Tags: Property | Bubbles | Brewing | Asia | Dominique | Dwor-Frecaut

Expert: Property Bubbles Brewing Across Asia

Monday, 04 Oct 2010 12:50 PM

Property bubbles of an "unprecedented magnitude" will happen across Asia next year unless Asian central banks tighten monetary policy now, warns Dominique Dwor-Frecaut, macro strategist at Royal Bank of Scotland.

“Countries that are preventing the appreciation of their currencies — whether China, Singapore or Hong Kong …. are facing unprecedented real-estate price inflation,” Dwor-Frecaut told CNBC.

Asian countries are "importing monetary-policy conditions which are far too loose for them," because the problems in Western economies that led to quantitative easing in the West didn’t happen in Asia, Dwor-Frecaut told CNBC, emphasizing that Asian currencies must appreciate to reflect the strength of their economies.

"Countries that refuse to let their currency appreciate ... are going to see their real estate market become more and more bubbly," Dwor-Frecaut predicts.

Dwor-Frecaut noted in a recent report that residential-property prices in Hong Kong and Taiwan were 20 percent above their 2008 peak, and that prices in Singapore and Malaysia had been above 2008 levels at the end of last June.

“You can’t have your cake and eat it,” Dwor-Frecaut notes. “At some point, those countries are going to have to think very hard about the benefits of cheapening their currencies, and I think the costs are going to outweigh the benefits.”

MarketWatch reports that proponents of the bill trying to make it easier to impose sanctions on China over manipulating its currency say a stronger yuan is a way to bolster the economy without any cost because they believe that U.S. exports would be more competitive in China were the yuan to have stronger purchasing power, creating an estimated 500,000 manufacturing jobs state-side without Congress having to spend a dime.

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Property bubbles of an unprecedented magnitude will happen across Asia next year unless Asian central banks tighten monetary policy now, warns Dominique Dwor-Frecaut, macro strategist at Royal Bank ofScotland. Countries that are preventing the appreciation of their...
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