Week in Review – 26 August 2016

Local Property News

Anchorvale Lane EC Site and Nassim Road land parcels attract strong developer interest
The Executive Condominium (EC) site in Sengkang released for tender recently has attracted strong interest from developers. Sixteen developers submitted their bids for the 99-year leasehold site along Anchorvale Lane, with Hoi Hup Realty and Sunway Developments submitting the highest bid of S$240.95 million. The previous tenders for nine EC sites saw an average of seven bids submitted for each site. The number of tenders submitted for the Anchorvale Lane site has far surpassed the previous average, receiving the most bids for an EC land site under the Government Land sales (GLS) programme since 2013 – when the Yuan Ching Road/Tao Ching Road Lake Life EC site closed its tender with 16 bids.
Property developer OUE Limited secured its purchase of two Nassim Road land parcels. These sites, situated near White House Park and Nassim Road, which are Good Class Bungalow areas, are next to the official residence of British High Commissioner Eden Hall. The sites make up a total of approximately 33,000 sq. ft. of land space when combined, and were purchased for S$56.6m.
CBRE, the global leader in real estate services, has reported that the sizable number of small and medium enterprises (SMEs) in Singapore has had little impact on the office sector. The office leasing volume comprising SMEs remains disproportionately small. CBRE attributes the lack of impact by SMEs to a mismatch of the needs of SMEs, as opposed to the types of office spaces available. CBRE said that SMEs’ tighter budgets, together with their smaller staff strength, are reasons behind why they usually rent smaller offices. CBRE estimates that office space requirements for SMEs range between 200 and 400 sq ft.
More applicants have shown interest in Build-to-Order (BTO) flats in Tampines this week, compared to when the project was first opened for balloting. As of 5pm on 23rd August (Tuesday), all flat types available for sale in Tampines were oversubscribed. 
The most popular flats were five-room/3Generation (3Gen) units, with 2,022 applicants competing for 879 units – a subscription rate of 2.3. That was followed by four-room flats with 2,487 applicants vying for 1,501 units – a subscription rate of 1.7. Second-time flat buyers drove demand for five-room/3Gen BTO and three-room flats, with 471 applications for the 356 available three-room units – a subscription rate of 1.3.
Ku Swee Yong, Chief Executive Officer of Century 21, told TODAY that demand might seem weaker for Tampines BTO flats but can actually be considered “quite healthy” considering the higher number of units put up for sale compared to other towns in the same exercise. When combined, the two BTO projects in Tampines make up a total of 2,736 BTO units available for sale. Other projects in the same exercise include Hougang, Sembawang, and Yishun, with 711 units, 570 units, and 824 BTO units being offered respectively.

Global Property News
According to the August 2016 Global Liveability Survey published by the Economist Intelligence Unit, Melbourne, Australia remains the most liveable city of the 140 cities surveyed. Vienna, the capital of Austria, comes a close second, just 0.1 percentage point behind Melbourne. Particularly worth noting is Sydney, which has been squeezed out of the top ten most liveable cities due to a greater perceived terror threat. Although Sydney was dropped out of the list of top 10 most-liveable cities, Australia remains one of the countries with the most cities in the top ten list – with Adelaide and Perth ranked fifth and seventh respectively, behind top-ranked Melbourne. The other country with the most number of cities in the list is Canada – with Vancouver, Toronto, and Calgary ranked third, fourth, and fifth (tied with Adelaide) respectively.
London, an investment destination favoured by Singaporean investors, has seen home prices dip after Britain’s decision to exit the European Union (EU). According to Haart, a real estate agency, Brexit had different impacts on the country’s residential market – the property markets in regions that supported Brexit have increased market activity while areas that voted against Brexit, such as London, have seen a slowdown. 
The number of listings put up for sale after the referendum on 23 June dropped six per cent in anti-Brexit areas, and the number of cancelled transactions in the respective regions increased by approximately 50 per cent. On the other hand, the number of property listings increased in pro-Brexit areas, with the cancellation of transactions remaining low. Paul Smith, Chief Executive Officer of Haart, told Bloomberg that London’s property market is strongly influenced by sentiment, and those who voted confidently for Brexit are putting in effort to sustain market activity. Countrywide Plc, one of the UK’s largest real estate agency groups, expects the price growth of homes in London to slow to 3.5 per cent in 2016, and reduce 1.25 per cent in the next year. Fionnuala Earley, Chief Economist at Countrywide, told Bloomberg that the prices in London’s luxury property market were already affected by a supply influx and higher sales taxes. These issues, compounded with Brexit, have led to prices falling even faster. 
Brexit weakens UK commercial property prices, but brings opportunities for investors
Prices of commercial property in the country fell after Britain voted to exit the EU, but most tenants have retained their leases, with some renewing rentals. For sharp investors, this is an opportune time to enter the property market at a lower price. According to the IPD real estate index, commercial property prices in the UK dropped 2.8 per cent in July, the steepest drop since March 2009, while Central London experienced greater price declines.  Shares of office property owners in the UK, which includes UK Commercial Property Trust (UKCPT), slid ten to 20 per cent within two days following the Brexit referendum, although some have recovered losses. However, IPD stats show that rental prices of offices fell merely 0.1 per cent in July. Property consultant Savills Plc believes that prices of the UK’s commercial property will increase as companies such as legal and accountancy firms require more office space due to trade and policy lobbyists returning to the UK.
The US housing market looks set to pick up with strong demand for new single-family homes in July. Sales of new single-family homes rose 31.3 per cent year-on-year, the highest in close to nine years. Millan Mulraine, Deputy Chief Economist at TD securities in New York, told Reuters that he believes the country’s residential property market prospects are starting to look brighter. Data provided by the Commerce Department show that sales of new homes rose a seasonally adjusted rate of 12.4 per cent to 654,000 units in July. That’s the highest since October 2007. However, strong sales have led to an eight-month low for inventory of new residential units in July. To meet the strong demand, builders have to increase their construction activity to ensure sufficient supply.
New York has also displaced London as the world’s best city for foreign commercial property investments. With London voting to leave the European Union, there have been concerns of the city’s attractiveness as a global financial centre. Referring to cross-border property transaction data, investors’ concerns regarding Brexit appear more pronounced than previously thought. According to brokerage firm Jones Lang LaSalle Inc., cross-border flow of capital into London’s real estate market reduced 44 per cent year-on-year in H1 2016. Despite the UK having more investor-friendly tax arrangements compared to the US, fundamental market conditions in the US prove to be stronger – with strong demand and no excessive supply – making the US more appealing to investors.
After four consecutive months of price hikes, resales of homes in the US have slowed due to an inventory strain which limits choices for interested buyers. But according to the National Association of Realtors, the dip in sales is expected to be short-lived, with the country’s labour market tightening and wages being pushed up as mortgage rates drop to record lows. In July, sale of existing homes dropped to 5.39 million units, a 3.2 per cent annual dip. The slowdown, attributed to the lack of properties being listed on the market, led to a 5.3 per cent year-on-year hike in median home prices. Joel Naroff, Chief Economist at Naroff Economic Advisors in Holland, Pennsylvania, told Reuters that it is tougher for buyers to find a home that they want if their choices are limited.
A report from the Federal Housing Finance Agency revealed slower growth in home prices, with prices rising 1.2 per cent in Q2 2016 compared to a 5.6 per cent growth in Q2 2015. Despite prices still rising, home owners do not seem keen on putting their properties up for sale, perhaps due to a buoyant labour market meaning fewer people are relocating. Although inventory of homes increased 0.8 per cent to 2.13 million in July, it has fallen 5.8 per cent year-on-year and is likely to be snapped up within just 4.7 months. A healthy supply range is gauged to take six months to clear.
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