The impact of Covid-19 on Asia’s residential markets
The number of new Covid-19 cases peaked in China on 12 February, and yesterday, for the first time, Wuhan and the wider Hubei province, recorded no new cases.
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With the UK, Europe and the US lagging the Chinese trajectory by several weeks, a look at how the Chinese and Asian property markets are now performing - two and a half months since the first case was identified - provides an interesting insight on the potential future path for other global property markets.
Knight Frank’s Kate Everett-Allen comments: “While the different global responses to Covid-19 mean we should be careful to draw strict comparisons - the experience in Asia suggests that once new infection numbers drop there is a relatively rapid uptick in activity - albeit from very low levels.”
China: market activity is rising in cities where stringent quarantine rules were imposed
It is still early days and the nascent recovery could yet be reversed, but the latest data from two sources, Sou-Fun CREIS, one of the China’s largest property portals, and Capital Economics, suggest a recovery of sorts is emerging in some Chinese cities.
The latest data from Sou-Fun CREIS shows weekly residential sales in Shanghai dropped to a low of 62 in the final week of January but increased to 1,374 sales in the week commencing 9th March.
Similarly, data from Capital Economics, which tracks the number of property sales across 30 major Chinese cities, reveals that 39,455 sales transacted in the first 17 days of March, this compares to 4,578 over the same period in February.
This tentative recovery, however, comes on the back of a marked slowdown. Sales in China’s 30 major cities declined from 7,929 on 31 December (the day the first case of Covid-19 was identified) to a low of just 22 on 8 February 2020.
Singapore: sales activity largely resilient
In contrast to China, Singapore’s market has proved largely resilient throughout the crisis with 1,464 sales completing in February 2020, up from 916 in February 2019.
According to Knight Frank’s Dr Lee Nai Jia: “There are a few reasons for the increase in sales. Some buyers are purchasing with wealth preservation in mind. In addition, the launch of new developments has generated additional interest.”
Dr Lee NaiJia adds: “I think the way Singapore reacted to the pandemic has helped support buyer confidence.” Singapore was quick to impose strict travel rules and tracing protocols, and to date, has seen no deaths and only 313 cases reported.
Hong Kong: new-build sales account for a rising proportion of transactions
Mirroring other Asian markets, the month of January saw the lowest number of sales in Hong Kong, reaching 2,762 before rising to 3,572 in February. New-build sales as a proportion of total sales has also increased from 21% in December 2019 to 28% in February 2020. Lower interest rates and volatile equity markets may be cushioning demand levels.
Second spike?
Despite the tentative rally in sales, a number of Asian cities appear to have seen a number of new Covid-19 cases in the last few days as quarantine rules have been relaxed. Hong Kong recorded 20 new cases yesterday.
As a result, calls to keep global travel restrictions in place for longer may intensify to reduce the likelihood of a second spike in some markets.
For more detail on the performance of Hong Kong’s residential market please see my colleague Flora Harley’s article - Covid 19 A View from Hong Kong