Cites like New York, Paris and London were once home to the most expensive housing markets, but these days cities in Asia have surpassed them. According to an Oxford Economics examination of price-to-income ratios across the world, it takes more than 30 years for a household with the local median income to buy a 90 square meter (970 square foot) apartment in Hong Kong, Mumbai, Beijing and Shanghai. This makes these the most expensive places to purchase a home.
“We expect housing price increases to moderate in the coming years across Asia, with outright falls possible in some markets,” says Economists Tianjie He and Louis Kuijs in the report. The sky high prices have not gone unnoticed with governments in China and Hong Kong already putting measures in place to cool the hot markets.
Other factors that could bring down home prices in Asia include rising supply as well as changes in interest rates that will likely put downward pressure on prices. However, rising prosperity and demographic factors in the long term mean there will be strong demand in many of Asia’s biggest cities which means efforts to bring down prices may not succeed.
Low interest rates in the past ten years helped fuel house price growth across the world, notes Bloomberg. This is in contrast to the rise in rates in the US that reversed that trend and made mortgages more expensive there. The report from Oxford Economics points out that further rate rises by the Federal Reserve in the US could attract money back to the states. This is an event that could also affect property prices in Asia.
Meanwhile, return from rents in the Asian cities of Mumbai, Shanghai and Beijing are said to be remarkably low. The report claims this could be an indication that the home valuations in these cities are stretched. The gross rental yield in the four cities is lower than 10-year government bond yields in 2016, according to Bloomberg. This is different than several prominent cities including Tokyo, Sydney, New York and Seoul.
Receive latest property news on email from Thailand’s No.1 property website here, or read more project reviews
