Rougher terrain for local leasing market

Property owners with rental units at hand have been finding it increasingly difficult to find tenants.

MartinPlaceResidencesForeigners make up approximately 60 per cent of the rental demand in Singapore, and as the financial and oil and gas sectors take a hit, demand has declined with the foreign workforce diminishing due to companies moving out of the country or simply because housing budgets have been cut as the sluggish global economic drags out. As of mid-2016, vacancy rates stand at 8.9 per cent and there were about 30,310 units vacant. The sudden influx of completed new homes hitting the market this year could not have helped things as well. This year, the number of completed properties entering the market outgrew the influx of a foreign workforce. Immigration and labour policies have changed since the last general election.

Rental rates in the suburbs fell the hardest at 1.2 per cent, followed by 0.6 per cent in the city fringes. Rents of core central region properties however increase by 0.1 per cent.

cavenaghlodge2017 will see the completion of even more residential developments and analysts are expecting rental demand to fall even further, particularly in the suburbs. Rents have dipped by up to 8.8 per cent in the suburbs and 4.5 per cent in the central districts. Some landlords have even give discounts of up to 30 per cent, just to secure a tenant. Others have found themselves going months without finding a suitable taker on the unit. Smaller one- and two-bedroom apartment units are however still faring well, especially those in the Central Business District (CBD), Marina Bay, Orchard Road, and River Valley areas.


2016’s demand for properties level with last year’s

Though it may seem like the property market took a turn for the worse this year, figures have shown that the level of demand has remained similar to last year’s.

peak-cairnhillProperty prices have fallen 10.8 per cent since the 2013 peak and perhaps it is precisely this decline of home prices that have kept buyers coming to the table, more so this year than the previous few which have been dull partly due to the property cooling measures implemented since 2013. Some property agents have in fact reported up to a 50 per cent increase in sealed deals this year, indicative of increased buyer’s interest and number of project launches.

The market inertia in terms of the property cooling measures and interest rates may also have been push factors in enticing buyers back into the market. Resale property sales have been strong with 5,587 transactions closed in the first 3 quarters of this year, up 18 per cent from 2015. Developers have also been pricing new units more competitively this year, giving the resale market a run for their money.

the-crestCity fringe and central region resale properties were particularly popular with buyers though some may still be waiting for better deals.  And as property analysts predict a further 3 to 3.5 per cent drop in prices for the rest of the year, the market seems primed for owner-occupiers though those considering investing in properties should wait a little more to get the most out of their buck.


Ready to invest in properties overseas?

The attraction of investing in a plum overseas property may be strong but while the yields may be high, so too could be the risks.

Prudent research and risk-calculation prior to taking the plunge is of course essential. And some of the very real and future-determining factors to take into consideration are:


1. Foreign ownership regulations

It almost goes without saying that this would be what any discerning buyer first finds out – what governs their purchase and whether they are eligible. Newer markets, in particular South-east Asian ones such as Vietnam, Cambodia, Myanmar and Laos, could have more relaxed rules as their immediate interest lie in attracting investments while markets with a longer history of foreign investment such as Australia and Thailand may have more rules in place in reaction to previous market movements. In some markets such as Australia and Malaysia, there are also restrictions on the resale of foreign-owned properties, and for buyers who do not have strong holding powers, having to hold on to properties in a economic downturn with only a niche target audience could be stressful in all senses of the word.

2. Currency exchange

Though currency fluctuations are inevitable, property analysts encourage buyers to seriously consider the market or country’s political and economic states. Markets where the local currency have been fairly stable for a prolonger period of time are generally lower-risk options, though even then, it would be wise to engage the services of a lawyer or accountant to help in long-term financial planning.


3. Rental potential

The location and type of property, the track record of the property developer and the rental demand for the property are all instrumental to the make or break of an investment decision. The property size should also be taken into consideration as larger albeit rarer properties may not be as quick to find a tenant as say, a smaller-sized unit at a more palatable quantum price. Industry experts also advice investors to first have a target audience in mind as expatriates may come from different industries and have differing housing budgets.

4. Payment schedules and options 

Singapore’s property market may veer to the stricter side in terms of payment schedules as they work on a progressive payment scheme. Many overseas markets however offer a deferred payment scheme, for example where a buyer puts down a 10% down-payment deposit and only pay the rest of the 90% upon completion of the projects. That could be a plus for some buyers, but it would mean a change in financial plans.  With overseas property investments, there are also more lending options, some of which could offer higher levels of flexibility such as dual currency switching and mortgages with the possibility of off-setting interest.



China real estate sector – impending bubble by 2018?

Property analysts are wary of a possible property bubble in China, especially after property prices in Shenzhen rose 60 per cent in a year. Despite the government’s attempts at curbing the rapid price rise, consumer fervency has spread from first and second tier cities to third and lesser-known cities and townships. The speed and extent at which China’s real estate sector is growing has economists concerned about an impending bubble and possible market crash. Some analysts have pegged 2018 as the year when things might take the turn for worse.

rafflescityshenzhenPhoto credit: CapitaLand

The fact that China’s banking sector is closely tied to the real estate industry, any shift in the dynamics may rattle the country’s economy. Akin to the property bubble in the United States in 2008, the fact that loans have increased to take up 71 per cent of new lending, up from 24 per cent within 8 months, indicates an increase that could be based on many gaps in the system.

Property prices are climbing so quickly that concerns for a sharp and drastic fall are well-founded. The unsubstantiated value of homes may cause an eventual collapse of the banking system as it becomes riskier for banks to loan such large amounts of money without a certain way of recouping the losses should the market fall. Having assets at hand which have no value or are not in demand will not bode well for individual property owners, funds nor banks.



Buyers act before impending rates hike

The niggling thought of interest rates possibly rising in the later part of the year may have gotten buyers pumped to seal deals sooner. The interest in 2 new condominiums – Forest Woods in Lorong Lew Lian and The Alps Residences in Tampines Street 86 – both launched last weekend, was overwhelming, leaving their developers happy.

the-alps3Almost half of the 626 units at The Alps Residences have already been snapped up during its launch last Sunday. The project houses a range of one- to four-bedroom apartments and penthouses with sizes ranging from 441 sq ft to 2,486 sq ft and selling at between $900 to $1,200 psf. Similarly at the 519-unit Forest Woods, more than 500 buyers have already make monetary commitments of their interest in the property. The most popular units were the one- and two-bedders and buyers were mostly Singaporeans looking to upgrade or invest in the property market. Units here are going at $688,000 for a 506 sq ft one-bedroom apartment with study to $1.65 million for a four-bedder. Penthouse units go as far as 2,185 sq ft in terms of size.

forestwoods2Property analysts say the fervency could be due to the pent-up demand after the Hungry Ghost month and the lack of launches last quarter plus the overall market sentiment that prices are already at its lowest possible. Physical assets such as land and property are also considered less volatile than bonds and securities as the outlook for the latter seem less secure.

Has Brexit really affected UK property prices?

northcentrallondonNot yet, it seems. Though the recent Brexit event has had investors in a bit of fluster, with the lack of clarity of the horizon ahead for both the UK and other European nations, with many expecting some sort of a price drop in properties in the United Kingdom, the real punch of Brexit has yet to take effect – for the real estate sector at least.

Unlike the 2008 financial crisis, property owners are yet pushed to the point to having to dump their assets haphazardly. The risks for property owners and sellers are not extreme yet, thus most of the re-pricing of properties are in secondary assets, according to property analysts familiar with the UK property market. Britain’s real estate sector has remained strong thus far, with continued interest from Asian investors and buyers. Some of the most recent property investments include a£700 (S$1.2 billion) deal from Singapore’s GIC fund who has joined forces with student housing provider GSA in a student-acommodation property.

grovelaneukSome British funds who may be dealing with investors pull-out due to Brexit may however be looking to sell their property assets and buyers could look towards these properties for possible bargains. Most would however be commercial properties. Residential property hunters may also still be enticed by the weaker sterling and slight discounts.

MAS relaxes income cap on loans

Interest rates have been flying low for sometime now. At less than 2%, home loan rates are even lower than the 2.6% offered by the Housing Development Board (HDB). Though the latter offers stability despite inflation, the small difference is considerable for the large purchases real estate surmounts to.

And though there has been talks of rate hikes, a sharp increase has not yet happen and while interest rates have plunged to near-zero in 2011 and not surged since then, many have been favouring the floating-rate loans which are pegged to the Singapore Interbank Offer Rate (Sibor). But at the same time, the property cooling measures rolled out in waves by the Monetary Authority of Singapore (MAS) and Inland Revenue Authority of Singapore (IRAS) have restricted the ability of many to refinance their previously high-interest home loans.

MAS has since adjusted the total debt servicing ratio (TDSR) framework as of 1st September, and more home owners and new buyers will find that they now qualify to refinance their loans or service a less taxing one. Now all home owners are exempt from the 60 per cent income cap. Previously, the monthly repayment amount for total household debt can only be of and less than 60 per cent of the household income.

As the goal of this regulation is to prevent a property bubble and to stop buyers from overextending themselves and running into debt, property investors may still find themselves restricted by the rule, but now with the change, less so. The loan threshold may be surpassed if they pass the bank’s credit checks and they also have to commit to repaying at least 3 per cent of the outstanding bank loan within a 3-year period. This may still keep errant property investing in check while allowing those we have done their risk calculations carefully an opportunity to plan their financial growth.

The property market has been gradually cooling for a few years now and while no change downwards or upwards has been sudden nor drastic, and although the authorities say this is in no way a relaxation of the property cooling measures, this is nevertheless a good start on the pathway to building a more structured and robust real estate industry.

Keppel Land develops mixed-use project in Yangon

Photo credit: Keppel Land

Photo credit: Keppel Land

1993 – the year Keppel Land first dipped their toes into the Myanmar property market by breaking ground for the Sedona Hotel Yangon. Now almost a decade and a half into the 21st Century, they are building an even stronger presence in Myanmar as they tie up with Myanmar conglomerate Shwe Taung Group to develope serviced residences and Grade A offices in the heart of Yangon.

More developers are making headwinds in Asean countries such as Vietnam, Laos, Cambodia and Myanmar. The potential for growth in these countries is immense as they rapidly open up to the international business and investment world. As the pool of young, educated professionals grow, so does the interest in these South-east Asian countries.

At Junction City in Yangon, Keppel Land is already in the second phase of developing this massive mixed-use project which will eventually house the 260-unit Sedona Suites and 50,000 square metres of office space in addition to the Pan Pacific Hotel, an entertainment centre and retail spaces.


Photo credit: Sedona Hotel Yangon

International investment monies have been pouring into the city and country in the past few years, and there are no signs of slowing down as yet. Property developers and real estate companies are capitalising on this population and commercial business boom by providing quality accommodation and business spaces – and rapidly too. The second phase of Junction City is scheduled for construction beginning in 2018 and 33, 400 square metres of Grade A office spaces will be ready as soon as the early part of 2017.