Markets in review.

ANNUAL HOUSE PRICE CHANGE (%), IN LOCAL CURRENCY TERMS
	2007* (LATEST)	END-2006
Bulgaria	30.59	--
China (Shanghai)	27.85	-0.61
Singapore	27.59	10.15
Estonia (Tallinn)	23.38	28.64
Lithuania	13.64	30.95
Philippines	13.04	9.63
Colombia	12.82	6.77
South Africa	12.52	15.12
Norway	11.56	16.67
Hong Kong	11.25	4.11
Australia	10.63	9.71
Latvia	10.22	68.99
Sweden	9.86	10.50
UK	9.68	10.49
South Korea	9.01	11.60
Poland	8.38	9.67
France (Paris)	8.27	9.70
Japan (6 cities)	7.75	4.12
New Zealand	6.67	11.86
Canada	6.13	10.74
Finland	5.88	6.56
Italy	5.60	6.30
Spain	5.31	9.14
Indonesia	5.24	6.60
Greece	4.18	10.54
Denmark	3.95	14.94
Netherlands	3.77	4.73
Malaysia	3.20	4.80
Switzerland	2.56	3.24
Germany	2.04	3.06
Portugal	0.49	0.65
Israel	-0.51	-3.16
Thailand	-0.78	1.87
Japan	-1.48	-2.78
Ireland (monthly)	-4.68	11.8
US (NAR)	-5.07	-0.18
US (FHFB)	-3.49	-1.9
US (OFHEO)	1.79	6.03
* latest available Source: various series, list of house prices, data and sources here

In 2007, the US housing market crashed, and Europe’s housing markets slowed. But house prices in Asia-Pacific gained momentum.

Shanghai’s red hot housing market continued to rebound, despite efforts by the government to cool the market. House prices rose by 27.85% to end-Oct 2007 from a year earlier; a significant turnaround from 0.6% drop in 2006.

Singapore registered an annual house price increase of 27.6% (24% in real terms) to end-Q3 2007, significantly higher than the 7.6% price increase over the same period in 2006. In real terms, Singapore was the world’s best-performing housing market, given inflation of only 2.66%.

House prices rose by more than 10% year on year (y-o-y) in nominal terms in several developing countries - the Philippines, Colombia, South Africa, and Hong Kong. However, when adjusted for inflation, price increases were generally substantially lower

Urban land prices in Japan’s six largest cities rose by 7.75% during the first half of 2007. Although Japan’s national urban land price index fell by 1.48% during 1H 2007, this is an improvement from the 2.8% price fall in 2006. The Japanese urban land price index is generally believed to lag reality, so significant recovery is taking place in the Japanese housing market.

ANNUAL HOUSE PRICE CHANGE 2007* (%), ADJUSTED FOR INFLATION
	INFLATION-ADJUSTED	NOMINAL
Singapore	24.29	27.59
China (Shanghai)	20.04	27.85
Bulgaria	15.42	30.59
Estonia (Tallinn)	15.08	23.38
Norway	11.93	11.56
Lithuania	11.43	13.64
Philippines	9.88	13.04
Hong Kong	9.44	11.25
Australia	8.60	10.63
Sweden	7.86	9.86
Japan (6 cities)	7.86	7.75
UK	7.49	9.68
France (Paris)	7.01	8.27
South Korea	6.53	9.01
Colombia	6.40	12.82
Poland	5.81	8.38
New Zealand	4.59	6.67
South Africa	3.77	12.52
Canada	3.66	6.13
Finland	3.29	5.88
Spain	2.88	5.31
Netherlands	2.44	3.77
Denmark	2.29	3.95
Italy	2.08	5.6
Switzerland	1.91	2.56
Malaysia	1.73	3.2
Greece	1.54	4.18
Germany	-0.40	2.04
Latvia	-1.02	10.22
Indonesia	-1.18	5.24
Japan	-1.38	-1.48
Portugal	-1.68	0.49
Israel	-1.86	-0.51
Thailand	-2.81	-0.78
Ireland	-9.08	-4.68
US (NAR)	-8.46	-5.07
US (FHFB)	-6.79	-3.49
US (OFHEO)	-0.56	1.79
* latest available Source: various series, list of house prices, data and sources here

The US housing market continues to weaken.

Asia

Housing markets in several Asian countries gained momentum during the first three quarters of 2007, reflecting to some extent continued recovery from the 1997 Asian Crisis.

The strong house price increases in Singapore, South Korea, and Japan have been mainly due to strong economic growth. Mortgage markets in Asia are generally underdeveloped. Hence the effect of interest rate movements on the housing market is indirect, channeled through over-all economic performance. With electronic goods as the main export of these countries, economic growth is expected to drop if the global economic recession occurs in 2008.

In the Philippines, demand for houses and condominiums has come mainly from families of Overseas Filipinos.

Price increases in China are subject to strong government intervention. Left unhampered, property prices would be expected to rise due to continued economic expansion and rapid urbanization. Adding fuel to the price boom are the Beijing Olympics in 2008 and World Expo in 2010 in Shanghai.

In Thailand, political problems have led to weak economic growth and falling property prices. Property price changes in Indonesia and Malaysia remain unimpressive. Although the national house price index in Indonesia was up 5.2% in nominal terms to end Q-3 2007, the index actually dipped by 1.2% in when adjusted to inflation. In Malaysia, the house price index rose 3.2% (1.7% in real terms) to Q2-2007 from a year earlier.

THE GLOBAL PROPERTY GUIDE’S FORECASTS FOR 2008:

Asia-Pacific

Property prices in much of Asia are still undervalued compared to pre-Asian crisis levels, despite strong increases in 2007.

China is unfortunately not open to investment, and non-resident foreign buyers of dwellings are no longer welcome (though developers still are). While Beijing’s property prices will probably peak in 2008 after the Olympics, Shanghai is still preparing for the World Expo in 2010. With yields at 8% Shanghai’s prices have nowhere to go but up, unless the government intensifies its intervention.

Cambodia could be a proxy for China. Strongly tied to the Chinese economy, Cambodia is open, has high yields, relatively low transaction costs and low taxes, though investors must be prepared for only an indirect acquisition of land due to constitutional limitations on foreign purchases.

The resolution of Thailand’s political crisis in 2008 could open opportunities, after two dismal years. Gross rental yields are good at 7%-8%, income taxes are relatively high but acceptable (compared to the Philippines), the market is pro-landlord. Under better management Thailand could do very well. Indonesia is attractive, but has problems as an investment destination - there are high yields in Jakarta, but very high transaction costs and high rental income taxes. The Philippines too has high yields, but similarly discouragingly high transaction costs and high rental income taxes.

Japan’s housing market is recovering strongly. While Tokyo’s gross rental yields are unattractive at around 4.7%, the price momentum is positive, the law is strongly pro-landlord, there are low-ish transaction costs, and low rental income tax. The recently announced tighter regulation of new dwellings could lead to faster property price appreciation.

In Singapore we believe gross rental yields are now too low, at 2% to 3%. Nevertheless, Singapore is attracting (and admitting) more foreign-born workers – which is positive for prices. Hong Kong’s yields are somewhat higher (around 3% to 5%), and the US$ peg will mean Hong Kong will follow lower US$ interest rates, which should boost the housing market. << Read More... >>