Beijing and Australian governments struggling to rein in runaway home prices

Runaway property prices in some major cities have had their respective governments scrambling to rein in the market.

beijing-tongzhouIn Beijing for example, regulations pertaining to online real estate portals have been set, resulting in 15 such sites having had to remove misleading information from their website. False advertising is rampant and could have had a part to play in the skyrocketing of home prices in Beijing. Many online sites promise “limitless potential for price gains” and even fengshui advice, boosting an atmosphere that is ripe for speculation. The government fears that uncontrolled price increases will result in household debt and ballooning bank credit risks and generally creating a sense of uncertainty and discontent on the grassroots level. This latest move is on top of other rules already implemented in attempt to cool the market in the Chinese capital. Minimum down payment for a second property has already been increased from 50 to 60 per cent and purchase of a third property is disallowed.

SYdneypropertyIn Australia, a surging housing market also has the Australian government trying to relieve the pressure on a possible property bubble which is in danger of bursting, with dire consequences for the economy, possibly even the first recession in 26 years. They have issued warnings to banks for the latter to curb home lendings, in particular to investors. Almost 50 per cent of the home loans taken out from Australian banks are from investors.

Interest rates have been at a record low, accounting for the heightened number of loans, which in turn has caused property prices to rise exponentially, with that in Sydney rising 104 per cent and in Melbourne, 88 per cent. Household debt has already risen to 189 per cent, one of the highest in the world and many Australian households now find themselves ladened with hefty home mortgages, which could be problematic should unemployment or a recession take place.

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.