Bucking the trend of softening property prices in Europe and declining prices in the US, Brunei property prices have continued to increase in the second half of 2007, according to a recent report. This has led some analysts to question how much further prices can go and how the wider region can be showing such different growth trends from the property market in the West.
According to figures compiled by the Global Property Guide, Brunei properties gained value in the last 12 months on the back of the rising costs of construction materials. House price inflation began to accelerate in 2006 and gathered pace in 2007 with local estate agencies recording price hikes of up to 5 % for the year. The growing global demand for building materials has been the biggest catalyst, especially with the growth seen in China and booming cities like Dubai.
Additionally, a growing population and a shortage of private land for sale in Brunei are further contributing to rising property prices. Gross domestic product (GDP) per capita is on the rise in the sultanate at more than $25,000 according to the International Monetary Fund in 2007, and the population now numbers more than 380,000.
While real estate prices have gained across the board in Brunei, growth has inevitably proven to be more robust in some areas than others. Currently, the business areas of Gadong, Kiulap and Kiarong are particularly popular with investors and are tipped as the major hotspots for growth in the coming months and years.
Brunei is not alone in experiencing rising property prices, with many Asian markets witnessing similar growth trends, jumping back from a 10-year slump that began with the Asian financial crash in 1998. Singapore is leading the charge, with real estate price growth of over 21.05% for the second quarter of 2007, from a growth rate of just 6.08% in Q2 of 2006.
Singapore's economy has been growing as a result of a booming wider economy, but poorer Asian nations are also experiencing strong growth. In the Philippines, house prices rose by 14.29% in Q2 compared with 8.45% in 2006. It seems that the housing market is being buoyed by repatriated money flowing in from Filipino workers who are benefiting from economic growth in the wider region. Even Hong Kong's property market has bounced back in the last year after suffering from a sustained period of property deflation.
Brunei has traditionally avoided high property inflation because freehold ownership of land remains closed to outside investors unless authorised by written permission from the Sultan himself. However, foreigners can purchase leasehold properties, an option that is becoming more common as the country becomes an increasingly popular holiday destination.
The trend seen in Brunei is viewed by many analysts as proof that the influence of the US economy on the region is waning and that China is now the most influential economic force. This has led many to hope that the region could avoid the worst effects of the credit crunch that has afflicted the US housing market. Some onlookers remain cautious about the Asian market, however, with memories of the property bubble that preceded the 1998 economic meltdown still fresh in many minds.
Investors who got their fingers burnt in the last crash will certainly remain wary, especially with the former chairman of the US Federal Reserve, Alan Greenspan, recently warning that difficulties in the US economy are likely to have severe implications for emerging markets. For now, however, this has not transpired and, with the Brunei housing market continuing to yield healthy returns, analysts will remain cautiously optimistic.