Asia's potential real estate markets are starting to feel the heat.

Despite the current risks affecting the global economy such as inflation, interest rate hikes, geopolitical conflicts, etc. Experts still predict the bright housing market in Asia - Pacific (APAC) will grow this year.

As of April, it seems that the predictions of experts are showing signs of bias. In New Zealand, first-quarter data showed the market experienced its biggest quarterly decline in a decade.

Meanwhile in Australia, the latest data indicates that home values in the two largest cities, Sydney and Melbourne, are both affected. Home sales in Hong Kong fell to a two-year low in March, while a similar drop in sales in Singapore is raising doubts about the weakness of that market.

In theory, the drop doesn't seem too severe. In New Zealand, for example, the decrease recorded was only 0.6%. However, David Nagel, chief executive of the QV House Price Index, an index of the New Zealand housing market, said the drop suggested growth this year is likely to be lower.

“We see year-over-year growth falling pretty quickly, especially compared to the first months of 2021, when the market was at its peak. This is most clearly seen in big cities,” says David Nagel.

Based on the latest data and current market conditions, ANZ economist Sharon Zollner forecasts New Zealand house prices will fall 10% by 2022.

However, Zollner notes that while this may sound pessimistic, the fact that this is a relatively "soft" drop will still keep New Zealand's median house price higher than it was before the pandemic. 

In an update on the Australian market in April, CommBank's Australia chief economist, Gareth Aird, said house prices in Sydney and Melbourne appear to have peaked. CommBank predicts property prices in Australia will be flat in 2022, before falling by around 8% in 2023.

Goldman Sachs predicts a steeper drop in house prices in Hong Kong, predicting a one-fifth drop over a four-year period. The popular investment bank has lowered its forecast from a flat rate this year to a 5% annual decline between 2022-2025.

Meanwhile, while still expecting to see growth in core markets in Asia Pacific this year, global real estate consulting firm Knight Frank has downgraded some of its previous forecasts. mine. For the main market in Auckland, New Zealand, 2022 growth is now forecast between 2 and 5%, down from the 7% growth forecast given in December 2021.

The forecast for the Singapore market, initially up more than 5%, has been revised down from 1 to 3%, largely due to the impact of tightening government regulations.

Real estate is still a safe investment in times of crisis

It's no surprise that Victoria Garrett, Knight Frank's head of APAC real estate, has pointed to a series of factors that prove what's driving home prices up in 2021 is unlikely to repeat this year.

“Home prices in the Asia Pacific region have increased by 9.1% for the whole of 2021. This is an 'incredible' increase compared to 2020, especially when the pandemic is still raging. Economic risks from the pandemic are fading, FOMO (fear of missing out) and expectations of a return of stimulus measures have created buying pressure. Ms. Garrett noted that delays in construction also contributed to "adding fuel to the fire".

She added that although conditions vary from country to country, there are some commonalities that can be observed, notably the "ghost" of higher borrowing costs as well as the government's tightening of the real estate industry.

Buying sentiment was also weakened by the geopolitical crisis in Ukraine, which caused inflation to soar, affecting purchasing power.

“Since the global financial crisis of 2008, governments in the APAC region have been more wary of rising property prices. In addition, the pandemic has widened the gap between rich and poor.

For example, Singapore has tightened macro-security measures to curb price growth, while regulators in Australia also raised the minimum interest rate buffer that lenders need to take into account when evaluating home loan applications. However, in Hong Kong, it is the resurgence of the pandemic that has affected the recovery in the residential market in this country, even more severely than the increase in the basic lending rate", Ms. Garrett said.

However, Knight Frank feels a reversal of bullish momentum in the region is unlikely. According to Garrett, housing shortages in key markets are unlikely to improve next year. With the rate hike cycle still in its early stages, there is still room for buyers to take advantage of financial interest rates.

For the full year of 2022, Knight Frank predicts housing prices across the APAC region will grow at a slower, but more stable rate, in the range of 3-5%. “For Asian buyers, the pandemic has reaffirmed the appeal of real estate as a store of wealth and portfolio diversification, which we expect will be evident in the coming months, as economies gradually stabilize again,” Ms. Garrett emphasized.