Category: 
July 29, 2010
Almost a decade after the Asian crisis, the mortgage markets of several Asian countries are in much better shape and are poised for expansion.
Increases in capital, the consolidation of banks, and increases in foreign ownership and participation are spurring growth, according to a report released by the Global Property Guide.
(Research available from this link)
The decline of state ownership of banks and the shift of government housing agencies to mortgage market “enabler” instead of direct providers of mortgage loans have paved the way for the expansion of the private sector. Most countries have also started to offer mortgage default insurance for lenders
Asia’s property markets are now growing and banks are more willing to extend mortgage loans around the region. The positive benefits could include stronger house-price growth – and more investment in housing.
While property prices in much of the developed world are currently at historic peaks, property prices in most Asian countries are well below peak levels. Asia’s housing markets have lagged for three main reasons:
1. The Asian Crisis caused a long period of high interest rates. Potential property purchasers did not want borrow at the interest rates being offered.
2. Post-crisis bank portfolios were full of defaulted property loans. Banks were, till recently, often reluctant to lend.
3. Poor credit information, weak legal systems, lack of transparency, high revenue extraction by governments (transfer taxes, registration fees) have raised the costs of housing investment in many Asian countries.
Mortgage markets in Asian countries are also relatively small, particularly Indonesia (2% of GDP), China (10%), Philippines (12%) and Thailand (16%). Only Singapore and Hong Kong have mortgage markets generally at par with most developed countries, with mortgage debt at 61% and 48% of GDP, respectively. Even OECD member countries Japan and South Korea have relatively small mortgage markets, given their level of economic development.
“The small size of Asia’s mortgage markets means there is huge potential for growth,” says Prince Cruz, senior economist of the Global Property Guide.
“For instance, if China’s mortgage market were to increase to 20% of GDP in 2010, the market will be worth more than US$700 billion. Given the strong growth of China’s mortgage market and economy, this scenario is not unlikely,” says Cruz.
Despite the recent interest rate hikes since, mortgage rates are still affordable in most of Asia, below 8%. This should turn the adjustable rate mortgage (ARM) structure typical of Asian loans into an advantage, making borrowing comparatively inexpensive.
In some Asian countries, the long period during which loans were effectively unavailable means that supply is low, and rents are relatively high, leading to good rental investment returns for investors – as in Indonesia, Thailand, and the Philippines.
The result could be a virtuous circle.
Low interest rates will foster an active mortgage market, aided by pent-up housing demand, which in turn will boost economic activity. A vibrant economy is good for the housing market.
Healthy mortgage markets are a critical factor in the growth of housing markets. With Asia’s mortgage markets now in better condition, the stage is set for further reforms which will provide the financial underpinning for better housing financing, more attractive pricing, more varied product offerings, and generally, the provision of more housing at lower cost to Asia’s citizens.
Economics Team:
Prince Christian Cruz, Senior Economist
Phone: (+632) 750 0560
Cell: (+63) 917 735 2228
Fax: (+632) 325 0642
Email: prince@globalpropertyguide.com
Publisher and Editor:
Matthew Montagu-Pollock,
Phone: (+632) 867 4220
Cell: (+63) 917 321 7073
Address:
Global Property Guide
5F Electra House Building
115-117 Esteban Street
Legaspi Village, Makati City
Philippines 1229
info@globalpropertyguide.com
The Global Property Guide
http://www.articlesbase.com/business-articles/asias-mortgage-market-is-set-to-take-off-138358.html
Horaayy..there are 2 comment(s) for me so far ;)
What fear? Singaporeans are still buying cars and houses….Do you think they are rational?
Asia faces ‘rough ride,’
Singapore’s leader says
By ALEX KENNEDY,Associated Press Writer AP –
SINGAPORE – Asian economies face a "rough ride" for at least the next year as weakening consumer demand from developed countries hurt the region’s exports, Singapore Prime Minister Lee Hsien Loong said Friday.
"The world is caught up in a financial storm, and dark clouds fill our immediate horizon," Lee said in a speech in Singapore. "The fear and panic gripping financial markets everywhere will take time to subside."
Asian stock indexes have plummeted this week along with their counterparts in the U.S. and Europe on fears turmoil in the financial system will spark a global recession. Japan’s benchmark Nikkei 225 index tumbled as much as 11 percent Friday while Hong Kong’s Hang Seng index was down more than 7 percent.
"Asian countries cannot avoid the impact of weakening U.S., European and Japanese economies," Lee said "We must prepare for a rough ride at least over the next year, and quite possibly longer."
"The crisis in the financial system will dampen consumption and investment in the developed countries and affect growth all over the world," he said.
Singapore’s economy, which relies heavily on exports, contracted 0.5 percent in the third quarter, the government said Friday. The government also said it cut its 2008 forecast for economic growth to 3 percent from between 4 percent and 5 percent.
The central bank, known as the Monetary Authority of Singapore, said in a statement Friday it shifted it’s foreign exchange policy to a "zero percent appreciation" of the Singapore dollar from a "modest and gradual appreciation" in a bid to boost the competitiveness of the country’s exports.
Lee’s comments contrast with the more upbeat outlook offered by Asian Development Bank Haruhiko Kuroda on Thursday, when he said Asia’s financial system appears to be little affected by the U.S. sub-prime mortgage problems and that Asia overall will enjoy robust growth.
"The impact on the financial sector in Asia is limited this time," ADB President Haruhiko Kuroda told a news conference in Tokyo Thursday. "We expect a fairly robust growth to continue, although we expect the growth rate would be smaller."
They are smart for doing this, even though the appreciation value is not much at this moment that will surely change since economies are cyclical in nature as is the environment. It is smart even for american to buy those two commodities at this time. Interest rates and overall prices are low at this moment, so investing in a home now and selling later will result in a greater augmenting return.
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