To buy or not to buy.

That is the question. When rental prices fall and rise according to property prices, which in turn are directed by local economies of scales and indirectly impacted by global economies and general market sentiment, that is often the question home-seekers ask themselves.

In the current market, is it wiser to buy or rent? Under what circumstances should you definitely choose one option over the other? Property analysts advice against renting while speculating on market direction as the uncertainties may not always work in your favour. Instead, the main factor should be whether renting or buying best suits your needs.

KembanganSuitesSingapore may very well be one of the cities in the world where most people own their homes. In many other cosmopolitan cities, rental is a more-than-common way of life. While renting may suit those who are not willing to be tied down by fixed monthly outlays such as mortgages, taxes and condominium maintenance fees, it also means that the money that goes into your rent does not ultimately accumulate into owning the roof over your head. There is also the danger of rental rates being raised and frequent moves.

Buying a property is not a small decision, and market advisors caution against doing so when you have not yet made sound financial calculations. The price differences in purchasing a freehold versus a leasehold property could also be considerable in the long run as most freehold properties tend to appreciate over time.  This then brings you to the considerations of when to buy and sell your property. While it is true that leasehold properties tend to depreciate, factors such as location and the competitiveness of neighbouring properties could also lend weight to the depreciation process, slowing it down considerably.

Sydney properties still finding ready buyers

Property prices in Sydney have become notoriously expensive, perhaps more so in the past couple of years than ever before. But the buyers are still ready to take the dive, no matter how deep, as reflected by the sales of a Darling Square apartment project by Lend Lease Group where all the 391 units were sold within 4 hours.

DarlingSquarePhoto credit: Lend Lease Group

Prices were not cheap, starting at A$630,000 (S$625,000) for a studio apartment and going up to A$3.5 million for a 3-bedder penthouse. In truth, property prices in Singapore are comparable and this Sydney property is situated in a prime location – just west of Sydney’s Central Business District. The property is set for completion by 2019 and will be able to house approximately 4,200 residents.

While more of the buyers were Australian, and with about 66 per cent buying the units to live in, property analysts are still waiting for the verdict to be out. Considering the proximity of these units to Sydney’s CBD, and positive rental yields, some buyers may eventually be looking at renting these units out.

There will be a construction boom in Sydney in the next couple of years as more than 81,649 new homes are expected to be built and completed within the time frame. By 2017, 34,300 new apartment units will enter the market. How will the rental market be able to cope with the spike in numbers come 2019, and will demand continue to increase?

Rents dip for Hong Kong’s luxury properties

The shaky global economic situation may have a wider effect than just the countries directly hit. The effects of cutbacks and job losses in the oil, gas and banking sectors have resounded worldwide. The flow of expatriates between countries have decreased and those who are still living overseas have found their housing allowances slashed considerably.

HKCEntralThis has in turn reduced the demand for property rental, mostly in the luxury sector. Besides  Singapore, Hong Kong is also feeling the effect of change. In Hong Kong, monthly rental budgets of expatriates have gone down to approximately HK$100,000 and below. Gone are the days when expats could easily afford a HK$300,000 per month rental. In fact, most are making do with HK$30,000 per month housing budget for individuals and HK$70,000 for families, which barely allows for a 550 sq ft apartment in the Central district.

Housing prices which have shot through the roof in September has since fallen 14 per cent and high-end properties at Victoria Peak have suffered the largest blow. Rental prices have fallen in some cases as much as 30 per cent. But considering the rise in property rents have risen steadily year by year for the past decade, it may not be as drastic as it seems.

HongKongPeakHowever, does this mean that smaller and middle-range private apartments are benefitting from the trickle-down effect? Are expats now looking at a whole new range of property types which could mean fatter pockets for landlords and developers willing to fit into their budget? In fact, some developers have already begin offering discounts in the form of offering a month’s rent for free.

Rational decline in private home rental prices

Instead of a wild and dangerous free fall, the price decline in the property rental market has been encouraging in its lack of acceleration.

Property analysts say the “sawtooth” pattern in the fall of rental prices is understandable and manageable. There was a spike in rental volume in March due to the influx of foreign talents after the Chinese new year festivities, followed by a level performance in April which indicated a higher rental volumes for both the private property and HDB rental markets though leases signed now tend to be shorter than 6 months.

TheSoundCondoRents in the Outside Central Region (OCR) fell 0.1 per cent in April while that in the core central region (CCR) remained unchanged and in the rest of the central region (RCR) rental prices rose 01. per cent. In a year-on-year comparison however, rental prices have been falling, with a 3.9 per cent dip for HDB flats in mature estates and 5.4 per cent for private condominiums.

The rental volume was however 10.5 per cent higher than in 2015 despite a 10.3 per cent fall from March. Many new completed units were included in the 3,953 units were leased last month. The continued influx of completed new homes entering the market this year may dilute the tenant pool even further and resale units may find it even tougher to secure tenants as the year moves on.

Property mortgage sales even include uncompleted units

A weakening rental market and the growing supply of new homes have pushed even more units into the realm of mortgage sales.

Silversea1Even uncompleted units are now going under the hammer. While only 3 properties were auctioned last year, the number have more than quadrupled to 13 in the same period this year. More mortgagees are defaulting on their loans, which could be largely due to the diminishing loans they are now able to secure based on the debt servicing limits, increasing competition in the rental market and an overall property price drop.

Investors who have been dipping their toes into too many properties may be finding themselves unable to service the multitude of loans taken on multiple properties, in particular smaller one-bedders or studio apartments which are only reaching completion in the recent couple of years. Some units at The Greenwich in Seletar and euHabitat for example, in particular smaller one-bedroom apartments priced at $1 million or below, are being put up for auction as their owners are overstretched financially and find it difficult to secure rents sufficient enough to cover their mortgages. Larger penthouses with irregular layouts above 1,500 sq ft and priced above $2million are also finding it difficult to find buyers or tenants as they exceed the budget of many investors but may not yet fulfil the requirements of affluent or high-networth buyers.

The GreenwichSome of the units put up for auction this year include a one-bedroom penthouse in Guillemard Edge, a three-bedder in Bartley Residences and a four-bedder in Silversea condominium in Marine Parade. The latter was sold at $1,529 psf or a total of $3.9million.

 

HDB flat and private condo rental prices evening out

The difference between renting a HDB flat and a private condominium unit used to be $1,000. Today, the difference stands at only $500. The gap between HDB flat and private property rental prices have narrowed considerably, due not to the rise in HDB flat rents but in the drop in private apartment rents.

Qbay ResidencesIn the past, renting a suburban condo would cost you $3,100 to $3,300 a month. Now, it is possible to rent a suburban unit at $2,700. HDB executive flat and 5-room flat rental prices have remained around the $2,200 to $2,400 range for the past 5 years now.

HDB flatMuch of the rental drop comes from the sudden increase in supply of new private condominium units, with more landlords now jostling for the same or shrinking tenant pool. Many HDB upgraders will also join the HDB rental pool as they seek to rent out their HDB flats.

Property analysts are putting it up to the shrinking apartment sizes. The psf rents have remained the same, but tenants are now getting less floor area than they used to for the same amount of money. They are however picky about location and may be willing to accept a smaller-sized accommodation in a central located as opposed to a larger one further away from their workplace or town.

As the gap narrows, will the HDB flat rental market take an indirect hit as tenants opt for private properties over public housing?

Rental market bodes well for HDB flats

The rental market has been on the downhill slip as a fresh crop of completed new private homes hits the market this year. Competition for an increasing limiting tenant pool will prove to be tough for private property landlords, but HDB flat rental prices are holding out well despite the softening rental market.

Paterson SuitesCore central region private apartments seem to be suffering the most with the global finance, oil and gas sectors in turmoil. Expatriates working here and their families have been moving out of the country, scaling the tenant pool for luxury and high-end prime properties down even further. For example, a 3-bedder in a 1,600 sq ft unit in Paterson Suites which would have tenanted at $7,000 in January is now offering $5,800 in rent.

Serangoon HDB flatPrivate property rental prices fell 1 per cent in March, while HDB flat rents fell just 0.1 per cent. Changes in immigration policies have reduced the foreign workforce in Singapore and those remaining may have to work around a smaller housing allowance, hence many private properties may be out of their rental budget. HDB flats are a fair and affordable option. For locals or HDB upgraders who have to rent a home while waiting for their new BTO flat or condominium to be built, private units often prove to be too expensive as well. Will the positive rental yields for the HDB flat market boost the sales figures for this sector?

 

 

High vacancy rate hits property rental market

The days of brisk rental demand for private apartments could be going as the high number of vacant private property units in the market reached a record 10-year high at the end of 2015. Rents have fallen 4.6 per cent last year and analysts are predicting a 6 per cent drop this year.

Cassia EdgePhoto: Cassia Edge condominium

With the sheer number of new condominiums and smaller units introduced into the market in the last five to ten years, the opportunities for investors with varying financial capabilities have expanded vastly. Many of them have purchased smaller suburban units for investment purposes but 2016 may not bode well for those looking for a quick turnaround in terms of resale or rental of these units. The number of new condominium units hitting the market this year will mean increased competition for a diminishing tenant pool which will squeeze rental prices downwards. Many landlords are already finding it difficult to find tenants with the same asking prices as before, and have found it necessary to lower prices by 10 to 20 per cent.

Districts 19 and 20, which includes Bishan, Ang Mo Kio, Hougang, Punggol and Sengkang, will have the highest number of new units in their midst this year – approximately 8,200. This is despite the fact that rental prices have not risen much in these districts over the past 3 years. Property experts are however positive about the huge redevelopment of the Seletar Aerospace park which may continue to provide the demand for rental units. In the eastern districts however, demand may be waning as expatriates working in the hard-hit financial and banking sectors could be leaving the country.