Inflation will hit Asian housing market
Posted on May 12, 2008
Filed Under Cover Story
Slowly but surely the Asian housing market has now entered its gloomy days. Although it has not been affected by the sub-prime mortgage crisis in the United States, inflation, rising interest rates, hiking food and agricultural products and increasing fuel prices – will slowly but surely hit the Asian housing industry.
Late last month, Global Property Guide released a report on the future of the housing industry in Asia. Entitled Gloomy days ahead for Asia’s housing markets, Global Property Guide disclosed that the Asian market could be still very strong at this time but it cannot easily avoid the housing market crisis triggered by global recession.
Indeed, so far the Asian property market so far has been quite strong and relatively has not been affected by the sub-prime mortgage crisis in the United States. But, the upward trend of inflation, rising interest rates of bank loans – the monetary authority normally raises interest rates to keep inflation down, rising food prices and agricultural commodity prices, and hiking fuel prices, no doubt will trouble the Asian property market.
Even, at the micro level, Global Property Guide observed that households in Asia tend to delay their decision of buying new houses or even cancel their plan of renovating their houses in anticipation uncontrollable price hiking as mentioned above. Data at the UN Food and Agriculture Organization (FAO) shows that rice – the staple food of the majority of the Asian population – increased by more than 90 percent from end-2007 to March 2008.
Surely, this situation has posed a heavy blow to the economy of average Asian families who so far have always suffered easily from rising food prices.
Besides rice, also skyrocketing are the prices of other staple food commodities like flour (by 160 percent), soybean oil (104 percent) and sugar (26 percent). Prices of essential commodities are the key component of Consumer Price Index (CPI). Singapore’s CPI is around 28 percent, while in China and India they are 33.2 percent and 50 percent, respectively.
The rising trend of staple commodity prices, according to FAO, World Bank and The International Rice Research Institute will continue until 2009.
Except essential commodities, the prices of almost all commodities have increased. Sweet crude oil rose to US$115 per barrel in April 2008, 80 percent higher than the same month of last year. The prices of NYMEX crude oil at this time hover above US$100 per barrel.
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