Singapore, 17 Mar 2017 – In an unexpected move on 10th March, the government announced some changes to the set of property cooling measures which were progressively introduced from 20th February 2010 to 9th December 2013.There were four main parts to the announcement.
First, the Additional Buyer’s Stamp Duty (ABSD) and Loan to Value (LTV) limits are to remain unchanged. Singaporean buyers will need to pay ABSD if they purchase a second residential property and more while Permanent Residents and foreigners will incur ABSD from their first home purchase. The LTV ratio remains at a maximum of 80 per cent for private residential property loans.
Second, the Seller’s Stamp Duty (SSD) would be modified for buyers who purchase residential properties on or after 11th March 2017. Previously, the SSD was payable if homeowners sell off their properties within four years of purchase, at a rate of between four to 16 per cent. The new SSD has had its holding period revised downwards to three years and the duty rate has been reduced by four percentage points for every year. The new SSD rates now range from four per cent for residential properties sold in the third year to 12 per cent for those sold in the first year.
Third, the Total Debt Servicing Ratio (TDSR) was relaxed so as to allow for borrowers to monetise their properties. The Monetary Authority of Singapore will no longer apply the TDSR framework to mortgage equity loans with LTV ratios of 50 per cent and below.
Last, a new stamp duty treatment for the acquisition and disposal of equity interest in property holding entities has been introduced. Transactions involving residential properties will be subject to the same stamp duty rates regardless of whether through a direct sale of the property or through the sale of shares in the holding entity.
To the typical property buyer and investor, the tweak to the SSD is the only material one. As there is hardly any speculation in the residential property market, the tweaking of the SSD holding period and rates is a very safe and calibrated approach. It brings relief and a way out for investors and property owners who may have to dispose of the property bought in the short term without the additional burden of SSD (if sold in the 4th year), or having to pay a reduced SSD should they have to sell within the 3 year holding period. The additional flexibility in the timing of sale will certainly benefit both owner occupiers and investors.
Though there is much to cheer about, this change in SSD period and rates is only applicable to residential properties bought on and after 11 March 2017. There is no change to SSD holding period and rates for residential properties bought between 14 January 2011 and 10 March 2017.
As such, this measure is a forward looking one that allows prospective residential property purchasers to re-calibrate their calculations, expectations and holding period, should they purchase residential properties on or after 11 March 2017. While it may change slightly how investors and home-buyers look at the timeline on holding the properties, it is not expected that this tweak will have the effect of pushing up property prices in both the primary and secondary market.
In today’s market, opportunities are plentiful for home buyers. The main dampers of buying demand, the ABSD and TDSR, are still in force. Hence, developers and individual sellers will still have to price their properties realistically in order to achieve the desired sales numbers within the marketing period.
Already, before the tweak to the SSD, figures from the Urban Redevelopment Authority already show that developer sales are picking up, with 977 private residential units sold in February 2017. This figure is 2.6 times that of January. March’s sales figures are expected to be even higher.
With the new SSD in place, investors will probably favour newly launched projects, as the three year holding period coincides with the approximate construction time of the development. This allows investors the flexibility to sell off their unit upon completion of the project without incurring any levy. Also, given the weak rental market currently, buying an uncompleted project allows investors to wait out the downturn.
In addition, developers have deliberately kept the overall quantum of each unit affordable so as to remain attractive. With ample supply in the market, these investors have many choices.
Developers have just started launching their 2017 projects. The Clement Canopy, Grandeur Park Residences and Park Place Residences At PLQ have all met with positive response from investors.
For a “safer” bet, investors could look at developments which are near commercial clusters or have easy access to public transportation. These projects will generally see higher demand for housing units due to a ready tenant pool, and are usually more resilient to market shocks.
For owner occupiers, good deals are still to be found in the resale market. For instance, in February, some mass market properties were sold at an approximate 20 per cent discount to their purchase price a few years back. For the wealthy, now might be a good time to enter the luxury market. Prices have only decreased by 1.2 per cent over 2016, compared to the three per cent decrease for the overall market. In addition, there have been several cases where buyers picked up very good bargains. For example, a unit in Orchard Scotts was purchased for $3.68 million, less than half the $8.5 million the previous buyer paid for it. At Seascape, a development in Sentosa Cove, a unit was transacted for $6.2 million, while the owner paid $12.8 million for the same property in 2010.
While this time around, the tweaking of the cooling measures is a minor one, we look to the intent rather than form. It would perhaps be an indication that the government is finally prepared to loosen some of the policies now that the property market is on firmer footing. Buyers might be tempted to postpone their plans to wait for more measures to be tweaked. However, as more measures are eased, prices will start to rise. Hence, instead of trying to time their purchase, buyers would be better off buying when they need to, at a reasonable price.
Summary table of current property measures
Source: Inland Revenue Authority of Singapore, Monetary Authority of Singapore, ERA Research
[1] If property is bought on or after 11 March 2017
[2] If property is bought between 14 January 2011 and 10 March 2017
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 15 Mar 2017 – The West region of Singapore was buzzing with activities in recent months. According to the official URA developer sales statistics released yesterday, the top selling projects for February were The Clement Canopy and Parc Riviera, with 207 and 200 units sold respectively. Both are situated in the Western part of Singapore; The Clement Canopy at Clementi and Parc Riviera at West Coast.Even in the public housing sector, flats located in the West are highly coveted. In the recently concluded February 2017 Build-To-Order (BTO) sale launch, Clementi flats drew the most number of applications, despite their higher prices compared to the Tampines and Punggol flats offered in the same exercise. In addition, a resale five room flat in Clementi crossed the $1 million mark in August 2016, a rare occurrence usually reserved for units at Pinnacle @ Duxton, executive maisonettes and terraces.
In a tender which closed on 9th February, China Construction won a land parcel situated adjacent to Parc Riviera for $291.99 million ($592 per square foot of Gross Floor Area), edging out eight other developers. The winning bid was 7.63 per cent higher than the winning bid for the Parc Riviera site.
Evidently, both homebuyers and developers are optimistic about the prospects of Singapore’s West side. And they certainly have reasons to do so.
Plans are underway to develop the Jurong Lake District into the largest commercial hub outside the Central Business District. The 360 hectare area is set to be home to more than 500,000 square metres of office space, 250,000 square metres of retail space, 1,000 homes and 2,800 hotel rooms when fully developed.
The recent signing of the bilateral agreement between Singapore and Malaysia on the implementation of the High-Speed Rail project is a key development in the area. Once completed, the travelling time between Singapore and Kuala Lumpur will be reduced to a mere 90 minutes.
This provides a strong tenant base for landlords who are looking to rent out their units; and is a major reason why investors are zooming in on properties in the West. Homes in and around Singapore’s second Central Business District (CBD) is also likely to see further headroom for capital appreciation in the years to come.
Adjacent to Jurong, the Clementi area may appeal more to buyers who prefer to be living just outside the hustle and bustle of the major commercial hub; yet near enough to reap the many benefits that the Jurong Regional Centre may bring.
Clementi is already considered a mature estate. It already has in place a comprehensive suite of amenities for residents. In addition, Clementi has the added advantage of having an “educational cluster”. The National University of Singapore, Asia’s top university according to the Quacquarelli Symonds (QS) World University Rankings and Times Higher Education (THE) World University Rankings, is situated there. Nan Hua High School, NUS High School of Mathematics and Science and Anglo-Chinese School (Independent) are all nearby as well. This is definitely an added boon to families with children who are schooling.
As such, it is no surprise that the western part of Singapore is much sought after by owner occupiers and investors alike.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 10 Mar 2017 – Housing and Development Board (HDB) flats house over 80 per cent of Singapore’s population, and more often than not, are the first choice of housing for young families. A perennial question amongst this group of buyers has always been: Build-To-Order (BTO) flats versus resale flats, which is the better option?While BTO flats are cheaper, they come with a longer waiting time of around three years before buyers can move in. Conversely, resale flats are pricier, but the sale process takes a shorter time. Buyers’ choice would therefore depend heavily on their individual circumstances. However, with stabilising resale prices and increased Central Provident Fund (CPF) Housing Grants, resale flats have become an increasingly attractive option recently.
In 2016, resale HDB flat prices were almost unchanged, only decreasing by 0.1 per cent over the course of the year. Over the same period, the number of HDB resale transactions increased to 20,813 units. Amongst these transactions, there were 20 units that changed hands above the S$1 million mark. Evidently, resale flats are popular choices amongst buyers.
Is it the right time to buy a resale flat now?
There are several reasons why the number of buyers is on the rise. A key one is that prices have fallen from their peak in 2013 and have been stable since mid-2015. It is extremely unlikely that HDB resale prices will register huge drops in the near future, as buying activity is already picking up at current price levels. Given the limited downside risk, buyers can be more confident in their purchase.
Also, HDB resale transactional information is available publicly. Buyers no longer need to be afraid of getting a bad deal by “overpaying” a premium above the flat’s valuation. They can easily check against HDB’s database, which is updated on a daily basis, prior to any negotiations. Armed with such information, buyers now have a firm ground to centre discussions around.
Recently, Finance Minister Heng Swee Keat announced during Budget 2017 that the amount of grants available to eligible first-timer buyers would be increased with immediate effect. Previously, the Family Grant was S$30,000, but has since been increased to S$50,000 for first timers buying a four-room or smaller resale HDB flat and S$40,000 for those buying a five-room or larger resale flat. Together with the Additional CPF Housing Grant and Proximity Housing Grant, the total amount a first timer is eligible for is now a maximum of S$110,000. Effectively, this makes resale flats more affordable for buyers. This is expected to swing more buyers to the resale market, especially those still deciding between a BTO flat and resale flat, as they capitalise on the higher grant amounts.
Hence, the current market is a favourable one for buyers. Now would be a good time buyers to consider committing to a purchase, especially if they have been sitting on it for some time.
Should I be selling my flat now?
On the other hand, some sellers might have been reluctant to put their unit on the market as prices are lower than the peak some three and a half years ago. However, current market conditions are still favourable for sellers.
For one, HDB resale prices were on the rise from 2005 to 2013, increasing by a total of 104 per cent over 31 quarters. In comparison, the recent slide in prices was only 9.9 per cent over 14 quarters. Most sellers would still be making a healthy profit even if they were to sell today, especially if their purchase was a BTO flat.
For sellers who are looking to upgrade to a private residence, now is an opportune time to make the switch. Private residential prices have been on a decline; and there is abundant supply in the market. Upgraders would be spoilt for choice as developers continue to keep prices attractive in order to woo more buyers.
Of course, there are concerns among sellers that prices would increase after they have sold their unit. However, this is not very likely to happen. As National Development Minister Lawrence Wong said, the government expects HDB resale prices to remain stable due to the healthy supply of resale flats.
In particular, the Mortgage Servicing Ratio (MSR) compels buyers to keep their monthly mortgage repayments to 30 per cent of their household income, thereby capping the maximum loan amount available to them. Any price increase will therefore be tied to income growth. Given that Singapore’s economic growth is forecasted to be in the region of one to three per cent in 2017, any price increase would be a gradual process, instead of a sudden spike.
Also, with the increased grants, there will be more buyers looking to purchase resale flats. Selling may likely be an easier and faster process now. However, sellers should be cautioned against rashly increasing their asking prices for their flats in view of the higher grant amounts, especially if the change is not backed by transaction data. HDB flats are very similar products and buyers can easily switch to another seller who did not raise prices.
No perfect time
Moving forward, we are not expecting huge changes to the HDB resale market. Transactions will probably receive a boost from the higher grant amounts. We are expecting a 10 per cent increase in resale volume this year over 2016, in the region of 22,000 to 23,000 units. Price wise, we might be seeing a modest uptick this year, in the range of 0.1 per cent to 0.5 per cent for the full year.
Unlike in the private residential market, where emphasis is placed on timing for investment purposes, the HDB resale market is much less speculative. As such, our advice to any prospective buyer and seller is to focus on need instead. There is simply no perfect or best timing to enter or exit the HDB resale market.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
ERA Realty Network Celebrates its 35th Anniversary by Hosting
Singapore’s Largest International Property Agent Business Conference
The event will be graced by Minister for Social and Family Development Mr Tan Chuan-Jin
SINGAPORE, 28 February 2017 – ERA Realty Network (ERA) is hosting the 2017 edition of Asia Pacific Business Conference today at Marina Bay Sands Grand Ballroom. Minister for Social and Family Development Mr Tan Chuan-Jin will be in attendance and he is slated to engage participants in a 30-minute dialogue session. The conference will also celebrate the stellar achievements and remarkable performances of ERA’s top 300 real estate agents.
In 2016, ERA closed up to 53,000 transactions, handling properties worth a staggering S$19 billion. “Compared with 2015’s performance, ERA has successfully gained a higher market share in some segments despite the bearish market conditions. We closed 6,787 more transactions last year, and our 15.6 percent growth rate is two times higher than the market’s 6.7 percent,” says Jack Chua, Chief Executive Officer of ERA.
ERA is poised to continue its success this year. It has secured new marketing appointments, including The Clement Canopy, Grandeur Park Residences, iNz Residence, Park Place Residences at Paya Lebar Quarter, Seaside Residences, Martin Modern and more.
A stalwart in the industry
The conference is held in conjunction with ERA’s 35th anniversary. ERA’s beginnings were humble: It occupied a tiny 500-square-foot office at Shaw Centre, and had only three agents. The agency has since grown to become a household name in Singapore. Per the latest Council for Estate Agencies’ public registry, ERA is the largest real estate agency in Singapore. Its 6100-strong workforce has served over 400,000 customers, helping them find their dream homes and offices. ERA’s loyal customer base attests to the trust and confidence Singaporeans have in its agents.
ERA’s success is anchored on its ability to keep pace with the times. It believes technology, along with traits such as compassion and empathy, is what will result in a smooth customer experience. Over the years, ERA has introduced and implemented many industry-first initiatives. One such initiative is 24/7 PropWatch, a property watch, search and match service that caters to the demands of tech-savvy consumers. Apart from discovering recent property transactions, homes for sale/rent, and new project launches in their neighbourhoods, consumers can check the number of potential buyers/tenants for their properties and request for a formal valuation report issued by a private-licensed valuer. Speeding up the home-finding journey, this feature is accessible to all members of the public free of charge via ERA’s website.
ERA has also made improvements to its i-ERA mobile app, a nifty tool for its agents. A salient feature is the i-ERA map, which agents can zoom in on to reveal ERA listings and transactions within a selected radius.
Beyond the hardware, ERA also focuses on the heartware. It has in place a robust sales and management career roadmap to enable employees to achieve personal and career breakthroughs. ERA’s scholarship initiative supports and encourages its agents to seek higher education in local institutions. In so doing, it grooms the next generation of competent performers who can contribute and collectively raise the profile of the industry.
ERA strongly believes in extending a helping hand to the community and works extensively with charity organisations such as Community Chest and The Singapore Association For The Deaf (SADeaf). The company also organised games and the distribution of goodie bags during Christmas and Chinese Lunar New Year; bringing the festive cheers to Lions Home for the Elders@Bedok and Canossaville Children and Community Services respectively. Furthermore, ERA aims to rehome 35 dogs with SOSD this year. Mr. Chua explained that these initiatives reignite the spirit of giving. “It also reminds us that there is a lot more from us to give. We believe in inculcating a sense of respect and kindness in every team mate as these values will be reflected in our service and ultimately leads to customer satisfaction.”
Singapore, 11 Jan 2017 – Looking back, 2016 did not turn out to be a bad year for the private residential property market, as some had feared. Transaction volume improved, with developers already selling more units in the first 11 months of the year than the entire 2015. In the resale market, buyers have been active as well, with volume transacted in the first 3 quarters being 27% higher than the corresponding period in 2015.While buyers have been picking up properties all over the island, some locations saw more activity than others. We observe that areas with new projects launches tend to be hotspots. In particular, the three most popular locations with buyers were Districts 19, 9 and 18 in descending order. All of them are home to at least one new launch in 2016, Forest Woods and Stars of Kovan in District 19, Cairnhill Nine in District 9 and The Alps Residences in District 18.
New launches have typically been the focal point of buying activity. Often, newly launched projects will turn out to be the best sellers in the month which they are launched. This is largely due to the intense marketing activities which start a few weeks prior to their launch. This results in increased buyer attention in the locality of the new project. Surrounding projects may get a boost from the heightened buyer interest in the area as well. For example, when The Alps Residences was launched in October this year, sales at neighbouring The Santorini was doubled in the same month.
As such, we expect transaction activity in the coming year to be driven by new launches. Hotspots will likely be the areas where new condominium projects are due to be launched.
Attention will probably on the eastern region of Singapore where three new projects are expected to be launched in the first half of 2017, Lendlease’s Park Place Residences at Paya Lebar, CEL Development’s Grandeur Park Residences at Tanah Merah and Frasers Centrepoint’s Seaside Residences at Siglap. Other key development plans in the East will likely add to the hype. For instance, Changi Airport is on track for its expansion plans, with Terminal 4 expected to be operational in 2017, while Terminal 5 is in the works, and is expected to be larger than Terminals 1, 2 and 3 combined. The additional employment generated is expected to fuel demand for homes in the eastern region of Singapore.
In the West, several condominium projects are also gearing up for launch in 2017. UOL’s The Clement Canopy at Clementi will probably be launched in the first half of 2017 while Qingjian Realty’s mixed development at Bukit Batok is expected to be launched in the latter half of the year. Together with the launch of Parc Riviera in late 2016, these projects will collectively generate interest and awareness for the area, which has not seen any new launch in a while.
In addition, with the recent signing of the bilateral agreement between Singapore and Malaysia on the implementation of the High-Speed Rail project, the western side of Singapore is expected to gain much appeal. Also, the development of the Jurong Lake District has served as a major attraction to buyers as it is envisioned to be the main commercial centre of the west.
Besides these new property hotspots, some areas have been continually seeing strong demand from buyers. These places are usually located near major commercial clusters, as the demand for employment helps drive demand for housing. To reduce travelling time, most people would choose to live near their workplace.
Districts 9 and 10 have been very popular among the well-heeled as they are the most prestigious residential areas in Singapore, and only a short drive away from the Central Business District. The multiple luxury developments also mean that wealthy buyers will be able to find one which suits their needs. Ardmore Three, Cairnhill Nine, OUE Twin Peaks and Sophia Hills were some of the projects which were popular with buyers in 2016.
The city fringe, which offers a reasonable trade-off between the distance away from the Central Business District and price, has been seeing a steady stream of buyers. Sale launches in city fringe areas have performed well, with Sturdee Residences, GEM Residences, The Poiz Residences and Thomson Impressions being favourably received by buyers.
Residential developments near secondary employment clusters have also been on buyers’ radar. For example, buyers have been active near the North Coast Innovation Corridor, which stretches from Woodlands to Seletar and Punggol. Major commercial centres along the Corridor include Seletar Aerospace Park and Woodlands Regional Centre. Seletar Aerospace Park is home to more than 60 aerospace companies, and more than 10,000 new jobs are expected to be created. Woodlands is envisioned to be developed as the next regional centre after the Jurong Lake District and will be home to an estimated 100,000 new jobs. Savvy buyers have been picking up residential units in housing estates surrounding these areas. Examples include The Wisteria and Symphony Suites in Yishun, Kingsford Waterbay in Hougang, and Riverbank @ Fernvale at Sengkang.
While we have attempted to list some of the property hotspots in 2017, the places are by no means exhaustive. If buyers prefer to take a longer term perspective, they could also consider the up and coming new towns Bidadari and Tengah. Bidadari is being actively developed into a residential town, with the government scheduled to release two plots of land intended for private housing and a retail mall along with thousands of units of public housing. Meanwhile, Tengah will be the latest residential town to be planned after Punggol. Envisioned as a “Forest Town”, it will incorporate lots of greenery and new technology, including smart homes and smart transportation such as self-driving cars.
With the good variety of new projects coming on stream this year; together with the proven popularity of selected current projects, 2017 certainly looks set to be another exciting year for home buyers!
Commercial properties: An alternative investment to consider
For investors who wish to invest in another asset class, commercial properties are a viable alternative to residential properties.
However, the purchase of commercial properties is subject to a slightly different set of regulations from residential properties and investors, before making any purchases, should carefully consider their investment objectives and weigh each available option.
Investors looking to purchase a commercial property should be aware of the following:
• Buying of commercial properties is subject to Goods and Service Tax (GST)
Individuals buying a commercial property will be required to pay the 7% GST on the purchase price. However, an investor who owns a company and purchases a commercial property through it may apply to claim back the GST amount, subject to the guidelines set by the Inland Revenue Authority of Singapore (IRAS).
• The purchase of commercial properties does not attract the Additional Buyer’s Stamp Duty (ABSD)
Any individual who purchases a second home onwards is required to pay at least a 7% ABSD on the purchase price. However, there is no such regulation for commercial properties.
• Investors can sell their commercial properties at any time
Any home owner selling their residential property within four years will be required to pay the Seller’s Stamp Duty (SSD). Depending on the holding period, the SSD payable can range from 4% to 16%. Buyers of commercial properties are not subject to this and can choose to sell off their properties and exit the market at any time.
Real estate remains a popular investment choice, even in this time where economic conditions are lacklustre. Historically, in land scarce Singapore, many property investors have seen capital gains over time. However, property investment is not risk free, as the property market is dynamic and is affected by many factors that have impact on supply, demand and therefore price. Investors have to balance their risk appetite with their objectives when selecting the appropriate property class.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 4 Jan 2017 – Real estate salespersons from ERA Realty Network (ERA) gathered at Lions Home for the Elders Bedok last Tuesday to bring joy and warmth to the elderly people who have had a hand in nation building when they were younger.During the visit, ERA salespersons and their family members sang some of the greatest oldies along with the elders and played bingo with them. They also specially prepared goodie bags containing care products such as Milo 3 in 1, organic oat drinks, Prickly Heat Powder, thermal mug and more for the elders.
All these joyous moments are captured and framed as a gift to the elders to keep. The photographs serve as a memento for them; a daily reminder to always stay happy, and these are the true happiness that money can’t buy.
ERA Singapore is committed to giving back to Singapore in meaningful ways. The salespersons are glad to be able to help brighten the lives of the elderly people by spending quality time and organising fun entertainments for them.
“Through our initiatives, we want to inspire more people to make meaningful connection with the less privileged. It is also a great opportunity to show our pioneer generation our appreciation towards what they have done for us, and will always be there for them,” said Mr Jack Chua, Chief Executive Office of ERA.
This is part of ERA’s ongoing corporate social responsibility efforts. ERA works closely with many charitable organisations such as Community Chest, Singapore Association for the Deaf and Canossaville Children’s Home. The company has been awarded the I Love You Ruby Award and named Ambassador for the Deaf since 2010 by The Singapore Association for The Deaf.
Singapore, 16 Dec 2016 – The Monetary Authority of Singapore (MAS) released its latest financial stability review last month. In it, it noted that demand for housing remains strong. There has been an increase in the take up of both new homes and resale homes. According to data from the Urban Redevelopment Authority, in the first three quarters of 2016, a total of 18,330 new and resale homes were sold. This is 14.6 per cent higher than sales in the corresponding period in 2015.Many of these purchases seem to be investment driven. While there are no official statistics on the number of people who own multiple properties in Singapore, recent new project launches have been driven by the sales of one and two bedroom units. These are unlikely to be purchased due to household formation, which is the “traditional” source of housing demand. Rather, it is more probable that these private housing units were bought as secondary homes.
In the past, most people were content with just one home, and buying a new one was purely out of necessity – being a home to live in. However, the current trend appears to be that one property is no longer enough. Perhaps this could be due to more people becoming increasingly investment savvy; and property has emerged as a popular choice for investors looking to diversify their assets.
While many are capitalising on the current low interest rates environment to own a home, this situation may not last forever. Interest rates may inevitably rise, with the United States widely expected to adjust rates upwards later this month. As such, property owners, especially those who bought for investment purposes and are looking to rent out their units, should bear in mind certain pertinent points before committing to a purchase.
Firstly, demand for rental homes come predominantly from foreigners. For those who bought small units in private residential projects, they would be looking to rent it to foreigners who are working here in Singapore alone. It is likely that foreigners who are able to afford private residential rents would be in Singapore on the Employment Pass. Currently, growth in this portion of foreign workforce has been quite measured, with there being only 1,700 new passes issued in the first half of the year. The Ministry of Manpower has also raised the income criterion of Employment Pass applicants to $3,600 from $3,300. Hence, it is imperative that buyers who bought with the intention of letting out the units be aware that there may be increasingly less new rental demand coming from foreign manpower going forward; as our economy adjusts to become less reliant on them.
Next, owners need to know what is it that this group of expatriates are looking out for in a rental home. As far as real estate goes, location, location, location has long been the guiding principle. Tenants are no different. They will be looking out for a location which fulfils their needs. From our observations, most tenants tend to look out for transport connectivity and amenities.
Most foreigners who rent small units are here in Singapore alone for work. Thus, in looking for a suitable place, they will pick one which has ease of transport. As such, property investors would do well to purchase a unit in a project which has at least one of the below locational attributes:
1. In the city fringe, so that tenants have relatively short commuting times to the city centre for work and leisure
2. Near a commercial cluster, as expatriates working in these commercial areas will be looking to rent a place nearby
3. Near public transport nodes, so as to minimise travelling times
Amenities wise, having them within a short distance away greatly enhances the attractiveness of a rental property. For the tenants who are staying alone, they would appreciate the convenience of having retail establishments around. For instance, shopping malls or eating establishments nearby provides them with the convenience of dining out or buying food home. Having a supermarket around is also a plus point as tenants can buy household items easily.
While going by these general guidelines makes it easier to spot a good investment property, we must still urge buyers to be cautious. The purchase of a property involves a large sum of money at the point of purchase and many more payments spread over years and healthy finances are important for this purpose. However, as MAS noted, most households are still resilient to economic shocks and their risk profile has improved. Repayment risks remain only for a small group of borrowers. Hence, as long as property owners choose attractive properties to invest in, risks would be minimised.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 2 Dec 2016 – For the past few years, property prices have been falling. Private property prices have decreased by 10.8% over 12 consecutive quarters. Prices of public housing fared slightly better, with a 9.8% decline. As such, many people would wonder if it is a good time to buy into property now.When buying property, many would try to time the market by buying low and selling high. However, such behavior is highly speculative in nature. Instead of being overly concerned about the timing of purchase, buyers should instead adopt a longer term perspective. Due to the cyclical nature of Singapore’s property market, taking a longer investment horizon means that the timing of purchase does not matter very much at all.
Instead, buyers should ensure that they have enough holding power so that they will not be forced to sell their property. In other words, they have to be prepared for unexpected situations. These could come in the form of interest rate hikes, difficulties in achieving the desired level of rent or in an extreme case, loss of employment. All these could lead to difficulties in fulfilling any mortgage obligations with the bank.
To this end, the Singapore government has come up with some measures to ensure that property buyers are not taking on too much debt. Monthly mortgage payments (inclusive of other monthly debts) are capped at 60% of income (Total Debt Servicing Ratio or TDSR). For those purchasing public housing or executive condominiums, there is a mortgage servicing to income ratio of 30%. Banks must use a hypothetical 3.5% interest rate when computing the maximum loan a buyer can borrow. These measures create an adequate capital buffer for buyers, ensuring that they will not have to be forced into selling their property, but can do so at a time of their choosing.
Hence, buyers should not be looking to “flip” their property and expect to make profits within a short time as it is risky. By talking a longer investment horizon, the risks are minimized, and buyers can then sell at a price which they are comfortable with. As such, there never is a “right” time to buy a property.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 25 Nov 2016 – Recently released figures by the Urban Redevelopment Authority (URA) showed that 1,252 private residential homes were sold by developers in the month of October. This figure is a 15 month high. In the first 10 months of 2016, developers have already sold 6,908 units. The figure for the whole year is expected to exceed the 7,440 units in 2015. In addition, buyers picked up another 6,337 units in the resale market in the first three quarters of the year. This is a significant 24.7 per cent higher than the 5,081 units sold in the same period last year.Evidently, more buyers are entering the market and committing to a property purchase. Why is this so?
Much has been said about the housing situation in Singapore. Vacancy rates reached 8.9 per cent in Q2 2016, a 16 year high, before decreasing slightly to 8.7 per cent in Q3 2016. The number of unsold private residential units with sale licences as of Q3 2016 remained elevated at 15,575. These indicators point to an oversupply situation, which could be bad for the property market.
However, thinking from the shoes of a buyer, this might possibly be a good time to enter the market.
Currently, there are many new projects in the market, providing buyers with a wide range of locations and products to choose from. In order to entice buyers, developers have been pricing their units very attractively. Even in the resale market, individual sellers have also priced their units reasonably so as to avoid leaving their property on the market for an overly long period of time.
Lately, property investors have been driving up the sales volume at project launches. One and two bedroom units make up the majority of units sold. For example, in the case of Parc Riviera and Queens Peak, both launched on the first weekend of November, 82 per cent and 90 per cent were units with one or two bedrooms.
In this period of economic uncertainty, property stands out as an investment option. Investment properties are not solely an income generating asset; owners can also occupy the properties for their own use. While there have been many reports about the difficult rental market now, buyers of properties under construction will only have to worry about that in three to four years’ time, when the property is completed. Market conditions could have improved by then.
Ups and downs are part and parcel of Singapore’s property market. While it is true that the market is currently experiencing its longest down streak of 12 consecutive quarters, if we were to adopt a longer term perspective of 10 to 15 years, the fundamentals of Singapore’s economy are quite sound.
Despite the spate of negative economic news this year, Singapore remains the second most competitive economy in the world, according to The World Economic Forum Global Competitiveness Report, for the sixth year in a row. Singapore’s strong showing is attributed to its strong infrastructure, higher education and training, and goods market efficiency.
According to a recent survey of Asia Pacific business leaders by PricewaterhouseCoopers also found that Singapore was one of their preferred destinations, alongside countries such as the United States, China and Indonesia.
In the local real estate market, several large quantum deals have been concluded with foreign entities, including the $3.4 billion sale of Asia Square Tower 1 to Qatar’s sovereign wealth fund. This makes it the largest ever single tower real estate deal in the Asia Pacific region.
Singapore, being a land scarce gateway city, is evidently still a major attraction to investors. Hence, many investors have flocked to the property market to park their money.
Consequently, some concerns have arisen over whether there would be an issue where many would be under pressure to sell when interest rates increase. However, given that banks are required to adopt a stringent set of loan approval rules, this is generally unlikely to happen.
For investors purchasing a second residential property, they are only allowed a loan quantum of 50 per cent of the property’s purchase price, resulting in a much lower loan amount than a first time home purchaser. The Total Debt Servicing Ratio (TDSR) of 60 per cent also has to be taken into consideration. Lastly, when evaluating the loan amount, an interest rate of 3.5 per cent is used; and this is much higher than current actual interest rates charged by the lending banks. As a result, these requirements provide a rather sizable capital buffer and investors should not be under pressure to sell.
So, if you are able to qualify for a second property loan and have sufficient capital to afford a second property, why not take the opportunity to invest in one?
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research
Singapore, 10 Nov 2016 – Due to the immobile nature of real estate, location, location, location, has always been one of the golden rules of buying properties. Arguably, location matters to many Singaporeans. Areas located nearer to the city centre command a higher price because of the savings in travelling time. Thus, Build To Order (BTO) flats offered in mature estates often see high application rates despite their higher prices. Buyers are also willing to fork out a hefty premium for resale flats at The Pinnacle @ Duxton, which is located in the city area.However, in Singapore, being near to the city centre might not be so important after all. Here are some reasons why:
1. Every housing estate is designed to be self sufficient
Each housing estate, regardless of its location, is planned such that residents can fulfil all their everyday needs without having to travel long distances. Amenities such as supermarkets, F&B outlets, schools and parks have been integrated into all towns, thereby providing residents with almost everything they need. Hence it does not matter if one lives in central areas or not.
2. Decentralisation is here to stay
Since the 1990s, the government has been adopting a decentralisation strategy, where jobs are being shifted to secondary commercial hubs outside the city centre. Located in the east, west, north and north east regions, these regional centres aim to bring workplaces into the suburbs and nearer to homes, thereby creating a live, work and play environment.
3. A more comprehensive public transport network
Commuting around the island is set to become easier. According to the Land Transport Master Plan 2013, it was mentioned that the rail network will be doubled by 2020 and by 2030, eight in 10 homes will be within a 10 minute walk of a train station. As Singapore becomes more connected, inter town travelling will become less of a chore and therefore, the location of a home will become less important.
Hence, by purchasing a home in a less prime location, savings could be achieved without compromising too much on convenience. The savings can then be used to spruce up the house, which has a few benefits:
• More efficient usage of space
• Easier to sell/let out
• Possibility of transacting at a higher price/rent than properties which are not renovated
Hence, instead of being overly concerned about a property’s location, it would perhaps be a better idea to focus on the interior of the house. After all, there is no bad location in Singapore.
By Eugene Lim, Key Executive Officer and Seah Yao Hui, Assistant Manager, Research