The first six months of 2018 have come and gone, leaving behind a trail of mixed results for the Asian property market.
While some country’s markets have firmed as new players in the property game with a glut of foreign investment, others have taken a hit and have entered a severe period of cooling.
Inconsistency should be expected, however, as individual countries progress to different stages of the property cycle. Here’s how the major countries in Asia performed in H1 2018, and where they’re predicted to head going forward.
Singapore
“Things have definitely cooled down.” That’s the message from BusinessTimes’ housing correspondent Rachel Au-Yong, who warns Singapore may take some time to recover “because of uncertainty over the trade war and rising interest rate environment.”
As previously reported, in early July the Singaporean government announced adjustments to the Additional Buyer’s Stamp Duty (ABSD) rates and Loan-to-Value (LTV) limits on residential property in the hope of cooling their property market.
The move was described by many as akin to ‘using a sledgehammer to kill a fly,’ and the aftershocks are only now being felt. According to Au-Yong, developers in Singapore are now putting off launches and buyers are purchasing apartments for 3-5 per cent cheaper as analysts predict things will get even cooler.
This slump continues a tumultuous few years for the Singaporean property market which has experienced a sharp increase in private residential prices of 9.1 per cent since October 2017, and before that experiencing a decline of 15 straight quarters.
Au-Yong believes the market will see less transactions in the next quarter until there is more certainty and people figure out what their next move will be. But for the time being, the tough new restrictions are forcing Singaporean compatriots to look anywhere other than home in the search for their next property.
As previously reported, Singaporean investment into the Australian property market has risen by 64 per cent since 2016 and shows no signs of slowing down, with Australia ranking second on the list of top 5 destinations where Singapore Ultra High Net Worth Individuals (UHNWIs) plan to buy prime property in 2018.
Vietnam
The Vietnamese property market has been one of, if not the strongest performing country in Southeast Asia in H1 2018 thanks to a booming economy and an abundance of foreign investment.
Home prices in Vietnam have risen year on year since 2015, propelled by the country’s recovery from the housing slump between 2009-2013. This trend continued in 2017 with new home and townhouse prices in Ho Chi Minh City increasing 3.6 per cent and 13.6 per cent, respectively.
A change in foreign ownership legislation in 2015 gave international buyers the ability to acquire a long-term lease and buy property in Vietnam more easily, and they’ve been flocking in ever since.
The number of foreign buyers in Vietnam has increased 21 per cent since 2016. More specifically, Chinese investment in Q1 2018 is more than 300 per cent higher than Q1 2017, drawn to the low property prices compared to neighbouring countries like Singapore and Thailand.
Stephen Wyatt, head of JLL Vietnam, also notes that for the last three or four years Vietnam has “seen an increase in launches in the premium and luxury end of the market,” mirroring a booming economy that posted a 7.38 per cent year-on-year increase in GDP in Q1 2018, the country’s strongest in a decade.
Hong Kong
The conclusion of May 2018 saw Hong Kong homes increase in price for the 25th consecutive month. Smaller flats and secondary-market homes saw the greatest increases in value, with buyers willing to chase after higher prices worrying that property “will become more expensive if they do not act now,” according to Derek Chan, head of research at Ricacorp Properties.
It’s important to remember, however, that past cyclic patterns in housing prices shows time and time again that periods of record breaking price growth are often followed by periods of weakness, with many experts suggesting that the Hong Kong property market could be heading for its biggest crash since 1997.
Following Citibank’s decision to become the first major bank in Hong Kong to increase interest rates on home loans, UBS has come out and said they predict house prices could slide as much as 10 per cent over the next 17 months.
But the predicted slide doesn’t factor in the potential fallout from the US-China trade war, with implications threatening to turn out far worse than expected if the trade war ends up turning nasty.
“The dampener on China and Hong Kong’s economies as a result of the trade war is likely to weaken property purchase sentiment in the city,” reported UBS. “Looking at historical downturns in Hong Kong’s housing market, for instance the property price fall in 1997/98, we note all the major downturns were triggered by economic shocks.”
Indonesia
H1 2018 was a quiet one for Indonesia with zero apartment projects or luxury condos launched nor completed.
Smaller, cheaper properties like condominium units continued to outperform in sales, however the country still experienced a 2.6 per cent decline in rental growth.
The relatively dire market conditions have forced Indonesia’s central bank’s hand, who are now driving up interest rates in hope of reviving the sluggish property sector to help maintain growth in Southeast Asia’s biggest economy.
Authorities are also scrapping the country’s 15 per cent minimum mortgage downpayment for first-time homebuyers and relaxing rules on loan disbursements in a bid to support listless credit expansion, hoping the market returns to similar conditions to those of 2012 where prices of luxury Indonesian apartments skyrocketed amid a commodities boom.
Indonesian property analyst Kah Ling Chan expects property sales to be flat for the remainder of 2018, with the market to move at pedestrian pace until a possible recovery in the second half of 2019.
Thailand
The Thai property market has had a stable, promising first half of the year with approximately 20,000 new units having launched, a figure 35 per cent higher than that from the corresponding period in 2017.
Demand in Thailand’s condominium market has increased on the back of the country’s overall economic situation showing positive trends, with prices expected to continue to rise a further 5-10 per cent in 2018 as they have in recent years.
Thailand is one of the most attractive destinations for overseas investors as they aren’t affected by high taxes and stamp duties compared to those of its neighbouring countries, and because of the country’s overall investment climate.
Chinese buyers are currently dominating the Thai property market, accounting for 27 per cent of Bangkok’s condo sales. However due to the country’s non-existent laws regarding foreign ownership, many Chinese are using them as Airbnb or leaving them empty.