More than nine months after the latest property cooling measures were implemented in July last year, homebuyers are still holding off on purchases. “Most people are not buying because they just don’t want to pay the additional buyer’s stamp duty (ABSD),” says Lee Nai Jia, head of research for Knight Frank Singapore.
Generally, people also feel that prices are likely to decline, says Lee. “When people think that prices are going to drop, they tend to give lowball offers.” This is contributing to a decline in sales at new launches so far this year, he says. Based on URA’s latest statistics for new private home sales last month, the take-up rate was the lowest since November 2014.
On stage from left: Boaz Boon, director (real estate advisory) of VestAsia Group; Marcus Chu, COO of ERA Realty Network; Regina Lim, head of research for Southeast Asia at JLL Singapore; and Lee Nai Jia, head of research at Knight Frank Singapore (Pictures: Albert Chua/EdgeProp Singapore)
Lee was speaking at the EdgeProp 360 event “Buying property: Is it the right time?”, organised by EdgeProp Singapore. It took place on April 11 at the Marina One auditorium. Other keynote speakers included Marcus Chu, COO of ERA Realty Network; and Regina Lim, head of research for Southeast Asia at JLL Singapore.
Avalanche of potential upgraders
While the higher ABSD and tightened LTV ratio continue to impact homebuyers’ affordability, property hunters are not putting off buying a new property. “We believe there is pent-up demand building up, and we suspect that it is likely to come back,” says Lee.
Most of this demand will come from HDB upgraders, who have contributed to more than a third of new private home buyers for the past 24 years, says Chu. “From 2019 to 2022, there will be a record number of HDB flats reaching their minimum occupation period (MOP). This means their owners will be eligible to sell the flats in the open market,” he says.
In a sign that HDB owners are selling their properties, the HDB resale volume has been increasing since 2014, from 17,318 transactions to last year’s 23,099 transactions. This segment of buyers is picking up private properties due to the divergence between the price index of private properties and that of HDB properties since 2Q2017, says Chu.
Last year, most of the flats that completed their MOP were in the Punggol, Sengkang, and Yishun areas. This year will see a large number of flats in Chua Chu Kang, Punggol, and Sengkang reach their MOP. Upgraders tend to buy a new property within 1km of their current neighbourhood, says Chu. “So if you are looking to buy a property in the suburbs, you should look at all these areas because this is where all the upgraders are buying into, and it will give a lot of support to the property price in the area.”
But buyers today are eventually settling on smaller-sized units when picking properties in the suburbs and city-fringe locations. In particular, most buyers surveyed by Knight Frank indicate that they intend to buy units of about 700 sq ft to 900 sq ft, and are willing to pay $800,000 to $1 million. This range falls within the current affordability of most homebuyers today, says Lee.
Prices fall in luxury resale market
In the ultra-luxury market, prices have recently been pushed down due to an increase in mortgagee sales of properties in Districts 9, 10, and 11. “We see more owners facing difficulties to service their loans, and this leads to more mortgagee sales,” Lee says.
Resale prices in the city-centre, or Core Central Region (CCR), have fallen since 3Q2018 compared to the suburbs and city-fringe areas, which have been largely flat. “This is because most sellers bought their properties five to eight years ago, and they are willing to take a small price cut to buy new and better products in new growth areas that show greater investment promise,” says Lee.
Pockets of opportunity overseas
For some property investors, given the state of the local property market, investing in residential properties in some overseas markets could be a more attractive alternative. That gives investors a chance to diversify their portfolio of properties, and benefit from attractive growth opportunities overseas and a stronger rental yield compared to Singapore, says JLL’s Lim.
For one, London remains a safe haven for property investment, despite difficulties surrounding Brexit negotiations, says Lim. “Property prices (in London) will start recovering once the government eventually gets through Brexit negotiations,” she says. ”Prices in prime central London, though down 15% to 20% from their last peak in 2015, will likely recover over the next five years.”
London is also projected to face a housing shortfall of close to 225,000 new homes over the next 10 years, as very strong demand from population inflow into London every year cannot be met by the current levels of supply. “This chronic under-supply will be supportive of rental demand, especially in central London,” she says.
More than 300 people gathered at the Marina One auditorium on April 11 for the EdgeProp 360 event
Other less familiar overseas opportunities include Japan and Portugal, which JLL identifies as choice investment locations for those seeking strong yields and capital growth respectively.
The Japanese government’s US$28 million rejuvenation plan for Tokyo complements its efforts to encourage foreign investment through a lower corporate tax rate in Tokyo, visa relaxations, and language support. “Japan’s property market offers one of the most tax-efficient locations globally. There is no additional stamp duty for foreigners, unlike 3% in London and 7% in Melbourne,” says Lim.
For capital gains, she suggests considering Lisbon in Portugal, which is steadily recovering from its housing crisis that started a decade ago. “Compared to other European capitals, Lisbon is one of the most affordable property markets,” she says. The number of new homes transacted in Lisbon has risen from 21,352 in 2012 to 47,067 last year, “but more supply is still needed to meet demand”.