Overall price decline in Q1 but buying sentiment remains upbeat

Price-declines across the board for private residential, commercial and resale public housing sectors could mean the bottom of property cycle is close. For the 14th consecutive quarter now, private home prices have fallen, the longest period in the past 13 years.

That said, the general market sentiment has recently picked up as slight tweaks in the property cooling measures and a series of new and exciting property launches have gotten buyers’ blood flowing once more. Private home prices have fallen 0.4 per cent in Q1, slightly lesser than the 0.5 per cent in Q4 of last year.

Paya Lebar Quarter_Lendlease PLQPhoto credit: Lendlease 

Values of private residential properties have fallen 11.6 per cent since its peak in 2013, and this difference has probably revived purchasing interest as most buyers still see the potential of well-located properties in Singapore.

Total private home transactions hit 5,202 units in Q1, the highest in 15 quarters thus far. Property analysts are expecting the market to remain bullish and continue its growth barring any unexpected economic circumstances. City fringe properties are faring particularly, propped up by the strong demand for newly launched projects such as The Clement Canopy, Grandeur Park Residences, Park Place Residences and the Paya Lebar Quarter. Non-landed home prices have in fact risen 0.3 per cent in the city fringes and 0.1 per cent in the suburbs. Core central region property prices fell 0.4 per cent however.

ParkPlaceResidencesLanded home prices fell 1.8 per cent last quarter, likely due to the restrictions placed on these rarer commodities. Foreigners are not allowed to own landed properties. On the resale HDB flat front, prices fell 0.5 per cent, though the decline is expected to reverse itself soon, in response to the positive sentiments from the private property market.

Resale condominium prices slide in February

The latest private resale condominium sales figures seem to slightly challenge industry experts’ expectations of the market bottoming out this year.

Marina One ResidencesFebruary’s resale condominium prices fell 0.3 per cent following a 0.1 per cent in January from December last year, indicating further decline in the private non-landed resale property sector. While the numbers could mean the market has yet to bottom out, the slower rate of decline does point towards a state of stabilisation.

The biggest impact was felt in the central region (made up of districts 1 to 4, 9 and 10, the financial district and Sentosa Cove) where a 1 per cent fall was registered following a hopeful 0.5 per cent rise in January. Even in the small-apartments (units 506 sq ft and below) segment, prices fell 0.6 per cent. Resale units outside of the central region however fared better, coming back up top with a 0.3 per cent rise following a 0.6 per cent fall from December.

Oceanfront Sentosa Cove CondoThough market sentiment has been picking up, the overall economic outlook and rising interest rates may not be enough to completely turn the market on its head. Recent tweaks in the property cooling measures may give the industry a little push towards to the direction of recovery, but property analysts are still expecting a 3 to 4 per cent price-decline by end of 2017.

Need for clear foreign property ownership laws in Myanmar

New emerging South-east Asian economies,  in countries such as Cambodia, Myanmar and Vietnam, are flourishing and investors have expressed interest in these growing markets as the rest of the world struggles with political and economic stability.

junctioncityyangonBut the demand is now and some confusion in Myanmar’s legal system may be stopping investors from bringing their investment monies into the country. Existing legislation concerning the permissibility of foreign ownership of private condominium units has put an obstacle in developers’ efforts in wooing investors. The uncertainty stems from the lack of clarity in whether the regulations apply to existing apartments and the specifications of a “condominium”. Under current laws, 40 per cent foreign ownership of a development is permitted.

While the Myanmar government scrambles to come up with by-laws, the real estate sector in Myanmar has lost a little of the shine following the bullish market since 2011 when the economy opened up to foreign investors. The residential sector in particular has been quiet over the past year and a half. The Department of Urban and Housing Development has been working hard to come up with the by-laws but they have yet to be sent to the Cabinet for approval.

GOldenCity1

Photo credit: D3 Capital

In the meantime, mid-tier condominium and luxury property prices have fallen 41 per cent and 22 per cent since 2014. That said, rental yields of 8 to 12 per cent can be expected in the current environment, though much more lies in potential yet untapped. Industry players are hoping the new rulings, when implemented, will open the market up to retail buyers from Thailand, Singapore, Hong Kong and China.

Penang raises minimum property price for foreigners

Besides Kuala Lumpur and Malacca, Penang is one of the more vibrant real estate markets within Malaysia. And as the ringgit continues to weaken, Penang’s housing committee has taken the step to increase the minimum price for foreign parties purchasing landed properties in the state from RM2 million to RM3 million (approximately S$948,000).

PenangHouseBungalowThe Malaysian government has recently announced that they were in the process of discussion with regards to raising the minimum floor price for foreigners purchasing Malaysian properties, but Penang has already gone ahead and made the change. Although strata-titled properties such as condominiums will continue to be sold at the minimum of RM$1 million to foreigners, the amount will be thrice that for landed properties.

Properties in Penang have long been favoured by buyers from Singapore, Indonesia and even Japan. Though the Penang branch of the Real Estate and Housing Developers Association has recently recommended that the floor prices for foreigners could be reduced to RM800,000, the state’s Cabinet minister in charge of housing, Mr Jagdeep has made a rebuttal stating the depreciation of the ringgit as a deciding factor.

THeMarinPenangCondoWhile the Federal government sets the minimum purchase price for foreign property buyers, each of the 13 Malaysian states are allowed to adjust the amount to suit their local supply and demand levels. The lowest minimum purchase price set by the Federal government currently stands at RM1 million.

 

Stamp Duty changes bring cheer to real estate market

With the recent Sellers’ Stamp Duty (SSD) changes, the real estate market is beginning to feel more upbeat all around.

PLQThe most significant changes were the SSD rates and the fact that sellers who let go of their properties after 3 years will no longer have to pay the sellers’ stamp duty. The Total Debt Servicing Ratio (TDSR) threshold has also been relaxed for properties with  loan-to-value (LTV) limits of 50% and less. The latter move is aimed at helping retirees monetise their properties as many could be sitting on their assets while having trouble with cash-flow or liquidity. Some property owners may wish to cash out on their properties in order to start businesses or send their children for overseas education but find themselves unable to loan enough as the TDSR framework limits the borrower only to amounts totalling up to 60 per cent of their gross income.

All these changes will give buyers a higher sense of security, knowing that they will have more flexibility in managing their finances without having to hold on to their properties should they urgently require liquidity. The crowds at the Paya Lebar Quarter’s (PLQ) residential project – Park Place Residences a couple of weekends ago were a positive affirmation of the improving sentiments in the property market. Property agents reckon that the SSD changes will motivate more people to buy as they now have less restrictions to take into consideration.

 

Sellers’ Stamp Duty rates tweaked

From March 11, the staggered rates which sellers have to pay should they resell their properties within stipulated time periods will be reduced. Previously, properties sold within a year of purchase were subjected to a 16 per cent seller’s stamp duty (SSD), the rates are at a staggered 12 per cent for properties sold within 2 years, and at 8 per cent and 4 per cent for those sold within 3 and 4 years respectively.

SingaporeskylineThe new tweaks to the regulation means that sellers now only have to pay 12 per cent stamp duty for properties sold within a year, and then at the staggered rates of 8 and 4 per cent for those sold within 3 and 4 years respectively. Whiles some buyers might have missed out on this new ruling by a day, the effect of the change on buyers who have purchased for the long-term will be minimal. This slight change in the property cooling curbs may provide a more fertile environment for property investment and some buyers may be interested in making headway with a second or subsequent property.

Whether this will boost home sales this year remains to be seen, but property analysts are expecting a slow and muted effect on the market. While the change may not translate to actual figures, with property analysts expecting only a 3 per cent increase on the previously projected 8,000 property transactions for 2017, what it does create is an atmosphere of positivity and a sense of hope. Any tweak by the government, however slight, could be seen as an indication of the market bottoming out, and following a period of market stabilisation, investors are hopeful that the market will eventually recover.

Will rental market climb back up this year?

The private rental market has made a bit of a turnaround last month, posting a 1.3 per cent rise after months of lacklustre demand and declining prices.

MillPointCondoIn the prime districts, rents have rise 0.9 per cent, while the most obvious change was in the city fringes where prices rose 1.6 per cent. In the suburbs, a 1.3 per cent price increase was recorded. Rental volume also rose by 5.8 per cent in January with 3,813 units leased. That is 0.7 per cent higher than the 3,785 units leased in January 2016.

With the year leaning on this positive note, could the private residential leasing market be climbing its way out of the gloom? While property analysts are not expecting any drastic or quick decline in prices, neither are they predicting a recovery in the near future. As more new completions from 2015 and 2016 hit the market, the increase in available leasing options will make it more a tenant’s market. What are more popular are shorter leases, and the authorities may even begin to reconsider making shorter leases legal as more tenants are leaning towards these preferences. Previously 2-year tenures were common, but of late, 1-year leases are now becoming the new norm.

HDBFlatRentalFor HDB flats, rents have been falling almost entirely across the board with the 5-room flat segment leading the way with a 1.5 per cent decline. 3-room flat rental prices have however risen by 0.2 per cent. Rental volume for HDB flats have also fallen 16.1 per cent last month.

 

 

Resale condominium market in gradual recovery

Could a slice of sunshine be sliding its way back into the local private property market? Resale condominium prices have risen 1.1% in January and it’s a bigger increase than the 0.5% in the last 2 months of 2016.

RivervaleCrestAnd as expected, non-landed private residential properties located in prime districts lead the way, with a 1.9% month-on-month increase. Central region properties also gained 1.5% in terms of prices while that of suburban properties rose by 0.4%. In a year-on-year comparison, resale prices were 0.3% higher than in the same period of 2016.

In some districts, resale properties exchanged hands at lower-than-market value, though the price difference at minus $4,000 is lesser that the $5,000 in December. District 23 posted more than 10 resale transactions in January alone and selling prices went as high as $2,000 above market value.

GrandeurParkResidencesThough the year is still young, it could be a budding sign of the things to come for the rest of the year. Property analysts are not expecting sharp rebounds anytime soon, though the stabilisation of prices and an increase in sales volume would already be sufficient to signify market recovery, albeit a gradual one. What could also be seen from the market data was that sellers were beginning to moderate their asking prices, possibly with pressure coming in from new property launches and completed new units entering the weak rental market.