Week in Review – 16 September 2016

Local Property News
URA tweaks methodology for calculation of property price indices 
The Real Estate Developers’ Association of Singapore (Redas) has announced that the Urban Redevelopment Authority (URA) is changing the methodology used to calculate private-property price indices. Starting from September 2016, delicensed projects – projects that have completed construction with individual strata titles issued to property buyers – will have to submit their net prices rather than their overall transacted price. Developers of licensed projects have been regulated to provide the same information since May 2015. This change takes into account discounts and incentives provided by developers. Prior to the change delicensed projects were not expected to provide sales data, such as a breakdown of incentives provided to buyers. As a result, quarterly indices calculated by the URA might have provided inflated prices since it does not factor in benefits offered by developers. 
According to a URA spokesperson, the amendment is aimed at ensuring that the property price index reflects property price movements more accurately. However analysts that TODAY spoke to, including OrangeTee’s Head of Research and Consultancy, Mr Wong Xian Yang and Chief Executive of Century 21 Mr Ku Swee Yong, said that the tweaks will unlikely have a big impact on the overall index. Mr Wong mentioned that in Q2 2016, delicensed private home transactions made up approximately 27 per cent of total resales (599 transactions) in the Core Central Region (CCR), representing a small percentage of the 4,550 units sold in the combined primary and secondary markets in the quarter. Mr Ku added that it is still beneficial for the public to have access to net prices in order to make better-informed decisions.

Singapore’s luxury property market sees greater interest from Indonesians 
Demand for Singapore’s luxury residential units from wealthy Indonesians has seen a surprising increase. From the start of the year to August, Indonesian nationals purchased 30 homes priced at S$5 million or higher, an increase of almost four times the eight transactions registered in 2015. According to Cushman & Wakefield Inc, Indonesians purchased 189 properties of varying price groups in H1 2016, a 23 per cent year-on-year increase. Property agents believe the surge in purchase activity matches a recently passed law in Indonesia, providing tax amnesty for tax evaders to declare their past income. Indonesians are purchasing property in Singapore to evade the authorities, hoping that the implementation of new global tax reporting requirements by Singapore will require the country to report on assets held in banks and not other investments such as real estate.
Not all Indonesians purchased residential property in Singapore to evade taxes. Some buyers see the value of investing in Singapore’s prime property areas as property prices, especially for units along Orchard Road, reached a low at the end of 2015,. According to Propnex Realty, a company handling sales for OUE Twin Peaks development located along Orchard Road, the developer sold close to half the 86 units in the first batch at approximately S$4 million, with Indonesians accounting for the majority of transactions made by foreigners. 
HDB reveals Masterplan for Tengah estate featuring Singapore’s first car-free town centre
The Masterplan for the Housing Development Board’s (HDB) newest 700ha Tengah estate, approximately the size of Bishan, was announced by Minister for National Development Lawrence Wong on 8th September. The Tengah estate, dubbed as the “Forest Town”, will have Singapore’s first car-free town centre allowing residents to get closer to nature. The first batch of HDB units is expected to be launched starting 2018, and the entire estate is slated to be completely developed in 20 years. This estate has the potential to house approximately 42,000 new homes spread over five housing districts – Plantation, Park, Garden, Brickland, and Forest Hill, with roughly 70 per cent made up of public housing. These districts will be designed according to each town’s identity. The Plantation District will be the first to be developed, and will feature a community farmway that stretches across housing precincts, as well as space for community gardening and urban farming. 
The HDB plans to construct an East-West corridor through the town, integrating with town greenery as well as certain existing vegetation, after conducting environmental, topological and hydrological studies on the area. Roads will be constructed beneath the town centre, with vehicles running underground. Once the estate reaches critical mass, the town centre will be car-free.

Tenants opt for newer, bigger and cheaper office developments
According to a Knight Frank LLP-compiled report, rents for offices situated on higher levels of Singapore’s skyscrapers dipped seven per cent in H1 2016 to S$775 per square meter. Older Grade A office buildings are feeling the pressure from newer, larger office spaces available at lower rents. Vijay Natarajan, a RHB analyst, said newer prime office projects such as Guoco Tower and Marina One have secured higher pre-commitment levels of more than 70 per cent and 35 per cent respectively.
However, Natarajan noted that the positive pickup rate for new office developments is the consequence of tenants shifting to capitalise on bigger and newer office spaces at a lower price. As a result, he expects older grade A office buildings to deal with the current trend through asset enhancement initiatives or by leveraging on the strong performance of office building transactions by putting the building for sale.

Singapore is Asia’s most sustainable city
The Sustainable Cities Index 2016 compiled by the UK’s Centre for Economic and Business Research (CEBR) for Arcadis, a design and consultancy firm, ranked Singapore as Asia’s most sustainable city and second globally, behind Zurich. The index analyses countries based on the three pillars of sustainability – social, environmental and economic. 32 indicators are categorised under the three sub-indices. According to Eugene Seah, Arcadis’ City Executive Director, all sectors in Singapore are looking for ways to be more sustainable. 
Despite being ranked highest in the economic and environmental sub-indices, Singapore is relatively poorly ranked in terms of the social sub-index. Singapore’s poor placement for the social sub-index stems from the country’s long working hours and high cost of living, according to Graham Kean, Asia-Pacific head of client solutions at Arcadis.
Global Property News
Sluggish growth in UK property prices; Europe’s distressed real estate assets 
Residential property prices in the United Kingdom (UK) showed a small increase in August. According to Acadata and LSL Property Services Plc, the price increase is a result of sluggish recovery following the UK’s  tax increase as well as the Brexit outcome. Reports from Acadata and LSL Property Services PLC show that on average, residential property prices increased 0.1 per cent to £292,921, matching the pace recorded the month before. Year-on-year, prices rose 4.3 per cent, the weakest price growth in three years. 
In Europe, distressed real estate assets are being cleared at a slower pace. According to Evercore Partners Inc, investors delayed clearing up soured loans and troubled assets due to concerns surrounding the Brexit vote. In the year to August, 24.4 billion Euros worth of soured and troubled assets were sold, 39 per cent less compared to the same time period in 2015, according to Evercore Partners Inc. However, Managing Director of Real Estate Portfolio Solutions at Evercore in London, Federico Montero, said real estate deals including loan sales might return to the market in H2 2016.

United States the most searched destination for international property investors; Manhattan’s rental market slows
The United States (US) is the most searched destination for international property buyers in August, grabbing top honours for the sixth time in eight months according to TheMoveChannel.com. The Top of the Props report by TheMoveChannel.com shows that the US attracted 8.1 per cent of all inquiries, jumping from third place in July to reclaim the top spot from Spain. Dan Johnson, Director of TheMoveChannel.com, explained that the strong demand for US property stems from the country’s residential property market offering strong capital appreciation complemented with low mortgage rates as well as stable employment growth with limited housing supply. Buyer interest was further fueled by weakening of the pound and euro against the US dollar due to Brexit. 
Despite greater interest in US residential property, apartments in New York saw zero rent growth in August, an indication that landlords’ ability to increase rents has waned. In August median monthly rent for an apartment was US$3,399, one dollar less compared to 2015. Furthermore, data provided by appraiser Miller Samuel In. and brokers Douglas Elliman Real Estate show that the number of rental listings increased 40 per cent compared to the year before. According to the President of Miller Samuel, Jonathan Miller, demand for rented apartment is still present. However, landlords are forced to give tenants more discounts to ensure their apartments do not end up empty as competition intensifies due to newly-constructed towers adding more supply to the market. At the end of August, Manhattan’s rental market had 7,478 rentals – the second-highest in a month since April 2009. A further 5,675 units will be added to Manhattan’s rental inventory according to Citi Habitats, and rental prices can be expected to further decrease as a result.

Slowdown in Malaysia property price growth as buyers face financing issues
In H1 2016, Malaysian property sales grew 13 per cent, 39 per cent less than the 52 per cent growth in H1 2015. The slower growth resulted from lower demand and end-financing issues faced by buyers. According to Datuk Seri FD Iskandar, President of Real Estate and Housing Developers’ Association, the number of first-time home buyers dipped 13 per cent in the first half of this year. He commented that while the property developers financing scheme aims to assist homebuyers facing financial issues, it is unlikely to be useful as the hefty interest rate ceiling of 12 per cent per annum for borrowers with collateral and 18 per cent per annum for borrowers without collateral will push away those who need help. While homebuilders have to seek financing to provide the loans, FD Iskandar suggests charging interest to only cover the cost of borrowing for homebuilders to ensure that those who require help can get it.

Transfer tax on non-Canadian buyers causes Vancouver’s market to shrink
According to Sothesby’s International Realty Canada, the number of property transactions in Vancouver of at least C$1 million plunged 65 per cent year-on-year in August after a 15 per cent transfer tax on property transactions by non-Canadian buyers was implemented by the city government on 2 August. On the other hand, the number of luxury residential units transacted in the suburbs of Toronto increased to 1,459 units, twice the number of transactions in the previous month. Sotheby’s said international investors are now moving their capital away from Vancouver to Toronto, and added that Montreal will see greater foreign investments. The newly-implemented tax had the greatest impact on the condominium market in Vancouver. Year-on-year, August sale of units priced at minimum of C$1 million dipped 49 per cent after increasing by 29 per cent in the 12 months to July. For residential units valued at C$4 million and above, the number of transactions in August reduced to 14 units, a 46 per cent dip. Toronto saw year-to-year transactions in August increase by 69 per cent, and the brokerage expects the luxury residential property market to perform the strongest among Canada’s cities.