Week in Review – 20 May 2016

City Developments Ltd, the second-largest developer in Singapore, said in an interview with Bloomberg that prices of Singapore prime land was “exorbitantly high” and expects prices to continue rising. Gramercy Park, a 170,000 square foot freehold prime property spot on Grange Road just off the Orchard Road shopping belt, was purchased by the company in 2006 for S$383 million, according to an earlier statement by the developer. This early purchase allowed City Developments to offer the property at competitive rates.

Separately, UOL Group reported a four per cent increase in profits in the first quarter, from projects such as Riverbank@Fernvale and Principal Garden. Despite positive results for the quarter, the developer expects a slow rate of growth for the local housing market and a squeeze on office rentals due to an expected influx of office space in the later part of the year.

More taking up HDB’s Lease Buyback Scheme

541 households took up the Housing and Development Board’s (HDB) Lease Buyback Scheme this year, more than double that of previous years.  233 of the households were four-room flat owners. The increase in take-up was less than a year after enhancements were made to the scheme to include four-room flats, increasing nationwide coverage of elderly-owned homes from 35 per cent to 75 per cent. Mr Nicholas Mak, Executive Director of SLP International Property Consultants, said that despite a significant increase in participants he estimates less than one per cent of eligible households in Singapore are part of the scheme. HDB has expressed commitment to continue reaching out to elderly households, helping the elderly understand how the Lease Buyback scheme can benefit them.  

Global Property News

Foreign investor interest in Canada on the rise

A recent survey conducted by The Royal LePage Carriage Trade Luxury Properties Report, which polled 250 luxury real estate advisors in Canada, said the past decade saw more foreigners purchasing property in the country. Six in ten advisors expect greater foreign investor interest in Canada in 2016. Data from the report also shows that Canadian property prices in the luxury range in designated areas of Carriage Trade Luxury Properties have appreciated significantly over the past ten years, with price increases of 58 per cent, 61 per cent, 69 per cent, and 125 per cent across Greater Montreal, Calgary, Greater Toronto, and Greater Vancouver respectively. More than half (51 per cent) of agents surveyed named China as the region responsible for driving property transactions in Canada. Mr Phil Soper, President and Chief Executive Officer of Royal LePage, attributed the country’s increased investor activity to its sound political and financial structures, cultural receptivity of diversity, as well as a recently weaker Canadian dollar. 

Investors turning to non-conventional foreign properties

The latest Christie’s International Real Estate Survey released on 12th May shows that sales of global luxury property increased eight per cent in 2015, cooling from the 16 per cent hike in 2014. According to the report, transactions declined in the usual hot foreign property markets of New York, London and Hong Kong. As investors moved away from traditional property hotspots, real estate sales in Auckland, Toronto and Paris rose 63 per cent, 48 per cent, and 21 per cent respectively in 2015. Investors are attracted to cheaper locations with higher potential for price growth, said Mr Dan Conn, Chief Executive Officer of Christie’s International Real Estate. 

 

US residential sales headed for 10-year high

At an economic forecast forum of a recently concluded Realtors Legislative Meetings & Trade Expo, the National Association of Realtors (NARs) predicted that the US housing market is primed to reach a ten-year high of about 5.4 million transactions. Mr Lawrence Yun, Chief Economist of NARs, said a severe shortage of new homes is the reason behind rising sales despite higher property prices. He added that pending sales have been stable in the past few months, which should provide the base for marginal gains in home sales heading into Q3 2016. 

Chinese investors increasing US property investment

A report by Rosen Consulting Group and the Asia Society has found that Chinese investors are responsible for ten per cent of US foreign investment, pumping over US$300 billion into the US real estate market between 2010 and 2015. Chinese investors ranked first in the total dollar amount spent on US homes from 2013 to 2015, surpassing Canadian investors who formerly led in purchasing US homes in 2015. This can be attributed to their higher budgets – the average price of homes bought by the Chinese is US$831,800, compared to the average of US$499,600 for other international buyers. Chinese purchases of residential properties have also increased rapidly, from $11.2 billion in 2010 to $28.6 billion in 2015, a 20 per cent annual growth rate. In 2015, China was the largest foreign source of residential purchases in the United States, outpacing Canada, India, Mexico and the United Kingdom. Between 2010 and 2015, Chinese nationals bought homes in the United States valued at a cumulative total of $93 billion. In 2015, 35 per cent of homes purchased by the Chinese were located in California. Washington and New York were two other hot spots, accounting for eight and seven per cent of Chinese purchases respectively, indicating a Chinese appetite for property in expensive markets.

Fastest acceleration of UK house prices in a year

In Q2 2016, prices of homes in the UK rose at the fastest pace in a year since the introduction of a new tax on the purchase of rental properties. The additional stamp duty was raised by three per cent in April for landlords and second-time home owners to give first-time buyers a high chance at bidding for property. The Office for National Statistics said that year-on-year home prices increased nine per cent in March, up from 7.6 per cent in February. Data from the Council of Mortgage Lenders also show that year-on-year mortgage loans in March 2016 increased 28 per cent. The number of buy-to-let mortgages in the past year also increased more than three times. 

Motivations behind UK investors

A recently concluded survey by Sequre Property Investment, polling 868 UK investors who purchased property in the past year, revealed four motivations behind their activities. The majority (46 per cent) of investors turned to property using their pensions, citing better returns compared to conventional investments in stocks and annuities. Another 22 per cent have their childrens’ interests at heart, investing with the aim of giving them a head start in property investment when they come of age. The third motivation, which 13 per cent of investors noted, was to begin curating their investment portfolio at a younger age. Most who fall under this group are young professionals who snap up more affordable property in non-prime lands. Lastly, 11 per cent are at the level of company directors, with stable investment portfolios seeking to diversify and maintain their investments.

EPL clubs spur increase of UK residential home prices

UK residential prices are rising for homes situated near English Premier League (EPL) clubs. A recently released Knight Frank report revealed that residences near EPL club Tottenham Hotspur saw annual prices rise 18.4 per cent in 2015, the highest increase for the year. Coming in second and third were West Ham United and Watford F.C., which saw annual price increases of 13.2 per cent and 10.6 per cent respectively.