02 Apr 2014

Prime land in Southeast Asian cities experience surging price growth

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Prime land in Southeast Asian cities experience surging price growth

Southeast Asian markets see the fastest price growth for prime development land especially in Bangkok, Jakarta, Kuala Lumpur and Phnom Penh who make up 4 of top 5 cities in terms of price growth.

According to Knight Frank Asia Pacific, the independent global property consultancy, the results show that in the two years from December 2011, 24 of the 26 markets tracked (13 residential and 13 office) saw an increase in their indices reflecting increasing prime land prices amid tight supply and strong demand.

The mature markets of Hong Kong, Singapore and Tokyo saw the lowest price growth while the prime Asia residential and office development land indices increased 50.4% and 38.3% respectively over the last two years.

With competition for prime development sites remaining as strong as ever, increasing numbers of developers and investors are looking overseas for opportunities.  Evident from a 55% YOY increase in intra-Asian cross-border developments driving price growth in development land.

Bangkok sees the highest growth in the prime residential development land index over the last two years with 190.7% while Kuala Lumpur and Phnom Penh also feature near the top of the rankings.

Meanwhile, Jakarta shows the second largest land price increase at 184.0% in the prime residential index and the largest increase in the prime office index at 192.3% over the last two years.

Recent deals in the city suggest that Jakarta land values are catching up with other countries in Asia.  While land prices are expected to continue on an upward trend, price growth is likely to moderate over the coming year. Transformed over the last 15 years into a relatively open, stable and democratic country, and fuelled by a growing middle class, demand for both high-end condominiums and premium office space in Indonesia’s capital has shot up over the last two years.

Knight Frank Asia Pacific today launches its first-ever Prime Asia Development Land Index which derives the price of prime residential (apartment or condominium) and commercial (office) development land in 13 major cities across Asia, for the period December 2011 to December 2013.

The land prices in the Index are derived using a repeat residual valuation methodology where Knight Frank essentially looks at what a reasonable developer would be expected to pay for development land, given the gross development value of the potential scheme, costs (construction, professional, contingencies, and financial), required profit, acquisition costs and relevant taxes.

Knight Frank’s inaugural research ploughs through prime development land markets across 13 cities in Asia.

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