Singapore gains traction as property investment safe haven

A little red dot, almost invisible in the huge map of the world. But as political and economic turmoil rock the majority, Singapore is increasingly considered by many global investors as a safe haven for foreign funds.

Asia SquareThe strength of the SingDollar, coupled with a relatively stable political climate has provided foreign investors with the assurance that their monies are well-protected. Thus far, $8.85 billion has reportedly been spent by foreign investment on Singapore property, a 62 per cent increase from last year, the highest in 9 years and making up 41.7 per cent of total property spending in 2016. In 2015, the total foreign monies invested in the local property market was $5.46 million and in 2014, $4.67 million. Qatar Investment Authority was a major foreign player this year, putting in $3.4 billion for Asia Square Tower One. Also in the Marina Bay area, a white site in Central Boulevard has been bid on and won by Wealthy Link of IOI properties at $2.57 billion. Projected to be up for sale next year are Jurong Point Mall and Asia Square Tower Two.

Though the commercial property rental market has dulled slightly, the lack of new office spaces being developed within the next 3 to 4 years might help the rental market eventually gain traction. 2020 might be the watershed year when the market is projected to rebound significantly and most investors are willing and able to financially wait out the next few years ahead.

marina-bay-suitesIn the residential market, a number of en bloc sales were successfully tendered this year, with Qingjian Realty’s $638 million for Shunfu Ville taking the spotlight. The sharp increase in interest this year could be the fact that other markets in Asia have been on the upturn in the past decade, and although Singapore has been priced out in terms of capital gains due to an economic slowdown during this time, she has more than made up for lost time with this year’s results.

 

525 potential new residential units near city fringe and nature reserve

hertford-collectionNear Little India and off Toh Tuck Road, the Urban Renewal Authority (URA) has released 2 residential sites that may culminate to a total of 525 private homes. Both sites are released under the Government Land Sales GLS) scheme and have 99-year leasehold tenures.

The first site off Perumal road near Farrer Park MRT station may be of particular interest to developers due to their city fringe location, proximity to a MRT station and its yet unfounded potential. The area is also close to the new medical hub off Farrer park and Novena. The tender for this site closes at noon on Jan 10 and is expected to fetch $280 to $295 million at $800 to $850 psf. The bids may come in strong as there has been a lack of new launches in the area for sometime now, which could mean buyers will be looking for something new to put their money in when the time is right.

connexion-farrer-parkThe only con for this site might be the proximity to the Sri Srinivasa Perumal Temple which could mean a higher noise level especially during festivals. But its location and depending on what other facilities or incentives the new property offers, may overcome all that.

Though the Toh Tuck Road is on the reserve list, should a developer be able to meet the minimum bid set by the authorities, it should still be able to fetch up to $225 million. This site is near the Bukit Batok Nature Reserve and Nature Park plus schools such as Pei Hwa Primary and Ngee Ann Polytechnic which could be rental fodder for expatriates or foreign students.

Banking on rents to cover mortgages increasingly risky

As the rental market strains against the backdrop of a general economic slowdown and job security wobbles on its feet, the old ways of banking on rental yields to cover mortgage loans and other outlays on invested properties may no longer be a sure thing.

Alexis @ Alexandra CondoThe imbalance may be getting dangerously so even as the Monetary Authority of Singapore (MAS) has publicly warned investors against the risks of putting all their eggs in the property basket. They mentioned both property and corporate bonds as emerging risks, especially as growth is weak and the political situations across the globe is uncertain.

Rising vacancy rates and declining rental demand are the more concrete and obvious factors investors should consider before closing a deal simply because the total quantum prices are too good to be true. Before investing in overseas properties, currency fluctuations and political stability are also serious considerations, not to mention the strength and longevity of property and rental demand in a country not in close proximity.

la-rivere-2Although MAS has noted that most households here are able to weather an economic storm, if it does occur, those who have bitten off more than they can chew may want to reconsider their financial holding power and set their sights in the long-term rather than counting on their eggs hatching early.

High prices may lower demand for Australian properties

It’s no secret that property prices have been skyrocketing in Australia, particularly in major cities such as Sydney and Melbourne. But as much as property owners and developers want to get onto the gravy train and take in all the profits they can, the way the current market prices are going may put many out of the affordability bracket and in turn cause a supply glut as fewer buyers are able to afford the exorbitant prices of homes in AustraliaProperty prices have risen 7.5 per cent in the last year alone, boosted by low interest rates and foreign investment monies flooding in mainly from China.

operaresidencessydneyIn Sydney and Melbourne, the market trend has moved away from landed homes or houses to high-rise apartments and as the number of units per square metre increase, analysts worry that the competition coupled with the high property prices may create a situation of oversupply of apartment units. This in turn could deflate the property market and see apartment prices falling 15 to 20 per cent within the following 2 years. How would this then affect those who have taken loans to purchase homes at higher prices prior to the deflation, and would that mean trouble for the banking and finance sector?

melbourneapartmentHigh-rise residential developments enjoying the most attention now are those near the railway stations or in the already crowded inner city areas. In Melbourne, 18,000 apartment units will be built within the next year and a half. Some analysts are however not overly worried about the apartment boom as overseas buyers are limited to purchasing only new homes and do favour apartment units closer to the city than landed houses future out in the suburbs. With the continued population increase and the number of foreign students or labourers coming into these cities, the demand may cool but a sudden fall seems unlikely.

Japan real estate may see future boom

Japan may have previously abhorred foreign labour but as their population declines and ages, they may be pushed to relax immigration laws. This may also increase the demand for real estate, and in particular since Japan’s Airbnb scene is also rather active, those who own a piece of prime real estate in the country will have profits to reap in the long run.

aoyama
Photo credit: Mitsui Fudosan Residential and City Developments

Singapore developer, City Developments (CDL) has recently been taking up stakes in various Japanese properties such as Park Court Aoyama The Tower, a 163-unit residential project in the Aoyama area within the Minato ward, where high-end businesses and exclusive residential areas  surrounded by modern eateries and pretty parks reside. In fact, with 26 storeys of freehold apartments ranging from 389 sq ft to 3,789 sq ft, the property looks set to attract both domestic and foreign buyers. Prices for the units will start at 178.8 million yen (approximately S$2.3 million) for a 1-bedder to 271 million yen (approximately S$3.5 million) for a 3-bedroom apartment. Only 55 units were released in its initial launch in Japan where show flats are already available for public viewing.

parkcourttokyo1Besides residential properties, hotels and commercial business spaces are also hot properties, quite literally. CDL’s hospitality unit, Millennium and Copthorne Hotels have already staked claim on a prime Ginza site for their flagship 329-room hotel and have invested in 3 other hotels as well. The CDL group also has stakes in 2 other residential developments. Despite the uncertain economic climate, Japan remains one of the more active real estate markets in the Asia-pacific region thus value appreciation will work in favour of property owners for quite some time yet.

October’s new home sales up 128 per cent this year

With more that 1,252 new private homes sold in October, new home sales have risen 145 per cent from the 509 units sold in September and 128 per cent in a year-on-year comparison with 2015 when 549 units were sold.

thealpsresidences4The sudden spike may have been due to pent up demand after the slower months of the June school holidays and Hungry Ghost month in August, plus the launch of major projects in the later part of Q3. The 2 new property launches which garnered most of the sales were The Alps Residences in Tampines and Forest Woods in Serangoon Central. Each sold more than 300 units which made up 55.7 per cent of October’s sales. Other projects which consumers actively seemed out such as Stars of Kovan, The Trilinq and Kingsford Waterbay all sold only 30 units each, though understandably as these are much older launches.

Property analysts put the sudden rise in sales, a 15-month record high in fact, to the affordable prices put out by developers. Despite the slower economic outlook, consumers know a good deal when they see one and are willing to invest in what they consider to be long-term investment-worthy properties. Forest Woods is situated close to the Serangoon transport hub – the MRT station, bus interchange and NEX shopping mall – which could account for its popularity.

forestwoodsForest Woods was the top seller last month, with 364 units going at an average of $1,078 psf. Smaller units were purportedly gaining traction with buyers once more. Shoebox apartments, though aplenty in the market, remain affordable and property analysts report a direction change from investors who have turned their attention from riskier financial products back to the more stable property market.

 

Rents down but sales of some projects up

Home rental prices have been slipping with a 0.4 per cent and 0.5 per cent fall in the private non-landed apartments and HDB flats markets respectively.

Cairnhill Nine CapitaLandPhoto credit: CapitaLand

But perhaps the decline in rent has increased rental volume. There was a 8.2 per cent increase across the board in rental volume with 3,686 units leased this October as compared to 3,408 from the same month last year. On the same year-on-year comparison, rental prices were however down by 4.5 per cent.

The increase in rental volume may also be reflected in the sales volume this quarter as stronger home sales may have lifted earnings for some developers. CapitaLand for example saw a 28.4 per cent rise in net profit in Q3. Locally, their private residential projects, The Nassim and Cairnhill Nine, have boosted sales, together with their new projects in China – namely Riverfront in Hangzhou, New Horizon in Shanghai and Vermont Hills in Beijing.

nassimhillcapitalandPhoto credit: CapitaLand

In Singapore, they have sold 206 units in the second quarter, and a total of $1.24 billion in total sales value in the first 3 quarters of the year. With the happy increase in number of launches within the last quarter, sales volume may hit a positive note and ring in the festive year-end cheer come end December.

New Vietnam properties hook buyers

It seems a few private residential ‘townships’ are coming up in Vietnam, and at the welcome of investors and those seeking a place to call home.

palm_cityOne of Singapore’s major developers, Keppel Land has been developing massive properties in Ho Chi Minh, where the expatriate population is growing and the rental demand for housing has increased by leaps and bounds in the last decade. 3 of Keppel Land’s major developments in the mamking are – Empire City, Palm City and Riviera Point.

Palm City on its own is already quite a force to be reckoned with. Jointly developed by Keppel Land and Tien Phuoc and Tran Thai, it covers a good 30 hectares of waterfront land, essentially an entire township itself. In Phase 1 of its development, all 135 landed terrace and detached houses have already been fully spoken for in their July preview. Now in Phase 2, they have launched the 816-unit Palm Heights apartments, with 570 units already booked at the average price of 32.6 million Vietnamese dong (S$2,017) per sq m.

riviera-pointOver at the 518-unit The View private apartments at Riviera Point, almost 33% of the 345-units launched have been sold. The selling price average at 37 million dong (S$2,302) per sq m. The developments in Ho Chi Minh seem be all be larger-sized high-rise ones. Yet another 500-unit private residential condominium project will be coming up within the year – Empire City, also a waterfront development in the Thu Thiem New Urban Area.