The International Monetary Fund (IMF) is warning the market about Asia’s inflated home prices which “pose risks to financial stability,” according to an IMF statement.
“The property bubbles in Asia right now are reminiscent of the U.S. before the subprime crisis because they are both fueled by debt when interest rates are too low,” said Andy Xie, former Morgan Stanley chief economist for Asia-Pacific and now a private economist based in Shanghai in an interview with Bloomberg.
In Hong Kong billionaire Lee Shau-kee’s Henderson Land Development Co. announced that his planned sales of 20 luxury apartments had terminated, including one property, which made worldwide headlines for setting a record price of $HK88,000 (US$13,100) for a square foot. Reports have suggested that the alleged buyer had already defaulted on five other transactions in the 39 Conduit Road project. It is a prestigious development by Henderson Land Development.
The controversy surrounding such magnified prices is that the property was promoted with developers without the 42 intermediate other floors available when it become publicized in 2009. The notice about the impending sale boosted the sentiment in the market, but the cancellation has also dampened enthusiasm.
Higher taxes may be imposed on some properties in Hong Kong, which could encourage more land auctions but scrutiny of developer’s sales tactics could be heightened.
Taiwan’s financial authorities have opted to negotiate with the bankers’ association to be more stringent with lending practices. This has resulted in two state-owned lenders raising mortgage rates and reducing the amount of loans for buyers of luxury homes and property investors.
“The regulatory measures are not aiming to crash the whole property market, they are aiming to cool the speculative end,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia), which manages $11 billion.
House prices in Hong Kong have climbed around 40 percent since 2009, propelled by interest rates at 20-year lows, and delayed supply growth and buying from the wealthy mainland Chinese. The risk of a property bubble remained in the city amid liquidity and low interest rates, Norman Chan, chief executive of the Hong Kong Monetary Authority, said on May 20.
In Taipei, home prices increased 3.4 percent in May from April, Sinyi Realty Co., the biggest housing broker in Taiwan, said on May 31. They have risen 29 per cent to a record since September 2008 when the collapse of Lehman Brothers Holdings Inc. led to the global credit crisis.
The failure to raise rates may allow the bubble to keep swelling.
“The lesson of subprime is that, if you let asset prices go too far for too long, the correction can be very damaging,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, who oversees around $135 billion, in a Bloomberg report.
“The property bubbles in Asia right now are reminiscent of the U.S. before the subprime crisis because they are both fueled by debt when interest rates are too low,” said Andy Xie, former Morgan Stanley chief economist for Asia-Pacific and now a private economist based in Shanghai in an interview with Bloomberg.
In Hong Kong billionaire Lee Shau-kee’s Henderson Land Development Co. announced that his planned sales of 20 luxury apartments had terminated, including one property, which made worldwide headlines for setting a record price of $HK88,000 (US$13,100) for a square foot. Reports have suggested that the alleged buyer had already defaulted on five other transactions in the 39 Conduit Road project. It is a prestigious development by Henderson Land Development.
The controversy surrounding such magnified prices is that the property was promoted with developers without the 42 intermediate other floors available when it become publicized in 2009. The notice about the impending sale boosted the sentiment in the market, but the cancellation has also dampened enthusiasm.
Higher taxes may be imposed on some properties in Hong Kong, which could encourage more land auctions but scrutiny of developer’s sales tactics could be heightened.
Taiwan’s financial authorities have opted to negotiate with the bankers’ association to be more stringent with lending practices. This has resulted in two state-owned lenders raising mortgage rates and reducing the amount of loans for buyers of luxury homes and property investors.
“The regulatory measures are not aiming to crash the whole property market, they are aiming to cool the speculative end,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia), which manages $11 billion.
House prices in Hong Kong have climbed around 40 percent since 2009, propelled by interest rates at 20-year lows, and delayed supply growth and buying from the wealthy mainland Chinese. The risk of a property bubble remained in the city amid liquidity and low interest rates, Norman Chan, chief executive of the Hong Kong Monetary Authority, said on May 20.
In Taipei, home prices increased 3.4 percent in May from April, Sinyi Realty Co., the biggest housing broker in Taiwan, said on May 31. They have risen 29 per cent to a record since September 2008 when the collapse of Lehman Brothers Holdings Inc. led to the global credit crisis.
The failure to raise rates may allow the bubble to keep swelling.
“The lesson of subprime is that, if you let asset prices go too far for too long, the correction can be very damaging,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, who oversees around $135 billion, in a Bloomberg report.
