property-report.com - Government intervention in Asian real estate Posted: 10 Jul 2012 12:48 AM PDT By Roy Ling . In the past three years, the Governments of Developed Asia (Singapore, Hong Kong) and Emerging Asia (China) have introduced real estate intervention measures in an attempt to cool the market. These government interventions are a result of the implosion of credit markets and the subsequent sharp decline in economic activity, as well as concerns about social and political stability.
Examples of government interventions in Asia may include but not limited to controlling land supply, increasing high upfront deposits for purchases, imposing additional stamp duties and taxes, imposing foreign ownership restrictions, limiting access to financing and so on.
These interventions are particularly surprising for Singapore and Hong Kong as they are widely regarded as free market economies in Asia. In the West, this has provoked a debate about whether it’s just a temporary response to great economic and financial turbulence, or if it represents a discontinuity that will redefine the government’s economic role in a significant and enduring way.
However, in much of Asia, the intensity of the West’s debate on the role of government is hard to comprehend.
We need to understand that Asian governments function differently from the West. Asian governments routinely shape economic outcomes by developing and implementing industrial policy, managing exchange rates, deploying reserves and using state-owned assets.
China’s ‘capitalism with Chinese characteristics’ never envisioned a withering away of the state. Real estate intervention by the Chinese government is a clear example of how the Chinese government influences policy to avoid a western style housing crisis. We view the Chinese government proactively tackling problems before they escalate further as a positive step.
We believe that continued government intervention in property markets across Asia has proved effective, as lending restrictions, additional taxes and protection from hot foreign money has led to relatively stable real estate prices throughout Asia, rather than being escalated into an asset bubble.
For many who live and do business in Asia, ideological angst about the government’s role in the economy misses the point. In Asia, political and business leaders are far more apt to focus on what works. This pragmatism will be vital over the coming years. Clearly, the crisis will require significant change. We believe that Asian governments will begin to function more as an economic strategist, and are likely to use stimulus packages and longer-term measures to transition their economies to a more regionally oriented growth model.
Asian governments influence real estate policies as they indirectly determine success in attracting capital and labor and in developing skills to bolster competitiveness. There is also the need for a major education initiative to ensure that the stakeholders understand both the advantages and the sensitivities involved with this approach.
While government intervention may pose policy or regulatory risk when investing in the short term, we believe this is beneficial for Asia real estate in the medium to long term.
Sources at : Government intervention in Asian real estate : http://www.property-report.com/government-intervention-in-asia-real-estate-23403