Govt policies could dampen demand in prime property markets in Asia Pacific in 2013

Asia-Pacific prime property markets are unlikely to outperform the other regions of the world in 2013 as government policies dent demand for residential homes, it is predicted.

According to Nicholas Holt, Knight Frank’s research director for the region, government interventions, aimed at mitigating the risk of asset bubbles and addressing concerns of affordability are taking a toll.

‘These cooling measures have dented demand for prime residential product in some markets, through limiting financing, introducing extra taxes for foreign buyers and penalties for disposing of the property within a certain time period,’ he explained.

Many of these measures have targeted the high end residential market. For example, loan to value ratios in Hong Kong are limited to 50% for properties over HK$10 million. But more often they have been introduced to penalise multiple home owners at the expense of first time buyers, which disproportionally impacts the prime residential markets.

‘At the same time that the market has become more difficult for some buyers, the attraction of prime property markets outside their domestic markets has continued to provide incentives to move their money abroad,’ said Holt.

‘With an increasingly mobile, educated and well travelled class of property owners in the Asian region, the lifestyle choice of having a second home abroad, for personal or for children’s  educational use is proving to be one of the key narratives for HNW Asian buyers,’ he explained.

‘Given the lack of alternative investment options, property in so called safe haven cities around the world has become an attractive asset for Asian HNWIs. Domestic currencies that have strengthened against destination market currencies have also provided a currency play which has, in some cases, provided significant discounts in real terms,’ he added.

He pointed our that with the ongoing global west-east shift in the economic balance of power, there is no doubt that the prospects in the medium term for prime residential markets in the region are promising.

‘Our forecasts show however, that given the protectionist measures introduced over the last 12 months in the Asian safe haven and lifestyle destinations of Singapore and Hong Kong, we expect fairly subdued price performances in these markets through 2013,’ said Holt.

A survey by Knight Frank found that shrinking mortgage availability is the top risk that respondents regard to be affecting markets followed by restrictions on multiple ownership, changes to CGT rules, large scale house building programmes and finally stamp duty increases.