Post-brexit Britain sees property sellers lowering asking prices


London HOuse
British home owners are slowly coming to terms with the reality of having to lower asking prices, post-brexit. The fear of how Brexit might affect the economy may have finally sunken in as the politically uncertain climate has made investors wary and property sellers are finding that they have increasingly had to offer deep discounts due to waning demand.

In prime central London in particular, the effects have taken hold of the property sector quite immediately. The effects have now trickled down to other parts of the UK and the prices of homes which have escalated in the years prior to Brexit are now out of reach to most buyers. In London, home prices are 86 per cent higher than in 2009, that is in less than a decade.

SydneySkylineOn almost the other end of the globe, in Sydney, Australia, property prices continue to skyrocket. Investor demand is aided by low interest rates as home values rose last month at the fastest pace in 14 years. Property prices in Sydney have risen 18.4 per cent since 2002. Despite the authorities’ efforts to curb the rapid rise, home prices have continued to rise in this and other major cities in Australia such as Melbourne and Brisbane.

Why property cooling measures are here to stay

ABSD, SSD, TDSR, QC – These abbreviations related to property cooling measures implemented over the course of 5 years have taken root in the local real estate and construction industry and despite a much quieter market, may not go away anytime soon. And with good reason.

Aeon MelbourneThe demand for properties in other major Asia-pacific countries and cities such as Hong Kong, China, Australia and Japan have not seem to wane, reflected by soaring home prices in Hong Kong, Sydney, Melbourne and various top-tier cities in China. And this is despite their governments placing more restrictive regulations in place in efforts to curb investment outflow and property speculation. But perhaps it could be the case of too-little-too-late. And it also goes to show that investors are still looking for markets to hedge their funds and the pool of willing China investors looking to take capital out of their country agains a depreciating yuan.

CasaAerataIn Singapore, despite a gradually decline in home prices, the market has remained resilient and a untimely lifting of property curbs may result in a quick and unrecoverable increase in property speculation. In fact, despite the series of property curbs instrumented since 2013, the property cycle seems to already be reaching the bottom, which could only mean a turnaround possibly within the year. Last year, resale volume rose 28 per cent and total sales increased by 16 per cent from 2015, indicative of a recovering, or at least stabilising, market.

China clamping down on investment outflow

The Chinese have been known to be big spenders in many real estate markets worldwide, thus the recent clamping down on investment outflow by the Chinese government has markets all over the globe in a little bit of a tizzy as Chinese buyers are now finding it increasingly more difficult to transfer funds out of China in payment for the properties they have previously purchased. In an announcement on Dec 31, the State Administration of Foreign Exchange (Safe) stated that all buyers of foreign exchange must now sign a pledge to not use their US$50,000 quota for offer shore property investment.

SydneyCondoDarlingSquareThis may put a crimp in things as many real estate markets may find themselves missing out on this potentially huge audience pool as Chinese buyers are now shying away from foreign investments due to the difficulties involved in trying to bring their monies offshore. While the move may not deter the major buyers, first-time buyers with a lack of offshore assets and expertise in capital-manuvering may be forced to relinquish their offshore real estate purchases despite having already made deposits of previous scheduled payments.

Those who violate the new ruling may be denied access to foreign currency for up to 3 years, be added to a government watch list and may be investigated for money-laundering. The regulation also applies to companies with corporate outflows, requiring them to provide clear documentation with regards to outbound monies. The use of foreign currency for real estate has always been banned, but the authorities are serious this time, as seen in their request for additional documentation.

Main factor for Australia’s property price-rise not foreign investment

The Canberra-based Australian Treasury has recently divulged the results of a study which showed that the main factor for rising property prices in Australia is not, contrary to popular belief, investment monies from foreign buyers but the strong foundation of household formation in the country.

sydneypropertyPerhaps it is a culture where citizens are keen to form new nuclear family units and to live in their own home which drives up demand for property, especially the main Aussie cities such as Sydney, Melbourne, Perth and Brisbane. The possible influx of foreign students in these cities could also mean locals are buying up properties to reap rental yields, thus pushing property prices upwards.

pacecollingwoodmelbourneSince 2008, property prices have risen more than 50 per cent, but only A$122 (S$129) of the A$12,800 increase in overall prices per quarter were attributed to foreign demand. That said, a total of A$24 billion in real estate investment monies from Chinese buyers have been approved in the year ending June 2015. This year, some states have begun to impose transaction taxes on foreign purchases of Australian properties and the study done by the treasury may have excluded properties purchased by locals for their overseas family members and relatives.

Will demand, local or foreign, wane and if so, how soon? Will prices slide gradually or continue to remain stagnant at its current levels?

 

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.

Increasing difficulty in securing Australian home loans

Foreign property buyers hoping to snap up homes in Australia may find it increasing harder to secure home loans from Australian banks. The major Australian banks such as Commonwealth Bank, the National Australian Bank (NAB) and Westpac have further tightened loan restrictions to non-residents.

Sydney NSW skylineIn June this year, foreigners buying properties in New South Wales (NSW) have to now pay a 4 per cent stamp duty surcharge. In the state of Victoria, stamp duties have been raised this month to 7 per cent from the 3 per cent which commenced last year. Queensland may soon implement a 3 per cent foreign property surcharge as well, with a projected commencement date of October this year.

Foreign property buyers have come under the hammer of late, with citizens raising concerns about rising home prices, especially in popular cities such as Melbourne, Sydney and Perth. Mainland Chinese buyers were the largest investors, spending A$24 billion in the property market last year, doubling that of A$12 billion in 2014.

The National Australian Bank (NAB) and Westpac are however still Sydney Surrey Streethelping Singaporean investors secure loans via their Singapore offices, though they are careful to alert clients to the total debt servicing ration (TDSR) framework which still applies. There are also other sources of home financing, including private lenders though additional information and documents, such as bank statements and income slips, will be required.

Aussie property market – Loan curbs in place

Those earning monies from outside Australia may no longer be able to buy up properties in Australia, even if they bring their own cash to the table. Australia’s four big banks – Westpac, ANZ, Commonwealth and NAB, have all began to tighten their foreign lending policies by putting measures such as face-to-face meetings and reduced loan amounts in place.

Sydney Macquarie STreetThis recent move could be in response to the recent property market boom, to prevent an unhealthy and unmonitored bubble from growing out of control. Westpac bank for example has ceased lending to non-residents, temporary visa holders and buyers whose income come from outside the country. In recent years, foreign investment in Aussie properties have soared, understandably stirring up some concerns from Australia’s government and citizens. Property prices in Sydney and Melbourne rose 9 and 10 per cent respectively, with prices across Australia rising 7 per cent last year.

China, the United States, Singapore and Malaysia were countries where the most property buyers come from, in descending order. Property buyers from China alone invested A$24 million in 2015, almost five times the amount in 2013 (A$5million). Chinese buyers often use monies sourced outside of Australia and even cash to fund their investments. Aussies banks are also making the move to reduce their exposure to property funds. Currently, 60 per cent of the banks’ property loans are to local residential buyers.

 

Chinese buyers inject new money into Aussie property market

In Australia’s major cities, the Chinese have purchase properties quickly and surely over the years. Property prices in Sydney and Melbourne in particular have been on full steam for a good 5 years now, having risen 55 per cent since while mortgage rates have fallen. The buying continues despite a fall in the yuan following last year’s global financial market bedlam.

SydneyKentSt ApartmentPhoto: Apartment on Kent St., Sydney.

As property prices in top-tier Chinese cities such as Beijing and Shanghai continues to inch up, more Chinese nationals are bringing their monies out of the country and looking for investment opportunities elsewhere on the globe. A 2-room apartment in Beijing sold for S$1.7million could more than comfortably fund a S$962,660, 688 sq m house just outside of Melbourne’s central business district. Most of the purchases made by Chinese Australian permanent residents are funded by relatives in China.

The Australian government has since clamped down on foreign investment as locals fear being priced out of the market. But Australian property analysts say that publicity around the issue of foreign-buying have made it seem bigger than is actually is. In fact, all the activity in the property market have helped to keep the property and construction industries busy and booming.