Price growth slowing in some parts of Asia due to cooling measures

Governments across Asia continued to introduce cooling measures during the first quarter of 2011 as they attempted to rein in surging residential property prices but they remain on an upward trend, according to the latest analysis from CB Richard Ellis.

Its Asian luxury Residential Capital Value index increased by 5.5% quarter on quarter in the first three months of 2011. Hong Kong and Guangzhou saw accelerated growth in luxury property prices, it shows.

In Hong Kong prices surged 14% in the first quarter of the year following a slow final quarter in 2010 as a result of the introduction of the Special Stamp Duty in November. While in Guangzhou a number of high quality projects were launched that pushed overall prices higher.

Overall prices remained on an upward trend although most cities, particularly Beijing, Shanghai and markets in south east Asia saw a slower pace of growth.

It also shows that luxury residential rentals grew at a slower pace than prices, up 2.3% quarter on quarter, but demand for houses and apartments from expat is strong in key cities in mainland China because of the expansion of multinational corporate business in the country.

However, in south east Asia rents remained stagnant as slow corporate expansion resulted in limited demand in markets which have already been suffering from a large amount of vacant accommodation.

The report details the effects of recent cooling measures. In China price growth began to slow after restrictions were put on property purchases by non domestic buyers and existing home owners. A pilot property tax on second homes in Shanghai and Chonqing also contributed to lower prices. As a result primary sales fell by about 26% to 41% quarter on quarter in first tier cities.

In Hong Kong the resumption of regular land auctions has meant that land continues to be sold at the upper end of price expectations.

Price growth in Singapore has started to ease because of an extension of the holding period for Sellers Stamp Duty from three to four years and an increase from 3% to a maximum of 16% for properties sold within a year. A lowering of LTV from 70% to 60% for buyers with mortgages on more than one property has also had an impact and overall trading volumes are down by about a fifth.

A cap on LTV ratios to 90% in Thailand seems to have had no impact on the property market. Here the luxury market is driven by buy to let investors with the average asking price up 3.3%. Prices for new projects are expected to remain strong.

Looking ahead demand in the region is expected to remain strong.  ‘However,  it is likely that demand will be suppressed by a new round of cooling measures introduced by authorities in Greater China and Singapore,’ the report says.

‘As transaction volumes decline developers may attempt to stimulate sales by offering discounts to buyers. The price growth of luxury residential property in Asia is therefore expected to moderate over the course of the year,’ it explains.

‘Prices and rental growth in most South East Asian cities are expected to remain flat under supply pressure. In Bangkok more than 7,000 new luxury residential units are scheduled to come on stream, while more than 3,000 condominiums will be completed in Kuala Lumpur in the second quarter of the year alone,’ it adds.