China reiterates price stability policy
China’s housing price growth accelerated in April, driven especially by its Tier 1 and 2 cities which rose 0.6% and 0.8% month on month compared to the 0.2% and 0.6% rise recorded in March. In addition, the central government also added Foshan, Suzhou, Dalian and Nanning to their warning list; urging its local authorities to take appropriate actions following the acceleration of price growth over the past 3 months.
Our thoughts: The four warned cities followed six others that were warned last month to monitor the rapid growth of their housing prices within their markets as prices have risen more than 10% year-on-year. The strong price growth was the result of some markets who were quietly relaxing their housing policies since December to spur slowing demand; the latest warnings should see these curbs re-tightened and prevent any other local governments from considering the move.
Malaysia unveils National Affordable Housing Policy
Launched in Jan, the policy’s details were unveiled in May and contains guidelines for the development of affordable homes in Malaysia.
Our thoughts: Affordable housing in Malaysia currently faces several structural issues such as weak affordability, demand supply mismatch, lack of coordination and future planning, and poor access to financing. The policy aims to address all these and is a commendable additional step following the introduction of the Residential Tenancy Act and Home Ownership Campaign. However, despite the good intentions by the federal government, cooperation by the local authorities is crucial given that development approvals are in their control. Nonetheless, market conditions are expected to remain challenging in the near term, plagued by weak sentiment, with any tangible results from the new policy expected to materialize in the medium term.
Supportive CBD office leasing demand drives Singapore investment volumes
Singapore’s 1Q 2019 commercial investment volumes rose 72% year on year to US$1.9 billion, with Office transactions forming the bulk at US$977 million with a 50% year on year increase buoyed by healthy leasing fundamentals.
Our thoughts: Major office deals done during the quarter were ARA and Chelsfield’s US$411 million purchase of Manulife Centre and Gaw Capital’s US$520 million 77 Robinson Road; note that the figures could have been higher if AEW’s pending US$760 million Chevron House deal was included. With office rents having risen 1.5% quarter-on-quarter in 1Q 2019 amidst healthy fundamentals within the CBD and its fringes, investors have taken a more optimistic outlook on the sector and are targeting older Grade A and B stocks which have greater organic growth opportunities (e.g. high vacancies, relatively low rents vs. newer Grade A stock).
Australian banking regulator signals relaxation on home loan policy
The Australian Prudential Regulation Authority (APRA) has proposed to remove another temporary cooling measure which will relax the high serviceability assessment placed on new mortgage loan applicants, allowing home buyers to borrow more when purchasing residential property.
Our thoughts: The proposal comes amid softening housing prices within the country’s major cities, low credit growth and a slowing economy. The Reserve Bank of Australia (RBA) has also signalled it may cut the official cash rate target at its June board meeting, to a new record low, and easing concerns of loan serviceability. Furthermore, since the Coalition retained power on 18 May 2019—eliminating any changes to negative gearing and capital gains tax—an instantaneous positive sentiment has rippled through the housing market. This is off-the-back of two state elections, the handing down of the banking royal commission findings and going to the polls for a federal election all being within the space of six months.