Interview: Jason Yip
Will real estate prices in Papua New Guinea level out in the short to medium term?
JASON YIP: We expect to see prices levelling out by the end of 2017 to mid-2018. There is always some uncertainty leading up to and during an election year, and this period has been no different, as corporations are taking a conservative approach to investment and expansion decisions. Once we have an indication of the direction of future policies, this will give businesses a better platform from which to make recommendations. However, we should put into perspective the fact that although there has been a drop in prices – as people relatively new to the country will be aware – it is nowhere near where prices were a decade ago, so there has still been immense gain in that sense, and the real estate landscape has seen a permanent shift.
To what extent will future developments such as APEC 2018 and investments in extractive industries impact real estate prices?
YIP: There has been much hype about APEC and how it will affect the real estate industry. We see it having nothing more than a short-term spike in the hospitality industry, affecting short-term accommodation as opposed to long-term stays.
Local real estate is naturally affected by activity stemming from other industries, in the sense that the more active those industries, the more impact they have on market demand. It is therefore important to encourage and make it a requirement for global firms doing business in PNG to ensure that they have an established base in the country, so that there will be substantial returns in terms of the direct contribution to local infrastructure and services.
What do you see as the market’s shortcomings, and what must be done to fill these gaps?
YIP: There is always positive talk and hope that more oil activity from extractive industries will fuel another growth period, however, it is clear that what we need is longer-term investments by organisations and businesses so that everyone benefits as a whole. To fill in the gaps – and when we say gaps we should be clear about the range of the rental market we are referring to, that is middle- to upper-management rentals – economic policy has to aim to provide a solid backbone of support and incentives for investment with realistic goals and minimal sudden changes. PNG has always had a reputation as a higher-risk, higher-return market, and companies setting up in PNG should be aware of this from the outset. It is not a market for the fainthearted, but it is well worth the effort if done correctly. Welcoming and allowing the establishment of those corporations that are most likely to flourish in PNG is the direction that should be sought, rather than pop-up businesses that aim to reap immediate rewards.
There is, of course, the long-held question of affordable housing in Port Moresby, or its apparent unaffordability for a large number of individuals. There needs to be a combined effort to find a long-term resolution by the government and private businesses, as the current problem is so overwhelming that it should be tackled by taking a longer-term marginal gains approach, otherwise it will never happen.
How is growth in the real estate sector dependent on increasing financial literacy and access to financial products in the country?
YIP: We would have to say that there is a more forgiving and less rigid relationship between banks and lenders, due to the recognition that there has been less access to finance and financial literacy. However, with technology and better access to internet, we can definitely see big changes in the shrewdness of the approaches taken to financial products. Requiring banks and financial institutions to seek better balance sheets plays a vital role in the opportunities offered to the public and how that affects the purchasing and leasing of properties.
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