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Monetary policy, tax, regulations and underlying fundamental drivers such as demographics and urbanisation will have a significant impact on property markets in the Asia Pacific region, according to the latest real estate analysis. The region’s economies are moving at multiple speeds with differing drivers and local dynamics, producing quite a wide range of housing market performance indicator, says the Asia Pacific residential review from international real estate firm Knight Frank. ‘Economic growth can certainly be a reasonable lead indicator as to which way housing markets will go,’ said Nicholas Holt, head of research for the Asia Pacific region. He also pointed out that despite facing many headwinds, the International Monetary Fund is forecasting stronger growth in 2015 for six out of the 11 major countries in the region. ‘While this should be a positive sign for home owners or investors, the reality is that in many cases there has been a divergence between short term economic growth and market performance,’ he added. The report reveals that since last November, the People’s Bank of China has cut interest rates three times, contributing to the first month on month increase in house prices in May this year, after falling for 12 consecutive months. Other countries such Australia, India and South Korea are also pursuing expansionary monetary policy. It points out that with further interest rate rises inevitable in the slow moving market of Singapore, cooling measures introduced previously could start to be reviewed by the government. China and New Zealand have already seen similar moves. And the likely extension of luxury tax and introduction of a super luxury tax have already started to impact market behaviours in Indonesia, as has the announcement of a new capital gains tax scheme in Taiwan. The report also points out that it is not just China that has seen the increasing influence of policy interventions in residential markets, whether fiscal, monetary or regulatory. In New Zealand, for example, authorities have stepped in over recent years. ‘Perhaps now more than ever, property market observers are looking to policy makers, whether Janet Yellen at the Federal Reserve, the Singapore government, the Reserve Bank of Australia, the People’s Bank of China or the Japanese government for clues about how markets will perform. We can expect more of this going forward,’ explained Holt. In Hong Kong the supply of land for development has affected the property market and the report says that until supply catches up with demand the upward pressure on prices will continue in what is already one of the costliest property markets in the world. Indeed, house prices in Hong Kong have continues to defy the ongoing cooling measures by rising 8.4% in the 12 months to the first quarter of 2015, the highest annual price growth in the overall market since the second quarter of 2013. The report suggests that the Reserve Bank of Australia’s recent decision to hold interest rates followed two 25 basis point cuts in the official… Continue reading →