While fears of a property bubble forming in China are beginning to recede thanks to a number of government calming measures, many analysts are now turning their attention to the growing Hong Kong market.
Real estate experts are warning that prices in the region are too high and need to come down if a property bubble is to be avoided. A 42 per cent growth in prices since the beginning of 2009 and predictions that they could rise another ten per cent this year is causing anxiety. "Property prices are at a fairly high level right now. If it continues it may form a bubble," said Peter Wong, HSBC's chief executive officer for the Asia Pacific region. With interest rates at a two-decade low and a growing local economy it is expected that prices will continue to move upwards.
According to Nicole Wong, regional head of property research
at CLSA, prices will rise another 15 per cent in the next 12 months as limited supply forces buyers to pay more for real estate that is already expensive. She said that the city's promising job market and growing wealth will help drive demand for real estate while supply does not increase much. However, the suggestion may be that as well as the news highlighting the strength of the Hong Kong market in recent years, it is also reflective of the direction in which real estate in Asia is heading.
In recent times it has become accepted that the property markets in the Asia Pacific region have outperformed their western counterparts, with many able to recover better and faster following the global economic crisis. Many of the markets have enjoyed rapid growth and investors who bought early have enjoyed massive return on investment
. However, many industry commentators are unsure how long the increases can be sustained and concerns have been raised about the formation of bubbles in certain areas.
These fears even prompted the Chinese government to intervene and introduce a number of cooling measures designed to prevent speculative buying from occurring and ultimately slowing the growth. The government in the country has raised mortgage rates and down payments for second and third homes, restricted lending and begun building affordable housing - all of which is likely to dampen sentiment in the sector. In fact, the harsh policies announced in mid-April appear to be working, with transaction volumes in some cities plummeting.
The government also plans to roll out more affordable housing as increasingly more Chinese buyers are complaining that they have been priced out of the market.
Slower Second Half of 2010
Meanwhile, according to an article by Reuters, a number of major real estate markets in Asia are likely to face a slower second half of 2010 because of increased policy risks and an expected increase in housing and office supply.
Furthermore, the report notes that the Hong Kong and Singapore governments are also wary of asset bubbles forming, although government moves to combat this have been tame in comparison with China. In Hong Kong the stamp duty on purchases of luxury apartments has been raised, while in Singapore a new stamp duty on homes sold within a year of purchase has been introduced as well as a cap on loans. "Every market is a little different in the coming six months," said Ms Wong. "Some markets might have policy risks and that would be for Singapore and a little bit from Hong Kong. And there will be some markets where policy risks have peaked in our view, like China."
Eric Wong, UBS head of Asia real estate research, believes that these policy risks are likely to lead to a number of reductions in property prices later in the year. "The main uncertainties are policy risks that are starting to unfold in China, and especially as inventory starts to build up, you should see price cuts emerge in September, October," the expert told Reuters.
Currently, the bright spots in the Asian property markets
would appear to be in a number of emerging markets, such as Thailand, where the government has been helping to support the markets as internal political strife impacted its economy.
A recent report by JPMogan analysts predicted that Thailand's economy will expand 8.5 per cent this year, while Indonesia may report growth of six per cent and economies in Malaysia and the Philippines may expand 7.2 per cent and 6.8 per cent respectively.
- Thursday 12 August 2010