The new Silk Road property boom

A trillion-dollar initiative will be one of the most significant drivers in international real estate over the coming decades. Lisa Freedman reports

At Marina One in Singapore, a penthouse is on sale for about £11.25m through Knight Frank
At Marina One in Singapore, a penthouse is on sale for about £11.25m through Knight Frank

The Silk Roads, which ribboned out from the ancient Chinese capital of Xi’an 2,000 years ago, brought paper, gunpowder, porcelain, spices and gold to trading centres as far-flung as Rome and Malacca. Now, China is attempting to replicate their effect with its Belt and Road Initiative (BRI), a trillion-dollar strategy to unite the world through infrastructure. The new Chinese “Silk Roads” will have significant implications for those buying property. “The initiative is one of the clearest manifestations of China’s vision and influence and will bring huge opportunities for investors,” says Kevin Coppel, Asia Pacific regional head of global estate agents Knight Frank.

In Singapore, seven-bedroom villa 25 Pearl Island is on sale for about £15.8m through Knight Frank
In Singapore, seven-bedroom villa 25 Pearl Island is on sale for about £15.8m through Knight Frank

Today, China is one of the world’s largest exporters and the BRI, launched in 2013, is designed to ensure it remains so. Over 80 countries are now part of the initiative – from the central Asian republics to the countries of south and southeast Asia, the Middle East, Turkey and eastern Europe, as well as states in Africa and the Caribbean. Its intended trade routes, economic links and business networks will affect over 60 per cent of the world’s population. “How the Silk Roads develop, evolve and change will shape the world of the future, for good and bad,” says Peter Frankopan, professor of global history at Oxford University and author of The New Silk Roads: The Present and Future of the World

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The initiative is focused on six economic corridors: three on land, which form the Silk Road Belt (from China to central and south Asia, the Middle East and Europe) and three by sea (from southeast Asia and Oceania to the Middle East, Africa and Europe), forming the 21st-century Maritime Silk Road. For those buying luxury property, the Silk Road’s influence is unlikely to immediately detract from the lustre of established western markets – particularly as many BRI projects are long-term and uncertain – but its consequences are already being felt. Knight Frank carried out research on 67 countries with official signed BRI agreements and – taking into account factors such as restrictions on foreign ownership, local supply and demand, taxation and liquidity – ranked them according to investment opportunity. Its conclusions were clear. “The ‘project of the century’ will be one of the most significant drivers in international real-estate markets over the coming decades,” says Coppel.

At Palme Couture Residences in Dubai, a five-bedroom apartment is on offer for £8.24m through Knight Frank
At Palme Couture Residences in Dubai, a five-bedroom apartment is on offer for £8.24m through Knight Frank

Near-neighbour Singapore, southeast Asia’s key financial centre and largest air-transportation hub, has unprecedented resources and expertise to further the development of the BRI. Since 2013, more than 6,000 Chinese companies have established a presence here and warm, long-standing relations between the two countries have been strengthened, furthering Sino-Singapore cooperation in trade, finance and technology. “We’ve already seen the effect of the BRI on the property market,” says Victoria Garrett, Knight Frank’s head of residential Asia Pacific, “and this will only increase over time.” 

The Four Seasons private residence on the Chao Phraya river in Bangkok
The Four Seasons private residence on the Chao Phraya river in Bangkok

The positives of purchasing in Singapore are self-evident, as the island offers political stability, a trustworthy legal system, excellent personal safety and, of course, some of the best conditions to conduct international trade anywhere in the world. “It’s a great place to live, work and educate your children,” says Garrett. “There are a lot of expats living here and the highest concentration of very wealthy residents in southeast Asia.” Indeed, so popular has the city state proven with local and international buyers that the government has sought to restrict access to property purchase, introducing such “cooling measures” as taxation on multiple-home buying. Even so, residential prices here rose by 9.1 per cent in 2018, still significantly greater than most other major world cities.

The sitting room of a Four Seasons private residence, units from about £960,000 through Country Group Development
The sitting room of a Four Seasons private residence, units from about £960,000 through Country Group Development

Singaporean residents have long been significant investors in property and traditionally buyers have prioritised “Good Class Bungalows” (GCB) in prime locations (Districts 9, 10 and 11), while those wishing to combine a live-play lifestyle favour resort-like Sentosa Cove, where Knight Frank is selling 25 Pearl Island, a seven-bedroom villa, for SG$28m, (about £15.8m). Alternatively, for those who consider time away from the office as time lost, the penthouse at Marina One (about £11.25m through Knight Frank), the award-winning development now also home to Facebook, offers the ultimate in deluxe downtown living. 

Dubai’s first “super prime” homes, Royal Atlantis Residences, start at £1.4m through Knight Frank
Dubai’s first “super prime” homes, Royal Atlantis Residences, start at £1.4m through Knight Frank

The United Arab Emirates’ relationship with China, if not as long-standing as that of Singapore, is equally cordial – and Dubai is likely to form a progressively pivotal link in the BRI blueprint, offering critical access to both Africa and Europe. China has already become one of the UAE’s most important trading partners, with over 4,000 Chinese firms established here, and Dubai has seen a rapid increase in both Chinese tourism and real-estate investment. “There are very close links and Middle East governments have been keen to build these relations,” says Steven Morgan, CEO of Savills Middle East. “Dubai’s Dragon Mart malls are the largest trading centre for Chinese products outside mainland China and give Chinese manufacturers and retailers the opportunity to display their goods to buyers from Africa as well as the Middle East.” 

The courtyard at the John Pawson-designed Jaffa Residences in Tel Aviv
The courtyard at the John Pawson-designed Jaffa Residences in Tel Aviv | Image: Amit Geron

For international property shoppers, Dubai presents a glimmering opportunity – in a remarkably short time it has grown from a mirage-like vision in the sand to a major global city of three million inhabitants and over 200 nationalities. As well as the world’s tallest building, its busiest airport in terms of international passenger numbers and its burgeoning financial sector (in the decade to 2016, financial and businesses services grew 220 per cent, according to research by Knight Frank), it is rapidly developing into a place of cultural innovation, something that will only be underlined at the opening of Dubai’s Expo 2020.

Properties at Jaffa Residences start at £1.6m
Properties at Jaffa Residences start at £1.6m | Image: Amit Geron

Despite the doom-mongers, Dubai’s nascent property market recovered successfully from the tidal impact of 2008, and while measures to stabilise property purchase (such as better-regulated mortgages) have led to a recent slowdown, the city undoubtedly provides enduring attractions, with no tax on income, capital gains or – an increasing rarity – dedicated tax on international investors. Lifestyle is critical in defining elite markets, and Dubai’s Vision 2021 is intended to make the city one of the best places to live and work in the world, with improving public transport and new walkable neighbourhoods. Meanwhile, a city already celebrated for its luxury shopping is becoming an established cultural destination, reflected in the opening of the Dubai Opera, the consolidation of its Design District and the launch of myriad new art galleries. 

Banyan Tree Residences in Thailand are priced from about £2.5m through Savills
Banyan Tree Residences in Thailand are priced from about £2.5m through Savills

The property market, too, has moved from adolescence to adulthood. “In the past buyers were happy to buy anywhere,” says Maria Morris, partner at Knight Frank in Dubai. “Now there are definitely established prime addresses.” At the pinnacle, purchasers favour Emirates Hills, The Lakes, Downtown Dubai and, of course, the Palm Jumeirah (where Knight Frank is marketing a five‑bedroom apartment in Palme Couture Residences for £8.24m). Here, on the defining crescent of the Palm, Dubai’s first “super prime” homes at Royal Atlantis Residences (from £1.4m through Knight Frank) open this year.

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In terms of economic potential, southeast Asian countries such as Thailand, Indonesia and Vietnam, with their rapidly growing populations, accelerating urbanisation and rising affluence, offer strong investment potential – factors already reflected in Chinese involvement with projects such as the railway network linking China to Malaysia and Singapore via Laos and Thailand.

Thailand has long been a southeast Asian holiday playground – largely due to its party atmosphere – particularly for those considering the 2.5-hour hop from Hong Kong. It has also become a world leader in the development of branded residences – hotel-linked homes first launched here in resorts such as Phuket (where renowned Aman Resort’s Amanpuri first set the world alight in 1988). Asia overall now accounts for about 30 per cent of global sales of this type of property, with Thailand leading the way. Here, over the next two years, nearly 29 new hotel-branded residential developments are planned countrywide, with an accelerating expansion into urban locations. “There are three waterfront branded residencies opening in the immediate future in Bangkok: a Mandarin Oriental, a Four Seasons and a Banyan Tree,” says Robert Collins, CEO of Savills Thailand, which is selling the Banyan Tree Residences from 104m Thai bart (about £2.5m). “These are particularly popular with Hong Kong Chinese buyers looking to make the most of the city’s shopping and restaurants.” 

Thailand, of course, has an outstanding reputation for service, and branded residences, such as the new Four Seasons (from about £960,000 for a one/two-bedroom unit through Country Group Development) on the Chao Phraya river, appeal to wealthy international buyers not only because of their five-star attention and indulgent design, but also for their guarantee of quality. “They command a premium of up to 80 per cent,” says Collins, “because buyers are assured the brands have done due diligence on their partners and are highly protective of their client profile, remaining closely involved after sale.”

Sun, sea and super-luxury also characterise the top end of the property market in Israel, the Silicon Valley of the Middle East, where cutting-edge technology and innovation have been the bedrock on which the China-Israel relationship has flourished. A significant gateway between Europe and the Middle East, Israel is now working closely with the Chinese on major new infrastructure projects, such as the light railway in Tel Aviv and the new port in Ashdod, and while the country remains vigilant of its traditionally tight bond with the US, its high-tech and green sectors stand to benefit hugely from the BRI. “The Chinese plan simply means a bigger pie,” Alexander Pevzner, founding director of Israel’s the Chinese Media Center, told The Jerusalem Post. “If there is a bigger pie, there is a chance that Israel will get more business opportunities.”

Israel, a small country with a booming population, will require a huge investment in real estate in the near future. But with serious restrictions on space and a growing class of very wealthy young people, as well as strong interest from overseas buyers, prices should see steady growth, despite recent “cooling” taxes. Tel Aviv – where prime purchasers focus on Rothschild Boulevard, the seafront (near here, Israel Sotheby’s International Realty is selling a four-bedroom penthouse for $19.48m) and Jaffa – has a history of arresting contemporary architecture. Now the Unesco-protected heritage site White City, the largest collection of Bauhaus-designed buildings in the world, has been joined by such striking additions as Ron Arad’s Design Museum Holon; while new residential developments, such as the John Pawson‑designed Jaffa Residences (from £1.6m to £46.3m), are introducing a strong note of 21st-century cool as sleek and sophisticated as anything in San Francisco. “Jaffa itself has undergone a fantastic transformation,” says Aby Rosen, co-founder of New York-based hotel-and-real-estate investment company RFR Holding, which owns the residences. “The historic area has seen a flock of artists, designers and creatives come to its Old City, coupled with the opening of incredible restaurants and nightlife.”

Investing in property to make the most of the multiple opportunities offered by the BRI may not be straightforward. “Progress will be patchy and opportunities staggered,” says Knight Frank’s global head of research, Liam Bailey. One thing is certain, however: patient purchasers prepared to calculate in decades rather than years should reap significant rewards. 

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