Falling Rents
1,736 HDB units and 3,758 private flats were rented in September, with rental volume increasing year-on-year by seven per cent and 17.7 per cent respectively. According to SRX, rents decreased by 0.1 per cent, 0.5 per cent and 2.8 per cent for HDB 3, 5 and executive room flats respectively. The only increase in public housing rent was registered by 4 room flats, up 1.1 per cent. Non-landed private residential unit rents dipped by 0.6 per cent and 1.3 per cent in the RCR and OCR respectively. Apartments in CCR registered an increase, up one per cent.
Non-landed private home resale transactions and prices fall
Following a revision of the income ceiling for executive condominiums (ECs), resale transactions of non-landed private homes dropped 4.7 per cent compared to September 2014. This broke the trend of ten consecutive months of year-on-year increases. SRX estimates that 446 non-landed private homes were resold in September 2015, while 468 units were sold in September 2014. September saw a 10.6 per cent dip when compared with sales from August of the same year. Resale prices for September 2015 also fell, by 1.2 per cent year-on-year.
Mr Eugene Lim, Key Executive Officer of property agency ERA, attributed the drop in transaction volume to fewer transactions in the Outside Central Region (OCR). Transaction numbers in OCR for September 2015 dropped 27.3 per cent compared to the previous month. This is the first year-on-year drop in resale transaction volume for 2015, which could be due to stiffer competition from ECs.
Due to cooling measures such as loan restrictions, Mr Wong Xian Yang of OrangeTee Research expects resale property prices to decrease by approximately two per cent for 2015, based on the SRX resale price index.
Mortgage rates expected to continue rising in 2016
Mortgage rates have been rising since 2015 and analysts expect further increases. Home buyers in Singapore were able to secure interest rates starting at 1.6 per cent in the first year at the beginning of 2015. According to the CEO of financial advisory firm SingCapital, Mr Alfred Chia, this figure has now risen to approximately two per cent for rates pegged according to the three-month Singapore
Interbank Offered Rate (SIBOR). SIBOR is a benchmark used by banks to set mortgage rates. As recent increases of the SIBOR have not reflected the interest rates homeowners are currently paying, mortgage brokers believe mortgage rates will soon increase. With Federal Reserve Rates expected to climb, SIBOR is likely to follow suit. DBS estimates SIBOR’s current rate of 1.13 per cent will rise to 1.22 per cent by the end of 2015 and 1.75 per cent in twelve months. If home owners are concerned about being unable to service their home loans, founder of Get.com, Ms Grace Cheng, suggests considering fixed-rate packages to better weather interest rates fluctuations.
Possibility of short-term renting of private homes
Home-sharing company Airbnb is interested in working with the Urban Redevelopment Authority (URA) to come up with clear guidelines for short-term leases, hoping to help homeowners monetize their properties. Allowing only the lease of primary homes and a limit on the number of days for short-term rentals are possible measures. These guidelines are used in other countries, like France and the Netherlands. Airbnb’s Managing Director for South-east Asia and India said Singapore currently lacks a clear framework on short term renting. Singapore’s current property guidelines states that private residences are meant for stays of up to six months, and Housing Development Board (HDB) flat owners are restricted from subletting rooms or units to tourists for short-term accommodation.
The concept of home-sharing is gaining popularity, as it provides additional income to home owners. However, concerns over safety, privacy and noise have been highlighted. The URA conducted a public consultation in January this year, to gain feedback on short-term stays for private homes. Despite concluding the consultation process in February, URA is still reviewing the issue.
Five-year project-completion deadline signals changes for property developers
Property developers are running out of time with their five-year project-completion deadlines. Developers’ requests for government extension of the deadline were rejected. Market analysts believe developers might have to lower prices in order to survive market challenges. Maybank analyst Ms Kim Eng believes developers are concerned over the payment of duty with interest if they be unable to sell all their units within five years of purchasing the site. Looking at GLS sites sold after the ABSD was implemented, Ms Eng estimates 32 homes with project deadlines in 4Q 2016 to be left unsold. It is estimated that this will increase to more than 3,000 units in 2017.
The changes on the extension could further hurt small property developers. UOB Kay Hian estimates extension charges amounting to 13 to 21 per cent of smaller developers’ book value, while the bigger developers deal with a limited impact of two to seven per cent. UOB Kay Hian cited
CapitaLand and City Developments as examples of the limits on big developers, with a mere five per cent impact on their book values. On the other hand, small players such as Heeton Holdings and Sing Holdings were more adversely affected, suffering a hit of 20.7 and 20.5 per cent of their book value.
Asia’s Property market trends
According to a survey conducted by YouGov, with respondents from Australia, China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand, 52 per cent of respondents hope to purchase a residential property in the next one to three years. Of this number, 33 per cent of them wish to purchase property outside of their home country. Destinations such as Australia (12 per cent), Malaysia (eight per cent) and Singapore (six per cent) were top choices for overseas property investment. More than half (54 per cent) of the respondents preferred funding their property purchase using their own savings, while 43 per cent see home mortgages as their preferred method of funding.
48 per cent of respondents do not plan to purchase a residential property in the next one to three years. For this group of respondents, affordability (46 per cent) and home ownership (23 per cent already solely/ partially own a property) were key contributing factors for their decision. Close to 80 per cent of the respondents currently assess home prices as unreasonable and are hoping government support can help to alleviate housing issues in their countries, either in the form of tax reductions or increase in amount of government housing subsidy.
Gold Coast’s next big property development
The development plan for Iluka, a 285-metre tower at the core of the Gold Coast’s Surfers Paradise has been approved. The 88-storey structure will become the tallest building in the area. Leading the AUD 1.2 billion (USD870 million) project is Chinese developer Forise Holdings, one of China’s biggest diversified financial holding companies. Forise Holdings estimates that the project will require four years to construct. Apart from being the tallest tower on the Gold Coast, Iluka will also be the biggest residential building in Australia with five-star Green Star accreditation. This is owing to the building process’ green credentials. The mayor of the Gold Coast, Tom Tate said in July that he believes that Iluka will be a world renowned cultural icon that enhances the skyline of the Gold Coast.
Singha’s luxury residential condo project
Singha Estate, the real estate arm of brewing giant Boon Rawd Brewery (manufacturer of Singha brand) has launched its first residential project. The 55-storey luxury condominium named Esse Asoke will be the tallest building in the area, occupying approximately three rais of the land of the former Singha Beer House in central Sukumvit, and is expected to be completed in Q4 2018. Near BTS Asoke and MRT Sukhumvit stations, the property is built on prime location. Singha Director and Chief Residential Development Officer Nattavuth Mathayomchan expects 80 per cent of the buyers to be Thai, and 20 per cent to be foreign investors. The Esse Asoke promises residents a vibrant and lively lifestyle with almost a third of the land area dedicated to a common green space. Singha Corporation will also issue buyers the S Club Card, a high-society privilege card for the corporation’s products and services encompassing restaurants, hotels, gold courses and shops.
Demand has far surpassed supply in the UK’s property market; this together with low interest rates have pushed home prices to new extremes. The supply of new houses in London and South East England was at its lowest in September in the period since the financial crisis. Supply was down by 74 per cent and 67 per cent respectively when compared to September 2007. To solve supply issues, local authorities in the UK must produce plans for new housing properties by 2017, as the government is trying to increase home ownership and house-building. The government aims to encourage one million new homes by 2020. The Royal Institution of Chartered Surveyors (RICS) has warned that the situation of Britain’s acute property shortage is expected to worsen, and prices may rise by 6 per cent in 2015 due to supply and demand imbalance. The British Prime Minister David
Cameron is seeking to address the issue by having funds made available to councils to aid construction of affordable “starter homes” on brown-field sites. In addition, planning permissions and regulations will be further relaxed. A temporary rule introduced in May 2013 to allow disused offices to be converted into homes without planning permission would be made permanent. RICS head of Policy and Parliamentary Affairs, Jeremy Blackburn, welcomes these measures, and believes swift implementation is necessary in order “deliver the vibrant property sector on which the success of our economy depends”.
Foreign exchange strategist at TMS Brokers, Konrad Bialas, estimates that the Australian dollar will end 2015 at 69 US cents, and will recover to 71 US cents in Q4 2016. He believes that the Australian dollar will be at its lowest in 2Q 2016, at 68 US cents. Following that, he expects the Reserve Bank of Australia (RBA) to tighten monetary policies. A brighter outlook in the commodity sector may push the Australian dollar to 71 US cents in December 2016.
Apart from currency woes, warning signs are surfacing for Sydney’s property market. The Goldman Sachs Group Inc. and regulators are now cautioning that the market is overheated. The Australia & New Zealand Banking Group forecasts a five per cent increase on residential prices in the next year. However, analysts from the Bank of America Merrill Lynch and Macquarie Group expect a drop in property prices due to increases in supply and weak population growth. Philip Lowe, Reserve Bank of Australia’s deputy governor advised people to be cautious. While the number of home loans is at its lowest in 50 years, households have been increasing their mortgage risks due to higher loans. Regulators have tightened money lending to investors to prevent short term buying and selling of properties.
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