Local Property News
Property cooling measures to stay: MAS
The fall in Singapore property prices since their last peak in Q3 2013 is insufficient to warrant the lifting of existing cooling measures, according to Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS). Mr Menon emphasised at an annual report briefing on Monday (Jul 25) that this decision was to ensure the property market remains stable and sustainable. Also, the increase in property prices by 60 per cent from 2009 to 2013 has outpaced that of household incomes, which increased by 30 per cent in the same time period. Mr Menon added that there was a risk of property prices rising in the event that cooling measures are lifted, considering sustained low interest rates and continued investment interest from foreign investors.
Ms Christine Li, Director of Research at Cushman & Wakefield, told TODAY that she agreed with MAS’ view and said that even though demand for housing has slowed down, investors may yearn to buy property to safeguard their wealth. However, Mr Nicholas Mak, Head of Research and Consultancy at SLP International, pointed out that the private property market may be over regulated by the government. The announcement by MAS came as private home prices fell for the 11th straight quarter in Q2 2016, though the cumulative price drop since its peak in 2013 has only been 9.4 per cent.
Q2 private home sales hit record-high since peak in 2013
Recent data from the Urban Redevelopment Authority of Singapore (URA) shows that private home sales increased in Q2 2016 by 59.8 per cent quarter-on-quarter, with 4,550 units sold. This was the highest number of transactions since 2013, when the Total Debt Servicing Ratio (TDSR) was introduced. The primary market saw developers selling 2,256 homes, while 2,294 private homes were resold. Home prices also fell 0.4 per cent quarter-on-quarter in Q2 2016 for the 11th straight quarter – the longest falling streak. The price decline, however, is stabilising compared to the 0.7 per cent decline in the quarter before. Mr Eugene Lim, Key Executive Officer of ERA Realty Network, told TODAY that buyer demand has risen in response to the declining prices. According to Mr Lim, buyers remain price conscious, mostly purchasing homes priced between S$1 million and S$1.5 million.
In a separate report, OrangeTee noted a slowdown in percentage price changes in the Core Central Region (CCR) and the Rest of the Central Region (RCR) in previous years. The report stated “the percentage price change for the CCR and RCR for 2014/2015/2016H1 were -4.1 per cent/-2.5 per cent/0.6 per cent and -5.3 per cent/-4.3 per cent/0.2 per cent respectively.” OrangeTee believes that buyers will continue to be drawn to the CCR should developers offer incentives such as deferred payment schemes or direct discounts. The outside central region (OCR), however, continues to see further downside risk with a high volume of upcoming supply concentrated in the region. Approximately 52 per cent of the upcoming supply pipeline is in the OCR. OrangeTee notes that “the percentage price change for the OCR for 2014/2015/2016H1 was -2.2 per cent/-3.7 per cent/-1.8 per cent.”
Although the take-up on private homes is encouraging, a CBRE report showed that new launches may not be doing as well. Seventy per cent of new private homes sold in the first half of 2016 came from previously launched developments, signaling that buyers may be waiting for discounts and incentives from developers before they purchase.
CBRE: Luxury market to slow in H2 but still outperform 2015
The luxury property market received a boost in H1 2016 with the sale of 131 luxury homes valued at S$5 million and above, compared to the sale of 166 luxury homes in the whole of 2015. CBRE attributed the surge in sales to unique pricing offerings, such as that of Ardmore Three, which transacted 34 homes at the price of S$3,200 psf, upon offering a 15 per cent discount and a 15 per cent cash rebate on additional buyer’s stamp duty. The median price of luxury homes have increased from S$2,700 at the end of 2015 to S$2,950 at the end of H1 2016. Luxury home sales are expected to slow in the second half of the year, however, due to the lack of new development launches. Even then, the luxury home sales recorded in 2016 are well poised to overtake that of 2015.
HDB resale prices flat in Q2
Prices of resale Housing and Development Board (HDB) flats remained unchanged in Q2 2016, even as the volume of resale transactions increased in the same time period by 31.2 per cent to 5,838 units up from 4,449 units in Q1 2016. Four-bedroom flats made up the bulk of the transactions with 2,473 units sold, followed by three-bedroom flats with 1,500 units sold. The number of applications approved for renting out HDB flats increased by 5.2 per cent from 11,239 in the previous quarter to 11,824 in Q2 2016. The number of HDB flats that were sublet increased by 2.2 per cent quarter-on-quarter, with 52,171 HDB flats sublet at the end of June. HDB will put up 4,800 Build-To-Order (BTO) flats in Hougang, Sembawang, Tampines, and Yishun on offer next month.
8 major office spaces to be added by 2018
More than 8.5 million square feet in office space is slated to be added in Singapore by end-2018, and out of this are eight major office projects which are currently under construction. These major developments are located largely in the Central Business District (CBD), namely Marina One, Guoco Tower, Duo Tower, 5 Shenton Way, Robinson Tower, and Frasers Tower. Two others, Paya Lebar Central and Woods Square, are located in the city fringe and outside of the central region respectively. Woods Square is set to be the first office project in Woodlands Regional Centre.
Meanwhile, office rents have fallen by 3.5 per cent quarter-on-quarter in Q2 2016, according to URA, and office vacancy rates have decreased by 0.1 per cent quarter-on-quarter to 9.1 per cent. According to Cushman & Wakefield, vacancy rates for prime office spaces have also decreased in Q2 2016. Vacancy rates in Grade A CBD, Marina Bay, and Raffles Place decreased by 0.4 per cent, 0.5 per cent, and 0.8 per cent to 4.2 per cent, six per cent, and 2.9 per cent respectively.
A Royal Institution of Chartered Surveyors (RICS) report predicts that the local commercial market is expected to decline even further, with rents continuing to fall in the coming year. According to RICS, rental values are estimated to drop by 3.3 per cent, while capital values will drop by 2.5 per cent due to the surplus in office space outweighing demand from investors.
Global Property News
Demand for UK expat mortgage increases while London sales and prices fall
Since Brexit, there has been an increase in demand for UK expat mortgages, especially from Hong Kong and the UAE, according to Liquid Expat Mortgages. Mr Stuart Marshall, the Director of Liquid Expat Mortgages, told OPP.Today that expat mortgage enquiries have likely increased as expats look to take advantage of a pound that is now weaker than the US dollar. He added that instead of hurting the expat mortgage market, the Brexit has resulted in UK investors potentially gaining from sterling fluctuations. The expected UK interest rate cuts will most likely increase interest and demand in UK property.
In another report by reallymoving, London sales have reportedly plummeted by 44 per cent since the Brexit vote, with prices dropping 12 per cent. Rob Houghton, Chief Executive Officer of reallymoving, told OPP.Today, “It seems clear that Brexit has had a marked impact on the UK property market. The drop in transaction volumes has been striking, particularly in London, the Home Counties, and Northern Ireland. In the medium term we would expect volumes to pick up if the price falls are maintained, but it is clear that many prospective home movers are sitting tight until there’s greater clarity over the post-Brexit economy and our likely new relationship with the rest of the EU.”
US home sales peak
US home resales hit a record high in almost nine-and-a-half years last month as it increased by three per cent year-on-year to 5.57 million homes – the most since February 2007, according to the National Association of Realtors. First-time buyers contributed to the resales, with a 33 per cent share of sales volume – the highest in four years. Sales were also bolstered by lower unemployment and low interest rates. Median prices for resale homes grew by 4.8 per cent year-on-year to a record high of US$247,700.
New home sales also performed well, rising by 3.5 per cent month-on-month in June 2016, bringing the annual total to 592,000 units, the highest in almost eight-and-a-half years. New home sales also increased 25.4 per cent year-on-year. Mr Millan Mulraine, Deputy Chief Economist of TD Securities in New York, told Reuters that the property market is expected to grow further in H2 2016 amidst better employment, lower interest rates, and economic recovery.
15% property transfer tax on foreign property investors in Vancouver
Foreign property buyers in Vancouver will be subject to a new additional property transfer tax of 15 per cent from 2nd August. Existing property transfer tax rates in the province are between one and three per cent. The move stands to affect Mainland Chinese the most, as they have reportedly caused Vancouver to become Canada’s priciest property region. The tax is aimed at helping locals afford homes and to curb current increasing activity of foreigners purchasing homes for investment purposes, leaving them unoccupied. Prices of an average home in Vancouver surged 32 per cent in a year to reach C$917,800 in June 2016. Foreign investors have been blamed for the heating up of Vancouver’s property market, with preliminary data revealing C$1 billion pumped into the British Columbia residential market by foreigners between 10th June and 14th July. The influx of foreign investment in Vancouver real estate is also attributed to low interest rates.
Danang, the next Vietnam boom
Danang, a coastal city and the third largest region in Vietnam after Hanoi and Ho Chi Minh City, is up-and-coming with its tourism potential. According to Savills Vietnam, which has recently set up office in Danang, seven hotel and resort acquisitions with valuations between US$20 to US$60 million have been completed in the city in this year alone. Its hospitality and tourism industry is boosted by China and Russia, due to its prime location at the fringe of North Asia. Mr Troy Griffiths, Deputy Managing Director of Savills Vietnam, told DealStreetAsia that domestic travellers are also boosting the tourism industry, with around 60 to 70 per cent of all travellers to Danang at present being domestic — and that continues to grow. Mr Griffiths believes that there is likely to be foreign interest in Danang, citing The Nassim in Ho Chi Minh City as an example. Current foreign ownership laws in Vietnam allocate a maximum of 30 per cent of a development to foreigners; The Nassim reached this limit due to it being a grade-A development. Opportunities also abound in the residential market for second homes in Danang. Mr Griffiths noted that homes that were purchased in the past two to three years are now occupied and in demand. The commercial sector in Danang is also set to grow, with many industries experiencing strong growth.
China tops global real estate price increases
According to Knight Frank’s Global Residential Price Index, four of the top five cities with the highest annual increase in home prices are from China. Shenzhen came out top in Q1 2016 with home prices increasing by an annual 62.5 per cent, followed by Shanghai at 30.5 per cent. Istanbul and Turkey came in third with a rise of 19.6 per cent in home prices year-on-year. In fourth and fifth place were Nanjing and Beijing with annual price increases of 17.8 per cent and 17.6 per cent, respectively. The average residential price increase of 150 cities worldwide was 4.5 per cent. Ms Kate Everett-Allen, Partner at Knight Frank, said that the gap between the best and worst performing housing markets grew from 55 per cent to 74 per cent quarter-on-quarter. She attributed it to the huge growth experienced by Shenzhen that lifted its year-on-year price growth from 48 per cent to 63 per cent in Q1 2016. Despite the growth experienced by these Chinese cities, further price growth from them are unexpected in the later part of 2016 due to newly implemented cooling measures in cities like Shenzhen and Shanghai. Annual price growth in Q1 2016 was noted for 74 per cent of the cities being tracked by the index.