Wealthy Asian Buyers Start Regional Asian Property Revival

September 2009

Wealthy buyers are returning to key markets in Asia, prompted by low interest rates and government stimulus, according to analysts. Domestic investors who have been waiting for prices to bottom are driving most of the demand, although there is also some expatriate and cross-border activity.

CBRE’s Asia Investment MarketView for the first half of 2009 showed that real estate investment rose by 41% to US$12.4 billion in the second quarter of the year. “In the major commercial centres of Shanghai, Guangzhou, Singapore, Seoul and Hong Kong we’re seeing exceptional activity at the luxury end,” said CBRE Research Asia’s executive director Andrew Ness. “Some cities are relaxing restrictions on foreign buyers but the bulk of the market is domestic.”

Jones Lang LaSalle’s chief executive for Asia Pacific, Alastair Hughes, told the Bangkok Post that residential prices at the top end of the market are “bouncing back,” signalling the beginning of economic recovery. Transactions in Singapore are coming mostly from local buyers, while Shanghai, Beijing and especially Hong Kong are seeing more ex-pat activity, he said.

Interest rates plummet
Buyer transactions represent the release of pent-up demand following the end of many months of price falls. But it is also being encouraged by very favourable credit conditions and government actions, said Ness. The three-month SIBOR (Singapore interbank offered rate) has fallen to its lowest rate in at least ten years, 0.4871%, while Hong Kong’s HIBOR is at a five-year low of 0.21786%.

“We’re in an environment of unprecedented low interest rates and governments have scrambled to make lending much cheaper,” said Ness. “In Hong Kong, for example, some banks will actually lend at the HIBOR for the first year of the mortgage.” He also highlighted actions such as the Korean government’s cancelling of capital gains tax and the easing of loan-to-value ratios on secondary mortgages as having positive effects.

Resort buyers
While Bangkok has seen little improvement, other parts of Thailand such as Phuket and Koh Samui have experienced an increase in activity at the upper end of the market, said Japhy Goldman of agent Exclusive Properties. “Things took a short breather but prices have not dropped significantly and now it’s peak season we’re getting more traffic.”

Transactions have actually been improved by the loss of jobs in financial centres like Hong Kong and Singapore, he added. “Some people who are close to retirement don’t want to go back to the job market are moving here and hoping they’ll be able to do business over the internet. Because they’re buying primary residences they are prepared to pay more. We’re getting more and more enquiries all the time.”