, as well as preference for landed and single-family homes – where outdoor space abounds, privacy is a given and living spaces are customisable to fit the needs of a large or growing family.

What we are most excited about, however, are some of the shifts that are happening within the travel and hospitality sector.

With border restrictions confining the majority of travellers to domestic destinations, many have taken the opportunity to discover lesser-known, off-the-beaten-path destinations. We are also seeing a move away from ‘big box’ travel and towards a ‘boutique’ holiday experience, with an increasing number of travellers seeking a more bespoke or personalised experience during their stay.

Branded leverage

The post-pandemic era offers an opportunity for branded residences – those that are managed by a hospitality brand through an adjoining hotel or resort – to position themselves as the investment property of choice.

The branded residence sector is growing around the world, especially in this region. According to a March 2020 report by C9 Hotelworks on the sector, Asia now has a third of the world’s branded residences, with most developments located in Thailand, Vietnam and the Philippines.

The promise of a global hospitality brand is at the core of the branded residence offering. Leveraging the developer’s and operator’s combined expertise, they offer assurance in terms of quality and service standards, including those governing the safety and well-being of residents, for additional peace of mind amidst the current global pandemic.

From a real estate standpoint, the branded residence model presents an opportunity for investors to generate both short- and long-term returns. With a full complement of hotel or resort amenities, buyers benefit from hassle-free home-ownership, and the opportunity to earn returns through a resort-managed rental program.

In the long run, buyers stand to benefit from an increase in the resale value. Savills, in its 2019 Branded Residences Report, estimates that the average premium for branded residences over a non-branded product starts at 35%, rising to as much as 70% in emerging destinations, where buyers also stand to benefit from first-mover advantage.

The trend and demand for luxury branded residences will only continue to gain traction in the future, driven largely by the rise of the upper- and middle-class market segment in Asia. Its growth trajectory will be closely linked to the travel and hospitality sector: we foresee branded residences growing in importance as drivers of tourism development in emerging destinations. Adding a branded residential project to a destination helps strengthen its attractiveness as a travel and investment destination, supporting the development of the destination from an economic perspective.

Hospitality advantage

With over 500 hotels, resorts and residences globally – 40 of which are under the Anantara brand – Minor International has built a reputation as a luxury hotel owner and operator over the past 50 years. As a real estate developer, we leverage this depth of experience when we build and manage our residential developments. Where relevant, we seek emerging destinations with growth potential, and invest in these locations as a pioneering developer, together with local partners that share our vision.

Our branded residences portfolio in Thailand, Malaysia and Indonesia allows us to offer a more attractive real estate investment opportunity than pure home-ownership. Our portfolio is purposefully small, which enables us to nurture a personalised relationship with every buyer, which lasts throughout the entire duration of their ownership. All our developments are also boutique-sized, to create and foster a strong sense of community within our owners.

Despite the challenges that remain, we feel there is sound cause for optimism in this post-pandemic world. For the luxury real estate sector, it is crucial that we remain cognizant of how the market is changing and how these shifting trends can be leveraged to uncover new opportunities.

 

The author is Vice President for Real Estate at Minor International