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Asia housing and property
OpinionComment
Nicholas Spiro
Nicholas Spiro

The View | Why Australia’s housing woes and Singapore’s booming office sector are not the whole story

  • The vulnerability of Australia’s housing market is typically viewed through the lens of Sydney and Melbourne, which ignores developments in Western Australia
  • Meanwhile, bullish narratives, such as those around the fate of Singapore’s office market, also need to be treated with caution

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A woman runs with her dog through Elizabeth Quay in Perth, Western Australia, on June 29, 2021. Unlike those in major cities on Australia’s east coast, housing prices in Perth remain relatively affordable. Photo: AFP
Nicholas Spiro
Narratives are important. A compelling story can go a long way towards shaping sentiment and economic trends. In Asia’s real estate markets, several powerful narratives have taken hold since the Covid-19 pandemic erupted and interest rates began to rise sharply to counter the surge in inflation.
In the residential sector, the vulnerability of Australia’s housing market is one of the most talked-about risks in Asian property. The 9.1 per cent decline in home values from their peak in April 2022 has already exceeded the previous record in peak-to-trough declines even though the current downturn is only 11 months old.

It has come as a shock to Australians who were led to believe that interest rates would not rise before next year. Yet, in the space of just 10 months, the Reserve Bank of Australia – which has been criticised for misjudging the timing of the start of its rate-raising cycle – has increased borrowing costs by 3.25 percentage points.

Australia has one of the world’s highest household debt-to-income ratios and a menacing “mortgage cliff” facing many mortgage borrowers this year. Two-thirds of the 35 per cent of loans on fixed-rate terms expire this year, leaving borrowers with huge increases in rates when they roll over to variable rate loans, currently just under 5 per cent. This means Australia is at the sharp end of the global monetary tightening campaign.

However, the performance of the country’s housing market is viewed through the prism of Sydney and Melbourne. Its two biggest markets have suffered peak-to-trough declines of 13.5 per cent and 9.6 per cent, respectively.

Far too little attention is paid to Perth, the capital of the state of Western Australia. Prices are down less than 1 per cent from their peak in July 2022 there and even rose 2.4 per cent in the 12 months to February, according to data from CoreLogic.

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