Singapore property market on the mend?

Is Singapore’s property market finally bottoming out? Are current property prices the lowest they can go?

WhitehavenHong Kong and Singapore are 2 of Asia’s most expensive residential property markets, and while both countries’ governments have implemented property cooling measures to help abate the tension, prices remain high. Though Singapore’s property price spike of 92 per cent in the decade between 2003 and 2013 was not as drastic as Hong Kong’s 370 per cent in the same time period, housing cost has increased considerably and was much fodder for debate during the past 2 elections. While home prices have fallen 1.2 percent in Singapore and 13 per cent in Hong Kong since September 2015, the fall will have to be much more drastic for the situation to return to what it was before 2003.

Taking inflation, economic growth and global economics into consideration, property analysts feel that Singapore’s property cycle has almost reached its bottom or turning point as it is in a much more advanced state than Hong Kong’s. Considering the gentle slope of decline in Singapore’s property prices, a sharp rebound seems unlikely. Will there however be a glimmer of hope for a gradual increase upon policy changes and changes in the demand and supply scale?

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.

Singapore’s property districts: Where do you belong?

Though small, Singapore’s 28 housing districts and 26 (and growing) HDB towns each have their own unique and distinct atmosphere. Each have their own history, good eats and exclusive hideouts or communal features. How do you choose which district or estate you belong to?

Grandeur8Many older estates such as Ang Mo Kio and Toa Payoh have their identity rooted in times preceding even World War II. These matures estates have well-established amenities and their transport options have grown over the years. Each will have their own MRT station and bus interchange providing inter-town and shuttle buses; schools, shopping mall, medical facilities such as polyclinics, sporting and recreation amenities as well as parks and libraries.

Some larger townships are built around a regional commercial hub, such as Woodlands and Jurong. Woodlands for example is laid out in a circular shape, with each part of the town connected to major highways and to the town centre. HDB flats and many private condominiums dot the estate and its proximity to the Causeway also makes it a prime leasing spot for Malaysians working in Singapore.

Queenstown HDB flatPhoto credit: HDB

And there are also Satellite towns, Queenstown being the first and Tampines joining its ranks later on. Queenstown was developed by the former Singapore Improvement Trust (SIT) in 1952 and was named after Queen Elizabeth II to mark her coronation. These towns, much like the other mature estates, are chock full of property-investment opportunities as buyers tend to look to these towns for leasing opportunities.

Outlying townships such as Punggol, Sengkang and Sembawang, previously considered remote and unpopular, are all coming into their own with Punggol leading the way into the 21st Century.

Thus, depending on your lifestyle preference, with the variety available within our small nation, there will always be a spot in Singapore which suits you.

Property market showing signs of awakening

Sturdee-ResidenceAlthough property prices have been falling, the show of interest from the buying public has never really waned, instead they are now simply more aware of their options and have become more selective in their investments.

Signs that the market lull might be broken soon have come from the positive take-up of units in 2 recent launches at The Visionaire Executive Condominium (EC) and The Sturdee Residences. 158 units were sold the 632-unit The Visionaire EC at a median price of $811 psf while prices averaged at $1,550 psf at the 305-unit The Sturdee Residences. Buyers at the private residential project have gone mainly for the smaller one- and two-bedders though 3 of its 8 penthouses have already found new owners. Two of the 1,830 sq ft penthouse units were sold at $3.2 million each.

Gem REsidencesThe Parc Life EC and private residential project Gem Residences will launch this weekend. Private condominium Stars of Kovan is expected to launch next month. The latter is a mixed-use development consisting of 390 residential units, 5 strata terraces and 46 shops. Prices are expected to range between $1,550 to $1,600 psf. E-applications for Parc Life have already exceeded the 660 units available and there is hope that uptake will be on the uptick at both these projects.

Private home prices dip for 10 consecutive quarters

The delicate balance between population growth, economy growth and housing provision is not an easy one to strike. And Singapore as a young nation, will have to learn quickly as land is limited but the number of completed units to enter the market in the next couple of years is set to reach 23,000.

Cairnhill Nine CapitaLand

Photo credit: Cairnhill Nine by CapitaLand

Private property prices have been dipping for 10 consecutive quarters now, and the market will be under even greater pressure in the months ahead as supply continues to increase while demand remains stagnant. Rental prices are expected to fall even faster than sale prices and the global economic situation does not seem to be helping. Prices have fallen 9.1 per cent since Q3 of 2013 and non-landed suburban properties in the OCR (outside of central region) fell the hardest.

Part of the reason for the falling figures could be the cutback on land sales by the government and the consequent lack of new launches. Only 953 units were launched in Q1, but property players are expecting the momentum to pick up as the year moves on.

It the first quarter’s numbers were anything to go by, with sales rising 7.2 per cent to 2,847 units, volume may have increased across both the new and resale private home markets.

 

Prices of suburban properties dipping

Prices of new properties in the prime central districts have been rising, even as the market dulls. Suburban homes are feeling the strain put on the market by the influx of completed new homes this year.

The PanoramaBuyers seeking out properties in the suburbs tend to be more price-sensitive, and are often hampered by the total debt servicing ratio (TDSR) framework and the additional buyers’ stamp duty (ABSD), leading to higher competition from an expanding pool of stock for a shrinking pool of ready buyers. Prices at The Panorama in Ang Mo Kio have fell 9.7 per cent since its launch to $1,213 psf and similarly in Clementi, units at The Trilinq are now priced around $1,408 psf, almost 9 per cent lower than its launch price.

In comparison, buyers of properties in the prime central districts are more affluent and are able to afford the prices properties here demand. For example at Robin Residences, selling prices are now hovering at $2,371 psf, 2.4 per cent higher than its launch-price. Buyers of centrally located properties also have stronger holding power and less likely to sell unless the price is right.

RObin ResidencesThe price gap between suburban and central district homes have been widening. Last year, CCR (core central region) new-home price premiums were 81 per cent over those in the OCR (outside central region). As more OCR homes hit the secondary market this year, how will smaller investors handle the competition?

 

New launches versus Completed private homes

As home supply inches towards a new high this year, the public’s attention may now be shifted to the competition between completed new homes and new developer launches.

Property investment was almost a sure thing not long ago, but now 3 to 5 years down the road from the peak of the market, when property prices were high but so were buying sentiment and potential investment yields, units which were launched then are now made available in the physical, adding pressure to the already-gluggy property market.

Private apartment prices in the core central region (CCR) have taken a turn for the better with a 0.4 per cent rise in the first quarter of 2016, following a 0.3 per cent fall in the last quarter of 2015. Luxury properties in the prime districts may once again be welcoming affluent buyers and investors as average unit prices have risen from $2,215 psf to $2,243 psf by the end of last year.

In the city fringes however, private property prices have continued to ebb, falling 0.4 per cent for 2 consecutive quarters now. Out of the central regions (OCR) and in the suburbs, prices fell 0.9 per cent. For the rest of the year, property experts are expecting private apartment prices to stabilise in the central regions while landed and suburban non-landed homes continue to struggle.