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Asian Property Market
The Asian property markets have been making the headlines for the wrong reasons more often than right lately, but even in the face of government cooling measures and continued economic uncertainty, we are still seeing rising prices across many of the hottest markets. Knight Frank's latest report on the region clearly displays that the "hot" markets are still pretty hot.
The Hong Kong authorities have tried desperately to deflate some of the pressure out of their housing market, which could easily come to an explosive pop. The measures have had varying success, but according to Knight Frank, quarterly house price growth accelerated from 1.8% to 8.4% in Q2 – the fastest growth rate since Q3 2009.
New home sales volumes in Singapore hit all an all-time record year to date in 2012, with prices continuing to edge up on a quarterly basis. Total sales volume is expected to hit a new record by end 2012 with about 20,000 to 22,000 private homes sold. "With inflation significant and therefore real interest rates negative however, there is a real incentive to put money in property," according to Nicholas Holt, the author of the report. "The low mortgage rates and the status of Singapore as a 'safe haven' have helped facilitate this," he said.
In Indonesia the government has tried desperately to cool the property market, including introducing a loan-to-value cap of 70% in July. But even this didn't stop house prices increasing 1.2% in Q2 across the country, or condos in Jakarta from seeing a growth of 16.7% year on year.
Knight Frank predicts no end in sight for the cooling measures as governments continue to fear that activity from central banks in the Eurozone, Japan and especially the US could lead to excess liquidity finding itself into property markets in Asia.
One market where cooling measures have worked is China. According to Knight Frank prices in Shanghai and Beijing have shown a 7.1% year on year drop as of year end Q2 2012. However, prices have continued to increase in the affordable segment of the market indicating real end user demand, the report finds.
However, the China measures have lost out on the dual aim of not affecting growth in the wider economy. The latest forecasts are for growth of less than 8% in China this year, which is the lowest growth rate since 1999. By contrast, the United States hopes its Gross Domestic Product (GDP) number will reach 2 percent by the end of this year.
"It will be interesting to witness whether the new (China) leadership in November continues with the property cooling measures, given the slowdown," Holt says in his press release.
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