Housing bonds are potential growth areas for Asia: ADB

By developing a housing bond market, emerging East Asian countries stand to address growing demand for residential properties better

Housing bonds are potential areas of future growth in emerging East Asia, according to a quarterly report issued yesterday by the Asian Development Bank.

Developing a market for housing bonds would increase access to home loans and diversify housing finance from commercial banks, the report noted.

“We see potential in the development of housing bonds to finance growing demand for homes as countries urbanise and for green bonds to fund clean energy and other climate-friendly projects,” ADB Chief Economist Yasuyuki Sawada said in a statement.

The bond market can provide housing finance and thereby mitigate the maturity mismatch arising between typically long-term borrowing by homeowners and short-term bank loans, ADB stated. A housing bond market can also help countries raise funds to build more housing units, meeting demand and generating jobs.

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The current prevalent system of providing housing finance via commercial bank loans is “structurally limited in meeting the housing finance needs of home buyers,” ADB noted.

The financial institution’s pronouncements come amid the expansion of currency bond markets in emerging East Asia despite trade conflicts and moderating global growth. The region saw USD15 trillion in local currency bonds outstanding at the end of March, up 2.9 percent from the end of 2018 and up 14 percent year-on-year. Bond issuance in the region amounted to USD1.4 trillion in the first quarter of 2019, up 10 percent up from Q4 2018.

“The region’s bond markets are holding firm but the risks are still to the downside,” Yasuyuki said.

Emerging East Asia refers to a region comprising China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.