ABSD no longer useful
Co-Founder and Chief Technology Officer of SRX Property, Jeremy Lee, claims that the Additional Buyer’s Stamp Duty (ABSD) is no longer useful and should be lifted. Mr Lee argues that the ABSD does not add or subtract units from the market, and while trying to bring down prices indirectly by reducing demand, housing has been made costlier to genuine buyers.
He also claims that with increased supply and rising vacancy rates, the usefulness of the ABSD has long worn off. The TDSR (Total Debt Servicing Ratio) helped the local market, that was over-stimulated by low interest rates, ensure buyers were more prudent in their spending, taking those who could not afford it out of the market.
Another reason to lift the ABSD is that it sends a bad signal to investors. With Singapore’s open economy being fully integrated with the world and export driven, Singapore’s customers are the world; the ABSD deters genuine buyers from purchasing property. Mr Lee says that the country has achieved a better price equilibrium thanks to an increase in supply leading to a more transparent and efficient market. Furthermore, with measures that prevent speculation already in place, the ABSD is no longer required.
Singapore luxury market is world’s weakest
The Knight Frank Prime Global Cities Index for 3Q15, which tracks 33 key cities, revealed that Singapore had the weakest-performing prime market; this is the seventh consecutive quarter of poor performance. Vancouver has been ranked first for the past two quarters, with skyrocketing prices. Sydney and Shanghai both recorded double digit growth. Things could be looking up for Singapore soon though, as the index recorded a smaller annual decline of prime property prices, from -15.2% at 2Q15’s end to -7.9% this quarter.
HDB registered its highest monthly volume so far this year with 1,553 units changing hands, an increase of 16% compared to last month. SRX property also found that resale transactions this month jumped 12.4% in comparison to last year’s volumes. Volumes are still low compared to the peak experienced in May 2010.
HDB resale volumes failed to mirror that of resale prices, with HDB resale prices remaining stagnant. Year-on-year prices dipped 2.6 per cent in this month, down by 11.7% since the peak in April 2013.
Similarly, condo resale volumes increased from 460 units resold in September to 505 units in October, representing a ten per cent increase. However, year-to-year figures show resale volumes in October 2015 remained constant compared to the 504 units sold in October 2014. According to SRX Property, condo resale prices have dipped 7.6 per cent when compared to the recent peak in January 2014. Despite the increase in transactions, analysts believe Singapore’s residential property market will maintain its weakness in the next year, as cooling measures are not expected to be relaxed soon.
Steep drops in home prices will affect quality
According to Augustine Tan, President of REDAS (Real Estate Developers’ Association of Singapore), increases in land, construction and operational costs, as well as higher regulatory fees for plan submissions, have resulted in financial strains for developers. These, together with restrictions on foreign labour and site operation hours, have also added to the burden.
Mr Tan stated that prices cannot drop too deeply without affecting the quality of products and operational obligations, adding that developers are still facing issues of increased supply. He further claims that the industry has raised concerns about the supply-demand imbalance and potential interest rate hikes, with some 3,000 units from the Government Land Sales programme 2012 remaining unsold to date.
A recent survey conducted by the association with its members has found that some have had to reduce prices by up to 11 per cent, with some projects having undergone two price cuts since 2013 to cope with the declining market. Analysts have warned that prices will continue declining, as cooling measures are not likely to be lifted soon.
California and Florida markets
Florida has always been a top target for international real estate buyers, with its sunny weather and major attractions. It accounts for around a quarter of all foreign property deals in the United States.
Florida agents are now seeing the importance of the foreign buyer market, with 69% of Florida realtors now having international clients, a rise of 17% in the last year. Residential property in Florida has experienced a six per cent year-on-year rise. Apart from its location, the other factors influencing a client’s decision to purchase Florida property is its security and profitability, with most buyers purchasing property for rental purposes.
A new Coldwell Banker Home Listing (HLR) survey reveals California as the host of half of the most expensive real estate in the country. Known for its scenic beaches and vibrant economy, Newport Beach tops the list, while Cleveland is the most affordable for the third year running.
The average listing price for a home in Newport Beach is seven and a half times the national average and 30-times the cost of a similar home in Cleveland.
Singapore set to be dethroned in real estate dominance
The city-state makes up one-sixth of the ‘Big Six’ established world cities, but it may not stay on top too long, as numerous cities are catching up.
According to a report by JLL, a number of cities are in line, with Sydney and Seoul leading the charge and Shanghai and Beijing waiting to blossom; Shanghai is already one of the world’s top 10 financial hubs. Director of global research programmes at JLL, Rosemary Feenan, says that for Singapore to remain in the Big Six, bold and ambitious urban transformation projects to accommodate growth and stay globally competitive are required.
Along with rival Hong Kong, Singapore continues to be seen as the most business-friendly city in the world. Cities like Manila fall behind due to their lack of physical infrastructure. Nevertheless, Manila and Jakarta are seen to be catching up faster than other emerging cities due to their attractive business environments. Despite being weakly governed, both are seen to have high potential.
Average UK house prices have hit a new high of £205,240, according to the latest Halifax market index. According to the Halifax House Price Index, house prices in the three months to October 2015 rose 9.7% year-on-year. House prices in the three months to October were 2.8% higher than in the previous three months, in part due to improving economic conditions and household finances, together with sustained low mortgage rates.
According to the Halifax Housing Market Confidence Tracker, over 68 per cent of Britons expect average property prices to be higher in 12 months, with just five per cent expecting it to be lower. The main factors of the market are seen to be the abundance of affordable mortgage products and a lack of housing in the Britain. Despite the benefit of higher property prices for homeowners, analysts caution that a large number of buyers wanting to secure mortgages, coupled with a severe shortage of homes, will lead to continued increases, dangerous for the market.
UK home sales experienced a second successive increase of 1% between August and September. Sales in the three months to September were 4.4% higher than in the preceding three months.
Looking at five-year predictions from the Royal Institution of Chartered Surveyors’ (RICS), RICS believes property in Britain will soon become unaffordable. Survey respondents expect an approximate 4.5 per cent annual rise in house prices over the next five years.
Cambodia is in the midst of an urban property boom right now as developers from Singapore, Japan, Taiwan and South Korea respond to the high demand from investors. A recent Knight Frank report found that prime residential land prices in Phnom Penh rose 14.1 percent year-on-year during the first half of 2015. Singapore-based Oxley Holdings is hoping to lure foreign cashed up expats with its 55-storey mixed-use tower. The Bay, a residential and commercial complex with an estimated value of over USD500 million, was developed by another Singaporean developer, TEHO.
Oknha Yum Sui Sang, chairman of Chinese bank UCB, stated that most developments now cater to foreign investors and the rich, being out of reach for most locals.
Property consultancy firm CBRE estimates that Phnom Penh’s condo stock will be level at just under 20,000 units by the end of 2018. The figure is 13 times the level of condo stock in 2014. Much of this boom in development can be attributed to Cambodia’s investor-friendly laws. “It is a very appealing place for foreign investors with its high rental yields of up to 9 per cent,” says Ross Whebble of Knight Frank Cambodia. “We are seeing Chinese, Taiwanese, Koreans, Singaporeans and people from Hong Kong snapping up property off-plan.”
However, Marc Townsend, managing director of CBRE Cambodia, says that unless there is a strong take-up by local families, Cambodia could be facing an oversupply. Although the construction of shiny new condominium developments continues unabated, experts believe that a ceiling may now have been reached due to supply beginning to outweigh demand.
Singapore developer HLG Group this year announced its intention to build high-quality, affordable homes in premium locations in Phnom Penh, in the hope of addressing the wealth imbalance within the country. The buildings are to be modelled on Singapore’s much-admired public housing, where prospective buyers register their interest in advance.
Although it has slowed recently, the outlook on Cambodia’s property market looks bright with reasonable property prices and clearly stated foreign ownership rules adding to the city’s appeal.