Asian Property Prices Are Falling “As If There’s A Global Financial Crisis”

With China’s property developers slashing prices, piling on incentives, and still seeing sales slump; it is no surprise that demand from the top to the bottom across Asia is falling. As Reuters reports, even Singapore’s Sentosa Cove (the man-made island resort billed as Asia’s Monte Carlo) is eerily silent as the billionaires seem to be staying away with prices down over 20-30% in the past year. New mortgage business is down over 40% as “the rential can’t even cover the mortgage anymore.” As one analyst notes, “the tables have turned,” adding rather ominously that, “The way prices have fallen, it’s as if there is a global financial crisis.”

China’s property plunge continues…

Source: @M_McDonough

And appears to be spreading to Singapore… (as Reuters reports)

There’s an eerie silence at night in Sentosa Cove, the man-made island resort billed as Singapore’s answer to Monte Carlo and the only place in the country where foreigners can buy landed property.

Dozens of houses – complete with their own private yacht berths and multiple swimming pools – sit empty while few lights are on in the apartment blocks overlooking the marina, a few kilometres away from Sentosa’s giant casino.

Prices in the gated community, where Australian mining tycoons Gina Rinehart and Nathan Tinkler bought properties, fell around 20 percent in the past year as lending restrictions and taxes on foreign buyers burst a bubble in the Southeast Asian financial hub’s luxury real estate market.

…

“Some of the earlier buyers are likely to have bought at prices 20 to 30 percent above current prices,” said Christine Li, head of research at property consultancy OrangeTee.

“The rental can’t even cover the mortgage for these high-end investments – they want to offload but there are no takers.”

…

Some in the luxury property industry fear foreign buyers have gone for good.

But the problems are growing rapidly…

United Overseas Bank, Singapore’s third-biggest lender, last month reported a doubling in its bad debt charges for the second quarter, saying a group of investors was struggling to service high-end property loans.

The number of residential properties being put up for sale at auction by banks after buyers defaulted on mortgages, known as mortgagee sales, quadrupled to 64 in the first half of this year from 16 in the second half of 2013, according to real estate agency Colliers.

“This is different from previous years, when owners’ sales dominated auctions,” said Joy Tan, head of auctions at DTZ.

“The tables have turned and we expect more mortgagee sales on the way.”

As bad as it gets…

“The way prices have fallen in Sentosa, it’s as if there is a global financial crisis,” said Alan Cheong, head of Singapore research at property firm Savills.

And finally – summing it all up perfectly…

“Sentosa happens to be a development targeted at a time when the world was leveraging up but now that we have deleveraged, there is a much smaller pool of people who can afford it,” Savills’ Cheong said.

That, combined with the end of the “easy money” seen before the 2008 financial crisis, may mean the quiet on Sentosa Cove’s streets is here to stay.

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Nope, no state-sponsored mal-investment malaise here at all…

But do not fear – we are sure any fallout from this will be “contained”