Key Asian markets strike early to ward off property bubble
Key Asian economies fearing a US-style housing market bubble are taking fresh measures to curb runaway property prices as the region leads the global rebound from recession. High domestic liquidity, cash-rich foreign investors and low interest rates...
Key Asian economies fearing a US-style housing market bubble are taking fresh measures to curb runaway property prices as the region leads the global rebound from recession.
High domestic liquidity, cash-rich foreign investors and low interest rates have stoked demand, with prices for some sectors in Hong Kong and Singapore surpassing peaks seen in previous property booms.
China is also trying to rein in buyer exuberance by tightening credit and imposing other regulations that make it tougher to buy and sell property.
“On the whole, this is good news because this is a potential problem area and regulators are acting early on it,” said Deborah Schuler, senior vice-president and group credit officer for financial institutions with Moody’s Investors Service, told AFP.
“These are people who believe you should not wait for bubbles.”
The International Monetary Fund said in a report last June that booming Asian real estate markets “may pose risks to financial stability as banks are increasingly vulnerable to a price correction”.
“In addition, because the majority of mortgage loans in Asian economies carry floating rates, the widely anticipated rate hikes in the region may increase the burden on household balance sheets,” it added.
Singapore last Monday introduced new regulations to curb ‘flipping’ – buying condominium units on easy credit and reselling them for a quick profit even before the property is built or opened for occupancy.
A typical three-bedroom suburban apartment of around 100 square metres that will be ready for occupancy in only two or three years now costs at least a million US dollars in Singapore.
In Hong Kong, a similar property can cost twice as much.
“We think that if we do nothing, there’s going to be a bubble,” Singapore’s Minister for National Development Mah Bow Tan said.
“And when the bubble bursts, not if but when it bursts, there will be severe implications for individuals as well as for the economy as a whole,” he said.