The next five years will be a trying time for Asian residential property markets, according to a recent report. The cost of housing is increasing in many Asian markets, which is one reason for this expectation. Governments are doing their part to try to keep housing prices down through regulation and law, but they continue to rise in many countries. While the property market in Europe and the UK slowed considerably (apart from in Bulgaria), Singapore and Hong Kong have outperformed the market in general with their housing prices. This sounds positive, but may cause trouble for uncanny investors.
A recent survey of experts in real estate, finance and business revealed that Asian real estate will still be hot ‘property’ in the next five years. This survey was commissioned by Allens Arthur Robins, a trust company and law firm. They predicted that REITs will remain quite healthy in Asia, however the residential property market in Asia may struggle. Commercial property is expected to do well, with high volume turnover predicted and good prices. Residential property though, is expected to suffer from increasingly high prices, and a resultantly slower market.
The residential property market in China is one of the biggest in Asia, volume-wise. A report by the South China Morning Post reveals that the main focuses of real estate growth will most likely be retail, industrial and commercial property. This is despite the fact that all three of these sectors have slowed down in the last few months. However, residential property has outperformed itself somewhat -the record high prices and appreciation that have thrilled many investors now make most residential property in Asia beyond the reach of the country’s middle-class citizens.
One example comes from Shanghai, where Shanghai Forte Land recently announced that a recently completed residential project will see an expected hike in prices of 20%. This is despite measures specifically put in place by the Chinese government to control the residential property market in China’s skyrocketing prices, which have created havoc in the country’s economy in the past years. Real estate investment in China is in turmoil due to these regulations.
Another example comes from Singapore, where the residential property market in this Asian country was described as the hottest in the world by Jones Lang LaSalle in 2007, after the city-state’s property prices surged by 31% in just one year. However, the effects of the credit crunch have not left Singapore’s market untouched, and Asia’s real estate generally, along with Singapore’s are now cooling somewhat. Private home prices rose by only .4% in the second quarter of 2008, which is the slowest increase in four years. These figures come from the government’s preliminary statistics.
India is also seeing the residential property market slow down. There is expected to be a 15-20% dip in residential property prices, due to the extremely low numbers of residential properties changing hands. The market is stagnating in cities like Mohali, Jaipur, Lucknow, Indore, Surat and Cochin, with up to a 90% drop in the number of property deals in these cities. This seems to be indicative of the residential property market in Asia generally.
Crude oil prices have also had their impact on Asian real estate, with both developers and private home buyers having less money to spend on their accommodation. The credit crunch continues, and we expect that residential property in Asia will be subject to all of these factors in the coming year.