How Covid-19 has boosted Asia's luxury residential sector

Australia, back in lockdown, kicked off in Tokyo last Friday, superspreader event, fifth wave of infections, latest prime residential forecasts, three of the top five spots

South Korea last week reported its highest number of daily new Covid-19 cases since the pandemic erupted, as the nation struggles to contain a surge in infections that has forced the government to put the capital Seoul and surrounding areas under partial lockdown.

In Australia – another country that won international praise last year for suppressing the virus – half the population is back in lockdown as the state of Victoria joined New South Wales in ordering residents to remain within a short distance of their homes.

More worryingly, the Summer Olympic Games, which kicked off in Tokyo last Friday, threaten to become a superspreader event just as Japan – which is already experiencing the weakest recovery among the main developed economies – is on the brink of a fifth wave of infections.

Across the Asia-Pacific region, the combination of the rapid spread of the Delta variant and worryingly low vaccination rates in most countries poses an acute threat to the region’s economic rebound.

Yet, when it comes to the luxury residential sector, the pandemic has turbocharged a market that had already registered some of the sharpest annual price increases globally before the virus struck.

Last Wednesday, Knight Frank published its latest prime residential forecasts, showing that Sydney is expected to post the strongest growth in prices this year among 11 leading markets.

Prices in the luxury segment – defined as the top 5 per cent of the residential market in value terms – are expected to increase 10 per cent year on year, compared with rises of 4 per cent in New York and 2 per cent in London.

Australia’s housing market – both the luxury and mainstream segments – is on fire. In the first quarter, prime residential sales volumes in major cities enjoyed their strongest growth on record.

While capital values in Sydney are surging, prime prices are growing at an even faster clip in Perth, Brisbane and the Gold Coast, data from Knight Frank shows.

Several factors are at work, including the economic response to the pandemic, which has inflated asset values and encouraged the wealthy to park their money in property. Ultra-loose financial conditions, virus-induced changes in the way people live, work and play, and the search for safe havens are also driving prices higher.

However, a dominant theme across the Asia-Pacific region has been the surprisingly strong role of domestic buyers in the segment of the housing market most reliant on foreign inflows. Lockdowns and travel restrictions have revealed the strength of local demand, which stepped in to the fill the gap left by cross-border transactions.

This is one reason markets with deep pools of domestic capital – in particular Tier 1 cities in mainland China and Seoul – have experienced the sharpest growth in high-end residential prices globally during the pandemic.

Not only has the virus forced local buyers to focus on their home markets, it has prompted a reassessment of the purpose, design and attributes of luxury homes.

Victoria Garrett, head of residential for Asia-Pacific at Knight Frank in Singapore, said prime markets in the region benefit from a more “captive audience”, with many buyers – both locals and foreigners who applied for residency – purchasing “co-primaries”, or second homes whose design specifications and technological features match those of their main residence.

Australia, back in lockdown, kicked off in Tokyo last Friday, superspreader event, fifth wave of infections, latest prime residential forecasts, three of the top five spots

Gangnam district in Seoul is one of the city’s prime residential districts. Markets with deep pools of domestic capital, such as Seoul, have experienced the sharpest growth in high-end residential prices globally during the pandemic. Photo: Getty Images / iStockphoto

However, unlike in North America and Europe where the pandemic has caused a shift in demand away from densely populated cities towards suburban and more rural locations, luxury residential markets in Asia’s big urban centres have proved remarkably resilient.

While some of the fastest growth rates in high-end home prices in Western economies last year were in coastal and resort locations – in particular San Diego, Aspen and Zurich – Asia’s large cities dominated the rankings, with Shenzen, Seoul and Manila occupying three of the top five spots, data from Knight Frank shows.

Although there is intense debate in the West about the future of big cities in the post-pandemic world, the virus has accentuated the appeal of urban living in Asia, a crucial driver of the region’s economic growth.

Instead of decamping to suburbs and commuter towns to have more space and privacy, well-heeled Asian buyers have upsized within metropolitan areas by buying larger apartments and houses in more secluded locations.

Still, while the attractiveness of metropolitan living in Asia – which is bolstered by a more favourable outlook for city-centre offices than in Western markets – remains undimmed, the scarcity of prime residential assets has become more pronounced since the pandemic unleashed a new wave of domestic demand.

The acute supply constraints are helping drive prices higher, increasing the risk of more forceful action on the part of governments to take the heat out of housing markets. Garrett said that once movement between countries resumes, facilitating cross-border purchases, political pressure to rein in runaway prices could intensify.

The pandemic has catalysed powerful trends – the rapid growth in high-net-worth wealth (particularly in mainland China), increasing private investment in higher-yielding real estate and a lack of available stock – that underpin Asia’s luxury residential markets. While price growth is bound to slow at some point, demand is proving insatiable.

Nicholas Spiro is a partner at Lauressa Advisory

News Related

OTHER NEWS

'Why is the house moving?': Historic 5.9-magnitude earthquake strikes Melbourne

One of Australia‘s biggest earthquakes on record caused damage to buildings as it hit Melbourne on Wednesday. The tremors were felt for hundreds of miles, but thankfully no serious injuries ... Read more »

UK sets date to accept UAE-vaccinated travelers after months blocking popular travel route

Businessman walk past an Emirates Airbus A380 during the Dubai Airshow on November 18, 2013 in Dubai, United Arab Emirates.Christopher Furlong | Getty Images The U.K. will accept travelers vaccinated ... Read more »

New drone policy will augment vertical aviation, urban air mobility: BLADE India

The government’s new drone policy, announced last month, is not only going to encourage the adoption of drones in India, but is also expected to push the growth of the ... Read more »

Web module bogus self-employed does not provide a definitive answer in more than a quarter of cases

“In almost 3 out of 10 cases, the module cannot provide a definitive answer. I think that is a meager result for an assessment instrument”, responds Cristel van de Ven, ... Read more »

Roald Dahl's family lands £500m windfall from sale to Netflix

The children's author's family, who were advised by bankers at Raine, have been paid "a little over" £500m to sell his literary estate to Netflix, Sky News can reveal. Read more »

Electronics Mart files Rs 500-crore IPO papers with SEBI

Representative image Consumer durables retail chain Electronics Mart India Ltd has filed preliminary papers with SEBI to raise Rs 500 crore through an initial share-sale. The initial public offering (IPO) comprises ... Read more »

Analysis | Why not all cooperative bank depositors are happy with the Rs 5 lakh insurance cover

PMC bank put under direction by RBI. On September 21, the Deposit Insurance Credit Guarantee Corporation (DICGC) said it will pay account holders of banks placed under curbs – including a ... Read more »

Finland and Russia sign memorandum of understanding to cooperate in construction industry

The document provides for a wider exchange of information on housing construction, renovation work, building planning and land use, as well as joint search for sustainable solutions for the development of urban space and the industry as a whole Read more »

Energy supplier Green to cease trading as it becomes latest casualty of energy crisis

Energy supplier Green has become the latest victim of the crisis engulfing the sector as it collapsed, blaming “unprecedented market conditions and regulatory failings”. Green, which has more than 250,000 ... Read more »

Leonardo DiCaprio invests in Dutch cultivated meat firm Mosa Meat

Photo: Mosa Meat Hollywood actor Leonardo DiCaprio is the latest high profile investor to put money into Dutch cultivated meat company Mosa Meat, the company said in a website post. ... Read more »

Russia plans to invest additionally $55 million in 2022 in Northern Sea Route development

The money will be used for construction of the Utrenniy LNG terminal at the Arctic port Sabetta Read more »

IDFC shareholders reject Vinod Rai's re-election on the Board

Vinod Rai Shareholders of IDFC has rejected the re-appointment of Vinod Rai on the Board as Non-Independent Non-Executive Director, according to the information shared with the stock exchanges on September ... Read more »

Indian startups seek clarity over Karnataka's online gambling bill

Representative image. Indian tech startups and industry associations have expressed concerns and sought clarity over the Karnataka government’s bill to ban online gambling. Rameesh Kailasam, CEO of IndiaTech.org, an industry ... Read more »

India's crude oil production falls 2.3% in August, gas output rises

India’s crude oil production fell 2.3 per cent in August but natural gas output rose by more than a fifth on the back of output from KG-D6 fields of Reliance-BP, ... Read more »

GM expands OnStar by offering 911 emergency services for your home through Amazon Alexa

Andrew Matthews | PA Images | Getty Images DETROIT – General Motors plans to expand its OnStar emergency services from an in-vehicle feature and phone-based app to a home-based 911 ... Read more »

ADB lowers India's GDP growth projection for this fiscal to 10% on COVID disruptions

The Asian Development Bank (ADB) has lowered India’s growth projections for the current financial year by a percentage point to 10 per cent, mainly due to disruptions in economic activity ... Read more »

Significant difference of opinion within govt on draft e-commerce rules: Official

Source: Shutterstock There is a significant difference of opinion within the government on the draft e-commerce rules put out by the consumer affairs ministry, a top government official said on ... Read more »

Essel Group to gain 2% stake in merged company as part of non-compete agreement with Sony

Essel Group, promoter of Zee Entertainment, will get a transfer of two percent stake in the merged entity from Sony Pictures as part of the Non-Compete Agreement of the merger proposal, ... Read more »

Leonardo DiCaprio sees potential in Dutch cultured meat

“Of course he is not a cell biologist, but he can help us put cultured meat on the map,” said Tim van de Rijdt, chief business officer of Mosa Meat. ... Read more »

CBS: Largest price increase + 17.8% owner-occupied homes since September 2000

The Hague Existing owner-occupied homes were 17.8 percent more expensive in August than one year previously. ‘That is the largest price increase since September 2000’, Statistics Netherlands reported on Wednesday. ... Read more »

Australian reporter brands anti-vax protesters who threw urine on him 'cowards'

Protesters gather at the Shrine of Remembrance in Melbourne, Australia, over new COVID vaccine requirements for construction workers. (Getty) A reporter has branded his attackers “cowardly” after he was pelted ... Read more »

Op-ed: Here's how financial advisors can navigate investors through uncertainty

Marko Geber | DigitalVision | Getty Images In a world that's rapidly changing and becoming more uncertain than ever, the financial advisory industry has a great opportunity to become a ... Read more »

Ford signs deal with Redwood Materials to recycle EV Batteries 

Dane Hardware (right), Ford design and release engineer, and Mary Fredrick, Ford battery validation engineer, measure the voltage of a battery using a digital multimeter at Ford's Battery Benchmarking and ... Read more »

Banks rush to slash home loan rates to woo home buyers

Top banks have reduced interest rates on new home loans, including balance transfers, as they compete for a bigger pie of the reviving housing market. Kotak Mahindra Bank, on September ... Read more »

Bengaluru-based startup HappyCredit raises Rs 5 crore in pre-seed money from Goodwater Capital, others

Representative image Bengaluru-based startup HappyCredit — an instant cashback rewards application — on September 22 announced that it has raised Rs 5 crores in a pre-seed round to accelerate its ... Read more »

Takeda breaks ground on first zero-emissions building in S'pore's pharmaceutical sector

Minister for Trade and Industry Gan Kim Yong said that Takeda’s zero carbon building is a positive step towards Singapore’s ambitions. SINGAPORE – Takeda Pharmaceutical broke ground on Wednesday (Sept ... Read more »

This startup wants you to get a credit card and bank account even before you land in US

Representative image. Neobanks are the new ‘in’ thing with many fintech startups offering digitised banking-related services to fill the gaps for what traditional banks cannot provide. While most neobanks are ... Read more »

Lithuanian defence ministry urges people to 'throw away' Chinese phones after discovering censorship tools

Flagship devices sold in Europe by Chinese company Xiaomi reportedly have a built-in ability to detect and censor particular terms that Beijing views as indicative of dissent, including "demonstration", "free Tibet", and "long live Taiwan independence". Read more »

The rise of the organic food market

The organic food industry is a booming business, with sales surging last year by 12.4% to $61.9 billion. However, most people don't know what “organic” really means. In 2014, brand ... Read more »

Argus upgrades Simon Property Group to buy as recovery plan takes shape

Shoppers ascend and descend escalators at the King of Prussia Mall, owned by Simon Property Group, United State's largest retail shopping space, in King of Prussia, Pennsylvania.Mark Makela | Reuters ... Read more »

Premium gasoline price surpasses $826 on exchange hitting all-time high

The previous record was registered on July 22 Read more »

Ant Group microcredit service Huabei feeds vast consumer data to China's central bank

Ant Group, operator of the world’s largest electronic payment platform, has started to feed its vast trove of consumer credit information to a database run by China’s central bank, heralding ... Read more »

Digital ad agency You & Mr Jones in talks with banks about $3bn US float

The ‘brandtech’ specialist is interviewing investment banks ahead of a public listing in New York that could come as soon as the first half of next year, Sky News learns. Read more »

JPMorgan faces oil bribery probe in Brazil

Brazilian authorities are investigating whether JPMorgan Chase & Co played a role in an alleged bribery and money laundering scheme dating back to 2011 and involved state-run oil company Petrobras, ... Read more »

More confident now of making hydrogen-powered zero-emission planes by 2035: Airbus CEO

Airbus is more and more confident now of achieving its goal of making hydrogen-powered zero-emission commercial aircraft by 2035 but various challenges such as finding the right fuel in the ... Read more »

Rakesh Jhunjhunwala's RARE Enterprises makes 61% gain on ZEEL investment in six days

Ace investor Rakesh Jhunjhunwala has made a gain of 61 percent in six days through an investment made in Zee Entertainment Enterprises Ltd (ZEEL) by his stock trading firm RARE ... Read more »

Rupee slumps 26 paise to close at 73.87 against US dollar

Representative image The rupee fell by 26 paise to close at 73.87 (provisional) against the US currency on Wednesday, tracking a strong American currency in the overseas markets ahead of ... Read more »

Why the Zee-Sony deal is a win-win for all

The Zee Entertainment-Sony Entertainment merger deal comes as no surprise. Zee has been up for grabs for the past two years after the promoters fell into bad times because of the misadventures ... Read more »

Stocks making the biggest moves premarket: General Mills, FedEx, Adobe and more

Check out the companies making headlines in the premarket. General Mills — Shares of General Mills added 1.7% in the premarket after the food company reported better-than-expected quarterly earnings. General ... Read more »

Russia meets all contractual commitments to gas consumers in EU — Kremlin

Dmitry Peskov pointed at "a very simple truth", which is that "gas is first sold, then produced, and only then transited" Read more »