Luxury residential prices in greater China and Singapore have reached peak, analysts claim

Average capital values fell 0.2% in quarter three of across monitored luxury residential markets in Asia, compared with the positive 1.6% growth recorded in the previous quarter, the latest data shows.

The Residential Index from Jones Lang LaSalle indicates that price growth has slowed steadily from the 7.4% quarter on quarter increase recorded in the third quarter of 2009, but this was the first time that average prices have declined since the first quarter of 2009.
 
Sales activity cooled further in the third quarter of 2011, with fewer launches and sales recorded in most markets as a result of economic uncertainties and ongoing tightening measures by some governments.
 
Of the eight featured luxury residential markets, only Jakarta and Mumbai saw an increase in capital values during the quarter, while prices remained stable Singapore, Bangkok and Kuala Lumpur and declined across the three Tier I cities in Greater China, namely Hong Kong, Beijing and Shanghai.

Luxury residential prices in Hong Kong edged down marginally by 0.6% quarter on quarter after growing 7.3% in the second quarter and this was due to tighter credit and weakening investor sentiment.

But in the twelve months to the end of the third quarter 2011, Hong Kong still delivered the strongest price performance among the monitored markets, with growth of around 23%. Average prices in Singapore’s luxury prime market remained stable for the fifth consecutive quarter despite slight rental correction. With mortgage and purchase restrictions remaining in place and falling sales volumes in the China Tier I markets, capital values for luxury apartments in Shanghai fell by 0.9%quarter on quarter , while average prices in Beijing fell by 3.4% quarter on quarter.

Jones Lang LaSalle believes that prices in Greater China and Singapore are likely to have reached the peak of the current cycle. Prices in China are expected to soften further over the next 12 months as developers are likely introduce more price discounts and launch less high priced units in the near term.

Prices in Hong Kong and Singapore are also expected to soften over the rest of 2011 and in 2012, partly as a result of projected rental correction as well as weaker investor sentiment. However, South East Asian markets are expected to be more resilient, with overseas workers’ remittances buoying buying demand in Manila, while the Jakarta sales market should be supported by a strong economy.

‘Though sales volume has slackened in the past months, we expect prices to remain stable as on the back of strong fundamentals. Nevertheless, with every global crisis, there will be uncertainties and uncertainties create opportunities. Foreign investors looking for a safe haven to retain wealth will continue to consider Singapore as an attractive and reliable proposition,’ said David Neubronner, head of Residential Project Sales at Jones Lang LaSalle Singapore.

‘Continued strong consumer demand and a buoyant resources sector is fuelling continued growth in Indonesia. Values are rising in spite of economic uncertainly elsewhere. We predict a buoyant luxury residential market for the medium term,’ said Luke Rowe, head of Project Marketing (Residential) at Jones Lang LaSalle Indonesia.