By FT Residential
In the third and final part of our series of property predictions for 2020, industry experts share their expectations from residential markets in Asia and Australasia this year.
Sophie Chick, head of Savills world research
There is uncertainty in Asia Pacific’s prime residential markets as headwinds threaten growth in the sector. An opportunity for price growth remains but build quality and design, location and appropriate pricing are key.
As I forecast last January, in 2019 Sydney’s prime residential market continued to see marginal price falls. This year should mark a return to growth helped by a cut in the interest rate. The market remains sensitive to global uncertainty, however, and price rises are forecast to be significantly lower than seen before the 2017 downturn.
In Hong Kong, prime prices began to fall in mid 2019 and the market remains cautious as the continuing social unrest and the US-China trade war affect growth. While a combination of constrained supply and low interest rates should prevent a dramatic correction, values are likely to see small falls over 2020.
The prime sales market in Singapore had an active 2019 despite the cooling measures in place. The city benefited from rising affluence among residents and interest from international buyers. Small price rises are expected in 2020 triggered by pent-up demand.
Victoria Garrett, head of residential, Asia Pacific, at Knight Frank
The Knight Frank Prime Global Cities Index, which tracks the movement in luxury residential prices across 45 cities, saw 1.1 per cent average annual price growth in Q3 2019, down from 3.4 per cent for the same period in 2018, with secondary cities in Asia — including Taipei, Manila, Guangzhou and Delhi — creeping into the top 10. We expect those markets with strong local economies (Manila, Shanghai and Taipei) to perform strongly in 2020 as well as those cities where wealth forecasts are above the regional average (Bengaluru, Manila, Guangzhou, Ho Chi Min City).
Manila’s prime residential market continues to sprint ahead, with prices rising 5.6 per cent in the first nine months of 2019, adding to the 11.1 per cent rise seen in 2018, according to Santos Knight Frank Research. This is driven by investors buying prime residential property to lease out to employees working in business process outsourcing (BPO) and for Philippine offshore gaming operators. While there are some supply concerns this year, demand should keep pace, and we expect prices to continue rising given the ever-expanding BPO sector.
Malaysia’s residential property market appears to be bottoming out, although it will take time before the market sees a significant improvement. We expect the market to improve gradually with support from government initiatives. The lowering of the price threshold for foreign buyers from RM1m to RM600,000 ($243,000-$146,000) in 2020 for unsold high-rise units in urban areas is expected to help address the overhang, particularly for units in the RM600,000 to RM700,000 range in selected areas.
Nick Goodall , head of research at CoreLogic New Zealand
There are favourable conditions for borrowers in New Zealand for at least the first six months of the year, with banks still competing strongly and mortgage rates low.
As we get to the second half of 2020, though, the requirement (from July 1) for banks to increase the amount of capital held on their balance sheets may begin to put upward pressure on mortgage rates and/or start to tighten the supply of finance. The general election could also create uncertainty.
With that in mind, after an expected total of about 90,000 sales in 2019, we believe activity could improve again in 2020, to about 95,000. For values, after an anticipated nationwide increase of about 3.5 per cent in 2019, it would be unsurprising to see growth of at least 5 per cent in 2020, as provincial New Zealand continues to see rising prices and the main centres move higher too.
Overall, the outlook for 2020 is cautiously optimistic. However, anyone associated with the residential property market needs to be aware of the move to risk-based pricing for buildings’ insurance policies. This is causing large premium increases for riskier areas (for example, those prone to flooding) and buyers need to assess cover early in the process.
Dr Henry Chin, head of research, Apac/Emea, CBRE
Australia’s key residential markets enter 2020 with new vigour, following almost two years of declines. Prices in Sydney and Melbourne rose by 6.2 per cent and 6.4 per cent over the three months to the end of November, according to CoreLogic. This growth spurt is expected to strengthen and spread to other markets.
Several key outcomes in 2019, including the coalition’s victory in the May federal election, which removed uncertainty over property investment tax reform, triggered the turnround. CBRE expects price growth to continue in 2020 although the pace seen recently should taper as pent-up demand is satisfied, more sellers enter the market and economic factors take effect.
Meanwhile the mantra that “housing is for living, not for speculation” has guided the Chinese government’s tight policy control over its residential market for years and 2020 is unlikely to bring a change. Both sales volume and sales area in square metres (the total area of residential property sold) have fallen to five-year lows but new measures to help purchases by first-time buyers should support healthy sales figures and measured price growth in the coming year.
Market fundamentals in Hong Kong remain solid despite territory-wide unrest, with the only major risk being a possible spike in unemployment. Supportive factors such as limited new supply, the relaxation of the mortgage cap for first-time buyers and the desire to own property will guard against a severe downturn.
Sarah Vaulkhard, adviser, Property Vision, Singapore
Global headlines did not made for pretty reading in 2019 with the ongoing global trade wars, widespread political demonstrations and Brexit. If real estate investors are looking for an excuse to sit on the sidelines and wait, they do not need to look far.
However, most investors do not have that luxury and are hesitant to call an end to this cycle in an age of such overwhelming central bank support. In this environment, where most asset classes are looking fully priced after strong returns in 2019, we still see strong appetite for real estate — for its income, its diversifying characteristics and the tangible ‘bricks and mortar’ aspect.
Although the trade wars are clearly impacting sentiment in Asia, the longer-term fundamentals that drive real estate demand — population growth, urbanisation and income growth — remain. This is not a uniform story however and, as I predicted in my outlook last year, one market which is clearly a concern is the Hong Kong real estate market.
This is due to the tighter monetary policy we saw earlier this year as well as the decreased flow of capital from China, and recently exacerbated by the ongoing violent protests. This could have a positive knock-on effect on other large regional cities, particularly Singapore, which is already benefiting from an increase in real estate investment, capital flows and even visitors.
Main photograph: Dreamstime