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%.

 

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.

 

Why property cooling measures are here to stay

ABSD, SSD, TDSR, QC – These abbreviations related to property cooling measures implemented over the course of 5 years have taken root in the local real estate and construction industry and despite a much quieter market, may not go away anytime soon. And with good reason.

Aeon MelbourneThe demand for properties in other major Asia-pacific countries and cities such as Hong Kong, China, Australia and Japan have not seem to wane, reflected by soaring home prices in Hong Kong, Sydney, Melbourne and various top-tier cities in China. And this is despite their governments placing more restrictive regulations in place in efforts to curb investment outflow and property speculation. But perhaps it could be the case of too-little-too-late. And it also goes to show that investors are still looking for markets to hedge their funds and the pool of willing China investors looking to take capital out of their country agains a depreciating yuan.

CasaAerataIn Singapore, despite a gradually decline in home prices, the market has remained resilient and a untimely lifting of property curbs may result in a quick and unrecoverable increase in property speculation. In fact, despite the series of property curbs instrumented since 2013, the property cycle seems to already be reaching the bottom, which could only mean a turnaround possibly within the year. Last year, resale volume rose 28 per cent and total sales increased by 16 per cent from 2015, indicative of a recovering, or at least stabilising, market.

Demand for Hong Kong properties continue to climb

Home prices in Hong Kong are escalating despite the government’s attempts to curb the rapid and steep climb.

OneKaiTak1Photo credit: www.onekt.com.hk/

Buying a resale private property from the secondary market has become difficult due to the heavy stamp duties levied by the Hong Kong government on open market homes in an effort to curb rising property prices and a ballooning market. Stamp duties for first-time local buyers are particularly high and the move has slowed down activity in the secondary market considerably. Instead, it has created a demand for new homes in the primary market. Since homes in this market are sold directly by the developers, they are able to adjust home prices according to market demand and requirements, sometimes even offering incentives and discounts.

In the first month of 2016, the demand for new homes fell by 76 per cent. In the same time this year, it rose by 48 per cent. A complete turnaround. With the current lack of interest and activity in the secondary market, developers are  ceasing the current window of opportunity by its neck and adjusting prices according to rising demand. And the demand is high indeed. At China Overseas Land & Investment‘s new residential project situated on the site of the old Hong Kong airport, One Kai Tak, all 188 units were sold out in a single day last month.

OneKaiTak3Buyers may ramp up their buying speed and fervency in the months ahead, as they pre-empt the possibility of the Hong Kong government implementing further curbs on the market, in particular on individuals who sell their properties to purchase new ones.

Consumer confidence in property market improving

Though gradual, the property market seems to be coming out of a long hibernation and there are some bright sparks to make 2017 a warm one.

VIIOThe supply and inventory stock is gradually diminishing, by 8.4 per cent at the end of last year, aided by the restriction in land supply by the government last year, the key word being gradual. Fortunately, the decline in home and rental prices have also been gradual, with no sudden collapse. Last year’s rate of decline of overall private home prices was at a 3-year low, at 3.1 per cent. The 2 years before saw a 3.7 and 4 per cent decline, counting backwards.

QuinterraBy now, consumers and investors are used to the price decline, which has been a regular occurrence since 2013 when the property cooling measures began to kick in. In the current market, any news of slower price declines will be good news, and of stabilisation, even better news. Private home prices have finally landed on a level where an increasing number of buyers find affordable and investment-worthy, which explains the boost in new home sales from 7,440 in 2015 to 7,972 last year.

Properties in the core-central region fared the best in the second half of 2016, while non-landed homes in the city fringe and suburbs registered 2 and 0.6 per cent drops respectively. Landed properties fared unexpectedly well with a 0.8 per cent price increase in Q4. Property analysts are expecting property prices to bottom out this year, which could the year when the property market bottoms out. The authorities do not yet seem to show any signs of easing the property cooling measures, at least not in the first half of the year.