A possible supply glut in Australia property market

Economists are beginning to see possible cracks in the Australia property market as an onslaught of new homes threaten to cause a supply glut by 2017. The property market has been booming for awhile now, with most homes overvalued at 20 per cent. Partly boosted by the central bank’s series of 10 interest rate cuts since 2011, buyers have been snapping up units in one of the world’s most expensive property markets.

GreenSquareProperty prices in Sydney alone have risen 46 per cent in 3 years, with a 24 per cent average rise in the whole of Australia. The latest property offering is Green Square in Sydney, which will yield 10,000 new apartments, adding to the 213, 000 new homes which will be made available across the country. Perhaps some of the reasons for the possible glut could also be the lack of a corresponding rise in income and population growth. Confidence and capital spending have thus reflected this. Tighter lending rules have also effected a 13.1 per cent drop in investor loan growth.

Though buying will not cease or fall immediately, analysts are advising buyers to proceed with caution and to consider their mortgage options for the long term as banking rates will fluctuate and holding power will no doubt be what differentiates the wise investors from those in for a quick buck.

When will the property cooling measures ease?

Some of the first property cooling measures were implemented more than 4 years ago, and they have stayed till today. More were added along the way and the market seems to be finally responding to the restrictions, with prices and sales volume falling slightly since the 2009 peak.

Considering it took almost 5 years for a slight decline in property prices, the authorities seem determined to stick to their guns and have the property cooling measures in place at least for a little while more. But analysts are expecting a much steeper drop in residential prices of up to 15 per cent before the Singapore government is likely to ease up on the measures. They are likely to also be waiting for mortgage interest rates to rise above the 3.5 per cent average from before.

Especially as the elections have just ended, a sudden change in policies is unlikely as increasing housing prices could affect public sentiment. Although there has been pushback from citizens about immigration policies, and the increasing supply of new properties in then next couple of years may further keep rental and housing prices suppressed unless there is a drastic shift there. In the HDB market, they are expecting a further 5 to 10 per cent drop in prices before any change might be effected.

Will there however be a gradual easing of cooling measures by removing restrictions one at a time?



Property – To buy or not to buy now?

Since the implementation of property cooling measures by the government agencies, property prices have fallen at a gradual pace and seem to have currently reached a plateau. Some may have been waiting for an opportunity to hop into the property buy-sell train, but others may be concerned about whether they should sell now or later.

How do you decide if the time is now or later?

The WaterlineThere are a few fundamental questions to ask yourself:

  • Need or want?

Of course, owning a home of your dreams is the ultimate desire for most. And so it is a want. But you will need to evaluate your situation very honestly – do you absolutely need a new place? Or could it wait? Are you hoping to merely flip a property for profit, or have the ability to hold out for the best deal? If you answer is “Need”, then you have to a few other considerations to take care of.

  • What’s in the piggy bank?

Do you have enough left in your savings and monthly earnings, after setting aside sufficient funds for your monthly bills, every day expenses and insurance to manage the risk of buying a home? Besides having enough to make your monthly mortgage, most people may not realise the need to have an amount within your savings for very real and unforeseen situations such as periods of unemployment or health issues.

  • Are there advantages or pros? 

Is the price on the property you are hoping to buy right? If there is room for negotiation, which is why an experienced real estate agent is a boon, and the mortgage calculator helps you compare rates and tells you that the interest rates are prime, then perhaps the time truly is now.

Suburban London districts growing – Silvertown

Mixed-use properties once again capture buyers’ hearts, now in the Royal Docks suburbs in East London. A new mixed-use development led by the partnership between Chelsfield Properties, First Base and Macquarie Capital will house 3,000 residential units, amidst offices, recreational and commercial spaces all housed within a 25 ha site.


Photo Credit: Silvertownlondon.com

Named Silvertown, it is situated in the fringe of the city, where new properties are sprouting aside from the usual real estate hotspots such as Canary Wharf, City of London and the West End. As property prices climb in London, a home  in the City of London could come up to £1,500 psf. in the West End double that at £3,000 psf. In comparison, city fringe properties are structured to be more affordable for local as well as foreign buyers. Developers are hoping to target Asian investors in particular as they are a growing group of overseas investors in the UK, spending up to£5.98 billion over the last year and a half.

The clarity of property rules and the relative ease of property buy-and-sell for foreign buyers have built the confidence of overseas buyers in respect to properties in London, as compared to other cities in the Euro Zone.


Photo Credit: Silvertownlondon.com

The Silvertown development will be will linked to other areas in terms of transportation options. The much-waited London Crossrail rapid train project will be connected to it, and it is also pegged to the Royal Docks’ plans for refurbishment of the historic Millennium Mills, an old mill building which will be transformed into office spaces.

Resale property prices slide further

The private property market seems to be going the way property analysts have predicted in the beginning of the year. Over the last 6 months, prices of completed private property have fallen 1.9%. The steepest fall was in the beginning of 2014, at 3.7%. Though the decline has continued, the fall has been lighter in the quarters following.

Maysprings condoSince the implementation of the Total Debt Servicing Ratio (TDSR) in June of 2013, property prices have fallen at varying speeds over the past 2 years. A total of 42,606 new homes are expected to be ready for occupation within these couple of years and up to 96 per cent of the land sold this year are expected for future non-landed homes. It may become a tussle for prices and buyers, between new and resale properties.

As rental demand also continues to dip, prospects for the property market seems to have dimmed slightly, though select properties will still hold potential. Property experts have explained that the dip in prices in the resale market may have been due to the ability of individual to be flexible with prices. New properties which are being sold by developers have the means to stick to their guns in terms of pricing. The scale for rental supply and demand is likely to continue leaning towards the former.

Private resale non-landed home prices rising

With more new non-landed homes reaching completion this year and entering the market with more vigour, resale properties will have quite a bit more competition to deal with.

65cc3e41521f45a9bee9cd4c20bcbf8cBut for the moment, good news prevails as prices of resale non-landed homes have risen albeit slightly. In March, prices rose 0.2 per cent with the number of sales maintaining at around 300 in February and March. Although there is no significant rise in the number of sales transactions or prices, at the very least prices do not seem to be dropping. This could indicate a stabilising market and where it goes thereafter is very much dependent on governmental policies and market forces.

Suburban resale homes were leading the price rise, with a 0.3 per cent monthly gain. Central region homes in districts 1 to 4 and 9 to 11 also saw a 0.1 per cent rise. It were the smaller apartments which saw a drop in prices of 0.4 per cent by the month. These shoebox apartments, with floor areas of 506 sq ft and less, were one of the hottest ticket items the last couple of years, why the depression in prices now?

Property analysts are putting it up to the increasing number of shoebox units in suburban condominium developments. Demand for these smaller units outside of the Central region may not be as high as developers had thought, and as the number of unsold or untenanted units rise, so does the competition. Buyers have more choices and will be more likely to bargain or wait for lower prices.

Sticking to previous estimates, property prices are expected to dip 3 to 6 per cent this year. Previous estimates were around 4 to 8 per cent.


New properties on a fresh new ride

And hopefully it will be an upwards ride.

May 2014 was a good month for the new private home market. Mostly due to the large number of properties launched, 1,487 units were sold. But after that huge spike, sales have held steady at around 300 to 400 units sold per month, with December’s showing a little lower due to the festive season.

KingsfordWaterbayThe numbers have however increased significantly in March this year, from 390 units sold in February to 613 last month. The results are promising, but there has been a few recent launches of new units at previously launched developments and also a release of pent-up demand after the Chinese New Year festivities, which could account for some of the positive vibes.  Most of the sales came from Kingsford Waterbay with 155 units sold and Sims Urban Oasis with 107 units sold. New launches are pulling out all the stops to get buyers’ attention. Competition will be high as more launches are planned for the year, thus getting first dibs with the buyers’ pool is crucial for developers.

Suburban properties are often priced below city fringe and central district properties; at 22 per cent lower than city fringe and 43 per cent lower than central region homes. Lower quantum prices seems to be the factor helping to close deals, as the property cooling measures do not work in favour of most middle-income buyers. The Skywoods and Symphony Suites projects seemed to stacked up better, but sales at Northpark Residences and Botanique @ Bartley may very well give them a run for their money soon, looking at the response from the public.

The outlook for the market this year seems spotted, with possible glimmers of hope but also tough restrictions which may put a damper on sales volume and prices.


Private properties – Not all in the slumps

Recent figures showed that the property cooling measures have only really affected the luxury market, which has slipped into the red.

Even then, there are properties within the private property market which have not been as drastically affected by the measures and market slump. At Cote d’Azur in Marine Parade for example, prices rose by 4.3 per cent. Prices of resale units at Costal del Sol also rose 4.5 per cent. And for the new property market, in Chestnut Avenue, selling prices of units at Eco Sanctuary showed a promising increase of 4.1 per cent.

Eco SanctuaryAlthough this could be caused by developers choosing to release juicier units later in their launch schedule, enticing buyers to purchase at their latest launches, this nevertheless gives hope to the market. Buyers are still wiling to fork out the cash to get the units they want. And there is no lack of these savvy folks.

Naturally as with all market movements, effects are never seldom felt the same way across the board, there will be units with more potential than others. It takes a keen eye and a close followup of market trends to make a killing at the right time.

While this is good news for property developers and sellers, it raises the question of whether the property cooling measures have really been effective in making property purchasing affordable for the majority, or only instead stymied the inflow of foreign cash earnings in the high-end property market?