Published September 11, 2012

Domestic buys behind world home price hike

S'pore among cities recording strongest growth in housing prices in H1: survey

By Felda Chay

CITIES experiencing strong domestic demand for homes, such as Hong Kong, Moscow, London and Singapore, recorded the strongest growth in home prices in the first six months of the year. Hong Kong registered the sharpest jump in prices to top the chart as the most expensive city to buy a home in.

The fourth issue of Savills' World Cities Review report, which studies 10 of the world's leading cities, showed that the strongest price growth was reported in places with buoyant domestic demand, while international investor cash retreated to a few core markets with established, long-term investment credentials.

Singapore, which has been trying to cool its property market, recorded a more modest 1.5 per cent jump in the capital value of its homes in the first six months of this year from the end of last year, compared with a 3.6 per cent rise in the second half of last year. It was fifth in the list of cities that registered the highest jump in home prices.

"It appears that government attempts to cool the markets by increasing supply may be working," Savills said in its report.

The additional buyer's stamp duty (ABSD) introduced at the end of last year is also denting foreigner demand at the top end of the market, it said.

"Nonetheless, the mainstream market remains strong, buoyed by a strong economy, growing wages and one of the highest home ownership rates in the world.

"This will prevent any more significant slowdown in the short to medium term," said Savills.

Data from the Urban Redevelopment Authority (URA) released in July showed that developers had sold 11,928 private homes excluding executive condos (a public-private housing hybrid) in H1 2012 - three-quarters of the 15,904 units they sold in the whole of 2011. Analysts predict a full-year 2012 tally of 18,000 to 22,000 units, surpassing 2010's record of 16,292 units.

URA's benchmark private home price index rose 0.4 per cent in Q2 from the previous quarter, after declining 0.1 per cent in Q1.

Prices in Hong Kong, which had begun to experience price falls late year following government intervention and as a result of a slowing global economy, rebounded 7.4 per cent in H1.

"The weight of Chinese money continues to push into this city (albeit at a slowing rate), but most of this growth can be attributed to a strengthening local market, aided by increased bank lending," said Savills.

In Shanghai, H1 capital values fell 2.6 per cent, making it the sixth most expensive city.

"Some cooling measures have been introduced and, as a result, Shanghai's residential market has been turned upside down," noted the report.

The city "will need to see its market adjust to a more sustainable domestic consumption model in the future before significant price growth can resume", it said.

The Savills World Cities Index measured not just the prime markets of each city, but also took into account the mainstream markets by measuring a basket of properties - dubbed the "Savills Executive Unit" (SEU) - which looks at ongoing costs for individuals from the middle-aged expat CEO and senior expat director, to the locally employed director and admin staff.