Week in Review - 31 July 2014
iProperty Group welcomes new major shareholder,Private property prices drop, unsold volume grows,HDB resale volume rises as prices drop, Dakota Crescent to start redevelopment work in end of 2016,Singapore's property curbs lauded,Keppel Land launches first US venture
iProperty Group welcomes new major shareholder
REA Group, Australia's leading digital advertising business specialising in property, will now own a 17.2 per cent share in iProperty Group. Mr Georg Chmiel, CEO and Managing Director of iProperty Group, said that "this substantial investment by the REA Group is a strong validation of our unique and leading market presence in Asia. REA's strong business acumen will be a major asset in advancing the iProperty Group's development, both in maintaining its current strengths and reaching new heights in Asia." REA's interim CEO, Peter Tonagh said that the acquisition provides the REA Group with a strategic stake in one of the fastest growing real estate markets in the world and complements its existing business in Hong Kong and the recent launch of MyFun.com as well as its partnership with Soufun.com in China.
Private property prices drop, unsold volume grows
A report by the Urban Redevelopment Authority (URA) last Friday revealed an overall decrease in private property prices of one per cent in Q2 2014, marking the third consecutive quarter of decline. Prices in the central region decreased the most at 1.5 per cent, followed by a 0.9 per cent drop in the suburbs, and lastly a 0.4 per cent drop in the city fringe areas. The falling prices appear to have resulted in the growth of resale transactions this quarter, from the sale of 941 units in Q1 to 1,314 units in Q2. The private residential property rental index also fell this quarter by 0.6 per cent, following a 0.7 per cent decline in Q1 2014.
The report also revealed an increasing vacancy rates in Q2 at 7.1 per cent compared to 6.6 per cent in Q1, contributing to the downward pressure on prices. Currently, the net new supply in the market stands at 4,715 completed units. A staggering 76,014 uncompleted units, excluding Executive Condominiums (ECs), are in the pipeline, and yet another 13,592 units including ECs are to be added. Colliers reported that in the remaining half of 2014, "the air of caution is expected to linger, as long as the punitive cooling measures and stringent loan curbs remain in place". Alice Tan, Director of Consultancy and Research at Knight Frank, commented to Channel NewsAsia that "if we see another price fall of five per cent and beyond for the second half of the year, this would then cause some form of concern".
HDB resale volume rises as prices drop
The Housing and Development Board (HDB) released a report on Friday as well, indicating the fall in HDB resale prices by 1.4 per cent compared to the previous quarter. The decrease in prices resulted in transaction volume increasing by 16 per cent this quarter. PropNex reported that the falling resale prices may be attributed to "government's measures to cool the public housing market such as, reducing the Mortgage Servicing Ratio (MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans, three-year wait for new PRs (Permanent Residents) before they can buy resale HDB flats, and allowing singles to buy two-room BTO flats in non-mature estates". However, Mr Mohamed Ismail, CEO at PropNex, commented that as transactions increased in Q2, the expectation would be for the "resale market to pick up in the second half as lower prices may entice more buyers to possibly upgrade to a larger flat". Currently, the HDB resale price index stands at 195.7 points - the lowest in two years.
The leasing demand for HDB flats however, registered increases in transaction volume in the first two quarters this year. In an interview with Today, Mr Chris Koh, Director of Chris International, attributed this to expatriates turning to HDB rentals because of tighter budgets. The demand for leases is also likely to rise with the government's ruling last August in which PRs have to wait three years to qualify to purchase resale HDB flats. Still, rental rates remain flat due to the increase in the supply of flats eligible for subletting. According to HDB, the number of flats approved for subletting rose by 0.8 per cent this quarter compared to the previous quarter, adding approximately 93,700 flats to the HDB rental market.
Dakota Crescent to start redevelopment work in end of 2016
HDB issued notices last Wednesday stating that 17 blocks of flats in Dakota Crescent - one of Singapore's oldest estates formed in 1958 - are to be redeveloped. The redevelopment will see an estimated 400 households located in these blocks vacate by end-2016. As a majority of the residents are renting flats in this estate, HDB will give priority to residents in rental applications in other parts of Singapore. Residents who prefer to remain in the vicinity will be able to choose from flats at Cassia Crescent, which will be completed by Q3 2016. The tenancy agreement for the new rental flats at Cassia Crescent will be for two years, starting at $26 a month for a one-room flat, and $59 for a two-room flat.
Residents intending to purchase a new flat can apply for the CPF relocation grant of $15,000 for eligible families and joint singles, or $7,500 for eligible singles. HDB also indicated that temporary rental flats will be allocated to residents who have already booked new flats that will only be ready after end-2016. A removal allowance of $1,000 will be granted for eligible tenants.
Singapore's property curbs lauded
Bloomberg released a report on Wednesday comparing housing prices between Hong Kong, London, Manhattan, Singapore and Sydney, concluding that both Singapore and Hong Kong governments have greater "control over their economies and the behaviour of their residents." This is in light of statistics showing property prices increasing over the past 12 months by 20, 18, and 15.4 per cent in London, Manhattan, and Sydney, whereas Singapore and Hong Kong managed to cool prices by 3.7 and 0.6 per cent respectively. Bloomberg attributes Singapore's success to having a government "with policy-making power over their entire geographic areas, where they are relatively free of political opposition from neighbourhood groups or borough councils that stymie directives or mitigate their effectiveness," allowing MAS to effectively implement property curbs. Meanwhile, the UK residential market is in an apprehensive state. According to Halifax's quarterly Housing Market Confidence tracker, the net balance of people who believe that the next year will be a good time to purchase a home has decreased to 5 per cent from 34 per cent in Q1 2014. In the survey, 35 per cent of respondents thought that current prices are too high, compared to 20 per cent in 2013. Concerns regarding rising interest rates were also raised by 18 per cent of the respondents, compared to 13 per cent last year. On the contrary, there is high confidence (a net balance of 25 per cent) in the market that the upcoming period is a good time to sell. According to property analyst Hometrack based in UK and Australia, signs of a rapid cool down are showing especially in London.
Keppel Land launches first US venture
Singapore's third-biggest developer, Keppel Land, announced its first investment in the US in a statement to the Singapore stock exchange. The US$70 million (S$87 million) project located on the Upper East Side in Manhattan will be developed by Macklowe Properties Inc. Mr Ang Wee Gee, CEO at Keppel Land, said in the statement that "Keppel Land will continue to invest opportunistically in key global cities with good growth potential, while remaining focused on Asia, with Singapore and China as our core markets."
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