Land price growth slows

In its Prime Asia Development Land Index research report covering the first half of the year, real estate firm Knight Frank reported that in Bangkok the price index for office land stalled as developers turned their attention to the luxury condominium market. At the same the prices of residential land in the Thai capital grew, but at a slower and what Knight Frank described as a more sustainable rate.

The Index derives the price of prime residential (apartments or condominiums) and commercial (office) development land in 13 major cities across Asia

The Index showed the average price growth of prime residential sites in the Asia region slowed to 1.1 percent in H1 2015 – down from 3.0 percent in the previous six months. Meanwhile, the Index for prime office development land gained momentum, rising 3.6 percent, up from 2.6 percent.

The Cambodian city of Phnom Penh recorded the strongest increase in both residential and office land prices in H1 2015, while extra cooling measures introduced in Hong Kong targeting mass residential market appeared to have channeled demand to the luxury sector, it said.

Local governments in China have reduced land supply and maintained aggressive pricing, and H1 2015 saw land sales volumes in China plummet by 54.8 percent year-on-year. The dearth of new supply in China in H1 2015 led development land investment volumes in Asia to plunge by 51.3 percent year-on-year. However, Chinese insurance companies are now taking on more development risk.

In addition, the political deadlock, especially when it comes to the contentious reform on land acquisition act, has resulted in 64.1 percent less investment year-on-year in India.

While foreign purchase of land in the region as a whole also slowed, that in Southeast Asia saw a fourfold jump.

Nicholas Holt, Head of Research for Asia Pacific, said: “While our Index showed prime development land markets have lost some of their upward price momentum in the ASEAN region, overseas developers continue to be attracted to the region’s development markets.

“The first six months of the year saw Australia’s Lend Lease make two significant investments in Singapore and Malaysia, while Chinese developers remain active in the region, partly due to the more difficult conditions in mainland China.”

Read the full Knight Frank Prime Asia Development Land Index report.