The luxury property market in Asia continues to rise in price and demand despite governmental efforts to cool off buyers. Murielle Gonzalez reports.
Overview of Singapore's financial district
US investor Jim Rogers moved with his family to Singapore in 2007, when nobody believed in Asia’s economic growth. But time proved Rogers’ vision right.
Since 2009, the Asian luxury real estate market has flourished with the world’s wealthiest families willing to relocate there.
Many are attracted by investment opportunities in the Chinese and Indian booming economies.
The Wealth Report 2011, a survey compiled by property consultancy Knight Frank and Citi private bank, confirmed prospects for the Asian real estate market in the coming years. The trend is proven by Singapore city and Shanghai climbing two places to the top 5 in the ranking of world’s 40 cities for high net worth individuals. These cities are also performing better in price increase and demand in the second-home market, narrowing the gap over Caribbean and European hotspots.
In terms of investment, real estate consultancy CB Richard Ellis reported Asia had $63 billion on property transactions last year; Hong Kong and Tokyo dealt almost half of it. The total amount spent in the market means 59% increase from 2009.
This is Asia’s second year of property boom, but some analysts have warned the market is at risk of an asset bubble. Concerns prompted governments in China, Taiwan and Singapore to impose measures aiming to curb speculations.
Fears of bust
In Hong Kong, new taxes and a series of land auction were set up in 2010 partly to boost supply and halt the spiral of prices. In Taiwan, a luxury real estate tax was passed meaning empty properties sold within two years of purchase will be taxed at 15%.
The boom in the high-end property market in Singapore is the main concern for the country’s National Development Minister Khaw Boon Wan. Tens of thousands of private homes have been bought off plan and a further 45,000 are in the drawing board.
Availability is the top one worry for Mr Wan. Another 8,000 private homes are forecasted to be built under the Government Land Sale Programme due for the third quarter of 2011. He told to a local daily his fear is based on “a slow global economic recovery could hit the real estate market and there may not be demand for such a large number of new properties”.
Healthy market
Despite cooling measures, luxury residential property prices in Asia continue to rise in the first quarter of 2011. The growing rate, however, is slower than last year. The Residential Index data from property consultant Jones Lang LaSalle shows the increase is only 1.8%, far from the third quarter of 2010, when prices hiked by 7.4%.
Jones Lang LaSalle head of capital markets Joseph Tsang said: “Strong end-user demand and long-term investors will likely see the luxury markets in Hong Kong and Singapore increase in strength.”
Looking into who is buying where in the Asian market, Singapore is by far a destination of choice for foreign wealthy buyers. The Wealth Report 2011 revealed 22% of investors from East Asia have it as their top relocation city. Singapore is also in the top of mind of 37% of high net worth individuals inIndia. Investors in western countries rated Singapore in the fourth place for relocation.
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