In a report published by Savills tracking the performance of 30 prime residential real estate markets worldwide, Bangkok was the second best performing rental market to Dubai in the first half of this year. Singaporewas the worst performer.
Such a sharp turnaround is remarkable even in the volatile real estate industry. It is all the more remarkable because all four residential real estate markets share similar trends, but are evolving differently. The common themes are affordability, an influx of foreign workers and students, and the dynamics of supply and demand in the housing market.
In Bangkok, the rental market benefited from a confluence of mainly domestic economic factors resulting from Thailand’s sluggish recovery and concerns about the country’s notoriously high household debt, which has risen sharply since 2019, making it difficult for the Bank of Thailand to cut interest rates. Political instability has increased concerns about financial stability.
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Thailand’s reformist political party Move Forward dissolved due to lese majeste law
Thailand’s reformist political party Move Forward dissolved due to lese majeste law
Mortgage applications for homes priced below 3 million baht ($87,000) – which account for two-thirds of the number of transactions in the Bangkok metropolitan area and one-third of the total value of sales – have seen a sharp rise in rejection rates in recent years, encouraging developers to focus on High-end real estate and has pushed many potential buyers into the rental market.
“The affordability problem has become much more acute,” said Anawin Chiamprasert, head of research and consulting at JLL in Bangkok. The return of foreign tourists and expatriates has given the rental market a further boost.
In Australia, however, the post-pandemic period was Increase in net overseas migration – a key factor behind rent increases in many capital cities – peaked last year. After rising by an incredible 40 percent since 2019, average rents rose by just 0.1 percent last month, the slowest monthly increase since August 2020, according to data from CoreLogic.
In Sydney, rents have fallen for the first time since 2020, mainly due to a sharp decline in apartment rents. According to CoreLogic, growth is still at an annualised rate of 6.6 per cent, but in May 2023 it was 17.9 per cent.
The suburb of Gordon in Sydney, Australia, on March 11. Rents in Sydney fell last month for the first time since 2020. Photo: Bloomberg
Acute pressure on affordability are another important factor. The share of median income required to cover median apartment rents in Sydney rose to a record 30.4 per cent in March, according to data from CoreLogic and the Australia and New Zealand Banking Group. With many renters reaching their affordability threshold, they are being forced to move to more affordable areas or take alternative options, such as Shared apartments.
The rental market in Hong Kong is now benefiting from the influx of professionals and students, especially from mainland China. The combination of a relaxation of work visa criteria and increasing demand for student accommodation as universities allow more enrolments by non-residents has led to a sharp increase in rents since the beginning of 2023.
The recovery of rental values to pre-pandemic levels despite the ongoing decline in property prices was “unexpected, especially since rents and prices tend to rise or fall in lockstep,” said Buggle Lau Ka-fai, chief analyst at Midland Realty. While lower credit costs will help stimulate the sales market, increasingly attractive rental yields and a shortage of new homes are likely to support the rental market in the coming years.
A pedestrian walks past a real estate agent in Hong Kong on February 28. Photo: AFP
The most striking change in the Asian residential rental markets, however, can be seen in Singapore. After rising by 10.2 percent in the first half of last year, rents for private properties have now fallen for three consecutive quarters.
The sharp deterioration in the rental market’s performance comes at a time when sales of new private homes have fallen sharply and prices are falling in the city-state’s central core region. A sharp rise in completions of Private households over the last two years and the departure of some expats, partly due to corporate retrenchments in key sectors, has put pressure on the rental market.
However, upon closer inspection, the changes in Asian rental markets over the past two years are less dramatic than they appear and need to be put into perspective. Just as the sharp rise in rents in Bangkok started from extremely low levels, the decline in Singapore means that rents are still up more than 45 percent since 2021. In Australia, rents continue to rise monthly in several capital cities and continue to rise on an annual basis in all capital cities.
A more accurate assessment of the evolution of Asian real estate markets would need to include the years before the pandemic, especially in the case of Hong Kong, which had already suffered several shocks before the Covid-19 outbreak. The region’s residential rental landscape is changing, even if the changes are not as profound as recent data would suggest.
