No signs of weakening China property market

Shanghai and Shenzhen – both super cities for properties. Home prices in these 2 top-tier cities have not waned despite China’s government tightening rules on the property market.

Savannah Hong KongIn April this year, home prices in Shanghai and Shenzhen continued to rise 2.3 and 3.1 per cent respectively. Though the numbers are slightly lower than March’s 3.7 and 3.6 per cent, in light of economic instability in other countries, this is a good sign. Even within China, where internal restructuring, higher global competition and weakening demand have began to put the brakes on their economy, the property sector continues to enjoy the momentum of growth.

Just over a year, home pieces in Shanghai  have risen a whooping 62.4 per cent and that in Shenzhen have grown 28 per cent. Across 70 cities in China, home prices are now 6.2 per cent higher, a further increase from the 4.9 per cent in March. Besides buying in the mainland, Chinese investors are also buying up properties in various other international cities such as Vancouver, Sydney, Melbourne, Hong Kong; and countries such as New Zealand, Malaysia, Cambodia and Thailand.

Canada HouseEven while property prices in first- and second-tier countries continue to accelerate, third-tier cities are also beginning to post positive growth after a period of declining interest and sales. Policy makers are however concerned about the excessive lending and rising debt levels and may be prompted to tighten lending rules and implement further measures.

Private home prices dip for 10 consecutive quarters

The delicate balance between population growth, economy growth and housing provision is not an easy one to strike. And Singapore as a young nation, will have to learn quickly as land is limited but the number of completed units to enter the market in the next couple of years is set to reach 23,000.

Cairnhill Nine CapitaLand

Photo credit: Cairnhill Nine by CapitaLand

Private property prices have been dipping for 10 consecutive quarters now, and the market will be under even greater pressure in the months ahead as supply continues to increase while demand remains stagnant. Rental prices are expected to fall even faster than sale prices and the global economic situation does not seem to be helping. Prices have fallen 9.1 per cent since Q3 of 2013 and non-landed suburban properties in the OCR (outside of central region) fell the hardest.

Part of the reason for the falling figures could be the cutback on land sales by the government and the consequent lack of new launches. Only 953 units were launched in Q1, but property players are expecting the momentum to pick up as the year moves on.

It the first quarter’s numbers were anything to go by, with sales rising 7.2 per cent to 2,847 units, volume may have increased across both the new and resale private home markets.

 

New launches versus Completed private homes

As home supply inches towards a new high this year, the public’s attention may now be shifted to the competition between completed new homes and new developer launches.

Property investment was almost a sure thing not long ago, but now 3 to 5 years down the road from the peak of the market, when property prices were high but so were buying sentiment and potential investment yields, units which were launched then are now made available in the physical, adding pressure to the already-gluggy property market.

Private apartment prices in the core central region (CCR) have taken a turn for the better with a 0.4 per cent rise in the first quarter of 2016, following a 0.3 per cent fall in the last quarter of 2015. Luxury properties in the prime districts may once again be welcoming affluent buyers and investors as average unit prices have risen from $2,215 psf to $2,243 psf by the end of last year.

In the city fringes however, private property prices have continued to ebb, falling 0.4 per cent for 2 consecutive quarters now. Out of the central regions (OCR) and in the suburbs, prices fell 0.9 per cent. For the rest of the year, property experts are expecting private apartment prices to stabilise in the central regions while landed and suburban non-landed homes continue to struggle.

2016 Budget – Cooling measures to stay

In this year’s Budget, there was no mention from the authorities on the easing of property cooling curbs which property players have said are part of the reason behind diminishing growth in the sector.

Are buyers looking outside of Singapore for investment opportunities?

Are buyers looking outside of Singapore for investment opportunities?

The property cooling curbs have put the brakes on plans for many investors and even home buyers who now have their loan options rather severely restricted. The total debt servicing ratio (TDSR) framework limits the amount that can be loaned based on a percentage of the borrower’s monthly income.  Levy on the additional buyers’ stamp duty (ABSD) which increases the final buying price on a property, and many buyers and investors have shied away from putting their monies on local properties. They are instead looking outside of the country or into other kinds of investment opportunities.

The stock on unsold homes set to enter the market this year may depress prices even more but some analysts consider the government’s move to stand firm on their decision a wise one. As property prices are still high, and interest rates still considerably low, there is still space for them market to grow, albeit a little slower.

CIty GateThat will keep any possibility of a bubble at bay and though conservative, may be the best plan in the midst of a shaky global economic situation. Though private property prices have been falling, resale HDB flat prices have stayed stagnant for quite awhile now, which begs the question of who really benefits from these property cooling measures?

Small completed private apartments fare better

Prices of completed private homes have risen slightly in January by 0.1%. That is after a 0.6% fall in December, which could be due to the lack of new launches and the festive year-end lull. The NUS Institute of Real Estate Studies’ (IRES) Singapore Residential Price Index (SRPI) has indicated varied price fluctuations across the different regions. Small apartments up to 506 sq ft fared the best, with a 0.6% rise while units in the central regions fell 0.5%.

This most recent study includes a new segment that looks at 574 private residential developments in 26 districts which were completed between October 2003 and September 2015, which could give a clearer picture of market direction in the recent decade. Some of the projects included in the study were the D’Leedon, Skyline Residences and Silversea condominiums.

The outlook for completed private properties remains conservative for the rest of the year, with prices expected to fall, however slight. Developers and industry players are already calling for the property cooling measures to be lifted, though the authorities seem to be standing their ground, for now. The year is still young, thus global economic shifts in the first half of 2016 may impact the decision-making process for H2. There will still be investment opportunities if one widens the scope to include regional cities.

 

China’s property market on road to recovery

Following the recent blip in China’s economy, which has affected economies across the globe, investor confidence and expectations have dipped considerably.

Home prices have also fallen but are now on the road to recovery as the authorities have eased measures to help regions, in particular smaller cities, in danger of a supply glut. The People’s Bank of China (PBOC) has helped to keep the yuan steady after allowing it to fall rather drastically in the beginning of the year. It has reduced interest rates 6 times since November 2014 and also lowered repayment requirements to allow buyers to borrow more for their first and second homes. Home prices have risen in 37 cities over the last month. In the more touristic cities such as Hangzhou and Xiamen, home prices have grown 1.1 and 1.3 per cent respectively over November last year. In a year-on-year comparison, a growth of 5.6 and 6.4 per cent was recorded.

PikShaRoadPhoto: Pik Sha Road property in Hong Kong

China‘s government seems determined to keep the economy afloat though sharp rebounds may be unlikely. Economists are expecting the authorities to play a more supportive role this year, with one of their main tasks this year being the reduction of home inventory, thus investors and market players are expecting further easing of measures this year.

Cities which are also business hubs, such as Shenzhen and Shanghai, have seen the quickest pace of home prices recovery. New home prices in Shenzhen and Shanghai have increased by 3.2 and 1.9 per cent respectively, followed by 0.4 and 0.7 per cent in Beijing and Guangzhou. Most of the positive activity in the property market remains centred around a small market segment, and some less popular cities are still seeing a market decline.

 

Lull in private home prices

Despite a projected lull in local private home prices this year, interest in Singapore’s property market remains steady as prime residential property prices are still 165 per cent and 92 per cent lower than those in Hong Kong and London respectively.

 Photo credit: Singapore Tourism Board

So despite property analysts predicting a 5 to 10 per cent fall in prime and mass market private property prices this year, the local property market’s core remains strong. 2010’s property cooling measures may have kept property prices 17 per cent lower than what it could have been. Private home prices have fallen 4 per cent last year, following a 3.7 per cent fall in 2014. In the luxury home market, prices have fallen 20 per cent since the Additional Buyers’ Stamp Duty (ABSD) was implemented in 2011.

China’s recent growth slump, plunging oil prices, the Federal Reserve interest rate hike and a general sense of a global recession looming, might consequently affect the property markets around the world. Businesses may reconsider their expansion plans, which could mean a fall in demand for office spaces and commercial properties. This in turn may affect the number of expatriates entering the country, which may also affect rental prices.

This year could prove tough for investors and property sellers, but not without glimpses of hope. 2016 may be the year to hang-in-there, but industry experts are expecting 2017 to take a turn for the better.

What do home buyers value?

Location and price. The first is a well-known fact, that the better placed the property, the higher the demand and hence also the price. But home buyers are also keeping a close eye on their budget and the total quantum price could be the make-or-break factor when it comes to sealing a deal.

NorthparkResidences2Photo: Northpark Residences

Developers have been quick to catch on to this and the launches which sold quickly and well last year were those in the vicinity of a MRT station, school or shopping mall and affordably priced. Mixed-use developments such as Northpark Residences and The Poiz Residences were especially popular. Northpark Residences has sold 486 units at the $1,374 psf average while The Poiz Residences sold 277 units at $1,440 psf. Other mixed-use developments buyers seemed out include J Gateway and DUO Residences.

Home buyers’ appetite have signalled a trend towards $1,000 psf for suburban homes, $1,500 psf for city fringe properties and $2,000 psf for homes in the central regions. They are however more willing to pay more for mixed-use residential properties or those nearer MRT stations or bus interchanges.

WIsteria YishunPhoto credit: thewisteria.net

There will be a number of new launches such as 183 LongHaus in Upper Thomson and The Wisteria in Yishun coming up within this first quarter of the year, and it will be a time to watch as it will set the tone for the rest of 2016.