Week in Review – 18 Sep 2015

REDAS voices concerns about property prices 
The Real Estate Developers’ Association of Singapore (REDAS) has continued to voice concerns about ongoing trends in the local property market. REDAS President Augustine Tan highlighted a potential housing market collapse, citing worsening economic sentiment, reduced sales and increase in supply as risk factors that might lead to downward spiralling of property prices. Mr Tan commented at the association’s Mid-Autumn Festival lunch on 16 September that the cooling measures need to be reviewed in view of global economic conditions being uncertain. “The property cooling measures were put in place in a period when quantitative easing and a flush of liquidity had fuelled record transactions and prices. Today, it is a very different picture,” he said. “The property market is clearly heading for a different phase, and there is an urgent need to think about how we can manage the exit so that there is a soft landing for the market…As Minister Khaw Boon Wan said, ‘Collapse of the housing market benefits no one’. This is the chief worry of developers and the many diverse stakeholders of the real estate ecosystem. The property cooling measures, in the current tone and intensity, could actually increase the risk to the real estate market and economy.” REDAS also indicated that the association is keen to join efforts with the Government to address the oncoming surplus of private residential homes. 
Government unlikely to lift property cooling measures
Following the results of the General Election, RHB has issued a report indicating that the government now has greater flexibility to implement less stringent property cooling measures and immigration policies. RHB analysts believe however that the government is unlikely to ease up on current policies. This speculation is based on the Property Price Index (PPI) that has declined a mere 3.7 per cent year on year, and a slide of 6.7 per cent from its 3Q13 peak. RHB reports that some ABSD (Additional Buyer’s Stamp Duty) cooling measures are likely to be lifted in 2016 only when islandwide property prices have fallen between 12-15 per cent.
Singapore remains attractive for property investment
Singapore ranks third on the Savills World Residential Investability Ranking, with the USA and United Arab Emirates ranking first and second respectively. The countries were selected as the best sites for property investment based on key demand variables such as population growth, wealth and economic growth, together with supply and price levels. Other factors considered in the Savills analysis include policies within the respective countries, as well as cultural sentiments. Singapore was the only Asian country ranked among the top ten countries. According to Savills, the country’s “prime market has been the one most favoured by international buyers while average mainstream property remains predominantly domestic”, commonly seen among high-end markets worldwide.
Singapore sees highest Sibor since 2008
Singapore’s core mortgage benchmark saw a hike on 14 September 2015 (Monday), to the highest level since 2008. According to data released by the Association of Banks in Singapore, the three month Sibor (Singapore Interbank Offered Rate) increased from 1.07483 per cent on Thursday (10 September 2015) to 1.13100 per cent on Monday. The rising interest rate could have an adverse impact on residential property owners, who are currently facing the problem of lower rents and resale values. 

Singapore sees a dip in number of property launches
With fewer property launches in Singapore, private home sales decreased 69.3 per cent in August. According to statistics published by the Urban Redevelopment Authority (URA), property developers managed to sell 495 new private homes in August; a reduction from July, when 1,611 units were sold. These numbers exclude executive condominiums (ECs). With the sale of ECs included, 961 units were sold in August as compared to 2,106 units in July. August saw the launch of 598 non-EC units, as compared to 1,468 in July. For numbers including EC units, 1,305 units were launched in August, a difference of more than 1,000 units compared to July’s launch of 2,623 units.  The sluggish market performance was also thought to be a result of developers focusing on launching units from existing projects. These projects included High Park Residences in Fernvale, North Park Residences in Yishun, and Corals at Keppel Bay. The top three selling projects were High Park Residences, Botanique at Bartley and Adana @ Thomson.

Europe’s new law impacts overseas property owners
New laws were introduced in Europe last month regarding wills that overseas property owners should take note of. A partner at Hunters, James Vernon-Miles does not expect any immediate impact on the demand for property in the UK as a result of the legal changes brought about by the Regulation (EU) No 650/2012 – commonly referred to as the Brussels IV Regulation, especially when the UK has opted out of it. He told OPP Today that foreign demand to purchase UK property is likely to remain driven by the standard of assets (whether as homes or investments), or as a result of work requirements. 
Vernon-Miles however emphasised for overseas property owners to review their wills and estate planning, bearing in mind the implications of the legislation. In Articles 21 of the Brussels IV, a new general rule was mentioned- “[u]nless otherwise provided for in this Regulation, the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death”. Prior to this law, British citizens habitually residing in Spain for instance would have had two wills; one for their property in the UK, and the other for their property in Spain. They should now update their wills to prevent their overseas property from being subjected to the forced inheritance rules of Spain. Article 22 mentions that “[a] person may choose as the law to govern his succession as a whole the law of the State whose nationality he possesses at the time of making the choice or at the time of death”. The selected choice of law must be made expressly within the will. Put simply, the rules now allow British citizens to make one will, with their express choice of English law. Such a will supersedes Spanish law, allowing British citizens to leave their UK and Spanish property to be considered under English inheritance law.
Property owners are also advised to seek professional legal opinion relevant to their individual circumstances.
Malaysia welcomes foreign investment in local properties
The weaker Malaysian ringgit presents investment benefits for the Malaysian property industry in the long run, on top of allowing foreigners to purchase Malaysian properties at a lower value. Chief Executive Datuk Seri Judin Abdul Karim of the Construction Industry Development Board (CIDB) explained that when foreigners invest in Malaysian properties, they are making a continuous commitment to the property industry, and that includes paying taxes. The Datuk further explained that as foreigners have to convert their money into ringgit when they want to purchase properties, there is no harm in property investment since the properties remain there. The Datuk also highlighted the need for the government to ensure sufficient affordable homes for the people nationwide even as foreigners are encouraged to invest in Malaysian property. A consistent policy is of paramount importance as a flip-flop in the market discourages investors.