Winds of change in local property market

A decade or so ago, owning a second or third property might be the fastest way to secure your retirement funds or to even accumulate a tidy little kitty. Investment properties were considered a surefire way of earning additional income, but in the climate of today, property owners and investors have much more factors to consider and competition to battle against.

SunshinePlazaResidencesWith the rental market weakening, property agents are finding that it takes twice as long and also many more viewings before a property is successfully tenanted. And even then, for much less than before. Some property owners have had to reduce rents by almost half. Leaving the units empty are simply not an option for some investors as the rents go towards the mortgage or mortgages of their properties. It is after all better to have less help than none at all.

SerangoonHDBflatFor new investors looking to enter the market, the environment is a lot tougher than before. Considerations such as whether there is a large pool of HDB flats available for rental nearby, the long-term potential of the property, competition from other new launches or even within the same property, whether the local and global economy will affect businesses and commercial hubs nearby thus reducing the pool of foreign tenants, and so forth.

Before the market makes a complete recovery, a possibly lengthy period of stabilisation will ensue, despite the governments having made some allowances in the are of the property cooling curbs.

February’s dip in resale flat prices points to market stabilisation

February was a little slow for the resale HDB flat market as prices fell by 0.3% and transactions by 8.5%. This was following a promising start to the year. But industry experts are not too quick to dismiss the possibilities for the sector as the year moves ahead.

ClementiHDBflatThe slight dip last month was most likely due to the post Chinese New year lull which is a common occurence. Rather than being indicative of a falling resale flat market, the decline simply points at a stabilizing  market enironment. Though resale flat buyers paid about $2,000 less than market value across  the board, some HDB estates continued to clock more than 10 transactions and at prices above market value

In Bedok, some buyers paid $10,000 and more for their resale flats while in Clementi, some transactions closed at $4,000 above market value. That comes as no surprise as these are mature HDB estates where demand is high. There were also some recent private property launches in the vicinity, for example the Clement Canopy, which may have had some residual effect on the resale HDB  flat market.

Aerial view of HDB flats in Ang Mo Kio

Aerial view of HDB flats in Ang Mo Kio

There were however a couple of HDB towns which did not post as promising figures despite being popular locations for flat seekers. In Queenstown, the lowest below-market prices were clocked at $12,500,  followed by $10,000 in Ang Mo Kio. Prices of 3-room flats rose by 0.2% while executive flat prices fell by 1.7%. Overall, prices of resale flats in mature estates rose by 1.1%.

 

Property cooling curbs working in China

Many Asian-pacific countries have placed property cooling curbs on their housing and real estate industry as prices climbed rapidly within the past half a decade. Cities such as Hong Kong, Tokyo, Sydney, Melbourne, Beijing, Shanghai and Singapore are facing not only space and housing issues but also rapid inflation and increasing property prices.

Aerial view of suburban neighborhood, Wuhan, Hubei, China on 11th March 2016. (Photo by Jie Zhao/Corbis via Getty Images)

Aerial view of suburban neighborhood, Wuhan, Hubei, China on 11th March 2016. (Photo by Jie Zhao/Corbis via Getty Images)

The Chinese government has been placing curbs upon curbs on their real estate industry, with perhaps conflicting sentiments as the sector accounts for a large part of the country’s economic growth. But housing prices have been skyrocketing at an alarming rate and for the first time in the past few years, the measures seem to be taking effect.

In Shenzhen, currently the country’s hottest market for new homes, property prices have fallen 0.5 per cent after consecutive dips over the past 4 months. In Shanghai, prices fell by 0.1 per cent, also following a 3-consecutive-month decline. While prices remained unchanged in Beijing, the stabilisation is a start to possible price deflation. News of a possible reduction of land release by more than 3 times that released in 2016 could further reign in price increase.

Park yoho venezia Hong Kong propertyThe price-increase in January was reflected in the smallest number of cities in a year. Home prices have fallen in 20 cities while 45 out of 70 cities saw a gain in prices, down from 46 in December last year. Part of the reason could be the curbs placed not only on buyers but also on banks. Some bank branches in major Chinese cities such as Beijing, Guangzhou and Chongqing have recently increased mortgage rates for first-time buyers. China’s central bank is likely to have even stricter restrictions on credit and housing loans put in place, in particular targeting developers and households, in order to prevent a property bubble.

 

Property cooling measures to stay put

National Development Ministry Lawrence Wong has recently mentioned that the curbs placed on the property industry are here to stay as demand for property not declined.

HillsTwoOneThough property prices may have fallen, the dip has been gradual and slow. Coupled with the fertile bedrock of low interest rate and affordable quantum pricing of residential properties, the authorities may be afraid of a sudden and unmanageable spike in demand from investors should the curbs be lifted anytime soon.

And their fears may not be entirely unfounded as the market has been showing budding signs of recovery in the past couple of months. Demand, in particular for smaller units in well-located properties, from local and foreign investors alike, have been on the rise while prices are beginning to hold steady. Pent-up demand from previous quarters of muted activity have meant a rise in sales volume.

SignatureECYishunBigger Central Provident Fund housing grants will be included in the upcoming Budget talks, which may sustain resale HDB flat volume as more buyers qualify for subsidies. Resale volume for the public housing sector has already risen 7.8 per cent last year. As demand for resale flat increases, so will pricing and sales volume. A stabilising resale flat market could also mean an increase in the number of HDB upgraders who are buying off the private property market, in turn boosting sales in the private housing sector as well.

Demand for Hong Kong properties continue to climb

Home prices in Hong Kong are escalating despite the government’s attempts to curb the rapid and steep climb.

OneKaiTak1Photo credit: www.onekt.com.hk/

Buying a resale private property from the secondary market has become difficult due to the heavy stamp duties levied by the Hong Kong government on open market homes in an effort to curb rising property prices and a ballooning market. Stamp duties for first-time local buyers are particularly high and the move has slowed down activity in the secondary market considerably. Instead, it has created a demand for new homes in the primary market. Since homes in this market are sold directly by the developers, they are able to adjust home prices according to market demand and requirements, sometimes even offering incentives and discounts.

In the first month of 2016, the demand for new homes fell by 76 per cent. In the same time this year, it rose by 48 per cent. A complete turnaround. With the current lack of interest and activity in the secondary market, developers are  ceasing the current window of opportunity by its neck and adjusting prices according to rising demand. And the demand is high indeed. At China Overseas Land & Investment‘s new residential project situated on the site of the old Hong Kong airport, One Kai Tak, all 188 units were sold out in a single day last month.

OneKaiTak3Buyers may ramp up their buying speed and fervency in the months ahead, as they pre-empt the possibility of the Hong Kong government implementing further curbs on the market, in particular on individuals who sell their properties to purchase new ones.

Consumer confidence in property market improving

Though gradual, the property market seems to be coming out of a long hibernation and there are some bright sparks to make 2017 a warm one.

VIIOThe supply and inventory stock is gradually diminishing, by 8.4 per cent at the end of last year, aided by the restriction in land supply by the government last year, the key word being gradual. Fortunately, the decline in home and rental prices have also been gradual, with no sudden collapse. Last year’s rate of decline of overall private home prices was at a 3-year low, at 3.1 per cent. The 2 years before saw a 3.7 and 4 per cent decline, counting backwards.

QuinterraBy now, consumers and investors are used to the price decline, which has been a regular occurrence since 2013 when the property cooling measures began to kick in. In the current market, any news of slower price declines will be good news, and of stabilisation, even better news. Private home prices have finally landed on a level where an increasing number of buyers find affordable and investment-worthy, which explains the boost in new home sales from 7,440 in 2015 to 7,972 last year.

Properties in the core-central region fared the best in the second half of 2016, while non-landed homes in the city fringe and suburbs registered 2 and 0.6 per cent drops respectively. Landed properties fared unexpectedly well with a 0.8 per cent price increase in Q4. Property analysts are expecting property prices to bottom out this year, which could the year when the property market bottoms out. The authorities do not yet seem to show any signs of easing the property cooling measures, at least not in the first half of the year.

Prices of new homes in China rise once more

Property prices in many major China cities have been on a constant climb since 2011, and new home prices have once again risen last year, at its fastest rate no less.

HuBinDaoWarning signs of a property bubble has been looming for sometime now, and as there has been no signs of relief, the fear is that the market might reach bursting point quite soon. Real estate market speculation threatens to hurt rather than help the economy even as China’s leaders fret over the country’s economic target for the year.

In over 70 cities across China, the average new home prices have risen 12.4 per cent. In top-tier cities such as Shenzhen and Shanghai, property prices have risen as much as 60 per cent in the span of a year. Some cities such as Beijing may have more leeway to cope with further market hikes, but in many cities, property markets are already languishing.

ShuiOnPlazaOut of 15 markets, 12 have shown signs of overheating as prices have began to fall. Growth is beginning to slow down as household loans and house sales have both been on the decline. The China government has implemented some cooling measures over the past year in attempts to slow down the growth of the bubble, the latest being limits placed on the number of new home loans banks are able to issue.

 

Private resale property market to cruise on status quo

2016 proved to be a roller coaster year for the private home market, as prices fluctuated throughout the year but never quite settled into an upward swing. Price increases lasted hardly a quarter before turning the opposite direction and movements differed between regions as well.

SeletarParkResidencesAcross the board, resale private home prices rose 0.1 per cent. Most of the increase were for properties in the prime districts. Prices here rose 1.8 per cent while falling 0.9 per cent and 0.4 per cent in the city fringe and suburban districts respectively. Location continues to rule buyers’ decision-making process and prime district home prices remained stable despite the year-end lack of market activity.

As the rental market continues to wane and competition from completed properties put further pressure on rental prices, more private condominium unit owners may be pushed to sell this year as they come to the end of their 4-year holding period, after which they will have to foot their sellers’ stamp-duty bill. Buyers of resale units could have the upper hand when it comes to negotiations in these cases.

NathanResidencesThe number of private apartment units sold have been falling as well, with 484 units sold as compared to the 618 sold in November. Though the numbers are higher than the 453 units sold in December 2015, it is still a far cry from the 2,050 in April 2010 – a 76.3 per cent fall in fact. Property analysts are expecting prices and sales volume to maintain their current levels, though 2017 could be more a year of keeping the status quo than quick recovery.