Week in Review – 15 July 2016

Local Property News

Experts predict bottoming out of home prices by 2018

Home prices could bottom out by 2018, before the property market sees a slow recovery, said industry experts at a property market seminar organised by the Real Estate Developers’ Association (Redas) this week. Dr Chua Yang Liang, the Head of Research of Southeast Asia at Jones Lang LaSalle, told TODAY that the property market recovery is influenced by the economy and GDP growth, and the higher-end property market is expected to gain momentum when the economy improves.

Industry experts believe property cooling measures such as the Additional Buyer’s Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) will not be lifted this year, with the earliest prediction for the relaxation of cooling measures being in 2017. According to the URA, prices have since cooled 9.4 per cent through 11 quarters consecutively, from a previous hike of over 60 per cent from 2009 to an all-time high in Q3 2013.


Cushman & Wakefield: Brexit may boost prime home purchases by foreign investors

A Cushman & Wakefield report predicts that despite a slower economy and a housing glut, more foreign investors could be keen on Singapore’s prime residential property due to the lower interest rates post-Brexit. As investors flee from the unstable UK real estate market, Singapore is likely to be the choice investment destination, as the country’s prime residential property market is viewed internationally as an investment safe haven. According to the report, however, Singapore’s commercial property market might not benefit from the increased demand from foreigners for local residential property, as global businesses have a conservative view of the future, biding their time to see what impacts Brexit will have on their business operations. Furthermore, there is a projected oversupply of commercial spaces due for completion over the next two years.

More prime homes going under the hammer

In Q2 2016, seven properties, of which six were residential, were sold at auctions for a total value of S$14.81 million, according to data by Jones Lang LaSalle. This was a 152 per cent quarter-on-quarter increase where six properties, including one residential property, were auctioned for a total value of S$5.88 million. This quarter’s auction value also more than doubled the S$6.8 million recorded in Q2 2015. Three of the seven properties auctioned were sold between S$2.92 million and S$3.9 million, above the average price of S$1 million to S$1.5 million paid by home buyers. These three units were sold at prices far below their previous purchase price. An example was a Sentosa Cove unit at Turquoise condominium, which was sold at S$2.92 million, almost 50 per cent lower compared to the S$5.46 million it was purchased for in 2007. Another was a Marine Parade unit at the Silversea condominium, sold for S$3.9 million, 18 per cent below its previous price of S$4.78 million in 2012. Bogged by the slowing economy, uncertainty in the property market, and stock market volatility, luxury and large units have been put up for mortgagee sales by banks after previous owners were unable to service their housing loans.

The prime property glut and property cooling implementations have dimmed the sale and rental prospects of such homes. As a result, investors and home owners have to resort to putting their homes up for auction. This is apparent as 32 of 69 non-landed homes put up for sale to date this year were large units with floor areas larger than 1,500 sq ft (square feet), according to Colliers International. Of these 32 homes, 13 were in districts 9, 10, and 11 – where foreigners usually make up the bulk of demand. Ms Grace Ng, the Head of Auction and Sales of Colliers International, told TODAY that homeowners were struggling to find tenants with monthly rents that matches their mortgages, and as a result those who owned more than one property were more prone to defaulting their loans. Ms Mok Sze Sze, Head of Auctions at JLL, predicts more mortgagee sales in the second half of the year, as well as on the commercial front, due to global economic uncertainty.


Two-fold oversubscription of Treasure Crest EC

Treasure Crest executive condominium (EC), a 503-unit project, attracted 1,077 online applications– more than double of the units available, according to Sim Lian Group. Most applicants were drawn by larger units like the three-bedroom premium and four-bedroom offerings. Almost half (48 per cent) were first-time home buyers, and the rest was made up of buyers looking for a housing upgrade. Treasure Crest had one of the lowest-per-square-foot average selling prices for an EC at S$742 psf, according to Sim Lian Group. The development includes 84 three-bedroom units, 364 three-bedroom premium units, and 56 four-bedroom units, ranging between 958 and 1,345 square feet. The lowest price for a home – a three-bedroom apartment – started at S$649,000. Ballot and booking for Treasure Crest units is slated for July 16 at its sales gallery.


URA seeking plans to turn Jurong Lake District into Singapore’s next CBD

The Urban Redevelopment Authority (URA) launched a Request for Proposals to transform Jurong Lake District into Singapore’s next Central Business District (CBD). The plans are for a 24/7 work and retail hub that also includes residential and recreational options. Developments including the upcoming Kuala Lumpur-Singapore High-Speed Rail (HSR) terminus, new Science Centres, Jurong Lake Gardens, and the former Jurong Town Hall building will define the future hub. The public transport share of this district is expected to be higher than the national aim of 75 per cent by 2030, and the car-lite hub will see traffic improvements aided by the upcoming Jurong Region Line and Cross-Island Line, together with the existing North-South and East-West MRT lines.

Mr Colin Tan, Director of Research and Consultancy of Suntec Real Estate Consultants, told TODAY that the HSR combined with round-the-clock facilities will help differentiate the area from other business hubs and warned against having Jurong become a duplicate of Raffles Place. He also mentioned that Jurong is in a more favourable position to become the next business hub than Tampines, a region that was previously marked for business development. Jurong has a healthier mix of developments, ranging from residences, retail, and hotels.


Prime office rents continue decline

Prime office spaces in Singapore’s central business district declined 1.1 per cent to S$8.86 psf (per square foot) per month in Q2 2016, the fifth consecutive quarter of price drops, according to a Cushman & Wakefield report. Rents in Marina Bay area and Raffles Place fell 1.4 per cent to S$9.56 psf per month and 2 per cent to S$9.13 psf per month respectively. Despite falling rents, there was a slight increase in office leasing in the same quarter, such as in Marine One with a pre-commitment rate of 30 per cent through 550,000 sq ft of leasing, and a similar rate through 20,000 sq ft in Guoco Tower.

The falling prime office rentals have been seen as opportunities for businesses to take advantage of lower rents and better-quality offers, according to a CBRE Research report, as the recent lease acquisitions were mainly in newer commercial developments. The current vacancy levels of 5.9 per cent are projected by CBRE Research to increase over the next three quarters as new developments enter the commercial property market, including Marina One, Guoco Tower, and DUO Tower. Rents are expected to continue decreasing with 3.3 million sq ft of office lots due to enter the market by end of 2016.


Global Property News

Asian investors sustain interest in UK property post-Brexit

In the week after the referendum vote, London prime property sales surged 38 per cent week-on-week; it was also 29 per cent higher than the month before, according to Knight Frank. Global investors with dollar-based currencies were incentivised as the sterling fell approximately 15 per cent against the dollar. According to CBRE Research, Asian investors accounted for 19 per cent of London property deals in 2015, worth £20.5 billion in value. Their interest has not waned as London is still likely to remain a fundamental global financial hub, said Mr Goodwin Gar, Chairman and Managing Director of Gaw Capital Partners, according to Reuters. Certain prominent Asian property investors like Chinese Fosun Group and Singapore’s GIC have indicated their intention to stick with Britain. Mr Lee Kok Sun, Chief Investment Officer of Real Estate of GIC, told Reuters that the company has a long-term outlook for their investment destinations.

Despite an increase in interest and transactions, Liam Bailey, Global Head of Research for Knight Frank, told CNBC that data shows sales were still 10 per cent lower than a year ago, and that sales are projected to stall in July and August. Not all London-based property investors are optimistic either; some buyers of London commercial property are invoking their “Brexit clauses” previously drafted into contracts, according to property lawyers and dealers. Others have not yet invoked such clauses but are leveraging on them to get discounts on their purchases. Yet another group is buying time to observe the extended effects of Brexit.


Indonesia plans emergency law to attract foreign investments in property sector

According to Luhut Pandjaitan, Indonesia’s Coordinating Minister for Political, Legal and Security Affairs, Indonesia intends to put in place an emergency law (perppu) to bypass current laws making it difficult for foreigners to purchase Indonesian property. Currently, Indonesia’s 1960 Agrarian Law stipulates that foreigners cannot own homes in Indonesia. According to Indonesia’s constitution, the President has the right to issue an emergency law to tackle any emergency situation, which comes into effect as soon as it is signed by the President. The emergency law can remain effective or be terminated within the year of issue, depending on Parliament’s decision. According to Minister Luhut, the emergency law allowing foreigners to purchase Indonesian homes is part of four or five emergency laws aimed to be introduced by August to tackle government reform obstacles.


More rental options for tenants in New York

A report by appraiser Miller Samuel and broker Douglas Elliman Real Estate shows that new flat leases in Manhattan reached 5,203 in June, its first increase since 2012 and a jump of 34 per cent year-on-year. Mr Jonathan Miller, the President of Miller Samuel, told Bloomberg that median rents in New York have increased 21 per cent in the last seven years and tenants are seeking alternative options in other locations. Tenants are aided by a new influx of housing listings with a total of 7,442 apartments put up for rent in June, an annual increase of 27 per cent. The increase in choices has led to landlords granting concessions in almost 10 per cent of all new leases, the highest for the month of June, compared to the past five years of data collection. Concessions included an average discount of two per cent off monthly rents, compared to a 1.1 per cent discount given last year. The median monthly rent before any concessions was US$3,444.

Meanwhile, US residential loans slipped in June, according to Mortgage Bankers Association (MBA). The mortgage credit available index of the Washington-based group fell by 1.3 per cent to 119.8 points, after investors discontinued some adjustable-rate mortgages – a sign that lending standards are tightening.


Malaysia’s property market sees sign of recovery

Malaysia’s property market saw signs of recovery in May, with an increase in the number of loans applied for the purchase of property at Bank Negara Malaysia reaching RM25.79 billion, a two per cent year-on-year increase and five per cent month-on-month. The first rise in 16 months was the only bright sign against the backdrop of applied loans for the cumulative first five months of 2016 being six per cent lower year-on-year compared to the cumulative first five months of 2015, said MIDF Research in a report. Nevertheless, the actual value of approved loans for purchase of property was an annual 13 per cent short of the previous year’s RM9.91 billion, hinting that tighter lending practices could be hindering property demand’s recovery.

Meanwhile, Malaysia’s property market transaction value in Q1 2016 fell 18 per cent year-on-year to RM32 billion, according to a Property Market Report by National Property Information Centre. A further breakdown shows a fall of 11 per cent for transaction value of properties below RM500,000 in the same period of time. Transaction values of properties worth between RM500,000 and RM1 million, as well as properties worth RM1 million and above, fell by 23 per cent and 20 per cent respectively. This shows that current demand is skewed towards more affordable housing of below RM500,000.

Survey: Australian consumers’ confidence in domestic property slips 1.8% in July

Amidst Britain and Australia’s domestic political uncertainty, Australian consumer sentiment slipped three per cent in July after a one per cent decline in June, according to a Melbourne Institute and Westpac Bank survey of 1,200 consumers. Despite the drop, the survey index was still 7.4 per cent higher than it was a year ago, as 99.1. Sentiments on the economic outlook for the year ahead declined 6.1 per cent. Meanwhile, a 1.8 per cent slide in consumer confidence in property purchasing was recorded as consumers brace themselves for rising home prices. 

Hong Kong, Luxembourg, and Sydney recognised as favourable locations for lifestyle 

According to Knight Frank’s Global Lifestyle Review, which examined the suitability of different lifestyles in 26 tax-efficient destinations, Hong Kong, Luxembourg, and Sydney topped the list of cities for the best places for entrepreneurs, families, and retirees, respectively. London was ranked second after Hong Kong, while Singapore came in eighth place for best places for entrepreneurs to stay, ranked by factors such as Mercer’s political risk ranking. Meanwhile, Luxembourg and Vienna were listed the top two best locations for families determined by the number of international schools and Mercer’s personal safety ranking. Sydney and Malta came out on top for retirees for its high quality of life and lower annual cost of healthcare.