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backGLOBALtalk December, 2009
Housing prices up across Asia
The real estate markets in South Korea, Taiwan, Hong Kong, and Shanghai are also very lively at the moment, with property prices surging.
Hong Kong's housing price index jumped 20.4 percent in the period from December to August. In Taiwan, average housing prices in the April-June quarter rose 9.6 percent from the January-March quarter.
In South Korea, housing prices have been on the rise for five consecutive months since April.
The common factor fueling these markets is the low cost of housing loans resulting from low-interest rate policies introduced by governments to cope with the recent worldwide financial crisis. These low loan rates have encouraged potential home buyers to take the plunge.
An official of DTZ, a Singaporean real estate research firm, said that in addition to low interest rates, people were diverting money into real estate having realized the high-risk nature of investing in complicated financial products after the deepening of the financial crisis following the collapse of Lehman Brothers last autumn.
In Singapore and Taiwan, the myth that real estate prices always rise is widely believed by ordinary citizens, and this creates an environment that fuels investment in real estate.
A Singaporean real estate broker said that in 2007, prices equivalent to hundreds of millions of yen for condominiums set record highs each day as investment money flooded in from the Middle East.
This time, condos within the reach of ordinary citizens are at the center of the boom, the broker said, indicating the complex relationship between genuine and speculative demand.
But the relevant monetary authorities are wary of the real estate markets heating up. This is because banks, which have fewer borrowers because of the recession, have been competing to extend housing loans by cutting home loan interest rates, a trend that could cause bubbles in their respective real estate markets.
South Korea has introduced a limit on housing loans of between 50 percent and 60 percent of the price of the condominium in question. The financial authorities have also called for stricter screening of loan applicants.
In Hong Kong, the government asked the banking industry in September to refrain from cutting loan interest rates any further.
Meanwhile, the central banks of Taiwan and South Korea have announced they will closely watch rising housing prices and growth in the number of new housing loans.
Source: The Yomiuri Shimbun - GAI
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