A Resilient Rebound: Noteworthy Recovery of the Asia-Pacific Residential Landscape in H2 2023
A Look at the Latest Trends and Factors Driving Growth
4 minutes to read
Over the past six months, there has been a noticeable acceleration in the recovery of property prices in Asia-Pacific, propelled by peaking interest rates and declining inflation. According to Knight Frank's Asia-Pacific Residential Review H2 2023, an investor-focused report providing an in-depth look at the performance of 25 mainstream residential markets across the region, 21 exhibited positive or stable year-on-year (YoY) growth in the second half of 2023. This marks a significant improvement from the first half of the year, where only 14 cities showed growth. The trajectory has shifted from a 0.2% contraction to a robust 4.5% growth in the second half of the year, indicating a promising trend in the property market.
The halt in rate hikes by the Federal Reserve has prompted potential buyers, who were observing from the sidelines, to finally make their purchasing decisions. Persistent challenges on the supply side, such as construction costs and delays, have contributed to upholding prices in various cities across the Asia-Pacific region. Standout performers like Singapore, Australia, and Manila have reaped the rewards of factors like the wealth effect, a demand surpassing supply, and positive economic growth prospects, with Singapore emerging as the top-performing market in the region, recording an impressive 13.7% YoY growth.
Despite challenges such as a significant rise in mortgage rates impacting housing affordability across markets like Hong Kong and South Korea, a resurgence in demand amidst a limited supply has bolstered buyer confidence, creating upward pressure on prices.
Southeast Asia: Singapore
The mainstream housing market in Singapore has seen a significant 13.7% YoY increase despite a quieter sales market and reduced launches following cooling measures in April 2023. Singapore remains a safe haven, attracting talent and maintaining population growth. These factors, coupled with the wealth effect, are expected to support stable prices despite a decline in transaction volumes.
Southeast Asia: Philippines
Meanwhile, in the Manila metropolitan area, a robust 8.6% year-on-year surge in prices is attributed to the revival of Business Process Outsourcing (BPO) firms. This resurgence has not only energized the local real estate scene but has also enticed a growing number of expatriates to return, overseeing business operations and contributing significantly to the region’s noteworthy performance.
Australasia: Australia
The Australian property market has been on the rise in recent years, and the trend is expected to continue into 2024. Despite the Reserve Bank of Australia maintaining its official cash rate target at 4.35% in December 2023, major cities in the country are experiencing a shared challenge of rising construction costs and limited supply, which is driving property prices and rents upward. This is projected to persist into 2024, driven by sustained demand, a scarcity of new housing stock, and a robust nationwide immigration rate. The mainstream residential markets of Perth, Sydney, Brisbane, and Gold Coast (with the exception of Melbourne) experienced double-digit growth in 2023, ranging between 10.8% and 12.8% YoY, with prices expected to rise by mid-range single digits in 2024.
Australasia: New Zealand
In New Zealand, the housing market has shown signs of stabilising and has recovered some losses since reaching a floor in the second half of 2023. Prices in Wellington and Auckland have increased by 2.75% and 0.5%, respectively, compared to the previous year when they witnessed double-digit declines.
East Asia: Chinese Mainland
With regards to the Chinese Mainland, the prolonged liquidity crisis is poised to hinder the economic recovery despite the government's efforts to stabilize the real estate sector. The housing market's weakness is expected to persist through 2024, with transaction volumes continuing to decline, indicating the potential for further contraction in the sector. Although the Chinese government is expected to initiate another round of stimulus packages, the return of confidence in consumer sentiment and the property sector is unlikely in the near future.
East Asia: Hong Kong SAR
The challenges faced by the Hong Kong residential market mirrored those of the Chinese mainland, including a weak market sentiment, high interest rates, and a significant inventory of unsold completed new flats. Elevated mortgage rates are adversely affecting the affordability of homebuyers, with many struggling to pass stress tests. The cautious approach of potential homebuyers, influenced by a slower-than-expected economic recovery, has led to a prevalent wait-and-see attitude.
South Asia: India
Despite the prevailing challenges of higher mortgage rates and escalating property prices, the demand for residential properties in India's major cities has soared to unprecedented heights in 2023. The top 8 property markets have witnessed a remarkable 5% growth in annual sales, culminating in a substantial total of 329,097 apartments sold during the year. Mumbai has emerged as the frontrunner in sales, notching up 86,871 units and displaying a commendable 2% growth rate. The collective strength of Mumbai, NCR, and Bengaluru has positioned these cities at the forefront, capturing a substantial 60% share of the total sales volume in the Indian market.
The city dynamics play a pivotal role in steering the overall growth trajectory of the real estate sector which is expected to continue steadily into 2024. Additionally, the anticipated reduction in interest rates presents a potential catalyst for the affordable housing sector, showcasing resilience amid evolving economic conditions.
Looking ahead, the pick-up in the positive momentum is likely to be sustained in the near future given the prospect of a rate cut and a more tamed inflationary environment. However, the recovery is also expected to be patchy, with uncertainties in geopolitical risks and election outcomes.