Cooling measures in Asia appear lukewarm Cooling measures have been introduced in many key countries in Asia because of residential prices rising too fast, most notably in Hong Kong, mainland cities in China, Singapore and Malaysia. In Malaysia house prices have increased by 44.2% since the fourth quarter of 2008. Bank Negara has reduced the maximum tenure of house loans to 35 years. The federal government has doubled capital gains tax to 30% for real estate sold within three years and doubled the minimum purchase price for foreign property buyers to one million ringgit. . In Singapore the total debt servicing ratio (TDSR) of 60%, introduced at the end of June saw sales activity slow in August and September. Volumes and pricing in the Core Central Region (CCR) and Rest of Central Region (RCR) have been more impacted due to the higher price quantums. Despite this slowdown, a number of new launches saw fairly healthy sales rates in the past month. In Hong Kong prices seem to be stabilising but it is in mainland cities that prices are not responding to cooling measures and home prices surged to fresh record highs in October. Analysts say that the cooling measures are likely to take a few years to have their desired impact, but this is four years on. So despite a concerted government campaign the threat of a serious price bubble in cities like Shanghai and Beijing has not gone away. There are occasionally scare stories about the potential for civil unrest as housing becomes increasingly unaffordable and now there is talk of farmers being allowed to sell their land more freely to free up space for new homes to be built. Commentators are saying that next year is crucial in terms of introducing long term controlling policies. This drive to sort out a more long term approach comes as data from the National Bureau of Statistics shows that in Chinas 70 major cities prices increased a record 9.6% in October compared with a year earlier, the straight month of year on year increases. Prices in the capital Beijing rose 16.4% in October from a year ago, in Shanghai they increased by 17.8% and in the southern cities of Guangzhou and Shenzhen up 20%. All four cities posted the largest gains since the data series began in January 2011. Beijing, Shanghai and Shenzhen have already announced a number of tightening measures, including raising minimum down payments for second home buyers, making more land available and pushing forward the construction of affordable housing. But policy makers are keen not to bring the market to a shuddering halt as real estate is a major driver of the economy, supporting some 40 other industries and generating about 16% of the countrys $8.5 trillion GDP. Property prices have climbed despite slower economic growth and government efforts to curb them in large part because of the view that property is one of the best investment options, and also due to local government land sales being a source of needed revenue. The next most likely step is the introduction of a national property tax but the earliest this could take effect is 2015. A pilot scheme on the most expensive properties in Shanghai and Chongqing is judged to have had little effect due to its limited coverage. In the shorter term a plan to scrap the household registration system for small and medium sized cities could act to spur property demand there, balancing out the market by narrowing the price rises between cities of different sizes. It is clear that something has to be done in China, but at the end of the day these Asian markets are emerging and moving into a system of stability, transparency and regulation takes time. Meanwhile, those with the money will continue to pay over the odds just because they can.
Posted on: Mon, 25 Nov 2013 12:41:58 +0000
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