Week in Review – 11 Sep 2015

iProperty Group Ltd, Asia’s leading online advertising business serving the real estate industry, has launched iProperty International (international.iproperty.com), a new international property platform. Managed by iProperty’s Singapore office, iProperty International is a powerful tool for investors, providing access to residential and commercial property listings worldwide.

Features such as videos, 3-dimensional (3D) showrooms and frequently-updated market and demographic data ensure an immersive experience for users. iProperty International’s initial launch phase features more than 3,000 listings of new Australian residential property, provided by REA Group, parent company of realestate.com.au, Australia’s market leading property site. Users can also access new property listings on iProperty Group portals in Hong Kong, Indonesia, Macau, Malaysia, Singapore and Thailand, through the site.

Singapore’s home prices are likely to continue dropping as borrowing costs increase and the Singapore dollar weakens. The three-month Singapore interbank offered rate (Sibor) is at its highest since 2008 and is expected to rise, closing in on the swap offer rate (SOR). A Singapore-based economist at Mizuho Bank Ltd, Vishnu Varathan, told Bloomberg that property prices will soften further should the Sibor catch up with the SOR in the next three to six months.

According to brokerage Knight Frank LLP, a five per cent drop in house prices can be expected this year, the greatest decline since 2001. Alice Tan, Head of Consultancy and Research at Knight Frank commented in an interview with Bloomberg that approximately 6,500 to 7,500 homes could be sold this year, in comparison to 7,316 sold in 2014. She added that rising rates would lead to downward pressure on home prices, and if there was a faster rate of increase, recovery is unlikely for 2016.

China’s recent financial market jitters have led to increased interest in London property. While experts believe that the exact impact of jitters in China’s financial market on London’s property market remains to be seen, movement of funds out of China into London’s property is expected.

Head of London residential research at Knight Frank Tom Bill said to Express UK, “There is evidence Chinese buyers have stepped up their interest in ‘safe haven’ global property markets like London and are increasingly looking for homes in ‘golden postcode’ neighbourhoods like Mayfair, although it is too early to discern any impact on transaction levels.” Camilla Dell, Managing Partner of independent property buying agency, Black Brick, said to OPP Today that investors  will likely spend less, “…for those investors nursing big losses on their stock market portfolios, finding the cash to make a property investment will have got harder.” Richard Barber, Director at boutique London estate agency W A Ellis noted in an interview with OPP Today that “weak equity and real estate investment alternatives from the largest traditional residential investors – Hong Kong and Singapore – could possibly drive improvements from these countries.”

According to Knight Frank’s Global House Price Index report, Singapore and China have Asia’s weakest growth in house prices. Global house prices recorded weak figures, rising by merely 0.1 per cent between June 2014 and June 2015 – the weakest growth rate recorded since Q4 2011. Hong Kong was one of the strongest performers globally, with a 20.7 per cent growth rate between Q2 2014 and Q2 2015. China on the other hand recorded a decline  of -5.7 per cent, and was the worst performer in Asia. Singapore declined -3.2 per cent during the same period, ranking second last, just ahead of China.

Savills’ recently released World Residential Markets Performance and Prospects 2015-2016 report noted that the rise of secondary markets, growth of second-tier cities and growing importance of resorts are key elements that will affect the international property sector in the decade to come.

According to Yolande Barnes of Savills World Research, buyer interest in the past ten years has been focused on prime residential markets, resulting in a great disparity between prime and secondary property prices. The growth of prime real estate prices in sought-after cities such as Hong Kong,

London and Singapore is as high as 140 per cent over the past ten years. The report identifies the USA, Japan and Australia as having relatively cheaper prime property in comparison with secondary and Hong Kong, Paris, Dubai, London and Singapore as having cheaper secondary property in comparison with prime. Savills foresees  that investors are now looking towards secondary property, attracted by the higher income returns made possible by lower-price purchases.

Second-tier cities were also identified as an upcoming source of opportunity as Savills observed that “some small cities have performed particularly well in the creative and digital economies as they offer alternative living and working styles to this highly productive and newly wealthy sector”. The report also suggests that resorts and retreats will be an interesting investment due to post-2008 price corrections resulting in some established resorts being cheaper as well the increasing wealth and ageing population of Asia, that will drive potential of investors who want to experience leisure time, holidays and a relatively prosperous retirement in the near future. Locations such as Hainan Island, Bali, Phuket and Japan were identified as being likely to show strong capital and income returns for residential investments.