Week in Review – 11 Dec 2015

According to SRX Property’s flash estimates, resale prices of non-landed properties grew 0.6 per cent in November compared to October. Analysts do not however see this as a strong signal for market recovery. The growth is largely contributed by transactions of prime and city fringe properties; analysts attribute it to market fluctuations rather than a rebound.

Year-on-year, overall prices in November dipped 1.3 per cent. Analysts expect home prices to continue facing downward pressure due to a large pool of supply compounded with property cooling measures.

The data also showed that transaction volumes hiked 31.2 per cent year-on-year, indicating an increasing number of buyers looking at the resale market, possibly due to lower prices and larger sizes compared with new developments.

Property market watchers believe that the Housing Development Board (HDB) resale market looks to be stabilising, despite a dip in November’s transaction numbers.

More buyers and sellers are willing to enter the market with recent changes and introduction of grants, as seen by SRX Property’s flash figures. The report says 1,467 HDB units were transacted in November, an 8.7 per cent increase in year-on-year resale volume.

Resale HDB flat prices saw a 0.4 per cent increase in November spearheaded by price increases of four-room and five-room units. Year-on-year, November saw a 1.9 per cent dip. Compared to the peak of April 2013, prices have slid 11.3 per cent up to November 2015.

With HDB launching a bumper crop of 12,411 flats through the Build-To-Order (BTO) and Sale of Balance Flats in November, and with buyers not expected to complete deals before the Lunar New Year, transaction volumes are expected to remain low for now. Transaction numbers are expected to gain traction in February.

According to Maybank Kim Eng, Singapore’s property sector might see cooling measures eased in 2016, with a corresponding increase in home sales of more than 30 per cent. The easing of property cooling measures could potentially revive home sales and reduce unsold inventory of developers.

Similarly, UOB Kay Hian expects Singapore’s government to ease property cooling measures should the HDB resale price index exceed the 10 per cent decline threshold. Data from Q3 shows the public house index declining for nine consecutive months, and has fallen 9.9 per cent from the Q2 2013 peak. HDB resale prices are expected to continue falling due to supply exceeding demand, coupled with demand curbs such as purchase limits for Permanent Residents (PR), remaining in place.

With property developers battling a supply glut, home sales slump and cooling measures leading to a sluggish property market, RHB analysts believe property prices will reduce by a further six to eight per cent in 2016.

Price trims can be expected with the additional buyer’s stamp duty (ABSD) still in force, and even more so for developers with unsold inventory nearing the deadlines for qualifying certificate (QC) charges.

Prices of private property have dipped approximately eight per cent as compared to the 2013 peak, and some analysts expect cooling measures to be eased in H2 2016/H1 2017.

Analysts expect that easing of cooling measures, such as tweaks to reduce stamp duties for buyers and sellers, lowering QC penalties and easing of ABSD, could help drive a property market rebound.

Additionally, UOB Kay Hian believes that the Singapore government will fine-tune policies to prevent home prices from tumbling by more than 20 per cent from the 2013 peak, with the tweaks expected to start when prices have fallen to 12-15 per cent.

Singapore’s property market has been squeezed out of APAC’s top ten cities for investment prospects for the first time in eight years. This is based on the Emerging Trends in Real Estate in Asia Pacific report, compiled by PwC and Urban Land Institute (ULI). Singapore is ranked eleventh this year, the country’s first placement out of the top ten since 2007, when the report was first published.

Real estate and hospitality leader at PwC Singapore, Yeow Chee Keong, said the number of transactions in Singapore’s residential market is contingent on tweaks made to cooling measures. The report also highlighted that Singapore is a top investment destination for investors.

Despite being squeezed out of APAC’s top ten cities for investment, Malaysians and Mainland Chinese remain interested in residential properties in Singapore. According to a DTZ report, Malaysian and Mainland Chinese purchased 530 private properties, accounting for 50 per cent of the total non-Singaporean private property purchases. Even with the Chinese and Malaysian currencies weakening against the Singapore dollar, their appetite for property in Singapore remains strong.

Mortgage lender Halifax believes house prices in Britain will likely experience slower growth of four to six per cent in 2016, as opposed to approximately 10 per cent growth over the past twelve months. Halifax economist Martin Ellis said that while house prices seem expensive relative to incomes, these prices reflect the conditions of low supply coupled with abnormally low interest rates. As a result of property values increasing at a faster pace compared to wages, many first-time buyers find home ownership out of their reach. The supply and demand imbalance, together with price inflation of property in Britain is expected to continue, and a correction of this situation is unlikely in the short term.

Economists in a poll by Reuters forecasted average house prices rising 4.3 per cent in 2016 and 3.9 per cent in 2017.

Foreign investors looking to invest in Australian residential property can expect greater hurdles. New legislation in effect since 1 December says foreigners wanting to purchase a residential property that is worth $1million or under will have to pay a fee of AUS$5,000. For property worth more than $1million, investors have to pay AUS$10,000 for each additional AUS$1million.

Foreign property investors who break current legislation governing foreign investment in Australia can be jailed up to three years, or face a fine not exceeding AUS$135,000. Agents who knowingly aid foreign investors to contravene the rules will also face criminal penalties and fines if convicted.

Housing Industry Authority (HIA) of Australia expects a good year ahead for Australia’s property market. According to HIA’s New Home Sales Report, seasonally adjusted new home sales dipped three per cent. However, indicators such as new home sales and ABS building approvals point to 2016 being the fourth healthy year.

Taking into consideration wider economic conditions in Australia, 2016’s outlook for the housing industry is impressive. However, the risk is in 2016/17, when delayed effects of stagnating population growth and uncertainty surrounding high rise construction is made worse by higher variable mortgage costs, as well as credit rationing that is more stringent than necessary.

Despite expecting a healthy property market in 2016, Chinese demand, which helped drive Sydney’s surge in property prices, has softened, a result of China’s slowing economy and volatile stock market. According to real estate agent McGrath, Chinese demand dipped by approximately 15 per cent compared to 2014.

In Melbourne, increasing numbers of home owners preferring to forgo rental income and leaving their houses vacant is fast becoming a concern. Approximately 82,724 properties appear unused. This is a problem, as empty accommodation conceals a hidden glut of supply with the potential of worsening housing slumps. One of the problems now is that the unused property creates a façade of scarcity and a housing supply crisis.

Loans to homebuyers rose by a significant 22 per cent in from the year to August – a shift in Vietnam’s financial habit. It was common to find home buyers engaging in all-cash transactions for residential property. However, real estate loans now make up eight per cent of total bank lending and fuelled a property rebound that saw home sales double in 2015. The shift in financial habit largely stems from changing demographics – Vietnamese under 35 years old now make up 60 per cent of the population, and migration into cities is becoming increasingly commonplace.

A change in legislation, which opened Vietnam’s market to foreign buyers, also helped stimulate Vietnam’s property market.

Amid this rosy picture, concerns regarding credit risks and the increased risk of a bubble is on the rise. Popularity of mortgages, as well as ample home inventories, are reasons for the growing worries. However, Vietnam’s economy is expected to enjoy six to seven per cent of growth annually till 2020, riding the back of foreign investment and free trade deals such as the Trans-Pacific Partnership.

The Chief Executive of Hong Kong, Leung Chun-Ying, indicated property cooling measures will be kept in place in spite of recent property price falls. He reaffirmed the government’s determination in solving the problem of housing shortage by increasing land supply.

Since 2009, property prices in Hong Kong have more than doubled, and have consistently been among the world’s most expensive. For the past couple of years, punitive measures such as a doubling of stamp duty, and a property transaction tax, primarily on non-permanent residents, have been used to cool the market.