Week in Review – 14 October 2016

Local Property News

DBSS resale flats in Ang Mo Kio sold for record sum of S$980,000

A 1,291 sqf five-room Design, Build and Sell Scheme (DBSS) resale flat was sold at a record sum of S$980,000 in September 2016. This flat is located at Ang Mo Kio Street 52, just 500m from Ang Mo Kio MRT. Two other DBSS units at Ang Mo Kio were sold in September; a 1,302 sqf apartment at Ang Mo Kio Avenue 1 sold at S$910,000 and another 1,205 sqf apartment at Ang Mo Kio Street 52 sold at S$905,000. Previously the costliest DBSS resale flat was sold at S$910,000 in September 2015, and was a 1,302 sq ft, five-room flat at 310B Ang Mo Kio Avenue 1.  

Increase in en-bloc sales in 2016

UOL Venture Investments and Singland Homes, a subsidiary of United Industrial Corporation (UIC), have purchased Raintree Gardens, a privatised Housing and Urban Development Company (HUDC) estate in Potong Pasir for S$334.2 million. With this transaction, the total amount of en-bloc sales this year has exceeded S$1 billion, the highest since 2012 when 19 deals amounting to S$1.2 billion were transacted.  

The en-bloc of Raintree Gardens is the third this year. The other two en-bloc sales were Shunfu Ville sold to Qingjian Realty in May for S$638 million, and Habour View Gardens sold to Roxy-Pacific Holdings in August for S$33.25 million. 

UOL’s increase in assets set to bolster profits

The last 12 months have proven to be profitable for United Overseas Land (UOL) with the acquisition of S$710 million worth of assets. According to CIMB, this could result in UOL’s Q2 2016 asset base increasing 3.3% to S$12 billion. Recent acquisitions by UOL include the S$334.2 million Raintree Garden residential site and Holborn Island, a S$387.8 million office/retail building in London. Both these acquisitions were through joint venture with United Industrial Corporation (UIC). According to CIMB, the purchase of Raintree Gardens is an indication of UOL’s intension to develop its residential portfolio. On-going residential UOL projects include Botanique at Bartley, Riverbank @ Fernvale, and Principal Garden, which have 97%, 92%, and 45% of units sold respectively. UOL is also preparing to sell its 505-unit project at Clementi in Q1 2017.

Commercial development and retail woes in central region 

Guoco Tower, the main feature of the Tanjong Pagar Centre, has received the temporary occupation permit (TOP) for its office and retail components. Wallich Residence, Sofitel hotel, and Urban Park are also part of the Tanjong Pagar Centre development. Guoco Tower, an 890,000 sqf Grade A office building, has achieved 80% tenant commitment, with tenants including Agoda, Danone, and Straits Trading. Cheng Hsing Yao, Managing Director of GuocoLand Singapore, stated that this development focuses on being a “liveable, vertical city” where lifestyle amenities are integrated into the workplace. It is also the tallest building in Singapore that is well-connected to an MRT station. Construction for the Tanjong Pagar centre is expected to be completed by 2017. 

Average prime rents in Orchard Road dip as more retailers reduce physical outlets

Amid a sluggish retail market, average prime rents in Orchard Road dipped 0.5% quarter-on-quarter and 0.1% year-on-year, according to Knight Frank. The residential and commercial property consultancy said more retailers were reducing their physical outlets to cut costs, and this weakened demand for retail space has led to falling rents. Throughout Singapore, prime retail rents fell 2.2% from Q2-Q3 2016. 

Global Property News

Ontario remains open to foreign property investments

While federal cooling measures such as tighter mortgage eligibility have been introduced to stabilise the heated housing markets in Toronto and Vancouver, Ontario has said it has no plans to introduce additional measures. Officials in Vancouver believe that the city’s proximity to Asia has in part led to an increase in foreigners investing in residential properties, which has in turn resulted in growth in the market. However, Ontario wants to conduct more analysis to determine if foreign buyers are the cause of growth in Toronto’s housing market as well. Charles Sousa, Canada’s Finance Minister, said that Canada is proud to be a top destination for foreign direct investment and that he believes increased interest in investing in Ontario is beneficial to job creation as well as economic growth and development.

More choose to rent rather than buy luxury homes in central London 

Buyers and sellers of luxury homes in London have adopted a wait-and-see approach due to the uncertainty regarding residential property prices. The uncertainty is caused by Brexit and the tax surcharge on investment properties implemented earlier this year. More homeowners are instead choosing to put up their homes for rent, and there is an increase in people looking to rent residential property. The rental market has become more active as a result, with rental prices increasing. Tom Bill, Head of Residential Research for Knight Frank, said the number of new rental properties in the market increased 44% between August 2015 and August 2016, and rental agreements increased 34% in September 2016 compared to the same period last year.  According to RICS Chief Economist Simon Rubinsohn, buyers seem to be slowly returning to the housing market. Brexit has weakened the sterling pound, and this has led to greater demand for prime London property among foreign buyers. According to residential data provider LonRes, buyers whose currencies are pegged to the US dollar, such as Hong Kong and Singapore, will find property in central London the most affordable since 2012 due to favourable exchange rates. 

Chinese authorities impose restrictions to control housing market bubble

Chinese property shares experienced their biggest slide in five weeks after restrictions were implemented in approximately 20 Chinese cities to curb further property price inflation. Home prices in China started increasing after the government eased restrictions on property purchases in 2015. In a bid to mitigate a price bubble, authorities in China’s tier one and two cities, such as Nanjing, Shenzhen, and Fuzhou have introduced measures including mortgage restrictions and down-payment policies. According to Shanghai Uwin Real Estate Information Services Co, month-on-month sale of new homes in Shanghai slid 44.5 per cent in September even though home prices climbed 5.1 per cent during the same time period. Jingyi Pan, strategist at IG Asia Pte Ltd, suggested that the objective of Chinese authorities is to control price surges, and not to cause prices to plunge. As such, property prices might still increase, but at a slower rate. 

Opportunities for US property investors 

U.S. investors, mostly from more expensive coastal cities, are increasingly investing in out-of-state residential properties in suburban areas. Increase in rental prices coupled with lower cost of purchasing suburban residential properties in states such as Georgia, Tennessee, and Ohio make them an attractive source of income for investors. Out-of-state properties are far more affordable to purchase compared to housing in the home cities of investors. Anne Callahan, a property agent in Cleveland, Ohio, said that in the last 12 months she saw more cash buyers from California targeting non-coastal cities than in her 25-year career. According to data provider CoreLogic, the average landlord collecting rent from a single-family home in suburban Atlanta recovers 25.8% of the home price annually as compared to 3.4% in the San Francisco Bay Area where the median home price was US$675,000 in August 2016.