As purchasers fear rising interest rates and economic headwinds, home prices have started to decrease in Sydney and Hong Kong, while values in Singapore barely increased last quarter.
After low borrowing costs and a fear of missing out during the epidemic sparked a global property craze that stretched from Toronto to Auckland, the turnaround couldn’t be more dramatic. Last year, prices in Sydney increased by about 27%, while prices in Singapore increased by the most in more than a decade and Hong Kong remained the world’s most expensive city to buy a property.
Despite the fact that conditions differ by place, the slowdown has some similar denominators. Concerns about affordability caused Singapore to implement property restrictions, while inflation fears are prompting central banks to contemplate raising interest rates, making it more difficult for home purchasers to repay their mortgages.
Meanwhile, Covid-19 is contributing to the real estate market’s difficulties in China. Following a bungled attempt to restrict the newest wave, Hong Kong is facing an exodus of inhabitants, while a lockdown in Shanghai has dashed hopes of a speedy rebound from a recession prompted by a crackdown on excessive debt among developers.
“Governments in the area have become more vigilant about rising asset prices since the global financial crisis, while the pandemic has also brought widening wealth discrepancies into focus,” said Victoria Garrett, Asia-Pacific head of residential at Knight Frank. “While moving from a seller’s market to a buyer’s market may open up more chances, buyers will likely become more choosy and price sensitive.”
Residential prices in the region are expected to rise at a slower and more sustainable rate of 3% to 5% in 2022, according to Garrett. This is lower than the 9.1% increase seen last year.
To be sure, demand may remain strong in some regions, partially due to a scarcity of housing stock that is unlikely to improve in the next 12 months, according to Garrett. And, she continued, because the rate-hike cycle is still in its early stages, there is still a window of opportunity for buyers to take advantage of still-affordable financing rates.
Buyers in other parts of the country have not been discouraged. In March, house prices in the United Kingdom rose at their quickest annual rate since 2004, while prices in 20 US cities are also rising.
The following is a summary of the most recent housing trends in major cities.
As expectations build that the central bank will begin hiking interest rates soon, home prices in Australia’s most populous city are exhibiting symptoms of tiredness at record highs.
Already, affordability is a concern at the top of the market, with pay growth lagging far behind price increases: between March 2020 and December 2021, earnings climbed by 3.3 percent, compared to a 22.6 percent increase in home prices. Sydney’s median house price is more than 17 times the country’s median earnings.
Furthermore, Australia’s gross household debt as a percentage of disposable income is approaching a mind-boggling 200 percent. All of this has prompted caution among purchasers in the country’s largest housing market. Following losses in February, home prices in the port city fell 0.2 percent last month, ending a gaining streak that began in October 2020.
“A lot of it has to do with interest-rate talk, and Sydney is quite sensitive to talk about rate rises because it is such an expensive market,” said Nerida Conisbee, chief economist at real estate firm Ray White. The lack of competition at auctions “reflects a shift in public mood toward people’s readiness to spend considerably above the reserve price.”
Hong Kong is a city in Hong Kong.
Since August, Hong Kong’s residential prices have been declining, with no signs of a speedy recovery in sight. The difficulties vary from a sagging economy and rising interest rates to the continuous exodus of natives and expats dissatisfied with political tensions and harsh social separation policies.
Last year, the city’s housing market seemed unstoppable, with prices setting a new high in August. According to Centaline Property Agency Ltd, values have dropped by 7.3 percent since then. Due to population loss and rate hikes, UBS Group AG anticipates prices to fall this year. Even more bearish is Goldman Sachs Group Inc., which predicts a 20% reduction by 2025.
“Home prices will continue under pressure for the foreseeable future,” said Rosanna Tang, Colliers International’s head of research for Hong Kong and the Greater Bay Area. “Aside from Covid-19, other market uncertainties, like as geopolitical tensions and interest-rate threats, are delaying homeowners’ decisions.”
Singapore’s home market is slowing as a result of property regulations and rising taxes, following a golden year that saw prices rise the most in more than a decade. Last quarter, new private home price growth slowed to 0.4 percent, while March sales fell to their lowest level in 21 months.
In December, the government enacted cooling measures in response to a lack of affordability and the possibility that households would struggle to pay their mortgages at higher rates. The government announced higher property taxes for wealthy residents in February, which may cause some buyers in that category to sit on the fence.
Nonetheless, analysts have speculated that the restrictions may only be a temporary solution because there is actual demand among residents, such as those moving from public apartments to private homes and millennials desiring to live independently.
According to Alan Cheong, executive director of research at Savills Plc, rising consumer prices may encourage potential buyers to enter the market sooner rather than later in order to maintain purchasing power. “The opioid that drives demand is inflation,” he said.
After policymakers took steps to prevent a slowdown caused by a liquidity problem at developers, residential prices in Shanghai, one of China’s most robust property markets, began to rise again in December after three months of losses. The financial hub’s wide lockdown is now jeopardising the recovery.
“We’ve seen Covid take a stronger hold in Shanghai, which could limit the market in the second quarter,” said Roddy Allan, Jones Lang LaSalle’s chief research officer for Asia Pacific.
Despite this, the city’s longer-term prospects appear to be improving, thanks to low inventory and interest-rate reduction. China’s economy has slowed, forcing it to ease policy in striking contrast to other major nations. The central bank slashed its main rate for the first time in nearly two years in January, while major banks cut mortgage rates and sped up loan processing periods.
According to Yang Hongxu, a director at E-House China Enterprise Holdings Ltd.’s research centre, home sales in Shanghai would likely steady this year, with a possible resurgence around the year’s end.