Week in Review – 2 Oct 2015

iProperty Asia Property Market Sentiment Report H2 2015
The iProperty Asia Property Market Sentiment Report H2 2015, Asia’s largest consumer property sentiment survey, released on 1 October, sees purchase intent rising, along with an increase in budgets and expectations of relaxed cooling measures. 
43 per cent of respondents (up from 38 per cent in H1 2015) intend to buy within the next 12 months; 41 per cent (up from 40 per cent) intend to purchase within one to two years. Buyers have also increased budgets, with 56 per cent (up from 40 per cent) indicating a budget above S$800,001 and 20 per cent (up from 17 per cent) with a budget above S$1m. 75 per cent of respondents believe that cooling measures will be lifted within a year, while 90 per cent believe that will happen within the next 18 months.
URA and HDB flash estimates point to dipping property prices
Flash estimates released by the URA on 1 October 2015 revealed that the private residential property index dipped to 142.3 points in Q3 2015, a drop of 1.9 points (1.3 per cent), compared to Q2 2015.
Non-landed private residential property prices fell across all market segments. Prices in the Core Central Region (CCR), Rest of Central Region (RCR), and Outside Central Region (OCR) declined by 1.3 per cent, 1.5 per cent and 1.6 per cent respectively, compared to the previous quarter.
Prices of Housing Development Board (HDB) resale flats fell as well. According to HDB flash estimates, the resale price index saw a 0.3 per cent decline in Q3 2015. The decline has slowed down in comparison to the 0.4 per cent decline seen in Q2 2015.
Auctioning on the rise
According to JLL, Q3 2015 saw seven residential properties out of ten being sold at auctions, all of which were mortgagee listings. Auctioned homes fetched better prices this quarter, with residential sales reaching S$13.62 million compared to S$6.83 million in Q2 2015. All ten properties were successfully auctioned at their first appearance, a marked improvement compared to Q2 2015, when only half of the properties were successfully sold at their first appearance. Many required multiple relisting before being sold. 
Developers must now ensure showflats accurately represent units for sale
Recent rules implemented by the URA dictate developers ensure their showflats are accurate representations of units up for sale before they open them for viewing. This will apply to all showflats built after 20th July, 2015. According to URA, spot checks will be conducted by the Controller of Housing to ensure developers abide by the rules. Projects first to be affected by the new rules include Criterion EC and Signature@Yishun. Developers of The Criterion executive condominium (EC) at Yishun have incorporated measures, such as labels specifying position and thickness of removed walls, and lists including materials, finishes and fittings. According to the URA, developers who fail to comply with new rules can have their licenses suspended or revoked. They might also be fined up to S$5,000, face a jail term of no more than 6 months, or both. 
BNP Paribas: Weaker foreign demand in Singapore’s housing market
BNP Paribas has reported a drop in foreign purchases in Singapore’s property market in 2015 compared to 2013 and 2014, citing three factors for the weaker demand: the weakening of currencies such as the Malaysia Ringgit (MYR), Indonesia Rupiah (IDR) and Renminbi (RMB); the 15 per cent Additional Buyer’s Stamp Duty (ABSD) for foreign buyers; and tighter immigration policy restricting foreign employees. Foreign buying decreased from 11.3 per cent in Q1 2014, to 7.6 per cent in Q1 2015. China was Singapore’s top foreign buyer, ahead of Malaysia and Indonesia. With weaker foreign demand, the housing market needs to seek local support. However, BNP Paribas believes local buyer demand is unable to provide relief, considering demand is dwindling with credit tightening measures, and rising interest rates. 
Signature at Yishun the first EC to be launched after the qualifying income ceiling adjustment
Signature at Yishun, an executive condominium (EC) project, was launched on 26 September, the first EC launch since the qualifying income ceiling was raised from S$12,000 to S$14,000. The project’s developer, JBE Holdings told Channel NewsAsia that 20 per cent of the units were sold by 5pm on the launch date. JBE Holdings CEO Patrick Lam remarked that an estimated 20 per cent of sales were made by buyers with incomes above S$12,000. The project received 507 applications online and out of the 525-units on offer, most that were sold were three and four room units. Prices are approximately S$750 per square foot (psf), lower in comparison to other ECs, with an average of S$800 psf.
BNP Paribas Report: Housing market heading towards oversupply, but prices unlikely to drop
BNP Paribas has suggested in a recent report that costs of residential property have not dipped significantly despite cooling measures, as developers are reluctant to lower prices due to the high cost at which land was acquired. Land has been acquired in recent years at S$400 to S$800 psf. 
Prices remain elevated to ensure developer profits. BNP Paribas’ report also suggests Singapore’s housing market might face oversupply from 2016 due to lower demand, including oversupply of residential property, tight immigration policies and rising interest rates. Prices are expected to hit the lowest point in 2018/2019. Analyst Chong Kang Ho believes the base case scenario would see the oversupply at its worst in 2020 before the situation improves. With proactive supply cuts and no external shocks, BNP Paribas believes the current oversupply cycle will not have as negative an impact as the one between 1997 and 2006.
URA launches three residential sites under 2H2015 GLS Programme
The Urban Redevelopment Authority (URA) has released three sites for sale under the 2nd Half 2015 (2H2015) Government Land Sales (GLS) Programme.
A mixed development site at Alexandra View under the Confirmed List, and a residential site at Jalan Kandis under the Reserve List were launched for sale on 30 September. Both sites can yield approximately 515 residential units. 
Diverging views of Sydney’s property market
Sydney’s property market is currently one of the most expensive in the world. The situation is expected to change with an impending influx of supply. Goldman Sachs’ economists estimate a supply glut of 75,000 homes by 2017. Accompanying the increase in supply is dwindling demand. 
Median prices have recently reached a record high of AU$773,000 (US$544,000) and investors are being constrained by stricter lending requirements and lower yields. There are however, contradicting opinions. Other experts posit that housing in Sydney is undersupplied, and the new supply addresses this issue. Harley Dale, economist for the Housing Industry Association, says the record number of new houses built this year is progress on solving housing shortages. He believes that at least 60,000 houses have to be built yearly in New South Wales for the next two years before the problem of housing shortages can be controlled. Dr Andrew Wilson, Senior Economist for Domain Group concurs, and adds that Sydney will most probably face property shortages, with affordability remaining a key issue.
Gut feeling: a double-edged sword for property investors
While developers and agents constantly advise investors to make well-informed decisions when buying overseas real estate, many seem to be making decisions based on gut instinct. Grant Thornton’s new report reveals that gut instinct is responsible for approximately US$250 billion a year in overseas real estate investment. The financial firm cautions overreliance on instinct without market analysis and research, citing the possibility of investors missing out on emerging opportunities. According to the report, cross-border real estate transactions during H1 2015 increased by nine per cent, likely a result of investors desiring to invest in politically stable regions. 
Gut feeling is mentioned as a key driving factor when deciding locations for investments. The Thornton report cites the importance of identifying emergent stability, as territories that have recently become investment/developer friendly offer valuable opportunities too. Furthermore, it mentions that urbanisation provides opportunities. As established cities become saturated, lesser known areas are opening up and provide investment opportunities. Investors can benefit by entering these secondary markets when costs of entry are lower.
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