Asian Property Prices Are Falling "As If There's A Global Financial Crisis"

Tyler Durden's picture

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.

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

But do not fear - we are sure any fallout from this will be "contained"

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hedgiex's picture

Exactly Jack. This is one hole (social unrest) that the Authority is focused on. A hole with all its variants like the collapsing export machines that had fed on subsidies and need the dosages to stay alive.

So you see them patching the "hole" with all the erratic stimuli and masqurading with dubious econ stats. Also, the populace need diversions so therefore the "Japan Banshings" and forays in South China Sea.

It is a matter of who go down first EC, Japan, US  or them.

mickeyman's picture

Some results of that seen in Zhengzhou. Haven't seen riots, but the gov't is changing rules rapidly trying to support the market

Son of Loki's picture

Strip malls in formerly nice areas are eerie with all those empty store fronts. More every day in many formerly nice neighborhoods. Retail sales way down and profit margins slim to none. I don't see house prices rising anywhere where I live. Luckily, at least my area has not deteriorated [yet] despite this recession.


The only spending I see, esp the bigger items,  is on credit.


AdvancingTime's picture

It seems America and China have something in common.

Dr. Bonzo's picture

They have a lot in common. Unfortunately for all of us, eventually theyr'e meeting in the middle, and then we're all fucked.

AdvancingTime's picture

Can China Break? Yes it can. As the debate continues as to how stable china really is I wonder how bad might it get.  Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need.

Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.

Dr. Bonzo's picture

Nail. Head. This is exactly why the CCP aren't taking the Hong Kong voting thing lightly. In fact, it's all the fake bravado and saber rattling that shows just how fucking terrified those old bastards really are.

Hongcha's picture

I found Singapore to be dull.  Planned 'colorful ethnic' neighborhoods.  The Li'l Islam neighborhood was actually seething with unrest ... a lot of unemployed guys in white shirts walking around looking angry with nothing to do.  The food was not that great.  I would take even Macau over Sing every time.  Macau has some interesting old neighborhoods.  Hong Kong is my favorite city on earth, for some reason.

TeethVillage88s's picture

Wow, didn't get impressed by Singapore. I was thinking a little about Malaysia, but it seems very commercial and for cheap living you give up some things or move out of the cities. I ran into a guy that used to live in Malaysia and he seemed to feel it was more Muslim than 50 years ago. Most governments are very strong, so I figure if you don't deal with them much it doesn't matter. But last year gave up on the idea of Asia for a while.

Hong Kong would not be as flat as Malaysia. I could see Hong Kong out of my price range completely, but probably most of these places are "Hot" and Singapore & Malaysia get the Smoke from slash burning in Indonesia.

Now we worry about the radiation in Seafood in all of these places and even South America.

Still Malaysia would have the most open land and possible low price rentals... Maybe try for the Hill Areas.

I just can't get into the idea of part time living in Asia or even Thailand. Just not feeling it.

CheapBastard's picture

Forget moving to a Muslim nation like Malaysia. Seethign with discontent and poverty. Every time they get riled up they pull out their machetes and start lopping off heads of their business people [who are mainly hard working Chinese] and foreigners; I know since I was there in 1988 when they had some serious Muzzie riots and I barely escaped. They were attacking every non-Muzzie they could find.  Phuk dat.  Have zero desire to return to Malaysia.

TeethVillage88s's picture

CheapBastard; Thanks for the take on this.

- Actually as you know... many of the Islands and much of South East Asia has Muslims... I don't know really how much radicalization of Muslims has occurred. In Southern Thailand the old Prime Minister seemed to be supporting poor people and Muslims with funding... after his Coup... the Southern Thai area near Malaysia began Rioting or Mass Terrorism or Mass Genocide at a small level.

- Clearly either they were Disenfranchised from greater Thailand or they were radicalized.

If you have Disenfranchised people... it seems you need to send money directly into their community while making sure that you are not funding radical or radical fundamentalist groups... not sure what was the story in Thailand after 2002 before the Coup.

- This reminds me of Social Programs in USA in the Depression... Use of Military against US Veterans protesting for payment on Authorized Congressional Bill... and the reason that FDR authorized Social Security after the history of US Hooverviles... and the Depression...
- and the event where US Banks would not Invest in the USA...
- Until war where there is a "Secret Agreement" that - "Government Guarantee's that ALL DEBTS will be Honored"

Dr. Bonzo's picture

A. LOT. I noticed among Indonesians in Hong Kong they've almost all gone full headscarf in the last 6-8 years. Seems the poor are being radicalized into Islam and that radicalized Islam is spreading like a forest fire through Southeast Asia.

Dr. Bonzo's picture

Good take dude. I laugh at all these fucking expats and Hongkies buying into cheap condo complexes in the KL suburbs. No wall high enough when the mobs come and the airport will prove a loooooong hard drive when the shit hits the fan.

Dr. Bonzo's picture

Hong Kong's best days are behind it. The commies are making sure the civil service is completely corrupted and kowtows to the CCP. Since '97 nearly 1 million mainlanders have already taken up residence in Hong Kong making nearly 1 in 7 current residents a post-handover migrant. These are DISTINCTLY different from the migrants who came before the handover. Most Hongkies who fled to Hkg BEFORE the handover were fleeing from the ravages of the cultural revolution and are distinctly ANTI communust. The current crop of migrants are either commie party elite or low skill flotsam and jetsam. Either way, Hong Kong is fucked.

You have this nonstop flow of mainlanders driivng up the price of everything; real estate, basic commodities, everything. The 50+ million mainland tourists have turned our downtown areas into one massive fucking shopping arcade selling nothing but Rolexes, jewelry and frog brandname handbags.

I barely recognize the city anymore. Already working on my exit plan. It was good while it lasted, but all good things end and all that jazz.

Ginsengbull's picture

It's a demand problem.


Chinese can live 30 or 40 families in one house.


They can thrive in close quarters better than most Mexicans or Puerto Ricans.

John Law Lives's picture

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

Coming to a theatre near you...


MoneyPowerWomen's picture

thats been the case in Australia for ever with negative gearing - basically the goverment lets you do a tax write off of any gap between rent and your interest payments, problem sorted.

On to the moon.

JRobby's picture

That is called Sched. E in the US

bitterwolf's picture

Fucking Chinese are right where we were in the 1920's when everyone was stock speculator.To bad they could not see the parallel with their awesome intelligence..but the biggest shame is this is going to hurt everyone else too in this globally connected market




Notsobadwlad's picture

Very smart, but not especially experienced wit certain things.

vyeung's picture

They have atleast 30% down unlike the Ninja shit the US was packaging. Yes, they have a bubble, but when it burst it will not wipe out their equity even in a 50% move. In the US, a 20% move will blow everything up including the moronic CDS's, ABS etc. In the east, they do not package mortagages and trade them as derivative products. They are nearly all plain vanilla. The Chinese are a lot more conservative than Wall Street.

Notsobadwlad's picture

There isn't always a bigger sucker, unless the government gets involved and subsidizes it.

capitallosses's picture

You're all nuts. Benny (and now Yellin) told me everything will be OK. Be a consumer and enjoy life. Rates are cheap, just borrow more. Ride on and enjoy life.

Global Observer's picture

When the Asian property bubble bursts, as it will, the effect will be limited to the construction industry and some banks. It will not be systemic, since the mortgages have not been repackaged into securities and sold to pension funds. Everyone directly involved in the speculation will lose heavily and few others will be impacted.

vyeung's picture

correct. Its nothing like the property scam in the US. Down payment is minimum 30%.

Atlas Crapped's picture

Just another debt bubble popping.

Lostinfortwalton's picture

Sentosa? If I wanted to be hot and humid with a good chance of being blown away by a hurricane I would move to Pensacola, Florida, and eat seafood, drink beer, and fish until the hurricanes or oil companies did in the northern Gulf of Mexico communities completely.

CHX's picture

As if...? The fininacial system as we knew it died ~6 years ago. Now derivatives and money printing keeps the global fiat ponzy alive in the ER, hooked to ever moar until it all ends in a singularity. 

Vendetta's picture

exactly.  The hallucination of the past 6 years eventually will end

JRobby's picture
"As If There's A Global Financial Crisis"