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.

Promising year ahead for landed properties?

At least in the Good Class Bungalow (GCB) segment apparently. Property analysts are predicting a 5 per cent price growth this year following promising response in the first quarter alone.

Despite economic slowdown and stock market volatility earlier in the year, this luxury landed property sector has seen a pick-up in sales volume as Singaporean investors are turning their sights on home ground once more, after a few seasons of investing in overseas propeties. Property agents have reported buyers making serious offers as compared to just a quarter ago in the latter part of 2015.

Leedon Road GCBRecent sales of GCBs included one at Swettenham Close at $1,354 psf. A total of 33 GCBs were sold in 2015, a similar number is expected for this year. Perhaps property owners have lowered their expectations and asking prices, and buyers are also enticed by the rarity and land area these bungalows provide. Many are upgraders or investors while sellers tend to be those whose children have flown the coop and are looking to downsize to more manageable properties. Rental yields for these large-sized properties have been diminishing, and these properties also tend to have higher property taxes and maintenance requirements.

Buyers may be more willing to take the bite this year as prices have already fallen 15 per cent since its peak in 2013, and further price declines will be unlikely. As these landed properties are also far and few in between, they may be quicker to pounce on a deal as it will not be easy finding similar options.

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.

Property auction sales do well in weakening market

Multiple-property owners may face increasing pressure as the market continues to soften. Rental yields and demand have fallen due to slowing global economic growth.

Axis@SiglapPhoto: Axis @ Siglap

Real estate consultancies and auction houses are beginning to see an down-the-middle split in auction listings between owner listings and mortgagee listings. The latter are units put into auction by banks because of owners defaulting on their mortgage payments.

Not only are residential units being put up for auction, but office spaces, shophouses and retail units are also finding their way into these auctions. Home owners are increasingly favouring the path of auction listings are they garner higher exposure and are more likely to attract investors or buyers who may be willing to pay for quality or a good bargain.

Some of the auctioned properties out there are in the million-dollar range, including a 1,776 sq ft penthouse with roof terrace at Axis @ Siglap for $1.3 million, a 13th-floor 1,808 sq ft unit at The Orchard Residences going for $6.2 million and a $16 million single-storey detached Branksome Road house in Tanjong Katong.

TanameraCrestPhoto: Tanamera Crest

Affordable units sold below valuation are also available at these auctions, for example a 603 sq ft unit at The Greenwich in Seletar road going for $730,000 and $980,000 for a 1,205 sq ft unit at Tanamera Crest. These suburban units may be good bargains for buyer-occupiers while the higher-end listings are good fodder for investors in the know.

More bulk property and auction sales

The year ahead may be a bumpy one for property developers who have a large inventory of unsold stock and for investors who may have overstretched themselves.

A good many unsold properties may be making their rounds within the local market as sellers, buyers, investors and developers bid against one another to see who gets the best deal. There will be those who need or want to sell, and those who are able to buy when the price is right despite a market slowdown.

Hua Guan Gardens House

Photo: House in Hua Guan Gardens for sale

As more buyers are defaulting on their mortgage as interest rates rise and the market lulls, more homes are going under the hammer in mortgage sales. Last year saw the number of units put up for auction almost double from 47 to 87. Comparing this to 2012, when only a mere 9 units were put up for auction, the numbers have leapt considerably over the past 5 years. Given the quietening rental market and a global economic tossup, some owners are finding it difficult to service their loans. What does this signify? Will private home prices fall this year or will the number of new units coming into the market simply place more options out there for buyers?

The mortgage-sales properties were mostly larger apartments or private landed homes. Though this may mean the market for these properties have shrunk, it is good news for buyers who have been waiting and are ready to buy purchase these rare properties. One such property is a cluster bungalow in Hua Guan Avenue, just off Dunearn road, attractive for its rarity, 4,219 s q ft size, and location. It is situated near King Albert Park MRT station. Other potential money-makers include 2 maisonettes and one former-HUDC unit all sized around 1,600 sq ft and a steal at possibly below $1 million.

Private condominium prices hold steady

The fall in completed private condominium prices was gentler last year at 3.5 per cent, compared to the 5.7 per cent from the year before. Prices are expected to hold steady this year as a dip in supply of properties in this sector bring prices to a plateau.

Jewel CDL

Photo: Jewel @ Buangkok

Demand for smaller apartments of up to 500 sq ft in size, have been weakening as their numbers, especially in the suburbs, have been on the rise in the past couple of years. Investors have found them more difficult to rent out in the dulling leasing market and those outside the central region or further from regional business hubs may find themselves competing for the same tenant pool. Tenants now prefer units with larger floor spaces with just slightly higher rents.

Sale prices of completed private properties within the central regions however have fallen more sharply as they usually come with a higher total quantum price. Compared to the many newer properties which have found a sweet spot with their total selling price, units in these central or prime districts see fewer overall transactions.

As the volume of unsold completed condominium stock diminishes and with the fewer launches expected this year due to cutbacks on land supply, resale properties could expect a happier year ahead.

Australia’s property and housing market feels the chill

Tighter loan restrictions and a supply glut – these issues may not be affecting only Singapore’s property market. It seems in Australia, the same has threatened to shake the markets.

SYdney PropertyPhoto: Sydney

Property prices which were soaring, especially in major Australian cities such as Sydney and Melbourne, have now come down, as the approval for multi-unit properties have fallen 12.7 per cent last November. Developers of high-rise, multi-unit properties have found it harder to secure approvals as a supply glut looms in the near horizon.

The banks have also tightened their lending, and new regulations have made it more difficult for foreign investors to pick off large number of properties. This in turn has affect the construction industry in Australia, and have come at an most unfortunate time as the government has hoped it will plug the hole left behind by the lagging mining industry.

That said, there are still many considerable new properties which are highly valuable. Most importantly, they need to fit well with the investor’s or buyer’s needs and portfolio. Factors such as financial feasibility and longevity, short- and long-term leasing potential and margin of development of the district will continue to guide investors in making their purchasing decisions.

A stable year for Singapore’s property market?

Resale HDB flat prices have fallen only 1.5 per cent last year, as compared to 6 per cent the year before. Industry experts are not expecting prices to fall much more this year and in fact last quarter saw a 0.2 per cent rise in HDB resale flat price index. But that may not mean a sudden rebound of HDB flat prices as the options available to home buyers have now increased, especially as private home prices have fallen and more are now eligible to purchase new BTO flats directly from HDB.
Poiz Residences2Photo: Poiz Residences

HDB has announced that they will be rolling out up to 18,000 new flats this year, 3,000 more that last year. Private properties are now more affordable as developers have caught on to buyers’ affinity to total quantum selling prices. Last year, private property prices dropped 3.7 per cent overall, and a 0.5 per cent fall was registered last quarter of 2015.

The number of new property launches in the 4th quarter propped up new property prices with launches such as Principal Garden, The Poiz Residences and Thomson Impressions. Prices of new units in the city fringes fared well with no price changes. Landed property prices however fell 10.4 per cent over the last 2 and a half years, with prices falling 4.4 per cent last year alone.

Property analysts are watching the market closely as they are expecting the interest rate hikes to put a strain on those servicing home loans, especially as the property cooling measures concurrently remain.