Is it the right time to invest in Asian realty markets?
The real estate climate in Asia is not just looking up, but the region also is leading the global real estate market recovery, according to a worldwide research. Average realty prices rose by 14% in the past year in Asia, the latest Knight Frank Global House Price Index shows.
Top performers are the Asian economies of Singapore, China and Hong Kong however their quarterly rate of growth suggests these heated markets are starting to cool. Europe continues to record the weakest performance of all world regions, although it is an improving picture, up from -4.1% in the first quarter of the year to -0.1% in the second quarter.
“Each quarter we are presented with further evidence that the impact of the global recession on the world’s housing markets is diminishing,” said Liam Bailey, head of residential research at Knight Frank.
He pointed out that a slight convergence is occurring with the disparity between the top and bottom of the table being less pronounced than a year earlier. On the one hand, government intervention, particularly in the heated Asian economies, is starting to have the desired cooling effect as indicated by the latest quarterly results.
On the other hand, economic stimulus measures put in place by many western governments such as ultra-low interest rates, first time buyer concessions and targeted support for banks have encouraged house buyers and this increase in demand has helped push prices higher, albeit moderately so.
He believes that prices are beginning to return to something close to a sustainable level as the relationship between prices, rents and incomes falls more in line with their long-run average.
“The performance of the global housing markets can still easily be grouped by world region with the Asia Pacific countries occupying the top of the table and the European economies the bottom. However, sub-divisions within these groups are starting to emerge. In Asia for example, the housing markets of Singapore, China and Hong Kong are clearly outperforming their neighbours in India, Indonesia and Japan which are ranked in positions 26, 29, and 42 respectively. In Europe too, there is a clear divergence with the Nordic countries recording annual growth of between 8 and 11% and most of their Baltic and Southern European counterparts experiencing negative growth,” said Bailey.
Aside from Asia Pacific’s strong performers, South Africa and Canada represent some of the most heated housing markets recording annual price growth of 14.8% and 13.5% respectively. “The potential risks to future growth are many and varied. For western economies the availability of new funding, the scale of austerity measures, earnings and employment growth will prove critical to the health of their housing markets. In Asia, a lot hinges on how far governments intervene in fiscal policy. In China for example, the government’s recent decision to increase interest rates to 5.56% from 5.31%, the first rise since 2007, represents a serious attempt to curb both inflation and its investment-led economy,’” he added. (Source: Knight Frank Global House Price Index, Q2 2010)
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