CBRE on H1 2015: Luxury property market sees signs of vigour as buyer interest returns
Good Class Bungalow (GCB) prices increased in H1 2015, despite the cooling measures. H1 2015 saw GCB prices average S$1,442 per square foot (psf)—higher than H1 2014 (S$1,381 psf), but lower than H2 2014 (S$1488 psf). CBRE also stated that although cooling measures have had marginal effects on GCB prices, investors are prevented from mortgage over-leveraging, resulting in a more stable and robust market as buyers are either occupants or investors with healthy balance sheets.
Sales volumes of luxury apartments (worth S$5 million and above) in the Core Central Region (CCR) jumped 45.7 per cent compared to H2 2014, with developers marketing recently completed projects locally and globally; prices ranged from S$2,600 psf to S$3,000 psf. CBRE expects projects with unsold inventory to be actively marketed and anticipates general price stability, as there are currently no known new luxury properties entering the market after 2017.
A recent tender by the Urban Redevelopment Authority (URA) for a residential site at West Coast Vale drew interest from six developers. The site, with an area of 18,908.7 sq m and maximum permissible GFA of 52,945 sqm, comes with a 99-year leasehold and attracted bids from S$236,900,000 up to S$314,100,000. Tender bids are still undergoing evaluation and an announcement for tender awards will be released at a later date.
Recent rulings by the Phuket Provincial Court and the Court of Appeals have invalidated two types of contracts—the ’30 Plus 30 Plus 30’ and ‘Secured 30 year leases’—which seek to extend foreign ownership of Thai property by bypassing legislation. Thailand has one of the shortest lease terms (30 years) available to foreign buyers, as compared to other countries in Southeast Asia.
With longer lease terms expected to yield higher rate of returns and hence being more attractive, investors have called on the government to extend lease terms of foreign ownership of Thai property. While this process may take years, the government has approved lease extensions in six economic zones on the basis that land-use will be for commercial and industrial purposes only. Meanwhile, Thai developers, such as a joint venture between BTS Group Holdings and Sansiri, continue to expect sustained demand for condominiums. The company will launch 25 separate projects worth THB100 billion (US$2.8 billion).
Deflation hits Johor’s property market as Malaysia introduce cooling measures
Sales of residential properties in the Iskandar region saw significant declines as compared to 2013, when high-profile land deals frequently saw strong investor demand. Today, growth in the region is gradual. First quarter results in 2015 by the National Property Information Centre revealed that the sale of industrial and commercial units had generally expanded, in contrast to that of residential units. According to the National Property Information Centre, industrial property sales jumped 51.8 per cent year-on-year (y-o-y) and 6.8 per cent quarter-on-quarter (q-o-q).
Commercial property sales increased six per cent y-o-y and eight per cent q-o-q, whereas residential property sales fell by nine per cent y-o-y and 6.8 per cent q-o-q. The contraction in the residential market can be attributed to tightening controls on lending restrictions and strict cooling measures set by the Federal government. While the Singapore government had advised caution in Johor’s property market given a housing supply glut, Johor continues to be one of the better performing regions in Malaysia, compared to Kuala Lumpur and Penang. This is most likely due to Johor’s proximity to Singapore and weaker Malaysian ringgit vis-à-vis the Singapore dollar.
Sydney’s housing prices have spiked since December 2002, emphasising regulators’ efforts to restrict market gains made by property investors. In response to a housing bubble created by buyers who are rapidly acquiring property through debt-funding, regulators have imposed greater restrictions on banks to their would-be borrowers. Although such changes will undoubtedly dampen growth, prices are expected to see a further five to eight per cent increase.