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.

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.

Silvertown2Silvertown2

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.

Silvertown1

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.

Australian properties getting pricier

When the property cooling measures kicked in for the Singapore property industry, many investors turned to overseas properties. Properties in Australia, the United Kingdom and Malaysia were particularly favoured by Singaporean buyers as these were the more popular overseas education spots for local students.

Sydney Mosman FlatBut it seems the property prices in Australia are gaining momentum. For 10 quarters in a row, prices have risen, led in particular by a leap in home prices in Sydney. Across the board, prices have risen by 1.6 per cent but in Sydney, prices have been reported to grow by 13 per cent on a yearly basis. Australians are seeing this as a threat to the affordability of their city and once again broaches the topic of immigration.

Banks’ interest rates are however considerably lower now, down to 2 per cent in May this year. Has this allowed or enticed more to secure a loan and how will this eventually affect the industry when rates start rising and might there be a danger of the rehash of the United States’ property bubble here? The Australian authorities have already tightened the loopholes in their foreign investment policies and foreign property buyers now have to abide by stricter rules under the Australian Foreign Investment Review Board. Ultimately, it may be up to the policy makers to steer the market in a direction which balances on the knife edge between economic growth and nationalism.

Private property buyers holding out on post-launches

New residential developments usually draw large crowds at their previews and initial launches, with some selling out within weeks as eager house hunters scramble for the best units. But buyers are holding back during post-launches, opting instead to wait for newer projects or other post-launches to see which developers offer the best deals. City Developments’ Coco Palms sold only 20 units over the weekend. In its debut, 52 per cent of its 944 units were sold. Prices range from $880,000 for a three-bedder to $1.21 million for four-bedder though units available range from 463 sq ft one-bedders to 3, 111 sq ft penthouses.

Commonwealth TowersSome developers have been dishing considerable discounts on their post-launch offerings. The Panorama in Ang Mo Kio just a couple of weekends ago saw developers giving up to 12 per cent discounts on their second launch. Property hunters are likely to compare between new project launches and previous projects’ re-launches, weighing the potential of rental possibilities and asset appreciation.

The increased number of mass-market property launches in May has lent some joy to the market and transaction volume is expected to reach 1,600 units. Projects which are offering prices lower than the projected buyers’ total quantum will be likely to still get buyers coming to their doorsteps. When it was first launched, units at Waterfront@Faber condominium went for $1, 100 to $1, 350 psf. Since then, only 6 more were sold, at an average of $1, 280 psf. Another May baby was the 845-unit Commonwealth Towers, where more than 66 per cent of the 400 units released have been sold.

As we move into the middle of 2014, the next half will be a time to watch. It may show signs of what 2015 will bring.

City fringe districts going strong

In the current softening property market, where private home sales and prices are on the downhill slide, it takes a good location to help a new launch stand its pricing ground.

The Thomson and Bishan area saw 3 such promising launches – Thomson Three, Three 11 and Sky Vue. Throw their proximity to current and future mrt stations, good schools, heartland shopping malls and other eateries into the mix, and it’s a recipe for success.

Thomson ThreeAll 65 units at Three 11 along Upper Thomson Road has been sold, whilst Thomson Three on Bright Hill Drive has already seen a 87 per cent take-up rate of its 445 units. Prices at the former were around $1,368 psf and $1, 308 psf at the latter.

Closer to Bishan, prices were even more positive, with units at the Sky Vue going at a median of $1, 465 psf. Prices have however dipped slightly. At its launch last September, prices were higher at $1, 500 psf. Closer to the Bishan MRT station, the massive 505-unit development, Sky Habitat, relaunched with encouraging sales figures last week. Prices were quite a bit lower than its launch price of $1, 700 psf. Discounts of 10 to 15 per cent were not rare, with units going at $1, 279 to $1, 590 psf. Perhaps these prices were more realistic and are sitting well with buyers still looking for a potential investment buy.

Sky Vue2In short, private home sales has been affected across the island, but there are still buyers out there looking for property worth their buck. And if the price is right, they might just bite.

Luxury condominiums going at lower prices

$2,200 psf to $1, 800 psf.
$3.7 million to $3.4 million.

That’s how far lower the prices for high-end luxury apartment units are going for.

Perhaps it’s a case of when the going gets tough, the tough gets going, at lower prices. It’s no secret that while luxury properties are the creme de la creme for property agents and developers, when investment money is slow in coming, these are one of the hardest to sell.

Hallmark residencesAnd the going looks like it is going to be tough for quite some time more. Property developers are struggling to move unsold stock, and depending on whether their holding power is strong enough, they may be forced to make other moves sooner. There were news earlier on this month that developers are looking to convert condominiums into serviced apartments as the pressure of the deadline to sell looms closer.

At MCL Land’s Hallmark Residences in Bukit Timah, the uncompleted condominium development is already advertising sales of units at discounts of up to $300,000. A 969 to 990 sq ft 2-bedroom unit was originally priced at $2 million but is now at a lower $1.8 million. Since its release of the first 20 units in January, 5 have been sold. They are however planning for a proper launch sometime in the first half of 2014. At the 999-year leasehold St Regis Residences on Tanglin Road, prices have dropped from $4,653 to $2, 349 psf. Of the over 10,000 private homes still under construction in the prime districts 9, 10 and 11, nearly half remain unsold.

Once again the story of low demand versus high supply dogs the real estate industry. With the government’s many cooling measures, a bubble is unlikely to happen especially since loans are harder to get. It will be interesting to see how the property market plans for a rebound.