New properties to help boost Indonesia’s property market

The global commodity slump has affected markets all over the world. In Indonesia, the property market has seen a 26 per cent drop in value in 2015 and a whooping 49 per cent in the first 3 quarters of 2016.

branz-indonesiaPhoto credit: Branz-bsd.com

But momentum has picked up within the last quarter as a number of foreign developers are drawn to the market and recognising the potential it holds. The Indonesian government has relaxed mortgage rules and implemented tax cuts in attempts to boost market activity. Taxes on home sales have been halved and the minimum down payment on homes have been cut once again in 2016. Bank Indonesia has also reduced the benchmark interest rates.

As urbanisation in Indonesia is amplified yearly, with approximately 200,000 people moving from rural areas to the major urban cities such as Jakarta, developers are seeing the real and immediate effects of providing ready housing for a rapidly growing market of property and home seekers. Recent entries by foreign developers include China Communication Constructions Group (CCCG), Mitsubishi Corporation, Tokyu Land, Hong Kong Land and Sime Darby. The total investment monies come up to an estimated US$2.8 billion, the highest amount recorded since 2007.

mitsubishi-jakartaPhoto credit: Mitsubishi Corporation

City centre properties in Jakarta are increasingly popular as traffic conditions make it difficult for the growing workforce to travel from outlying districts. CCCG for example have their hand in the development of 4 residential projects in Jakarta alone, targeting mainly young couples and families. Mitsubishi Corporation is also jointly developing 1,000 housing and retail units in Bumi Serpong Damai. Though there may be some doubt about how the domestic market will be able to manoeuvre around the sudden increase in available properties, analysts are hopeful that property sales this year will post at least a 15 per cent growth.

Property cooling measures likely to remain

The economic slowdown and diminishing growth rates are causes for concern not only for the Singapore government, but also for consumers and businesses.

National Development Minister Lawrence Wong has recently spoken about the property cooling measures which were implemented in succession over the past three years. He has mentioned that they are likely to remain at this time of uncertainty as a response to “global context and environment”.

Kingsford HIllview PeakProperty prices have fallen 10.8 per cent since Q3 of 2013 and prices fell 1.5 per cent in the third quarter of this year, bringing it to the 12th consecutive quarter of price decline. The real estate industry currently faces stagnation and though interest rates are low, many are looking for higher yields. He has warned against creating an environment rife with property speculation and has said that capital inflow might create a volatile and highly-speculative atmosphere which will result in property market fluctuations.

With the high number of completed units entering the market this year, and with unsold inventory rising, the property cooling measures may be helpful in keeping the delicate market balance. As of Q2 this year, there were 21,500 unsold and uncompleted private homes, the lowest ever recorded, indicating a possible shift of influence from the seller to the buyer. The government has also held back on the launch of land sites earlier this year.

Meyerise2Property analysts are not surprised by the government’s move to keep the property curbs in place, though sudden pace changes and steeper declines might prompt the government to reconsider relaxing the rules sooner.

Hong Kong’s property market strong despite cooling measures

Unlike Singapore where the public housing sector is strong and almost 80 per cent of the population lives in a Housing Board (HDB) flat, in Hong Kong only 21 per cent live in a public housing unit and even then, it takes them a minimum of 3 years for a successful application. Though both cities have large population, the density is higher in Hong Kong where land restrictions are greater and unlike Singapore, they hardly have means of reclaiming land and expanding liveable space vertically is one of their only solutions. It comes as no surprise then, that unit sizes and liveable floor areas are shrinking.

hongkongpropertyMany could say that Hong Kong’s real estate fluctuations is very much like its undulating terrains, with steep climbs and equally slippery downhill slopes. Property cooling measures were rolled out in Hong Kong in 2012, around the same time as curbs were implemented in Singapore as well. But it still takes an average Hong Kong household 19 years to save up enough to purchase their own home compared to the 5 years for a Singaporean household.

Though property prices did fall in February, they rebounded to the levels comparable to 2015’s peak in September this year, possibly indicating renewed interest in Hong Kong real estate from mainland buyers. Numbers seem to show that more mainland Chinese are favouring Hong Kong properties over Singapore properties, possibly since Singapore’s property market has been seeing consecutive quarters of muted growth since last year.

 

Indian Diaspora form new group of property buyers

Diaspora has always been one of the many lucrative ways of boosting a country’s economy, one of the most obvious ways being through the media industry, and the next being the real estate sector. Diasporas’ high disposable incomes may also translate to higher investment demand and capabilities. And when provided with ample and clear opportunities, they are more likely than not to bite.

godrejthetreesmumbaiPhoto credit: Godrej Properties

The Chinese and Indian diasporas are especially strong globally, and now the Indian diaspora in Singapore is being seen as a worthy target audience group for one of India’s largest real estate developer, Godrej Properties (GPL).

GPL has already been actively working with clients all over the globe, namely in the UK, USA, Africa, Australia, Dubai, Hong Kong and Singapore but now with major luxury development projects happening in over 10 Indian cities such as Mumbai, New Delhi, Kolkata, Hyderabad, Ahmedabad, Gurgaon, Noida, Chandigarh, Pune, Nagpur, Bengaluru and Manglore, they are strengthening their marketing efforts to their global diaspora as these new properties are likely to be of interest and are highly affordable to these overseas individuals and entities.

godrejeternitybengaluruPhoto credit: Godrej Properties

GPL first established themselves internationally in 2014 in Dubai, and now their Singapore office will also serve an international clientele, with a focus on providing residential property investment opportunities to Indians in Singapore, Malaysia, Indonesia and Hong Kong.  Their office will be situated in One Fullerton Road. Foreign nationals or companies also invest in properties in India though they will have to fulfil more specific requirements set by the Reserve Bank of India.

 

To buy or not to buy.

That is the question. When rental prices fall and rise according to property prices, which in turn are directed by local economies of scales and indirectly impacted by global economies and general market sentiment, that is often the question home-seekers ask themselves.

In the current market, is it wiser to buy or rent? Under what circumstances should you definitely choose one option over the other? Property analysts advice against renting while speculating on market direction as the uncertainties may not always work in your favour. Instead, the main factor should be whether renting or buying best suits your needs.

KembanganSuitesSingapore may very well be one of the cities in the world where most people own their homes. In many other cosmopolitan cities, rental is a more-than-common way of life. While renting may suit those who are not willing to be tied down by fixed monthly outlays such as mortgages, taxes and condominium maintenance fees, it also means that the money that goes into your rent does not ultimately accumulate into owning the roof over your head. There is also the danger of rental rates being raised and frequent moves.

Buying a property is not a small decision, and market advisors caution against doing so when you have not yet made sound financial calculations. The price differences in purchasing a freehold versus a leasehold property could also be considerable in the long run as most freehold properties tend to appreciate over time.  This then brings you to the considerations of when to buy and sell your property. While it is true that leasehold properties tend to depreciate, factors such as location and the competitiveness of neighbouring properties could also lend weight to the depreciation process, slowing it down considerably.

Singapore property market on the mend?

Is Singapore’s property market finally bottoming out? Are current property prices the lowest they can go?

WhitehavenHong Kong and Singapore are 2 of Asia’s most expensive residential property markets, and while both countries’ governments have implemented property cooling measures to help abate the tension, prices remain high. Though Singapore’s property price spike of 92 per cent in the decade between 2003 and 2013 was not as drastic as Hong Kong’s 370 per cent in the same time period, housing cost has increased considerably and was much fodder for debate during the past 2 elections. While home prices have fallen 1.2 percent in Singapore and 13 per cent in Hong Kong since September 2015, the fall will have to be much more drastic for the situation to return to what it was before 2003.

Taking inflation, economic growth and global economics into consideration, property analysts feel that Singapore’s property cycle has almost reached its bottom or turning point as it is in a much more advanced state than Hong Kong’s. Considering the gentle slope of decline in Singapore’s property prices, a sharp rebound seems unlikely. Will there however be a glimmer of hope for a gradual increase upon policy changes and changes in the demand and supply scale?

When investing in properties overseas …

There are a number of things to look out for when investing in properties. And even more so in properties overseas. It may be familiar ground if you know your stuff, but otherwise it could be a rather risky affair.

Balmain ColgatePhoto: Apartment in Balmain, NSW, Australia.

Every country’s investment environment varies, sometimes quite drastically, and while brochures and presentations may look sleek and professional, the ins-and-outs of the local economic infrastructure may speak the same language. Thus finding out more about the legal and tax systems of the country in which the property is located would be one of the first and most important steps. The Council of Estate Agencies (CEA) has good advice for investors in their consumer guide for foreign property investments. Some countries have restrictions on the type of property foreigners can purchase, and also on whom they can eventually sell it to and the about of taxes or stamp duties they have to pay. In Australia for example, foreigners purchasing property have to seek approval from the Foreign Investment Review Board; whereas in Cambodia, where the market is just opening up, the restrictions are not as limiting.

Similar to how you would plan for any major investment, doing the groundwork and sums will help you financially. It is wise to know what your options are should there be a need to sell, and how long it would take you to do that would depend on the political and economic situation. Make the effort to find out the developer’s track record, and even take a trip down to look at the properties. After-sales property management could sometimes make or break your bank account and familiarising yourself with the legal systems of the country could ensure you are well-covered in unexpected circumstances. Having a solid point-of-contact in the country, such as a property agency or management agent could also reduce the risk and make the investment experience a smooth-sailing one.

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.