Week in Review – 11 November 2016

Local Property News
Prices of luxury homes in Singapore set to increase despite muted buyer interest
Prices of luxury homes in Singapore increased 6.2 per cent year-on-year in September 2016, and increased by 0.5 per cent quarter-on-quarter according to Knight Frank. Alice Tan, Director and Head of Consultancy & Research at Knight Frank Singapore, prices of luxury homes in Singapore are set to increase despite muted buyer interest. This is due to economic uncertainty and property cooling measures which are in place. She believes that expectations of economic slow-down and the unlikely increase in private home transactions could continue to curb demand for luxury homes for another six months. 

Outside Central Region private home rents fall in Q3 2016
Rental prices for private homes continued falling in Q3 2016. Homes in the Outside Central Region (OCR) saw the steepest decline at 2.4 per cent quarter-on-quarter. Eugene Lim, Executive Director of ERA Real Estate, noted that the recent layoffs in the finance and oil and gas industries have contributed to falling demand for rental apartments. He also added that overall rents are expected to fall three to four per cent for the whole of 2016. 

Increase in office transactions in 2016; BlackRock testing buyer interest for Asia Square Tower 2
2016 has seen an increase in volume of office sales. These include the purchase of 60 per cent of CapitaGreen by CapitaLand Commercial Trust, purchase of the Straits Trading Building by investment company MYP Ltd and the upcoming sale of prime government land in the Marina Bay financial district. The largest office sale in Singapore happened in June this year when BlackRock Inc., the largest global asset manager, sold Asia Square Tower 1 to a Qatari sovereign wealth fund for $3.4 billion. BlackRock is now testing buyer interest for its 46-storey Asia Square Tower 2, which has offices as well as a Westin Hotel. The 784,100 sqf building is valued at an estimated S$2 billion. According to Cushman & Wakefield, the tower has a 90 per cent occupancy rate as of October 2016.
Record bid of S$2.57 billion for Marina Bay GLS white site
Wealthy Link Ltd, a IOI Properties Group Bhd holding company, submitted the winning bid of S$2.57 billion for a 1.1-hectare site at Marina Bay – a record bid for a white site sold under the Government Land Sales (GLS) programme. The 99-year leasehold site on Central Boulevard, which attracted seven bids, has a gross floor area of 141,294sqm equivalent to S$1,689 psf per plot ratio. Tay Huey Ying, JLL’s Singapore Head of Research, estimates offices to be priced at S$3,000 to S$3,100 psf. According to the Urban Redevelopment Authority (URA), a minimum of 100,000 sqm needs to be allocated for offices, a maximum of 5,000 sqm may be used for retail, and the remaining area may be used for other extra offices, hotel, serviced apartments or residences. The development is expected to boost the supply of offices when it is completed in 2020. The transaction also marks the first sale of land in Marina Bay in nine years.

Margaret Drive site up for public tender
The Urban Redevelopment Authority (URA) has announced that a 0.48-hectare private housing site at Margaret Drive will be available for tender in the next two weeks. The 99-year leasehold, and was triggered for sale after a developer committed to a minimum bid of S$185.76 million. Mr Nicholas Mak, Executive Director of the Research & Consultancy Department at SLP International Property Consultants, expects the site to attract a high number of bids due to its attractive size and favourable location. The highest bid is expected to range between $205 to S$218 million, which translates to S$858 to S$912 psf per plot ratio. The site is located near Commonwealth MRT station and Ayer Rajah Expressway. It is also close to IKEA Alexandra, Queensway Shopping Centre, Queenstown Primary and Secondary School, as well as Anglo-Chinese School (International). The land parcel has up to 238,905 sqf of allowable gross floor area, equivalent to around 275 homes. 
Global Property News
Lack of domestic buyers’ interest in UK property; international buyers remain keen 
While the average home price increased 4.6 per cent year-on-year in October, home prices grew slower than the 5.3 per cent year-on-year growth seen in September. According to Robert Gardner, Chief Economist at Nationwide, home sales dipped approximately 10 per cent in the past few months compared to the same period in 2015. Mr. Gardner attributed the slowing transaction volume and growth of home prices to the introduction of stamp duty on second homes in April 2016. Ian Thomas, Co-Founder and Director of LendInvest, noted that interest from foreign buyers remains strong due to the weakened pound. Moreover with tighter regulations coming into effect in 2017, landlords are pressured to reinforce their property portfolios by the end of 2016. 
Stamp duty review on London homes unlikely despite falling home values and transactions
London property investors are feeling the effects of falling home values and transaction volumes, and are calling for a review on stamp duty taxes for buy-to-let properties and second homes. Lucian Cook, Savills Plc Research Director, believes that a review of additional sales taxes by the UK Chancellor of the Exchequer Philip Hammond is unlikely since the additional taxes resulted in a £660 million increase in revenue for the government. Countrywide Plc estimates that by the end of 2016 the growth of London home values will fall to 3.5 per cent, and decrease by another 1.25 per cent in 2017. The real estate agency also predicts that in 2017, London home prices will fall for the first time since 2009. 

Annual home sales in Toronto nearly doubles despite foreign buyer tax and greater inventory 
Annual sales of prime residential property in Toronto has nearly doubled in the year-to-September despite foreign buyer tax causing home transactions in Vancouver to fall. Figures provided by RE/MAX, an international real estate company, shows that transactions of homes in the Greater Toronto Area (GTA) priced above C$3 million increased by 86 per cent, compared to a 41 per cent increase in Vancouver. There was a three per cent increase in transactions of homes valued at C$1 million in Vancouver, while there was a seven per cent year-on-year slide in sale of single-family homes in the same price range. According to Elton Ash, Regional Executive Vice President at RE/MAX of Western Canada, higher inventory of residential units, which helped reduce buyers’ sense of urgency, coupled with the foreign buyer tax which was implemented by the provincial government in August, have contributed to slower sales. 

Strong demand for Australian residential property
According to the REA Group October Property Demand Index, there is a strong demand for residential property in Australia. According to Nerida Connisbee, REA Group’s Chief Economist, demand for Australian residential property is currently at a “fever pitch”. She added that home prices have reached record levels, with prices increasing in all states other than Western Australia. The index shows that the number of people interested in purchasing a residential property in Australia increased 8.2 per cent in October. Demand for residential apartments continue to outpace the number of listings, which is unexpected considering the high number of new apartment developments across the country.

Chinese developer continues with London’s tallest residential tower despite market uncertainty
Despite uncertainties posed by Brexit, Chinese developer Greenland Group is sticking to its plan to build the Spire – a 67-storey residential tower adjacent to Canary Wharf, near London’s financial centre. The £800 million construction will be the tallest residential tower in Western Europe. Wenhao Qian, Managing Director of Greenland Investment Ltd, said that while they are aware of uncertainty in the property sector, they have confidence in its long term prospects. The Spire is expected to appeal to foreigners, who make up half of property buyers in central London. A recent survey of 127 high-net-worth individuals from the United Arab Emirates, conducted by Cluttons, found that Canary Wharf was the most preferred neighbourhood.  Faisal Durrani, Head of Research at Cluttons, noted that while the Spire might not be popular among locals initially, as they do not favour “cookie-cut” apartments, they might come around to living in the building due to a shortage of homes in the city.