Week in Review – 13 May 2016

Local property news
Demand increases for prime office space as rents fall
Companies are snapping up Grade A+ office space in the Central Business District (CBD) as rents fall by as much as 3.9 per cent quarter-on-quarter in locations like Raffles Place/Marina Bay. Knight Frank reported a decreased vacancy rate, from 6.3 per cent in Q4 2015 to 5.5 percent in Q1 2016. Vacancy rates for traditional Raffles Place/Marina Bay Grade A buildings have however risen from two per cent to 2.9 per cent in the same period. Knight Frank expects the upcoming supply of new offices by end 2016 will bring about greater rent declines, by about eight to 12 per cent year-on-year.

Commercial opportunities 
The recent Knight Frank Global Cities Report has projected Singapore’s commercial property opportunities. Overall, finance sectors, especially in asset management, insurance and currency trading, can look forward to benefiting from Singapore’s growth as South East Asia’s axis of trading.  This will push the demand over the long run for both the Central Business District (CBD) and Fringe districts such as Tampines and Changi, for both front and back end operations. Singapore’s Smart Nation vision will likely see technology firms fill up office space in the CBD in the near future, considering the preference for city centres demonstrated by TMT (Technology, Media and Telecoms) sectors worldwide. Singapore’s goal of a well-diversified and sustainable economy involving sectors such as healthcare, education, logistics, aerospace, petrochemicals and biotechnology will likely drive interest in the Fringe, as firms in these industries are predicted to locate there.

Bigger budget for HDB shop upgrades
The Housing and Development Board (HDB) announced a bigger upgrading budget on 9th May, as part of the enhanced Revitalisation of Shops (ROS) Scheme. Shopowners will only have to bear 20 per cent of the upgrading cost, a reduction from 50 percent and a ceiling of S$5,000. Respective town councils and HDB will split the remaining costs, up to a maximum of S$30,000. HDB added that the full upgrading cost for rental shops will continue to be funded. On top of this, Merchants Associations (MA) will be provided with a new funding of up to S$10,000 to engage consultants for HDB shops to kick-start their ROS upgrading. HDB is also providing a new Start-up Fund of $10,000 to encourage HDB shops not part of any MAs to form one.
Global property news

Prices of homes in US metro areas increase in Q1 2016
Increasing buyer demand is driving home prices up in 87 per cent of US metropolitan areas against a backdrop of limited supply. The National Association of Realtors (NAR) reported that the hike in demand was due to recent employment growth in the US. NAR Chief Economist Lawrence Yun stated in the report, “The solid run of sustained job creation and attractive mortgage rates below four per cent spurred steady demand for home purchases in many local markets.” There were 1.98 million previously owned homes for sale at the end of March, down 1.5 per cent from a year earlier, NAR said. The jump in values has made it difficult for many first-time buyers to compete in the most heated areas, according to Mr Yun.

Luxury condos in Lower Manhattan 
Over 5,000 homes in 31 residential towers are being built in Lower Manhattan and analysts are foreseeing a supply glut for luxury condos. Real estate agency Olshan Realty reported that the number of condos sold at over US$4 million has plunged to its lowest level since 2012.  A study by listings site StreetEasy and an industry magazine The Real Deal, shows that prices for a third of 261 penthouses on the market were cut by an average of ten per cent in April to increase sales. Pamela Liebman, President at real estate agency Corcoran told the Financial Times that high-end condo buyers from China and the Middle East are continuing to invest in Lower Manhattan; interest from Russian and South American investors has dropped. Despite this, things are still optimistic for the rest of the Manhattan property market. “Most indicators are still showing it’s a sellers’ market,” said Gregory Heym, Chief Economist at consultancy Terra Holdings to the Financial Times. “Smaller apartments have been a hot commodity.”

UK launches property register to combat corruption
Foreign companies in Britain will have to reveal their property ownership on a public register that will be launched next month, Prime Minister David Cameron announced ahead of a global anti-corruption summit on 12th May. The register also applies to existing foreign companies with properties in the country. At the moment, the true owners of property in UK can be concealed by registration through anonymous offshore sites. A government statement noted, “The new register for foreign companies will mean corrupt individuals and countries will no longer be able to move, launder and hide illicit funds through London’s property market, and will not benefit from our public funds”.