Knight Frank's COVID-19 sentiment survey showed a monthly decline of transaction activity across the region in March which has gradually lifted through to October.
While Mumbai grew spectacularly as an urban centre in the years following India’s independence, the geographical constraints of the island city have caused serious problems today. (Image: Financial Express)
Many had expected residential markets across Asia-Pacific to stumble given the unprecedented challenges brought on by the pandemic as viewings ceased and show suites closed, pushing buyers to the sidelines for several months in most markets. This, coupled with the region entering recession and heightened job insecurity, should have all but sealed the fate for the sector this year.
However, while overall volumes did contract significantly initially, demand proved to be more resilient than expected as several markets reported quick recoveries of transaction volumes as months of lockdown saw pent-up demand build, according to a report by Knight Frank.
Knight Frank’s COVID-19 sentiment survey showed a monthly decline of transaction activity across the region in March which has gradually lifted through to October. For example, Singapore reported primary nonlanded home sales almost doubling monthly from May to July following the easing of its ‘circuit breaker’ restrictions. Similarly, new home sales in the Chinese Mainland were quick to rebound back to normalised levels with monthly sales rates equal to that of 2019.
Comparably, prices across Asia-Pacific were surprisingly resilient, with 12 out of the 22 prime markets tracked by Knight Frank recording either stable or increasing prices year-on-year for 2020 (based on data as at Q3 2020) with an average price increase of 1%. The main driver behind this result is the current low interest rate environment across the region as governments took aggressive steps to ease monetary policy to minimise the economic fallout from the pandemic.
Examples of such policies include the PBOC reducing its reserve rate requirement for its banks several times this year, releasing roughly US$250 billion (c.2% of GDP) of credit into its economy, while others such as the Reserve Bank of Australia brought its benchmark interest rate to a record low of 0.1% via three interest rate cuts.
Heading into 2021, Knight Frank expects a repeat of 2020’s performance with stable to moderate price growth in 17 out of 22 markets, underpinned by continued low interest rates. Furthermore, most markets across the region are starting to re-open and ease their COVID-19 restrictions (as long as new infection cases remain low) which should reduce the risk of a rapid rise in unemployment.
The re-opening of borders will also bring back high-net-worth foreign buyers who have largely been absent this year, benefitting markets such as Singapore, Australia and New Zealand. All in all, these factors should act as a floor for market sentiment in the coming year and bring more confidence as economies start to recover.