Housing prices have been booming throughout Australia and much of the Asia-Pacific region in recent times. Can this trend be sustained? And which cities still represent good value for investors?
Aspiring homeowners in China’s massive manufacturing hub Shenzhen know what it is like to be caught up in a property boom.
Over the past year, the city of 10 million that borders Hong Kong has seen estimated house price gains of between 47 and 52 per cent, with many investors turning to property after a volatile period on the country’s share markets.
Even some locals are confounded by the buying frenzy. Nonetheless, those who can afford it are joining in, anxious not to miss out on what seems like a sure way to make some serious money.
Shenzhen’s experience, while somewhat extreme, is far from unique.
Across the Asia-Pacific, many major cities are experiencing double-digit and high single-digit house price growth.
Related: Why do house prices keep rising in places like Australia and Singapore?
According to the Global Residential Cities Index (PDF) compiled by international property firm Knight Frank, five out of 10 cities with the fastest-rising house prices last year were in the Asia-Pacific region, led by Shenzhen and include Auckland (25.4 per cent), Sydney (19.9 per cent), Shanghai (18.2 per cent) and Vancouver (12.9 per cent).
Several other cities are not far outside the top 10, including Beijing (10.4 per cent), Melbourne (9.9 per cent) and Guangzhou (9.2 per cent). All sit well above the global average growth in 2015 of 4.4 per cent.
INTHEBLACK takes a look a seven of the Asia-Pacific’s hottest city property markets to find out what you get for your money, how they compare and what the future might hold.
By some estimates, Shenzhen is now the most expensive place in Mainland China to buy a home, outstripping even Beijing and Shanghai.
Real estate agent Colliers International reports an average sale price of A$10,200 a square metre.
After prices continued to surge early this year – Colliers International says (PDF) the average sale price jumped 18.4 per cent in the March quarter – the city government has acted to curb speculation by increasing the minimum deposit required and tightening rules for buyers who are not local.
Colliers says these measures helped slow sales in April, and price growth is likely to be volatile. But because the level of home ownership in the city is significantly lower than that of other major Chinese cities, demand from first home buyers is expected to provide a solid base for the market.
Knight Frank estimates Beijing’s house prices climbed 10.4 per cent in 2015 and China’s National Statistics Bureau says the average gain was 8.3 per cent.
Either way, it is a far cry from the hefty gains experienced through much of the past 10 years and in part reflects the effectiveness of measures that were taken by authorities earlier this decade to cool activity.
Beijing’s government is now trying to spur activity by cutting the bank reserve ratio and reducing the deed tax for certain properties. As a result, transaction volumes for new houses are growing at an annual rate of 75 per cent, according to Colliers International.
After soaring by between 150 and 242 per cent in the past 10 years
, Hong Kong property prices are moderating. Rising interest rates, hefty taxes, tighter lending requirements and a slowdown in capital coming from mainland China have combined to drive a sharp deceleration in activity.
Transaction volumes fell by almost a third late last year, helping push prices down 7.2 per cent in the December quarter, and Colliers International senior manager Joanne Lee believes they will head even lower. Although she does not expect prices to crash, she predicts they will fall by 10 to 15 per cent this year.
After peaking in mid-2013, Singapore’s property prices have been easing and are now down 9 per cent, according to Trading Economics.
The decline is the deliberate result of Singapore Government policy. Spooked by a rush of money into its property market from offshore, particularly from China, it began taking action in 2010 to cool demand, including restricting concurrent home ownership, increasing minimum occupancy periods, extending stamp duty and doubling deposit requirements for second homes.
In the March quarter 2016, the value of investment sales was the weakest at any time in the past six years, and views are mixed about how the market will perform from here.
In a note to clients, Joanna Chen, manager, research and advisory at Colliers International, said government land releases would boost property sales. But others think soft economic conditions, along with government policies, will continue to weigh on activity.
Economic growth slumped to 2 per cent last year and the International Monetary Fund predicts it will drop to 1.8 per cent in 2016 before accelerating to 2.5 per cent next year. Employment and bank lending are subdued and immigration has slowed, factors which some expect will constrain demand. Consultancy Jones Lang LaSalle estimates home prices could drop by as much as 8 per cent this year, while Knight Frank predicts a more moderate decline of between 3 and 6 per cent.
After years of strong gains, the Malaysian capital’s property market is slowing. House prices more than doubled between 2000 and 2014
, but began to slow last year, rising by less than 6 per cent (down from almost 8 per cent the previous year).
The slowdown has followed a series of measures taken by the government to dampen the market, including doubling the minimum price for offshore buyers (one million ringgit) and a big hike in the real property gains tax, particularly for homes turned over within five years.
More recently, a slowing economy has helped cool investor interest.
Reflecting the view that most of the pressure on Sydney house prices has come from a shortage of housing rather than overseas speculators, most attention has been directed at cooling demand by increasing bank lending standards and requirements.
This, combined with an increase in housing supply and slower immigration, is helping to rein in price growth, according to economist Rob Ellis, from Property Insights.
Ellis expects the Sydney housing market to soften rather than collapse, although he admits the risk is “on the downside”.
After registering strong house price gains last year, the residential property market in New Zealand’s largest city shows signs of calming.
Auckland’s average sale price climbed just 0.8 per cent in April to reach A$806,982, according to real estate agency Barfoot & Thompson.
The market has moderated after the New Zealand Government introduced a range of measures late last year, most notably tighter restrictions on loan-to-value ratios for investor loans.
Aucklanders are becoming more reluctant to buy and to sell. Sales volumes in April were down 12 per cent from the same time last year, and new listings were down 5.3 per cent over the same period, according to Barfoot & Thompson.
But this period of calm may not last.
New Zealand Reserve Bank governor Graeme Wheeler warned on 11 May that house prices in the city were beginning to accelerate once again, increasing “imbalances” in the country’s property market.
Flagging that policymakers may have to do more to dampen the market, Wheeler said that “further efforts to reduce the imbalance between housing demand and supply in Auckland remain essential.
This includes measures such as decreasing impediments to densification and greenfield development and addressing infrastructure and other constraints to increased housing supply.”
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