The risk of a property bubble forming in Asia is moderate despite rising real estate prices, credit ratings firm Moody’s Corp. (MCO) said Tuesday, according to AFP.
Government actions to cool down the market appear to be working, said Deborah Schuler, a senior vice president at Moody’s who overseas ratings in Asia, the Middle East and Africa.
“At the moment, we think asset bubbles are confined to the property sector and it’s still only a moderate risk,” she said after a news briefing in Singapore.
“We do see…property prices accelerating faster than (economic) growth at the moment so it has that potential (to become a risk). But there’s been a lot of government actions…to limit those risks,” she added.
“It’s something we’re watching, but right now there’s a really good chance of keeping it under control.”
While the real estate sector in other parts of the world is struggling out of recession, property markets in Asia, including Australia, China, Hong Kong and Singapore, have been heating up.
Governments have taken aggressive steps to slow down the growth, some by raising interest rates and others by restricting lending for housing loans.
Schuler said investors were buying properties in Asia as the region recovered faster than the rest of the world from the global downturn.
“It is a risk but still it hasn’t ballooned into a big bubble yet. If we have a bubble it’s a very small bubble,” she said.
Policymakers have been worried that excessive exuberance could push property prices far above their real value, only to crash and bring down with them banks that lent money too freely and individuals who borrowed beyond their means.