Week in Review – 23 July 2015

MPs raise concerns over DBSS scheme
Mr Hri Kumar Nair, Member of Parliament (MP) for the Bishan-Toa Payoh Group Representation Constituency (GRC) has called for the Design, Build and Sell Scheme (DBSS) scheme to be “shelved permanently”. His comment on Facebook last week came after other MPs voiced similar concerns over the Housing Development Board’s (HDB) role in ironing out disagreements over defects in DBSS homes, and the future prospects of the scheme. 
Several DBSS projects have recently been lambasted for defects, such as the sudden appearance of black spots on wooden floorings in flats at The Peak@Toa Payoh in 2013. While DBSS projects are meant to marry private and public housing, in an interview with TODAY, Mr Hri Kumar said that there seems to be some misunderstanding over HDB’s responsibilities: “Because this is public housing, the expectation is that not only will HDB oversee the development, they’re supposed to work with the developer to resolve all defects. And because there is such an expectation, there is also disappointment when that did not happen.”
Mr Desmond Lee, Minister of State for National Development has said that market conditions may still shift and there may be reasons to bring back DBSS in some form.
MAS: Still premature to relax property cooling measures
Mr Ravi Menon, Managing Director of The Monetary Authority of Singapore (MAS) said on 21 July that it is still too early to lift property curbs, dashing hopes of a market rebound this year: “Property prices have softened somewhat, but like I said last year, in the context of the price increase that had occurred — 60 per cent over three years — the softening we have seen is really not all that much. 
So, it’s still premature to consider removing any of the cooling measures that are in place,” Mr Menon said at the central bank’s annual report media briefing on 21 July. Since the global financial crisis in 2008, housing prices started increasing in 2009 and hit their peak in the third quarter of 2013. The property market has cooled since then, but more so after MAS slapped on the Total Debt Servicing Ratio (TDSR) in June 2013 to ease buyer speculation and raise credit practices by financial institutions. 
Flash estimates from Urban Redevelopment Authority (URA) in July showed that private residential properties fell for the seventh consecutive quarter since its peak in 2013. However, the total price correction was less than seven per cent from its highest in 2013, bolstering the need for further cooling measures. 
While the Real Estate Developers’ Association of Singapore (REDAS) has continuously urged the Government to relax property curbs as it “hurts foreign investment flows”, others such as Mr Leong Wai Ho, Economist at Barclays said to TODAY that the cooling measures are fair from a policy point of view to re-engineer home affordability.
Savills: 41 investment transactions worth S$5.69 billion recorded in Q2
According to Savills’ Asia Pacific Investment Quarterly, transactions rose 56.7 per cent from S$3.63 billion in the previous quarter. The Singapore private property market also recorded a quarter-on-quarter (QoQ) increase of 11.9 per cent to S$2.94 billion, which comprised 51.7 per cent of the market share. However, the quarter was stagnant in terms of transaction volumes.  In the residential market, most buyers tried to wait out the cooling measures. As for the remaining 48.3 per cent of Q2’s total investment value; a total of S$2.75 billion was made from the sale of three residential sites, three industrial sites and one commercial site under the government land sale (GLS) programme.
With a reduced number of sites under the Confirmed List, a high number of bids have been received from developers trying to replenish their land banks. A residential site at Dundee Road in Queenstown received highest bid of S$483.2 million, at S$871 per square feet (psf), from Hao Yuan Realty, a unit of Chinese developer Hao Yuan Investment Pte Ltd.
Analysts believe property cooling measures will come to an end 
Analysts predict that the property market may be headed for a rebound as the government looks likely to relieve measures in the coming 12 months. In an interview with Singapore Business Review, Mr Andrew Chow, Analyst at United Overseas Bank Kay Hian said, “We see the potential for selective easing of property cooling measures in 1H16 as physical property prices have retreated by 6-9%. 
However, we do not expect prudent measures such as total debt servicing ratio (TDSR) to be changed”. Ms Cheryl Lee and Mr Louis Chua, Analysts at Union Bank of Switzerland told Singapore Business Review that aside from reduced prices, measures will be lifted as a number of sale transactions have reduced. Specifically, they anticipate a lift in stamp duties measures in H215 and that measures to moderate debt service ratios will likely be unchanged.
Indonesia revamps rules to attract foreign property investors
With the country’s economic downturn causing a 13.5 per cent quarter-on-quarter dip of residential sales amid regulatory uncertainties in Q1 2015, Indonesia is taking active steps to reinvigorate its real estate market. Plans are currently underway to relax rules on foreign ownership which allow foreigners to own Indonesian homes under ‘right of use’ for 25 years which is extendable for an extra 20 years. 
The new changes would allow the rule to become a permanent period, without needing to extend, and inheritable upon the owner’s demise. However, according to Jakarta Globe, foreigners are restricted to purchasing only luxury apartments that cost above IDR5 billion (USD375,000). According to Deal Street Asia, The Central Bank of the Republic of Indonesia (BI) will also relax its lending regulations for residential property buyers to encourage sales. While previously buyers had to put a 30 per cent down payment, terms have been readjusted to 10 to 40 per cent, depending on property size.
Surge in Penang’s property demand
According to Affin Hwang Capital Research, a rising population in Penang combined with persistent property demand will see public-private partnerships (PPP) helm property projects in the area. The RM27bil Penang Transport Master Plan (PTMP) is among the largest PPP projects which could be confirmed by September. Singapore’s Temasek Holdings and Penang Development Corp (PDC) have put out a joint venture proposal to build a RM11.3bil business process outsourcing centre and international technology park. Penang’s government has pushed the economy up the value chain by supporting a manufacturing and services sector based on knowledge and innovation. 
“Property development companies such as E&O, Eco World Development Group Bhd and Ewein Bhd are embarking on new large-scale mixed development projects in the state with total gross development value (GDV) of RM60bil,” added the report. Six consortiums have indicated interest to be the project delivery partner (PDP) for PTMP while discussions for PDC’s joint venture are still underway. If Temasek enters the market, more Singapore companies and foreign investors are likely to be attracted to Penang.
NAB: Strong foreign residential property purchase in Australia 
According to the National Australia Bank (NAB) South Wales (NSW) and Victoria (VIC) had the best improving markets, while sentiments dipped in other states, led by South Australia/ Northern Territory (SA/NT) and Western Australia (WA). The NAB’s Residential Property Index is predicted to jump 35 points next year and by 42 points in two years. According to NAB chief economist Alan Oster, differences were present between states where foreigners bought more than 28 per cent of all new apartments in VIC compared to 16.5 per cent in NSW. 
In existing property markets, foreign buyers represented 8.6 per cent of demand, with foreigners accounting for one-tenth of home sales in VIC and NSW. Of the total established apartment sales and home sales in Q1, foreign buyers accounted for 11.4 per cent and 9.4 per cent respectively. Mr Oster also notes that first time home buyers were more widespread in new property sectors in the June quarter, although he attributes this increase to first time home buyer investors. 
“Owner occupiers or up-graders were also more active in both new and established markets, while resident investors (net of FHBs) accounted for just over 1 in 5 sales in both new and established markets,” he said in an interview with Business Insider.
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