Knight Frank’s latest Asia-Pacific Residential Review looks at the possible impact of a tightening of monetary conditions on the various markets across the Asia-Pacific region.
Key Findings:
• Markets in Asia with dollar or basket based currency pegs will be most directly impacted by a tapering of QE3. Sales volumes could be impacted, with the clamour to put money into property that we have seen over the last few years mitigated.
• Pricing however is more difficult to predict: as house prices are not influenced by interest rates alone, but more by fundamentals. Other factors (like economic performance) have a bigger impact on house prices than changes in interest rates.
• In emerging Asia (except China), although less impacted directly by rising interest rates in the US, further capital outflows could put pressure on domestic residential property prices. Domestic economic performance will be the key set of indicators to monitor.
• China meanwhile is a separate market altogether, with the lack of market-set interest rates mitigating the impact of rising US interest rates, along with the amount of pure equity buyers.
“One of the difficulties when analysing what is happening in the global economy and trying to predict impacts on various asset classes is that we have very little historical experience to draw on. This is because the monetary stimulus measures that we have witnessed in the US, China, Europe and now Japan have never been seen before on this scale.”
“Ultimately, while the tapering of QE3 will have an impact, the solid underlying fundamentals in a region that is still outgrowing the other regions of the world provide us with a degree of optimism going forward” said Nicholas Holt, Head of Research of Asia Pacific at Knight Frank.