Singapore has been the only market in the Asia-Pacific in which government efforts to contain price increases have in reality been successful.
Governments in China, Hong Kong, and Australia have been trying for years to long-play the steady rise of residential property prices.
But their efforts have been largely failed, with prices continuing to grind boost because of the local public fears that if they don’t go for buy now, prices will increase on the far side what they can afford in future time.
This was according to the Emerging Trends in Real Estate Asia Pacific 2018 report published by the Urban Land Institute (ULI) and PwC. In Singapore, from peak to trough, public housing resale prices have fallen 11%, and private housing prices have fallen 10%.
The report recommended that the main difference between Singapore and other jurisdictions is the government’s tight control over the land sales, which underscores the role that supply-demand imbalances play in residential pricing dynamics.
Since this seems a noncompliant issue in most jurisdictions, upward pricing pushing in other regions are likely to persist, it added.
As it is, developers have been paid sharply higher prices for new plots of land, and as a result, home sizes are reduced throughout the region, particularly in markets with the highest prices.
In Hong Kong, for example, some 30% of new apartments authorized for construction during the first 5 months of the year were smaller than 200 sq. ft. , according to government reports.
Some factors that have negated property cooling measures elsewhere include current low-interest rates, supply shortages, and strong demand from foreign home buyers due to immigration and domestic migration.
Australia’s high levels of immigration, in tandem with housing shortages and growing competition from cash-rich foreigners, have efficient the country’s three largest states to impose increasingly higher taxes on foreign buyers – now equivalent to about 9% of purchase prices in Sydney and 13% in Melbourne.
Most of the banks have introduced lower loan-to-value ratios on mortgages and are bring down on loans to foreign buyers. Development funding for residential projects has also restricted.
The report cited one interviewee saying that Chinese buyers are not deterred by rising prices : “It’s just not an issue for them because quite apart from the fact that many people are just desperate for a foreign residence, property in big cities like Beijing and Shanghai is already more expensive than here, and incomes in China are rising faster than both Aussie taxes and housing prices.”
Similarly, China has imposed numerous potential duties on property sales depending on location and other criteria, while down payment there is now a minimum 20% and as much as 60% for second purchasers in developed cities. New home prices rose 5.4 per cent year-on-year in October.
In Hong Kong, home prices have jumped 10 per cent since the start of this year, despite prohibitive sales taxes on what is already the most expensive property in the world.
Current duties increase buying prices by 30% for overseas purchasers, while down payments are a minimum of 40% for most properties. Many non-bank lenders, some of whom are financing arms of developers, offer 90-per-cent financing for mortgages of new properties. This creates upward pressure on home prices because the annual demand is much higher than the number of newly construct homes.
Adapted from: The Business Times, 18 November 2017