Published & Updated as on - 2010-03-04
Asian
countries, fearing a disastrous US-style property bubble are striving to cool
down their real-estate markets as the region powers out of the global financial
crisis.
Policymakers are worried that excessive
exuberance could push property prices far above their real value, only to crash
and bring down with them banks that lent money too freely and individuals who
borrowed beyond their means. “It is better to preempt a bubble than wait for
it to get serious and have to take more drastic measures,” Singapore prime
minister Lee Hsien Loong said last month after the city-state took fresh
measures against speculation.
Singapore was one of the countries hit by the
1997-1998 Asian financial meltdown. That crisis followed a property crash,
leaving a blighted landscape of unfinished projects across the region and banks
gasping for lifelines.
Problems
in the US housing market had set off the devastating financial firestorm that
swept across the world in late 2008 and lasted well into 2009.
While Asia is now leading the global economic
recovery, officials are determined to avert another crisis. Low interest rates,
strong demand and speculation have pushed property prices in many Asian cities
higher, in some cases surpassing peaks reached in 2007.
“The risk of an asset bubble is quite high in
certain (economies) such as China, Hong Kong and Singapore,” said Chua Yang
Liang, head of Southeast Asia research at property consultancy Jones Lang
LaSalle.
A bursting of that bubble could “potentially
derail economic growth, especially if banks and other investment houses are
overly exposed to those sectors”, Chua told AFP, singling out real estate as a
cause of concern.
In
China, property prices in 70 major cities hit a 21-month high in January
Beijing has tightened lending, requiring buyers of second homes to put up a
down payment of at least 40 %, and they also face higher interest rates on
their mortgage loans.
In
Singapore, where housing prices have been heating up since last year, the
government slapped additional duties on sellers who flip a residential
property within a year of buying it.
Home buyers are also now limited to borrowing up
to 80% of the property’s value, instead of 90%. In densely packed Hong Kong,
home to one of the world’s most frenetic property markets, authorities are
fretting about a surge of speculative money since late 2008.
Starting April, the territory will increase the
stamp duty for sales of flats worth 20 million Hong Kong dollars ($2.6 million)
or more from 3.75% to 4.25%.
Prices
of some Hong Kong luxury flats have returned to 1997 boom levels. In October
last year, Henderson Land Development said it had sold a luxury duplex apartment
for a world record of 88,000 Hong Kong dollars ($11,300) per square foot, or a
price tag of $57 million.
Australia’s
central bank on Tuesday lifted interest rates afresh. One factor it cited was a
“solid” increase in mortgages, “and dwelling prices have risen significantly
over the past year”.
Median
house prices in Sydney rose 12.1 % in 2009 and 18.5% in Melbourne, and
observers said the rise was likely to continue.
But Simon Vinson, head of Asian property at AMP
Capital Investors, said he did not see the overall Asian market overheating.
“It’s really only been the residential market that has experienced strong
price growth. Commercial markets remain less buoyant,” he said.
The rise in residential property prices is just
a “retracing” of some of the losses suffered by the sector during the global
downturn, he said. “Is this a bubble? At the overall market level, we believe
it is more a reversion,” he said.
Analysts also said that unlike their
counterparts in the West, Asian banks are not over-exposed to the property
market. “Banks in Singapore, China and Hong Kong have been managing their risks
quite well as the respective monetary authorities provide strict instructions
on banking operations,” said Chua Chor Hoon, head of Southeast Asia Research at
DTZ.
Chua of Jones Lang LaSalle said that in Asia,
“the share of mortgages as a proportion of total bank lending is still within
healthy levels”.
Source: DNA
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