Singapore remains a safe haven, attracting talent and maintaining population growth (Photo: Samuel Isaac Chua / EdgeProp Singapore)
In Knight Frank's 2H2023 Asia Pacific residential review, Singapore showed the most substantial price growth among the 25 key cities across the region tracked by the firm. Mainstream housing prices surged 13.7% y-o-y in 2H2023, despite muted sales, a challenging macro-economic environment and higher acquisition costs following cooling measures in April 2023.
"Singapore remains a safe haven, attracting talent and maintaining population growth," says Christine Li, head of research at Knight Frank Asia Pacific. She adds that the wealth effect created in Singapore is also expected to support stable prices despite declining transaction volumes.
Along with Singapore, other cities in Asia Pacific, such as Sydney, Brisbane, Perth, Manila, Delhi, and Bengaluru, have benefited from factors like wealth effect, demand exceeding supply, and optimistic economic growth prospects.
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Based on the 25 cities tracked by Knight Frank, 21 showed positive or stable y-o-y growth in 2H2023. It is a significant improvement from 14 cities in 1H2023. Overall price growth was 4.5% in 2H2023, compared to a contraction of 0.2% in 1H2023. "Despite encountering unforeseen challenges such as geopolitical issues and persistent inflation, Asia Pacific real estate has demonstrated a more optimistic outlook heading into 2024," says Li.
While greater China and South Korea face challenges from regulatory scrutiny and rising interest rates, the region as a whole has seen buoyant sales, with pricing remaining stable and trending upward, Li continues. "The annual growth rate of 4.5% has reversed early pessimism in sentiment, and the robust economic momentum is anticipated to sustain home buyer sentiment throughout 2024."
In the Manila metropolitan area, prices surged 8.6% y-o-y, driven by the resumption of business process outsourcing or BPO firms. An increasing number of expats are returning to oversee business operations, contributing to the area's strong performance.
In December 2023, the Reserve Bank of Australia maintained its official cash rate target at 4.35%. The anticipated impact on current mortgage holders from prior consecutive interest rate hikes has been relatively minimal.
(Source: Macrobond, Knight Frank Research)
Across major Australian cities, elevated construction costs and limited supply have resulted in an upward trajectory in property prices and rents. The trend is expected to continue into 2024, driven by sustained demand, scarce new stock, and robust immigration nationwide.
Except for Melbourne (up by 3.2% y-o-y), other major Australian cities such as Perth, Sydney, Brisbane, and Gold Coast have seen double-digit price growth of 10% and 12.8% y-o-y in their mainstream residential markets. Knight Frank expects prices to rise by mid-range single digits in 2024.
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In New Zealand, the housing market shows signs of stabilising and has recovered some of its losses since reaching a floor in 2H2023. Prices in Wellington and Auckland rose by 2.75% and 0.5% y-o-y, respectively, reversing the trend from the earlier double-digit declines.
Despite government attempts to stabilise the real estate sector, the extended liquidity crisis is expected to weigh on the economic recovery of the Chinese mainland market. Weakness in the housing market will persist into 2024, with transaction volumes still declining, signalling further contractions in the sector.
The Chinese government is anticipated to start another round of stimulus packages. However, confidence in the consumer sentiment and property sector will not return anytime soon, according to Knight Frank.
The Hong Kong residential market faces similar challenges, including weak market sentiment, high interest rates, and a substantial inventory of completed new flats. Elevated mortgage rates are impacting home buyers' affordability, with many struggling to pass stress tests.
The cautious approach of potential home buyers, influenced by a slower-than-expected economic recovery, has contributed to a wait-and-see attitude.
In Japan, Tokyo and Osaka continued to see price gains as yields over debt costs still offer good spreads for investors. South Korea's Seoul saw a 5.5% decline y-o-y due to the slowing export-oriented economy and higher borrowing costs.
Despite higher mortgage rates and prices, the demand for residential properties across India's major cities reached a 10-year high in 2023. The top eight property markets registered a 5% growth in annual sales, totalling 329,097 apartments in 2023.
Mumbai led in sales with 86,871 units, showing a 2% growth. Together with NCR (National Capital Region) and Bengaluru, these three regions garnered 60% of the total sales volume across the Indian market.
Knight Frank says the growth momentum is expected to continue steadily into 2024, with the potential for sustained performance in the real estate market. "The expected reduction in interest rates may further support the affordable housing sector, which has been losing momentum amid changing economic conditions," says the report.