Knight Frank Launches Asia-Pacific Residential Review June 2015

Knight Frank has launched the Asia-Pacific Residential Review for June 2015 that tracks the price movement of 11 major markets in Asia-Pacific. Q1 2015 saw house prices increase across six of these markets.

Commenting on the report Nicholas Holt, Head of Research for Asia Pacific said, “Despite facing many headwinds, the IMF is forecasting stronger growth in 2015 for six out of the 11 major countries we track. While this should be a positive sign for home owners or investors, the reality is that in many cases there has been a divergence between short-term economic growth and market performance.

“Perhaps now more than ever, property market observers are looking to policy makers for clues about how markets will perform.  Monetary policy, tax, regulations and underlying fundamental drivers such as growth demographics and urbanisation will have a significant impact on markets.”

Here is a quick tour around Asia Pacific’s main residential markets according to Knight Frank:

The Reserve Bank of Australia’s recent decision to hold interest rates followed two 25 basis point cuts in the official cash rate in February and May. Market performance continues to vary significantly across the state capitals, with Sydney continuing to see the strongest price growth, followed by Melbourne, while Darwin has seen its prices soften.

In China, the reported introduction of the Qualified Domestic Individual Investor Programme 2 (QDII2), which will allow residents in six selected cities to invest directly abroad, is the latest possible step in the continued liberalisation of capital outflows. With residents in Shanghai, Tianjin, Chongqing, Wuhan, Shenzhen and Wenzhou who meet certain criteria reported to be able to apply, this could have a significant impact on destination markets for Chinese investors, most notably Australia, the US and the UK.

House prices in Hong Kong defied the ongoing cooling measures by rising a staggering 18.4% in the 12 months to Q1 2015. This is the highest annual price growth in the overall market since the second quarter of 2013.

The Reserve Bank of India recently moved to cut its repo rate from 7.50% to 7.25%. This is the third time in 2015 the Bank has acted, despite the economy now growing at a faster rate than China. This move will partially help residential markets to recover in the world’s largest democracy, which saw 6.3% annual price growth as at Q3 2014.

A revised super luxury tax of 5% on the purchase price for houses above Rp 5 billion or a building area exceeding 400 sq m has been introduced in Indonesia. This move, mainly aimed at raising revenue for the government, could also be joined by an increase in the scope of the luxury tax, which is currently levied at 20% on houses above 350 sq m in size and condominiums above 150 sq m. To counter these taxes, policy makers recently reviewed the minimum down payment on properties over 70 sq m, potentially relaxing them from 30% to 20%.

Japan continues to be a story of Tokyo and the rest, as the country posted impressive economic growth in Q1 2015. The country’s capital, which continues to see strong population growth and the prospect of the 2020 Olympics, has boosted infrastructure spending, which will help support market performance through 2015.

The market in Malaysia is still digesting the impact of the recent introduction of the Goods and Services Tax (GST) although this is not levied directly on residential purchases. With a lower number of loan applications, due to tighter lending guidelines as the government tries to rein in household debt, the market remains subdued.

In New Zealand, the Reserve Bank of New Zealand announced that it will now differentiate between the Auckland real estate market and the rest of the country. The decision to relax the loan-to-value ratio restrictions on first home buyers outside of the Auckland region will prove a boost to those regional markets that have been subjected to the restrictions since their introduction on 1st October 2013.

The residential market in Singapore remained muted in Q1 2015, with only 1,311 new private residential units being transacted, the lowest volume in a quarter since Q4 2008. Overall private home prices fell for the sixth consecutive quarter, declining by 1.0%. Prices are expected to further decline by 3 – 4% for the whole of 2015.

The recent announcement of the new capital gains tax scheme in Taiwan could further weaken the confidence of property investors. The plans include a 45% tax on the profit if the vendor sells the property having owned it for less than one year. The previous regime taxed on the assessed value, often significantly lower than the sale price. Many investors are now expected to be more eager to dispose their residential properties before the launch of the new tax regime in 2016.

In Thailand, Bangkok’s market performance is increasingly becoming polarised between centrally located condominiums, which continue to perform well, and outer suburbs. More secondary locations are seeing a significant amount of new supply with developers having to compete more aggressively for buyers.

 

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