Singapore’s residential leasing market is facing downward pressure on rents, a result of increased supply coupled with softening demand. Despite high transaction volumes, vacancy rates are increasing and rents are falling.
According to a new report from Savills, quarter-on-quarter (QoQ) leasing volumes in Singapore for Q2 2015 increased by 10.9 per cent, from 15,435 to 17,262 transactions. The growth came mainly from the Outside Central Region (OCR), which saw quarterly transactions increase by 13.7 per cent, to 5,672 transactions. Savills attributed the increase in transactions to standard two-year leases being replaced by more one-year tenancies.
With more completions, supply is increasing and the number of private residential homes in Q2 2015 reached 318,524 – a 2.2 per cent increase quarter-on-quarter. Most of the new supply is within the OCR, which saw 124 per cent growth to 5,643 units, compared to Q3 2014.
As Singapore offers overseas talents plenty of job opportunities, there is greater demand for housing leases for expatriates employed on local terms. However, the rise in demand from these tenants is insufficient to keep up with the supply of new private residential units. Rents dropped 1.1 per cent QoQ in Q2 2015, and vacancy rates were at a nine-year high.
Senior Director of Savills Research Singapore Alan Cheong believes that it will remain a tenants’ market as supply of private residential units is expected to exceed demand.
Bidadari estate will soon have 2,150 new flats, consisting of two- to five-room units launched for sale under HDB’s Build-to-Order (BTO) exercise.
This launch will be the first of HDB flats in the Bidadari estate, and buyers with parents living in Toa Payoh, Potong Pasir, or within a 2km radius will have priority.
The estate is expected to house approximately 10,000 residential units eventually, as well as community malls, a lake and a ten-hectare park. The estate is situated in close proximity to two North East Line MRT stations, Woodleigh and Potong Pasir.
Property watchers expect prices of Bidadari units to be at a higher price point based on its city-fringe location.
Mr Eugene Lim, ERA Realty’s Key Executive Officer said to Channel NewsAsia that he expects prices for flats in the Bidadari estate to range from S$300,000 to S$350,000 for three-room flats, S$400,000 to S$450,000 for four-room flats and S$600,000 for five-room flats.
This BTO exercise is the first since the income cap was raised to S$12,000, which Mr Ku Swee Yong, CEO of Century 21, believes will draw more buyers.
Residential site at Lorong Lew Lian up for sale by public tender
The Urban Redevelopment Authority (URA) has accepted an application from a developer to put the residential site at Lorong Lew Lian up for sale by public tender, based on the acceptable bid price committed. The land parcel was available for sale on URA’s Reserve List and the developer who submitted the application for the site has committed to bid at least S$250,000,000 in the tender for the land parcel. While the minimum price committed to the site is revealed, the applicant’s identity remains confidential following protocols of the Reserve List system. The public tender for the site will be launched by URA in the next month, with the exact launch date to be confirmed. The tender period for the land parcel will last between four to six weeks. The land area is approximately 1.4ha, and the residential site has a maximum permissible gross floor area of 42,005 m2.
Iskandar’s oversupply worries “a bit overblown”
Mr Lock Wai Han, Chief Executive of real estate and investment firm Rowsley believes that concerns regarding an oversupply in Iskandar’s property market are “a bit overblown”. Mr Lock who spoke to TODAY, added that investors have been alarmed by news of thousands of housing units by Chinese developers in the pipeline. The alarmed investors do not understand that these housing units require time to enter the market. Mr Lock mentioned that “[developers] have to reclaim the sea, let the land settle … so this will be phased out over a longer period of time, but I think that kind of messaging has not been conveyed to the market. So when the market hears that kind of numbers, it’s a bit spooked”.
Rowsley has announced plans to have its Vantage Bay project re-conceptualised into a healthcare city. Lock says that job creation, migration to Johor and increased demand for homes are benefits of investments into Iskandar. His comments come after market observers warned about the glut of homes in Iskandar possibly pressuring property values. Analysts at Maybank commented that the situation of oversupply in Iskandar is likely to worsen before the situation improves.
Sydney, Melbourne spearhead Australia’s largest quarterly gain in more than five years
Between April and June home prices in Australia recorded their largest quarterly gain in more than five years, spearheaded by Sydney, which saw its largest rise on record.
The eight capital cities saw a gain in residential property prices of 4.7 per cent on the quarter, the largest increase since Q4 2009.
Sydney residential prices leapt by 8.9 per cent in Q3 2015, resulting in an 18.9 per cent gain in Sydney home prices compared to 2014. Average home prices in New South Wales were the highest in the country at A$777,400 (S$783,800).
Property information and analytics firm CoreLogi RP Data’s monthly report shows that home prices in popular areas such as Sydney and Melbourne were starting to cool in August. With July regulatory measures implemented to tighten mortgage lending to investors, recent auction clearance rates point towards the success of tightening measures.
Tokyo’s residential property market is attracting savvy property investors, with a depreciating yen resulting from ‘Abenomics’, Japanese urbanisation and increasing prices.
Tokyo has a younger population compared with the rest of the country, with 67.7 per cent of the population working age, compare to 62.3 per cent for the whole of Japan. More than half the population in the city rent homes, creating strong rental demand for investors.
Despite increasing demand in Tokyo, the supply of condos has been decreasing since 2005, partly due to the Global Financial Crisis of 2008, as well as the increase of the Consumption Tax in 2014.
As a result of demand increasing while having limited supply, Tokyo’s residential property prices rose by nine per cent between 2011 and 2015, from approximately US$5,400 to US$5,900 per square metre. The Japanese capital is seeing increased purchase of residential property from Hong Kong investors according to South China Morning Post. Property Report reported that experts believe Tokyo will remain an attractive investment site as long as it manages to control its supply and pricing of real estate despite rapid increase in demand.
Wealthy international students contribute to London’s rental market
According to EJ Harris, Mayfair-based agent, there are 107,000 international students in London, made up of rich Chinese, Russian and Malaysian students. These students spend up to 72,000 pounds a year (1,500 pounds per week) to live in areas such as Mayfair, Knightsbridge and South Kensington. The rents are mainly financed by the parents of students, or homeland grants (from their respective countries).
Managing Director Ms Elizabeth Harris says that more than 100,000 international students study and live in London, and the number is fast increasing. Since 2010, university applications by overseas students have increased by 18 per cent. For prestigious universities in London, applications by overseas students have increased by 30 per cent.
Students from China make up the largest group of international students (18 per cent of all foreign students in London). Other Asian students that make up significant numbers are from Hong Kong (five per cent), Malaysia (four per cent) and Singapore.