Local Property News
APMSR shows respondents believe Singapore’s residential properties make good investments
The latest iProperty Asia Property Market Sentiment Report H1 2016, Asia’s largest consumer property sentiment survey, released on 23 March, reveals expected price declines, less concern about affordability and confidence that cooling measures will be removed. Most respondents expect interest rates to rise, but say that will not affect their decision to purchase. Confidence in property as an asset class remains very high, with many interested in property as an investment. It also shows rising intent to purchase overseas properties, with respondents mostly focused on Australia.
For the full report, please refer to: iProperty Asia Property Market Sentiment Report H1 2016
Fresh Start Housing Scheme can be improved by providing more than just monetary aid
Observers are hoping that the upcoming Budget – to be delivered on 24 March at 3:30pm – can address existing issues with the Fresh Start Housing Scheme. The scheme is meant to aid public rental tenants – in particular those who have owned a flat before and have young children – to own their own flat. Suggestions to improve the scheme include additional grants, concessionary loans, as well as shorter leases. According to Head of Research at DTZ, Lee Nai Jia, past studies indicate that owning a home encourages citizens to be more responsible, and this stability supports their children in doing better in school. Fei Yue Family Service Centre also believes it is vital to provide education to the families regarding home ownership responsibilities by conducting programmes on financial management, as well as creating activities for children to remain in school.
Property cooling measures to remain until Q4, prices likely to remain stagnant
Property cooling measures are likely to remain in the upcoming Budget 2016 statement, according to a report by UOB Kay Hian. The report added that it is expected that property prices are likely to fall 12 to 15 per cent before measures are introduced to lift property cooling measures. UOB Kay Hian stated that easing of measures such as the Additional Buyer’s Stamp Duty (ABSD) may occur in the last quarter of the year, seeing that the price index has dropped to 8.4 per cent so far.
A separate report by Jones Lang LaSalle (JLL) noted that property prices have shown recent signs of possible stagnation due to a fall in demand as home supply increases. Due to stricter immigration policies enacted in 2012, the number of new residents has decreased significantly, adversely affecting the demand for homes. JLL indicated however that the population trend may reverse if the government allows for higher growth in the population in the following five years. The report states, “The investment in housing supply and infrastructure from 2011 has bore fruit, giving more room for growth”.
CIMB: Developers may opt to pay hefty penalties
Despite the substantial sum required to pay off the Qualifying Certificate (QC), CIMB believes that the fine will be insufficient to push developers to cut selling prices. QC penalties increase in phases and are more likely to affect high-end developers whose projects are currently seeing a high volume of unsold units. CIMB opined that high-end projects have a higher margin and therefore developers are less likely cut prices and may adopt a wait-and-see stance for the policy restriction to be eased. In contrast, the ABSD requiring developers to pay 15 per cent of the land cost — in cases where there is remaining units unsold within five years of the purchase — is not pro-rated for unsold units. This may therefore compel developers with land sites purchased in 2012 into reducing prices as they “run the risk of lower-than-projected earnings (should) developers opt to pay the ABSD”.
Global Property News
Drop in US home resales despite housing shortage
Despite indication of strong employment growth and the stabilisation of factory output, US home resales in February dropped 7.1 per cent compared to January, according to the National Association of Realtors (NAR). Sales have been erratic following the introduction of new mortgage guidelines intended to help home buyers develop a better understanding of their loan options and homes best suited for their financial needs. Similarly, first-time home buyers are also refraining from making purchases. With supply of starter and trade-up homes dropping more than 40 per cent since 2012 according to United States property portal Trulia, premium home prices have increased, widening the gap between premium and trade-up homes. This has created a homebuyer gridlock where owners of trade-up homes are not as likely to sell their existing properties as they cannot find a premium home that fits their budgets, further escalating the falling supply of homes. The combined effect of limited supply and high prices has deterred first-time home buyers from making purchases. According to a report by the US Department of Commerce, first-time buyers accounted for only 30 per cent of home purchases, a drop from the usual 40 per cent.
Institutional investors in UK required to pay higher stamp duty
A deduction in capital gains tax by eight per cent will not be applicable for profit gained from residential properties. This will be a huge obstacle for institutional investors who typically operate in the build-to-rent sector, according to Melanie Leech, chief executive officer of the British Property Federation. In addition, commercial property buyers also face a higher rate of stamp duty, which has increased from four per cent to five per cent for purchases above £250,000.
Sydney home values sees greatest fall in seven years
In Q4 2015, home values in Sydney experienced the greatest fall in seven years due to a regulatory crackdown coupled with higher mortgage rates. According to statistics released by the government, Sydney’s residential property index saw its first decline in 13 quarters, dipping 1.6 per cent. Despite the Q4 2015 dip, statistics from CoreLogic Inc has shown that residential property prices have recovered since the first two months of 2016. With increases in mortgage rates and lending standards tightening (measures introduced to control price climbs), growth of residential property prices is expected to slow with houses becoming less affordable. Across Australia’s biggest cities, home prices increased 0.2 per cent in the last quarter of December 2015.
Annual residential land prices in Japan gains marginally
Japan’s residential land prices saw a 0.2 per cent annual dip in 2015, the eighth annual decline in succession. However, in the top three metropolitan areas of the country, residential land prices saw an annual increase of 0.5 per cent in 2015, a 0.1 per cent increase compared to 2014. In the survey conducted by Japan’s Ministry of Land, Infrastructure, Transport and Tourism, the Northern island of Hokkaido dominated the top ten locations which saw the biggest rises in residential land prices, with prices in the famous Niseko Ski resort experiencing the strongest gain in Japan, recording a growth of 19.7 per cent during the same period of time.
Stronger US economy fuels growth of property prices in Vietnam
With a stronger economy in the United States, and improving prospects in Vietnam, more Vietnamese living in the US are encouraged to remit money back to Vietnam. The State Bank of Vietnam (SBV) expects homebound remittance to set a record of US$14 billion in 2016, a 15 per cent hike from 2015. The inflow of money through remittances is helping to spur economic growth in Vietnam, which grew 6.7 per cent in 2015, the strongest growth since 2008. These developments have led to price growths in Vietnam’s property market. According to CBRE, average prices of high-end apartments in the southern commercial hub of Ho Chi Minh City rose to US$1,949 per square metre in end 2015, a 21 per cent increase from the year before, and apartment prices in Hanoi increased ten per cent approximately to US$1,592 during the same period. Market activity has also increased, according to the Construction Ministry. In 2015, the number of successful property transactions in Hanoi and Ho Chi Minh jumped 75 per cent from 2014, to 38,050 transactions.