Economic performance to dictate property markets in Asia-Pacific
Asia-Pacific has seen huge variation in residential property in 2016 and looking ahead to 2017, experts predict economic performance and policy will have the biggest effects.
Overall, China dominated the headlines with residential markets in Tier-1 and Tier-2 cities continuing to see extremely strong price growth, to such an extent policy makers stepped in yet again with measures to cool off the markets, according to an analysis from international real estate firm Knight Frank.
Policymakers were also making their impact felt in other markets such as Hong Kong, which saw a further rise in stamp duty in an attempt to slow a market that has continued to defy expectations, while in Australia strong price performance led to further taxes for foreign buyers introduced in a number of states.
In much of Southeast Asia and India, the story continued to be one of slow or sluggish performance, the report said, and in the case of Southeast Asia, a mixture of cooling measures and disappointing economic performance continued to make for weak performance in much of Singapore and Malaysia.
Indonesia and Thailand, two of the region’s past star performers, saw a slowdown in activity and in India, the market continued to be slow in many of the major cities with weak sentiment continuing to make trading difficult.
The wider economic environment and policymakers’ actions will have the most impact going into 2017, the report explained. “In the post-Brexit and Trump world, and with the likely demise of the transpacific partnership (TPP), there continues to be much uncertainty about economic growth prospects,” it pointed out.
“While on the one hand, this could directly impact residential markets, on the other, uncertainty does drive money away from equity markets into property. Policymakers, whether looking to withdraw measures or implement measures, will continue to have an impact on the market throughout 2017 which makes residential property observers increasingly in need of becoming political scientists,” it added.
As far as the outlook is concerned, Alice Tan, head of consultancy and research for Knight Frank in Singapore, some sectors will do well in 2017. She explained it has been a year of twists and turns with unprecedented global events unfolding in 2016 including Brexit in the UK, Trump’s victory in the US and the slowing Chinese economy, all of which have had an effect on Singapore’s economic growth and business sentiment.
“Almost all segments of the property market, residential, commercial and industrial, have experienced weaker performance in price and rentals, hitting new lows in the third quarter of 2016 since their previous peaks,” she said.
“Should market conditions weaken further and more units be released into the market as developers strive to meet project deadlines, there could be further price adjustments expected. Secondary sales could contribute slightly higher proportion of total private home sales transactions in 2017, as the market shows greater interest for larger sized and reasonably priced private homes, coupled with potential supply from home owners affected by possible interest rate hikes,” Tan pointed out.
“Overall private residential sales transactions could range between 14,000 to 16,000 units in 2017. For the commercial and industrial markets, the looming supply overhang, prospects of muted economic outlook and rising tenants’ market situation could weigh on prices and rentals, with at least negative five percent year-on-year rental corrections by end-2017,” she added.
The residential market in mainland China improved throughout 2016 with more cities seeing price increases while home prices in first tier cities and major second tier cities in particular, recorded strong growth, however, looking ahead, destocking inventory remains a major task in 2017, particularly for lower tier cities, according to David Ji, head of research for Knight Frank Greater China. He believes the central government will continue home purchase restrictions on these cities in 2017, with more cities set to join should their housing markets overheat. In Hong Kong, total residential sales are expected to reach over 50,000 in 2016, largely on par with previous years. Ji said given the recent price recovery partly prompted by investor interest, some of which are from the mainland, the Hong Kong government is keeping up various price cooling measures such as lowered loan to value ratios, tightened stress test requirements and a set of stamp duties.
He also pointed out the Hong Kong government has recently increased stamp duty for second home buyers to 15 percent in an effort to curtail price but affordability remains a major concern for many potential home buyers.
He also added in recent years, mainland developers have been increasingly active in residential land site acquisitions in Hong Kong, a trend that is likely to continue in 2017. Sarkunan Subramaniam, executive director of Knight Frank Malaysia believes 2017 will be another subdued year for property as developers will face lower demand whilst implementing strategies to attract and improve sales to counteract the lower consumer demand due to the current state of the economy.
‘On the investment front, vendors have more realistic expectations and purchasers are looking for bargains, therefore we expect to see more sales activity. We anticipate transactions in commercial properties and investment properties to be priced 10 to 20 percent below perceived market value with realistic and increased yields,’ Subramaniam added.