According to the recent Residential Index from Jones Lang LaSalle's research team, average capital values rose only 1.6% quarter-over-quarter (q-o-q) in 2Q11 across monitored luxury residential markets in Asia, slowing from the 1.8% q-o-q pace recorded in the previous quarter.
Price growth has slowed steadily from the 7.4% q-o-q pace recorded in 3Q09, as sales activity cooled in 2Q11, with fewer launches and sales recorded in most markets, as a result of ongoing tightening measures by various governments. Of the eight featured luxury residential markets, four saw an increase in capital values during the quarter, while prices remained stable in three cities and declined in Beijing.
Despite the latest round of government measures aimed at curbing speculative demand, luxury residential prices in Hong Kong grew strongly by 7.3% q-o-q in 2Q11, due to continuing rental growth and tight supply. In the twelve months to end-2Q11, Hong Kong delivered the strongest price performance among the monitored markets, with growth of around 28%. On the other hand, prices in Singapore's luxury prime market remained stable for the fourth consecutive quarter as buyers remained cautious after recent government tightening measures. Despite falling sales volumes in the China Tier I markets, capital values remained largely unchanged for luxury apartments in Shanghai, though average prices in Beijing fell by 1.9% q-o-q.
"In Hong Kong, we saw a continued growth in luxury residential prices last quarter of 7.3% as a result of the continued low interest rate environment, progressive rental growth and limited supply in the market. We saw a growing percentage of Mainland Chinese buyers in the luxury residential market, despite the decline in capital values in Beijing" says Joseph Tsang, Managing Director and Head of Capital Markets, Hong Kong.
Luxury residential prices are generally likely to remain stable or see slower growth for 2011 due to ongoing policy and interest rate risks. Prices in China are expected to either remain flat or edge down slightly over the rest of this year as developers will likely introduce more price discounts and launch less high-priced units over the next 12 months. Prices in Hong Kong and Singapore should remain largely stable over the second half of 2011, buoyed by continued demand from end-users and long-term investors.
Commenting on the Singapore, Jacqueline Wong, Head of Residential for Jones Lang LaSalle Singapore says "Despite the low interest rates environment, capital values for the Singapore luxury residential market is expected to remain stable. This could be a result of a successful government intervention in tightening measures as well as a sustained cautious mood over the global economy. While developers are not actively increasing their selling prices, they are also resisting deflating the asking prices as these developers have built up enough holding muscle over the past few years of stellar performances."
Ms Wong adds "While Singapore is establishing itself to be a favored global city to live in, there has also been more long term high net worth investors placing Singaporean real estate into their portfolio. This profile of investors has helped stabilized capital values away from speculators."