When will property cooling measures cool off ?

The past two years have seen the implementation, and perhaps effects, of a series of property cooling measures. From increased stamp duties to revised subsidies and the strictest of which, the TDSR (total debt servicing ratio) framework, restrictions have certainly risen the heat on the property industry.

Singapore still has some way to go before the property market achieves the sophistication it requires to reach new heights. Economist are estimating the second half of 2015 as the earliest the authorities are likely to cool off with the cooling measures. That is when most households would have managed to reduce their debt levels. However, property prices can be expected to fall by more than 10 per cent in the first half of next year, or at least show a substantial decline before curbs are removed. In fact, by 2016, property prices are expected to fall by up to 20 per cent due to the oversupply at that time.

Prices have stablised somewhat since the implementation of the property cooling measures, but the fall has only be about 3 per cent, which means the authorities could be waiting for a significant fall in figures, or a recession, before amending the rules. The fear could be the sudden upward rebound of prices which may far surpass the watershed of 2009. With the elections coming in 2016, 2015 seems like the turning point for the market and buyers and sellers alike may be watching closely to catch any opportunities  they can before things change once more.

Could 2015 be the year for home buyers? How will landlords, developers and sellers fare?

iProperty H2 2014 Survey: Sellers Up, Buyers Down

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Owners keen to sell while buyers expect price declines; HDB confidence rises.

The latest iProperty Asia Property Market Sentiment Report H2 2014, Asia’s largest consumer property sentiment survey, shows a significant shift in Singapore sentiment, with more wanting to sell (from one per cent to 16 per cent) and fewer wanting to buy now (from 22 per cent to ten per cent) as prices head lower. More respondents also expect new and resale private condominium prices will continue to decline (up from 34 per cent to 53 per cent), but are more confident about HDB values.

“The H2 2014 report shows that both property sellers and buyers are nervous a year after the start of the Total Debt Servicing Ratio (TDSR). In the H2 2013 APMSR report, just after the TDSR was announced, 59 per cent of owners were confident their property would retain its value; now only 38 per cent think so, a decline of 21 per cent.  Another 25 per cent are unsure if the value will be retained,” commented Mr. Sean Tan, iProperty.com Singapore General Manager.

“Buyers are biding their time, with affordability and financing as top concerns. While the number of respondents who intend to purchase within the next 24 months remains the same at 51 per cent, buyers may wait for new and resale private condo prices to fall,” said Mr. Tan.

Developers are already responding to the more cautious market, delaying new project launches and lowering launch prices, among other strategies. According to the Urban Redevelopment Authority (URA), developer launches decreased from 441 to 351 private homes last month. Median prices between Q1 2013 and Q2 2014 declined three per cent for completed projects, while declining eight per cent for uncompleted projects.

Singaporeans do however continue to view property as a good investment, stating rental income (34 per cent) and long-term investment (29 per cent) as the top reasons. Home ownership was at 23 per cent. Private condominiums (57 per cent) continue to be the top choice, with terrace houses at 25 per cent and HDBs at 23 per cent. Survey respondents chose price, location and potential ROI as the top three factors when purchasing properties.

“Singaporeans are confident about property and have the money. 17 per cent of respondents have identified budgets above $1 million; 61 per cent have budgeted between $500,000 and $1 million; and 18 per cent have less than a $500,000 budget. The market is now correcting after the rapid rise over the last few years ago, and demand is there at the right price point,” concluded Mr Tan.

Mr. Getty Goh, Director at real estate research and consultancy firm Ascendant Assets, noted that buyers are jumping in to purchase properties when prices are within expectation, or if they are in a good location. “Examples include the 91 per cent surge in sales in District 9 and 10 reported by Barclays, and more recently the good sales figures at Highline Residences,” said Mr. Goh.

The Highline Residences in Tiong Bahru, District 3, launched in September, saw a strong sales with 80 per cent of its 160 units launched, following a “special preview discount” that took prices from $2,000 per sq. ft. (psf) to an average of $1,900 psf. District 3 was selected as one of the top three preferred locations in the iProperty H2 2014 survey.

A large number of respondents (45 per cent) indicated lower price per square foot was more important than other incentives, such as furniture vouchers. The next most important criteria (40 per cent) were smaller unit sizes. CIMB has reported that median sizes of homes have fallen from 1,200 sq. ft. to 800 sq. ft., because “most buyers compromised on smaller units in order to keep the investment amount more affordable”.

52 per cent say HDB resale prices are not affordable, down from 53 per cent in the previous survey, and from 61 per cent before that. Only 15 per cent say HDB resale prices will continue to fall, down from 37 per cent in the previous survey. This shows pricing levels are becoming more comfortable for buyers.

Overseas Properties Popular For Investment Purposes; Malaysia #1 followed by Australia and the UK

Overseas property continues to appeal for investment, with private condominiums and serviced apartments as the preferred property type. In May 2014, the Monetary Authority of Singapore (MAS) reported that the value of overseas property investments handled by local real estate agencies increased by 43 per cent from S$1.4 billion in 2012 to S$2 billion in 2013. Malaysia accounted for slightly more than half of investments, followed by the United Kingdom and Australia.

Malaysia remains Singaporean’s top investment destination at 31 per cent. Most respondents (40 per cent) are willing to pay less than S$500,000 for overseas properties and the attractive exchange rate of the Malaysian currency against the Singapore dollar continues to draw Singaporeans. Iskandar Malaysia remains a stronghold for investors, with 58 per cent stating investment as a reason for purchase, while citing affordability (54 per cent) and proximity to Singapore (69 per cent) as positives.

Australia sees continued interest (18 per cent, down from 22 per cent) along with the United Kingdom (UK) (12 per cent up from 9 per cent). Australia appeals for its proximity, quality education and lifestyle. The UK draws interest for capital growth, yields and as a place for buyers’ children to live while they study. Recent exchange rate shifts have made investing in both locations more attractive.

Respondents also indicated a preference for seminars and exhibitions when purchasing overseas properties, with 53 per cent having purchased their overseas properties through developer shows/seminars/exhibitions in Singapore.

The APMSR is Asia’s largest consumer sentiment survey, with close to 13,000 respondents from four countries, including 2,805 in Singapore. The survey was conducted by iProperty Group from June to July 2014. For the full report, please refer to http://www.iproperty.com.sg/asia-property-sentiment-survey/download/.

Do upgraded HDB flats bring higher resale prices?

Given an older resale HDB flat in a prime location and a recently upgraded one in a less popular HDB estate, which would you choose?

HDB recently announced that they will be speeding up the Home Improvement Programme, the Neighbourhood Renewal Programme and the Selective Lift Replacement Programme. Some sellers and property agents are putting a higher price tag on flats which have be selected for such programmes. But with caveats.

HDB MUPPhoto credit: HDB

Only HDB flats whose owners have already paid for the upgrading may have an edge in the resale market. As the upgrading is usually only billed and paid for after the work is completed, some buyers may find themselves having to foot the bill for the flat or estate’s upgrading work if the seller has not already done so. Though it may seem like a significant difference, property agents are saying that it will not affect resale prices on the whole. The most it will do is slow down the price decline.

In fact, some buyers may prefer not to purchase flats which have yet been upgraded as it may bring inconveniences such as dust and noise for a significant period of time. Only flats which have been completely upgraded can command a higher selling price. But buyers who are thinking ahead may consider these older flats for the potential they hold once upgrading has been completed. With elderly-friendly facilities, newer amenities, perhaps even more room, the future could be more promising than you think.

Private property out of reach for HDB Upgraders?

If home prices are falling, most would think that the upgrade from public housing or HDB flats to the private home market should be getting easier. But it seems the opposite is true.

Prices of HDB flats and a private condominium apartment are perhaps softening at around the same rate, or that of HDB flats possibly even quicker. This creates a widening price gap between resale HDB flats and private condominiums, and HDB sellers can no longer depend on the sales proceeds of their HDB flats to balance out the price of their new private condominium.

BellewoodsECPhoto Credit: Bellewoodsec.com

Does this also mean that more HDB flat owners will now be forced to stay put and thus decrease the number of HDB flats available in the resale market? What about those who may have already purchase a private property and have a limited time period within which to sell their HDB flats? WIll they be pushed to sell at lower prices hence suffering the growing amount they need to top up?

Property experts are expecting ECs or executive condominiums to be the bridging properties between these two markets. As a hybrid between public and private housing, buyers qualify for public housing subsidies but after a 10-year period, can sell their units as private properties.  There is also the question of home sizes, will HDB upgraders be willing to settle for lesser space and a higher psf price to make the leap from HDB to private home?

Blooming Balestier

Although it has had the reputation of being a red-light district, albeit a less infamous one compared to the likes of Desker road and Geylang, its proximity to the Novena medical hub and being on the city fringe has brought the value of its properties up. With a new round of property launches and mixed-use properties such as hotel-parks like the Zhongshan Mall, Zhongshan Park, the Days and Ramada hotels, the Balestier area looks set to be the next property hot spot.

Viio BalestierWith its fair share of pre-war preservation shophouses and a quaint, historical feel, just the right amount of new condominiums, hotels and malls has breathed some new life into the area without taking away too much of its original facade. This, coupled with expatriates’ diminishing housing packages, means an increasing interest in rental and sales of properties here.

One of the latest residential projects, Viio @ Balestier, has launched its two-bedders at $1, 600 psf. At Ascent @ 456, prices hovered around $1,477 psf. Cosmo Loft, yet another freehold property in the district sold 5 units at $1, 775 psf. Prices of new launches in the area have risen over the past 2 years alone, up by almost 10 per cent.

Though property owners who had bought into the area early may not be reaping the profits yet as resale property sales and rental demand has dipped across the board, property experts are expecting things to turn around in another 7 years or so.

A little east-side enclave – St. Patrick’s road.

The Thomson-East Coast MRT line looks set to have a big effect on properties near the future MRT stations. The exclusive area of St Patrick’s road is but just one of them. With a station in Marine Parade situated nearby, properties in the area may see a big boost in home prices as the future MRT line will cut down travel time to the city.

Grand DuchessAlthough situated in the prime district 15, near good schools and many other amenities such as the 112 Katong and Parkway Parade shopping malls, the Marine Parade library, and the market and town centre just a stone’s throw away, sales has been far and few in between for a long time. But private home rental prices has held steady. With new property launches coming up, buyers may now consider these properties in all seriousness, with their potential for high rental yields.

Currently, only a few private apartment blocks stand in its vicinity, such as the St Patrick’s Residences and the Grand Duchess @ St Patrick’s. New launches planned for the months ahead include Seventy St Patrick’s and Amber Skye. Despite the harsh conditions of the TDSR framework, buyers may be drawn to the area by its exclusive and lush surroundings, the convenience of amenities and schools just streets away, and the evergreen plus point of a MRT station nearby.

New private homes – Sales lacklustre

The hungry ghost month and the lack of new property launches during that time have affected new home sales in August. Sales were down 15% and only 432 units were sold although 351 units in previously-launched developments were put up for sale.

The PanoramaMost of the sales came from suburban properties, especially from newer launches such as The Panorama in Ang Mo Kio and Coco Palms in Pasir Ris. Median selling prices at the former was $1,249 psf and $1,046 psf at the latter. Whilst Eight Riversuites launched around the same time as Coco Palms in May 2012, the Whampoa East property fared better with average prices at $1, 345 psf. Positive sales at these few developments could be due to the lower prices at its re-launch. The Panorama for example saw sales picking up once median prices were lowered during its relaunch in May. It was official launched in January this year.

But in the upcoming months, home sales may see a rebound as new launches in the pipeline bring a surge of buying interest. New launches include Marina One Residences, Highline Residences, Seventy St Patrick’s., and a few executive condominium developments such as Bellewoods and Bellewaters EC.

Property analysts are however cautious about the amount of increase in home sales, and the overall sales figures for 2014. The TDSR (total debt servicing ratio) framework and other property cooling measures such as stamp duties for additional properties, may keep the numbers suppressed. Some developers could also be holding their launches for next year in wait of any policy or market shifts.

Marina One Residences breathes new life into Marina Bay

Activity at the Marina Bay district may see a boost as new units at the Marina One Residences were launched over the weekend. With its exclusive CBD address, the 1,024-unit residential development may see a more positive uptake as property cooling measures could have kept prices at a reasonably affordable range for investors.

Those with strong holding power and are looking for properties with a high growth potential may consider the Marina One development quite seriously. With one- to four-bedder apartments available in the mixed-use development, residents will be in close proximity not only the entertainment areas, the Central Business District but also the Marina One offices and the 65,000 sq ft retail podium, The Heart. Prices are set to hover around $2, 600 psf. Over the past year, prices averaged between $1, 945 to $2,694 psf.

Marina One residential project with 1,042 new condominium units. Photo by marina-one.org.

Marina One residential project with 1,042 new condominium units. Photo by marina-one.org.

Buyers of units in the Marina Bay area, such as those at Marina Bay Residences, Marina Bay Suites and The Sail @ Marina Bay, have seen profits ranging from $60,000 to close to $1 million. Other properties in the area include V on Shenton.

With the Marina One Residences being one of the rare freehold apartments in the area, property experts are expecting its value to hold steady or increase over the years. Despite resale prices falling up to 8 per cent, and with expatriates now moving into less central areas such as the suburbs due to their housing allowance curbs, smaller units are still expected to do well as the mid- to senior-level foreign workforce may still favor the convenience and proximity of units in the CBD.

For this sector of the market, the main change which came about from the implementation of the TDSR (total debt servicing ratio) framework by the MAS (Monetary Authority of Singapore) is that buyers may now dictate how owners and developers price their units.