Jurong private properties in demand

For those who are not used to living in the west, the lure may not be strong. Not yet perhaps. But as it changes from the industrial, remote ‘wild west’ into a well-greased regional commercial and education hub, many have seemed to change their minds.

LakevilleThe 695-unit Lakeville at Jurong West Street 41 has sold so well last weekend that the developers, MCL Land had to release 50 additional units to its original release of 150 units. Most buyers were Singaporeans, and they purchased mainly two- and three-bedders. A total of 180 units were sold thus far, at an average of $1, 300 psf. J Gateway, which was the last westside property launched since Lakeville, sold at an average of $1, 480 psf.

Despite constant reminders that the property market may be on a downturn, the response has buoyed the mood of the real estate market. This could however be due to the lack of private properties, especially new ones, in this neck of the woods. New amenities such as the Ng Teng Fong General Hospital and Jurong Community Hospital, and new commercial properties promises of more jobs, and better services, which could drive up rents of both HDB and private properties in the area.

Commonwealth TowersSlightly more inland, Commonwealth Towers, which will be linked to Queenstown MRT station, could be the next property to watch. This 99-year leasehold property will likely be launched in May, with mostly one- and two-bedders in its massive 895-unit development. If nearby condominium prices are anything to go by, buyers could be looking at prices of between $1, 300 to $1, 700 psf.

Investment money take overseas trips

Overseas properties are looking particularly attractive to investors from within Asia. Higher yields are one of the draw factors.

Areas which are pulling in crowds are the US and Europe. Commercial buildings such as offices, development sites as well as hotels are hot on the property investors’ lists. As Asia, the Americas and Europe go through different stages of the property cycle, higher returns are evident outside of Asia especially with the currency within Asia strengthening and low interest rates. The number of overseas investment opportunities are also on the increase, making the overseas market more competitive.

Oxley Royal Wharf

Photo credit: Oxley Holdings Limited.

In terms of residential developments, Oxley Holding‘s first London project is garnering a great deal of investor interest. Most of the studio apartments going at £235, 000 (S$495,000) have been sold at the 811-unit development, Royal WharfThe Royal Wharf project, situated near the Thames Barrier Park, will consist of 3, 385 homes, 10,000 residents who will be serviced by schools, shops, offices and leisure amenities. It is also near a future transport line, the Crossrail line, which will provide timely links to Heathrow airport and Bond Street.

Both the London and Singapore launches welcomed a big response. Mr Richard Oakes, the sales and marketing director of the project manager Ballymore says that despite Londoners’ usual lack of enthusiasm for property launches, a long line of 300 had queued for this particular project.

Authorities ease up on home refinancing rules

When the Monetary Authority of Singapore (MAS) implemented the Total Debt Servicing Ratio (TDSR) framework last June, it threw a rock in the home loan and mortgage system and made it difficult for many to get a home loan. For some who have already purchase properties prior to this new ruling, it made re-financing difficult and impossible.

The authorities have realised that the property market dynamics have been thrown rather out of whack ever since the new rules kicked in, and to prevent a rapid downward spiral of property prices, they have now eased up on the mortgage rules. More home owners are now exempted from the noose of the rules, but only those who have purchased prior to June 2013, and only for properties they are currently living in.

money imageThe main purpose behind this exception is to help households for whom refinancing may be the only way to keep the total debt ratio down. Instead of having to be forced to sell the roof over their heads, no matter how expensive the roof may be, they will now be able to find a little wriggle room. According to property analysts, this move will not affect new buyers, thus home prices and sales transactions may still be lower than before. Buying demand has been decreasing for a couple of quarters now.

Home prices are expected to dip 5 per cent this year, and with the looking oversupply starting in 2015, an even further drop of 5 to 15 per cent next year. In an industry that is all about timing, smart buyers will begin keeping a keen eye on what to buy and what not to  buy.

The Resale HDB flat rollercoaster ride

A year or two ago, the property market was at its peak and now, it seems to be have taken the quick dash down. With the fervent entry of new HDB flats and private properties over the last 3 years, the market is now facing a possible glut. The continuous implementation of property cooling measures also accounted for much of the decrease in activity over the last 2 quarters.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

Data from the Urban Redevelopment Authority seems to signify a peak in home supply in 2016. That is when most of the properties purchased in the past 2 years will be completed and ready for occupation. That might mean many will be compelled to sell their existing homes and the resale HDB flat market may then face yet another challenge then. By 2016, 33,290 homes are expected to be completed.

In the resale HDB market, transactions have been at an all-time low since 2005. Prices fell by 0.6 per cent, and sellers may find themselves at the mercy of market demand. Median COV prices are now $10,000 and below. No longer are the days when sellers could command exorbitant cash premiums, which have to be paid upfront.

Most buyers in the resale HDB flat market now are upgraders or PRs. But the pool of buyers may have diminished as buyers may be restricted by loan limits and reduced number of foreigners granted permanent residency. PRs are now only allowed to purchase HDB flats after a 3-year period. Property analysts are expecting interest to rise again after the first half of the year, as low prices bring the buyers back.

2013 closed with weak demand for resale homes

Although a 0.1% rise was registered, the last quarter of last year saw a resale private home market which was relatively quiet, and where demand was low. But industry experts were none too ecstatic about the rise, with most recognizing that this might be a mere “technical rebound” which will not be sustained.

The Montana1Homes in the central region which sold above the median market prices could have accounted for this rise in numbers. A few units at The Montana in Jalan Mutiara for example, sold at $1, 832 to $2, 130 psf. The market prices were at an average of $1, 600 to $1, 800 psf. Another high-floor unit at The Orchard Residences also went at $4, 312 psf, above the $3,600 psf market price, possibly due to the rarity of the unit.

The largest dip came from the shoebox apartments sector. For these small apartments of less than 500 sq ft, which were the best sellers of earlier in the year, a 0.6 per cent drop could signify a saturation of the market with these types of units, and where rental demand may not yet make up for the sheer number in existence. As new non-landed residential developments flaunt their remaining units, resale units in the suburbs may be forced to lower seller expectations. Will 2013 purely be a buyers’ market?

What’s the situation with the rental market?

The sheer number and speed of new homes entering the market is bound to have some effect on the rental market. And indeed the cracks are beginning to show. Even in areas where resale properties have been commanding considerable rents, there have been signs of price compression. In the River Valley stretch, a four-bedder at Aspen Heights used to go for $5,700 just two years ago, but now $5,000 is the norm. With new properties such as RV Edge coming into play, comparison may make for stiffer competition in the rental front.

RV Edge in the River Valley area, just off the Orchard road belt and the Central Business District.

RV Edge in the River Valley area, just off the Orchard road belt and the Central Business District.

For the next couple of years, the rental market is expected to suffer, whether in terms of lower rental prices or longer periods of vacancy. This year alone, there are 17, 458 vacant units for rent by the end of Q3. Some home owners had bought resale units at the peak, and now may find themselves having to come down on the prices or risk a longer wait before finding a tenant. Next year, 19,302 new private home units will be ready for occupation. Combine that with 19, 727 in 2015, and stricter immigration and labour policies, the rental market may be facing some tough challenges moving ahead.

Shoebox apartments and smaller condominium units were popular for the past year. But now, it seems supply has larger overshadowed demand. The dip in rental prices were most obvious here, with a 10 per cent decrease. A two-bedroom apartment at Cote d’Azur in Marine Parade for example, which would have been rented out at $3,000 per month last year is only going for $2,700 in the current market. New homes at Silversea and The Shore Residences which will be ready soon, may only lower the prices even further. And landlords who are eager to recoup their capital may have to lower prices in order to secure a tenant in order to make their mortgage payments.

Shore Residences on Amber Road

Shore Residences on Amber Road

As supply of HDB flats reaches a saturation point, and lower sale prices mean more HDB owners are upgrading to private properties and renting out their HDB flat, the options for tenants have opened up tremendously. That also means they are more likely to compare or wait for the best deal, putting landlords at a disadvantage. The prediction is a 5 to 10 per cent drop come 2014. Will governmental policies be likely to change to the benefit of home owners anytime soon?

More smaller HDB flats to be built

Though the supply of HDB flats may be reduced starting next year, National Development Minister Khaw Boon Wan has said that these may apply only to the larger four- and five-room flats. Smaller two-room and studio flats will still be steadily supplied in the coming year or two.

5,000 new two-room flats are targeted for 2014, and since response from singles applying for new HDB flats have been overwhelming, with 58 applicants for 1 unit since the scheme began in July this year, this will be greeted with much cheer.

bto-families-ft-st-b2
Photo Source: Ministry of National Development.

Some larger HDB flats will also be made available to second-time applicants. But this shift in supply is to balance out demand for BTO (build-to-order) flats between singles and families. And since demand from families have mostly been met, the shift to releasing smaller units will allow for more success from other applicants such as singles, divorced families and young couples.

Is this halt to releasing larger HDB flats an effective way to adjusting the dynamics in the housing market? Will there be a kickback reaction in the private property market? What is the percentage of the population who are able to afford private housing and will that percentage increase five years down the road or will the building of HDB flats continue to dominate much of the nation’s housing supply?

Homes, homes, homes galore

204,461 in 2016. And a good lot of it will be in the private property market. The number of HDB flats remain the same but there will be an increase in the number of private properties and executive condominiums (ECs) come 2016. One might question if Singapore really does need that many homes or is it a case of having enough homes but at prices not many can afford?

Forestville Executive Condominium.

Forestville Executive Condominium.

In 2013 alone, 15, 824 private homes will be built come end December. In the public and private hybrid housing (EC) market, the number this year is 1,659 and counting. Over the next 3 years, buyers can expect 1, 355 executive condominium and 4,884 new private properties to enter the fold. Sales of private residential homes have already begun to dip, will this increase in supply signify a further price drop over the next 3 years? Or will the supply glut dissipate quickly and redirect interest into the resale and rental markets?

Sales of new properties plummeted 46 per cent with only 2,430 units sold in Q3. 1,340 resale units were sold, at a 35 per cent drop. Overall, private property prices still rose though at only 0.2 per cent. Most of sales came from suburban condominiums. City centre home prices dropped 0.3 per cent but city fringe homes suffered a 1.1 per cent decline.

But despite recent lulls, a rise was registered in the rental front, at an increase of 0.2 per cent . Has the make-up of Singapore’s population shifted, with a larger percentage of temporary residents or has the population’s property purchasing habits changed and more are willing to simply rent rather than purchase a permanent home? Which way is the nation headed and are we becoming more like the bigger cosmopolitan cities in the world?