Week in Review – 7 October 2016

Local Property News
Stronger interest for new projects and high-end property
Transaction volume for the residential property hit 2,100 units in Q2 2016, a 50 per cent spike from Q1 2016. New residential launches, such as Sturdee Residences, Gem Residences, Stars of Kovan, Botanique at Bartley, Kingsford Hillview Peak, Kingsford Waterbay, Sims Urban Oasis, The Glades, and Poiz Residences, contributed to the increase in the second quarter.  A total of 3,500-3,600 units were sold in H1 2016, with newly-launched projects accounting for 70 per cent of the units.
Similarly, luxury apartments performed well in H1 2016 with sale of 131 units valued at S$5 million or more, compared to a total of 166 units sold in the whole of 2015. CBRE noted that attractive payment packages influenced buyers to scoop up value-for-money deals. Ardmore Three accounted for the sale of 34 units in the first half of the year. A seventh floor unit in Le Nouvel Ardmore sold for S$21M (S$4,006 psf) was the most expensive luxury apartment sold during the period. As of end-June, the overall average price of luxury apartments stood at S$2,950 psf, up from S$2,700 psf at end-2015.
Q3 saw biggest quarterly drop in private home prices since 2009
Private homes prices in Q3 2016 fell 1.5 per cent quarter-on-quarter, the steepest quarterly fall since Q2 2009. Prices of private property have been declining since Q3 2013, and have dipped 10.8 per cent since then. Prices in the CCR, RCR, and OCR fell by 1.8 per cent, 1.3 per cent, and 1.2 per cent respectively. Private home prices are expected to fall by 2-4 per cent in 2016. Ms Christine Li, Director of Research at Cushman & Wakefield, believes the fall in prices is a result of a slowdown in the economy and surplus of property in 2015-2017, and noted that home owners with weaker holding power could agree to lower selling prices. The price fluctuation could also be a result of a change in the way private property price indices are calculated by the Urban Redevelopment Authority (URA). Following the change, the URA uses net prices of delicensed projects instead of just overall transacted prices. Previously, developers of delicensed projects were not required to submit information about incentives such as discounts and vouchers. 

Healthy market expected for HDB homes
Prices for Housing Development Board (HDB) resale flats in Q3 2016 remained stagnant compared to Q2 2016, with a Resale Price Index (RPI) of 134.7 for the third quarter. Following the unchanged growth of the HDB RPI, buyers are expected to commit to more purchases with sellers having more realistic price expectations. HDB also announced that approximately 5,090 Build-To-Order (BTO) units across Bedok, Bidadari, Kallang, and Punggol will be up for sale in November. A further 5,000 flats will also be put up under the concurrent Sale of Balance Flats exercise.

Investors more confident in local real estate investments 
Property investments in 2016 are expected to hit a three-year high. Real estate investment management firm Jones Lang LaSalle (JLL) estimates that the first nine months of 2016 saw total sales of S$15.41 billion compared to S$14.49 billion within the same time frame in 2015. Head of Research at JLL Singapore, Ms Tay Huey Ying, said that fierce competition in bids submitted for various sites during recent Government Land Sales (GLS) reflects investors’ confidence in the real estate market. The GLS tenders for Anchorvale Lane Executive Condominium and Fernvale Road closed in August and September respectively. Ms Tay forecasts 2016 to end on a high, with the Central Boulevard GLS expected to attract bids over S$2 billion. The sale of Capital Square and 77 Robinson Road are also expected to attract high bids.

Overseas buyers find Singapore luxury properties attractive
Luxury property in Singapore dropped about 25 per cent in 2016 compared to last year, making it more affordable compared to similar properties in London, Hong Kong, and New York. Luxury properties in these cities are up to 165 per cent higher than in Singapore. According to global Swiss private bank Julius Baer, sales volumes for luxury property in Singapore rose in H1 2016 as a result of incentives and discounts offered by developers, as well as due to the country’s top reputation in healthcare and as a livable business city. However, the Additional Buyer’s Stamp Duty (ABSD), which levies an additional 15 per cent tax on the purchase price for foreign buyers, might be a push factor.
Brandon Lee, a property analyst at JP Morgan Singapore, noted that Americans were the second highest foreign property buyers in Q2 2016. He observed that this is unusual as foreign luxury property buyers in Singapore are usually Malaysians, Indonesians, and Chinese.
Global Property News

London Mayor plans to conduct an inquiry to understand role of overseas funds on city’s property market
According to the Guardian, a British newspaper, London mayor Sadiq Khan plans to launch an inquiry to investigate foreign-owned properties in London. The inquiry is meant to analyse the scale and impact of different types of overseas investments in the city, and how other cities handle the impact of real estate investments by foreigners. Foreign ownership of residential property in London has resulted in higher housing costs. Through the inquiry, the authorities also want to assess how they can support Londoners looking for homes. Official data reveals that London property prices increased more than 12 per cent in the 12 months leading to July 2016. In mid-2014, annual price growth reached 20 per cent.
Vancouver’s property market cools on back of decreasing demand from foreigners
Home sales in Vancouver fell to 2,253 transactions in September, a 33 per cent year-on-year decrease and the largest decline since 2010. This decline is a result of the British Columbia government implementing a 15 per cent tax for foreign purchase of residential property in Vancouver in August. Authorities are now also implementing policies to help ease price gains in the property market. Prices for detached property in Vancouver hit C$931,900 in September, a 29 per cent year-on-year increase, but a 0.1 per cent decrease from August. According to UBS Group AG, Vancouver’s residential property market is most at risk of a housing bubble globally.
Record low interest rates boosts overall prices of residential properties in Australia
According to property consultant CoreLogic, prices of Australian homes increased 7.1 per cent in September following a 7 per cent rise in August as a result of bank borrowing costs being cut to a record low of 1.5 per cent by the Reserve Bank of Australia (RBA). However, these figures remain lower than the 11 per cent peak recorded in 2015. Demand for residential property in Melbourne and Sydney remained strong in Q3 2016 due to the record-low mortgage rates, with home values up by 5 per cent and 3.5 per cent respectively. While Canberra and Adelaide both had positive third quarters, Brisbane, Perth, and Darwin saw a fall in residential property prices. The RBA will hold its policy meeting on 11 October, and is expected to leave interest rates unchanged in order to study the impact of previous interest rate adjustments.

Q3 2016 sees US apartment vacancy rate stagnate and slower growth in rental prices
Data from real estate research firm Reis Inc. reveals that quarter-on-quarter apartment vacancy rates in the US remained stagnant at 4.4 per cent in Q3 2016. Growth in rent also slowed in Q3, despite this period typically recording the highest increase. For the third straight quarter, year-on-year rent experienced slower growth, with asking and effective rents both growing 0.9 per cent in Q3 compared to 1.1 per cent in Q2. According to Barbara Denham at an Economist at Reis, developers benefitted from healthy growth in rental prices and pre-leasing a couple of years back, but have since been overbuilding in certain markets where demand has softened. Reis Inc. data shows that effective rents in New York continue to be the highest at US$3,441 per unit per month, with San Francisco behind at US$2,481 per unit per month.