Q3 2011: Asia’s luxury residential markets

AVERAGE capital values fell 0.2percent quarter on quarter in quarter three (Q3) 2011 across monitored luxury residential markets in Asia, compared with the positive 1.6percent growth recorded in quarter two (Q2), according to the latest Residential Index from Jones Lang LaSalle. Price growth has slowed steadily from the 7.4percent quarter on quarter increase recorded in Q32009, but this was the first time that average prices have declined since the first quarter (Q1) of 2009.

Sales activity cooled further in Q32011, with fewer launches and sales recorded in most markets as a result of economic uncertainties and ongoing tightening measures by some governments. Of the eight featured luxury residential markets, only Jakarta and Mumbai saw an increase in capital values during the quarter, while prices remained stable Singapore, Bangkok and Kuala Lumpur and declined across the three Tier I cities in Greater China, namely Hong Kong, Beijing and Shanghai.

Luxury residential prices in Hong Kong edged down marginally by 0.6percent quarter on quarter in Q3 this year (+7.3percent in 2Q2011), due to tighter credit and weakening investor sentiment. In the twelve months to the end of Q32011, Hong Kong still delivered the strongest price performance among the monitored markets, with growth of around 23percent. Average prices in Singapore’s luxury prime market remained stable for the fifth consecutive quarter despite slight rental correction. With mortgage and purchase restrictions remaining in place and falling sales volumes in the China Tier I markets, capital values for luxury apartments in Shanghai fell by 0.9 percent quarter on quarter , while average prices in Beijing fell by 3.4percent quarter on quarter.

Jones Lang LaSalle believes that prices in Greater China and Singapore are likely to have reached the peak of the current cycle. Prices in China are expected to soften further over the next 12 months as developers are likely introduce more price discounts and launch less high-priced units in the nearterm. Prices in Hong Kong and Singapore are also expected to soften over the rest of 2011 and in 2012, partly as a result of projected rental correction as well as weaker investor sentiment. However, South East Asian markets are expected to be more resilient, with overseas workers’ remittances buoying buying demand in Manila, while the Jakarta sales market should be supported by a strong economy.

Commenting on the Singapore market, David Neubronner, Head of Residential Project Sales at Jones Lang LaSalle Singapore said: “Though sales volume has slackened in the past months, we expect prices to remain stable as on the back of strong fundamentals. Nevertheless, with every global crisis, there will be uncertainties and uncertainties create opportunities. Foreign investors looking for a safe haven to retain wealth will continue to consider Singapore as an attractive and reliable proposition”.

In Indonesia, Luke Rowe, Head of Project Marketing (Residential) at Jones Lang LaSalle Indonesia commented: "Continued strong consumer demand and a buoyant resources sector is fueling continued growth in Indonesia. Values are rising in spite of economic uncertainly elsewhere. We predict a buoyant luxury residential market for the medium term."

(Singapore, 25 October 2011)