Week in Review – 1 April 2016

Local Property News 
Prices of private residential homes increase 
According to the latest Singapore Residential Price Index (SRPI) compiled by the National University of Singapore (NUS), overall resale prices of private residential homes increased 0.4 per cent month-on-month in February. Excluding small units, prices of private properties in the central and non-central regions rose 0.5 and 0.3 per cent respectively. However, prices of shoebox units with a floor area of less than 506 square feet decreased 1.1 per cent compared to January.   

Jurong property prices expected to increase 
Property prices in Jurong West are expected to increase along with the development of the new Jurong Innovation District (JID). The development is predicted to bring about a greater demand for real estate in the area and hence a growth in real estate value according to Tay Huey Ying, Head of Singapore Research at JLL. Likewise, there will likely be greater interest from the private sector to develop and invest in property in Jurong. 

Property cooling measures expected to ease in late 2016/early 2017 
In the Budget 2016, the government announced that property cooling measures as well as foreign worker levies in the construction sector will remain. However, a report by RHB Research stated that property cooling measures are expected to ease late-2016. This will only occur after the property price index has fallen by 12 to 15 per cent from its peak, with more developers affected by the Qualifying Certificate (QC) and Additional Buyer’s Stamp Duty (ABSD). Similarly, a separate report by Maybank Kim Eng noted that the prices in the property market have not decreased sufficiently for the government to tweak existing cooling measures. 

Q1 2016 sees number of mortgagee listings remain elevated
Colliers International, a leading global commercial real estate services firm, said the property auction market in Singapore saw 70 mortgagee listings including residential and commercial properties in Q1 2016, similar to the previous quarter. The previous peak was recorded in Q2 2008, with a total of 71 mortgagee listings. Forty-eight residential properties were put up as mortgagee sales listings in Q1 2016, comprising 33 non-landed properties and 15 landed properties. Out of the non-landed residential mortgagee listings, 15 were larger, pricier apartments and condominiums with floor areas above 1,500 sq ft and five were located in prime residential districts. The high number of residential mortgagee listings continues the trend from last year when a total of 50 landed residential mortgagee listings more than doubled the 19 recorded in 2014. Most had larger areas, such as corner terraces, semi-detached houses, and detached houses with floor areas around or bigger than 3,000 sq ft, worth more than S$3 million. The number of mortgagee listings for the rest of 2016 is expected to remain high.
Global Property News 
Rise in US pending home sales 
According to the National Association of Realtors (NAR), pending home sales in the United States increased by 3.5 per cent month-over-month in February, reaching a seven-month high after sales dropped in January 2016. Contrary to the 1.1 per cent increase analysts predicted, February data showed a much stronger performance as buyers were attracted by dropping mortgage rates and a seasonal rise in supply.  Barclay’s analyst Jesse Hurwitz believes the rebound indicates that the US housing market is indeed improving, and the fall in January sales was simply an outlier partially caused by the severe winter season. Similarly, annualised prices of single-family homes in the US rose in January, though the increase was lower than expected. Year-on-year, a composite index of 20 metropolitan areas by S&P/Case Shiller increased 5.7 per cent in January, matching growth recorded for the month before. This growth falls 0.1 per cent shy of the 5.8 per cent estimate from a poll Reuters conducted with economists in.

Stamp duties and financial market instability add on to London’s luxury property market woes
With worries over an oversupply in London’s luxury residential property market, developers are being charged higher interest rates by lenders for development loans of such homes. Furthermore, according to broker Knight Frank, prime districts in London have seen home prices experience the greatest dip since June 2009 from September through February. The fall in prices were attributed to buyers being deterred by increased stamp duty sales taxes and instability in the financial markets. Stamp duties currently stand at more than £1 million for a £7.5 million residence used as a second home. According to Managing Director of Dragonfly Property Finance, Mark Posniak, property stamp duties exceeding £1 million cripple the market. However, Louisa Brodie, Head of Search and Acquisitions at Banda Property, argues the fall in prime property transactions and market uncertainty over the June European Union (EU) exit vote serves as an opportunity for international buyers. Furthermore, bolder investors might grab the opportunity to avoid new Stamp Duty Land Tax rate increases for second homes and buy-to-let purchases.

Tokyo’s property market is strongest in Asia 
Tokyo is Asia’s most important market today, according to real estate consultancy firm Savills based on the 12 Cities report on the first half of 2016. Looking at residential and commercial real estate, cities are ranked based on global connectivity, economic indicators, power, and competitiveness. Tokyo is ranked fourth globally, averaging US$69,800 per person per year for living and work accommodation costs. On the other hand, London, the global leader averaged close to twice of Tokyo, at US$112,800 per person per year. 

Australia’s new home sales falls in February
According to a survey of large-home builders conducted by Australia’s Housing Industry Association (HIA), sales of new homes in the country dipped in February after seeing increases over the previous two months. The survey shows sales of new homes dropped 5.3 per cent in February after factoring in seasonal adjustments, compared to the January rise of 3.1 per cent. February saw sales fall by 3.9 per cent for detached homes and by 10.6 per cent for the multi-unit sector.