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SINGAPORE – House prices in Asia-Pacific cities have jumped sharply this year, helped by record low interest rates amid the pandemic.
Optimism is also picking up steam as the pace of vaccinations picks up and some countries move towards recovery from the coronavirus.
Analysts say that as companies move towards a hybrid work model – combining work sometimes at home and in the office at other times – demand for larger homes has also grown.
Overheating in property markets in some Asian cities has led to wide expectations that governments will intervene through housing restrictions or other measures such as fiscal or monetary policy.
South Korea, for example raised interest rates for the first time in three years in August – analysts associate this step with rising house prices and an increase in debt.
According to the consulting company Knight Frank, here are the cities with the highest price increases compared to last year as of the end of June.
On average, the Asia-Pacific region averaged 6.4% year-on-year growth – the highest growth in four years, according to Victoria Garrett, head of Asia-Pacific Residential at Knight Frank.
Analysts and real estate agents say there is intense competition among home buyers, leading to bid wars and sky-high cash bids far beyond market valuation.
Sean Coglan, global director of capital markets research and strategy at JLL, said: “There are more potential buyers than market opportunities, which creates more intense bidding processes,” says Coglan, adding that this is seen in the residential and logistics real estate segments. in particular in the region.
“Increased competition and large amounts of capital targeting real estate are joining forces to drive up prices,” he said.
One real estate agent in Singapore described the Asian housing market as “on steroids”.
“Some buyers don’t even consider houses, they post offers from the sidelines, or they just watch videos of a home tour,” said Kenneth Tan of PropertyLimBrothers. He added that for every 10 buyers, three would opt out.
The trading was so frenzied that their listings attracted cash offers that Tan said could be S $ 800,000 (about $ 595,000) more than the official property price estimate of over S $ 3 million ($ 2.2 million). ).
For those valued in excess of S $ 1 million, his agency has received additional cash offers of up to S $ 80,000.
Cash offers are also on the rise, Tang said – typically for real estate between S $ 4 million and S $ 8 million.
“This is the real estate market on steroids,” he told CNBC.
According to Mohamed Ismail Ghafoor, CEO of Propnex, one of the largest real estate agencies in Singapore, developers are buying up land and “outbid each other.”
This will lead to even greater price increases.
“What drives the market is people know that next year prices will be much higher based on land value and construction costs will not go down,” he told CNBC.
“This is why people need to make a commitment urgently,” Ghafoor said, referring to the fact that at one recent new property opening, prices rose six times in one day due to strong demand.
He sees hotter bidding among buyers vying for good-grade Singapore Bungalows (GCBs) – exclusive luxury bungalows worth up to tens of millions of dollars.
This particular segment of housing has recently come under the spotlight as it has been acquired by high-profile tech entrepreneurs.
Among them is Razer CEO Tan Min Liang, who bought GCB for more than S $ 50 million ($ 37 million), according to local media reports in July, and CEO of gaming company Secretlab Yang Ang reportedly buying up such property for 36 million Singapore dollars.
Super App Grab CEO Anthony Tan and his family reportedly also had bought GCB worth S $ 40 million.
The boom was fueled in part by low interest rates, loose monetary policy and “uneven distribution of wealth” during the pandemic, said Regina Lim, head of capital markets research at JLL Asia-Pacific.
“Home prices are likely to continue to rise with income and wealth unless action is taken to reduce its attractiveness as a store of value,” she told CNBC in an email.
“There are anecdotes about homeowners looking for bigger homes, expecting to spend one or two more days a week working from home, but we are seeing strong sales and prices across all types of housing units,” she added.
Analysts believe high prices may soon trigger government intervention.
“We expect home sales and prices to remain strong in the near future,” said Koichiro Obu, Head of Real Estate Research at DWS Asia Pacific.
However, he noted that “with several countries in the Asia-Pacific region increasingly imposing restrictions on housing and stimulating housing supply to prevent overheating due to affordability issues, the magnitude of government intervention, and shifts in macroeconomic expectations, are likely to be more significant factors that can affect home prices and sales. “
New Zealand was also expected to raise interest rates. – but one case of Covid triggered an expansion of the group of infections, with the result that the central bank instead kept rates unchanged. As in the case of South Korea, analysts were expecting a rate hike due to rising house prices in New Zealand.
In Singapore, analysts are also anticipating new restrictions, as city-state leaders warned last year that home buyers should be wary of the risk of rising interest rates.
Piyush Gupta, CEO of the country’s largest bank DBS, said earlier this year that people are trying to “get ahead” of expected cooling measures. according to a Reuters report.