According to analysts from RHB Research, the current Singapore property market downturn is rather mild compared to past price declines. Prices of private property have dipped approximately 7 per cent from the mid-2013 peak, a mild decline compared to the price drops experienced during the Asian Financial Crisis (AFC) in 1997-1998 and the Global Financial Crisis (GFC) in 2008.
Despite government intervention, property prices sank to almost half of the peak during the AFC. Between Q2 1996 and Q4 1998, the Urban Redevelopment Authority (URA) property price index fell from 129.7 to 71.5. During the GFC in 2008, prices dropped approximately 25 per cent, with the URA property price index falling 24.9 points through the span of just four quarters, from 126.9 to 95.3.
Real estate crowdfunding in Singapore
Real estate crowdfunding is a fast-growing market and global crowdfunding consultancy Massolution expects the industry to double to US$2.5 billion this year. Lower investment amounts for crowdfunding allows investors to diversify their investments, which lowers risks and helps improve returns. Investment processes are more easily accessible and manageable online.
Singapore has regulatory rules on capital raising. Companies and crowdfunding platforms looking to raise capital through third-party investors are required to follow regulations. The country has a combination of independent and developer-managed platforms, with major industry players such as Capitaland already involved. Growth of the crowdfunding industry is expected to lower costs for developers, and in turn perhaps lead to lower prices for property.
UK hotspots for Singaporean buyers
With high prices, Central London properties are losing their appeal. Singaporeans are big buyers of London’s property market and of late it has become increasingly difficult to find affordable, good quality property with strong yields.
Singaporeans interested in London’s residential property should consider looking outside central London. South London’s up and coming areas such as Mitcham, or the Borough of Merton in South-west London, provide affordable housing within a good environment. Mitcham has a well-connected public transport system that allows commuters to reach central London within minutes. It is also connected to the tram network of South London. One-bedroom flats in Mitcham remain affordable, with prices starting from £210,000 and good rental yields.
CapitaLand, Southeast Asia’s biggest property developer, has stopped talks regarding purchasing Asia Square Tower 1. The office tower is situated in Marina Bay Financial District, within Singapore’s Central Business District. CapitaLand announced in October that there were ongoing discussions regarding the purchase of Asia Square Tower 1 from Blackrock Inc., the world’s biggest asset manager. The deal was said to be worth approximately S$4 billion.
Chinese Buyers flock to the US and Mediterranean
Despite global financial uncertainty, Chinese buyers are continuing to invest in the US, albeit with lower budgets. Chief executive officer of Euro Properties, Neo Que Tau, believes that overseas buyers will continue to see US property as a safe haven although prices for high-end luxury apartments, priced between five to ten million, have slowed.
Developers in New York believe demand for lower-end apartments will increase as the Chinese continue to seek homes for their children studying abroad. They are also eager to invest in solid long term assets. More developers are now targeting less wealthy clients who are willing to spend less than US$3 million. Euro Properties have developed single-floor condos, large enough to cater to the preferences of international buyers, with prices that can target a larger audience. Neo said, “We have deliberately created a product that is sized, priced and located very well for international buyers”. Mr Neo believes that New York real estate will remain popular, as it is seen a stable environment for investment.
Chinese real estate buyers have been looking to the Mediterranean nations as well. An attractive lifestyle, affordable luxury housing, educational opportunities for their children and advantageous visa programs are some of the reasons that have led to a rapid increase in demand from the Chinese.
Chinse buyers often look to the ‘Golden Visa’ rule to allow them to not only purchase an investment in the country, but to gain permanent residency as well. The visa investment scheme garnered US$768million for Spain in the first 15 months of its implementation.
Cambodia’s capital Phnom Penh is experiencing an increase in the construction of high-rise apartments, the result of an expat-led property boom. Frontier markets like Cambodia are getting more attention from investors, with popular property markets like Singapore losing appeal.
Developers that venture into the Cambodian market, such as Singapore’s Oxley Holdings, look to develop upmarket high-rise condominiums, while local developers look to low-rise apartments. There is concern amongst experts that in a few years, supply could outstrip demand. This is unless the Cambodian middle class move away from traditional preference for houses with land.
As a result of relaxed regulation on foreign home ownership in 2010, foreigners now account for an estimated 60 to 70 per cent of Cambodia’s condominium sales.
CBRE estimates that by the end of 2018, Cambodia will see 19,745 condominium units built, a 13-fold increase compared to last year. Despite the increase in supply, CBRE says rental yields for Phnom Penh’s prime area condominiums currently remain at ten per cent. This is in comparison to yields of four to six per cent in Bangkok and two to three per cent in Singapore. Although property investment in Cambodia remains a cheaper alternative for some investors, prices still remain out of reach for most locals.
According to a recent Knight Frank report, over the last two years, Singapore, China and Malaysia were the top Asian investors into Australian and United Kingdom’s property markets. Singapore accounted for USD25.10 billion worth of investment, while China and Malaysia accounted for USD 22.09 and USD5.61 billion respectively. Since the second half of 2013, Asian property investment into the United States, UK, Europe and Australia has amounted to USD78.4 billion. A UK investment company, London Central Portfolio (LCP), believes that while affordability is not an issue, scarcity of stock and slowing global demand is expected to underpin price growth for the near future.
Active investment from Malaysians has slowed over the past two years due to the weakened Ringgit. Malaysians are seen to have shifted their focus to the Australian market as the Ringgit has weakened by 6.6 per cent against the Australian dollar compared to a hefty 24 per cent swing against the pound sterling.
Chinese demand for property slowing
The average price of an Australian property has risen to approximately S$1million, due in part to Chinese demand. Credit Suisse Group AG has however warned that demand from the Chinese is waning due to a slowdown in the Chinese economy. Analysts from Credit Suisse, Damien Boey and Hasan Tevfik, claim that popular markets for the Chinese, such as Sydney and Melbourne, have experienced declining auction clearance rates, which may indicate less cashed-up foreign investors. The unexpected devaluation of the Chinese currency hit consumer confidence and the appetite for overseas property.
Chinese buyers have purchased an estimated 25 per cent of Sydney’s new homes over the past three years. Most homes in Sydney are sold at auction, and recent months have seen auction clearance rates in Sydney plummet from more than 90 per cent early this year, to mid-60 per cent. Despite weaker Chinese demand, Sydney’s house prices are still rising due in part to the weaker Australian dollar, a lack of supply and a strong local economy.
Some of the world’s largest residential markets are overpriced
Some of the world’s largest residential markets are overpriced, with countries such as Hong Kong and London at risk of a housing bubble. Demand from foreign buyers and investors seeking a safe haven have caused significant increases in property valuations in London. A UBS report tracking housing data claims that some markets, such as Australia, the UK and Canada, are currently overvalued by as much as 30 per cent. European cities perceived as overvalued include Amsterdam, Geneva, Zurich and Paris. Outside of Europe, Sydney and Vancouver are significantly overvalued, with Tokyo and Singapore not far behind.
Sydney is viewed as the third most overvalued city, behind London and Hong Kong. The city has seen house prices sky rocket due to record low interest rates. The Bank for International Settlements has also targeted emerging markets such as Turkey, Thailand, Philippines and Hungary as markets that are experiencing sharp increases in residential property prices.