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Asia’s housing markets are now two-tiered

Five of the eleven Asian property markets for which figures are available saw house price increases during the year to Q2 2016, Global Property Guide’s latest detailed analysis of individual regions and countries shows.

In total, six Asian housing markets analysed in the Global Property Guide's global survey were stronger in Q2 2016 compared to a year earlier, with China’s housing market ranked number one.

Property in China

China's housing market is now the best performer in the global house price survey, as house prices surged after the government introduced several measures to support the housing market. In Shanghai the price index of second-hand houses surged by 20.38% y-o-y in Q2 2016, the highest annual rise since Q2 2008. During the latest quarter, house prices in Shanghai rose by 6.68%.

Demand is rising strongly again. In June 2016, the value of Shanghai homes sold rose 22% from a year earlier, after a y-o-y rise of 32.9% the previous month, according to the National Bureau of Statistics.

Despite the surge in demand, local real estate experts are quick to warn that housing starts should remain below sales levels for a few years to absorb the overhang of unsold properties in third-tier and fourth-tier cities. Currently, unsold homes are estimated at around 13 million. To solve this problem, the Chinese government recently announced a plan to purchase unsold residential properties and convert them into low-cost housing to reduce inventory levels. Moreover, in February 2016, the central bank cut the minimum mortgage down payment for first-time buyers from 25% to 20%, in an effort to encourage demand. The central bank kept its benchmark one-year lending rate at 4.35%, after cutting it five times in 2015.

The Chinese economy grew by 6.7% y-o-y in Q2 2016, at par with the previous two quarters’ 6.8% and 6.7%, respectively, amidst a string of government stimulus measures. The world's second largest economy expanded by 6.9% in 2015, its lowest growth in 25 years.

Property in Japan

In Japan, housing prices continued to rise during the year to Q2 2016, despite the weak economy. In Tokyo, the average price of existing condominiums rose by 5.7% during the year to Q2 2016. Residential property prices fell slightly by 0.22% q-o-q in Q2 2016.

Demand continues to rise. Existing condominium sales in Tokyo rose by 4.2% to 19,238 units in H1 2016 from a year earlier, according to The Land Institute of Japan. Likewise, sales of existing detached houses in Tokyo also increased 11.4% to 9,806 units over the same period.

The Japanese economy grew by an annualized rate of just 0.2% in Q2 2016, from a revised 2% growth in Q1 2016, amidst falling exports and weak capital expenditure – an indication that Japanese growth is largely dependent on government stimulus. Japan's economy is expected to grow by 0.5% this year, at par with the previous year’s growth.

From the perspective of a US$-based investor, the market's gains were bolstered by the appreciation of the Japanese Yen from ¥122.967 = US$1 in May 2015, to ¥101.197 = US$1 in August 2016. However, this was not enough to offset the 31% drop in the value of yen against the dollar from 2012 to 2015.

Property in Thailand, Vietnam and South Korea

Asian housing markets with modest to minimal house price rises included Thailand, with house prices rising by 4.38% during the year to Q2 2016, Vietnam (3.58%), and South Korea (1.07%). Thailand and Vietnam recorded positive quarter-on-quarter growth in Q2 2016 of 2.17% and 1.64%, respectively, while South Korea saw a quarterly decline of 0.07%. Only Thailand showed better performance in Q2 2016 compared to the previous year.

Some Asian housing markets are struggling, with house prices falling in six of the eleven Asian markets for which figures were available during the year to Q2 2016.

Property in Hong Kong

Hong Kong’s housing market is now the weakest housing market in Asia and the third worst performer in our global house price survey. Residential property prices fell by 10.73% during the year to Q2 2016, in sharp contrast with the 16.88% y-o-y rise a year earlier. House prices increased 2.68% q-o-q in Q2 2016.

The number of property transactions fell by 11.6% y-o-y to just 13,700 in the second quarter of 2016, according to the Ratings and Valuation Department (RVD), while sales values dropped 8.7% y-o-y to HK$108bn over the same period. Hong Kong's economy grew 1.7% in Q2 2016 from a year earlier, according to the Census and Statistics Department. The economy is expected to grow by around 1% to 2% this year, after 2.4% in 2015, 2.6% in 2014 and 3.1% in 2013.

Property in Mongolia

Mongolia’s housing market remains depressed, amidst a sharp economic slowdown. Nationwide, house prices plunged by 10.55% during the year to Q2 2016. House prices dropped 3.21% during the latest quarter.

Mongolia's economy grew by just 2.3% in 2015, sharply down from GDP growth rates of 7.9% in 2014, 11.6% in 2013, 12.3% in 2012, 17.3% in 2011, and 7.3% in 2010. The economy is projected to expand by a meagre 0.4% this year, amidst mounting external debt, falling budget revenues and low commodity prices.

Property in Taiwan

Taiwan's nationwide house prices fell 4.58% y-o-y in Q2 2016, after an annual decline of 2.16% in a year earlier, mainly due to the government's housing market cooling measures - its fifth consecutive quarter of annual declines since 2008. During the latest quarter (Q2 2016) house price rose 1.59%.

House prices in Taiwan are expected to fall further in the second half of 2016, by between 2% and 10%, according to local property experts. Taiwan's economy grew by a meagre 0.69% in Q2 2016, after contracting by 0.89% in Q4 2015 and by another 0.68% in Q1 2016, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS). The economy grew by just 0.65% in 2015, the weakest annual growth since 2009. GDP growth is expected to be 1.06% this year, according to DGBAS estimates.

Property in Singapore

Singapore's housing market is still weak. House prices fell by 2.94% during the year to Q2 2016 and by 1.21% q-o-q during the latest quarter.

Demand is now rising. There were 2,256 new private residential units sold in Q2 2016, up 59% the previous quarter and 6.6% higher than a year earlier, according to the Urban Redevelopment Authority. Supply is also increasing. The number of uncompleted private residential units launched increased 13% y-o-y to 2,371 y-o-y units in Q2 2016.

Singapore's economy expanded by 2.2% y-o-y in Q2 2016, slightly up from 2.1% in Q1 2016 and 1.8% in Q4 2015, according to the Monetary Authority of Singapore. GDP growth was 2% in 2015, 3.3% in 2014, and 4.7% in 2013.

Property in the Philippines

In the Philippines, the average price of 3-bedroom condominium units in Makati CBD rose by 2.86% during the year to Q2 2016, but fell 3.9% q-o-q during Q2 2016.

Makati CBD property prices soared by 28.3% from Q1 2011 to Q4 2015, amidst rapid economic growth. The Philippine economy grew by 7% in Q2 2016 from a year earlier, up from GDP growth rates of 6.9% in Q1 2016, 6.5% in Q4 2015, 6% in Q3 2015, 5.8% in Q2 2015, and 5% in Q1 2015. The economy is projected to grow by 6% in 2016 and another 6.2% in 2017, according to the IMF.

Property in Indonesia

In Indonesia, residential prices in the country's 14 largest cities fell by 0.35% y-o-y in Q2 2016, but increased slightly by 0.34% q-o-q during the latest quarter.

Demand continues to weaken sharply and total supply growth is expected to slow in the coming years. In an effort to attract foreign investors, the Indonesian government unveiled last year a plan to finally allow foreigners to purchase luxury apartments in the country.

Indonesia’s economy grew by 5.18% y-o-y in Q2 2016, slightly up from 4.92% in Q1 2016 and 5.04% in Q4 2015. The economy is expected to grow by 4.9% this year, after a 4.8% expansion in 2015.

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