Asia’s real estate markets seem, on the surface, to have recovered from the Asian crisis and to be back on their feet. In fact the entire world has enjoyed a residential property boom over the past decade - Europe, the US, Australia and New Zealand have seen property prices soar.

But in Asia the reality is quite different. Asia’s residential markets have performed poorly, according to a report released today by the Global Property Guide (Asian residential property buyers beware!). Once the price rise figures are adjusted for inflation, Asia’s record looks poor. .


Hong Kong: still 61% below peak

Indonesia: still 50% below peak

Malaysia: still 10% below peak

Philippines: still 55% below peak

Singapore: still 37% below peak

South Korea: still 38% below peak

Thailand: still 10% below 1992 peak

“There have been few less profitable investments than Asian residential property over the past decade,” says Matthew Montagu-Pollock, publisher of the Global Property Guide (

“And if the present construction boom continues across Asia, the next decade isn’t going to be much fun for property investors either.”

Rental yields are quite high in Indonesia, Thailand and the Philippines, while Asian countries benefit from strong economies. But their real estate markets’ rise has been limited, primarily by government mis-steps.

“Asian real estate markets would have been stronger had it not been for government mistakes,” says Prince Cruz, chief economist for the Global Property Guide. “If it is not a coup, a protest rally or runaway inflation, then it is government meddling in the housing markets that has killed performance”. Cruz’s study points to the housing markets of Singapore, Hong Kong and South Korea as victims of government subsidies and intervention, while the housing markets of the Philippines, Indonesia and Thailand have suffered from political instability.

Asian prices still far below peak levels

Despite gleaming reports of recovery, Asian house prices are still below their pre-Asian Crisis levels. In a report released today, Global Property Guide suggests that a combination of inflation, widespread subsidies of housing markets, political troubles, and overbuilding, have made the outcome in Asia quite different from other ‘boom’ markets. Asia’s present apparent property boom is a ‘construction boom – not a property boom’, it says, warning investors against following the tempting siren song of the real estate professionals.

When adjusted for inflation, the happy picture changes remarkably from the good news about property price rises.


2004 2005 2006 2004 2005 2006
Philippines 6.02 10.61 8.45 -1.54 3.61 1.24
Indonesia 4.62 7.87 7.37 -1.59 -8.41 -7.05
Singapore 0.89 3.87 6.08 -0.28 2.53 4.61
South Korea -2.10 -1.30 4.80 -4.99 -4.31 2.43
Thailand 9.27 7.19 3.92 6.16 1.33 -1.85
Hong Kong 27.37 23.90 -3.73 27.09 22.60 -6.07
Malaysia 2.60 2.20 .. -2.05 -3.18 ..
SOURCE: * Latest data available, see list here

Indonesia, for instance, is having a difficult time battling inflation. Corrected for inflation, Indonesia’s house prices actually fell 8.4% in 2005 and 7% y-o-y during 2Q 2006.

This year’s mild nominal price fall in Hong Kong (3.7%) is amplified by considering inflation. Hong Kong dwelling prices have actually fallen by 6% in real terms.

The (modest) apparent price rises in South Korea, Singapore and the Philippines actually become price falls, or are greatly moderated, once inflation is factored in.