Home prices rise across Asia

SINGAPORE -- Residential property prices are rising across much of Asia, prompting fears of a real estate bubble. Apartments are selling for staggering prices, and central banks and finance ministries have begun to rein in property-related stimulus measures.

It seems like only yesterday that prices were falling. Now fears are rising once again that property investors could be in for a hard landing, destroying personal wealth and delaying the economic recovery.

In Hong Kong, for example, prices for apartments costing more than $1.3 million fell 6.2 percent in the third quarter of last year, according to Savills Research, which feared that luxury prices might fall 40 to 45 percent more by the end of this year.

As it turns out, luxury apartment prices in Hong Kong are now 30 percent above their low point in the fourth quarter of 2008, with prices up 14 percent between the second and third quarters this year in sought-after neighborhoods. Similarly in Singapore, prices for private homes rose 15.8 percent in the third quarter from the second, the first such rise in more than a year. In China, prices are up 37 percent from last year.

So is Asia in the grip of a bubble -- or just enjoying a healthy reaction to the excessive gloom and doom of the end of last year? No one knows, but some governments and central banks are taking limited preemptive action just in case.

In Singapore, the government has shut down bank lending programs that allowed buyers to defer mortgage payments on uncompleted developments. Tharman Shanmugaratnam, Singapore's finance minister, told the Financial Times that this appeared to be having some effect but that it was not clear whether further action was needed. "It is worth watching very carefully," he said.

South Korea's financial regulator has tightened rules on borrowing, and the central bank in Hong Kong has warned that low interest rates are not sustainable. It increased the required down payment on homes costing more than $2.6 million by a third, to 40 percent.

But no country other than Australia -- gripped by a China-fueled commodity boom -- has taken the step of raising benchmark interest rates to cool demand. That reluctance reflects fears that higher rates could choke domestic recovery and push up Asian currencies against the U.S. dollar, harming trade prospects.

It also suggests central banks are not yet sufficiently sure that an asset price bubble is forming.

Jim Rogers, an international investor based in Singapore, said there were clearly hot spots but no general regionwide bubble.

"I would not think about buying in Hong Kong or Shanghai, but it is not so widespread that all of Asia is in some sort of property bubble," Rogers told the Financial Times. "It may happen . . . but I don't think it's happening now."

Some observers go further, asserting that the bubble is an illusion. Matt Nacard, Tuck Yin Soong and Eva Lee, property analysts at Macquarie Research, say price growth is likely to slow significantly next year because it has been largely a product of the stimulus measures introduced to fight off recession.