Wed, 04 Jul 07
Almost a decade after the Asian crisis, the mortgage markets of several Asian countries are in much better shape and are 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.
The decline of state ownership of banks and the shift of government housing agencies to mortgage market enabler instead of direct providers of mortgage loans have paved the way for the expansion of the private sector. Most countries have also started to offer mortgage default insurance for lenders
While property prices in much of the developed world are currently at historic peaks, property prices in most Asian countries are well below peak levels.
1. The Asian Crisis caused a long period of high interest rates. Potential property purchasers did not want to borrow at the interest rates being offered.
2. Post-crisis bank portfolios were full of defaulted property loans. Banks were, till recently, often reluctant to lend.
3. Poor credit information, weak legal systems, lack of transparency, high revenue extraction by governments (transfer taxes, registration fees) have raised the costs of housing investment in many Asian countries.
Mortgage markets in Asian countries are also relatively small, particularly
Only
Even OECD member countries
Potential for huge growth
The small size of
For instance, if
Despite the recent interest rate hikes since, mortgage rates are still affordable in most of
In some Asian countries, the long period during which loans were effectively unavailable means that supply is low, and rents are relatively high, leading to good rental investment returns for investors - as in
Vibrant economy ‘essential’
Low interest rates will foster an active mortgage market, aided by pent-up housing demand, which in turn will boost economic activity. A vibrant economy is good for the housing market.
Healthy mortgage markets are a critical factor in the growth of housing markets. With Asia’s mortgage markets now in better condition, the stage is set for further reforms which will provide the financial underpinning for better housing financing, more attractive pricing, more varied product offerings, and generally, the provision of more housing at lower cost to
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