Consistent growth in private resale property prices

For the fifth consecutive month, resale private home prices have had a good showing. Can we hope for a market recovery? Perhaps not quite yet, but there is no reason not to feel good about the turnaround.

THeSienaCondoMarch’s numbers were the highest in 2 and a half years with the resale index hitting 168.8 with an improvement of 50% in the number of units sold. Market prices have also been creeping upwards with sellers now beginning to set asking prices above the market rates. Overall, private resale property prices rose 0.5 per cent last month and were 2.2 per cent higher than the same month last year.

In the same year-on-year comparison, resale transactions grew by 77.5 per cent last month with 1,058 units sold. That is 51.8 per cent higher than the 697 units sold in February. Prime district property prices rose 0.4 per cent while 0.7 per cent and 0.4 per cent increases were registered in the city fringes and outlying suburban regions respectively.

Though the numbers are still lower than when the property market was at a few of its peaks in 2010 and 2013, the consistently improving numbers reflect an overall positive market sentiment. As the half-year mark draws closer, the numbers from the second quarter will be more crucial in determining the direction for the rest of the year.

High-risk mortgages prompt Hong Kong authorities to rethink cooling measures

Singapore authorities rolled out property cooling measures just 4 years ago and while it was not necessarily a welcomed move, it was certainly a prudent one. With restrictions placed on the loan-to-value and the debt servicing ratios, home prices were kept from escalating. Now Hong Kong could also be considering doing the same as their real estate market skyrockets. The worry is that property prices could become unsustainable and a property bubble could grow and subsequently burst with disastrous consequences.

hongkongpropertyThe rapidly increasing number of high loan-to-value mortgages taken out on properties have had the de facto central bank of Hong Kong concerned. Property developers and individual buyers alike, these high-value loans are creating a growing list of high-risk financial profiles. Some developers have even taken out mortgages worth 120 per cent of the project’s value. Developers such as Sun Hung Kai Properties and Cheung Kong Property have been offering incentives such as tax rebates and loan offers in attempts to attract buyers.

Despite the Hong Kong government implementing higher taxes on properties last November, property prices have continued to climb and increased home buyers’ borrowing costs. Many buyers have not only been putting all their assets into property purchases, but also their parents’ monies and all that will be at risk should the bubble burst. Some buyers have even been leveraging on their parents’ properties in order to fulfil residential deposits. The Hong Kong Monetary Authority (HKMA) is keeping a close eye on the situation and may move to enforce new regulations on banks should there be any undue changes.

 

Land a landed property despite softer market?

Despite the softer real estate market, landed properties remain rare and in demand, particularly in land-scarce Singapore. Would this then be a good time to invest in one in preparation of a market recovery? How will the value of landed properties hold up in tough times?TanahMerahGreenHOUSEIn terms of availability, as of Q4 of 2016, only 1,352 new landed residential properties will be built by 2021. Sales volume for landed homes have also risen by 0.8 per cent in the last quarter of 2016. That said, the landed property market is recovering more quickly than expected. And perhaps despite sentiments of a flailing sector, sales figures have shown that the number of homes sold last year was close to that in 2013. The number of private homes sold overall have shown a 30 per cent dip from 2013.

The Total Debt Servicing Ratio framework implemented in 2013 has had some impact on the market, overall with landed residential property price index falling 14.1 per cent, likely due to the high stamp duties and price quantum. The demand for freehold landed properties have remained strong with prices of such properties in prime districts falling only 6.6 per cent. Most of the price decline came from leasehold terraces in non-prime districts and in the secondary market.

Thomson Grand condo project along Upper Thomson Road.

Freehold landed homes in or near the Central Region will continue to be popular amongst buyers and investors this year due to their accessibility, scarcity and potentially higher capital returns. Property analysts do however caution buyers to think beyond location and accessibility. Other factors such as growth prospects of the area, development potential in the surrounding township and rebuilding and construction costs should also be taken into serious consideration before closing the deal.

Junction city in Myanmar ready for tenants

In the heart of Yangon’s central business district is a spanking new 23-storey new Grade A office tower. Junction City Tower, developed by Keppel Corp’s property unit and Myanmar’s Shwe Taung Group has opened its doors 2 weeks ago to tenants.

JunctionCityMyanmarIt is Keppel Land‘s foray into Myanmar’s growing real estate industry where the long-term potential for Grade A office spaces in the city is great as the country continues to open up to regional and foreign investors. While Keppel Land established its presence in Myanmar as early as the 1990s, demand for quality commercial and residential properties has only recently been steadily growing.

Junction City is a 260,000 sq m integrated development which will include 33,400 sq m of Grade A office space and 50,000 sq m of premium serviced apartment, the later as part of Phase 2 of the project, amidst retail and hotel businesses. The ready availability of office spaces have already encouraged confirmed tenants such as Allen & Gledhill, WongPartnership, Samsung and the British Chamber of Commerce to take up units.

As more businesses invest in Myanmar and the expatriate population increases, the real estate market will be likely to rise in tandem. While the rate of growth is quick for now, and might be so for the decade or so ahead, how will it fare in the horizon?

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.

 

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.

Winds of change in local property market

A decade or so ago, owning a second or third property might be the fastest way to secure your retirement funds or to even accumulate a tidy little kitty. Investment properties were considered a surefire way of earning additional income, but in the climate of today, property owners and investors have much more factors to consider and competition to battle against.

SunshinePlazaResidencesWith the rental market weakening, property agents are finding that it takes twice as long and also many more viewings before a property is successfully tenanted. And even then, for much less than before. Some property owners have had to reduce rents by almost half. Leaving the units empty are simply not an option for some investors as the rents go towards the mortgage or mortgages of their properties. It is after all better to have less help than none at all.

SerangoonHDBflatFor new investors looking to enter the market, the environment is a lot tougher than before. Considerations such as whether there is a large pool of HDB flats available for rental nearby, the long-term potential of the property, competition from other new launches or even within the same property, whether the local and global economy will affect businesses and commercial hubs nearby thus reducing the pool of foreign tenants, and so forth.

Before the market makes a complete recovery, a possibly lengthy period of stabilisation will ensue, despite the governments having made some allowances in the are of the property cooling curbs.

February’s dip in resale flat prices points to market stabilisation

February was a little slow for the resale HDB flat market as prices fell by 0.3% and transactions by 8.5%. This was following a promising start to the year. But industry experts are not too quick to dismiss the possibilities for the sector as the year moves ahead.

ClementiHDBflatThe slight dip last month was most likely due to the post Chinese New year lull which is a common occurence. Rather than being indicative of a falling resale flat market, the decline simply points at a stabilizing  market enironment. Though resale flat buyers paid about $2,000 less than market value across  the board, some HDB estates continued to clock more than 10 transactions and at prices above market value

In Bedok, some buyers paid $10,000 and more for their resale flats while in Clementi, some transactions closed at $4,000 above market value. That comes as no surprise as these are mature HDB estates where demand is high. There were also some recent private property launches in the vicinity, for example the Clement Canopy, which may have had some residual effect on the resale HDB  flat market.

Aerial view of HDB flats in Ang Mo Kio

Aerial view of HDB flats in Ang Mo Kio

There were however a couple of HDB towns which did not post as promising figures despite being popular locations for flat seekers. In Queenstown, the lowest below-market prices were clocked at $12,500,  followed by $10,000 in Ang Mo Kio. Prices of 3-room flats rose by 0.2% while executive flat prices fell by 1.7%. Overall, prices of resale flats in mature estates rose by 1.1%.