Hong Kong, Shanghai and Taipei are among the hottest luxury residential investment markets in Asia. Though locations like Jakarta, Phnom Penh and Ho Chi Minh City offer varying levels of value and smart buys based on economic basics, and Singapore and Bangkok are equally attractive metropolises with scores of perks and strong infrastructure, it is this so-called holy trinity that remains, arguably, at the top of the heap.
Hong Kong is the veteran among the three, and for good reason. It has been stable and transparent for the longest amount of time, it’s a port city that relies on and welcomes transient labour, it’s business-friendly and widely considered the safest, easiest introduction to Asia for overseas investors. Shanghai’s greatest rival is Beijing, but the two are similar enough for it to be a coin toss — until you factor in Shanghai’s glamour angle. It’s been called the Paris of the East for a reason, and the city’s hip factor makes it attractive. Rounding out the trifecta, Taipei is among the most exciting emerging markets, and for many investors, potential growth is key to any purchase. So in the middle of 2012, where do these sprawling hubs seem to be heading?
According to Colliers International, the continuing woes in Europe and the election year uncertainty in the United States have sent investors running back to Asia’s relatively resilient markets. Though cross-border investment remains most popular in the commercial sector, luxury residential real estate is still recording high and/or rising prices, signalling strong growth potential. The luxury sector is still recovering from the mess of the last few years, but available luxury homes are still in limited supply, keeping residential investment below 2007 levels.
“Amongst these three markets, Hong Kong is an international city, Shanghai is the economic powerhouse of mainland China, while Taipei has a reputation for its vibrant Chinese culture, being the political and commercial centre of Taiwan,” Colliers said in a statement on its research of the current markets. “As a result, the luxury homes in these cities enjoy their fair share of supporters. In addition, owing to their different regulations and financing means, the cities each boast unique merits for property buyers.”
Each has it strengths and weaknesses, and depending on what investors are seeking, one of these benchmark cities should fit the bill. If capital gains taxes are an undesirable element, stay away from Shanghai, unless you’d prefer no stamp duty. There are no buying restrictions in Hong Kong or Taipei, but only Hong Kong is fully open to foreign ownership; the SAR also has the highest overseas buyer ratio (15 percent) of the three, with Taipei having room to grow (5 percent). Taipei also currently boasts the lowest effective mortgage rates, at 2 to 2.7 percent.
And Taipei is the emerging star. Luxury home prices have increased 60 to 70 percent over the last five years, a trend largely chalked up to demand from Chinese buyers around the world. “In view of the benefits from the Economic Coorperation Framework Agreement (ECFA) and stable cross-strait relations, Taipei’s luxury residential prices are expected to rise further,” explains Andrew Liu, Managing Director of Colliers in Taiwan. “In addition, the increasing number of direct flights between Taiwan and China provides great convenience, making Taipei a favourite for investors and Chinese worldwide. These elements fuel further growth of demand in Taipei’s high-end residences.”
Shanghai, by comparison, is facing some constraints, one of which is a 70 percent loanto- value ratio for first-time buyers. Foreign buyers are also on the hook to prove residence in the city for at last one year, and the home can’t be sold to local Shanghai buyers. These are two factors that have cooled off the city’s market in recent months according to Colliers’ Harvey Coe, senior director of investment services for Asia. Again, new supply is limited, but many developers are offering deep discounts to drive up sales. “Bargains” are there — if an investor can somehow quality to buy.
Which brings us back to Hong Kong, the trio’s mature market and one that saw an unexpected price bump in the second quarter of 2012 (5.3 percent). Given the restrictions in Shanghai and the emergent nature of Taipei, Hong Kong is still the place to be. “Given the recent upsurge in prices, the luxury homes sector is not likely to see sharp price appreciation in the short run. However, Hong Kong, being a free market with simple tax regimes and low tax rate, is still attractive to investors,” sums up Antonio Wu, executive director of investment services, Asia. Dorothy said it. There’s no place like home.