Local Property News
MAS tweaks mortgage refinancing rules to ease debt burdens of homeowners
On 1st September 2016, the Monetary Authority of Singapore (MAS) announced the easing of mortgage refinancing rules aimed at helping homeowners ease their debt burdens. The tweaks to the rules mean that existing mortgages will be exempted from the 60 per cent cap on their total debt-servicing ratio. However, the borrower has to follow a debt reduction plan with a financial institution, financing a minimal of three per cent of the outstanding balance within three years as well as successfully undergo the financial institution’s credit assessment. The change is a response to feedback from borrowers who were unable to refinance their existing property loans due to the 60 per cent Total Debt Servicing Ratio (TDSR) cap. The Managing Director of the MAS, Ravi Menon, explained that the relaxed mortgage refinancing rules will help existing homeowners ease their debt burden without leading to greater demand for housing loans.
According to Eli Lee, Lead Analyst at OCBC, the tweaks were meticulously planned and conceptualised and will help provide existing borrowers with greater credit stability. However, the rating for Singapore’s residential property market remains “neutral”, with property prices expected to slide further for the Financial Year of 2016-2017. The government has repeatedly declared that it is premature for cooling measures to be relaxed, even as home prices have dipped 9.4 per cent from the 2013 peak.
Current volatile market increases vulnerability of smaller developers
A S&P Global Ratings report, titled ‘Is Singapore’s Real Estate Sector A Safe Haven In The Local Currency Bond Market?’, states that smaller property developers, with their high debt and weaker financials, are more exposed in an uncertain market. The report states that developers have turned to debt to finance their growth due to the low interest rate environment over the past few years. According to S&P Global Ratings credit analyst Chan Kah Ling, there is a very high level of leverage among developers in Singapore, but the smaller players are more susceptible to financial suffering as they have limited operations, constrained financial flexibility and weak liquidity. She added that the ability to secure funding will be the main differentiator for such smaller developers in the current volatile market.
Real estate investment trusts (Reits), in comparison, are better placed due to their steady cash flows, lower leverage and prevalence of unencumbered assets. Furthermore Reits have healthy margins and strong interest coverage and the Singapore regulatory framework for Reits is supportive of sensible leverage policies. According to the report, almost half of the more than S$10 billion corporate bonds maturing by 2017 are accounted by the real estate sector. Some of the smaller developers that might be experiencing a liquidity tightening have almost S$1.4 billion currently outstanding in bonds. The report further states that the influence of larger property players in Singapore should be able to mitigate the downside risk in the domestic bond market as they have better and flexible finances as well as more funding options to overcome the short-term market weakness. Overall the real estate sector in Singapore should be able to stay robust in the face of market volatility.
HDB Awards recognises design and construction excellence of public housing projects
This year the Housing Development Board’s (HDB) annual construction awards recognised 23 projects by architectural consultants and building contractors for their excellence within their fields of design and construction. One of the winners was a project near Margaret Drive, SkyVille @ Dawson, which had community spaces designed to resemble parks, where residents could connect with other residents. Another award-winning project is Waterway Ridges, handled by Surbana Jurong Consultant, where the site was undulated to form a terraced landscape by staggering the blocks in terms of orientation and height. This allowed more units to have a view of Punggol Waterway, as well as give the impression of “ridges”. This is also the first public housing project that incorporated “water-sensitive” design on a large scale, including a network of vegetated swales that are environmentally sustainable, bio-retention basins, as well as different features that assists in treating surface run-off.
Global Property News
Housing prices in the US expected to continue rising in 2017; luxury residential units oversupplied
According to CoreLogic, a leading global property information, analytics and data-enabled solutions provider, property prices in the United States rose six per cent year-on-year in July 2016 and are expected to grow at a similar rate next year. Month-on-month values of homes rose 1.1 per cent in July across the country. CoreLogic expects a further increase of 0.4 per cent in August, and year-on-year home prices to increase 5.4 per cent by July 2017. Chief Economist at CoreLogic, Dr Frank Nothaft, expects home prices to continue rising in the year ahead if mortgage rates stay relatively low while the number of jobs continues growing.
Despite optimism in the US housing market, luxury residential property in Manhattan is facing a different situation. To encourage the sale of luxury residential units, buyers have been offered discounts of up to five per cent, and developers have been adjusting their sales plans to help their projects gain more traction. In 2016, New York will have launched 3,500 more new apartments, resulting in stiffer competition for sales. According to Corcoran Sunshine Marketing Group, the industry leader in planning, design, marketing and sale of new luxury residential developments, developers have delayed adding to the supply, as the number of units expected to enter the market this year is 38 per cent lesser compared to January estimates.
Average property prices in Auckland surges beyond NZ$1 million for the first time
The average price of a residential property in Auckland, the largest city in New Zealand, has risen above NZ$1 million for the first time in history. According to government property research agency Quotable Value, the price for a home in Auckland rose 16 per cent to NZ$1.01 million year-on-year, an 86 per cent surge compared to 2007. The property boom in Auckland is a result of record immigration, relatively low interest rates and a supply shortage. However, Jan O’Donoghue, QV General Manager, observed that while the average value of homes in Auckland rose due to increased activity in advance of the announcement of new lending restrictions which will take effect on 1 October, raising deposit requirements for residential property investors, market activity has slowed in the past few weeks.
Spire London to be officially launched in October 2016; home building sector gets boost post Brexit
Chinese developer Greenland Group will launch Spire London, Western Europe’s tallest residential tower, in October 2016. Spire London, a 235.145 metres high and 67-story residential project situated in the Docklands, will be the tallest in the UK and Western Europe. The project has 861 luxury apartments comprising 765 suites, ranging from one-bedroom to three-bedroom apartments as well as three-bedroom duplex penthouses. The units, with 999-year leases and starting from £595,000, are being sold by international agents including CBRE and Jones Lang Lasalle. According to Senior Director at CBRE, Matthew Leitch, the record-setting height of the project, together with unparalleled views and dynamic architecture sets the Spire London apart from other projects in the Docklands. As a result, buyer interest is expected to stem from end-users as well as local and overseas property investors.
As Britain prepares to leave the European Union, the British government will be announcing a £3 billion house building fund, aimed to help developers by providing cheap loans to improve the home building sector. Existing schemes such as the £525 million builders fund and a £1 billion large sites infrastructure programme are expected to be incorporated in the new building fund to help developers construct new homes. The fund is believed to be target small and medium-sized developers by providing cheaper loans or financial guarantees.