Local property news
Minister of National Development: Singapore’s property market more reliant on the economy
At the ERA career advancement day held on 21st April, Minister for National Development Lawrence Wong highlighted the importance of Singapore’s economy and how it affects the property market more than the cooling measures. He noted that the real estate industry also needs to pay greater attention to innovative practices, creating value for buyers and to be prepared for potential disruptions with the advent of technology. According to Mr Wong, there is a new pool of consumers who are more knowledgeable and processing property transactions on their own. There has therefore been a rise in DIY (do-it-yourself) HDB resale transactions.
Prices continue to fall in both private and public housing market
Recent figures by the Urban Redevelopment Authority (URA) and the Housing and Development Board (HDB) show a continued decrease in private and public property prices respectively. On the private property front, prices further declined by 0.7 per cent in Q1 after falling by 0.5 per cent in the previous quarter. Speculation on private properties is also seen to be dropping with lesser sub-sale transactions reported by URA. Only 88 sub-sale transactions were reported in Q1 as compared to 132 in the previous quarter, the lowest in almost 11 years.
Performance of the HDB resale market dropped slightly as the Resale Price Index of HDB flats fell by 0.1 per cent in the first quarter of 2016 compared to a 1.5 per cent fall in Q4 2015. The number of transactions also dropped 10.9 per cent, according to data from HDB. The rental market however, displayed signs of improvement as the number of approved applications in the HDB rental sector increased by 5.8 per cent from the previous quarter.
HDB flats more affordable now
Despite the reduction of maximum loan tenures from 30 to 25 years, the affordability of HDB flats has improved over the past three years. In 2015, first-time buyers in non-mature estates allocated less than a fifth of their monthly income to housing loans hence resulting in a fall in debt-servicing ratio (DSR) from 24 per cent in 2013 to 19 per cent. HDB attributes the consistent decline in DSR to the stable prices of new flats and improvements made towards housing grants.
Ku Swee Yong, Chief Executive of Century 21 Singapore, speculates that the fall in DSR could be caused by a variety of reasons. He said to TODAY that more units are being offered in more affordable locations and buyers might also be making smaller loans in exchange of higher down payments. Another factor he suggested was that demand could be shifting towards smaller units as a result of economic uncertainty.
DTZ: Local property investments fall as interest in overseas property continues
Property investment sales in Singapore for land and buildings as well as multiple units priced over S$5 million, fell by 74 per cent in the first quarter of 2016.
According to consultancy DTZ, the fall in investment sales was partially due to the uncertain global economic outlook. A large number of Singapore investors are however, still making investments in the overseas property markets. Despite a fall in private property investment sales from S$5.1 billion to S$521.90 million in 2016, DTZ data shows that total overseas investment figures amounted to at least S$2.05 billion.
Global property news
Drop in UK market optimism
UK property market optimism has dropped to a three-year low according to the Knight Frank/Markit House Price Sentiment Index (HPSI) survey. Households expressing interest in purchasing properties within the next two years also fell to 10.8 per cent, the lowest since April 2014. While the HPSI reading was at 60.1 with 25 per cent of households surveyed indicating a rise in the value of their homes in the past month, this was a slight decrease from 60.5 recorded the month before. HPSI readings above 50 demonstrate that prices are on the rise. Future HPSI reflecting sentiments on future values also decreased from 71.6 to 68.8 in April, the lowest value recorded in 2016. Although overall prospects of the market improved from 2015, increased uncertainty towards the economy and European Union vote has caused buyers to lower their expectations, according to Gráinne Gilmore, Head of UK Residential Research at Knight Frank, in an interview with OPP Today.
Lower number of approved mortgages in UK
The introduction of an additional tax on buy-to-let properties on 1st April brought about a fall in approved mortgages by British banks from 45,646 in February to 45,096 in March. According to the British Bankers’ Association, this was the lowest since December 2015 which saw a surge in demand by investors seeking to complete their purchases before the new tax was imposed.
Measures taken to deter foreign demand in Australia
The Australian state of Victoria is set to increase property tax on foreign buyers from three per cent to seven per cent, which will take effect on contracts signed on or after 1st July. There will also be an increase in the taxation on absentee land owners from 0.5 per cent to 1.5 per cent. State Treasurer Tim Pallas said that foreign buyers reap capital gains due to Victoria’s liveability and amenities and therefore should be expected to contribute to the upkeep of government services and infrastructure.
In addition, the Australian banks are tightening control over home loans made to foreign investors due to concerns that foreign demand has pushed locals out of the market. The Reserve Bank of Australia noted that Chinese investors’ purchases have doubled for the second consecutive year, posing an “indirect risk”. Such measures by national banks have resulted in a fall in foreign demand from 16.8 per cent in Q3 2014 to 11.8 percent in Q1 2016, according to the National Australia Bank.
Fall in US new homes sales
New home sales in US fell by 1.5 per cent in March from the previous month, making it the third consecutive month of decline. This trend was primarily concentrated in the West region where sales decreased by 23.6 per cent. However, this is not an indication of a slowing property market according to Daniel Silver, an economist at JPMorgan New York in an interview with Reuters. Overall prospects of new homes are still looking positive, as sales increased by 18.5 and five per cent in the Midwest and South regions respectively. New homes sales is expected to continue growing as borrowing costs remain low and income levels improve, according to Kristen Reynolds, US economist at HIS Global Insight in Lexington, Massachusetts
Pending home sales also rose by 1.4 per cent in March, based on data from the National Association of Realtors (NAR). Lawrence Yun, NAR Chief Economist, said to Agence France-Presse that US homes have become more affordable with lower mortgage rates even as the rise in prices exceed income growth.