Post-brexit Britain sees property sellers lowering asking prices


London HOuse
British home owners are slowly coming to terms with the reality of having to lower asking prices, post-brexit. The fear of how Brexit might affect the economy may have finally sunken in as the politically uncertain climate has made investors wary and property sellers are finding that they have increasingly had to offer deep discounts due to waning demand.

In prime central London in particular, the effects have taken hold of the property sector quite immediately. The effects have now trickled down to other parts of the UK and the prices of homes which have escalated in the years prior to Brexit are now out of reach to most buyers. In London, home prices are 86 per cent higher than in 2009, that is in less than a decade.

SydneySkylineOn almost the other end of the globe, in Sydney, Australia, property prices continue to skyrocket. Investor demand is aided by low interest rates as home values rose last month at the fastest pace in 14 years. Property prices in Sydney have risen 18.4 per cent since 2002. Despite the authorities’ efforts to curb the rapid rise, home prices have continued to rise in this and other major cities in Australia such as Melbourne and Brisbane.

China clamping down on investment outflow

The Chinese have been known to be big spenders in many real estate markets worldwide, thus the recent clamping down on investment outflow by the Chinese government has markets all over the globe in a little bit of a tizzy as Chinese buyers are now finding it increasingly more difficult to transfer funds out of China in payment for the properties they have previously purchased. In an announcement on Dec 31, the State Administration of Foreign Exchange (Safe) stated that all buyers of foreign exchange must now sign a pledge to not use their US$50,000 quota for offer shore property investment.

SydneyCondoDarlingSquareThis may put a crimp in things as many real estate markets may find themselves missing out on this potentially huge audience pool as Chinese buyers are now shying away from foreign investments due to the difficulties involved in trying to bring their monies offshore. While the move may not deter the major buyers, first-time buyers with a lack of offshore assets and expertise in capital-manuvering may be forced to relinquish their offshore real estate purchases despite having already made deposits of previous scheduled payments.

Those who violate the new ruling may be denied access to foreign currency for up to 3 years, be added to a government watch list and may be investigated for money-laundering. The regulation also applies to companies with corporate outflows, requiring them to provide clear documentation with regards to outbound monies. The use of foreign currency for real estate has always been banned, but the authorities are serious this time, as seen in their request for additional documentation.

Sparks of hope in property market

Despite the prolonged property lull, analysts are hopeful that a few sparks of recovery will begin to rejuvenate the market this year. The office sector may boost the commercial market while high-end luxury homes will hold up the residential property segment.

dleedonAs far as regions go, the core central region is heating up in terms of foreign interest in both residential and commercial properties. The sliding private home prices, by 11 per cent since 2013, have brought investors back into the luxury homes market. Currency valuation will however continue to play a part in the movement of investment money, and Singapore will still have to compete with other cities such as Melbourne, Sydney and Shanghai for investors’ attention.

Compared to other major cities such as Hong Kong, New York and London however, apartment prices here have fallen and will become more appealing to foreign buyers as the potential for yields in the medium term is considerable, especially as these specific market segment is expected to perform well this year.

skylineorchardboulevardThe collective sales market is another to watch in 2017, as developers are expected to collaborate to build up their store of land sites for long term yields. There might also be acquisitions of smaller developers by larger ones in order to participate in the government land sales programme. Property prices are expected to remain stable but depending on a property’s rental yields as a means of investment or profit could become less attractive as investors find it more difficult to find tenants in an increasingly competitive market.

Hong Kong’s property prices expected to rise further

As one of Asia’s, if not the world’s, most expensive cities to live and work in, it comes as no surprise that the real estate in Hong Kong is one of the world’s costliest.

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Photo credit: www.onekt.com.hk

Despite the Hong Kong government‘s repeated attempts to cool the market, with implementation of stamp duties and laying down of other purchasing restrictions, property prices in Hong Kong have continued to climb. And things could be heating up even more this year as even Mr Li Ka Shing, the country’s richest man, predicts the market still have room for property prices to climb further. In November last year, private property prices reached a peak unseen since 1979 when the data was made available by the city’s rating and valuation department.

Although there has been some political unrest, mostly civil, in the city and interest rates have been on the rise, there is still space apparently, for slight rise in prices this year. It will not be a smooth ride up, but there will be increments made nonetheless. China Overseas Land and Investment for example has listed the prices of their latest private residential development in the former Kai Tak airport area for almost 20 per cent higher that the same which were sold in August. In a city where liveable land is scarce, developers have been known to pay exorbitant prices for land sites, for example the record ids for sites in the same Kai Tak airport area for US$1.8 billion or S$2.58 billion.

 

New properties to help boost Indonesia’s property market

The global commodity slump has affected markets all over the world. In Indonesia, the property market has seen a 26 per cent drop in value in 2015 and a whooping 49 per cent in the first 3 quarters of 2016.

branz-indonesiaPhoto credit: Branz-bsd.com

But momentum has picked up within the last quarter as a number of foreign developers are drawn to the market and recognising the potential it holds. The Indonesian government has relaxed mortgage rules and implemented tax cuts in attempts to boost market activity. Taxes on home sales have been halved and the minimum down payment on homes have been cut once again in 2016. Bank Indonesia has also reduced the benchmark interest rates.

As urbanisation in Indonesia is amplified yearly, with approximately 200,000 people moving from rural areas to the major urban cities such as Jakarta, developers are seeing the real and immediate effects of providing ready housing for a rapidly growing market of property and home seekers. Recent entries by foreign developers include China Communication Constructions Group (CCCG), Mitsubishi Corporation, Tokyu Land, Hong Kong Land and Sime Darby. The total investment monies come up to an estimated US$2.8 billion, the highest amount recorded since 2007.

mitsubishi-jakartaPhoto credit: Mitsubishi Corporation

City centre properties in Jakarta are increasingly popular as traffic conditions make it difficult for the growing workforce to travel from outlying districts. CCCG for example have their hand in the development of 4 residential projects in Jakarta alone, targeting mainly young couples and families. Mitsubishi Corporation is also jointly developing 1,000 housing and retail units in Bumi Serpong Damai. Though there may be some doubt about how the domestic market will be able to manoeuvre around the sudden increase in available properties, analysts are hopeful that property sales this year will post at least a 15 per cent growth.

Banking on rents to cover mortgages increasingly risky

As the rental market strains against the backdrop of a general economic slowdown and job security wobbles on its feet, the old ways of banking on rental yields to cover mortgage loans and other outlays on invested properties may no longer be a sure thing.

Alexis @ Alexandra CondoThe imbalance may be getting dangerously so even as the Monetary Authority of Singapore (MAS) has publicly warned investors against the risks of putting all their eggs in the property basket. They mentioned both property and corporate bonds as emerging risks, especially as growth is weak and the political situations across the globe is uncertain.

Rising vacancy rates and declining rental demand are the more concrete and obvious factors investors should consider before closing a deal simply because the total quantum prices are too good to be true. Before investing in overseas properties, currency fluctuations and political stability are also serious considerations, not to mention the strength and longevity of property and rental demand in a country not in close proximity.

la-rivere-2Although MAS has noted that most households here are able to weather an economic storm, if it does occur, those who have bitten off more than they can chew may want to reconsider their financial holding power and set their sights in the long-term rather than counting on their eggs hatching early.

CDL reports positive growth despite property lull

With a whooping 60.1 per cent spike in net profits in the third quarter, City Developments (CDL) seems to be shaking off the market gloom early. Their Q3 net profit rung in at $170.3 million.

gramercyparkPositive public response and strong sales from their properties, both local and international, have contributed to their recent success. At their latest launch, Forest Woods condominium, sales have hit the 70% mark at the considerable price of $1,400 psf. The project has a total of 519 units. They are fully sold at their 616-unit Jewel@Buangkok condominium development and almost all of its 40 units released at the 174-unit Gramercy Park have also been snapped up.

At the 944-unit Coco Palms condominium in Pasir Ris and the 638-unit The Brownstone executive condominium in Sengkang, they are also 91 and 80 per cent sold respectively. Such promising numbers considering the current global economic uncertainty will put them ahead of their competitors and help them pave a strong foundation for the journey ahead.

The Brownstone ECCDL also has properties overseas which are doing well, including the Hanover House project in Reading, Britian. The group is also expanding their suite of investments into other areas such as hotel operations, investment properties and management. Moving forward, investors can looking forward to more international properties being added to the list of potential investment opportunities.

Rents down but sales of some projects up

Home rental prices have been slipping with a 0.4 per cent and 0.5 per cent fall in the private non-landed apartments and HDB flats markets respectively.

Cairnhill Nine CapitaLandPhoto credit: CapitaLand

But perhaps the decline in rent has increased rental volume. There was a 8.2 per cent increase across the board in rental volume with 3,686 units leased this October as compared to 3,408 from the same month last year. On the same year-on-year comparison, rental prices were however down by 4.5 per cent.

The increase in rental volume may also be reflected in the sales volume this quarter as stronger home sales may have lifted earnings for some developers. CapitaLand for example saw a 28.4 per cent rise in net profit in Q3. Locally, their private residential projects, The Nassim and Cairnhill Nine, have boosted sales, together with their new projects in China – namely Riverfront in Hangzhou, New Horizon in Shanghai and Vermont Hills in Beijing.

nassimhillcapitalandPhoto credit: CapitaLand

In Singapore, they have sold 206 units in the second quarter, and a total of $1.24 billion in total sales value in the first 3 quarters of the year. With the happy increase in number of launches within the last quarter, sales volume may hit a positive note and ring in the festive year-end cheer come end December.