Singapore’s property market in 2016 – cooling measures to stay, prices to fall
In 2016, property cooling measures are not expected to be lifted, property prices are expected to fall, with mortgage rates rising. Despite developers intensifying their requests for cooling measures to be eased, analysts believe the government will not tweak policies within this year. DBS reports that policymakers will not ease measures unless there are signs of “material stress” in the system. Historically, measures were adjusted only after price decreases of 13 per cent to 15 per cent.
According to the Real Estate Sentiment Index (RESI) by the Real Estate Developers’ Association of Singapore (REDAS) and National University of Singapore (NUS), 60.7 per cent of developers expect residential property prices to see minor dips in the six months ahead. A RESI respondent stated that new residential launches may see more competitive pricing, with some residential sites won at comparatively lower prices. Cautious buyers will expect lower prices looking at the uncertainty in the market.
Government helping citizens achieve home ownership
According to the Housing and Development Board (HDB), since 2011, an excess of 3,000 rental tenants have purchased a flat through the Build-to-Order (BTO) or Sale of Balance Flats (SBF) exercises. The HDB said approximately 73 per cent of first-time home owners who previously rented flats bought three-room or smaller HDB flats.
The HDB said 84 per cent of these rental tenants bought flats through the assistance provided under the Additional CPF Housing Grant (AHG) or Special CPF Housing Grant (SHG) or both. 12 per cent of the buyers were provided with the maximum grant of $60,000.
The National Day Rally 2015 introduced the Fresh Start Housing Scheme, aiming to help second-time households with young children living in public rental housing to have home ownership again.
Global Property News
Foreigner investors key drivers of UK property market growth
Foreign investors are the key drivers of Britain’s real estate boom; most of London is currently owned by the Qatari royal family rather than the British royalty. Research conducted by global real estate agent Knight Frank points to an increase in foreign-owned prime central property. Between mid-2011 and mid-2014, non-UK nationals bought 49 per cent of prime central new-build property. Between July 2014 and July 2015, 63 per cent of buyers of homes valued above USD15 million were foreigners.
A primary reason for Britain being a popular destination for foreign investors is its reputation as a safe haven for residential property investments. With geopolitical instability in the Middle East, Middle Eastern buyers of British residential property rose from 11 per cent to 16 per cent. Other than Middle Eastern and Russian investors, Asian investors from Singapore and Hong Kong also rose in numbers, with investors from both countries amounting to 40 per cent of purchasers of newly built property in prime central London.
However, according to research by the Belvoir agency franchise, ‘interference’ by the UK government in the buy-to-let (BTL) market will probably affect investment levels and cause rents to rise. To cool the BTL market, the UK government has increased stamp duties – causing greater pressure on the Private Rental Sector (PSR). 88 per cent of the surveyed landlords believe the rising costs of investment properties from higher stamp duties and lack of BTL mortgage tax relief will cause rents to rise.
With increased transaction taxes on rental investments coming into play in April, there has been an increase in activity in the British housing market, as investors are trying to transact before the increased taxes are enforced. Properties purchased to rent from April onwards will be levied with an extra three per cent transaction tax.
Indonesia opens up for greater foreign investment
Indonesia’s residential property market seems to be a prime investment destination for international real estate investors, with real estate values rising, a strengthening economy as well as regulatory changes to allow foreign purchases. However, real estate professionals are treading carefully, with a mixture of cautious optimism and belief that more can be done to encourage foreign investment.
Chairman of Realestat Indonesia (REI), Eddy Hussy, said that property sales are expected to grow 10 to 12 per cent in 2016, up from seven to eight per cent in 2015. The improved sales can be attributed to the predicted economic growth of 5.3 per cent and 5.8 per cent in 2016 and 2017 respectively. Furthermore, at the end of 2015, Joko Widodo signed legislation that gave foreigners permission to own landed houses for up to 80 years, given the precondition that they live, work or invest in the country and help “provide benefit” to Indonesia. Prior to the new legislation, foreigners were only allowed to own landed houses for 25 years, with the possibility of an additional 25-year extension.
With President Widodo promising to review Indonesia’s restrictive policies on foreign investments, a positive impact on job creation can be expected, and demand for Indonesian real estate will likely increase. With 2017 a year believed to see high volumes of new supply, abundant options will continue to be up for grabs for foreign investors.
Manhattan Real Estate is now a tenants’ market
According to Equity Residential, rents are expected to be flat for Manhattan’s West Side apartment leases, considering the competition brought about by an influx of new supply into the area. The company’s Chief Operating Officer, David Santee, said the performance of the company’s Manhattan portfolio will be heavily affected by an upcoming estimated 2,000 new units on the Upper West Side – which contributes about 30 per cent of Equity Residential’s total revenue for the New York Metro area.
Two- and three-bedroom luxury units make up the bulk of the new supply, offering stiff competition to the similar apartments owned by Equity Residential. The rich across Manhattan will have more options to choose from this year, with more than 6,700 newly built apartments that will be listed for rent. According to brokerage Citi Habitats, this is the highest number since 2005.
Landlords have already begun seeing signs of the market slowing down. In December, tenants were enticed with sweeteners – 13 per cent of all new leases were offered a month’s free rent or payment of broker’s fees, up from 7.8 per cent of all deals year-on-year.
According to the National Association of Realtors, 81 per cent of US metropolitan areas saw home prices rise in 4Q 2016. For existing single-family homes, the median price has risen compared to a year ago in 145 out of 179 areas measured. As a whole, the country saw home prices increase on the back of stronger employment, low borrowing costs and competition for a smaller pool of supply. The national median price for single-family homes was US$222,700 in Q4 2015, a 6.9 per cent increase year-on-year.