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Volume 10 issue 3 January 2013
Volume 10 Issue 3 January 2013
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f you invest in property in South East Asia, one of the most critical parts of the process is to exchange your own currency (perhaps US dollars or UK pounds) into that of the local region. If you want to buy in Thailand for instance, you must first purchase Thai baht. Given that, the strength of these South East Asian currencies can have a big impact on your investment. If the Singapore dollar weakens, for example, then property there becomes cheaper for foreign investors. And if the Singapore dollar climbs, it’s the opposite.
With that in mind, we at Pure FX have compiled a brief overview of how the main South East Asian currencies have performed in the past month. The idea is that, you can read the update, and it leaves you in a better position when you exchange currencies. Singapore dollar (SGD) The Singapore dollar has risen almost a cent against the US dollar in the last eight weeks, from 0.8136 on October 5th to 0.8204 at the time of writing. This reflects the fact that, with inflation high at 4.5 percent in Singapore, the island’s Monetary Authority is eager to let its currency rise, to mitigate this impact. If the Singapore dollar is higher, then imported goods will fall in price, leading to less inflationary pressure. In addition, the US Fed’s policy of unlimited quantitative easing is bringing huge investment inflows into Singapore, also taking the local dollar higher. Thai baht (THB) The Thai baht has stood virtually unchanged against the US dollar in the last eight weeks, moving from 0.0327 against the greenback on October 5th to just 0.0326 today. This reflects considerable umming and aahing among investors, concerning Thailand’s economic prospects for 2013. On the one hand, the economy expanded three percent in the third quarter compared to a year ago, which looks positive. But with 2011’s floods skewing statistics, it’s hard to say if this is up to snuff or not, creating uncertainty about Thailand’s prospects for next year. Hence, the unchanged baht. Japanese yen (JPY) The yen has sunk against the US dollar in the
last two months, falling from 0.0127 on October 5th to 0.0122 today. In fact, this is the yen’s lowest point against the US dollar since April. Why is this? Well, it reflects a deeply negative opinion about Japan’s economy and future prospects. Fiscal policy is seen as ineffectual, with national debt at more than 200 percent of GDP, while the Bank of Japan is about to be completely overhauled. Given that, investors are shorting the yen in record numbers, and the odds of the currency continuing to fall are high. Indian rupee (INR) The Indian rupee has fallen against the US dollar in the past eight weeks, slipping from 0.0193 on October 5th to 0.0184. This reflects the fact that India’s economy expanded at the slowest pace since the first three months of 2009, between July and September, growing just 5.3 percent year on year (YoY.) Given that, there are concerns that, “If the government does not take any policy actions, the growth outlook could remain ominous,” as Samiran Chakraborty at Standard Chartered Bank notes. Of course, that could see the rupee fall further.
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he Nation forecasts a positive outlook for the New Year in Thailand, with high demand for residential housing predicted to continue.
As anticipated by The Nation, presales for the top seven Thai property developers dropped by 11 percent in the third quarter of 2012, to a total of THB39.6 billion (US$1.29 billion). By the end of September this year however, developers had seen a 23 percent rise on total sales year on year, with a total of THB124.2 billion (US$4.05 billion) in presales transactions, making up 77 percent of developers’ targets for that point in the year. With an increasing number of property launches and higher weighting towards condominiums, it is predicted that presales will increase in the final quarter of 2012. Due to their moderate forecasts, The Nation anticipates that there will be an upside risk for the presales of developers Asian Property, Land Houses and L.P.N Development, in addition to higher demand than originally anticipated. The Nation predicts Pruksa Real Estate is expected to meet its estimate target, while Sansiri and Supalai ought to achieve their twice revised targets of THB40 billion (US$1.3 billion, up 84 percent year on year) and THB19 billion (US$620 million, up 38 percent year on year).
The Nation also expects demand for residential property is also expected to increase in Thailand’s provinces. While demand for residential properties in Bangkok and the city’s vicinity is anticipated to increase at a normal rate of five to ten percent in 2013, demand for developer-built housing is expected to experience a much greater growth. This is due to urbanisation, for as the urban population and income increase, so does the demand for property, and developerbuilt houses in particular. According to The Nation, it is from this sector that developers can expect primary growth in the future. With most major development companies already having a substantial presence outside of Bangkok and Asian Property launching their first provincial project next year, exposure of all developers in the provinces is expected to rise. The Nation predicts that the developers to watch in 2013 are Quality Houses, Sansiri and Asian Property based on operational turnaround, cheap valuation and evidence of positive growth.
Also deemed noteworthy by The Nation in Thailand’s anticipated 2013 real estate climate, is the likelihood that the Bank of Thailand will keep its interest rate low in order to boost the economy. However, it is not predicted that this will encourage strong demand in the housing sector, with a study by The Nation showing weak correlation between interest rates and housing demand.
An additional factor expected by The Nation to influence the demand for residential housing in Thailand is the introduction of a new government measure on 1 January 2013, that stipulates loan-to-value for low-rise houses with prices below THB10 million (US$326,530) per unit will be limited at 95 percent, where there was previously no limit at all. It is forecast that this measure will have little impression on demand as many Thais will have savings, and in some cases banks will still lend 100 percent of the property price. The expiration of several government stimulus measures that include a tax refund for first time buyers, soft loan for flood victims and three-year 0 percent mortgage rate for first time buyers are predicted to cause few ripples in the housing market.
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