Malditah Musings

Asia's Mortgage Market is Set to Take Off

Almost a decade after the Asian crisis, the mortgage market in some Asian countries are much more great shape and poised for expansion.

Increases in capital, the consolidation of banks, and increases in foreign ownership and participation are spurring growth, according to a report released by the Global Property Guide.

(Research available from this link)

The decline of state ownership of banks and the transfer of government agencies in the housing mortgage market "Enabler" Instead of directly providing mortgage loans to be paved the way for expansion of the private sector. Most countries have also started to offer mortgage default insurance for lenders

Asia's property markets are now growing and banks are preferred extend mortgage loans throughout the region. The positive benefits can including stronger house price growth – and more investment into housing.

While property prices in much of the developed world is currently in the historical Peaks, property prices in most Asian countries are well below the peak level. Asia's housing markets have lagged for three main reasons:

1. The Asian Crisis caused a long period of high interest rates. Potential property purchasers will not want to borrow the interest rate offered.

2. Post-crisis bank portfolio is full of defaulted loans to property. Bank has, until recently, often reluctant to lend.

3. Weak credit information, weak legal system, lack of transparency, high revenue extraction by governments (transfer taxes, registration fees) have raised the cost of housing investment in many Asian countries.

Mortgage markets in Asian countries is also relatively small, especially Indonesia (2% of GDP), China (10%), Philippines (12%) and Thailand (16%). Only Singapore and Hong Kong have mortgage market in general and par with most developed countries, with mortgage debt to 61% and 48% of GDP, respectively. Although OECD member countries Japan and South Korea have relatively small mortgage market, given their level of economic development.

"The small size of Asia's mortgage market means a huge potential for growth, "says Prince Cruz, senior economist of Global Property Guide.

"For example, if China's mortgage market is to increase to 20% of GDP in 2010, the market is worth over U.S. $ 700 billion. Because of the strong growth of China's mortgage market and economic situation is not unlikely, "says Cruz.

Despite the current interest rate hikes since, mortgage rate is still affordable in most of Asia, below 8%. This should turn the adjustable rate mortgage (ARM) structure typical of an Asian credit advantage, making a fairly cheap borrowing.

In some Asian countries, the long period during which the loans are available effective means supply is low, and rents are relatively high, leading to good rental investment returns for investors – such as Indonesia, Thailand and the Philippines.

The results can be a circle spotless.

Low interest rates would foster an active mortgage market, aided by pent-up housing demand, where na will boost economic activity. A vibrant economy is good for the housing market.

Healthy mortgage market is a critical factor in growth markets housing. In Asia's mortgage market now in better condition, the stage is set for further reforms which provides financial underpinning for better housing financing, more attractive pricing, more varied product offerings, and generally, the provision of more housing at lower costs in Asia's cities.

Economics Team:

Prince Christian Cruz, Senior Economist

Phone: (+632) 750 0560

Cell: (+63) 917 735 2228

Fax: (+632) 325 0642

Email: prince@globalpropertyguide.com

Publisher and Editor:

Matthew Montagu-Pollock,

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Address:

Global Property Guide

5F Electra House Building

115-117 Stephen Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com

About the Author

The Global Property Guide is a research publication and web site for the high net worth investor in residential property — providing information about the process and benefits of buying property in any country in the entire world.