In the excitement of a bullish property market where positive sentiments are the order of the day, it bears noting that there are still bearish voices out there to remind investors that there is still some frailty in the sector.
One such naysayer — The Global Property Guide — says the Asian residential property market has lagged badly behind Europe, the United States, Australia and New Zealand.
Once the price rise figures are adjusted for inflation, Asia’s record looks poor, says Matthew Montagu-Pollack, publisher of the Global Property Guide.
“There have been few less profitable investments than Asian residential property over the past decade,” says Mr Montagu-Pollack. “And if the construction boom continues across Asia, the next decade isn’t going to be much fun for property investors either.”
While Asian markets benefit from strong economies and rental yields are quite high in Indonesia, Thailand and the Philippines, their real market rise has been limited, says the Global Property Guide because of government mistakes.
“Asian real estate markets would have been stronger had it not been for government mistakes,” says Mr Prince Cruz, chief economist for the guide. “If it’s not a coup, a protest rally or runaway inflation, then it is government meddling in the housing markets that has killed performance.”
Mr Cruz’s study points to the housing markets of Singapore, Hong Kong and South Korea as victims of government subsidies and intervention, while the housing markets of the Philippines, Indonesia and Thailand have suffered from political instability.
However, not all experts agree with this view. “It is misleading, and even more so in the case of Singapore as there is a dual-tracked market here with a very wide divergence between prime and non-prime properties for the past year at least,” says Mr Colin Tan, head of research at property consultancy Chesterton International.
If the report is aimed at investors, the focus should be on investment-type properties. In the case of Singapore, the analysis should focus on properties, which appeal to investors, namely the prime properties and leave out the suburban condo market.
“Therefore,” says Mr Tan, “analysing the market using the URA’s PPI is misleading. I assume they have used the PPI as it is consistent with their analysis as the index aggregates the prices for all private properties in Singapore which is really a mixed bag.”
Just going by anecdotal evidence, Mr Tan surmises that the majority of investors who had invested in a prime property before 1996 would have made a quite a huge bundle given the high benchmark prices for the recent spate of en bloc collective sales.
“So I would surmise most investors would have made it big — in some cases very big,” says Mr Tan.
As examples, he has analysed two high-end developments in Singapore — Ardmore Park and Regency Park — by plotting the transacted prices on a Singapore dollar per square foot basis on a scatter diagram and fitted a trend line to it.
In both cases, the long-term trend lines have surpassed their previous peaks in 1996 by about 2.8 per cent for Regency Park and by about 1.7 per cent for Ardmore Park.
His verdict: “Whichever type of trend line you used, the result is more or less the same – close to previous peaks or passed it.”
Source: TODAY, 11 November 2006
