Changes in overseas property markets – Malaysia

Massive property developments have been springing up all over Malaysia as part of the Iskandar Malaysia development plan over the past few years. But now, as the project is in full force, bumps are gradually showing up.

In Johor, one of the key economic drivers of Iskandar Malaysia, a major land reclamation project which is to yield thousands of luxury homes may now be in danger of being cancelled as it may threaten marine environment and the livelihoods of hundreds of fishermen.

Named Forest City, the project which will be built on the reclaimed land will feature four islands whose land area will total three times that of Sentosa, linked by roads and also to mainland Johor. It will house a massive number of luxury condominiums and landed homes. As a joint project by China’s Country Garden Holdings and a company with links to Johor’s Sultan Ibrahim Ismail, it seems they are counting on Chinese buyers from snapping up properties there, despite a looming supply glut.

development-riverside-01Besides Country Garden Holdings, other Chinese developers such as R&F Properties are also reclaiming land on both sides of the causeway to build a mixed-used developments which including hospitality, commercial and residential properties. Greenland Group and their Tebrau Bay Waterfront City in eastern Johor Bahru is also adding to the pool of high-end luxury homes in Iskandar.

Malaysians and investors alike are now worried that the oversupply of luxury homes in Malaysia may take the turn for the worse should more such massive projects be allowed to carry on. With that many projects being developed at the same time, how could investors better prepare themselves for the future? And are all projects in equal danger? Or are there still projects which are worth investing in?

Changes in overseas property markets – Australia

Australia, the UK, Japan and Malaysia, have long been some of the favourite cities of Singaporean property investors. With an increasingly number of Singaporeans studying in Australia, buying and rental of properties in cities such as Sydney, Melbourne and Perth have been on the rise.

But Australia has recently announced plans to rein in foreign investments as foreign monies, especially Chinese, have been reported to be depriving local buyers of housing opportunities and possibly driving up prices. Home prices have increased 13 per cent in Sydney last year alone. New fees, of up to A$5,000 for properties valued under A$1 million and additional A$10,000 for every subsequent A$1 million, may be introduced. A foreign real estate buyers register may also be set up, for the government to better monitor and enforce these new rules.

VictoriaResidences2-600x397This could put a bender on Singaporean investors looking outside of the domestic market as restrictions have already been placed on local as well as Malaysian properties.

This is not  the first time Australia has placed restrictions on the property market. In 2010, the FIRB (Foreign Investment Review Board) was set up to review foreign purchases of Australian properties. Only upon approval can Temporary residents purchase properties, which they in turn must sell when leaving the country. Approval periods often take up to 4 weeks and foreign investors may be represented by the Property Council of Australia.

Before these new rules take effect, are there any properties in Australia to look out for?

HDB property market – Has balance been struck?

The last four years saw aggressive moves by the Housing Development Board to release and build new HDB flats. In 2014 alone, 51, 598 new HDB flats were added.

Has this supply of new flats been effective in stabilising the property market? Is the supply and demand scale now balanced? Minister for National Development, Mr Khaw Boon Wan, has mentioned that the increased supply has helped move the selling price of HDB flats down, yet at a gradual pace and margin which buyers are still able to stomach.

WEst Rock HDB FlatFrom this year on, the number of new HDB flats will begin to decrease, from 50,796 this year to 38,316 in 2018. Which could mean that this year might be the watershed year for the HDB market. Will buyers be taking the opportunity to purchase before supply becomes tighter once more? Or will the number of HDB flats which have been released thus far be able to provide for a stable resale market, keeping a level playing field between buyers and sellers?

As Singapore grows in population size, and global and domestic economies fluctuate, all this would also be tightly linked to population and immigration policies. With the election possibly coming our way next year, buyers may take the chance to look out for opportunities to upgrade property-wise this year, or perhaps wait and see what the post-election changes may bring.

Private condominium rental – Volume up, prices down.

Despite a softening of the private property market across the board, private condominium rental demand seemed to have remained steady, especially at popular projects in close proximity to transport and in areas with a low supply of similar new properties.

At Reflections at Keppel Bay for example, 314 more leases were signed last year as compared to 293 in 2013. But rental prices dipped 6.6 per cent as landlords may have been forced by competition to lower their asking prices. Average monthly rental here was $4.85 sf. Nearby, at the Caribbean at Keppel Bay, average monthly rent dipped by $0.43 psf from the previous $5.63 psf.

Reflections at Keppel Bay boasts waterfront living with a marina and a good many luxury amenities as well.

Reflections at Keppel Bay boasts waterfront living with a marina and a good many luxury amenities as well.

The tipping scale may now be leaning towards tenants as the influx of new properties, and in larger residential properties, many landlords may be competing against one another for the same audience. And once rental begins to dip across the island, tenants have an upper hand at bargaining for reduced rent and landlords often find themselves having to adjust prices to seal a deal.

Properties with a prime location and fewer competing units in the vicinity may still be in high demand, though City Square Residences at Kitchner Link seems to be losing its popularity with tenants despite its proximity to City Square Mall and Farrer Park MRT Station.

As more new properties reach their occupation-ready status this year, and coupled with the rising interest rates, it may be a slow but arduous journey for the market. What can property owners and landlords do to steel themselves for the year ahead?

Competitive pricing will help Property developer move units quicker

Home mortgage interest rates look set to rise sometime this year, and while new properties continue to come into the market, buyers will be spoiled for choice with executive condominiums, resale private apartments and new condominium units all competing for their attention.

Trilive KovanPricing might then be the differentiating factor in the current property market which is still finding its footing. In January, Symphony Suites in Yishun proved to be one of the best sellers in the non-landed private property market. Prices averaged at $1,010 psf, which was not considered to be on the higher end of the price spectrum. Most suburban properties fared better, making up 62 per cent of the total sales numbers last month. City fringe properties followed behind with 28 per cent and city centre homes took up only 10 per cent.

The TDSR (total debt servicing ratio) continues to be the main obstacle for buyers as the loan amounts they are now able to receive have been largely reduced. However, developers are unlikely to make drastic price reductions as land prices have been high for the past two years.

Contrary to concerns that new properties may outshine previous older launches and resale properties, some older developments have fared well in the last month. Trilive in Kovan sold 22 units at a $1,562 psf median price while 20 units in Jurong West’s Lakeville also exchanged hands at the average selling price of $1, 378 psf.

While the influx of new units and restrictive loan limits may be the way things go for the year ahead, the demand for residential properties may not necessarily have disappeared altogether. It may simply be a matter of buyers taking longer to weigh their options.

Higher success rates with HDB priority schemes

More BTO (build-to-order) HDB flat applicants have been successful in securing their units of choice at recent HDB sales launches. Under the Parenthood priority scheme, the number of married parents applying for a unit have dropped from 10,000 to 8,000 last year.

BuangkokParkVista_HDBWhat could this mean for the resale HDB flat market? As property prices drop, more HDB flat buyers may widen their options here, instead of heading straight for the new HDB flats. Some may have location considerations, especially if they have elderly parents or young children preparing to enter specific primary or secondary schools.

In 2013, 26, 494 new HDB flats were released.  But as the supply of BTO flats decrease, dropping to 16, 900 this year, and as most first-time HDB flat applicants successfully receive their flats in time for family-planning; the number of applications under these priority schemes look set to fall as well. Many of these new flats could be in non-mature estates. But as mature estates reach a saturation and before these non-mature estates reach maturation, will resale HDB flats  and private properties be the way to fill in the gaps for buyers looking to live nearer their workplaces, elderly parents or children’s schools? Will temporary rental of condominium apartments or even HDB flats be a stop-gap for this group of home seekers; and will that be an opportunity for investors and landlords of properties near schools and MRT stations?

City fringe properties – Sales versus Rental prices

Despite a steep drop in prices of non-landed properties in the city fringes, rental prices in these districts seem to be holding up well. In 2014, sale prices in the Rest of Central Region (RCR) fell 5.3 per cent, more than the 4.1 in the central region and 2.2 per cent in the suburbs. Sale prices between city fringe and suburban properties are narrowing, especially with the large number of new city fringe properties introduced last year, paired with the increased ABSD (additional buyers’ stamp duty) and TDSR framework (Total debt servicing framework).

Sims Urban OasisExpatriates may be steering towards the city fringe regions with their exclusivity, proximity and more price-friendly options. Rental prices in the city fringes are around $3.50 to $4.50 psf, compared to $5 sf in the city centre and $3 psf in the suburbs.

With city fringe homes becoming more affordable, and rental prices still considerably high, these properties may be a good investment as resilience in demand and rental seem consistent. One of the latest city fringe residential development to go on sale is the Sims Urban Oasis, just a stone’s throw away from Aljunied MRT station and the future Paya Lebar Central Sub-regional Centre. Prices are starting at $628,000 for a 440 sq ft one-bedder to $1.55 million for a 990 sq ft four-bedder. Other properties in various city fringe districts include TRE Residences in Geylang, Eight Riversuites in Whampoa East, Highline Residences in Tiong Bahru and Sky Vue and Sky Habitat in Bishan.

Applying for a HDB loan – Do it early

If you’ve been waiting for ages to qualify and apply for a HDB flat, the housing development board has advised against last minute loan applications.

Not only does the process help you get a firm grip on your finances, it also helps give you a better idea of how to plan for the future. A HDB loan eligibility letter will tell you how much you are able to loan from the Housing Development Board (HDB) should that option be your mortgage financier of choice. Some buyers may opt for a bank loan instead.

MacPhersonSpring_HDB

Photo credit: HDB

But if you’re buying a BTO flat directly from HDB, they will require a HDB loan eligibility letter when booking a flat. This is to prevent buyers finding themselves in a bind, unable to acquire sufficient loans after they have already booked a flat. Previously, they were only required to have the HDB loan eligibility letter when signing the Agreement for Lease which could be a number of months after booking a flat.

Though this may not affect those looking to purchase a resale HDB flat, some buyers who may original be considering a BTO flat may change tracks and also consider resale options should they qualify for a higher loan quantum. Will this then be a boost for the resale HDB flat market?

The latest BTO launch in February consists of flats, including larger 3Gen (3-generation) flats, in non-mature estates such as Bukit Batok, Housing and also the mature estates of Geylang. The new McPherson Spring flats in Geylang are situated near the MacPherson MRT station and may be the first to be booked up. For singles who are now able to purchase 2-room BTO flats directly from HDB, those in Housing may be hot property. Applications will close on Tuesday and it may be some time before the next launch in May.