Asia’s Rising Property Prices
Concerns have been growing about a property bubble forming in Asian Property Markets but Bangkok prices have not risen by significant amounts.
The October 15th announcement by Hong Kong developer Henderson Land that it had achieved a world record price of US$ 9,200 per square foot (3.25 million baht per square metre) for a 6,158 square foot (572 square metre) apartment at 39 Conduit Road focused analysts attention on rising property prices in Asia and fears of a bubble.
Across Asia with the exception of Japan local buyers have been buying property from mainly local developers financed by local banks.
Demand is being driven by low interest rates for both lending and deposits. End-users are taking advantage of some of the lowest borrowing rates they have experienced.
Low interest rates on deposit accounts are driving people to invest in property.
The Hong Kong, Singapore and Korean governments have voiced concerns about price rises have and withdrawn some measures designed to stimulate the market.
In Hong Kong the maximum loan to value for properties costing more than 20 million Hong Kong Dollars (85 million baht) at 60% from the previous level of 70%.
In Korea loan to value ratios have been cut to 50% in some areas of Seoul.
In Singapore government banned banks from offering interest only loans for property projects and developers from absorbing interest payments for condominiums that have been sold off plan and are under construction.
In Hong Kong central city residential prices are now above levels prior to the collapse of Lehman Brothers according to the “Centa-City” leading sub-index.
CB Richard Ellis Hong Kong reported a 41% increase in luxury residential prices compared to the fourth quarter of last year.
In Singapore Private Residential Developers sold 10,000 units in the first seven months of 2009 compared to 4,300 units for the whole of 2008.
In Bangkok the condominium market is less transparent there are significantly less transactions in completed buildings compared to Hong Kong and Singapore and transacted prices in existing buildings are not publicly disclosed.
CB Richard Ellis have seen resale prices in some of the main residential developments completed over the last 18 months increase.
In January to March it had been possible to acquire a unit in Athenee Residence and Park Chidlom for prices of around 120,000 baht per square metre.
For two bedroom units it is now difficult to find vendors in these buildings willing to sell for less than 150,000 baht.
For luxury and high end buildings under construction and due to be completed next year there has been no significant increase in primary sale prices from developers but individual vendors offering resale units have in most cases stopped offering units at below the developers current offered price.
Recent launches of new projects have been focused on the city centre such as Asian Property’s the Address Sathorn and the Address Sukhumvit. The projects have been offered on a furnished basis increasing the price per square metre but the total price has been lower than other high end projects because of the size of the units.
I do not see evidence of a potential bubble in Bangkok with dramatic increases in lending to both developers and purchasers, or dramatic spikes in prices and a frenzy of trading.
New launches continue to be concentrated in the city centre and are mainly smaller sized units.
There will be a number of condominium developments completed over the next twelve months in the City Centre.
The developers of these buildings will be focusing on clearing unsold inventory competing with some of the existing buyers who will want to resell. This new supply will act as a damper on the potential for prices to spike.
Each Asian market has different dynamics Hong Kong and Singapore have always had a much greater level of price volatility than Bangkok.
