Week in Review – 10 July 2015

Knight Frank: Property sales and rentals to decline 3 to 4 per cent
Knight Frank says property prices in Singapore will decline three to four per cent this year; statistics indicate a sixth consecutive month of decline in prices and rents with mid-market homes affected the most. Foreign investment declined slightly, with 27.3 per cent of purchases made by overseas buyers. 
Sales appear to be picking up in the luxury residential market however, as buyers begin to return after prices declined in previous quarters by double digits. In an interview with Singapore Business Review, Maybank Kim Eng analyst Mr Derrick Heng said, “We observed an uptick in high-end sales, using core central region (CCR) sales as a proxy, in May. 69 units were sold, led by Marina One, Leedon Residence and Sophia Hills. Their decent sales indicated more-or-less intact foreign interest in Singapore’s high-end market”. 
Barclays analyst Ms Tricia Song noted in a Singapore Business Review interview that it might be time for a review of the Additional Buyers’ Stamp Duty; she said, “We expect an eventual easing of Additional Buyers Stamp Duty (ABSD) measures, in particular the 15% tax on foreign buyers, to benefit the luxury-end segment the most, especially as this segment has the fewest future supply completions. In May’s developer take-up data, a small uptick was seen in the higher-end segment above S$2,000psf, as the correction in this segment has attracted buyers”.

Bidadari BTO exercise postponed to September 
The Bidadari Build-To-Order BTO exercise originally slated for release in August has been postponed to September. According to Channel NewsAsia, the Housing and Development Board (HDB) is delaying the BTO exercise due to considerations for an increase in income ceilings for new BTO applicants and merger of flat schemes for studio apartments and two-room flats. 
The proposed revisions were announced on 23 June by National Development Minister Mr Khaw Boon Wan, who intends for changes to be applied by the next BTO exercise. September’s BTO exercise will make it the third and largest in supply this year, despite a cut from 16,900 to 15,000 units. 2,150 units from the first phase of HDB flats in the Bidadari estate will be offered, including studio apartments and three to five-room units.
Big opportunities in Japan
Japan’s property prices are on the increase despite its declining population and stagnant economy and wages, Deutsche Bank revealed in a June report. The country’s residential price index rose 1.5 per cent in March compared to a year ago, while Tokyo rose 4.7 per cent. Tokyo’s condominiums, which cost nine times annual household income rose 8.9 per cent over the same period. “There are many high-net-worth individuals who invested in expensive city center condos (particularly tower condos) as a tax-saving measure,” Deutsche Bank said. 
“Investment in rental apartments has been also increasing. We view this to be the result of inheritance tax countermeasures.” Competition is also stiff and despite an increase in prices by 10 to 20 per cent in two years, Mr Ku Swee Yong, an international property advisor at Century 21 Singapore, thinks the market is good for foreign investment, as the rise in price come after 20 years of recession.
In an interview with CNBC, Mr Ku noted that the yen’s 18 per cent decrease against the US dollar makes Japan’s properties valuable for foreign investment. Also, due to Japan’s low rates, rental cash flow is expected to be positive despite moderating interest rates. According to Mr Ku, most investors are coming from China, Hong Kong and Taiwan. The relaxed Taiwanese property market, a drop and in rental yields and good exchange rate have caused an influx of Taiwanese investors, while the Chinese are attracted by the weakening yen and the upcoming 2020 Tokyo Olympics.

Ringgit at 3.8, its lowest against the US dollar  
The ringgit is back at its previous Asian Financial Crisis peg of 3.80 to the US dollar. According to data from Thomson Reuters, the ringgit is now 2.8189 against the Singapore dollar, the lowest in 25 years. Before a market rebound on 1 July, the Malaysian stock market saw foreign funds exiting  the market at the quickest pace this year. Investor confidence has also faltered due to the growing spotlight on Prime Minister Najib Razak’s alleged mismanagement of debt of 1Malaysian Development Bhd and weak exports and national revenue after commodity prices declined. With the ringgit being the worst-hit currency in Asia this year, it bodes badly for investors anticipating returns. 
Back home, the cheaper ringgit is welcomed by Malaysians working in Singapore and those planning to invest or holiday in Malaysia. In an interview with Today, Malaysian Tham Yong Seng, who works in Singapore, said that he would exploit the exchange rate to remit more money home. He also added that he might consider investing in Ipoh or Penang properties now.