Banking on rents to cover mortgages increasingly risky

As the rental market strains against the backdrop of a general economic slowdown and job security wobbles on its feet, the old ways of banking on rental yields to cover mortgage loans and other outlays on invested properties may no longer be a sure thing.

Alexis @ Alexandra CondoThe imbalance may be getting dangerously so even as the Monetary Authority of Singapore (MAS) has publicly warned investors against the risks of putting all their eggs in the property basket. They mentioned both property and corporate bonds as emerging risks, especially as growth is weak and the political situations across the globe is uncertain.

Rising vacancy rates and declining rental demand are the more concrete and obvious factors investors should consider before closing a deal simply because the total quantum prices are too good to be true. Before investing in overseas properties, currency fluctuations and political stability are also serious considerations, not to mention the strength and longevity of property and rental demand in a country not in close proximity.

la-rivere-2Although MAS has noted that most households here are able to weather an economic storm, if it does occur, those who have bitten off more than they can chew may want to reconsider their financial holding power and set their sights in the long-term rather than counting on their eggs hatching early.

Chinese top buyers of Singaporean properties

Foreign interest in local properties have not waned despite rising prices and supply over the past half a decade. Their appetite have not diminished, if at all. Transactions may have shrunk slightly due to the additional costs involved in foreign-purchases of properties in Singapore, put in place by the series of property cooling curbs rolled out since 2011, but they buyers are back in the market in search of potential sites and units, in particular buyers from mainland China.

skyline-residencesIn a year-on-year comparison, foreign property transactions were up 11.8 per cent and this excludes purchases by permanent residents. Besides the Chinese, other major buyers hail from Malaysia, Indonesia and the United States. Each group have their preferences as the numbers show. Chinese buyers mostly favoured suburban properties while Malaysia and Indonesian buyers went for core central region units. 68 per cent of Indonesian buyers and 40 per cent to Malaysian buyers purchased homes in the prime districts while 58 per cent of transactions from the Chinese were for homes outside of the core central districts. Most Indonesia buyers are willing to pay $2,000 psf and above for prime properties while Chinese buyers usually went for properties priced between $750 to $1,700 psf.

Marina ONe iprop watermarkThe Additional Buyers’ Stamp Duty (ABSD) may have been a deterrent at one point in time, but as the government made clear that the measures are here to stay, acceptance is beginning to truly sink in and buyers are willing to spend the additional amounts in exchange for long-term capital gains. Buyers from the United States are exempt from the ABSD due to a free-trade agreement and this has raised the number of buyers up from 1.1 to 7.3 per cent over the past 5 years.

 

Indian cities top in list of Asia’s property investment hotspots

India may not have previously come up as a potential goldmine for property investors, but real estate in some Indian cities have been creeping up the popularity charts and can now be viewed as some of Asia’s most prime investment real estate.

mumbaipropertyJust like in China, a huge country like India will no doubt have some cities which shine over the others. Mumbai and Bangalore have come up tops in a comparative table of 22 Asian markets. With many multi-national companies setting up regional headquarters or back offices in India, it comes as no surprise that commercial properties are key when it comes to real estate investment in India. The migration of locals from smaller cities and townships into these main cities and business hubs also mean a demand for rental properties are on the rise.

Singapore has fallen from its 11th place to 21st as residential property prices declined for 12 consecutive quarters. Even Tokyo, which topped the list at first place this year, have fallen to 12th place for next year as low interest rates see sellers holding on to their properties despite low vacancy rates. Japan’s declining economy also has a part to play in the market sentiments there.

newyorkapartmentThe mainland Chinese investors are some of the largest players in real estate markets across the globe, but they have begun to turn their attention away from Asia to markets further north such as London and New York. Property prices in China are soaring, and their yearning for foreign footholds and connections have brought them into both established markets in the West and emerging ones in the region.

3 City fringe properties exchange hands for $190 million

3 residential properties in the city fringes – owned by 1 group of 3 investment holding firms and sold to 3 different developers fetching $190.5 million in total. Quite the sale, it seems. These 3 sites, situated in Grange Road, Cuscaden Walk and Hullet Road, were launched for sale in October for $185 million and from the interest it drew before the sale closed on November 2, developers and investors seem upbeat about the future of high-end luxury residential projects and serviced apartments or hospitality-based properties in Singapore.

urban-suitesThe luxury property market may have shrunk slightly in the past 3 to 4 years, but buyers are coming back into the market, after letting the effects of the additional buyers’ stamp duty sink in. Despite the authorities being unlikely to budge on the property cooling measures for now, interest is once again growing, with central region properties sales on the rise this last quarter.

The site on Hullet Road with a total strata area of 18,428 sq ft was sold to Hullet Development for $38.2 million. The consortium led by Mr Patrick Kho of Lian Huat Group have plans to build a high-end development in the site, leveraging on its location right in the centre of town. The biggest of the 3 sites on Cuscaden Walk with a land area of 21,560 sq ft, was bought by a consortium led by Sustained Land for $103.8 million. The other plot on Grange Road was purchased by Roxy-Pacific Holdings for $48.5 million.

boulevard-vueThese new sales may ultimately see the introduction of some choice luxury apartment units in and about town, by the time they are launched or built, the market may or may not provide a suitably soft landing for these new properties.

Will home loan rates rise soon?

Low interest rates have been ruling the home loan environment for at least the past year. But how long more can this streak continue is anyone’s guess, especially as the current global economic climate is uncertain at best, what with the effects of the recent Brexit and US elections yet to be revealed.

Two golden idols carrying a red house with a "%" inconProperty analysts say that this may be the last chance for home owners to jump on the refinancing bandwagon as interest rates in the United States have been expected to rise starting next month, and similarly those in Singapore may also follow suit. Some loan packages may however have a lock-in period and borrowers may find themselves unable to refinance or having to pay a penalty for loan-cancellation or pre-payment. But there are a good many options out there and financial planners or experienced property agents will be able to advise on the best course of action for those looking to refinance their home loans. There are also data, website and apps out there to help borrowers who may want to do their research before approaching the banks.

forte-suites1The current financial climate is competitive and banks are also out to acquire market share, thus the competitive rates in the initial loan period could help shave a load of your ultimate home loan. Though the rise in interest rates is likely in the next 2 years, the climb will be gradual with the Sibor possibly doubling from the current 0.9 per cent to 1.85 per cent by 2018.

High prices may lower demand for Australian properties

It’s no secret that property prices have been skyrocketing in Australia, particularly in major cities such as Sydney and Melbourne. But as much as property owners and developers want to get onto the gravy train and take in all the profits they can, the way the current market prices are going may put many out of the affordability bracket and in turn cause a supply glut as fewer buyers are able to afford the exorbitant prices of homes in AustraliaProperty prices have risen 7.5 per cent in the last year alone, boosted by low interest rates and foreign investment monies flooding in mainly from China.

operaresidencessydneyIn Sydney and Melbourne, the market trend has moved away from landed homes or houses to high-rise apartments and as the number of units per square metre increase, analysts worry that the competition coupled with the high property prices may create a situation of oversupply of apartment units. This in turn could deflate the property market and see apartment prices falling 15 to 20 per cent within the following 2 years. How would this then affect those who have taken loans to purchase homes at higher prices prior to the deflation, and would that mean trouble for the banking and finance sector?

melbourneapartmentHigh-rise residential developments enjoying the most attention now are those near the railway stations or in the already crowded inner city areas. In Melbourne, 18,000 apartment units will be built within the next year and a half. Some analysts are however not overly worried about the apartment boom as overseas buyers are limited to purchasing only new homes and do favour apartment units closer to the city than landed houses future out in the suburbs. With the continued population increase and the number of foreign students or labourers coming into these cities, the demand may cool but a sudden fall seems unlikely.

Last BTO flat launch of 2016 brings over 10,000 new units

Photo credit: HDB

Photo credit: HDB

Bringing 2016 to a close, the Housing Board (HDB) has truly brought in the goods with their last and biggest BTO and SBF flats launch this year with over 10,000 units.

The flats in this launch are expected to be particularly popular with applicants as they are in the popular up-and-coming Bidadari estate and also the mature estate of Bedok and Kallang/Whampoa. 5,110 new BTO units will be spread out between these 2 estates while the remaining 2,194 will be in Punggol. Close to 3,000 flats unsold from previous launches will also be put up for sale this time round. This includes executive flats and 2-room flexi units.

Photo credit: HDB

Photo credit: HDB

Earlier launches this year have included units in mature estates such as Ang Mo Kio and Tampines as well. Units in Bidadari have been favoured by young couples and families as it is in a good location in the city fringes, well-served by public transport and near a few schools. The Bidadari development, though new, will be considered a matured one as it is essentially part of the larger Toa Payoh estate. Although singles are now allowed to apply for new flats directly from HDB, they are restricted to only 2-room flats in non-mature estates.

Photo credit: HDB

Photo credit: HDB

Prices of the new BTO flats in the current launch range between $135,000 for a 2-room flat in Bedok to $503,00 for a 5-roomer in the same estate. A 4-room unit in Kallang is priced at $497,000. Prices stated are before the application of grants or subsidies.

The application deadline for this launch will be at 2359 hours on Monday, November 28. The next launch is scheduled for February.

Scope for property investment opportunities in Vietnam widen

As Singapore-based property developers deepen their foray into emerging Southeast Asian markets, the opportunities for investment are increasing. Not only are residential projects viable investment options, but commercial and industrial spaces are also added to the mix.

d1mensionPhoto credit: CapitaLand

CapitaLand for example, is investing US$500 million (S$713 million) into commercial property in Vietnam come 2017. They will also be looking into acquiring more residential development sites to add on to the 9 which they have already launched since they established their presence in Vietnam in 1994. Major wealth management funds are indicating interest in investing in Asian real estate and many of these emerging markets are untapped pools of potential.

d1mension2Photo credit: d1mension.co

One of the most recent developments is a residential project in Ho Chi Minh city named the D1mension, suitably so as it stands on prime district 1 land. The project will consist of a 102-unit residential block as well as a 200-unit serviced apartment block which will be operated under the Somerset brand. More than half of the 30 units launched in the residential tower have already been sold and more will be launched next month. Private residential properties in Vietnam have been selling well as the middle class grows and rapidly. CapitaLand has already sold more than a third of the 1,700 units they have in stock with total sales accumulating to $114 million. The rising suburban class and increased foreign business investment will mean a higher demand for housing.