Fourteen out of 25 cities in Asia-Pacific recorded positive growth in residential prices in the first half of 2023, with Singapore registering as the top-performing market with 8% year-on-year growth, a new report finds.
The average price growth in the region, however, was -0.2% compared with a year ago as elevated interest rates continued to weigh on market sentiment, although a slowdown in aggressive monetary tightening by central banks provided relief for prospective buyers, Knight Frank says in its Asia-Pacific Residential Review for H1 2023.
“After the bull run in home values over the past few years, prices plateaued six months into 2023, indicating that correction is taking place in more markets,” says Victoria Garrett, head of residential at Knight Frank Asia-Pacific.
“With rate hikes being paused, buyers are utilizing this window of opportunity to lock down on their dream homes, which is notably seen in Australia, New Zealand, and India. While the high inflationary conditions plough on, the combination of limited housing supply, restricted new constructions and robust household formation will support prices in various markets."
Christine Li, head of research at Knight Frank Asia-Pacific, adds: "The Asia-Pacific region maintains a balanced outlook, adapting to global challenges while showcasing resilience in key markets. Steady sales momentum, positive year-on-year growth in select markets, and buyer confidence in the face of diminishing affordability underscore the region's promising outlook. As we move forward, the rate of price deceleration in Australasia could start to restore confidence in the Australian and New Zealand markets, while the rise in income levels, coupled with a strong aspiration for property ownership, will sustain demand in emerging markets such as India and Malaysia."
Singapore’s housing market continued its price growth streak, although its economy narrowly avoided a technical recession in Q2 2023. Home prices in the city-state rose 3.1% in H1 2023, moderating from a 4.7% increase in H2 2022. The moderation could be attributed to the absence of new launches, which is favoured over the secondary market. Still, demand for housing will persist, driven by homebuyers purchasing for self-occupation and healthy household balance sheets, Frank Knight says.
China remained conservative on the back of bearish stock market performance and a sluggish economic recovery. Despite bottoming-out prices, the annual change in transaction volume for Chinese cities is still negative, reflecting the lacklustre effect its 16-point rescue package had on demand since its implementation in late 2022, according to the report.
A similar trend is playing out in Hong Kong SAR where a dull residential market persists. In a bid to invigorate the dormant sector, the Hong Kong Monetary Authority adjusted the maximum loan-to-value ratio from 50% to 60-70% on July 7, thereby easing down-payment requirements.
In Malaysia, Kuala Lumpur and Penang saw prices grow by 0.34% and 5.78% y-o-y, respectively, with the latter being the second-best performing city in Southeast Asia, after the national economy advanced 5.6% y-o-y and the unemployment rate tightened to 3.5% in Q1 2023.
Meanwhile, the Reserve Bank of Australia (RBA) has kept the official cash rate on hold at 4.10% after raising it by 50bp over the second quarter. Despite the higher mortgage rate, average sales volume in the H1 stayed flat, indicating that confidence is coming back to the property market.
The housing market in New Zealand showed signs of gaining momentum in defiance of the technical recession the economy registered in June. The rate of price deceleration is slowing – annually, prices in Auckland and Wellington dipped 10.6% and 10.5%, respectively, compared with 17.4% and 21.6% six months ago.
In India, residential launches have remained robust, with developers aiming to capitalize on the heightened demand and dwindling inventory. Prices have been on the rise since H2 2021, growing 5.3% annually on average, with Mumbai leading the growth at 6.0% in H1 2023, Frank Knight says.
