Report on House Prices in Asia

Monday 15th of December 2008

Research undertaken by the Global Property Guide believes that property prices in Asia will continue a downward in 2009.Prices fell in most of Asia in the second half of 2008, because of inflation, interest rate increases, and contagion from the financial crisis.

In China, the post-Olympic slump has added to the overall economic slowdown. Plummeting sales figures are reported, although official and unofficial statistics provide conflicting views.

In Shanghai, newspapers report huge discounts. However, figures from e-homeday still show an impressive 24% y-o-y house price increase from a year earlier. We believe that house prices will continue to fall, as rental yields in China are moderate, according to Global Property Guide research.

Japan and South Korea are both quite dependent on electronic and automobile exports to Europe and America, and their economies are now in recession. The situation is expected to deteriorate in 2009, and house prices expected to fall further.

In Hong Kong and Singapore, finance-related job cuts are following the collapse of major US and European financial institutions. Local demand is also likely to weaken as exports fall. Dwelling price falls are expected.

In the Philippines, the real estate boom at the top-end of the market was financed by Overseas Filipinos, mainly those in the US, Europe and Japan, now in recession. A significant amount of new supply is expected to be completed in 2009, which may lead to overhang and more price falls.

In Vietnam, Cambodia and Indonesia, a construction boom financed by South Korean firms has abruptly stopped as South Korea enters recession. The South Korean won is Asia’s worst performing currency, and Korean firms have been asked to pull out their foreign investments. Risky real estate investments in Southeast Asia have been among the first to be withdrawn. These countries are also prone to be affected by the global economic slowdown.

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