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SINGAPORE - This year has seen record low interest rates and a surge in housing prices across Asia-Pacific cities. As vaccination rates rise and countries make progress towards a post-Covid recovery, optimism has grown. Analysts say that companies are moving to hybrid work models, which allow employees to work from home and at the office, but also increase demand for larger homes. There is a lot of expectation that governments will intervene to curb the overheating property market in some Asian cities by imposing housing curbs, or taking other measures like fiscal or monetary policies. South Korea raised interest rates in August for the first time since 2003. Analysts attributed this to increasing home prices and rising debt.
Property prices are rising
These are the top cities that saw the largest year-on-year price rises as of June 30, according to Knight Frank data.
According to Victoria Garrett (head of residential Asia-Pacific at Knight Frank), the average annual growth in Asia-Pacific was 6.4%. This is the highest increase in four-years.
It's a property boom on steroids. PropertyLimBrothers Kenneth Tan real estate agent
Real estate agents and analysts agree that there has been intense competition among homebuyers, which has led to high-priced cash offers and bidding wars far beyond market valuations. JLL's global director of capital market research and strategy, Sean Coghlan said that there are more potential buyers than available on-market opportunities. This has led to more intense bidding processes. He added that this is evident in the regional residential and logistics property sectors. He said that pricing is driven up by greater competition and deep capital pools targeting real estate.
Housing market "on steroids"
One Singaporean property agent described the Asian housing market as "on steroids." Kenneth Tan, a real-estate agent from PropertyLimBrothers said that some buyers do not even visit the homes. They either make offers after viewing them from the outside or view the videos of the homes. He said that three buyers would be able to view the home for free, while 10 buyers would have to pay.
Their listings have attracted cash offers of up to 800,000. Singapore dollars (about $595,000), which is more than the official valuation for properties valued at more than 3 million Singapore Dollars ($2.2 million). According to Tan, this has caused a frenzy in bidding. His agency has been offered additional cash for those with valuations exceeding 1 million Singapore Dollars. Tan reports that all-cash offers are on the rise for properties valued between 4 million Singapore Dollars and 8 million Singapore Dollars. Tan said that it was a property market "on steroids".
Luxury bungalows in Singapore are in high demand
According to Mohamed Ismail Gafoor (CEO of Propnex), one of the largest real-estate agencies in Singapore, developers have been buying up land and "outbidding one another." This will drive up prices. He explained to CNBC that "what is driving the market here people understand next year, prices will be much higher, as land costs and construction costs are not going down neither." Gafoor explained that prices have risen six times in a single day because of high demand at a recent property launch. He is seeing more intense bidding from buyers for Singapore's high-end luxury bungalows (GCB), which are priced in the high tens to millions of dollars.
These properties have been snapped up by high-profile tech entrepreneurs. These include Razer CEO Tan Min Liang (gaming giant), who purchased a GCB worth more than 50 million Singapore Dollars ($37 million), according local media reports. Secretlab CEO Ian Ang, a gaming chair company, reportedly bought a GCB at a price of 36 million Singapore Dollars. Anthony Tan, CEO of Super App Grab, and his family purchased a GCB for 40 million Singapore Dollars.
Are housing prices set to rise?
According to Regina Lim, head capital markets research at JLL Asia-Pacific, the boom was partly due to low interest rates and loose monetary policies. She told CNBC via email that home prices will continue to rise with incomes and wealth unless there are interventions to decrease its value as a store-of-value. She said, "There are some anecdotes about home owners looking for larger homes in anticipation that they will spend one or two additional days per week working from home. However, we see strong sales figures and pricing across all residential units."
We anticipate residential sales and prices to continue buoyant in the short term. Koichiro Obu, head of real estate research Asia Pacific, DWS