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Friday, September 23, 2016

Singapore, Hong Kong, and Thailand Post Flat to Declining Housing Prices, Can the Philippines and Indonesia be Not Far Behind? - 2nd Qtr. 2016

Almost all countries discussed in this blog post, with the exception of Thailand, have been experiencing rapid growth in home prices that have outstripped inflation by a wide margin.  The gap between home prices and their inflation adjusted levels are at the widest ever, particularly in Singapore, Hong Kong, and the Philippines.


Singapore's home prices have now been declining for eleven straight quarters, which, according to Bloomberg, is the longest losing streak in five years.  Home prices are still  70.38% above their year-end 2004 levels. Overall prices levels, as measured by inflation have just increased by 29.09% since year end 2004.  In other words, for the past ten years, Singaporean home prices have outpaced inflation by more than 40 percentage points.


In Thailand, which has been experiencing political turmoil for some time, home prices have remained essentially flat since the end of 2004. Home Prices ended 2013 with the index at 100.54, just 0.54% higher than the end of 2004, but showing a substantial recovery since the recent low of 74.08 posted in the third quarter of 2009. Since 2013, home prices have rebounded to In the first quarter of 2016, home prices have rebounded to 16.41, or 16.41% higher than its year-end 2004 levels, way below its expected inflation adjusted levels. General Price levels are 33.78% above their year-end 2004 levels. In other words, Thailand Home Prices have lagged inflation by as much as 17.36% since their year-end 2004 levels.


Meanwhile, in Indonesia, home prices have shown no signs of slowing down their upward trajectory.  In fact, prices seem to have gone parabolic, climbing 4.63% in the last quarter of 2013, from a base of 121.49 as of the third quarter of 2013 to 127.11 as of year end 2013.  In the second quarter of 2016, home prices have climbed an additional 16.86% to reach 143.97.  Since the first quarter of 2007, home prices have risen 43.97%, while inflation has raised general prices by 73.17% during the same period. Indonesian Home Prices, like Thailand, have lagged inflation since 2007.

Hong Kong

Hong Kong real estate prices have leaped by 215.30% in a little over 10 years to reach a staggering 315.30 as of the second quarter of 2016 from a base of 100 since year-end 2004. General inflation levels have just climbed 41.39% during this same period.  In other words, Hong Kong home prices have outpaced inflation by an astounding 173.90% during this period, the highest rate of appreciation in the countries covered in this post.

However, it is important to note that Hong Kong Home Prices have also entered into a correction phase, declining by 9.99% from its recent peak of 350.31 as of the third quarter of 2015 to just 315.30 as of the second quarter of 2016.  There is a distinct possibility that Hong Kong Home Prices may have entered a bear market just as it did in the aftermath of the 1997 Asian Financial Crisis. See previous post: How low can Hong Kong Property Prices Go? Some Clues from the Not Too Distant Past


For the first time in years, Philippine House Prices seem to be on the decline.  As of the second quarter of 2016, the Philippine House Price Index stood at 218.29 or 1.22% below the peak of 220.99 as of the first quarter of 2016.  However, they still stand at 118.29% above their year-end 2004 levels.  Philippine home prices, with the exception of Hong Kong, have posted the largest 10-year gains among all the countries considered in this blog post.  Like Singapore and Malaysia, Philippine home prices have outstripped inflation by over fifty-six percentage points.  Like Indonesia and Hong Kong, Philippine home prices have so far no signs of slowing down their upward trajectory for the foreseeable future.   The question is, is this momentum sustainable?  Or will the Philippines and Indonesia follow its ASEAN neighbors, Singapore, Malaysia, and Thailand, in exhibiting plateauing or declining house prices?  That remains to be seen.

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