Wednesday, 14 February 2018

China-fueled property boom distorts markets in Asia-Oceania

Authorities move to stop overheating as soaring prices cause concern
TAKASHI NAKANO, Nikkei staff writer
The Center skyscraper fetched a record price for a Hong Kong office building in late 2017.

SINGAPORE -- As red-hot investment money from China continues to drive up real estate prices in Asia and Oceania, local authorities have started taking steps to curb the enthusiasm before things get out of control.

In Hong Kong, a group of investors including a major Chinese resource company struck a deal late last year to purchase The Center skyscraper, a symbol of the financial district there, for around 40 billion Hong Kong dollars ($5.1 billion). The amount that the 73-story structure fetched set a new record for the price of an office building in the Chinese special administrative region.
Prices of office space and condos there rose 6.5% and 5.2%, respectively, over the six months through last October, according to the Japan Real Estate Institute. Yet there is no sign of the market cooling anytime soon. The average rent for major office buildings in Hong Kong is more than double that in Tokyo.
The aggregate value of property-related deals in Asia and Oceania, including acquisitions of real estate companies and large-property sales, jumped 43% on the year to reach $195.2 billion in 2017, according to U.S. research firm Dealogic.
Office rents in Thailand's capital of Bangkok and Phnom Penh, the capital of Cambodia, have climbed more than 30% over the past five years, and Indonesia's Jakarta and the Philippines' Manila have each seen even-sharper increases of around 40%.
In Singapore, many condos are being bought for redevelopment purposes. The collective sales value of residential properties for redevelopment totaled 7.7 billion Singapore dollars ($5.78 billion) last year, data from U.S.-based real estate services provider Jones Lang LaSalle shows. The tally is comparable to levels seen a decade before, ahead of the 2008 global financial crisis. An index of private-sector home prices in the city-state climbed for the first time in four years in 2017.

Singapore has seen a large number of condos bought for redevelopment. (Photo by Ken Kobayashi)

Aside from the popular belief that property prices will keep rising amid urban population growth and infrastructure development, Chinese money has been fanning the overheating of the region's property market.
In the Australian city of Melbourne, more than one-fifth of newly built homes were snapped up by foreigners in last year's April-June quarter -- and an estimated 80% of them were Chinese.

But strains on the markets have begun to surface. In Malaysia's Jalan Kuching area, about a 20-minute drive from central Kuala Lumpur, a commercial building completed a year ago next to a major road still has advertisements up in search of tenants. The building's occupancy rate is only about 10%, according to a brokerage. In central Kuala Lumpur, more than half of a 29-story condo building remains vacant.

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