Week in Review – 4 November 2016

Local Property News
Serangoon Gardens site from Government Land Sales Reserve List open for application
A 17,189 sqm private housing site in Serangoon Gardens from the Reserve List of the Government Land Sales (GLS) programme for H2 2016 has been made available for application. According to the Urban Redevelopment Authority (URA), the 99-year leasehold site at Serangoon North Avenue 1 has a 2.5 gross plot ratio with maximum permissible gross floor area (GFA) of 42,973sqm. This is equivalent to 505 homes, at maximum height of two storeys as the site is located in a designated low-rise zone. Property analysts expect the site to open for tender as it sits in an extremely desirable location close to schools such as Nanyang Junior College, Serangoon Garden Secondary School, Rosyth School, Lycee Francais De Singapour; amenities such as myVillage and Nex shopping mall; and the Central Expressway. Mr Ku Swee Yong, CEO of International Property Advisor, estimates the bid price to be around $300 million.

Prices of HDB resale flats remain stagnant in Q3 2016; more BTOs to go on sale in November
According to the Housing Development Board (HDB) the Resale Price Index (RPI) remained stagnant at 134.7 in Q3 2016; resale transaction volumes fell 5.5 per cent to 5,514 in the same period. The number of approved applications for subletting in Q3 2016 decreased by 8.8 per cent to 10,789 from the previous quarter. A total of 52,394 flats were sublet in Q3 2016, an increase of 0.4 per cent quarter-on-quarter. 
The HDB will offer 5,090 new Build-To-Order (BTO) flats in Bedok, Bidadari, Kallang/Whampoa and Punggol in a Build-To-Order (BTO) exercise in November. There will be also be an estimated 5,000 flats available in a Sale of Balance Flats exercise.
Dip in sales and prices of new private homes in Q3 2016; sales of resale private homes increase
Transaction volumes of new private homes dipped 12.2 per cent to 1,981 units in Q3 2016 compared to the previous quarter, as a result of fewer new homes being launched. Analysts expect new launches, including The Alps Residences and Forest Woods, will result in improved sales in Q4 2016. Overall prices for private homes in Q3 2016 fell 1.5 per cent compared to a 0.4 per cent fall in the previous quarter, the steepest fall in seven years. According to the URA, landed home prices fell 2.7 per cent while prices of non-landed homes fell 1.2 per cent in Q3 2016, compared with 1.5 per cent and 0.1 per cent respectively in Q2 2016. Conversely, sales volume for resale private homes in Q3 2016 saw a 14 per cent increase to 2,615 units from the previous quarter, the highest transaction volume since 2012. According to Ms Christine Li, Director of Research at Cushman & Wakefield, the increased sales volume is indicative of prices falling to levels where buyers are comfortable re-entering the market. 

Rents and take-up of offices continue to fall 
In Q3 2016, office vacancies increased to 10.4 per cent, 9.1 per cent higher than in Q2 2016, the highest levels since Q2 2012. In the Central Business District alone, approximately 2.7 million sf of office space remains vacant. According to Cushman & Wakefield (C&W), the vacancy rates for all grades could continue to rise with the expected completion of an additional 879,000 sqm of GFA of office space. C&W believe the vacancy rate could reach the record level of 13 per cent that was seen in Q3 2010. Similarly, the office rental index fell by 1.1per cent quarter on quarter in Q3 2016. Many companies have taken advantage of the falling rents to move into newer developments, causing further vacancy strain on older buildings. As a result, landlords of non-grade A buildings are offering increased rent holidays and rent-free renovation periods to hold onto existing tenants and attract new demand to take-up the vacant offices. 

Retail vacancies increase even as rents continue to slide 
According to Bloomberg data, mall vacancies in Singapore increased 0.6 per cent, to 8.4 per cent in Q3 2016, the highest since Q3 2006. According to the Urban Redevelopment Authority (URA), the 2,460 leases for mall space in Q3 2016 represented a 12.5 per cent and 14.7 per cent slide quarter-on-quarter and year-on-year respectively. The increase in vacancies is despite rents decreasing 1.5 per cent in Q3 2016 from Q2 2016. In this period, Colliers international found that rents at the Orchard Road area fell 0.9 per cent quarter-on-quarter to S$39.86 psf, while rents in Regional Centres fell 0.8 per cent quarter-on-quarter to S$33.38 psf. The drop in demand for shop space from retailers follows decreased consumer spending due to the slowing economy and consumers turning to online commerce. 
Global Property News
Plans to attract foreign companies to Iskandar Malaysia to increase housing demand
UEM Sunrise Bhd, the largest landowner in Iskandar Malaysia, is planning to sell land parcels in the development zone to foreign companies in a bid to create jobs and uplift economic activity in the area. Mr Izzaddin Idris, Chief Executive Officer at UEM Group Bhd, said that having a right mix of industries setting up in Iskandar Malaysia would result in spin-off industries, creating more jobs and increasing the demand for housing in the region. There has been an oversupply of apartments in Iskandar after an influx of large projects helmed by Chinese developers. 
US home prices continue to rise 
In August 2016 home prices in the United States (US) increased 0.3 per cent month-on-month and 5.3 per cent year-on-year. According to Black Knight Financial Services, the rate of growth for home prices has been stable with seven of the eight months leading up to August 2016 showing similar rates of year-on-year price appreciations. Black Knight’s Home Price Index (HPI) showed that the average price of a home in the US in August 2016 was US$266,000, only 0.7 per cent less than breaking a new national record. 

Record low interest rates help fuel price growth in Australia’s residential property market
Overall home prices in Australia rose for the tenth consecutive month in October 2016. Fuelled by record-low borrowing costs, housing demand stayed strong in Melbourne and Sydney. The strong housing demand means it is unlikely for the Reserve Bank of Australia to further ease borrowing costs. According to a Reuters poll, 55 out of 60 economists expect interest rates to remain at 1.5 per cent, partly due to policy makers’ concerns of an overheated residential property market. Annual price growth increased to 7.5 per cent in October, compared to 7.1 per cent in September. Despite accelerating growth, the property price growth is still less than the peak of 11 per cent price growth in 2015. While prices in Sydney and Melbourne grew 10.6 per cent and 9.1 per cent respectively in October, states such as Perth and Darwin experienced price falls. 

Rents in South East England outgrows London as demand outweighs supply
According to the UK Office for National Statistics (ONS), the South East of England saw a 3.5 per cent increase in annual rents compared to London which saw a 0.8 per cent decrease in the year to September. In September, the average annual rent in Britain increased by 2.3 per cent year on year with an increase of 2.5 per cent in England, 0.1 per cent in Wales but a decrease of 0.1 per cent in Scotland. According to the ONS, the demand for rental properties rising faster than supply is a probable reason for the continued rise in rental prices. Year-on-year rental prices in England have been growing between 1.4 per cent and three per cent since 2012.

Increase in retail vacancies at Manhattan 
Retail vacancies in Manhattan’s shopping districts have reached record levels as retailers are shying away from exaggerated rents. According to C&W, Fifth Avenue in New York saw a 15.9 per cent increase in retail vacancy in Q3 2016, compared to 10 per cent in Q3 2015. This is a record vacancy rate for Fifth Avenue, surpassing the peak of 11.3 per cent in Q4 2014. The retail vacancy rate has been increasing in 2016. C&W data shows that this follows a rise in rents to an average of US$3,213 psf, up from US$2,075 psf in 2011. Richard Hodos, Vice-Chairman at CBRE Group Inc, said that while rents have increased proportionately with property values, retail spending has declined, scrapping away profits from retailers. The decline in retail shoppers has been due to falling interest in luxury products and tourist spending in response to the strong US dollar as well as rising popularity of ecommerce.