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.

 

 

Hong Kong’s property scene veer towards Commercial

Buyers and investors in Hong Kong’s property market seem to be veering towards commercial as residential property prices decline.

Mongkok Office hOng KongPhoto credit: Office18.com

Offices are at the top of the list as Chinese companies continue to seek out spaces and sometimes even entire buildings. Hong Kong is a city popular with Chinese corporations who hope to elevate their brand globally by having offices in the country. As the economy in China begins to slow, many companies are looking outside of the country for higher returns.

Home prices on the other hand, are not faring as well. Residential property prices are expected to fall by up to 20 per cent within the next couple of quarters. This may impact overseas investors who have previously purchased properties in Hong Kong. But the falling prices may be good news to those who are hoping to snag a few more properties in the city. Investors may very well take the opportunity to purchase and hold on to these  assets whose value might rise in the future not too far away.

Upper East Hong Kong CondoPhoto credit: GoHome.com.hk

There is however certainly no lack of new property launches in Hong Kong; with apartments in Mong Kok, Aberdeen and Yuen Long, just to name a few.

$1.5 million sweet spot for private resale buyers

Singapore’s property market will be expecting some adjustments in the private resale non-landed sector as more completed units continue to enter the market next year. But prices have stabilised somewhat in the past couple of months after 5 months of consecutive decline.

Loft @ Nathan, one of the new property launches available to buyers.

Loft @ Nathan, one of the new property launches available to buyers.

Property analysts have realised that buyers remain highly sensitive to the total quantum price and they seem to have reached a sweet spot of $1.5 million. Smaller units are more susceptible to price changes as their numbers are on the rise, causing rental competition to be rather fierce. In October, a 0.1% value increase for private completed non-landed properties was registered by the NUS Singapore Residential Price Index. More buyers have been setting their sights on resale properties as developers largely cut back on the number of new launches in the second half of the year.

There were 247 more transactions registered this year as compared to the last and with a $750,000 increase in sales figures. There has also been a shift this year in the market’s focus, from new developer properties to resale properties. More buyers are own-occupiers who are looking for immediate housing needs, thus are more willing to pay for resale units.

Industry experts are expecting 2016 to bring more fluctuations as the market copes with new homes reaching completion, private homes and HDB flats included.

More for less – Smaller condo apartments

With the rising prices of land plots sold under the Government Land Sales programme and with developers taking into consideration how the property cooling measures have affected buyers’ purchasing power, private apartment sizes have been diminishing since 2010.

LakevillePhoto: Lakeville at Jurong West

More apparent in units in the city fringes, average sizes have shrunk from 1,051 to 810 sq ft. And in the suburbs, apartment sizes went from 878 sq ft to 811 sq ft; though the average sizes from new projects actually dropped from 1, 113 sq ft in 2006 to 667 sq ft in 2011 but rose again to 928 sq ft in 2014.

In 2012, the Urban Redevelopment Authority (URA) put in place guidelines for the maximum number of units for condominium developments outside of the central area. Developers have since noticed that buyers are more sensitive to the total quantum price of a unit rather than per unit prices, especially since the implementation of loan curbs such as the Additional Buyers’ Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR), hence maximising the land area and total number of units would be the best way to go.

Symphony SUitesPhoto: Symphony Suites

There are some residential projects which chose to follow their own path however, including Lakeville and Symphony Suites. But as the population continues to grow, it seems that unit sizes will only continue to diminish. Resale units may then have an edge over the smaller-sized newer units, provided pricing is equally competitive when time comes.

Property market and Economy = Cause and Effect ?

It has always been thought that the economy, both local and global, has a big part to play in the performance of the local property market. But it seems a recent study by the Monetary Authority of Singapore (MAS), has shown that the link is not all that obvious.

The study has shown that Singapore’s economy may be affected more so by external factors such as exports, rather than our property market’s ups and downs. The latter, in turn, is more attuned to its own internal factors, mainly by how developers choose to hold back or release units during the property market’s flow and ebb.


Although news about Singapore’s economy may not be all that positive at the moment, the effect of that on the property market may be weaker than expected. Thus Singapore’s property market, despite slightly lowered prices and sales volume, may not be in such a bad place after all. The housing cycle’s rise and fall takes a longer route as compared to the overall economy and business sectors’, and is more often than not, caused by factors such a developers managing their inventories to preserve profit margin and mismatched expectations between buyers and sellers. These in turn cause a kink in the demand and supply chain, which in turn affects housing prices.

In short, it takes quite a huge change in sales volume of new and resale properties here before a significant adjustment in the property market can be seen.

The private home gentle wave

It’s an up and down ride for the private non-landed property market for more than a year now. Across the board, non-landed resale home prices dropped 6.2 per cent last year. Prices of homes in the central districts dipped an average of 7 per cent last year, though there were good months when some segments managed to bounce back slightly before falling again. That could mean that things were mainly level though there are outliers.

Duchess ResidencesResale private apartment prices fell 0.2 per cent last month, with a 3.9 per cent fall compared to the same month last year. But some city fringe properties bounced back with an average price rise of 0.4 per cent. Part of the yoyo-ing in prices could be due to the Chinese New Year period in February and buyers were just coming back into the fray in March.

The second quarter of this year would be a crucial point in almost determining how the rest of the year will flow, at least up to just before the Hungry Ghost month. Though the ride has been more a gentle wave of price fluctuations rather than a roller coaster ride, property experts are however not expecting a drastic change in prices unless there are major policy changes or a major interest rates hike.

The year could be a relatively quiet one with bright sparks and dull moments along the way, but the basics of good location and lowered total quantum prices will still move units.