Tenants calling the shots

Tenants are now calling the shots in the private apartment rental market. From lower rental prices and shorter leases to property renovations, some are even demanding specific furniture, new utensils and linen.

SeaHorizonEC

Photo: Sea Horizon executive condominium in Pasir Ris

Property rental prices have been coming down, especially as property prices have fallen over the last few years, and supply have increased substantially. Landlords are now finding it harder to find tenants willing to sign the standard 2-year leases which were commonplace in the past. Now most tenants are asking for shorter leases of 6 months as they know they are able to secure another place at a cheaper price should they wish to do so after the lease period. Private property rents have fallen 4.6 per cent in 2015, with rents in the outside central region (OCR) feeling the heat more with a 5.6 per cent fall. Rental prices of city fringe properties fell 4.9 per cent.

Property experts are expecting a 9 to 10 per cent vacancy rate this year, with rental prices falling 8 per cent. There will be approximately 26,467 new private property and executive condominium units made available this year, pushing supply up to an record high. Coupled with the authorities clamping down on immigration and a weak global economy, the prospects may seem a little dim. With investors and landlords not able to secure rental yields, the market may see an influx of units being sold; mortgage auctions may also find themselves having quite a few more units at hand.

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.

Suburban private home prices waver


Parc EleganceNovember saw a 0.6% fall in private home prices, pulled down mainly by falling figures in the shoebox apartments segment. These units sized below 506 sq ft fared 1.2 per cent better in October than in November.

Property analysts are expecting some selling action in the months ahead, particularly in the non-central suburban private home segment as the surge of completed units and increased interest rates may force the hand of investors who have overstretched themselves. However, the number of sellers may outweigh the number of buyers as competition toughens up.

Properties in the central regions or prime districts of 1 to 4 and 9 to 11 could have fared better as well, with a 4.5 per cent fall in prices in a year-on-year comparison. That is a drop of 13.1 per cent from the peak in May 2013. Industry players have reasoned that properties in the central regions are generally larger in size, which means they also have a higher total quantum price, which makes them harder to find buyers for. Foreign buyers are also expected to pay a 15 per cent ABSD (Additional Buyers’ Stamp Duty), which may have turned some investors off the Singapore property market.

The Boutiq Killiney

Photo: The Boutiq Killiney

As the target audience for the central and non-central regions are quite different, sellers and buyers alike may need to alter their expectations of the market in 2016. In the central regions, some sellers may be ready to let go of their properties as the economy slows, but prices are not expected to fall drastically as the owners usually have the holding power to hang on to their properties till the price is right. In the non-central regions however, where owners and buyers are usually salaried workers, pricing may be more dependent on external forces such as the overall rate of economic growth, employment and mortgage rates, rental potential and debt ratios.

Decrease in property launches next year?

Large fresh batches of completed homes will be entering the market next year, which may in turn increase the supply of available private homes and decrease consumer’s demand. Add the Federal Reserve’s rate hike which was just announced yesterday, the market is expected to remain quiet in 2016. The authorities are picking up on these changes and have announced that they will be holding back on the release of land sites for sale in the first half of 2016.

As most of the completed new private homes flooding the market next year will be outside the central regions, that is 55% in the suburbs, suburban private properties might be feeling the crunch in terms of rental competition and sales volume. The total number of private homes reaching completion next year will be a whooping 22,351. Property experts’ have previously projected the market requirement of only 8,000 to 10,000 new units per year. The numbers have almost doubled over the last 4 years, with a total of 70,000 private homes were launched within this time period. Add public housing and the numbers are substantial reason for worry.

Although the government will still keep the Government Land Sales (GLS) programme going in order to keep the property and construction industry going, they will only be releasing 16 sites in the H1 of 2016. Some of the confirmed sites include a residential site in Sembawang,  an executive condominium (EC) plot in Anchorvale Lane which may yield 640 units, a mixed-use plot in Bukit Batok West and a rare plot on Martin Place near River Valley road. The last of the 4 confirmed sites may be of particular interest to developers hoping to snag a prime plot which could yield potential high-end residential units.

Developers and buyers could also be interested in a few other mixed-use sites, in particular one on Holland Drive.

New home sales up in November

The Poiz Residences near Potong Pasir MRT station sold almost 80% of its 350 units launched last month. Median prices were at $1,440 psf. Elsewhere, newly released units sold at the previously launched Sky Vue in Bishan clocked in at 59 units, with an average selling price of $1,552 psf. Other best sellers include Principal Garden and Thomson Impressions.

poiz-img-001Photo: The Poiz Residences in Potong Pasir
In total, 423 units were sold in November, making it a 79 per cent rise in new private home sales last month. Properties in the city fringes fared especially well, with transactions almost doubling that of October. This could be due to more new developer launches in November as compared to a quiet October.

Thomson ImpressionsMoving ahead, location and selling prices will be the main focus for buyers as most are out for a bargain. Take the executive condominium (EC) market for example, 186 units were sold last month without any major EC launches based on the relevance of ECs and also their attractive pricing. Executive condominiums are a hybrid of private and public housing. Buyers can apply for HDB grants to purchase these properties and after 10 years, they attain a private condominium status, often elevating the value and selling price of the units.

Property analysts are expecting 2016 to be a fruitful year for developer launches which are reasonably and affordably priced, at good locations near MRT stations or schools. Suburban projects might struggle a little as competition with new resale private condominiums (those which have just reach completion) drive supply up.

Property market looking positive

Buyers, it seems, are slowly realising that property prices are not likely to fall any further, and are making their way back into the market once more. Both in the private property and HDB resale flat sectors, sales are picking up and the year might just close on a happy note.

Trilive KovanPhoto: Trilive condominium 

Resale private properties in particular are faring well, as they one up on newer launches in terms of price per unit of floor area. They are usually larger in size and while may not be cheaper in terms of the total quantum price, buyers consider them better value for money in the long run especially as more buyers of resale units are now owner-occupiers rather than investors. The latter often prefer smaller units in newer launches as they come at a lower overall selling price, though rental competition may prove tough in the market ahead.

More buyers now hunt for residential units near their workplace or schools and are less adverse to living in the suburbs, especially around a strong regional centre such as Jurong, Tampines or Woodlands.

TheTerraceECPhoto: The Terrace Executive Condominium

In the resale HDB flat front, transaction numbers are up 10 per cent from last year. Property analysts are expecting up to 19,000 transactions of HDB flats this year alone. Prices of resale flats are unlikely to fall any further in 2016, and may even pick up a little as demand returns.

$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.

Lower property tax for 8 in 10 home owners

8 in 10 private home owners and up to 80% of those who own a HDB flat will receive a christmas gift that keeps on giving. Due to the marked-down annual values of up to 260,000 homes, 80% of home owners will pay almost 3 to 20 per cent less property tax in 2016, according to the Inland Revenue Authority of Singapore (IRAS). The owners of 380,000 four-room HDB flats, 250,000 five-room HDB flats and 65,000 ECs (executive flats) will also see their taxes greatly reduced; some may not even have to pay any property taxes next year.

FOresta Mount Faber

Photo: The Foresta @ Mount Faber

Considering the IRAS has received $4 billion in property taxes in the 12 months leading up to March 31, it may be a small dent, but to the home owners, it may be truly happy news. As residential rents have been on the decline for sometime now, and with the expected supply boom next year, property owners may be facing some struggles when the onslaught of new private homes and BTO flats enter the market in 2016. Some of the effects can already be seen in the market in the latter half of 2015.

As property values are calculated based on the rental value of similar properties in the vicinity of a said property, the falling rental rates have no doubt been part of the reason for the tax cuts. Rents for private homes have fallen 3.3 per cent this year. Though a progressive tax system has already been implemented last year, with home owners who are living in their properties not having to pay taxes for the first $8,000 of their property’s annual value, this readjustment will help them save even more.