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reporter2
06-01-17, 18:26
http://www.todayonline.com/business/two-tier-housing-market-likely-year

Business

Two-tier housing market likely this year

By Ku Swee Yong

Published: 4:00 AM, January 6, 2017


Our forecast for housing prices to drop by 8 to 10 per cent in 2016 was off the mark. The Urban Redevelopment Authority’s (URA) private residential index turned out to be surprisingly resilient, dropping a mere 3 per cent for the whole of last year, while the Housing and Development Board’s (HDB) resale price index ended the year almost where it began.

While it appears that policy measures have managed to stabilise prices in the residential market, a deeper look at the numbers reveals that the overall B-grade result was achieved through A grades in a couple of subjects and B, C and D grades in other subjects. Examining the performance of the various regions and sub-types such as landed housing, we might conclude that 2016 was a directionless market. Several factors point to a continued search for direction in 2017.

ON ONE HAND, UPWARD PRESSURE ON PRICE INDICES

More than a dozen HDB flats transacted above the S$1 million mark in 2016 and many more set new area records above S$900,000 to help hold up the overall HDB resale index.

Developers also contributed to the upward shift in the private residential price index. A few projects that have gone quiet for more than a year started selling briskly when developers offered discounts and attractive payment schemes. Even with the discounts, the prices achieved for these relatively new apartments were higher than the average prices in their respective neighbourhoods, nudging the index upwards.

The Monetary Authority of Singapore and the Inland Revenue Authority have, as of January 1, implemented the Common Reporting Standard (CRS) with 46 countries, and the first automatic exchange of information will commence in 2018. This is an agreement among participating countries to share information about residents’ gross financial assets, a move to deter and detect tax evasion through the use of offshore bank accounts.

The key element in the exchange is the disclosure of the value of the bank accounts of high net worth individuals.

Some foreign high-net-worth individuals might not feel comfortable that their accounts are being disclosed to their home country’s taxman. We might therefore expect some of them to trade their financial assets for real assets such as luxury properties.

It seems that there is plenty of liquidity among high-net-worth investors and prudent owner-occupiers who did not place property bets in the frothy market three years ago. And perhaps these reasons contributed to the Government’s reluctance to relax the cooling measures.

On THE OTHER HAND, MORE DOWNWARD PRESSURE

Investors with little holding power have sold their properties with losses or defaulted on their mortgages. According to research by The Edge Property, the proportion of unprofitable deals rose from 10 per cent (447 of 4,687) in 2015 to 17 per cent (873 of 5,264) in 2016. These figures refer to resale transactions of condominiums and apartments where the previous caveats can be traced.

Defaults on residential mortgages increased from 2014 through to 2016 and are likely to rise further as retrenchments and vacancies increase, rentals decline and interest rates rise in 2017.

Developers avoiding penalties imposed for not selling out their new projects will probably slash prices for bulk investment deals, and offer attractive payment schemes and stamp duty absorption to clear the remaining units.

Adding to the pressure is an increasing supply in the second-hand market. An increasing number of families who treat HDB flats as investments are eligible to sell their flats after the five-year Minimum Occupation Period (MOP). Thus, resale values have declined, especially those in less desirable locations, such as Choa Chu Kang, Jurong West, Punggol, Sengkang and Woodlands.

The situation is similar for executive condominiums (EC), which have an MOP of five years, and for private residences, which are “discharged” from the four-year Seller’s Stamp Duty liability. Due to the massive ramp-up in residential developments after the Lehman crisis, the supply of resale HDB flats, ECs and private homes is expected to increase in the next few years, putting more downward pressure on prices.

This is good news for buyers who are looking for good-value picks. Property agents may also look forward to potentially higher transaction volumes.

A TWO-TIER MARKET LOOMS

Barring seismic shifts in global political and economic events, what might happen when the upward pressure of excess liquidity combines with the potential increase in the number of resale residences? Last year presented us with a hint: A two-tier market will develop in both the public and the private housing segments.

We expect the massive supply and weak rental demand in the outskirts of Singapore to bring prices down. Meanwhile, cash-rich investors looking for gems in the market will focus on centrally-located properties. We believe these trends will continue for the next three years and price gaps will widen.

As the market waits out the supply glut to be absorbed through population growth, investors might do well to appoint a property agent to help sift out the well-built, undervalued, freehold private residences in Districts 9 and 10. When the next economic boom hits Singapore, the value of these properties will jump. Bargaining power is enhanced with scarcity.

ABOUT THE AUTHORS: Ku Swee Yong is a licensed real estate agent and the CEO of International Property Advisor Pte Ltd. Justina Joseph Steven is a research intern at the same company.

http://www.todayonline.com/sites/default/files/styles/photo_gallery_image/public/photos/43_images/28430359.JPG?itok=_hWZJN-v

http://www.todayonline.com/sites/default/files/styles/photo_gallery_image/public/photos/43_images/28430358.JPG?itok=NNygLCgr

teddybear
07-01-17, 17:44
These comments are interesting indeed, and gel with my perception that OCR will continue to drop significantly and the price difference between OCR and CCR widening:

"We expect the massive supply and weak rental demand in the outskirts of Singapore to bring prices down. Meanwhile, cash-rich investors looking for gems in the market will focus on centrally-located properties. We believe these trends will continue for the next three years and price gaps will widen.

As the market waits out the supply glut to be absorbed through population growth, investors might do well to appoint a property agent to help sift out the well-built, undervalued, freehold private residences in Districts 9 and 10. When the next economic boom hits Singapore, the value of these properties will jump. Bargaining power is enhanced with scarcity."



http://www.todayonline.com/business/two-tier-housing-market-likely-year

Business

Two-tier housing market likely this year

By Ku Swee Yong

Published: 4:00 AM, January 6, 2017


Our forecast for housing prices to drop by 8 to 10 per cent in 2016 was off the mark. The Urban Redevelopment Authority’s (URA) private residential index turned out to be surprisingly resilient, dropping a mere 3 per cent for the whole of last year, while the Housing and Development Board’s (HDB) resale price index ended the year almost where it began.

While it appears that policy measures have managed to stabilise prices in the residential market, a deeper look at the numbers reveals that the overall B-grade result was achieved through A grades in a couple of subjects and B, C and D grades in other subjects. Examining the performance of the various regions and sub-types such as landed housing, we might conclude that 2016 was a directionless market. Several factors point to a continued search for direction in 2017.

ON ONE HAND, UPWARD PRESSURE ON PRICE INDICES

More than a dozen HDB flats transacted above the S$1 million mark in 2016 and many more set new area records above S$900,000 to help hold up the overall HDB resale index.

Developers also contributed to the upward shift in the private residential price index. A few projects that have gone quiet for more than a year started selling briskly when developers offered discounts and attractive payment schemes. Even with the discounts, the prices achieved for these relatively new apartments were higher than the average prices in their respective neighbourhoods, nudging the index upwards.

The Monetary Authority of Singapore and the Inland Revenue Authority have, as of January 1, implemented the Common Reporting Standard (CRS) with 46 countries, and the first automatic exchange of information will commence in 2018. This is an agreement among participating countries to share information about residents’ gross financial assets, a move to deter and detect tax evasion through the use of offshore bank accounts.

The key element in the exchange is the disclosure of the value of the bank accounts of high net worth individuals.

Some foreign high-net-worth individuals might not feel comfortable that their accounts are being disclosed to their home country’s taxman. We might therefore expect some of them to trade their financial assets for real assets such as luxury properties.

It seems that there is plenty of liquidity among high-net-worth investors and prudent owner-occupiers who did not place property bets in the frothy market three years ago. And perhaps these reasons contributed to the Government’s reluctance to relax the cooling measures.

On THE OTHER HAND, MORE DOWNWARD PRESSURE

Investors with little holding power have sold their properties with losses or defaulted on their mortgages. According to research by The Edge Property, the proportion of unprofitable deals rose from 10 per cent (447 of 4,687) in 2015 to 17 per cent (873 of 5,264) in 2016. These figures refer to resale transactions of condominiums and apartments where the previous caveats can be traced.

Defaults on residential mortgages increased from 2014 through to 2016 and are likely to rise further as retrenchments and vacancies increase, rentals decline and interest rates rise in 2017.

Developers avoiding penalties imposed for not selling out their new projects will probably slash prices for bulk investment deals, and offer attractive payment schemes and stamp duty absorption to clear the remaining units.

Adding to the pressure is an increasing supply in the second-hand market. An increasing number of families who treat HDB flats as investments are eligible to sell their flats after the five-year Minimum Occupation Period (MOP). Thus, resale values have declined, especially those in less desirable locations, such as Choa Chu Kang, Jurong West, Punggol, Sengkang and Woodlands.

The situation is similar for executive condominiums (EC), which have an MOP of five years, and for private residences, which are “discharged” from the four-year Seller’s Stamp Duty liability. Due to the massive ramp-up in residential developments after the Lehman crisis, the supply of resale HDB flats, ECs and private homes is expected to increase in the next few years, putting more downward pressure on prices.

This is good news for buyers who are looking for good-value picks. Property agents may also look forward to potentially higher transaction volumes.

A TWO-TIER MARKET LOOMS

Barring seismic shifts in global political and economic events, what might happen when the upward pressure of excess liquidity combines with the potential increase in the number of resale residences? Last year presented us with a hint: A two-tier market will develop in both the public and the private housing segments.

We expect the massive supply and weak rental demand in the outskirts of Singapore to bring prices down. Meanwhile, cash-rich investors looking for gems in the market will focus on centrally-located properties. We believe these trends will continue for the next three years and price gaps will widen.

As the market waits out the supply glut to be absorbed through population growth, investors might do well to appoint a property agent to help sift out the well-built, undervalued, freehold private residences in Districts 9 and 10. When the next economic boom hits Singapore, the value of these properties will jump. Bargaining power is enhanced with scarcity.

ABOUT THE AUTHORS: Ku Swee Yong is a licensed real estate agent and the CEO of International Property Advisor Pte Ltd. Justina Joseph Steven is a research intern at the same company.

http://www.todayonline.com/sites/default/files/styles/photo_gallery_image/public/photos/43_images/28430359.JPG?itok=_hWZJN-v

http://www.todayonline.com/sites/default/files/styles/photo_gallery_image/public/photos/43_images/28430358.JPG?itok=NNygLCgr

bargain hunter
07-01-17, 19:07
i know of a unit in CCR which was tenanted at around 8k and terminated after 7 months of tenancy in mid december. the tenant COMPENSATED the remaining 5 months till mid May this year due to the contractual obligation to fulfill the minimum 12 months before invoking the diplomatic clause. after 2 weeks, a tenant has been secured at the same rate of 8k starting in feb (1 1/2 months vacancy) so landlord is effectively earning double rent for 3 months plus.

on the other hand, I know of an OCR relatively new (about 4 years since TOP) 2 bedder, tenanted for 3.5k previously. re-tenanted last year to a new tenant at 2.3k.

i thought people said big units in CCR hard to rent out? 8k is "too ex"? do u think OCR tenants will compensate you 5 months or just pack their bags and go?


These comments are interesting indeed, and gel with my perception that OCR will continue to drop significantly and the price difference between OCR and CCR widening:

"We expect the massive supply and weak rental demand in the outskirts of Singapore to bring prices down. Meanwhile, cash-rich investors looking for gems in the market will focus on centrally-located properties. We believe these trends will continue for the next three years and price gaps will widen.

As the market waits out the supply glut to be absorbed through population growth, investors might do well to appoint a property agent to help sift out the well-built, undervalued, freehold private residences in Districts 9 and 10. When the next economic boom hits Singapore, the value of these properties will jump. Bargaining power is enhanced with scarcity."

Kelonguni
07-01-17, 22:54
i know of a unit in CCR which was tenanted at around 8k and terminated after 7 months of tenancy in mid december. the tenant COMPENSATED the remaining 5 months till mid May this year due to the contractual obligation to fulfill the minimum 12 months before invoking the diplomatic clause. after 2 weeks, a tenant has been secured at the same rate of 8k starting in feb (1 1/2 months vacancy) so landlord is effectively earning double rent for 3 months plus.

on the other hand, I know of an OCR relatively new (about 4 years since TOP) 2 bedder, tenanted for 3.5k previously. re-tenanted last year to a new tenant at 2.3k.

i thought people said big units in CCR hard to rent out? 8k is "too ex"? do u think OCR tenants will compensate you 5 months or just pack their bags and go?

You are the CCR owner right?

For each his strategy I guess. You are generally right about tenant profiles though much still depends on luck. OCR tends to compete with HDB tenants but slightly better occupational profiles.

bargain hunter
08-01-17, 10:07
not me lah. relative's. i do agree that luck plays a part. :)


You are the CCR owner right?

For each his strategy I guess. You are generally right about tenant profiles though much still depends on luck. OCR tends to compete with HDB tenants but slightly better occupational profiles.

teddybear
08-01-17, 11:26
Well, you are right to say that:
OCR tends to compete with HDB tenants but slightly better occupational profiles.

But why you don't want to say and admit that CCR tenants will always be MUCH MUCH BETTER than OCR tenants?

And if RCR condos rent at close to OCR price (when shit hit the fence and crunch time comes like 1997 GFC), your OCR tenants will obviously choose RCR, and hence some or even many of condos will have no-takers. Similarly for CCR vs RCR (not to mention OCR condos which are further down the line and close to HDB flats), this is obvious right?

You are a OCR owner right? (So to you OCR and 99-years leasehold properties are always very good?) :cheers1:



You are the CCR owner right?

For each his strategy I guess. You are generally right about tenant profiles though much still depends on luck. OCR tends to compete with HDB tenants but slightly better occupational profiles.


i know of a unit in CCR which was tenanted at around 8k and terminated after 7 months of tenancy in mid december. the tenant COMPENSATED the remaining 5 months till mid May this year due to the contractual obligation to fulfill the minimum 12 months before invoking the diplomatic clause. after 2 weeks, a tenant has been secured at the same rate of 8k starting in feb (1 1/2 months vacancy) so landlord is effectively earning double rent for 3 months plus.

on the other hand, I know of an OCR relatively new (about 4 years since TOP) 2 bedder, tenanted for 3.5k previously. re-tenanted last year to a new tenant at 2.3k.

i thought people said big units in CCR hard to rent out? 8k is "too ex"? do u think OCR tenants will compensate you 5 months or just pack their bags and go?

Arcachon
08-01-17, 11:38
Well, you are right to say that:
OCR tends to compete with HDB tenants but slightly better occupational profiles.

But why you don't want to say and admit that CCR tenants will always be MUCH MUCH BETTER than OCR tenants?

And if RCR condos rent at close to OCR price (when shit hit the fence and crunch time comes like 1997 GFC), your OCR tenants will obviously choose RCR, and hence some or even many of condos will have no-takers. Similarly for CCR vs RCR (not to mention OCR condos which are further down the line and close to HDB flats), this is obvious right?

You are a OCR owner right? (So to you OCR and 99-years leasehold properties are always very good?) :cheers1:

1997 GFC will never appear again because now the whole world know you can print you problem away.

Kelonguni
08-01-17, 11:55
There is less stress in my opinion. No tenants just pay mortgage and carry on with life. For those I have the mortgage starts from 1K+. No tenant also no problem, but of course with tenant better.

It has never taken more than 2 months to find tenant though in my experiences.

But imagine a 6-8K mortgage without rent, stress anot?

Actually recently CCR has turned a bit more favourable as the traffic gridlock and infrastructure is more manageable to live in. I am not pro-OCR in all situations, but the cards are still in low quantum favour.


Well, you are right to say that:
OCR tends to compete with HDB tenants but slightly better occupational profiles.

But why you don't want to say and admit that CCR tenants will always be MUCH MUCH BETTER than OCR tenants?

And if RCR condos rent at close to OCR price (when shit hit the fence and crunch time comes like 1997 GFC), your OCR tenants will obviously choose RCR, and hence some or even many of condos will have no-takers. Similarly for CCR vs RCR (not to mention OCR condos which are further down the line and close to HDB flats), this is obvious right?

You are a OCR owner right? (So to you OCR and 99-years leasehold properties are always very good?) :cheers1: