Why property cooling measures are here to stay

ABSD, SSD, TDSR, QC – These abbreviations related to property cooling measures implemented over the course of 5 years have taken root in the local real estate and construction industry and despite a much quieter market, may not go away anytime soon. And with good reason.

Aeon MelbourneThe demand for properties in other major Asia-pacific countries and cities such as Hong Kong, China, Australia and Japan have not seem to wane, reflected by soaring home prices in Hong Kong, Sydney, Melbourne and various top-tier cities in China. And this is despite their governments placing more restrictive regulations in place in efforts to curb investment outflow and property speculation. But perhaps it could be the case of too-little-too-late. And it also goes to show that investors are still looking for markets to hedge their funds and the pool of willing China investors looking to take capital out of their country agains a depreciating yuan.

CasaAerataIn Singapore, despite a gradually decline in home prices, the market has remained resilient and a untimely lifting of property curbs may result in a quick and unrecoverable increase in property speculation. In fact, despite the series of property curbs instrumented since 2013, the property cycle seems to already be reaching the bottom, which could only mean a turnaround possibly within the year. Last year, resale volume rose 28 per cent and total sales increased by 16 per cent from 2015, indicative of a recovering, or at least stabilising, market.

Demand for Hong Kong properties continue to climb

Home prices in Hong Kong are escalating despite the government’s attempts to curb the rapid and steep climb.

OneKaiTak1Photo credit: www.onekt.com.hk/

Buying a resale private property from the secondary market has become difficult due to the heavy stamp duties levied by the Hong Kong government on open market homes in an effort to curb rising property prices and a ballooning market. Stamp duties for first-time local buyers are particularly high and the move has slowed down activity in the secondary market considerably. Instead, it has created a demand for new homes in the primary market. Since homes in this market are sold directly by the developers, they are able to adjust home prices according to market demand and requirements, sometimes even offering incentives and discounts.

In the first month of 2016, the demand for new homes fell by 76 per cent. In the same time this year, it rose by 48 per cent. A complete turnaround. With the current lack of interest and activity in the secondary market, developers are  ceasing the current window of opportunity by its neck and adjusting prices according to rising demand. And the demand is high indeed. At China Overseas Land & Investment‘s new residential project situated on the site of the old Hong Kong airport, One Kai Tak, all 188 units were sold out in a single day last month.

OneKaiTak3Buyers may ramp up their buying speed and fervency in the months ahead, as they pre-empt the possibility of the Hong Kong government implementing further curbs on the market, in particular on individuals who sell their properties to purchase new ones.

Hong Kong’s red-hot real estate calls for new cooling measures

The pace and amplitude of Hong Kong’s rising property prices, in particular over the last couple of years, have seen the authorities taking proactive steps to cool it. Despite a move to increase stamp duties 3 years ago, prices have continued to climb. In September this year, prices surged once more, after 6 consecutive months of increase, to clock at a record high for the year.

hongkongpropertyHong Kong is already considered one of the most expensive Asian cities to live in, and current cost of real estate plus the high standard of living, has placed many housing options out of reach for the average citizen. Now, with experts predicting further price increase for the rest of the year, the Hong Kong government has once again raised stamp duties on property transactions.

Stamp duties will be raised 15 per cent for all transactions, up from the current 8.5 per cent. This change only affects citizens however, as foreign buyers are already paying a 15 per cent stamp duty. This will hopefully deter property flipping for the populous though the wealthy may still transact within the luxury property sector. ManyWi mainland buyers prefer to hedge heir funds in the Hong Kong real estate sector and have thus negated the effect of the Hong Kong government’s properties cooling measures.

The_Mediterranean_Hong KOngTo help the common man secure housing, first-time home buyers will only be charged a maximum 4.25 per cent stamp duty, dependent in the property value. This latest move is one of the government’s attempts to cool the red-hot property market before financial instability sinks in and causes more chaos to their economy.

 

China’s property explosion slows only slightly

There has been fear of a bubble growing in China’s property market but as property prices fell  in some of China’s top and second-tier cities this month, the fears may be slightly allayed as it seems to indicate that the curbs which authorities have put in place are starting to work.

Property analysts have however reported a change in focus for some mainland buyers to Hong Kong as skyrocketing property prices and cooling measures put some off.

HongKong The AltitudeThe property market in China is one of the country’s main source of revenue growth, and while the authorities may want to prevent a bubble from bursting, they are also put to task to keep the economy alive. China’s economic growth of 6.7 per cent in Q3 was largely dependent on its real estate industry. Recent curbs include larger down payments and restrictions on multiple property ownerships. But the low interest rates offered by China banks have kept the buyers coming. Though the rates have remained unchanged since October 2015, it has been cut 6 times prior.

While new home prices in Beijing fell 3.7 per cent and 2.5 per cent in Shanghai, some may consider this a market cooling. But the average new home prices across 70 cities have shown a record surge last month, the highest in 7 years, with a 1.8 per cent rise from August.

 

The true value of Hong Kong homes?

Property prices in Hong Kong are at a record high, and there are no signs of it letting up anytime soon. Or does there?

From the number of foreclosures on properties surging to a 5-year high, buyers seem to be struggling to cope with high-interest home loans, almost impossible property prices and a weakening economy. Although a property bubble has yet to occur, cracks in the market seem to be showing as the Hong Kong Monetary Authority (HKMA) points to a growing number of homes whose value are lower than their original price tag.

Park yoho venezia Hong Kong propertyBy the end of 2016’s first quarter, 1,432 homes were already under the foreclosure hammer, and their value – a whooping HK$4.9 million (S$852.5 million). As the Hong Kong government has a strictly-regulated banking system and with 7 rounds of property cooling measures already in place, home buyers and investors have been borrowing from unregulated sources such finance firms and real estate developers, some up to 95 per cent.

Analysts are concerned that the household debt is at 70 per cent and more investors and home owners have been using their properties are collateral for other transactions such as stock trading. As the global and local economy shake, they find themselves in deep hot water. What will the near future hold for Hong Kong’s property market? Is a bubble brewing and is there a danger of the 2008 recession?

 

Singapore property market on the mend?

Is Singapore’s property market finally bottoming out? Are current property prices the lowest they can go?

WhitehavenHong Kong and Singapore are 2 of Asia’s most expensive residential property markets, and while both countries’ governments have implemented property cooling measures to help abate the tension, prices remain high. Though Singapore’s property price spike of 92 per cent in the decade between 2003 and 2013 was not as drastic as Hong Kong’s 370 per cent in the same time period, housing cost has increased considerably and was much fodder for debate during the past 2 elections. While home prices have fallen 1.2 percent in Singapore and 13 per cent in Hong Kong since September 2015, the fall will have to be much more drastic for the situation to return to what it was before 2003.

Taking inflation, economic growth and global economics into consideration, property analysts feel that Singapore’s property cycle has almost reached its bottom or turning point as it is in a much more advanced state than Hong Kong’s. Considering the gentle slope of decline in Singapore’s property prices, a sharp rebound seems unlikely. Will there however be a glimmer of hope for a gradual increase upon policy changes and changes in the demand and supply scale?