Rising interest rates, increasing supply of homes for rent contributes to increase in auctions
Colliers International says 171 properties were put up for auction as mortgagee sales in the first nine months of 2015. This is a 52.7 per cent increase compared to the same period in 2014, which saw 112 such listings. 32 were landed properties, double the 15 listings in the first nine months of 2014.
For the first three quarters of 2015, sales totaled S$90.8 million, a hike of 54 per cent compared to the first three quarters of 2014. Rising interest rates and the increasing supply of homes for rent were key reasons for the rise in mortgagee sales.
Weak economic data and China’s growing woes have led to Singapore’s investment property market recording transactions worth only S$2.86 billion in 3Q 2015. This is an alarming 52.9 per cent dip compared to 2Q 2015, which recorded $6.07 billion. Data from Savills show that transaction volume in 3Q 2015 is the lowest since 3Q 2009. According to the report, such weak performance is a result of weaker global economic conditions, as well as negative developments from currency adjustments in China, which has led to higher volatility in global financial markets.
Apart from the wider trends and influences, cooling measures, as well as lower supply from Government Land Sales (GLS) sites could have played a part in the dip.
In Q3 2015, private sector transaction value dipped 28.7 per cent quarter-on-quarter, to approximately S$2.37 billion from 36 transactions; private property deals amounted to 82.9 per cent of transactions. During the same period, the public sector under the GLS Programme saw just two residential sites and two industrial sites awarded, with total revenue of S$487.8 million, 17.1 per cent of total investment value for Q3 2015.
HDB: four new neighbourhood centres in the next three years
Over the next three years the Housing Development Board (HDB) will build Singapore’s first neighbourhood centres in more than ten years. These neighbourhood centres will be built in new estates such as Punggol, Hougang and Sembawang, with waterfront features, lush terraces and connections to public transport, along with “green” systems, such as rainwater harvesting. The new projects will include sheltered community plazas to facilitate interaction amongst residents, providing space for daily activities and community events. Mr Fong Chun Wah, Group Director (Development and Procurement) of HDB said that the goal of HDB is to plan well designed towns that are sustainable and community-centric, and to have a social role for the community, on top of being a developer or master planner.
Individual neighbourhood centres expect to serve the needs of 5,000 to 6,000 households, as one-stop centres designed with public feedback, providing a range of amenities, including supermarkets, food courts, other eateries and retailers. These centres will be linked to existing and upcoming transport nodes, such as MRT/LRT stations and bus stops.
The last new neighbourhood centres were built in 2004 (Pioneer Mall, Punggol Plaza). HDB ceased to build such centres to encourage participation by the private sector to provide commercial facilities in HDB towns. Private developers tend to build neighbourhood centres only if the resident population is large enough to support business operations, and so HDB has undertaken the new projects to better address residents’ needs.
According to a report by Knight Frank, Singaporeans make up the bulk of private property buyers in Singapore. Singaporeans purchased 4,431 units in the first half of 2015, 74 per cent of private home deals in Singapore. Permanent residents purchased 1,487 units in the same time period, 24.8 per cent of transactions. Companies bought 76 units, while corporates bought 36 units in Q2 2015, a mere fraction of the 301 units bought in Q2 2014.
Cut in number of land sites, established developers crowded out
BNP Paribas reports that less established property developers have been successful in bidding for Government Land Sales (GLS) programmes in 2015, as they have been more aggressive in their bids.
The report states that “traditional” developers, including City Dev, Fraser, UOL, CapitaLand and Keppel Land have won no sites since the start of 2015. The BNP Paribas report says this points towards greater competition for land, with new entrants coming into the market, hoping to quickly increase their market share. New entrants include foreign developers, boutique local developers and construction-related companies. BNP Paribas notes that there is still strong competition for land, with the number of bidders increasing for each tender site. Following a supply cut in the GLS programme in 2014, there is a greater urgency to restock land banks.
Luxury resale apartments in Hong Kong are among the priciest in the world, at an average of approximately $4.5 million. With such high prices, real estate investors in Hong Kong are looking for property investment opportunities overseas, which offer more affordability.
Julie Harvey, Director of Pinnacle Alliance, a UK property investment specialist in the process of opening a Hong Kong office, says one bedroom residential apartments in the UK start from £55,000, a fraction of the amount for similar apartments in Hong Kong. Hong Kong buyers are also looking at property investments in Malaysia, Australia and Thailand. With accommodation shortages, she believes the UK market is seeing an average growth of approximately ten per cent yearly, with rental growth of four to five per cent annually. These figures represent room for capital growth, expected to continue with housing shortages.
Harvey says UK property investment is safe and secure, and most investors are looking at medium to long term investments. Investors have the choice of living in their apartments, or have letting agents manage their properties for them. This passive investment with minimal work is popular in Hong Kong.
Currency exchange is also a contributing factor for investors. The Hong Kong dollar is linked to the US dollar, and changes in US interest rates could impact the property market. Praveen K Choudhary of Morgan Stanley and Cusson Leung of JPMorgan Chase & Co. both suggested that there could be price falls of ten per cent or more; transactions in August decreased by approximately a third, the lowest in 17 months, setting alarms ringing.
With favourable exchange rates, more investors are also turning towards Tokyo and Melbourne. According to Deloitte, prices in Japan have dipped by 70 per cent over the past 16 years. As a result, Japanese property has a stronger appeal to young people who are unable to afford the down payment for flats in Hong Kong.
Bangkok: condos or apartments?
Bangkok is experiencing a steady rise in the number of expats according to statistics provided by the Ministry of Labour. Popular areas include Sukhumvit, Lumpini and Sathorn. Most prefer renting, staying between two and three years. CBRE Thailand says expats tend to favour apartments over condos. The single ownership of apartments means tenants can go to building owners when they require repairs or maintenance work. In the case of condos, the building manager manages only common areas and does not deal with unit-specific problems. Tenants have to go through a more troublesome process, and can take a longer time to rectify problems. This is why in the long run apartment buildings are mostly better maintained compared to condominiums, even if they are built around the same time. This might present an opportunity for developers. According to CBRE, there are only 415 apartments under construction in Bangkok’s more popular areas, against 27,000 condo units.
Sydney shows signs of market peaking
Frasers Property Australia and joint venture partner Sekisui House Australia have seen their proposal to develop DUO approved by the New South Wales Department of Planning & Environment. DUO is a two-tower, A$520 million mixed-use project with residential apartments, luxury flats, hotel rooms and ground floor retail and commercial space. It is part of the development at Central Park (an A$2 billion urban village development in Southern Village).
Analysts believe Sydney and Melbourne are coming to the end of their growth cycle, indicated by lower auction rates. The Chief Executive of McGrath Estate Agents, John Mcgrath, forecasts price growth of between three and five per cent before hitting a plateau. Richard Wakelin, Director of
Waken Property Advisory, likewise believes that the two cities are nearing the end of their growth phases.
Knight Frank: sluggish growth for global prime residential rents
The Knight Frank Prime Global Rental Index shows slow overall growth in the eighteen global cities tracked, ten saw rent increases between June 2014 and June 2015. During the same period, global prime residential rents saw a modest increase of 0.2 per cent, the worst since early 2010. Cape Town, South Africa tops the Knight Frank rankings, with prime residential rents increasing 10.2 per cent year-on-year. On the other end of the spectrum, Moscow, Russia is the worst performer, with an eleven per cent drop during the same period.
Beijing and Singapore are among the worst performers, with prime residential rents dropping by 8.4 per cent and 6 per cent respectively. Kate Everett-Allen, a Knight Frank Partner, says while sales markets in cities including Singapore, London and Nairobi are slowing down mainly due to cooling measures in the form of taxes or regulation of mortgages, expectations of accelerating prime rental markets are not being realizing.