Week in Review – 26 June 2014

8th iProperty.com International Property & Investment EXPO 


The 8th iProperty.com International Property & Investment EXPO, iProperty.com’s flagship event, concluded last weekend with more than 2,000 visitors exploring a wide range of overseas investment properties offered by 40 developers. The expo also included 14 seminars, each providing valuable tips and strategies to capitalise on market opportunities. Popular topics included “Overseas Property Financing for Singaporeans”, “Iskandar Malaysia – Shenzhen to Singapore?” and “The New Paradise, Medini”. Iskandar properties continue to draw investors’ interest, with full attendance at seminars on the region. The Feng Shui workshop series by Sharon Q, held for the first time at the International EXPO, also saw overwhelming attendance. 
TDSR: A year of financial prudence 
The Total Debt Servicing Ratio (TDSR) introduced last year was aimed at ensuring financial prudence among Singaporeans by limiting total monthly debt payments to 60 per cent of income. In an interview with xinMSN, property analysts Mr Ku Swee Yong, CEO of Century 21 Singapore and Mr Desmond Sim, Head of CBRE Research Singapore, agreed that the TDSR has definitely done its job in keeping prices down. 
URA data shows the number of new homes sold from July 2013 to May 2014 (9,115 units) was half what it was in the year before. Prices increased by 0.4 per cent in the third quarter, immediately after the TDSR was introduced, but declined in Q4 2013 and Q1 2014 by 0.9 per cent and 1.3 per cent respectively. 
The luxury home market is especially slow this year, according to a report by real estate agency HSR. The first major luxury project this year – the 120-unit The Rise @ Oxley Residences – launched last month, broke the seven-month long drought of luxury launches. 12 more high-end projects, offering a combined 2,060 units, will soon be launched and an estimated 5,836 new units are to be completed in prime districts over 2014-2016. HSR said the increased supply would likely drive up vacancy numbers, causing rents to come under pressure, likely capping prices in the prime districts. 
The secondary market also felt the impact of the TDSR. CBRE reported an overall 50 per cent drop in transaction volume in the first half of 2014, compared to the same period last year. “Fortunately enough, mortgage rates remain relatively low, so home owners, or investors, can still put their units into the leasing pool,” said Mr Sim, “But at the same time, low mortgage rates have not pressured them into putting the units back onto the market for sale.” However, tightening foreign labour controls and impending housing oversupply may cause difficulty in finding tenants. 
Moving forward, Mr Ku suggests “relaxation and a tweaking of TDSR’s very tight borrowing rules versus a tweaking of the Additional Buyer Stamp Duty and the Seller Stamp Duty”, since there is less “evidence of investors who could be considered speculators in the market”. An OCBC report predicts that once home prices decline more than 10 per cent, sellers’ stamp duties and additional buyers’ stamp duties are likely to go. 
Mixed views on future private home sales and prices
In OCBC’s latest report, primary private home sales are expected to dip 33 per cent to about 10,000 units in 2014. In addition, OCBC forecasts that residential prices will “dip 10 per cent-20 per cent over 2014 – 2015, but foresee a price crash in excess of 20 per cent to be unlikely, even after accounting for the anticipated physical over-supply and interest rate uptrend ahead.” Prices in the mass-market segment are more at risk compared to mid-tier and high-end segments, OCBC adds. Due to “a high price elasticity of demand in the market largely due to a prolonged period of physical undersupply from 2004 – 2012 … significantly more buyers will likely come into the market at lower price points, which will slow the rate of decline as prices soften.” OCBC anticipates that 50,000, 49,700, and 73,600 homes will enter the physical supply in FY14, FY15, and FY16 respectively. The additional supply and “an anticipated interest rate uptrend after mid-FY15, will likely keep the market on its back foot.” 
Mr Colin Tan, Director of Research and Consultancy at Suntec Real Estate, believes however that the majority of private home buyers are “investors first rather than owner-occupiers, who are less price sensitive in terms of affordability than in terms of exposure to risk.” In a Today article, he states that investors expect interest rates will rise only very gradually, which can “explain why local investors have started to return to the market in bigger numbers.” He expects that the upcoming attractive and well-located projects to garner strong sales if priced competitively. 
Meanwhile, Knight Frank reports that private homes located around future stations of Phases 2 and 3 of the Downtown MRT line have experienced value enhancements. “Many studies have shown the positive impact on prices for houses within proximity to new public transportation, most notably metro systems, tram, suburban railway and bus stations,” according to Knight Frank’s report. In areas within 500 meters of the future Hillview, Beauty World and King Albert Park MRT stations along Upper Bukit Timah Road, and Rochor MRT station, private home prices have surpassed the 20.5 per cent average increase in the Outside Central Region price index, since Phase 2 was announced.

HDB Housing – 14,000 more HDB flats in 2H14; seniors less keen on 3Gen flats
Mr Khaw Boon Wan, Minister for National Development, said in a blog post last Thursday that the HDB is set to build 14,000 more flats in the second half of this year, bringing the total to 28,000 for the whole of 2014. Mr Khaw also indicated that the Ministry of National Development (MND) found that “Most of the couples in the (Housing) conversations expressed a strong preference to live in the same town or neighbourhood as their parents, if they do not live together.” 
The third round of the Housing Conversations series organised by MND saw 51 participants ranging in age from 44 to 83. Concerned with friction that may arise from living under the same roof, only 25 per cent were keen on having more 3Gen flats, compared to 68 per cent of married couples and 55 per cent of dating couples who attended the previous two rounds. Despite these sentiments, Mr Desmond Lee, Minister of State at the MND, said that the 368 3Gen flats that have been put up for sale since September 2013 have seen strong demand, with 960 applications so far. He adds that the Tampines North BTO project to be launched later this year will offer 50 more of these flats. 
The dialogue also revealed strong support for higher CPF housing grants for first-timers buying resale flats near their parents’ homes. A suggestion at the dialogue that Mr Lee said “MND will seriously consider” was that grants could also be extended to seniors opting for resale flats near their children. Many participants also suggested adjusting the CPF Housing Grant for Family based on the flat price, or to increase it according to inflation. The current scheme grants S$10,000 on top of the S$30,000 CPF housing grant to these buyers who represent 40 per cent of the 1,850 family-based CPF housing grant recipients, based on MND data. In terms of giving priority to BTO applicants who want to live near or with their parents, more than half of the participating seniors favoured absolute priority, in contrast to dating couples who felt that this was unfair.