A sizzling year for Asian property markets

Runaway private housing prices compelled governments to impose cooling measures, with varying results
by Jo-Ann Huang Limin

05:55 AM Dec 23, 2010

SINGAPORE - Asia's residential property market stole much of the limelight this year as concerns of record property prices spurred government intervention in the form of repeated cooling measures. Singapore, China and Hong Kong were among the jurisdictions that have introduced anti-speculative measures to cool down their red-hot property market.

China was at the forefront of introducing price controls after property prices in the country surged 7.7 per cent over an 18-month period. This prompted the government to introduce measures such as a ban on mortgage loans for third properties.

In Hong Kong, prices grew by 50 per cent this year alone and to curb the rapid increase, policymakers had imposed a 15-per-cent stamp duty last month on properties sold within six months of its initial purchase.

These measures are considered drastic, said analysts, but have worked to cool the property market, albeit with varying results.

In Hong Kong, weekend sales of homes in the resale market dived 83 per cent immediately after the stamp duty tax was increased. But Hong Kong property market watchers still believe residential property prices could increase by 10 per cent next year.

"After the introduction of the stamp duty in Hong Kong, a lot of developers criticised the move for overdoing it," said Mr Colin Tan, head of research and consultancy at Chesterton Suntec International.

Singapore also implemented its own set of cooling measures, the latest of which were introduced in August. They include lowering the mortgage loan-to-value ratio to 70 per cent for owners intending to buy a second and subsequent properties.

The measures had some slowing effect on the property market, but robust housing demand, low interest rates and ample liquidity meant that the measures did not deter home buyers.

Latest home sales figures from the Urban Redevelopment Authority (URA) highlighted that, despite the cooling measures, last month saw sales hitting 1,909 units - a spike from 1,058 units in October.

However, quarterly prices fell signficantly since the introduction of the measures - private residential property prices grew at 5.6 per cent and 5.3 per cent in the first two quarters of this year, dropping significantly by the third quarter to 2.9 per cent following the latest batch of cooling measures.

Singapore's cooling measures were aimed at reducing speculative activity in the market, and analysts said that it has indeed achieved its objective to varying degrees. Yet, the market has remained robust and analysts said that it is because of the strong underlying demand for private homes, and not speculation, which has driven the market higher in recent months.

"The last round of Government cooling measures, which imposed several restrictions on re-selling, was ultimately incrementally adjusted by homebuyers," said Mr Ong Kah Seng, Cushman & Wakefield's Asia-Pacific senior manager of research.

"Many homebuyers are currently buying with the self prophecy that not buying a property now will mean one will miss the opportunity ahead - hence many are buying to fulfil the aspiration to own a piece of private property instead of hoping to make quick profits from it," he added.

To meet the demand in housing, the government will release about 30 land sites next year - roughly the same number of sites released this year.

Those balloting for their Housing Development Board (HDB) flat also have more reason to cheer. In the first quarter of next year, HDB will launch about 5,000 Build-to-Order HDB flats.

Still, some analysts expect more cooling measures to emerge next year. "It is inevitable," said Chesterton's Mr Tan.

URA's property sales and price data recorded this month will ultimately decide on the need for more cooling measures, said analysts. But they may not be as drastic compared to those imposed by Hong Kong and Chinese policymakers, analysts said.

Curbing demand too drastically may spell bad news for developers, too. "If prices fall too hard, this may mean thinner profit margins for developers," said Mr Tan.

Further steps may include tightening CPF policies to reduce withdrawal limits and lowering the loan-to-value ratio, particularly for second home mortgages, said Mr Ong.

Analysts said with a bright economic outlook going forward, coupled with low-interest rates and ample liquidity, home prices may still increase about 5 to 12 per cent next year.

MediaCorp also understands that the URA is seeking reactions and feedback from property consultants to study the need for more regulation in the sector.

Source: www.todayonline.com