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.

 

Last GLS site of the year drew 14 bids

Perhaps because it was the last land plot for sale under the Government Land Sales (GLS) scheme for 2016, or that the 22,195 square metre site is situated near both the Commonwealth and Queesntown MRT stations in an area which has not seen new private home launches for awhile, but the latest Margaret Drive site saw an active bidding war between 14 developers with MCL Land lodging $238.38 million as the highest bidder.

queenspeakcondoThe highest bid is almost 8 per cent higher than the second highest of $220.9 million that came from Allgreen properties, and 14.5 per cent higher than the price of the land site on which Queens Peak condominium will stand. The site was originally on the Urban Redevelopment Authority’s (URA) reserve list but was triggered for sale when the minimum bidding price was met. A developer had originally committed to bid at least $184.758 million.

Commonwealth TowersCompared to the $483.2 million and $562.8 million previous wining bids on the neighbouring Commonwealth Towers and Queens Peak residential developments, the $238.39 million for this new site could yield 300 highly affordable units in the future. Property analysts deem the bullish bids as a sign that developers are keen to add new sites to their development lists, and truthfully, land is not easy to come by in this tiny island.

 

Economic slowdown affects industrial property market

2016 has seen quite a few political shakeups and the economy has been suffering the aftershocks. The  gas and oil market have been slightly flailing, with some companies stripping down to the minimum or moving out entirely hence the pickup for new industrial units or renewal of older leases have been lesser than optimal.

az-paya-lebar-industrial-propertyIn Singapore, industrial property prices and rental demand have declined in the third quarter, in particular sites or units with 30- and 60-year leases. Following the recent Trump win in the US elections, global uncertainty continues as countries question what future moves the newly elected US president in terms of trade agreements. With one of the most fast-moving industries of late begin e-commerce, which may not require as much space as manufacturing, storage and smaller boutique spaces could be the next wave.

Economic analysts say that global trade needs some rejuvenating or the industrial and warehousing sectors may continue to decline. Freehold industrial developments saw the smallest fall in prices of 1.4 per cent while 60-year leases fell 4.7 per cent and 30-year leases, 2.1 per cent. Rental demand is lower than supply and it continues to be a tenants’ market.

jtcinternationalbusinessparkThe only plus is the increase in interest in business park units, with rents expected to increase by 3 to 5 per cent next year. The International Business Park in Jurong East has seen a rise in average monthly rent of $0.10 psf with 25 leases signed in Q3 alone.

In the industrial sales market however, fewer industrial properties exchanged hands as most companies are holding back their expansion plans in lieu of the economic slowdown. Property analysts are expecting a further 5 per cent dip in industrial rents come end of 2016.

Main factor for Australia’s property price-rise not foreign investment

The Canberra-based Australian Treasury has recently divulged the results of a study which showed that the main factor for rising property prices in Australia is not, contrary to popular belief, investment monies from foreign buyers but the strong foundation of household formation in the country.

sydneypropertyPerhaps it is a culture where citizens are keen to form new nuclear family units and to live in their own home which drives up demand for property, especially the main Aussie cities such as Sydney, Melbourne, Perth and Brisbane. The possible influx of foreign students in these cities could also mean locals are buying up properties to reap rental yields, thus pushing property prices upwards.

pacecollingwoodmelbourneSince 2008, property prices have risen more than 50 per cent, but only A$122 (S$129) of the A$12,800 increase in overall prices per quarter were attributed to foreign demand. That said, a total of A$24 billion in real estate investment monies from Chinese buyers have been approved in the year ending June 2015. This year, some states have begun to impose transaction taxes on foreign purchases of Australian properties and the study done by the treasury may have excluded properties purchased by locals for their overseas family members and relatives.

Will demand, local or foreign, wane and if so, how soon? Will prices slide gradually or continue to remain stagnant at its current levels?

 

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.

Chinese top buyers of Singaporean properties

Foreign interest in local properties have not waned despite rising prices and supply over the past half a decade. Their appetite have not diminished, if at all. Transactions may have shrunk slightly due to the additional costs involved in foreign-purchases of properties in Singapore, put in place by the series of property cooling curbs rolled out since 2011, but they buyers are back in the market in search of potential sites and units, in particular buyers from mainland China.

skyline-residencesIn a year-on-year comparison, foreign property transactions were up 11.8 per cent and this excludes purchases by permanent residents. Besides the Chinese, other major buyers hail from Malaysia, Indonesia and the United States. Each group have their preferences as the numbers show. Chinese buyers mostly favoured suburban properties while Malaysia and Indonesian buyers went for core central region units. 68 per cent of Indonesian buyers and 40 per cent to Malaysian buyers purchased homes in the prime districts while 58 per cent of transactions from the Chinese were for homes outside of the core central districts. Most Indonesia buyers are willing to pay $2,000 psf and above for prime properties while Chinese buyers usually went for properties priced between $750 to $1,700 psf.

Marina ONe iprop watermarkThe Additional Buyers’ Stamp Duty (ABSD) may have been a deterrent at one point in time, but as the government made clear that the measures are here to stay, acceptance is beginning to truly sink in and buyers are willing to spend the additional amounts in exchange for long-term capital gains. Buyers from the United States are exempt from the ABSD due to a free-trade agreement and this has raised the number of buyers up from 1.1 to 7.3 per cent over the past 5 years.

 

Indian cities top in list of Asia’s property investment hotspots

India may not have previously come up as a potential goldmine for property investors, but real estate in some Indian cities have been creeping up the popularity charts and can now be viewed as some of Asia’s most prime investment real estate.

mumbaipropertyJust like in China, a huge country like India will no doubt have some cities which shine over the others. Mumbai and Bangalore have come up tops in a comparative table of 22 Asian markets. With many multi-national companies setting up regional headquarters or back offices in India, it comes as no surprise that commercial properties are key when it comes to real estate investment in India. The migration of locals from smaller cities and townships into these main cities and business hubs also mean a demand for rental properties are on the rise.

Singapore has fallen from its 11th place to 21st as residential property prices declined for 12 consecutive quarters. Even Tokyo, which topped the list at first place this year, have fallen to 12th place for next year as low interest rates see sellers holding on to their properties despite low vacancy rates. Japan’s declining economy also has a part to play in the market sentiments there.

newyorkapartmentThe mainland Chinese investors are some of the largest players in real estate markets across the globe, but they have begun to turn their attention away from Asia to markets further north such as London and New York. Property prices in China are soaring, and their yearning for foreign footholds and connections have brought them into both established markets in the West and emerging ones in the region.