Market recovery uncertain despite rise in resale condo prices

May was a rather good month for the resale private condominium market as prices rose 0.4% and sales volume increased by 17.4%. In comparison with the same month last year, prices have risen 1.5%.

CreekBukitTimahAll signs seem to be pointing to a market recovery after 3 years of lacklustre performances. However, some property analysts are taking a more conservative stance with regards to the recent price adjustments. The leasing market remains weak and rental prices have fallen, putting additional pressure on an already-weak market hence the market is still a ways from bottoming out. Private property values have fallen 11.6 per cent since the peak in Q3 of 2013.

skyline-residencesPrices of resale properties in the core central and city-fringe regions have shown improvements with a 1.1 per cent rise from April. In the suburbs, prices fell slightly by 0.4 per cent. A moderate look at the current situation would more likely than not mean a gradual rise in prices over the course of a year rather than a quick and immediate recovery. A recent hash of high land bids and the gradually diminishing stock of unsold private homes do however seem to be beacons of light, however dim, pointing towards the promise of a market stabilisation at the least. Positive sentiments and sales at new project launches and continued low interest rates may add icing to the cake if developers can have it and eat it too.

 

Prime sites may yield high-demand homes

Should the sites currently earmarked for future residential use be put up for sale, the public can expect some juicy baits from developers as these sites are in prime locations near the city centre.

Tanglin ResidencesThe 2 sites which are particularly beguiling are the former Ministry of Home Affairs Phoenix Park site in Tanglin road and the former Overseas Family School plot in Paterson road. Both sites are under governmental ownership and while the location of these sites will excite developers and buyers alike, the government is unlikely to put them up for sale anytime soon. They have in fact been holding back on the release of land sites possibly contributing to the increased number of successful en bloc sales in recent months.

Paterson SuitesThese sites with their exclusive addresses are currently put up for interim use though should they eventually be placed for sale, they are likely to yield 450 to 700 homes in the Paterson road site and 850 to 1000 units averaging 800 to 1,000 sq ft on the Phoenix Park site. The latter is currently tenanted by LHN Facilities Management who will have the option of renewing till the end of 2020. The proximity of this site to various embassies in the Tanglin area will however mean restrictions may be placed on the height not to mention possible heritage conservation regulations.

 

How to make your rental unit shine

Though the Monetary Authority of Singapore (MAS) has reminded property investors in their Financial Stability Review released late last year of the increase in vacancy rates and declining rental market, there are still ways to ensure the best yields from the properties you have invested in.

lagunagreenFinding yourself a reliant property agent is of course the first step, and experienced agents can often advise you on how to make your property more appealing to tenants, what to look out for when selecting a suitable tenant and what the current market sentiments or pricings are like. But putting in the behind-the-scenes work will also get you the results and the little things do make a difference.

As more tenants are taking their search online, making an online presence, and a good one, will at least help to bring in the views. The reach of social media and online platforms where expatriates often visit could be extensive. On occasions, you may even consider online advertising. And providing a 360-view of your unit will also provide tenants who search online with a more comprehensive idea of what you are offering. This helps save time for both landlords and tenants.

loyanggardensBefore taking any photographs, some home-staging will go a long way. The rise of Airbnb (though not yet legalised in Singapore) means tenants now have more options or are used to more elaborate visuals of the units they potentially select. Taking care of tiny details such as cleanliness, lighting, placement of plants or quality of furniture and utensils all play a part in making the tenant feel comfortable and could be just what gives them the final push to sign on the dotted line.

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.

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.

Ready to invest in properties overseas?

The attraction of investing in a plum overseas property may be strong but while the yields may be high, so too could be the risks.

Prudent research and risk-calculation prior to taking the plunge is of course essential. And some of the very real and future-determining factors to take into consideration are:

chonburi-thailandproperty

1. Foreign ownership regulations

It almost goes without saying that this would be what any discerning buyer first finds out – what governs their purchase and whether they are eligible. Newer markets, in particular South-east Asian ones such as Vietnam, Cambodia, Myanmar and Laos, could have more relaxed rules as their immediate interest lie in attracting investments while markets with a longer history of foreign investment such as Australia and Thailand may have more rules in place in reaction to previous market movements. In some markets such as Australia and Malaysia, there are also restrictions on the resale of foreign-owned properties, and for buyers who do not have strong holding powers, having to hold on to properties in a economic downturn with only a niche target audience could be stressful in all senses of the word.

2. Currency exchange

Though currency fluctuations are inevitable, property analysts encourage buyers to seriously consider the market or country’s political and economic states. Markets where the local currency have been fairly stable for a prolonger period of time are generally lower-risk options, though even then, it would be wise to engage the services of a lawyer or accountant to help in long-term financial planning.

kl-property

3. Rental potential

The location and type of property, the track record of the property developer and the rental demand for the property are all instrumental to the make or break of an investment decision. The property size should also be taken into consideration as larger albeit rarer properties may not be as quick to find a tenant as say, a smaller-sized unit at a more palatable quantum price. Industry experts also advice investors to first have a target audience in mind as expatriates may come from different industries and have differing housing budgets.

4. Payment schedules and options 

Singapore’s property market may veer to the stricter side in terms of payment schedules as they work on a progressive payment scheme. Many overseas markets however offer a deferred payment scheme, for example where a buyer puts down a 10% down-payment deposit and only pay the rest of the 90% upon completion of the projects. That could be a plus for some buyers, but it would mean a change in financial plans.  With overseas property investments, there are also more lending options, some of which could offer higher levels of flexibility such as dual currency switching and mortgages with the possibility of off-setting interest.

 

 

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.