Major Asian property markets may face a slower second half due to an anticipated growth in office and housing supply and policy risks, after some property developers enjoyed a positive first six months.
Among the developers that enjoyed strong housing prices in major markets earlier this year include Hong Kong’s Cheung Kong (Holdings) Ltd, Singapore’s CapitaLand Ltd and China Overseas & Investment Ltd.
However, the Chinese government measures aimed at cooling its hot property market, which include raising mortgage rates and down payments for second- and third-home purchases, as well as building and lending affordable housing, are expected to dampen market sentiment within the sector.
Transaction volumes in some Chinese cities have declined due to harsh policies announced in mid-April. The central government also intends to launch more affordable housing as increasing number of Chinese are complaining that they are being priced out of the market.
“The main uncertainties are policy risks that are starting to unfold in China, and especially as inventory starts to build up, you should see price cuts emerge in September, October,” said Eric Wong, head of Asia real estate research at UBS.
One-third of Chinese developers, including Evergrande Real Estate Group Ltd and China Vanke, have implemented price cuts, and more developers are expected to follow suit in H2, said analysts.
The Singapore and Hong Kong governments are also cautious of asset bubbles, although the measures they implemented have been softened as compared with China. The Singapore government set a cap on loans and slapped a new stamp duty on properties sold within the year of acquisition, while Hong Kong increased the stamp duty on acquisitions of luxury apartments.
“Every market is a little different in the coming six months,” said Nicole Wong, regional property research head at CLSA. “Some markets might have policy risks and that would be for Singapore and a little bit from Hong Kong. And there will be some markets where policy risks have peaked in our view, like China.”
Meanwhile, the increasing interest rates in India and Australia might dampen purchasing sentiment for the rest of 2010.
A better second half may be seen in some emerging markets like Thailand, whose property sub-indexes have been outperforming its broader stock market. Thai Land & Houses, the top home builder in the country, said it expects a 15-percent growth in revenue this year, well above analysts’ estimate, in spite of a weak second quarter.