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Luxury homes go off the boil across region
Posh home prices here fall 1.7%, says report; upscale rents take dip too
Published on Aug 23, 2011
By Esther Teo, Property Reporter
THE heat is going out of the luxury home market here and across the region, hit by factors from tighter mortgage lending to higher interest rates.
The slowdown is affecting markets to different degrees but the trend shows prices softening across the region, with even red-hot Hong Kong coming off the boil.
Prices in Singapore declined 1.7 per cent in the three months to June from the quarter before, according to a report from property consultancy firm CB Richard Ellis (CBRE) yesterday.
Rents of upscale homes also dipped 1.9per cent in the same period.
Competition from new buildings in non-prime locations was one factor for the price slide, the firm said.
It added that prices for posh homes are falling slowly, although other property segments are likely to remain stable.
The slowdown led developers to hold back launches of new luxury residential projects during the second quarter as existing developments continued to struggle to attract buyers, CBRE noted.
The Urban Redevelopment Authority's second-quarter data found that prices for homes in Singapore's city centre rose 1.6per cent. This includes all homes in the prime districts such as 9, 10 and 11 and not just the luxury segment alone.
The outlook for the high-end segment across the region remains clouded, with concerns over the potential introduction of new tightening measures in China, Singapore and Hong Kong.
Mr Nick Axford, executive director and head of CBRE Research Asia-Pacific, said interest rate hikes, tightening credit availability and general uncertainty over the global outlook are beginning to impact Asia's residential market.
Central banks in China and Malaysia had raised interest rates during the second quarter in an attempt to tackle inflation, which pushed up the cost of borrowing in the process.
Concern over the regional outlook also surfaced as the economic situation in the United States and the euro zone worsened last month, with further deterioration likely to have a knock-on effect on the Asian economy.
Most Asian cities also recorded slowing growth as buyer demand weakened.
The CBRE Asian Residential Capital Value Index, which tracks prices of luxury homes, rose 2.5per cent in the second quarter, down from the 5.5per cent gain in the first.
Price growth eased in most first-tier cities in China after further restrictions on home buying were implemented.
But prices in Hong Kong jumped nearly 9 per cent - the fastest in the region - though even that was down from the scorching 14 per cent expansion in the previous three months.
Prices in Bangkok and Ho Chi Minh City were static, as demand from end users was dampened by tougher mortgage policies, CBRE said.
While price gains were easing in the quarter, rents were firm in general across the region, with Hong Kong again leading the pack with a 7.3 per cent surge on the back of strong demand from expatriates.
But in South-east Asia, leasing demand was largely unchanged due to an oversupply of rental units in core locations.
Rents are expected to remain firm in the next quarter amid sustained demand from expatriate executives.
'In those cities where supply is tight, rents may be boosted further by users opting to rent instead of buy in the face of tight mortgage lending and the high cost of property financing,' the report noted.
Luxury home prices are also expected to remain stable for the rest of the year, although some markets could see a slight dip, CBRE said.
But Mr Axford cautioned: 'While the medium-term fundamentals for the sector remain healthy, the ongoing volatility in the global environment and concerns over the short-term outlook could have a softening effect on the market in the coming months.'
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