Expatriates present significant growth market for serviced apartments
Wednesday, December 19, 2012
While many budget-conscious executives have been using corporate housing for some time now, competition in the business hospitality sector is fierce. Real estate developers typically favor investment in the construction of serviced apartments due to the cost-effectiveness and quality they provide for customers. According to Reuters, the expatriate communities in places like the Middle East could present developers with significant market growth potential.
Supply failing to meet demand
Riyadh, the capital of Saudi Arabia, is a hot spot for English-speaking expats, especially those moving to the city from the U.S. and U.K. However, while many of the expats moving to Riyadh do so for business purposes such as short-term contractual work, most new arrivals are experiencing a dearth of available housing.
According to data from Jones Llang LaSalle, the price of average rents in Riyadh has increased by 10 percent during the past four years. In addition, availability of both serviced apartments and private rental properties has been greatly outpaced by demand. As such, many expats experience tremendous difficulty in securing suitable accommodation. While there is some hope that compound housing supplies will increase by 50 percent during the next two years, there is still a substantial number of expats forced to endure lengthy waiting lists to find places to live.
"It has become a real challenge for expats to find a place to live on their budget," John Harris, Saudi Arabia director at Jones Lang LaSalle, told the news source. "We're going to see a substantial amount of compound supply coming on stream, which will relieve the pressure somewhat. But there's obviously a huge backlog of demand."
While the difficulties experienced by many expats in finding suitable housing are lamentable, they present unique opportunities for wealthy international investors.
According to The Telegraph, real estate is a favored investment strategy among affluent international businesspeople, alongside traditional portfolio options such as shares. A recent survey of the investment habits of internationally mobile wealthy individuals revealed that more than half of those polled indicated real estate was a high priority in terms of their investment portfolios, especially in emerging markets such as the Asia-Pacific region.
Conducted by the Economist Intelligence Unit on behalf of Royal Bank of Canada (RBC) Wealth Management, the survey also revealed investor preference for opportunities that yield high gains over prolonged periods of time, which real estate has traditionally offered in many regions.
"Our experience working with high net worth clients around the world shows that their success is often strongly influenced by a global perspective about building, protecting and ultimately transferring wealth to future generations," said George Lewis, head of wealth management at RBC, as quoted by the news source.
Expats have long favored temporary lodging and short term rental apartments in countries such as Spain when looking to purchase property. However, this trend appears to be reversing after many years of growth, according to the BBC.
A recent report into expatriation to Spain revealed that, in 2011, emigration outpaced immigration for the first time in more than 20 years. Many individuals who moved to Spain during the 1990s feel trapped by their financial obligations, and expressed concerns over the country's lingering economic uncertainty. Additional worries regarding the weakness of the British pound in comparison to the euro have only fueled many expats' concerns about their financial future.
Property development has been a mainstay of the Spanish economy for many years. If this report is any indication, it would seem that the days when Spain was viewed as a leading destination for expats could soon be numbered.