Q2 2019: Thailand House Price Slowdown Follows the Trend in Asia-Pacific Region
Most of the twelve Asia-Pacific housing markets included in the latest Global Property Guide’s survey showed a weaker momentum in Q2 2019 compared to a year earlier.
The website considers as modest to minimal the annual house prices rise in Thailand, Taiwan, South Korea, Tokyo-Japan, and Singapore, while markets in Macau, Hong Kong, Shanghai-China, Indonesia, and Pakistan are now falling.
Sri Lanka, on the contrary, experienced an extraordinary boom during the year to Q2 2019. In New Zealand, the residential market rose at a slower pace.
The global real estate boom continues but is weakening. Real prices, or prices adjusted for inflation, rose in 26 out of the 46 world’s housing markets which so far published housing statistics, the website also mentions.
Asia-Pacific appears sluggish by the ongoing Sino-US trade war. North America is cooling after years of house prices boom. Latin America has mixed markets. The Middle East is affected by political tensions and weaker oil prices. Yet most of Europe continues to experience strong house price rises.
Resilience to Cope with Challenging Times
The house price in Thailand rose 2.59% (inflation-adjusted) y-o-y in Q2 2019 but slightly fell by 0.29% during the latest quarter, data compiled by Global Property Guide show. The slowdown is due to a combination of factors such as the strong Thai baht, slower economic growth in the country, bank loan restriction, and a new loan-to-value (LTV) ratio enforced since April this year. Also, external factors like the Sino-US trade war and global anxiety are taking a toll on several Asian real estate markets, including Thailand.
These events are not only affecting potential national buyers, since foreigner investors from traditional markets, like Mainland China, are less enthusiastic about buying in the Kingdom. Nevertheless, the Chinese still account for the biggest foreigner group for property investments in the country.
A drop in demand is affecting housing and rental prices nationwide with great impact in Bangkok. Property developers, especially SET-listed companies, face the challenge of clearing the stock accumulated from last year and the launching of new projects to meet their yearly business goals. As a result, in the last few months, special discounts aiming to lure both Thai and non-Thai buyers have been added to many off-plan developments.
Thailand’s Q1 2019 GDP rose by 2.8% y-o-y, down from a revised 3.4% in Q4 last year, the slowest pace in 17 quarters. The last quarter GDP only rose by 2.3%. The National Economic and Social Development Council last month cut its forecast for 2019 economic growth from 3.3-3.8% announced in May to 2.7-3.2%. Thailand’s economy grew at a rate of 4.1% in 2018, the highest in six years.
Group of Four Close Behind
House prices grew at a rate of 2.25% y-o-y in Q2 in Taiwan, which registered a minimal increase of 0.55% q-o-q in Q2. From 2001 to 2018, the house price index (inflation-adjusted) rose sharply in major cities from 97% in Hsinchu (lowest) to 178% in Taichung (highest). Taipei City registered an increase of 147%, Xinbei 155%, Taoyuan 134%, and Kaohsiung 123%.
Housing affordability remains a major problem in Taipei; therefore, it is affecting most young Taiwanese. According to Global Property Guide, Taipei also vies with Monaco for the lowest yields in the world – a landlord can be lucky to get a 2%-yield, except for the very smallest apartments. Average rental yields in Taiwan is around 1.5%.
Besides Thailand and Taiwan, modest to minimal annual house prices were registered in South Korea (0.97%), Tokyo-Japan (0.94%) and Singapore (0.6%). However, only Taiwan and Singapore saw house price rises during the latest quarter, the global survey mentions.
The meager 0.94% rise of the average price of existing condominiums in Tokyo y-o-y in Q2 2019 represents a slowdown from a y-o-y growth of 3.89% in 2018. Moreover, existing condo prices fell by 2.34% during the latest quarter. The average price of new condos decreased 1.65% y-o-y in Q2 this year, a drop from the growth of 9.71% last year, Global Property Guide stated in another report.
The Falling Markets
Slower economic growth in mainland China is hitting the gambling industry in Macau, which is the main sector driving the local economy with a prime impact on real estate price fluctuations.
The average transaction price of residential units fell by 2.98% y-o-y to Q2 2019, in contrast to a y-o-y rise of 6.68% a year earlier – the first annual decline since Q3 2016, Global Property Guide states. House prices rose by 1.4% q-o-q during the latest quarter.
The former Portuguese territory also experienced a contraction of its economy by 1.8% y-o-y in Q2 2019, following a 3.2% contraction in Q1 this year, data from Macau’s Statistics and Census Service (DSEC) reveal.
In Hong Kong, the social unrest coupled with the slowing of demand from Chinese buyers that are choosing other destinations like Singapore is taking a heavier toll on the most expensive housing market in the world.
The deteriorating affordability is another negative cause due to the benefits of development not being shared equitably and the widening gap between rich and poor. Rising mortgage rates and the impact of the Sino-US trade war are also damaging the Hong Kong market where residential property prices fell by 2.44% y-o-y in Q2 this year, from the rise of 13.64% y-o-y in Q2 2918. Nevertheless, according to Global Property Guide, house prices rose 2.64% q-o-q in Q2 this year.
The housing market continues to struggle in China, with new regulatory and monetary policies impacting developers and speculative buyers, the website’s global report mentions. In Shanghai-China, the second-hand house prices decreased by 2.53% y-o-y in Q2 2019, the seventh consecutive quarter of y-o-y house price falls, and on a quarterly basis, house prices rose by 0.67% Q2 this year.
China’s economy grew at a rate of 6.2% y-o-y during the last quarter, from 6.4% Q1 this year, the slowest rate growth the Asian tiger has experienced since Q1 1992.
In Indonesia, residential prices fell by 1.63% in 14 largest cities during the year to Q2 2019, and 1.71% q-o-q during the last quarter, the global survey show. The country’s GDP expansion slowed to 5.05% in Q2 2019, from 5.27% in the same period last year, Statistics Indonesia (BPS) announced in August.
Lastly, Pakistan’s high inflation – 10.34% in July this year, the highest since November 2013 – has no parallel with housing prices in the country, which declined 4.35% y-o-y in Q2, and 2.21% q-o-q during the latest quarter.
Two Best Performer Markets
Sri Lanka has the best performance of the twelve markets surveyed with national house prices rising by 10.64% y-o-y in Q2 2019. Nevertheless, prices fell by 1.01% q-y-q during the last quarter, Global Property Guide show.
Sharp rising of inbound foreigner tourists over the last decade is fueling property demand, namely in top travel destinations like Colombo, Kandy, and Galle.
The government aims to attract over four million tourists annually by 2020, hence, properties directed to the hospitality industry as well as short-term residential properties set for rent can expect a boosted demand in the next few years.
Sri Lanka saw a record 2.3 million tourist arrival last year, up 10.3% from 2017. The economy is projected to grow by 3.5% this year, from 3% in 2018, and 3.3% in 2017.
Far more discreet than Sri Lanka, yet ahead of the other ten surveyed peers in the Asia-Pacific region is New Zealand where house prices continue to rise, but at a slower pace, after the new regulation banning non-resident foreigners from purchasing most types of homes in the country. Foreigners with residency status in New Zealand, also non-resident Australian and Singaporean nationals, are exempt from the ban.
According to the global survey, median house prices rose by 2.74% y-o-y in Q2 2019, a slowdown from a y-o-y growth of 4.3% last year. The economy is projected to grow by 2.5% in 2019, from 3% in 2018, 2.6% in 2017, and 4.2% in 2016.