Last year, the New Zealand government banned foreigners from buying existing homes to make property more affordable for its citizens. In June this year, it softened its stance to allow non-residents to own up to 60% of large, new apartment buildings.
Malaysian Prime Minister Mahathir Mohamad made headlines in August when he said foreign buyers could be banned from the giant Forest City project. The US$100-billion project spearheaded by the Chinese developer Country Garden Holdings, he said, was "built for foreigners".
However, the chief minister of the state of Johor declared less than a week later that foreigners were still welcome to buy property in the controversial project on the country's southern coast, just across from Singapore.
Property ownership by foreigners has always been a hot-button issue all over the world, but the debate has intensified in Asia in recent years. The rapid rise of China in particular has created a huge new class of dollar millionaires and others who can afford property abroad.
The influx of foreign money has been blamed in some centres for rising real estate prices, especially in major cities where local middle-class citizens are now priced out of the market. A rise in homelessness, meanwhile, has been blamed for pushing rents of even the most modest properties beyond the reach of the poor.
Foreigners make a handy target, especially for politicians, but the factors that influence property prices are many and varied, say industry executives.
According to the world's largest commercial real estate services and investment firm, CBRE, many institutional investors such as pension funds, sovereign wealth funds and insurance companies around the world have been buying up properties overseas in bid to earn steady and predictable income.
The firm's 2018 CBRE Global Investor Intentions Survey in March showed that Tokyo, Melbourne, and Singapore were the top three investment destinations in Asia Pacific last year. The cities' key attractions were high investment liquidity and property market transparency, strong legal protection and low foreign investor restrictions.
Real-estate investment activity worldwide rose slightly last year to $953 billion, from $941 billion in 2016. But volume in Asia Pacific was up 20% from 2016, compared with 9% in Europe, the Middle East and Africa (EMEA) combined, while volume in the Americas dropped 6%.
CBRE says Asian investors are shifting from North America to developed Asia in search of higher returns. In 2016, 37% of surveyed investors saw capital value appreciation as their main motivation, compared with just 12% this year, as real estate yields reach record lows.
But 17% of Asia Pacific investors see capital gains from real estate as a primary motivation for investing, compared with 13% in EMEA and 11% in the Americas.
However, they are growing concerned about higher property prices in the region, especially for core assets in key cities. The search for higher returns has led investors toward "core-plus", good secondary locations and value-added assets, CBRE explains.
Core, core-plus, value-added and opportunistic are terms used to define the risk and return characteristics of an investment. They range from core with low risk and historic returns of 7-11% annually, to opportunistic with the highest risk but a minimum return of 12%.
As low-risk core assets grow more expensive, investors are taking more risk. At the same time, they are looking beyond traditional markets of Shanghai, Sydney and Tokyo and looking at Singapore, Melbourne, Brisbane and regional cities in China and Japan, the report reveals.
NEW ZEALAND IN FOCUS
While New Zealand is not high on the list of investment destinations identified by CBRE, the rise in foreign-owned property has become a big issue there. But foreign ownership is not the sole reason why citizen homeownership is currently at its lowest point in 66 years, said Zoltan Moricz, head of CBRE Research in New Zealand.
"The rapid increase in house prices is the cause, which has made housing less affordable and shut out sections of society from home ownership," Mr Moricz said in an emailed reply to questions from Asia Focus. "It is not directly caused by foreign ownership because there is a complex set of contributing factors, but indirectly any price increases driven by foreign ownership would have contributed."
The country's new Overseas Investment Amendment Bill, which places limitations on foreign purchasers and has passed its final reading in parliament, will direct offshore investment into new apartment projects that are exempt from foreign purchaser restrictions. This is similar to Australian legislation passed earlier.
"Hopefully it will stimulate the off-plan, high-density newly built residential market," Mr Moricz added.
The restrictions on foreigners buying existing homes will take effect within two months of the law receiving formal assent from the governor-general.
Just 3.3% of home transfers in the country in the first quarter of this year were to people who did not hold New Zealand citizenship or resident visas, according to Stats NZ. That figure was up from 2.9% in the previous quarter, reflecting a fall in the total number of transfers and a small rise in the number of transfers to overseas people, said property statistics manager Melissa McKenzie.
The impending changes in the law might explain the increase in overseas buyers who sought to close purchases before it becomes harder to do so in the future.
According to Stats NZ, nearly 33,000 homes were transferred in the first quarter. Almost four in five were transferred to at least one New Zealand citizen while the other one in five were transferred to corporate entities, resident visa holders and overseas people. Of all property transfers, the largest share of foreign buyers come from China, followed by Australia.
"The proposed changes could make it more challenging for overseas buyers to purchase residential land in New Zealand," noted Ms McKenzie.
As foreign buyers are concentrated in a few areas such as Waitemata, Henderson-Massey and Kaipatiki, it is not clear whether talk of ownership curbs has contributed to the recent dip in prices. According to QV, a local property information provider, the House Price Index shows that nationwide residential property values fell 1.6% over the three months to August.
However, prices are still up 4.8% on an annual basis but the rate has slowed from 14.6% two years ago. This is certainly good news for Prime Minister Jacinda Ardern and her Labour Party, which came into power on promises to make houses more affordable for citizens.
DEVELOPED ASIA TREND
The flood of real-estate investors into developed Asia has given rise to some extraordinary stories, such as that of the four-bedroom house in the exclusive Peak neighbourhood in Hong Kong that is now being offered for US$446 million. This would make it the most expensive home in the world, but this ridiculous sum comes as no surprise in a city where a single parking space can cost up to $765,000.
Denis Ma, head of Hong Kong research at the property services group Jones Lang LaSalle, blames Hong Kong developers for ridiculous prices of parking space. They make more money building apartments than garages so the ratio of parking spots to housing units has declined. But that alone does not explain why Hong Kong has been the world's least affordable housing market for eight straight years, ahead of Sydney and Vancouver.
According to research by the US-based urban planning policy consultancy Demographia (see Page 2), the median home price in Hong Kong is 19.4 times the median annual pre-tax household income in 2017, up from 18.1 times in 2016.
Demographia said measures to tame the market in the past failed as prices have now more than doubled since 1997. Rules restricting land use are also a factor, but the research does not mention foreign ownership as a contributor to price spikes.
Nevertheless, the problem of homelessness or "McRefugees" -- so called because some people sleep in McDonald's restaurants -- persists in Hong Kong and throughout Asia's richest cities including Beijing and Tokyo, highlighting the levels of disparity.
In Tokyo, 4,000 people without stable residences take shelter in game centres or internet cafes. In Hong Kong, the "registered" homeless population grew 22% last year to 1,127, though some social activists put the figure as high as 1,800. In any case, the official figure is an increase of 51% from 2014.
According to the Legislative Council, of the registered street sleepers, 244 had been homeless for more than a decade; 392 for 5-10 years; and 325 for one to five years. Around 35% of are unable to pay rent because they were unemployed, while 15.7% could not find affordable accommodation.
Although the Demographia study does not see foreign ownership as a big factor in Hong Kong housing prices, others blame the surge of investment from the mainland even if, strictly speaking, China is not a "foreign" country.
"The rooms become smaller and smaller but people have to pay higher and higher rent," Wong Hung, an associate professor at the Chinese University of Hong Kong's department of social work, told Time magazine earlier this year. "Although rent is also very high in cities like Singapore and Tokyo, eligible flats there are much larger."
He blamed the influx of hot money from China for the "rocketing rate" of increases in housing prices. Hong Kong authorities have made many attempts to curb prices, he said, "but every policy has failed".
Anti-establishment lawmaker and social activist Eddie Chu also blamed the government. "The Hong Kong government is the landlord of this place," he said. All of the land is given to developers on leasehold, so the government has the power to take back whatever land it wants and repurpose it for affordable housing.
In Taiwan, meanwhile, the Ministry of Health and Welfare says nearly 9,300 people were reported as homeless last year, double the 2013 figure. The majority are male blue-collar workers aged over 50 who lost their jobs when factories moved their operations, primarily to China and Southeast Asia.
New Zealand, Hong Kong and Taiwan are all seen as examples of markets where foreign property investment has played a role in raising property prices, though the exact extent is debatable. The failure of government policies to promote affordability and tackle economic disparity are clearly also part of the story. Governments in Southeast Asia, where foreign ownership is starting to have a bigger impact, should take heed.