Archive for January 25th, 2010
Monday, January 25th, 2010
The Wall Street Journal and the Heritage Foundation last week released their annual rankings of the freest economies in the world, with Hong Kong and Singapore retaining the No. 1 and No. 2 spots, respectively, for the 16th straight year. Smeal’s Austin Jaffe recently visited these two areas (along with South Korea), and wrote about their real estate economies on Just Listed, the blog of the Pennsylvania Association of Realtors:
Though capitalism has been in vogue for a generation in these countries, it sometimes takes different forms from the American version we’re used to.
For example, Singapore is one of the most dynamic city states in the region, yet its government is involved in virtually every decision (certainly all real estate decisions) on the island. Democratic principles sometimes give way to government mandates and many controversies remain close to the surface. Hong Kong is a Special Administrative Region of mainland China and has a delicate relationship with Beijing. South Korea remains dynamic and considerably different from its closed and very poor neighbor to the north.
There are also similarities among real estate markets in each of these three countries. For the most part, the decision to develop land is strictly a government affair; state agencies maintain tight control over the supply of land. Given the high population densities, especially in Hong Kong and Singapore, most housing units are apartments or condominiums. In Singapore, home ownership rates are among the highest in the world (over 90 percent) since the Singaporean government has long had a policy of privatization of flats to sitting tenants at deep discounts, using the state’s pension fund for financing. Given Singapore’s continuing economic growth, trading up from “HDB flats” (public housing projects) to higher quality condominiums (generally privately developed and managed) is a national obsession.
It’s said in Hong Kong that real estate is the only business in town. Indeed, I heard about the new record price of a condo sale in Hong Kong: HK$92,000 (or almost $12,000 USD) per square foot! The talk of the real estate community for several months, this vast sum is thought to be even too high by local standards.
In Singapore, prices continue to rise and construction continues around the site where one of two casinos is being developed. Once considered offensive to Singaporean sensibilities, the casinos are scheduled to open next year—with entrance fees of more than $100 USD! In Seoul, real estate values are escalating, along with bumper-to-bumper traffic.
Read Jaffe’s complete post here.