Residential capital values rose 1.8% q-o-q in 4Q10 across monitored luxury residential markets in Asia. However, price growth has slowed steadily from the 7.4% q-o-q pace recorded in 3Q09, as sales activity cooled after the string of anti-speculative measures implemented in 2010 by various governments.

Of the eight featured luxury residential markets, five saw an increase in capital values during the quarter, while capital values remained stable in three cities (Singapore, Jakarta and Bangkok) and declined in Beijing. This compares with the previous quarter when five markets recorded an increase in capital values and the remainder saw stable prices.

Despite the latest round of government measures aimed at curbing speculative demand, luxury residential prices in Hong Kong grew by 6.4% q-o-q in 4Q10, due to continuing rental growth and tight supply. On the other hand, prices in Singapore’s luxury prime market remained stable for the second consecutive quarter as buyers remained cautious after recent government tightening measures.

Luxury residential prices are generally likely to remain stable or see slower growth for 2011 as buyers have become more cautious about further tightening measures by governments

In the China Tier I markets, sales activity remained quiet throughout 4Q10 due to greater restrictions on mortgage loans for investors and other policy tightening, while developers had little incentive to lower prices. Capital values of luxury apartments rose marginally by 0.3% q-o-q in Shanghai but fell by 5.4% q-o-q in Beijing.

Luxury residential prices are generally likely to remain stable or see slower growth for 2011 as buyers have become more cautious about further tightening measures by governments. At the same time, downward pressure on prices is likely to be limited, supported by rising rental levels and low holding costs. However, luxury markets in Hong Kong and Singapore should retain some price momentum due to strong end-user demand and with long-term investors continuing to be attracted by the current low holding costs and the potential hedge against inflation. KK Fung, Managing Director, Jones Lang LaSalle Greater China comments,

“Government policy has become progressively tighter in China’s Tier 1 cities in an effort to cool the residential markets.  It’s interesting to see the price trends across Asia Pacific are largely similar in direction to China, if not as dramatic in magnitude. While the Hong Kong government has also been proactive in avoiding an asset bubble by placing more restrictions onto the residential sales market in the last few quarters, the city’s luxury residential properties continued to lead capital value growth across Asia Pacific through 2010, suggesting the strong underlying investment demand and market optimism there”.

Chris Fossick, Managing Director, Jones Lang LaSalle, Singapore and South East Asia adds,

“The Singapore mass residential market increased 12% in 2010 driven by positive sentiment on the back of strong economic performance, population growth and improved affordability as people earn more money and finance costs remain low. The government, I believe, concerned with rising values have introduced measures to keep property price inflation more sustainable and in line with the overall economic growth.

However the high end market has been more subdued over the same period with prices increasing 9%. In the rest of South East Asia, market sentiment has improved.  In particular economic growth in Indonesia has supported the luxury housing market in Jakarta. Local Indonesian high net worth individuals who traditionally invest in Singapore, are also increasingly buying into the popular downtown lifestyle in their home market”.

Reference Charts

Source: Jones Lang LaSalle

Thailand Real Estate Overview

Although the current outlook for Thailand property has taken a knock and the current political situation needs to be followed closely by potential Thailand property investors, the country’s property market should not be overlooked. Being a developing country, the cost of property in Thailand is much lower than in the more developed European markets. But, on the other hand, prices for Thai property, in general, are rising at a much faster rate. .