Home prices pick up as demand rises
China, Singapore and Australia see home prices rise on the back of low interest rates and investors’ appetite for returns
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China, Singapore and Australia see home prices rise on the back of low interest rates and investors’ appetite for returns
Bloomberg in Singapore
04 July 2012
Home prices in China, Singapore and Australia have rebounded as demand for property assets rose, boosted by low interest rates as investors sought real estate investments in the Asia-Pacific region.
China’s new-home prices in June increased for the first time in 10 months, while those in Australia’s eight major cities recorded their largest monthly increase in more than two years as lower mortgage rates encouraged buyers. Singapore prices rebounded to a record in the second quarter.
The Federal Open Market Committee - the group that makes monetary policy for the US Federal Reserve System - said on June 20 it would expand the Operation Twist programme to extend the maturities of assets on its balance sheet and stands ready to take further action as needed.
Central banks in China and Australia cut interest rates last month, while Singapore’s mortgage rates are at a record low.
“The quantitative easing in the West is finding its way to Asia, which is perceived to be an engine of growth,” said Alan Cheong, a director at Savills in Singapore. “If interest rates stay low for a prolonged period of time, inflation is always a certainty.”
The Fed pushed down its target interest rate close to zero in December 2008 and has engaged in two rounds of asset purchases totalling US$2.3 trillion in a bid to lower long-term borrowing costs and boost the economy.
The Bank of England will probably expand its so-called quantitative easing programme this week as the debt crisis in Europe impedes Britain’s return to growth, according to a Bloomberg survey.
In Australia, the median price of homes in state capitals was A$460,000 (HK$3.65 million) last month, compared with A$465,000 a year earlier and 3.2 per cent lower than the record of A$475,000 set in December 2010, according to data from RP Data and Rismark International.
The Reserve Bank of Australia reduced the overnight cash rate target by 75 basis points in May and June, and banks have passed on about 58 basis points of reductions in their standard variable mortgage rates in the past two months, said Annette Beacher, head of Asia-Pacific research at TD Securities.
Singapore’s private residential property price index rose 0.4 per cent to a record 206.8 points in the three months ended on June 30 from the previous quarter, according to preliminary estimates released by the Urban Redevelopment Authority yesterday.
Housing sales on the island climbed even as the government introduced more measures to cool the property market.
Home affordability in Singapore has risen to the highest in a decade because of historically low interest rates and flexible payment options available to buyers, according to Jefferies Group.
Average mortgage rates are about 70 basis points above the Singapore Interbank Offered Rate, or Sibor, according to Maybank Kim Eng Holdings.
The three-month Sibor is at an all-time low at just under 0.4 per cent, compared with a peak 3.56 per cent in 2006, according to Bloomberg data. A basis point is 0.01 percentage point. That makes Singapore’s mortgage rates the lowest in Asia, according to Credit Suisse Group.
China’s home prices increased 0.05 per cent from May to 8,688 yuan (HK$10,630) per square metre, SouFun said in a statement yesterday, based on its survey of 100 cities.