Asian Property Market Bubble Threatens In China And Singapore

Asian Property Market Bubble Threatens In China And Singapore
Published on: Wednesday, November 25, 2009 Written by: Property Wire


The threat of an Asian property market bubble have some concerned that government stimulus plans have worked too well, and have simply lead to unbridled speculation and a glut of development. Yet the low rate of home ownership in the region suggests there is still capacity for growth, even with prices climbing. Meanwhile, federal authorities in Singapore and China continue to keep a close watch over the direction of their real estate markets.
The government in Singapore will continue to monitor real estate prices to see if further measures are needed to cool the market to avoid a property bubble but officials said that so far cooling measures are working.

Many markets in Asia including Singapore, Malaysia and China have seen property prices rise in recent months amid fears that a mini boom could dent recovering markets and lead to another down turn.

But Singapore’s National Development Minister Mah Bow Tan said that releasing more land for development and making it harder for property buyers to defer payments seems to be dampening speculative demand.

‘The government will continue to monitor the property market closely and assess the market response to the measures introduced before deciding whether further measures are necessary to promote a stable and sustainable property market,’ he said.

But in China opinion is divided over whether or not the government should halt its stimulus packages which have led to soaring property prices.


China should immediately halt some of its real estate stimulus policies or risk inflating a bubble, according to an opinion piece in the government owned Financial News which is published by the central bank.

It described ‘rampant speculation in the country's property market’ as like a time bomb that could threaten future growth.

‘If China does not exit its stimulus policy property prices and the market may go out of control,’ it said.

Residential property prices in China have been rising since March propelled by a slew of government measures including lower down payments and mortgage rates and tax cuts.

Rising prices have encouraged developers to break ground on new projects, with real estate investment up an annual 18.9% in the first 10 months of the year, compared with a mere 1% rise in the first two months.

While the government has welcomed this surge in building activity, which is an important pillar of the economy, some officials now worry that property development is outstripping end-user demand in some locations and that prices are not affordable for ordinary citizens.

But others say there is no risk of a property bubble.

It is not a concern according to a new report from CLSA.

It says that the country’s home ownership ratio is between 30 and 50% in first tier cities and just 25% in second tier cities suggesting that the need for first home and upgrades is strong.

‘There is strong underlying housing demand which is underpinned by a low home ownership ratio, low leverage and high income growth,’ said Nicole Wong Yim, regional head of property research.

She predicts that the government will not curb mortgages although it may ‘fine tune’ its policies rather than tightening lending.

‘There is still room for property prices to climb in China,’ she added.

This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.

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