Week in Review – 2 December 2016

Local Property News 

Iras announces home owners can expect lower property taxes in 2017


The Inland Revenue Authority of Singapore (Iras) announced that Housing Development Board (HDB) flat owners can expect lower or no property tax in 2017, applicable to owners of one-, two- and some three-room flats. Some three-room flat owners will be taxed S$18.50 in 2017, 51 per cent lower than 2016. For owners of four-room flats, five-room flats, as well as executive flats, taxes will range between S$52 and S$143.20. Property taxes for these owners will be 14.1 per cent to 20.6 per cent lower in 2017 compared to 2016. For private residential property owners, their property tax for 2017 will either be lower or unchanged.



NUS SRPI shows stronger demand for centrally located properties


The NUS Singapore Residential Price Index (SRPI) for October remains flat. A 0.3 per cent dip for non-central units was mitigated by increases for central units and small units, which rose 0.2 per cent and 0.1 per cent respectively. According to Eugene Lim, Key Executive Officer at ERA Realty Network, interest in purchasing centrally located properties remains keen in spite of the softer employment market and economy, with investors believing these properties are likely to see stronger long-run price increases compared to properties located outside the central area. He believes it is unlikely property prices will see a quick recovery in the short run as economic growth is currently weak.



URA releases Perumal Road and Toh Tuck Road sites for sale under GLS Programme


The Urban Redevelopment Authority (URA) announced the release of two residential sites, with 99-year leasehold, for sale under the H2 2016 Government Land Sales (GLS) programme. The Perumal Road site has a land area of 3,847.8 sqm, with maximum permissible gross floor area (GFA) of 173,955 sq ft. The Toh Tuck Road site has a land area of 18,721.4 sqm, with a maximum permissible GFA of 282,122 sq ft. According to Mr Nicholas Mak, Head of Research & Consultancy Department at SLP International Property Consultants, the Perumal Road site will see keen interest from developers despite weak sentiment in the residential property market, with its proximity to Farrer Park MRT Station and no mass-market condominium project launches in the area. However, the Toh Tuck Road site, which is under the Reserve List, is unlikely to be triggered for tender within the next year as it is not as attractive as other sites in the GLS programme. The Toh Tuck site is designated for low-rise developments and residential developments in the area have freehold land tenure. Reserve List sites are only triggered for public tender when a developer agrees to commit an acceptable minimum price to the land sale authorities.



CapitaLand Commercial Trust predicts office rents to pick up only towards the end of 2017


CapitaLand Commercial Trust foresees weak demand for office space to continue, with rents to pick up towards the end of 2017. Lynette Leong, Chief Executive Officer of CapitaLand Commercial Trust, noted that the weak demand for offices resulted from the strong supply of new office space; the approximately 2.3 million sqf of office space introduced in 2016 resulted in about a 15 per cent decline in rents. According to the Urban Redevelopment Authority, office rents in the Central area have been sliding since Q1 2015. Moreover, Ms Leong said that with less than 1 million sqf of office spaces will be introduced during 2018-2019, and with no projects planned from 2020, office rents would rebound by end 2017.


Global Property News


Property prices in the UK likely to stagnate in 2017, with rents expected to increase


According to Stacks Property Search and Acquisition, a property search specialist in the UK, property prices in the UK will most likely stagnate in 2017. Managing Director Sara Ransom believes that property in London, where prices have fallen about 20 per cent recently, will be attractive to American and European investors, especially with Trump’s election victory. Furthermore, European countries such as Italy, France and Germany are possibly facing turbulence in upcoming elections. Regional Director Sally Fraser expects property in the countryside to see greater demand. With the property market in London having reached a plateau, and prices in the countryside being priced relatively well compared to London, Londoners might have greater incentive to move to the country with good schools and healthier lifestyles. The rental market can expect to see prices increase, particularly for student accommodations in university towns and cities.



Foreign buyers re-entering Vancouver housing market


Data from the provincial Finance Ministry showed that in October 2016, foreign buyers accounted for 3 per cent of home transactions in Vancouver’s metro area, an increase from the 1.4 per cent and 1.8 per cent in August and September 2016 respectively. In the period from June to July 2016, prior to the introduction of a 15 per cent tax on foreign transfers, foreign buyers accounted for approximately 13.2 per cent of home transactions. Moreover, economists and real estate agents attributed the sharp drop in foreign purchases between July and August 2016 to many property transactions being advanced earlier to avoid the tax. Michael De Jong, Finance Minister of the British Columbia province, said that “Foreign purchases are re-emerging to a limited degree”. Jamie Edwardson, spokesperson for the Finance Ministry, stated that the percentage of foreign buyers would be steady at approximately four to five per cent.



Prices of Australian homes continue to rise in November 2016


In November, average home prices across Australia continued the month-on-month growth seen since December 2015. Although Property Consultant CoreLogic found that price growth slowed to 0.2 per cent in November 2016, down from 0.5 per cent in October 2016 among Australia’s capital cities, the year-on-year increase in home prices accelerated to 9.3 per cent in November 2016 compared to 7.5 per cent in October 2016. In November 2016, the dwelling values in capital cities also increased 0.2 per cent. Data from CoreLogic showed that in November 2016, year-on-year prices for homes in Sydney, Melbourne, Brisbane and Adelaide increased 13.1 per cent, 11.3 per cent, 3.9 per cent, and 4.7 per cent respectively, while those in Perth declined 3.4 per cent.



Residential property prices in US reaches new peak with market outlook remaining strong


According to the S&P CoreLogic Case-Shiller National Index, residential property prices in the US  reached a new peak in September 2016 – a 5.5 per cent year-on-year increase and a 5.1 per cent increase compared to August 2016. The previous peak was recorded in July 2006 at the apex of the country’s housing boom. According to David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, while home prices for seven of 20 cities have surpassed their previous peaks, home prices in Miami, Tampa, Phoenix and Las Vegas are still a distance away from their all-time highs. Prospects of the housing market remain strong, with sales of existing and new homes increasing while the annual rate of housing starts reached its post-recession peak of 1.3 million units.



Sudden hike in US mortgage rates surprises homebuyers

Following Donald Trump’s election as president on 8 November 2016, average US mortgage rates rose 0.5 per cent to four per cent, the highest since July 2015. The sudden hike in mortgage rates stemmed from expectations that the president-elect would reduce taxes, boost corporate profits, and invest in improving the country’s infrastructure, hence increasing the value of homes. Prior to that, homebuyers enjoyed low interest rates due to a stronger demand for mortgage based securities. Glenn Kelman, Chief Executive of Online Real Estate Brokerage, Redfin, said the company, which had previously predicted 30-year fixed mortgage rates to be capped at 4 per cent through 2017, now believes these mortgage rates will rise above 4 per cent.