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The View | 4 bright spots for Asian property in 2024
- The big worries in Asian real estate from 2023 will persist, but sources of resilience and strength will also endure
- Trends to watch include Australia’s housing market, Chinese property beyond housing, an Indian real estate boom and retail property strength
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In Asia’s property markets, there is no shortage of risks to preoccupy landlords, investors and developers. The big worries last year – the fallout from the sharp rise in interest rates, the deterioration in housing affordability, the crisis in China’s residential market and the threat of more geopolitical and economic shocks – will persist in 2024.
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However, sources of resilience and strength will also endure. According to a Knight Frank index, several cities in India and Australia experienced some of the fastest growth rates in average residential prices on a quarterly basis in the third quarter of last year.
In the commercial market, transaction volumes in Japan – which continues to maintain ultra-loose monetary policy – rose 3 per cent year on year in the third quarter. They were buoyed by strong demand for hotels, logistics properties and multifamily rental flats.
Among the trends and themes to watch this year, four warrant close attention. First, it is worth keeping an eye on Australia’s housing market. Not only did prices in the capital cities bounce back 8.1 per cent last year following a nearly 5 per cent drop in 2022, in some of the capitals they barely contracted and currently stand at all-time highs, according to CoreLogic data.
However, in recent months, the recovery has slowed mainly because of intensifying cost of living pressures and deteriorating affordability. Last year, Australia narrowly avoided a recession. This puts pressure on the Reserve Bank of Australia (RBA) to signal a shift to less-restrictive policy as inflation starts to come down. However, cuts in rates could lead to even sharper gains in prices, exacerbating the affordability crisis.
This creates an awkward policy dilemma. Stretched affordability is a hot-button political issue. The share of household income required to service a new mortgage is near a record high, according to CoreLogic. While the government has pledged to build 1.2 million new homes in the next five years, little will happen in the short term.
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