More residential property investors buying across borders in the Asia Pacific region

Various residential property markets in Asia Pacific are seeing a diverse range of buyers and while most remain domestic, there is an increase in inve

Various residential property markets in Asia Pacific are seeing a diverse range of buyers and while most remain domestic, there is an increase in investors buying across borders, a new analysis report shows.

Many markets in the region are maturing and property investors and developers are now looking for the next high yielding market, according to the report from international real estate consultants Knight Frank.

It suggests that developing countries such as Cambodia, the Philippines, and Indonesia are becoming attractive as due to high economic growth, a young population, rapid urbanisation and a rising need for different types of housing.

Looking at the region as a whole, the most mature market in Australia saw 1.5% price growth in the fourth quarter of 2016 and 3.5% growth across the whole year. But finance can be an issue due to tighter lending restrictions from the major banks across the board, including limiting interest-only loans to 30% of total new mortgage lending, down from 40% previously.

In the region’s other mature market, New Zealand, a lack of supply, rising demand and record low interest rates fuelled a 12.7% price growth making it the second strongest performing market worldwide last year. In recent months, however, market activity has seen some slowdown as the Reserve Bank of New Zealand continues to lobby the Government to add income limits to its macro prudential cooling measures.

In China national house price growth is slowing gradually from 10.8% year on year to just 1.9% in the final three months of 2016. The report suggests that strong interventions from the authorities to cool down property markets in Tier-1 and Tier-2 cities are showing early results.

In Beijing, some of the strictest restrictions were introduced, for example, down payments for second-time buyers of private sector developed homes were raised to at least 80% of the purchase price, up from 70%, and the definition of second time buyer was broadened to include those who have any mortgage history, regardless of where or whether they currently own a property.

Hong Kong house prices continue to increase, with the upward trend expected to persist throughout 2017 with vales up 11.2% from the second to the fourth quarters of 2016, the strongest growth in the region.

‘Rebalancing the dynamics in the property market and providing affordable housing for the low and middle classes will be vital for Hong Kong’s newly elected chief executive,’ said Nicholas Holt, Asia pacific head of research at Knight Frank.
In India, the report says that the highly controversial demonetisation initiative is believed to be softening price growth in the short term, as it poses an unpredictable disruption. In recent months, developers refrained from announcing any new launches and buyers turned extremely cautious before committing to purchases.

In the long run, however, the reduction in the black money economy is projected to augur well for the industry, with positive impacts expected to start to be felt by the end of 2017, the report explains.

Indonesia’s property market is regarded as having entered a mature or consolidation phase. Quarter on quarter house price growth slowed to 0.4% compared to the 2.4% increase year on year and the outlook for 2017 remains cautiously optimistic with opportunities and challenges.

‘Despite the successful local election and tax amnesty program in early 2017, buyers are still adopting a wait-and-see approach. However, the new infrastructure underway and plans for its acceleration are expected to see increased consumer confidence and optimism in the near term,’ Holt pointed out.

House prices in Japan stayed flat in the second half of 2016, recording a marginal drop of 0.2% for the whole of 2016. The report points out that the Government relaxed its immigration policy and now allows highly skilled foreigners to apply for permanent residency after as little as a year.

‘As an attempt to boost its declining young working population, this new point system may potentially propel more demand in housing, further strengthening the appeal of Japanese residential properties,’ Holt added.

The report says that the general performance and outlook for Malaysia’s property market is still lacklustre as both economic conditions and public sentiments are down. However, some investors, including overseas buyers, may opt to capitalise on the chance to purchase discounted properties that offers stability and long term potential.

Taiwan’s housing market was the second weakest performing globally in 2016, with a 6.5% year on year decline. Holt explained that the local property market has been affected by the integrated Housing and Land Tax and high holding tax at the beginning of 2016. As a result of the Government’s cooling measures sales volumes fell by 35% last year.

He also pointed out that a slight tweaking of cooling measures in Singapore was a surprise in March as the Government reduced the holding periods for residential property purchase down to three years from four years while also lowering the seller’s stamp duty by 4%.

On the other hand, regulators also imposed Additional Conveyance Duties on residential property holding entities, which closed a tax loophole that allowed developers to offload apartments in bulk to institutional investors and wealthy Singaporeans.

Last year saw a strong performance in the prime and super prime markets in Thailand, particularly in Bangkok. Despite a slowing economy, demand stayed high, supporting price growth.

‘With limited land and growing competition for capital from other real estate classes, the prime residential sector is expected to witness moderate price growth amidst potentially slower sales activities in 2017,’ added Holt.

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