Cooling measures take effect on luxury Asian property market

MANILA, Philippines - Cooling measures are taking hold in major luxury residential markets in Asia and as a result the outlook for 2013 is looking flat, according to the latest quarterly report from Jones Lang LaSalle.

Its latest Asia market report says that a flat fourth quarter at the end of 2012 closed a relatively stable year in luxury residential real estate in the region.

Capital values rose an aggregated five percent in 2012, up from the 4.8 percent recorded in 2011. Of the nine featured luxury residential markets, six saw mild increases in capital values during the year while Jakarta saw a major surge, outperforming all monitored markets with growth rates of 27.5 percent on an annualized basis.

On the downside, growth fell 5.6 percent in Singapore year-on-year where a number of measures were introduced by the government to cool the market, particularly overseas buyers and second-home owners.

Growth was also down 0.5 percent in Shanghai where again government imposed cooling measures are seen to be taking effect. But these did not affect the markets in Beijing and Hong Kong so much where annual growth increased 3.3 percent and five percent, respectively.

Elsewhere in the region, Bangkok saw growth increase by 3.5 percent, Kuala Lumpur by 6.9 percent, Manila by 3.3 percent and Mumbai by 3.2 percent.

But the figures for the last quarter of 2012 show that growth has slowed in recent months, suggesting that cooling measures are now biting. On a quarterly basis growth in Singapore fell 0.8 percent and was down 0.1 percent in Hong Kong. It remained static in Kuala Lumpur and grew by just 0.3 percent in Shanghai and by 0.6 percent in Bangkok.

Other markets saw quarterly growth but well below the annual figures. Growth was one percent in Mumbai, 1.1 percent in Manila, and 1.2 percent in Beijing. While Jakarta saw quarterly grown of 6.5 percent this is well below the annual figure of 27.5 percent.

Looking ahead, Jane Murray, head of research for Asia Pacific at Jones Lang LaSalle said that steady sales activity and limited price growth in the short term is to be expected in 2013. ‘Policy restrictions in markets such as Hong Kong, Singapore and China will constrain growth. Despite this, Hong Kong’s capital values are expected to see a mild rise in 2013 supported by ongoing low interest rates,’ she explained.

‘Capital values in Shanghai should also rise marginally this year, while prices in Beijing are likely to increase further on the back of stronger rental growth. Among the emerging markets, Jakarta should continue to outperform in 2013 due to strong underlying fundamentals,’ she added.

Where the cooling measures remain in place it is unlikely that prices will rise in the short term, according to Chris Fossick, managing director for Jones Lang LaSalle in Singapore and South East Asia.

‘Prices in the luxury condominium residential market in Singapore have eased slightly over the past year as a result of cooling measures which have reduced the number of buyers,’ he said.