Week in Review – 15 April 2016

Local Property News
MND increases budget to improve old estates
The Ministry of National Development (MND) has announced plans to increase expenditure for this financial year to S$3.8 billion, up 38.7 per cent compared to the S$2.74 billion spent the previous year. The additional budget will be used to revamp old towns and to develop new towns.  Pasir Ris, Woodlands and Toa Payoh Town Centres, that are more than 30 years old, will benefit from the Ministry’s increased expenditure. Upgrades to these towns include improved transportation and enhancements to the town centre infrastructure.

Families with young children can seek aid with launch of Fresh Start Housing Scheme by end 2016
MND will launch the Fresh Start Housing Scheme by the end of this year. The scheme looks to help families with young children who stay in rented homes to achieve home ownership. Families purchasing houses under the Fresh Start Housing Scheme will be mandated to stay in their new flats for a minimum of 20 years – a requirement to ensure that young children can grow up in a stable environment. These families will also be given up to S$35,000 under the Fresh Start Housing Grant. All applicants under this scheme will enjoy at least S$20,000 in grants, with the subsequent S$15,000 given under a pro-rated basis, depending on the lease period of flat purchased.

Minister of National Development: not time for easing of property cooling measures
New home supply has increased over the past few years in Singapore to ease pent up demand. The government however, is wary that excessive supply of public housing will have potential repercussions on home prices. As such, Minister of National Development (MND), Mr Lawrence Wong highlighted that MND plans to gradually reduce supply of new units over the medium term to ensure market sustainability. In his Parliament speech, Mr Wong also reiterated that cooling measures will not be eased any time soon. He warned that premature tweaks to the property market might lead to a market rebound. 

Luxury residential property prices rise in Q1 2016; unlikely to continue
Luxury residential property prices in Singapore saw an uptrend in Q1 2016 – the first time in the last three years. This uptrend may not continue according to a report released by Jefferies Singapore. Jeffries Singapore added that one-off transactions were primary contributors to the rise in average transaction size in Q1 2016. Currently, within the Core Central Region (CCR), there are approximately 25,000 units with Qualifying Certificate deadlines fast approaching. Due to this, prices might be adjusted causing an anticipated slide in luxury property prices.

Global Property News

Chinese investors double investments into Australia’s real estate
In the financial year ending 30 June 2015, Australia saw Chinese investment into its real estate increase to US$18 billion, which is double of the previous year. According to Australia’s Foreign Investment Review Board (FIRB) report, China’s investments were three times greater than that of the United States (US) and six times that of Singapore, making China the largest investors in Australia’s real estate. After China, the next biggest investors were from the US and Singapore, with FIRB approved investments of US$5 billion and US$3 billion respectively. In the same period of time, total foreign investment into Australia’s property market increased 75 per cent to US$60.75 billion. 
While the influx of Chinese investments into Australian real estate has helped the Australian economy ward off recession due to a slowdown in mining, the Australian government started cracking down on illegal homeownership in 2015, forcing residential property owners to put property acquired illegally up for sale. In Australia, foreign investors are only allowed to purchase new dwellings.
Uncertainty in UK might lead to softer housing market
Developers in central London have started to offer up to 20 per cent discounts for investors purchasing in bulk (100 or more luxury apartments). This is a result of weaker demand from foreign investors as increased purchase taxes have made luxury apartments in the country less desirable for foreign investors. Even as demand for luxury property is falling, a report by consulting firm Arcadis NV says there are up to 35,000 luxury properties planned for development in the next ten years. These developments are estimated to be worth up to US$147.5 billion.  
Foreign investors cautious of investing in the UK due to the pending referendum for the exit of the UK from the European Union (EU). In March 2016, home values in the UK averaged £214,811 (US$303,817), a 2.9 per cent increase year-on-year. However, leading mortgage lender Halifax believes that uncertainty regarding Britain’s future in the EU might cause the housing market’s growth to ease. David Green-Morgan, Research Director of Global Capital Markets at Jones Lang LaSalle said Asian investors have opted to stop and observe developments in the UK rather than actively invest. However, there are some investors enticed to invest due to a weaker pound.

US residential leases unlikely to increase soon as vacancy rates rise
US’s luxury rental market has softened, driven by excess supply. Extell Development Co has decided to sell 38 units of its One57 tower, a move away from their initial plan to lease these. These units will be sold as condominiums, at US$3.45 million onwards. According to a report by appraiser Miller Samule Inc as well as brokerage Douglas Eliman Real Estate, leasing prices of Manhattan’s luxury apartments have dipped 3.5 per cent year-on-year as of March 2016. Vacancy rates are 2.42 per cent higher during the same period, while rental yields have decreased, suggesting that prices in Manhattan’s leasing market is unlikely to increase in the short term, causing landlords to face stiffer competition.

Tech Cities, Florida sees strong luxury residential market performance
In the United States, Florida and cities with a high concentration of tech and innovation businesses have seen hikes in sale of homes valued above US$1 million. Austin, Texas, which is enjoying a technology and entertainment boom, saw home prices rise 32 per cent year-on-year according to Coldwell Banker. Florida remains a desired destination for buyers looking for luxury real estate. Data gathered from the Multiple Listing Service (MLS) for sales activity in 2015 also point that of the top 20 cities for luxury home sales, more than ten saw market activity increases. Across the country, luxury property sellers are able to transact around their asking prices, showing signs of strong demand.

Are foreigners to blame for Canada’s skyrocketing housing prices?
According to a report by the Canada Mortgage and Housing Corporation (CMHC), foreign investors who look to invest in Canada are more likely to go to Vancouver and Toronto.  
The objective of CMHC’s report was to determine how foreign investors have contributed to the rise in housing prices, beyond what local residents can afford. Luxury housing prices in Vancouver and Toronto have shown significant increases, attributed to foreign investment. Within Greater Toronto’s metropolitan area, non-residents own 7.4 per cent of the newer condos, whereas in the city centre, the same segment now owns 10.1 per cent of new condominiums. Foreign nationals also own six per cent of condos in metro Vancouver that were built in or after 2010. The report did not provide a breakdown of ownership figures in downtown Vancouver. If older homes are considered, 3.3 per cent and 3.5 per cent of all condos are owned by foreign nationals in metro Toronto and metro Vancouver respectively.