In anticipation of greater demand for public housing due to recent policy changes, the Housing Development Board (HDB) will be increasing the supply of Build-to-Order (BTO) flats in 2016. New Minister for National Development Lawrence Wong said there will be an increase in supply of BTO flats in 2016, to between 15,000 and 20,000 units. Concrete numbers will only be available after the introduction of November’s 12,000 unit bumper crop. The ministry plans to make temporary adjustments in order to ensure policy changes do not have an impact on market stability. Property analysts are concerned however, about oversupply and hope for any increases to be marginal.
Key Executive Officer of ERA real estate agency, Mr Eugene Lim, believes that while this supply increase is temporary, it inevitably adds to the upcoming supply of the next few years. Mr Lim raised the possibility of oversupply in light of Singapore’s slowing population growth, and reiterated the importance of demand and supply balance, as Singapore saw its slowest population growth in a decade between June 2014 and June 2015.
Rent policy changes include a revised income ceiling from $10,000 to $12,000 for BTO flat buyers. This enlarges the pool of buyers eligible to purchase public housing. Amendments were also made to the Special Central Provident Fund Housing Grant, aiding lower and middle-income households to purchase their first flats. A Two-Room Flexi scheme, with flexible lease lengths for seniors, was also introduced.
Singapore’s total residential property investment sales for Q3 2015 amounted to S$950.8 million, a 42.1 per cent drop compared to S$1.64 billion in Q2 2015. Poor performance in Q3 can be attributed to several factors, including market volatility related to the Chinese Yuan, and an expected US interest rate hike that failed to happen in September, perceived as a sign of US market instability.
Domestically, cooling measures, including the Additional Buyer’s Stamp Duty (ABSD) and adjustments to the Total Debt Servicing Ratio (TDSR) pushed transaction volumes down. Despite the dismal market performance, 20 luxury residential homes each worth at least S$10 million have been transacted so far in 2015.
Alan Cheong of Savills Research Singapore remains hopeful, “[the] third quarter’s numbers may look disappointing, but they mask the large deal flows in the pipeline which, if consummated in the coming quarter, will bring the investment market back on an even keel”.
In September 2015, developers managed to sell only 341 units, bringing total sales for the year to 5,892 units, a 1 per cent dip compared to the same period in 2014. Developer sales in September were the lowest September sales figure since 2007, and pales even in comparison to September 2008, which saw 376 units sold. This September did not have any new private project launches, with developers choosing to postpone due to volatile stock markets, “The Hungry Ghost Festival” and the Singapore General Election.
September sales were led by mass market units Outside Central Region (OCR). There were weaker sales across all price segments and high-end Core Central Region (CCR) saw a 56 per cent month-on-month drop in sales, to 20 units. Since June, the market has not seen luxury units sold above $3,000psf.
A change in stamp duty regulations has led to a bounce back in London’s rental market. A new twelve per cent stamp duty for property worth more than £1.5 million has led to property purchases becoming a less viable option, with many now preferring to rent. Rents have increased by more than four per cent in Central and East London.
Strong figures were recorded in Prime Central London during the last quarter, a rebound from the stagnation experienced over the previous few quarters. Overseas professionals made up a bulk of the tenants, and they opted for long-term rent over home ownership. According to Marc von Grunherr, Lettings Director at Bentham & Reeves Residential Lettings, the rental market usually remains strong in areas that attract Millennials, such as east London. Millennials are happy to take up long-term rents, and generally do not see homeownership as a goal, choosing to rent better quality property than purchase lower-grade property that they need to scrimp and save to afford.
Millennials also prefer central areas close to good bars and restaurants over affordable areas that require commuting.
Vietnam’s Property law changes allow greater flexibility for foreigners
The Vietnamese government introduced two new policies in the middle of this year that have the potential to fundamentally change Vietnam’s investment landscape. The changes include visa-free 15-day travel for five European nationalities, as well the reformed Law on Residential Housing (LRH), with many restrictions on foreign real estate buying removed.
Vietnam’s foreign ownership laws now include permission for foreigners with a visa to legally purchase residential property. Also, foreign investment funds, banks, Vietnamese branches and representative offices are now allowed to purchase property. While previously only applicable to condominiums, all types of residential sector including landed property and town houses can now be sold to foreigners. Furthermore, there is no longer a limit to the number of dwelling units bought by a foreigner as long as the number of units bought by the foreigner does not exceed 30 per cent of total units in a condominium complex, or exceed 250 landed property units in one administrative ward. Lastly, foreigners are now allowed to sublease, inherit and collateralize properties (previously only allowed to occupy the property), while foreigners married to Vietnamese citizens enjoy freehold tenure.
Sydney’s property market cools
With the proportion of successful home auctions dropping to a 10-month low last week, Sydney’s housing market might be cooling down. Sydney’s auction clearance rate, which gauges housing demand in Sydney, saw a 66.6 per cent drop for the week of 12 October.
According to property research CoreLogic, this is the lowest number recorded since December 2014, significantly below the peak of over 90 per cent in April. Buyer interest has decreased, in part due to the 44 per cent price hike over the past three years.
Sydney’s house prices grew just 3.2 per cent in the past quarter, its worst since March 2014. SQM Research Pty believes that house prices are currently 40 per cent overvalued, with a slower price growth of four to nine per cent expected in 2016.
In its semi-annual assessment of risks of the Australian financial system, the central bank stated that Australia’s over-heated residential market might be slowing down, and accelerated construction of residential units in certain areas is causing an oversupply. Coupled with slower population growth, Macquarie Group and Bank of America Merill Lynch expect a fall in prices in the next two years.
The Australian Prudential Regulation Authority had advised lenders to restrict investor home-loan growth to 10 per cent a year back in December, and further warned bigger banks of the need to increase holding capital in order to better tide over potential losses stemming from mortgages from July next year.
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