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OBOR property investment: which Asian market reigned H1 2017?

Q2 2017 saw Hong Kong dominating as the top performing market in Asia, as well as the second-best performer globally.

Despite strict restrictions, including a 15% residential property stamp duty imposed on non-first time buyers in November 2016, property investors have remained eager and enthusiastic in Hong Kong.

In the Philippines, its thriving economic growth has kept the momentum of housing prices in Makati CBD on the rise, even as housing price growth in other Asian countries lying on the One Belt, One Route (OBOR) have remained steady.

We analyse the latest Juwai Global Property Index (GPI) Report for Q2 2017, and put the spotlight on several housing markets for a more in-depth look below:
 

Hong Kong

The former top performer in Q1 2017, Hong Kong fell behind Iceland to become the second-best performing global housing market in the second quarter of the year.

Nevertheless, Hong Kong still dominated as the strongest housing market in Asia that staged a dramatic comeback from its -10.5% decline in the same period last year to accelerate into Q2 2017 with a 19.3% y-o-y growth and 4.2% m-o-m growth.

Bolstered by surging housing demand amidst limited housing supply and low interest rates, Hong Kong saw over 35,000 property transactions completed within the first seven months of 2017 – a 47.4% y-o-y increase and 80% y-o-y in terms of volume and transaction value, respectively.

Currently, rental yields in Hong Kong is about 2.6%, but rental return rates could fall as housing prices continue to rise.

The Philippines

The housing market in the Philippines continues to strengthen, with Q2 2017 seeing the average price of 3-bedroom apartments in Manila up 8.5% y-o-y – higher than the 7.9% charted in the same period in 2016.

Property prices in the Makati CBD area has surged 49% between Q1 2011 and Q4 2016, thanks to the rapid economic growth in the Philippines.

Nevertheless, property prices in Philippines remains relatively low. Currently, apartments in Manila CBD area costs around RMB 26,000/sqm, offering property investors annual rental returns of over 6%.

The Philippines is projected to maintain an economic growth rate of 6.5% - 7.5% this year, and this will bolster its housing market and property prices.
 

Cambodia

Cambodia has recently received much attention from domestic investors and the financial media, as the average price of high-end apartments in Phnom Penh fell 2.7% y-o-y in Q1 2017.

Apartments in Phnom Penh are currently at a low price of RMB 16,000/sqm, with annual rental yield of around 5.3%.

This is due to an oversupply of apartments following the launch of over 9,000 and 8,000 new apartment units in 2015 and 2016, respectively. Already, local real estate experts have predicted apartment prices in Phnom Penh will fall more than 10% in 2017.

According to Cambodia CBRE data, the overall value of new apartments in 2016 is 2.4 times of that in 2015. Moving forward, the Organization for Economic Co-operation and Development (OECD) projects the Cambodian economy to grow 6.9% and 6.8% in 2017 and 2018, respectively – lower than the average economic growth of 7.2% in the past six years.
 

Vietnam

Housing prices in Ho Chi Minh City saw a mere y-o-y increase of 1.13% in Q1 2017, significantly lower than those charted in previous quarters. Compared with Q4 2016, housing prices in Vietnam fell -1.06%, a decline for two consecutive quarters.

However, Vietnam’s economic growth and momentum is surging ahead. Together with Vietnam’s rapid urbanisation and construction of several mega projects in its major cities, this should shore up its housing market and push it into an upward trend again.

Q2 2017 saw Vietnam’s GDP grow 6.17% y-o-y – the second highest expansion in five years – mainly thanks to its agriculture-forestry and fishing sectors, and this robust growth is set to continue.

OECD expects the Vietnam economy to grow by 6.5% and 6.3% in 2017 and 2018, respectively.

Singapore

The easing of some cooling measures in Singapore has seen housing demand back on the rise, but property prices have remained comparatively low.

Private apartment prices in Singapore declined -3.23% y-o-y in Q2 2017, more than the -2.16% fall chartered in the same period last year.

Although new housing supply on the wane – 2016 saw the launch of new private residential units falling 15.2% y-o-y – property sales in Singapore has seen a 36.4% y-o-y increase to hit 3,077 new private residential units sold in Q2 2017.

Singapore’s economic growth has been stable, its GDP rose 2.9% in Q2 2017, and Singapore is set to see an annual growth 2% to 3% this year.
 

Thailand

Thailand’s property market is presently going through a slump.

Q2 2017 saw its housing prices fall -2.8% y-o-y and -0.68% q-o-q, compared to the 4.29% y-o-y growth charted in the same period last year.

Still, rental yields are good with Bangkok currently offering yields of 5.05%. Also, the Thai economy expanded by 3.7% y-o-y in Q2 2-17 – its fastest growth in four years, thanks to its strong tourism sector, improving agricultural sector, and recovering exports.

Currently, Thailand’s annual GDP growth is expected to remain between 3.5% and 4%.
 

Indonesia      

Indonesia’s economy is booming, yet its property market has remained sluggish as it struggles to keep pace with its economic growth.

Q2 2017 saw housing prices dip -1.1% y-o-y in 14 cities, the tenth consecutive quarter of y-o-y declines.

With its political stability having improved dramatically in recently months, S&P upgraded Indonesia’s credit rating to investment grade, while Moody's revised its outlook of Indonesia’s banking system from stable to positive.

Indonesia’s GDP is also forecast to grow by 5.1% this year, higher than the 5% and 4.88% recorded in 2014 and 2015, respectively.

Nevertheless, its weak housing demand has led to feeble growth in housing prices, and with housing supply in Indonesia likely to decline in next few years, this could push and adjust the supply and demand imbalances in its housing market.

Note: Global encompasses the 46 housing markets that published housing statistics. All house price changes are based on inflation-adjusted figures, except for Vietnam and Cambodia.