The redevelopment of Johor Bahru City Centre

As it is, Singaporeans are heading north to Johor Bahru (JB) for business, leisure and even to live. But with massive plans to re-develop JB into hubs of many industries, what impact will it have on the real estate scene there as well as here in Singapore?

coronationasquarePhoto credit: www.skyscrapercity.com

Areas outside of Johor Bahru’s city centre, areas such as Iskandar Puteri and Danga Bay have been attracting many foreign investment dollars over the past few years. But JB’s city centre could be the place that will reveal major yields in the long term as it’s essentially the transport, retail and commercial hub of the city.

So it is perhaps not surprising that the government has put a RM20 billion (S$6.48 billion) plan in place to rejuvenate the ageing district. Launched in 2015, the plan aims to develop JB’s city centre into an international business district, complete with all-new infrastructure – the Ibrahim International Business District (IIBD). The most recent unveiling was the 268m link bridge which is targeted for a 2017 completion. It will connect the JB Sentral railway station and bus terminal to Persada Annexe, an extension of the Persada Convention Centre.

But perhaps the true gem of the project is Coronation Square, a major mixed use development. The RM$3 million project is overseen by Coronation Properties and consists of 6 towers – 2 office blocks, 1 condominium block consisting of 480 high-end apartment units, 1 block of serviced apartments, 1 hotel and 1 tower dedicated for medical purposes. The residential units have not yet been put up for sale, but the developers are so bullish about its potential they have already started the construction process.

AstakaJBAnother large-scale development near the city centre is the One Bukit Senyum project located just off the Tebrau expressway. Aside from a shopping mall, residences and a 5-star hotel, it will also house the Johor Bahru City Council‘s new headquarters. The residential component of the project is The Astaka, with 438 units spread across 2 blocks of 65- and 70-storeys. Already 300 units have been sold and Singaporeans make up more than half of the buyers.

As Singapore and Malaysia continues to improve on their inter-country accessibility, the demand for properties across both borders will remain high.

Effect of China’s real estate boom spreads to 3rd- and 4th-tier cities

Real estate in the major cities of most countries tend to be priced high and attract both local and foreign investment. However, when the rate at which properties even in less populated or less popular cities for that matter are being sold gain traction, does that signify a property bubble or simply a positive sign of the country’s growth? How far and for how long more can these property-buying sprees go on and what are the short-and long-term effects on the country’s economy?

chinaMoody’s has already downgraded China’s credit rating for the first time since 1989. Even though the Chinese government has taken steps over the past year to contain the exponential explosion of the country’s real estate sector, their strategies were by no means one-size-fits-all but was instead targeted at specific property hubs such as Beijing, Shanghai and Shenzhen. Smaller cities are left in the hands of local governances and because of the restrictions in larger cities, buyers and investors are now setting their sights on these far-flung places. In Xisuangbanna, a region near Yunan, for example, new apartment units are being snapped up and on the cheap. The lack of buying limits, easily attainable mortgages and promises of a future property boom have lured buyers to these smaller townships. As effect of the impending property bubble risk ripples, demand for homes in small cities could mean the eventual impact should the bubble burst, will be one larger than anyone can predict.

Economists are already picking up warning signs of a bubble as sales in the 3rd- and 4th-tier cities show that buyers are buying without clear understanding of asset yields. There is a sense of real estate hoarding as sales are driven purely by hopes or a future price rally. But should the market fall in the future, will China then suffer the same fate as the US?

Limits placed on tenancy of private homes

From today on, private homes can no longer be tenanted by more than 6 unrelated persons. This is 2 lesser than previous cap of 8 persons.

Enforced by the Urban Redevelopment Authority (URA), the new ruling kicks in today but existing tenancy agreements of 7 or 8 persons will be allowed to carry on until May 15, 2019 regardless of the tenancy contract’s expiration date.

TownervilleThis change was made to keep the integrity and character of the local community and to ensure that residential premises integrate with the neighbourhood. The move will also better engage the services of student hostels and company dormitories. There are differing views to this change. Property agents, some landlords and even tenants may welcome this shift towards quieter and less disruptive living environments. Others who are relying on rental income to prop up their finances may have opposing views. The loss of 2 tenants could very well surmount to $1800 to $2600 in potential monthly rents.

This shift to tenancy regulations will also affect home-sharing market such as Airbnb. The URA has been considering the creation of new leasing category for short-term rentals such as those publicised on home-sharing sites. And for those wondering if a huge bungalow and a small private studio may have different restrictions? The answer is no. URA has stated that there is no “stratified occupancy cap control based on unit sizes”.

Aura83For HDB flats which are sublet, the number of sub-tenants allowed remain unchanged at 6 and 9 for 3-room and 4-room or bigger units respectively. Property analysts are however expecting this new tenancy rules to soon apply for the HDB market.

 

Condominium rents up, HDB rents down

A brieft respite in the rental market presented itself in January and February as increases in condominium rental rates were recorded for 2 consecutive months. HDB rents however slipped slightly.

Draycott8Condominium rents rose 1.1 per cent in February as demand from expatriates is usually high in the first few months of the year. Private residential properties in the prime districts were particularly in demand with a rise of 1.2 per cent in rental rates, while the city fringe and suburban sectors saw a 0.8 and 1.2 per cent rise respectively.

Property analysts are seeing an increase in leasing demand not only due to the influx of a foreign workforce in the beginning of the year, but also because rents are now at a affordable levels and more tenants may be willing to take on larger properties or properties in a more expensive location. Though rents are still 18.1 per cent lower than the peak in 2013, sales volume has increase by 12.6 per cent in comparison to the same period last year.

JurongWestCentralHDBFLatThe number of HDB flats being leased has also increased by 1.2 per cent with 1,477 units rented in February. HDB flat rents have however slipped by 0.8 per cent overall, falling 1.3 per cent in mature estates and 0.3 per cent in non-mature estates. Industry experts are expecting further decline in rents this year, while harbouring hope that 2017 will stabilise the market and bring about a recovery early next year.

Weak rental market not an obstacle for investors

While the weakening rental market may have been putting pressure on investors, the concurrent weakening private property prices are opportunities to some. While the leasing market has slowed down considerably, the property-purchasing market has been gaining speed, especially in the last quarter or so.

TRE ResidencesThe overall genial atmosphere in the private residential property market over the past few months have brought property investors back into the heat of things. As more newly completed properties enter the market and new projects such as The Clement Canopy and Grandeur Park Residences were launched to affirmative responses early in the year. Overall private home prices fell at the slowest rate in 3 years, which could point to an increasingly stabilising market.

It would be prudent however for investors to take into consideration that the property cooling measures have not yet been lifted, though some signs of relief have been provided earlier this month. In the past, profits of up to 60 per cent could be reaped in the short-term, but the long-term potential of a property, rather than quick turnarounds or a dependency on rental profits, will be at the heart of a good investment henceforth. Property analysts advise investors to consider cash-flow, calculate mortgage and maintenance costs carefully while keeping a portion aside for periods of negative cash flow when  the property is unable to be tenanted.

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.

 

Many new office buildings pre-leased

A sense of strength is coming back into the property market this year, with the bottom of the cycle possibly closing in. And consumer interest, in both the residential and commercial fronts, are on the rise too.

FraserTOwersWith news of Facebook pre-leasing space at Marina One, the upcoming Frasers Tower in the heart of the Central Business District (CBD) has also received leasing proposals for 30 per cent of its 38-storey office building from various interest tenants. Most were from multi-national conglomerates, legal services, technology firms and a serviced-office provider, The Executive Centre who expressed interest in taking up an entire 20,000 sq ft floor space.

New office buildings are gradually filling up even before they are completed or ready for occupancy. There is however some movement from other existing buildings as tenants take the opportunity to relocate or upgrade, as seen in the mix of tenancy in Marina One and Guoco Tower. Frasers Tower has a 663,000 sq ft of total net leasable area. More new office spaces are currently being developed in the CBD, including UIC Building and the new property which will sit on the site of the previous CPF building. Though office rents have been falling, it may be a good sign after all as the market would have picked up by the time these new buildings are

First private condominium launch in 2017 – Clement Canopy

Open for preview today is a new condominium in the west – on Clementi Avenue 1 to be exact. The 505-unit Clement Canopy is a joint venture between UOL Group and Singapore Land and the developers are hopeful about an uptick in demand, as shown by a pickup in new home sales last year.

The-Clement-Canopy-1Photo credit: http://clementcanopy.info

Situated in the Jurong Lake District – which is earmarked to be developed into the second Central Business District (CBD)– and with a number of schools such as the NUS High School of Mathematics and Science and the Yale-NUS College, this new condominium project will benefit from high rental demand. The 99-year leasehold development will consist of two 40-storey blocks holding a range of 2- to 4-room units. 194 out of the 505 units are 2-bedders sized between 635 to 732 sq ft and priced between $85,000 to $1 million. These smaller units are more palatable in terms of the total quantum price and also more in demand in the rental market.

The TrilinqOther bigger units include 3-bedders starting at $1.28 million and 4-bedders priced from $1.62 million. Selling prices are pegged between $1,340 to $1,360 psf. As a comparison, the neighbouring private residential condominiums, The Trilinq, is going for $1,400 psf but it is a tad nearer the Clementi MRT station; and Parc Riviera on West Coast Vale is selling at around $1,200 psf . There are no one-bedroom apartments at Clement Canopy and developers are hoping this will help differentiate their product from the rest of the market. Swimming pools and smart home features will be included in the project.

This year, the  would probably be all about timing. Launched at the right time, when demand is high and supply slow in stirring consumer interest, a new development could do very well indeed.