Local Property News
Private home prices down 0.4% in Q2
Recent flash estimates by the Urban Redevelopment Authority (URA) show that prices of Singapore’s private homes decreased for the 11th consecutive quarter in Q2 2016 by 0.4 per cent quarter-on-quarter. This is the longest consecutive decline to date since the government started introducing cooling measures in 2009. In the Core Central Region (CCR), non-landed private residences saw a price increase of 0.2 per cent, compared to a 0.3 per cent increase in Q1 2016. In the Rest of Central Region (RCR), home prices rose 0.3 per cent after stagnating in Q1 2016. Homes in the Outside Central Region (OCR) saw a decline of 0.7 per cent compared to the previous quarter’s price decrease of 1.3 per cent.
HDB resale prices up 0.1% in Q2
According to flash estimates released by the Housing and Development Board (HDB), the resale prices of units increased 0.1 per cent quarter-on-quarter in Q2 2016. This increase reverses the 0.1 per cent slip in Q1 2016 resale prices. According to ERA, the RPI has been relatively flat over the last three quarters – a sign that resale prices of public flats has stabilised. Demand for homes has not slowed, with buyers willing to pay more for homes in good locations, according to ERA Realty Key Executive Officer Eugene Lim as quoted by Singapore Business Review. It is also unlikely for prices to dip drastically as demand will be fueled by permanent residents who have completed their 3-year wait out time, as well as buyers who urgently need homes. HDB will be launching approximately 5,000 Build-to-Order units in Hougang, Sembawang, Tampines, and Yishun in August.
Maybank Kim Eng: Property cooling measures should stay in place for a better economy
Maybank Kim Eng has recently suggested in a report that property cooling measures should not be removed until property prices fall significantly to “ensure Singapore’s long-term survival”. The report found that Singapore’s domestic consumption as a proportion of the nation’s GDP is one of the lowest globally, even as the country is ranked seventh in the world for highest per-capita income. This phenomenon of reduced spending is due to the value placed on residential property as an investment, as well as the large percentage of almost one third of household income devoted to housing-related expenses. According to Maybank Kim Eng, Singapore households have 209% of GDP invested in residential properties, thus restricting consumer spending and entrepreneurship efforts. The report stated that “a sustained and gradual easing of property prices is necessary to restore business competitiveness”. With the likelihood of the property market bottoming out, capital could be unlocked for investments in productive assets or used for consumption, potentially enhancing entrepreneurship.
Holland Village no longer the living area of choice for expats
Singapore’s District 10, especially Holland Village, is no longer the preferred residential area of the country’s expatriate population. Juliann Teo, Head of Residential Leasing at Jones Lang LaSalle, told Singapore Business Review that Holland Village owed its popularity in the past to amenities and a community where fellow expats could mingle. The option to purchase groceries and access expat communities online has resulted in the shift in choice locations. The expat choice residences are now in Districts 1, 2, 4, 8 and 13, according to Ms. Teo.
JLL data showed that rental demands from expats rose by 110 per cent in District 10 over the past 10 years, while rental demand in Districts 1 and 2 rose by 751 per cent and 652 per cent respectively in the same time period. Both districts are close to the central business district – District 1 covers areas like Boat Quay, Chinatown, Cecil Street, Havelock Road, Marina Square, Raffles Place, and Suntec City, while District 2 covers Anson Road, Neil Road, Shenton Way, and Tanjong Pagar, making it convenient for expatriates to commute to work. Ms. Teo added that there has also been a larger supply of CBD housing in recent years.
Expat demand for housing in District 4, Sentosa Cove, has also surged by 480 per cent over the last decade, due to new launches and unique lifestyle offerings in the district. There was also an increase in the number of District 4 homes leased last year, from 2,097 homes in 2014 to 2,424 homes in 2015. Districts 8 and 13 were also popular among expats, with leasing volume increasing by 425 per cent and 365 per cent respectively over the past ten years. The draw of homes in these districts was attributed to their central location and the increase in more compact houses, which are suitable for smaller families. Teo added that popularity in Districts 8 and 13 could also be due to companies reducing costs by locating expats outside of the central region.
Global Property News
Singapore and Hong Kong have the best environment for real estate operations and investments in APAC
The Jones Lang LaSalle’s (JLL) Global Real Estate Transparency Index (GRETI) 2016 has found Asia Pacific to have the best progress worldwide in being transparent with its real estate practices. The major factor driving improvements in Asia Pacific has been the increased availability and quality of market data. In some countries improvements have also been seen in regard to performance benchmarking, the enactment of new legislation, the introduction of higher ethical standards, and the wider adoption of ‘green building’ regulations and tools. In the region, Singapore and Hong Kong were labelled as ‘Transparent Markets’, with a close fight to be the most Transparent market in Asia-Pacific, but both missed the “Highly Transparent” category by a short margin. The index rated the United Kingdom, Australia, Canada, and United States as ‘Highly Transparent’ markets – countries with the most transparent real estate markets.
The JLL index helps identify which countries have a higher risk of corruption, unsatisfactory corporate governance, and failings of regulatory enforcement that has led to a negative impact on business activities and investments.
Prime global rents fall by 0.5% between March 2015 and March 2016
With economic uncertainty, average global rental returns on prime property fell by 0.5 per cent year-on-year in March 2016, according to a Knight Frank Prime Global Rental Index report. Toronto, Canada was ranked first, with rents in prime district increasing by 8.9 per cent annually due to greater demand for prime residences and lower condo vacancies. Guangzhou, China was ranked just behind Toronto, with a 5.5 per cent annual increase in rental returns. Cape Town, South Africa was ranked third with a 1.5 per cent increase. Taimur Khan, Senior Research Analyst at Knight Frank said that 11 out of the 17 surveyed cities indicated stagnant or falling prime rents over the past year. London is at 11th place, with prime rental prices decreasing one per cent year-on-year in March 2016.
In these prime districts, tightened regulations and newly imposed taxes have raised the supply of luxury rental homes and brought rental prices down, according to the report. Over the next year, the luxury rental market is expected to recover once these changes are stabilised.
US housing market environment improves for home buyers and tenants
US home rents grew by 3.7 per cent annually in the second quarter of the year, a far cry from the 5.1 per cent gain in the same time last year, according to apartment analytics firm Axiometrics. Almost all housing markets experienced rental growth, with only a decrease in rents in Houston due to an excess supply of homes and lay-offs. Jay Denton, Senior Vice-President of Axiometrics, told CNBC that the annual rent growth is stabilising with the influx of new homes and jobs. Occupancy rates in the second quarter are at an all-year high of 95.2 per cent, leading to strong demand for rental homes – except in the prime rental market where it is facing a glut of both rental and non-rental housing.
At the end of June, there were 5,362 resale condominiums and co-ops on the market in New York, a 25 per cent jump compared to the previous year, according to a Miller Samuel Inc and Douglas Elliman Real Estate report. In Q2 2016, with sales being cooled, the supply of resale homes reached the 10-year quarterly average, according to Jonathan Miller, the President of Miller Samuel, in an interview with Bloomberg. More buyers will be able to own a home under US$1 million as prices decline. A total of 2,231 resale units were transacted in the second quarter, a decline of 9.4 per cent year-on-year, with units transacted at a median price of US$945,000.
Asian banks on alert amid increased interest in London property
Despite the post-Brexit referendum uncertainty, Asian property investors are still drawn by the cheaper real estate as a result of the weakened sterling. Lenders, however, are more hesitant about financing their mortgages. Singapore’s United Overseas Bank (UOB), the third-biggest lender in the country, has indicated that lending to London property buyers will be on hold until there is more information about Britain’s future economy. The Development Bank of Singapore
(DBS), the largest lender in Singapore, took a more relaxed approach by cautioning investors on London property investments. It remains to be seen if other Asian banks will follow suit. Sam Ahmed, the Managing Director of Deriv Asia, told BBC that banks will soon tighten loaning and seek protection from vulnerabilities of UK assets. Camilla Dell, the Managing Partner and Founder of Black Brick, told IBTimes UK that UOB’s concern was currency risk, rather than the prospects of London’s property market.
Despite greater interest from Asian investors, sales volumes in London have taken a hit. Paul Firth, the Head of Real Estate at Irwin Mitchell LLP, told Reuters that some deals have been cancelled or put on hold to monitor the situation, one of which involved a stalled £30 million shopping centre acquisition. Mark Carney, the Governor of the Bank of England, said that commercial property sales stood at just 50 per cent of its peak last year, while residential property has dipped significantly. According to Cushman & Wakefield, commercial real estate investment in Britain was worth £10.7 billion from January to March of 2016, a 28 per cent decrease from the same time period the year before.
The construction industry has also taken a hit, falling to a seven-year low. The construction Purchasing Managers’ Index fell by to 46.0 in June when seasonally adjusted, compared to 51.2 the month before. It was also the first time in more than three years that the index went below the neutral 50.0 point, according to financial data analyst Markit. The lack of housing has prompted the Local Government Association to call for a national renaissance for council house building, which has been backed by the Federation of Masters Builders. In 2013 to 2014, homes constructed by private developers made up about 77 per cent of all new homes, while the councils built only about one per cent of all new homes in that same time. This is in contrast to the 44 per cent of new homes built by the council in 1977 and 1978 to fulfill the nation’s needs of over 250,000 new homes.
Sydney home prices rose 6.8% quarter-on-quarter in Q2 2016
In June 2016, home prices in Sydney rose 1.2 per cent month-on-month, leading to a 6.8 per cent quarter-on-quarter rise in home prices for Q2 this year, according to CoreLogic Inc. data. Home prices rose as a result of dwindling housing supply. Home listings in Sydney have fallen in June by more than 16 per cent compared to the same period last year, hitting a five-month low.
Cheaper US homes a hit among foreign buyers
The stronger US dollar and higher home prices have not deterred international buyers’ demand –they are in fact changing their focus to cheaper residences. Lawrence Yun, Chief Economist of the National Association of Realtors (NAR), told CNBC that although non-resident foreign buyers have slowed, more immigrant foreigners have been purchasing homes, leading to the second highest overall sales dollar volume since 2009. Although home purchases by foreigners fell by an annual 1.3 per cent to US$102.6 billion between April 2015 and March 2016, according to an annual NAR report on US real estate, there was a 2.8 per cent increase in the number of homes purchases to 214,885 homes.
Chinese buyers purchased the most, buying a combined dollar volume of US$27.3 billion, three times as much as Canadians who came in second place among top foreign buyers. They also bought the most expensive homes – at a median price of US$542,084. The prices of homes bought by global buyers were higher than that of the median US home price. Florida, California, Texas, Arizona, and New York were popular destinations for foreign buyers, accounting for 22, 15, 10, four, and four per cent of foreign buyer share respectively.
UK real estate funds impose freezes
The UK real estate sector is turning to drastic measures since the country voted to leave the EU, as UK’s position as a multinational financial hub is threatened. As investors flock to make withdrawals, at least seven major real estate funds – Aviva Investors, M&G Investments, Henderson Global Investors, Columbia Threadneedle Investments, Canada Life Aberdeen Fund, and Standard Life – have ceased investors’ fund withdrawals to prevent a sudden departure that could result in heavy losses. Analysts have warned that London office valuations could decrease by up to 20 per cent within the next three years. These mutual funds allow investors to cash out on short notice on assets like commercial property. M&G Investments reported that investor redemptions surged since the Brexit result. Real estate funds also dealt with a flurry of redemptions in the global financial crisis of 2007 to 2008, which saw property values drop more than 40 per cent from its peak. The Bank of England published a report that cautioned “tightening credit conditions” for the nation’s commercial property market and warned that price falls could be worsened by investors and real estate funds alike when the funds are sold in order to facilitate investors cashing out.