More renting out homes as they await property market rebound, Prices for cluster and landed homes increased from 2009 to 2013, Property auctions gaining popularity, Maybank advises caution over Johor property investments, Popularity of shophouses grows with rising office rentals
More renting out homes as they await property market rebound
An increasing number of homeowners are opting to rent out their homes as they await an upturn in the property market. The rise in rental options is causing a fall in rentals; more tenants are signing shorter lease agreements as they expect a further drop in rental prices. Lease periods are usually for two years, but ERA Realty has noted that one-year leases have increased by about 30 per cent.
Mr Steven Tan, Managing Director at OrangeTee told Channel NewsAsia that many sellers are unable to get the price they want due to the sluggish residential property market. They are therefore renting and will sell the property when the market picks up. Rental transactions are on the rise, with the Urban Redevelopment Authority (URA) registering 56,417 rentals in 2014, up from 50,417 in 2013 and 48,785 in 2012.
Prices for cluster and landed homes increased from 2009 to 2013
A report by SLP showed that 99-year leasehold cluster homes saw the highest increase in value among landed housing types, between 2009 and 2013, with annual price increases of freehold cluster homes, 99-year leasehold and freehold landed homes with individual land titles, at 10.2 per cent, 15.1 per cent and 18.7 per cent, respectively. Sales transactions for freehold cluster homes, 99-year leasehold and freehold landed homes with individual land titles were 1,492, 2,051 and 11,356 respectively. Transactions for 99-year leasehold cluster homes were the lowest, at 1,125.
Mr Wong Xian Yang, Research and Consultancy Manager at OrangeTee told TODAY that landed home prices have been affected in the past two years alongside the broader private residential property market as demand weakened due to various cooling measures and loan curbs. He added that, “The landed segment would be out of reach for most HDB (Housing and Development Board) upgraders, which is currently the main demand driver in the market. According to 2014 caveat data, only 240 out of 964 landed purchasers came from HDBs.”
Property auctions gaining popularity
Colliers noted in a report that the attendance rate for monthly auctions organised by property auction houses in Singapore has more than doubled, to about 150 to 200 in Q1 2015, as compared to Q1 2014. More mortgagees are also offering their properties for auction, with 56 properties listed in the first quarter of this year, compared to 22 properties in the same period last year. 82.1 per cent of the 56 mortgagee listings consist of residential properties.
Knight Frank revealed similar findings, noting that buyers are scouting for good deals through mortgagee listings in the auction market. The property consultancy stated that in Q1 2015, the success rate of these mortgagee sales increased to 18.5 per cent, from 15.9 per cent in Q1 2014. Knight Frank also noted that the auctions have seen significant losses, with five private homes sold at losses during auctions held in the first quarter this year. The most significant loss-making transaction among the five was a unit at The Grange that sold at $4.2 million, compared to its previous transacted price of $6.2 million. The other units were at Eng Kong Drive, Estilo, Pearl Bank apartment and Amber Residences, sold at losses ranging from $38,000 to $403,000.
Maybank advises caution over Johor property investments
The oversupply for the Iskandar Malaysia property market is “likely to get worse before it gets better”, according to a Maybank report. Its research unit said that it is probable that property values would decrease over the medium term. According to Maybank’s statistics, there was a 33 per cent quarter-on-quarter decline in Q4 2014, in terms of the transactional value of properties in Johor. This is significantly lower as compared to the country (-7 per cent), Kuala Lumpur (-12 per cent) and Penang (8 per cent).
Ms Wong Wei Sum, Maybank analyst, said in the report that, “The oversupply situation will be exacerbated by the huge incoming supply in 2015/2016, where units under construction have risen 18 per cent year-on-year in 2012 and 2013.”
The report also stated that Maybank prefers developers that are invested in the Klang Valley and Penang due to the upcoming KVMRT and LRT lines, KL-Singapore high-speed rail project and the strong population growth in the two areas.
Popularity of shophouses grows with rising office rentals
In the face of rising office rents, especially within the Central Business District (CBD), the demand for shophouses continues to rise, according to analysts who spoke to Channel NewsAsia. Colliers International reported that quarterly median rents for shophouses remained low at S$5.42 per square foot per month in 2014 Q1, as compared to below S$4 before 2012. Ms Christine Li, Director of Research at Cushman & Wakefield told Channel NewsAsia that shophouses “appeal to people and tenants, particularly those from the creative industries, who do not need the Grade A specifications but still want to be in the CBD, close to their clients. So without paying S$10 per square foot per month for a Grade A office building, they can just pay S$5 to S$6 for a shophouse next to it.”
However Mr Donald Han, Managing Director of Chestertons Singapore, stated that investors considering shophouses for investments should consider other properties instead, as the rental yield for shophouses is significantly lower than residential units and commercial strata offices.