Asia Weekly

Asian Property

Real estate woes

Property consultant Jones Lang LaSalle has warned that markets across the Asia-Pacific region should be braced for a downturn as oversupply coupled with the global economic slowdown puts the brakes on transactions, says China Economic Review. China's first-tier cities will be particularly badly affected, especially Shanghai and Hong Kong. Things also look bleak elsewhere, with the strong yuan hampering export growth and leading to steep declines in the real estate market in China's other coastal cities, says Keith Bradsher in The New York Times. The tumbling stock market has tied the hands of many Chinese investors, and this has coincided with government measures designed to check inflation that have restricted the availability of credit to households. Easing credit restrictions and restoring consumer confidence "may be difficult," as the central bank must use its reserves to buy dollars and protect Chinese exporters from further damage due to the rising yuan.    

The market in Japan remains soporific as investment dwindles and the market begins to enter a reverse "after several years of encouraging improvement," says Nikkei News. Annual figures released in July suggested nationwide residential prices are continuing to fall, but hinted at a recovery in urban land prices. Yet the immediate picture is more telling, with prices in Tokyo and Nagoya beginning to go backwards in the first half of this year as US investors turn off the taps in the wake of the credit crisis. The squeeze has seen increasing numbers of "real estate firms going under," and demand has also fallen off in the wake of higher prices. Bank lending has also declined and office vacancy rates are up, suggesting the market lacks the drive to see its way out of the current stupor. 

Meanwhile in Seoul, the government has announced it plans to provide a "combined five million houses over the [next] 10 years," says the Dong-A Ilbo. The plans incorporate a significant easing of development restrictions on the 100 square kilometres of green belt land required to build 400,000 homes around Seoul and the outskirts of other cities. A total of 1.2 million homes will be newly built, prompting fears that the government "overlooked the possibility that a large-scale increase in supply might cause prices to plunge," says the JoongAng Daily. With house prices already falling and many plots still unsold, the plan does seem "untimely," but President Lee Myung-bak has cited it as evidence of his commitment to provide "low-income earners and newly married couples" with a place to live. Yet these couples want homes in the metropolitan area, not the green belt, and the plan "is more likely to create chaos in the real estate market" than boost an ailing economy.