Signs of property market bottoming out?  

Though the vacancy rates of private residential properties are currently 1.4 percent higher in Q2 and at a 16-year record high, and property prices 9.4 percent lower than the 2013 peak, property analysts remain positive about the outlook as these could be signs that the property market is reaching the bottom of its cycle.

7478d455d05b4f2aa26fd1e5a8ce7bd2There were 30,310 vacant private homes in the second quarter, that is 5,391 units more than in Q1. As the number of completed properties rise, with almost 11,400 new units entering the market in the first half of 2016, the rates are seemingly modest. Property prices have also been stabilizing, and as long as interest rates remain at their current level, most households will be likely to be able to hold on to their properties over the down season.

More property buyers are now making home purchases for their own use instead of pure investment purposes and many are taking the opportunity to seal deals during this quieter time. In a year-on-year comparison, sales volume has risen 11 per cent and the luxury property market in particular is enjoying a spike in buying interest as prices have fallen sufficiently, luring buyers back into the high-end property market.

 

 

 

Home loan competition heats up

As the economy slows worldwide,  as global markets struggle to make sense of the recent Brexit vote and as the US Federal reserves rate hikes are put on hold, the time to secure or refinance a home loan could be now. Especially as banks compete for earnings with diminishing property demands.

Image courtesy of Singapore Tourism Board.

Image courtesy of Singapore Tourism Board.

The Singapore Interbank offered rate (SIBOR) at which local home loans are set to, has since fallen to 1 per cent. At its peak, rates went as high as 1.25 per cent.  On the commercial property front, the swap offer rate (SOR) was at 0.94 in June, down from 1.36 per cent in March. What all this means is it now costs less for banks to borrow funds from one another, which makes it easier to schedule fundings for their clients and they may take the opportunity to offer lower rates to secure more earnings.

Banks have been battling for clients and offering up increasingly competitive home loan packages. The dropping SIBOR rates also means linked home loan packages will have lower interest rates. If the US Federal reserve continues to hold off the incline of the rates hike, home buyers may still be able to benefit from the correspondingly lower home loan rates here.

Private resale home prices inching up

Prices of resale private non-landed homes have been on the rise since March this year and the upward climb though gradual, shows promise and property analysts are hoping market sentiments will improve as the year moves on.

Qbay ResidencesLast month’s price rise clocked at 0.5 per cent and was apparent throughout all regions. In the core central region (CCR), prices rose 0.9 per cent and 0.4 and 0.5 in the city fringe and suburbs respectively. Sales volume has also improved 27.4 per cent in a year-on-year comparison with 754 units sold, just a wisp lower than the 763 units sold in May.

Buyers are beginning to be more acceptable of the market prices of resale units as the median X-Value (TOX) was at negative $7,000, $1,000 more than the negative $8,000 in April. While there are a few major launches planned for the next half to the year, the number of unsold units in the market has been expanding to almost 15,000, and about 57,500 private homes and 12,000 executive condominiums are in the pipeline. How will the market react to the release of these units into the market? Many new launches now face challenging times beyond their initial launch. Depending on the speed and volume at which new units are released and changes in interest rates will be determining factors.

Singapore home prices remain muted

As long as the property cooling measures are here to stay and global economics remain shaky, home prices may hover at the current levels.

ArdmoreIIIAnd as the government continues to roll out more new build-to-order (BTO) flats while keeping the loan ratio capped at 30 per cent, demand for resale HDB flats may continue its lacklustre run. Although there was a 0.1 per cent rise in HDB prices in Q2, prices were mainly flat and private home prices dipped further by 0.4 per cent, that is following a 0.7 per cent fall in Q1. Some property players have viewed the private property market as possibly reaching the bottom of the cycle.

Since the last market peak in 2013, HDB and private home prices are now 9.8 per cent and 9.4 per cent lower respectively. There have been some signs of recovery in Q2 as private property prices in the core central region (CCR) rose 0.2 per cent. Developers have also been actively seeking out sales by offering creative payment schemes and keeping sales volume to a respectable level.

Considering the average length of a property lull being 8.4 quarters, this cycle may already have reached the end of its run. Will a prolonged cycle mean an even sharper and more drastic rebound when the measures are loosened? How will the market then respond to that and will there be any drawbacks?

River Valley’s properties peak

Just off the city centre, with a quiet and exclusive environment and a variety of hip and happening eateries, retail and office housed in quaint heritage buildings nearby, River Valley has always been a property hotspot for expatriates and young professionals.

MartinPlaceResidencesSo it probably comes as no surprise that developers were quick to bid, fast and furiously, on a GLS (government land sales) site in its vicinity. With the highest bid coming from Guocoland at $595.1 million or $1, 239 psf for the Martin Place plot which is situated near the upcoming Great World MRT station and promises to yield as many as 450 homes, this could be one of the highest bids for a land plot, aside from those on Sentosa. In January this year, a Siglap road condominium site was sold for $624.2million but that could yield up to 900 units, twice the number of units the Martin Place plot is capped at.

Confidence was likely to have been boosted by strong sales from the recent Cairnhill Nine launch. The area is peppered with a wide variety of private properties, including shophouses, older resale condominiums, newer developments and upcoming residential projects. Demand continues to be strong as rental prices become more competitive. Sales volume has always been on the rise, with 86 units sold in May this year, compared to the 15 units monthly average in 2015. Developers’ response to this land sale could be a positive indication of market confidence in recovery.

 

Increasing difficulty in securing Australian home loans

Foreign property buyers hoping to snap up homes in Australia may find it increasing harder to secure home loans from Australian banks. The major Australian banks such as Commonwealth Bank, the National Australian Bank (NAB) and Westpac have further tightened loan restrictions to non-residents.

Sydney NSW skylineIn June this year, foreigners buying properties in New South Wales (NSW) have to now pay a 4 per cent stamp duty surcharge. In the state of Victoria, stamp duties have been raised this month to 7 per cent from the 3 per cent which commenced last year. Queensland may soon implement a 3 per cent foreign property surcharge as well, with a projected commencement date of October this year.

Foreign property buyers have come under the hammer of late, with citizens raising concerns about rising home prices, especially in popular cities such as Melbourne, Sydney and Perth. Mainland Chinese buyers were the largest investors, spending A$24 billion in the property market last year, doubling that of A$12 billion in 2014.

The National Australian Bank (NAB) and Westpac are however still Sydney Surrey Streethelping Singaporean investors secure loans via their Singapore offices, though they are careful to alert clients to the total debt servicing ration (TDSR) framework which still applies. There are also other sources of home financing, including private lenders though additional information and documents, such as bank statements and income slips, will be required.

Money still to be made in property rental market

Despite falling property rental prices across the board as the market slump continues, home owners and investors are finding that there is still profit to be made in the home rental sector, at least earning them more than simply leaving their properties empty or waiting for money in the bank to earn them interest.

The AmstonA sudden and deep plunge in rents is quite improbable, and with slight adjustments of expectations, landlords will still find that there are tenants to be had in the current market. The median gross rental yield in May this year stood at 3.2 per cent, with median prices at $1,223 psf. Median monthly rents were down from $3.45 psf in April to $3.26 psf in May. The districts with the highest yields were 1, 2, 4,5 and 17 with the highest median prices at $1,960 psf in district 1 and 2 – in Chinatown, Raffles Place and Tanjong Pagar.

Property analysts are however expecting further reduction in yields as the foreign workforce plays musical chairs with the abundant number of rental units in the mark. Areas with fewer residential properties, such as in districts 1, 2 and where property prices are lower such as in district 17 (Changi, Loyang and Pasir Ris), rental demand tends to be stronger. Rents have however plunged in districts 20 and 8 of Ang Mo Kio, Bishan and Little india and Farrer Park respectively.

The Brexit effect on London home prices

While Europe is astir after the Brexit vote, how have or will the property market in the United Kingdom respond? Prior to the vote, London home prices were already rising with the average at a considerable £310,500 or S$611,000. That was about 5.5 per cent higher in May this year compared to the same month last year.

LondonPropertyPrices have however fell 0.2 per cent with effect from a new property-tax regulations in place. An increase in taxes have helped first-time buyers get ahead of landlords who have had the upped hand in the leasing market for sometime. In the breathless weeks before the EU vote, home sales and prices were understandably suppressed as fewer property owners were putting their properties on the market due to the uncertainties. Property analysts hoping for a remain vote were hoping for the vote to help put things back to normal. But now, the future is murky, and seems it will be so for sometime more as the country struggles to make sense of the vote and how to move on henceforth.

Properties in London may take the largest hit as international investors are the top buyers of properties in this borough. Home prices of prime central London properties have already fallen by half but the fall of the sterling may spur some investors to make use of the opportunity to pick up some good deals.