Developers offer more direct discounts

If you’re looking for a good property deal, you could be hitting the market at the right time as developers are now preferring to offer direct discounts instead of indirect ones such as renovation and furniture vouchers and the likes. And the buyers seem to prefer that too.

In a bid to attract buyers back into the property market, developers have realised that with the prevailing property cooling measures, especially the tighter loan limits, it’s the final number that counts. Defraying the total costs through offers of furniture and renovation may no longer seem as attractive to buyers who are now keeping a keen eye on the total quantum prices.

HomeReno1Home buyers are more discerning and aware of how these indirect discounts affect the final sale price and more importantly, the total loan quantum they are able to receive from the banks. Though the rule which states that all discounts, even indirect ones such as renovation discounts and furniture vouchers, have to be declared when applying for a loan were in place since 2002, the banks have only recently been stricter about their checks. What this means for the buyer could be a lesser loan quantum as the amount give in indirect discounts are taken off from the final sale price of the unit, before consideration is given on how much the bank is able to loan.

Now, what developers are doing instead of offering renovation and furniture discounts, are to refurbish unsold units and selling them at a lower price than if the buyer were to purchase the furnishings themselves. Thus, the buyer gets a fully renovated unit at a slightly higher price than an unfurnished one, but at a lower price than if they were to renovate and furnish it themselves. This may be more cost-effective for buyers who are looking to rent out the unit as it saves them money and time.

Decline of home prices not reflective of cooling measures’ power

It all boils down to holding power. Of both buyers with their mortgages and home loans; and developers with their unsold units. Despite a year of seemingly repressed property market growth, the actual decline in home prices as a direct effect of the property cooling measures may not be as steep as it feels like. In fact, URA figures show only a 3.9 per cent drop in prices since Oct 1 of 2013 to 30 Sept of this year.

TheVermontCairnhillSince the property boom of 2009, home prices have increased 65 per cent till the end of 2013. Whereas the drop this year is a mere 4 per cent. Which means, property prices are still more than double of what they were before 2009.

Though the average total quantum price of homes may have dropped, the psf prices are maintained at a reasonable level as the main change comes from the diminishing property sizes. Though buyers’ affordability now ranges between $1million to $1.3 million, figures which have held steady for the past 5 years; the median sizes of new homes have fallen from 1, 195 sq ft in 2009 to 753 sq ft in 2014. This is a sure sign that developers are still holding on to their asking prices while giving less in terms of liveable space.

Resale homes are holding up better than new homes however, with a 3 per cent drop as compared to a 6 per cent drop of the latter. This is largely due to developers’ offers of discounts on unsold units. Examples of these can be seen at The Vermont At Cairnhill, and also at Sky Habitat, where more units were moved after a 10 to 15 per cent cut in prices.

Moving into the new year, property analysts are expecting sales volume of next year to be similar to 2014’s, though home prices are unlikely to experience a drastic drop. Rather, a gentle decline into a comfortable equilibrium is what most experts are prone to agree on.

Rise in HDB Resale flat sales

As HDB resale flat prices continue to decline for the eighth month in September, buyers are taking the opportunity to suss out the best deals. The number of sales transactions for HDB resale flats rose to the highest since April this year. A total of 1, 469 flats were sold in September, up 10.7 per cent from August and almost 20 per cent from the same month last year.

St George Towers

Photo credit: HDB

It comes as no surprise that the larger flats saw the largest fall in prices. Five-room HDB flat prices fell 1.6 per cent, followed by three- and four-room flats dipping 0.2 per cent and ECs (executive condominiums) 0.1 per cent. The recent numbers also revealed the fact that buyers are willing to accept a smaller price difference between the selling price and the average market value when previously, they had expected larger margins before committing to a deal.

Some of the factors contributing to the drop in HDB flat prices could be:

The first and last two factors in the list may have more lasting effects that expected. And it may change the value and purpose of HDB flats. But would the change be all that bad? Or will it help refocus investments into the private property market?

When will property cooling measures cool off ?

The past two years have seen the implementation, and perhaps effects, of a series of property cooling measures. From increased stamp duties to revised subsidies and the strictest of which, the TDSR (total debt servicing ratio) framework, restrictions have certainly risen the heat on the property industry.

Singapore still has some way to go before the property market achieves the sophistication it requires to reach new heights. Economist are estimating the second half of 2015 as the earliest the authorities are likely to cool off with the cooling measures. That is when most households would have managed to reduce their debt levels. However, property prices can be expected to fall by more than 10 per cent in the first half of next year, or at least show a substantial decline before curbs are removed. In fact, by 2016, property prices are expected to fall by up to 20 per cent due to the oversupply at that time.

Prices have stablised somewhat since the implementation of the property cooling measures, but the fall has only be about 3 per cent, which means the authorities could be waiting for a significant fall in figures, or a recession, before amending the rules. The fear could be the sudden upward rebound of prices which may far surpass the watershed of 2009. With the elections coming in 2016, 2015 seems like the turning point for the market and buyers and sellers alike may be watching closely to catch any opportunities  they can before things change once more.

Could 2015 be the year for home buyers? How will landlords, developers and sellers fare?

Lakeside Wonder

Things in the West are heating up, especially with the launch of a number of private residential properties, announcements of a new Jurong Lake Gardens, a new retail and commercial hub Jurong Gateway and new transport lines. It’s a whole new township blossoming.

Prices of properties at Lakeside, a largely residential district, has been on the rise, significantly more so since 2009. Lakeholmz condominium apartments were only priced at $440psf in 2003. In 2009 and 2010 respectively, relatively properties such as The Caspian and Lakefront Residences were already costing buyers $580 psf and $1, 020psf. That is almost double in just a year’s time.

LakevilleOne of the newer launches is the Lakeville condominium and current median prices of properties in the area range at $1, 300 psf. Over the past 12 months, prices have ranged between $706psf for older establishments such as Lakepoint condominium to $1,263 psf at Lakefront Residences.

The new malls, businesses and regional offices setting up shop in the area has also brought along with it a new flow of tenants. Thus rental prospects are promising, especially for newer properties. Rental prices above $3 psf and at least 10 leases are signed at each residential property per month.

With a new land parcel up for bids in December, buyers looking to enter the market in the west side of the country could possibly have something to look forward to.

Varied market response to declining property prices

Home prices in both the private and resale HDB markets have continued to dip in the second quarter of 2014. In the first three months of the year, the decline was 1.6 per cent. Perhaps buoyed by the increased number of launched in Q2, the rate of decline was somewhat less steep at 1.3 per cent the quarter past.

Rezi 3 TwoBuyers who have been on the lookout for opportunities such as this may be happy to find that more than a few property developments have been offering discounts. Though the overall number of sales have picked up in the second quarter, mostly due to new launches, the private homes market saw a more obvious slowdown in both the city centre and suburbs. The drop was 1.5 per cent in the city centre and 1.1 per cent in the suburbs. Properties in the city fringe fared better with a 0.6 per cent drop, an improvement considering the 3.3 per cent dive in the earlier part of the year.

But there are those who are concerned about the longevity of their investment should they purchase now. The question they may ask is, is this the lowest prices can go? If I were to buy now, will the prices continue to drop? Though property analysts are doubtful that the prices will bottom out anytime soon, they are expecting the maximum of a 5 per cent decline.

As long as the supply continues at a steady pace, prices will not vary far from the current levels. Perhaps true change will only come with a shift in policies. Considering the elections will be here in a couple of years’ time, the time leading up to that might be a period of uncertainty.

3 Reasons to invest in a Booming Brisbane

Brisbane_May_2013_edited

Australia has been the investors’ hotspot for property investment. Having avoided the technical recession in the financial crisis it is rated by Dun & Bradstreet’s Global Risk Indicator as the safest country to invest. This is expected to continue given the stable economy, political and legal environment. According to The Australian Bureau of Statistics (ABS) it is expected that residential property prices in Australia will continue to rise for the remainder of 2014. Brisbane as one of the capital cities is an investor heaven, set to ride this wave of rising property prices.

Why Brisbane?

1) Positive landscape

Brisbane is set to be the ‘New World City’ of Australia, attracting international events like G20 summit, and multi-million dollars worth of major infrastructure projects that improve domestic and international accessibility to the city. With all the hype and strong infrastructure development plans, Brisbane is becoming a natural magnet to draw in businesses, increase employment and grow its population.

In recent years Brisbane has recorded a high population growth, on average of 2.2% annually. The Queensland Government has also forecasted population to reach close to 3 million by 2031.  With lower unemployment than other capital cities like Melbourne and Sydney, APM chief executive, Andrew Wilson predicts that this will help to boost Brisbane’s economic growth and lend potential for higher yield and capital growth to investors.

These factors suggest that there will be strong future demand for residential properties.

2) Competitive property pricing

Sydney and Melbourne reached close to the peak of the property cycle in 2013/2014 and have little room left for further capital gain in the short term. according to a number of experts including Shannon Davis, of Metropole Property Strategists in Brisbane and Ben Skilbeck, Managing Director of Rismark Brisbane has the opportunity for capital growth as property prices are still below the 2010 peak. The Australian Property Monitors (APM) report reveals that Brisbane’s housing market is also recovering with median house prices that have increased by 2.1% over December 2013 quarter. House prices increased by 5% in 2013, just 2.2% below the 2010 peak while unit prices were up by 0.4%.

Property prices in Brisbane are also more affordable than the other capital cities as indicated in Table 1. This suggests that there is a better chance for higher returns for Brisbane property when the market picks up.

Capital Cities Median House Prices Median Unit Prices
Brisbane $470,000 $383,000
Sydney $775,000 $557,000
Melbourne $625,000 $481,000
Perth $ 537,250 $439,000
Canberra $ 570,000 $432,000

 

Table 1: Affordability of house and unit prices in various capital cities

Source: Michael Yardney, Director of Metropole Property Strategists, who extracted from RPData and SQM Research.

Furthermore, the rental yield of Brisbane is among the top performers in Australia (Figure 1), outperforming both Melbourne and Sydney.

grossrentalyields - brisbane

Figure 1: 2014 Q1 Rental Yield across capital cities

Source: RPData

3) Favourable investment climate

The sound legal system, implies that transactions are transparent, making investment more secure and convenient. While the Singapore market experiences strong curbs and loan restrictions on property ownership, the Australian market welcomes foreign investment and there is no Additional Buyer Stamp Duty charged on property purchases.

At present, there is a favourable exchange rate, with AUD 1 equivalent to SGD 1.16, making Australian property more attractive.

The Australian government has also announced in its Federal Budget that interest rates would remain low in the medium to long term, thereby promoting construction to boost up the supply of housing, making properties in Brisbane even more affordable.

In all, Brisbane holds great potential and opportunities for higher returns on investments as well as a chance to diversify an investors’ portfolio with a lower risk asset – residential property, as compared to commercial developments.

For more information about investment opportunities in Brisbane, please visit http://www.australasian.sg for more details.

 

Pasir Panjang’s star set to rise

Part of the Urban Redevelopment Authority’s (URA) Draft Master Plan is the major redevelopment in Pasir Panjang, shaping the Greater Southern Waterfront district which will seem a boom in commercial, retail and residential upgrades. When the ports are moved to Tuas in 2027, the space will see a major growth spurt.

Village Pasir PanjangThough not as conveniently located as its neighbouring Clementi or Buona Vista, it undoubtedly has the potential for property appreciation within the next two decades. This also means there are low-rise freehold private apartments to be had at lower prices, for now. It is not difficult finding tenants as well, with the Science Parks and National University of Singapore nearby.

Some of the selections here include Village @ Pasir Panjang with average selling prices of $1, 404 psf. Others include older establishments such as The Spectrum, Pasir Panjang Court, Palm Green and Villa de West.  At Pasir Panjang Court, a freehold 28-unit project just across from Village @ Pasir Panjang, a 1,335 sq ft unit was sold at $1.24 million, at a rather affordable $928 psf. Most new suburban properties are already commanding $1, 300 psf, easy.

The window of opportunity may not be open for long, as more pick up on its potential and demand drives up prices.