Potential of European real estate more real now

Fancy a summer home in the French Riviera? Or perhaps a lakeside cottage in a quaint little Italian town? Maybe, just maybe, a winter lodge in the mountains of Germany. The real estate possibilities in Europe are more real now than before, as property-buying and international property investment has become much easier with cross-border property agencies.

ItalyPalermoPRopertyFor investors looking to diversify, Europe could be the perfect agglomeration of yet-untapped real estate potential. Though the major cities such as Paris and London have always been the darlings of real estate investors, smaller secondary cities are coming into their own as the outlook for European real estate becomes increasingly bullish.

FrancePropertyRetailChanging work patterns, urban renewal and improved transportation infrastructure have brought out the potential of investing in real estate markets in smaller cities such as Milan, Malmo, Hamburg, Leon and in the United Kingdom, Manchester and Leeds. Not all cities present residential property potential, for some, commercial properties offer more yields. In Germany and the Netherlands for example, office spaces are more profitable, as are retail real estate in France and Poland; while in Italy, especially up north, investors are also looking into residential properties. With the global economic situation in constant flux, particularly with Asian markets heating up, perhaps a little too quickly and too much, diversifying investment portfolios might be a good move.

Singapore no. 2 destination for Asian property investors

A recent study has found Singapore to be No. 2 in a list of top destinations for wealthy Asian investors. The Wealth Report compiled by Knight Frank has placed Singapore second, after only Britain, as a country high net worth Asians are favouring as a property-investment destination.

BishopsgateResidencesExcluding their primary residence, these individuals are defined by their portfolios of at least US$30 million (S$42.3 million). They are also more likely to apportion most of their assets to real estate investments. This could come as good news to developers and property marketing agencies, helping them narrow down their target audiences and structure more focused marketing strategies which are more essential now than ever as the economy languishes.

While Chinese investors are the mainstay of the real estate scene, Indian and Malaysian buyers are making an increasingly obvious presence. Property analysts are expecting the proportion of foreign home buyers in Singapore to rise to between 25 and 28 per cent this year. Their numbers currently stand at 24.7 per cent. Singapore’s slower rate of property growth allows investors to take stock of their investment and stake calculated risks without having to grapple with the rapidly increasing price growth in cities in China, Australia and Canada.

Some of the other countries which are also gaining traction in the real estate investment arena are China and Vietnam. Singapore’s stable political and business environment has however continued to make it a choice pick amongst Asian investors.

January’s private home sales plateau

After a slight rise of 0.1 per cent in December, January’s completed private home prices remained flat. There were some rise and fall in the different districts but overall, non-landed residential property prices evened out on a plateau.

CreekBukitTimahThat may not necessary be a negative as signs of stabilisation are generally expected of the year. Property analysts say that some of the zero per cent month-on-month change could also be due to the availability of smaller units with a higher psf pricing schedule. Besides shoebox apartments, studios and one-bedders, family-size units in new developments are also now smaller in size than before.

Small apartments aside, prices of completed condominium units in the central region did rise 0.7 per cent after a 0.3 per cent dip in December. In the non-central regions however, prices went the other direction with a 0.6 fall following a 0.5 per cent increase the month before.

26NewtonThe private real estate market could however be looking at more resale properties entering the pen soon as most buyers who have purchased investment properties in 2013 will have completed their 4-year holding period this year. This means they are no longer tied down by the cooling measure which requires them to pay a seller’s stamp duty should they sell their property within 4 years following the purchase. Whether the sector is ready for this influx of properties while pulling themselves sluggishly out of the lull remains to be seen.

Weaker UK pound drives up property market interest

Following Brexit, the Sterling pounds to Singdollar exchange rate have fallen from S$1.85 to S$1.7437 as of last Friday. The 16 per cent fall, since the pound started at S$2.0847 in the beginning of 2016, may be the reason behind a sudden spike in interest in British properties, especially those in London and Manchester.

Photo credit: OrangeTee.  Downtown Apartments in Manchester, UK.

Photo credit: OrangeTee.
Downtown Apartments in Manchester, UK.

Real estate agencies have understandably began to market British residential properties, with a few new launches coming up. These include JLL‘s London City Island apartments and Atria in Slough, and OrangeTee’s Downtown apartments and Property Group’s Affinity Living Riverview apartments in Manchester.

JLL’s London City Island apartments, which is jointly developed by Ecoworld and Ballymore and situated near Canning Town Station, will be launched soon, on 27 and 28 Aug. Also in London, but towards the west, is the 108-studio apartment development Atria, in which Oxley Holdings has a 20 per cent stake. Over the Manchester, buyers will have a couple of options to choose from with the 368-unit Downtown or 318-unit Affinity Living Riverview residential projects. With a variety of apartment types including studio, one-, two- and three-bedders to whet their appetite, buyers may wish to research property and rental potential, neighbourhood popularity, transport convenience and financial longevity before closing a deal.

Property experts caution against the risks of overseas property investment, in particular currency exchange fluctuations and maintenance costs. Despite the lure of the weaker pound, there may also be corresponding concern about the future of UK’s economy and the effect it has on property sales and rental prices.

China’s property market on road to recovery

Following the recent blip in China’s economy, which has affected economies across the globe, investor confidence and expectations have dipped considerably.

Home prices have also fallen but are now on the road to recovery as the authorities have eased measures to help regions, in particular smaller cities, in danger of a supply glut. The People’s Bank of China (PBOC) has helped to keep the yuan steady after allowing it to fall rather drastically in the beginning of the year. It has reduced interest rates 6 times since November 2014 and also lowered repayment requirements to allow buyers to borrow more for their first and second homes. Home prices have risen in 37 cities over the last month. In the more touristic cities such as Hangzhou and Xiamen, home prices have grown 1.1 and 1.3 per cent respectively over November last year. In a year-on-year comparison, a growth of 5.6 and 6.4 per cent was recorded.

PikShaRoadPhoto: Pik Sha Road property in Hong Kong

China‘s government seems determined to keep the economy afloat though sharp rebounds may be unlikely. Economists are expecting the authorities to play a more supportive role this year, with one of their main tasks this year being the reduction of home inventory, thus investors and market players are expecting further easing of measures this year.

Cities which are also business hubs, such as Shenzhen and Shanghai, have seen the quickest pace of home prices recovery. New home prices in Shenzhen and Shanghai have increased by 3.2 and 1.9 per cent respectively, followed by 0.4 and 0.7 per cent in Beijing and Guangzhou. Most of the positive activity in the property market remains centred around a small market segment, and some less popular cities are still seeing a market decline.

 

Sell now or later?

In real estate, it is often a timing game. How do you exactly know when to sell and when to buy? If you’re currently looking to sell your property, what should you be looking at for when making your decision of whether to sell now or later?

Just like buying a home, you first have to figure out why exactly you are selling. Is it to finance a new home upgrade, to invest in another property, or because you need the money urgently? The push factors are often stronger than you think when it comes to how much and how quickly you are willing to sell for.

KingsfordWaterbayAnother important question to ask yourself is “How much is my property worth?” Aside from getting a trustworthy real estate agent and valuator, spending a bit of time doing your own market research will help you determine where your property stands. A quick look at property websites, some of which provide tools to help you keep track of property trends and transacted property prices, or checking out resale HDB flat prices from the HDB website as well as attending property talks and seminars are just a few of the many ways to hone your pricing skills.

Market competition is also an important factor which affects pricing. Have a look at how other properties similar to yours are currently prices for a guide to pricing your property. But that said, if you know what qualities your property has above others in the market, list them. These may help you price above the market median. You do however have to be prepared to justify these premium prices and once you are confident the edge your property has, you will have a relatively easy time asking for higher prices. Location and proximity to transport nodes or schools are often a big plus; and sometimes the configuration of rooms, quality of renovation and age of the property could also be added to your property’s calling cards.

 

Malaysian banks tighten loan rules

Even as news of the possibility of a property supply glut in the Iskandar regions break, Malaysian banks are beginning to tighten their rules about lending on property in these areas.

Since the Monetary Authority of Singapore (MAS) has implemented their Total Debt Servicing Ratio (TDSR) Framework, it has been harder for Singaporeans to secure loans. Some have turned to foreign banks, on the back of the strong SingDollar, as repayment is lower should the exchange rate be in the lender’s favour. It used to be possible to secure loans of up to 90 per cent of the purchase price of a property. But that may soon also prove more difficult as Malaysian banks are increasingly becoming more selective in lending to foreigners.

PonderosaWOods JohorNot only are the consumers feeling the heat of a possibly oversupply, competition is high in the developer, building and construction industries as well. Construction costs have increased, and the number of foreign developers and building firms competing for projects are also on the rise.

Despite a slight dip in interest from buyers since the announcement of a delay for the Singapore-Kuala Lumpur high-speed rail to 2020, some buyers remain positive about the potential of their Iskandar property, banking on a possible rise in the number of retirees and Singaporean families who may want to own a retirement or holiday home in Malaysia.

Downturn for Downtown homes

The luxury property market has taken a downturn as homes in the downtown areas take a hit. Transactions were still taking place, and there were homes being resold, but an increasingly number of them at a loss. Recent transactions show a $60,000 loss in the resale of a Marina Bay Residences unit just last month. One of the largest differences came from a $342,000 loss from a subsale of a Robinson Suites unit.

eMuch of the competition comes from unsold stock from developers, a dipping rental market and a diminishing expatriate population. The first factor could be the most hurtful to investors as some developers have begun adjusting prices downwards, and even renting out unsold units instead of selling them. This puts up fierce competition for buyers who have originally planned for their properties to earn them the monthly sustenance through rental. Even small apartments and and one-bedders are meeting similar fate.

Downtown home prices have fallen 8 per cent, and properties in the prime districts 9 and 11 have fallen 5 per cent. Ultimately, it may come down to holding power. And learning some tricks of the trade through property seminars and talks could be the best way to safeguard yourself from bad investments.