Twelve industry leaders put South East Asia under the microscope and tell us what’s needed for the region to fully unleash its potential in the near future. Here are Victoria Garrett and Dominic Heaton-Watson of Knight Frank on what’s ahead for homebuyers.
An analysis by world regions shows that prime prices in Australasia and North America were the most resilient in the second quarter of 2020. In cities such as Sydney, higher value properties – often large detached homes – remain in high demand, supporting prime residential values. In contrast, Asia saw average prime prices weaken significantly, falling from 2.5 percent to 1.1 percent. However, it is unlikely we will see a large volume of distressed prime sales as in 2008. Lending criteria is tighter, new supply is constrained in several cities, interest rates are low, plus furloughing schemes and mortgage holidays are cushioning incomes and repayments. Manila, Tokyo and Seoul are Asia’s top performers year-on-year, although these cities registered flat or falling prime prices in Q2 2020.
The Knight Frank Global Buyer Survey (released in early August) analyses the impact that the Covid-19 pandemic has had on property markets and residential buyers’ attitudes around the world. The survey, representing the views of over 700 clients across 44 countries, highlights that buyers expect property prices to decline over the next 12 months, although 53 percent of respondents say that their budget has remained the same or increased since the start of the crisis. Over a quarter of respondents say that they are more likely to buy a second home as a result of the pandemic. And more than half of respondents have either travelled abroad already or will do so within three months of borders reopening.
According to the same survey, homebuyers from Asia-Pacific have stated that their most important reason for purchase is in upgrading the family’s main residence, with improved access to quality healthcare ranking second, followed by business or employment reasons in third place.
The desire to upgrade their family homes is – and has historically been – the primary motivator for many residential buyers in Asia-Pacific. With demands on the home expanding and people having had time to reflect on the way they live and use their space, it is inevitable that, as we ease out of lockdown, these changes will have repercussions on property markets around the world.
With the pandemic at the forefront of buyers’ minds, improved access to quality healthcare is now a key consideration for many homebuyers, particularly in Asia where multi-generational households including young children and senior members are the norm.
Unsurprisingly, many homebuyers are also citing business or employment reasons as one of the primary motivators for buying property abroad. Since the start of the pandemic, we have seen an increasing number of expats purchasing a property ‘back home’. This has partly been driven by people moving due to employment changes, but also families reassessing their priorities. Covid-19 has really made people take stock of their priorities and what is important to them and their families in terms of lifestyle.
It has been encouraging to see how quickly activity has resumed within the luxury property segment following various lockdowns. Knight Frank adapted by compressing a five-year technological evolution into five weeks by rolling out virtual viewing globally. What helped set us apart is our research and knowledge sharing with daily updates to our clients including a podcast series and webinars on market briefings, projects and opportunities.
The positive reaction we received highlights an appetite for best-in-class properties regardless of the market cycle. We expect this appetite to build as more certainty unfolds and a vaccine is developed, and the option to travel and view properties in person becomes available.
Victoria Garrett is Knight Frank Asia-Pacific’s head of residential and Dominic Heaton-Watson is Knight Frank Malaysia’s associate director of international project marketing. Knight Frank’s recently released 2020 wealth report projects a 27 per cent rise in the UHNWI population in the next five years.