Rougher terrain for local leasing market

Property owners with rental units at hand have been finding it increasingly difficult to find tenants.

MartinPlaceResidencesForeigners make up approximately 60 per cent of the rental demand in Singapore, and as the financial and oil and gas sectors take a hit, demand has declined with the foreign workforce diminishing due to companies moving out of the country or simply because housing budgets have been cut as the sluggish global economic drags out. As of mid-2016, vacancy rates stand at 8.9 per cent and there were about 30,310 units vacant. The sudden influx of completed new homes hitting the market this year could not have helped things as well. This year, the number of completed properties entering the market outgrew the influx of a foreign workforce. Immigration and labour policies have changed since the last general election.

Rental rates in the suburbs fell the hardest at 1.2 per cent, followed by 0.6 per cent in the city fringes. Rents of core central region properties however increase by 0.1 per cent.

cavenaghlodge2017 will see the completion of even more residential developments and analysts are expecting rental demand to fall even further, particularly in the suburbs. Rents have dipped by up to 8.8 per cent in the suburbs and 4.5 per cent in the central districts. Some landlords have even give discounts of up to 30 per cent, just to secure a tenant. Others have found themselves going months without finding a suitable taker on the unit. Smaller one- and two-bedroom apartment units are however still faring well, especially those in the Central Business District (CBD), Marina Bay, Orchard Road, and River Valley areas.


Home rental market softening

Rents for both HDB flats and private condominiums have been falling. The number of leases transacted per month have also dipped.

olina-lodgeThe weakening economic situation might be lengthening its stay as the job market remains soft and the hiring of expatriates is on the decline as well, indirectly affecting rental demand. The influx of new completed private condominium units and increase in number of HDB flats being sublet have also pushed rental prices and volume down in recent months.

In September, private non-landed property rental prices fell 0.6 per cent while HDB flat rents fell 0.3 per cent. In a year-on-year comparison, prices have fallen 4.6 and 4.5 per cent in the previously-mentioned property sectors respectively. Weak rental demand have also impacted property sales as resale private condominium prices have been reported to be shrinking, especially with added pressure from new completed units and new project launches.

hdb-flat-rentalStrangely however, core region property prices have increased despite the district leading the drop in condominium rents at 1.8 per cent. City fringe properties bucked the trend with a 0.2 per cent rise as the quantum rental might be more affordable to foreign tenants who also want to live in convenient and popular locales.

In the rest of 2016, the rental market may stagnant while in wait for the new year. As most of the completed projects were rolled out this year, 2017 may be the turning point for both the rental and resale markets. Property analysts are expecting rents to fall by a further 5 per cent before a possible rebound.

Resale apartment prices falling

If anyone has found it increasingly difficult to find buyers for their private apartment, they may not be alone. Falling resale private non-landed property prices have heightened market competition, aided by the increase in completed new units hitting the market and the presence of major new launches in the past quarter.

visioncrest-residenceThe weak rental market has not helped as well. Property experts are expecting the rental demand to remain stagnant till 2017. In August, 830 units exchanged hands while only 683 were transacted in September. The drop in transactions were particularly apparent in the suburbs, once again possibly fuelled by the influx of completed units since 2014. The only bright spark came from the core central region resale properties, with a 0.6 per cent rise from August.

The volatility of the economic outlook and impending interest rates hike has also caused some edginess and those who may not have been able to handle the financial burdens of servicing their home loans may also be in a hurry to sell, thus pulling home prices down. Private resale apartment prices have fallen once more in September, this time by 0.9 per cent. In a year-on-year comparison, prices were 1.5 per cent lower than in 2015. City fringe home prices fell 1.3 per cent.



Forest Woods condominium in Serangoon selling fast

Keeping unit prices at the new Forest Woods condominium below the $1 million mark seems to be a good move by developer, City Developments (CDL).

forestwoodsBuyers are attracted by the prime suburban location and its proximity to the Serangoon MRT station which speaks volumes since location is still a key mitigating factor for most tenants. The fact that the Serangoon MRT station is a major interchange node connecting between different MRT lines, is linked to a bus interchange and also a huge shopping mall, NEX, are all bonuses. And as property prices have been falling for a couple of years now, buyer sentiment is that they will not fall any further, and are taking the opportunity to buy now before interest rates potentially rise in the later part of the year. The $6,000 to $12,000 early bird discount may also have enticed some to seal the deal early.

forestwoods2All the one- and two-bedroom apartments launched at Forest Woods have sold out and the median selling price currently stands at $1,400 psf. The development has a range of units ranging from 506 sq ft one-bedders to 2,185 sq ft penthouses. As of Sunday evening (the project was launched last weekend), almost 65% of the units were already sold. One of the three penthouses available was also sold at $2.85 million. Almost 90 per cent of the buyers were Singaporeans, with the rest being permanent residents or foreigners from China, Indonesia, Malaysia, Taiwan, Vietnam and Switzerland.

Regional centres primed for growth

28 districts and 29 HDB estates strong, Singapore’s real estate market still holds space for growth, especially in the suburbs. As buyers become more investment-savvy, and the country grows, their needs and demands shift with the tides of time.

Lakeside URA MasterplanPhoto credit: URA

Buyers of today are looking for properties in a good location, not necessarily only in the central region, with the potential for value appreciation. There are now more regional centres than 2 decades ago, such as Woodlands, Tampines, Jurong and Seletar. These townships are considered second-tier commercial zones where residential, retail and industrial sectors connect and where residents can live, work and play all in the same location without having to step foot into the city centre. It helps spread the population out across the island and also create job opportunities and boosts property value and prices.

FLoravilleWith the Urban Redevelopment Authority’s (URA) Masterplan moving into action, there may be even more property hotspots coming up by the end of the decade. There are plans to develop the once sleepy Lakeside district into Singaporea’s second CBD. The Singapore-Kuala Lumpur High Speed Rail terminus will be located at Lakeside Gateway, which will be a good way of driving rental traffic in the area. The North will also see the development of the North Coast Innovation Corridor, centred around Woodlands and connected to the North South and Thomson MRT lines. And over in the North-east, the Seletar Aerospace Park is poised to bring in 10,000 new job opportunities and the early adopters of properties in the area may do well in the long term.

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.