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Thread: Are investors banking on a rental recovery?

  1. #1
    Any complaints please PM me

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    Default Are investors banking on a rental recovery?

    http://www.todayonline.com/Business/...ntal-recovery?

    Are investors banking on a rental recovery?

    by Tan Hui Leng [email protected]

    05:55 AM Jun 25, 2009


    Consider this: Rentals are sliding while residential property sales continue to scale new heights in the current troubled times. With almost half of recent buyers being potential investors with private addresses, could these people be punting on a rental recovery?

    If so, they may be staring at a wait of several years for the uptick.

    "I don't expect any rental recovery for the rest of this year," said PropNex chief executive Mohamed Ismail.

    ERA Asia Pacific associate director Eugene Lim concurred. "Tenant demand has nothing to do with property prices, so even though sales have gone up, the rental market is still challenging," he said.

    Some analysts are even projecting that a rental recovery will not kick in until three years later.

    According to the Urban Redevelopment Authority, rentals slid 8.5 per cent in the first quarter of this year - down from 5.3 per cent in the fourth quarter of last year - as the double whammy of a weak economy and new supply hit the market.

    Mr Mohamed expects second-quarter rental rates to be even more dismal than those of the first quarter. After all, rentals went up 40 per cent in the two-and-a-half years since 2006 as the property market boomed, he noted.

    Still, residential property buyers continue to pile in, shrugging off predictions that rentals would continue sliding for the rest of the year. Perhaps they are not even interested in rental yields.

    Said Cushman and Wakefield Singapore's residential head Connie Looi: "Buyers are rushing in to buy because there has been a downward adjustment in prices. It's not so much because of rental yields, which is about 3.5 per cent on average. It's more for capital appreciation down the road.

    Mr Mohamed cautioned: "Even if you buy property from an investment angle now, it's very hard to predict what the market will be in three years".

    Some market watchers, however, are bullish on the rental market. UBS Investment Research analysts said in a report dated June 18 that they expected rents to "stay flat for the rest of the year and potentially rise 2 to 15 per cent in 2010". They calculated that prime rents had fallen 12 per cent in the year to date.

    So who should invest now? "You need to have a greater appetite for risk and greater holding power to go in now - these are investors with mid- and long-term views, about five years and beyond," said Mr Mohamed.

  2. #2
    Just my 2 cent worth..

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    developers must have learn from patpong night market
    Jacked up $, discount %, is the right strategy...



    Quote Originally Posted by mr funny
    http://www.todayonline.com/Business/...ntal-recovery?

    Are investors banking on a rental recovery?

    by Tan Hui Leng [email protected]

    05:55 AM Jun 25, 2009


    Consider this: Rentals are sliding while residential property sales continue to scale new heights in the current troubled times. With almost half of recent buyers being potential investors with private addresses, could these people be punting on a rental recovery?

    If so, they may be staring at a wait of several years for the uptick.

    "I don't expect any rental recovery for the rest of this year," said PropNex chief executive Mohamed Ismail.

    ERA Asia Pacific associate director Eugene Lim concurred. "Tenant demand has nothing to do with property prices, so even though sales have gone up, the rental market is still challenging," he said.

    Some analysts are even projecting that a rental recovery will not kick in until three years later.

    According to the Urban Redevelopment Authority, rentals slid 8.5 per cent in the first quarter of this year - down from 5.3 per cent in the fourth quarter of last year - as the double whammy of a weak economy and new supply hit the market.

    Mr Mohamed expects second-quarter rental rates to be even more dismal than those of the first quarter. After all, rentals went up 40 per cent in the two-and-a-half years since 2006 as the property market boomed, he noted.

    Still, residential property buyers continue to pile in, shrugging off predictions that rentals would continue sliding for the rest of the year. Perhaps they are not even interested in rental yields.

    Said Cushman and Wakefield Singapore's residential head Connie Looi: "Buyers are rushing in to buy because there has been a downward adjustment in prices. It's not so much because of rental yields, which is about 3.5 per cent on average. It's more for capital appreciation down the road.

    Mr Mohamed cautioned: "Even if you buy property from an investment angle now, it's very hard to predict what the market will be in three years".

    Some market watchers, however, are bullish on the rental market. UBS Investment Research analysts said in a report dated June 18 that they expected rents to "stay flat for the rest of the year and potentially rise 2 to 15 per cent in 2010". They calculated that prime rents had fallen 12 per cent in the year to date.

    So who should invest now? "You need to have a greater appetite for risk and greater holding power to go in now - these are investors with mid- and long-term views, about five years and beyond," said Mr Mohamed.

  3. #3
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    Default Logic of home buyers

    Long term investors look at rental yield and capital appreciation in totality. The biggest fear for any investor is short term capital depreciation. This is why investors have shyed away from purchases end of last year and that resulted in steep price corrections.

    Now the thought in most home buyers' minds is:

    1. risk of short term capital depreciation is v low
    2. possibility of capital appreciation is unclear in short term but good in long term
    3. 'rental yield' to 'interest rate' ratio is at historical high

    So why would it not be logical to buy now?

    Unless there is a black swan negative event, I'd think it's a good time to buy. Don't forget that black swan events could be negative or positive as well. So I would take the black swan factor out - as you can never guess the next war or next state of hyper inflation.
    Last edited by cool_rrk; 25th June 2009 at 07:22 PM. Reason: typo error

  4. #4
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    but your point 3 seems a little wierd. rental yield is still falling (and likely so with all the supply coming up in next few years) while interest rate has hit rock bottom (in fact a little above rock bottom already as banks added in more base margin), so your yield vs interest ratio at historical high only indicates the risk of both rent and interest rate moving in the non desirable directions together?! that's a double whammy.


    Quote Originally Posted by cool_rrk
    Long term investors look at rental yield and capital appreciation in totality. The biggest fear for any investor is short term capital depreciation. This is why investors have shyed away from purchases end of last year and that resulted in steep price corrections.

    Now the thought in most home buyers' minds is:

    1. risk of short term capital depreciation is v low
    2. possibility of capital appreciation is unclear in short term but good in long term
    3. 'rental yield' to 'interest rate' ratio is at historical high

    So why would it not be logical to buy now?

    Unless there is a black swan negative event, I'd think it's a good time to buy. Don't forget that black swan events could be negative or positive as well. So I would take the black swan factor out - as you can never guess the next war or next state of hyper inflation.

  5. #5
    OCR properties going to crash!

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    Gross rental yield is now left only about 2.5-3% based on current market price. After minus maintenance fees and possible repairs & agent fees, owners are left with 1.5-2% net rental yield. How can rental yield to interest be at historical high? Even if so, owning the property for renting is still a money-losing business because the lowest interest rate you can get is probably 1.6% and only just 1 and only 1 year. Nobody knows where the rate will be in the future but yet everybody knows that rental is still falling because of more and more units being made available as they TOP in massive numbers in 2009 and 2010.

    Quote Originally Posted by cool_rrk
    Long term investors look at rental yield and capital appreciation in totality. The biggest fear for any investor is short term capital depreciation. This is why investors have shyed away from purchases end of last year and that resulted in steep price corrections.

    Now the thought in most home buyers' minds is:

    1. risk of short term capital depreciation is v low
    2. possibility of capital appreciation is unclear in short term but good in long term
    3. 'rental yield' to 'interest rate' ratio is at historical high

    So why would it not be logical to buy now?

    Unless there is a black swan negative event, I'd think it's a good time to buy. Don't forget that black swan events could be negative or positive as well. So I would take the black swan factor out - as you can never guess the next war or next state of hyper inflation.

  6. #6
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    Quote Originally Posted by cool_rrk
    3. 'rental yield' to 'interest rate' ratio is at historical high

    .
    Then buy HDB lah, 6% rental yield

  7. #7
    Junior

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    Quote Originally Posted by jitkiat
    Then buy HDB lah, 6% rental yield

    HDB shophouse. 10 to 12%

  8. #8
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    Quote Originally Posted by cool_rrk
    Long term investors look at rental yield and capital appreciation in totality. The biggest fear for any investor is short term capital depreciation. This is why investors have shyed away from purchases end of last year and that resulted in steep price corrections.

    Now the thought in most home buyers' minds is:

    1. risk of short term capital depreciation is v low
    2. possibility of capital appreciation is unclear in short term but good in long term
    3. 'rental yield' to 'interest rate' ratio is at historical high

    So why would it not be logical to buy now?

    Unless there is a black swan negative event, I'd think it's a good time to buy. Don't forget that black swan events could be negative or positive as well. So I would take the black swan factor out - as you can never guess the next war or next state of hyper inflation.
    Good in long term. Do you believe it will go up up and up?
    Only a property agent will say such things.

  9. #9
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    Default Analysis of figures

    Quote Originally Posted by teddybear
    Gross rental yield is now left only about 2.5-3% based on current market price. After minus maintenance fees and possible repairs & agent fees, owners are left with 1.5-2% net rental yield. How can rental yield to interest be at historical high? Even if so, owning the property for renting is still a money-losing business because the lowest interest rate you can get is probably 1.6% and only just 1 and only 1 year. Nobody knows where the rate will be in the future but yet everybody knows that rental is still falling because of more and more units being made available as they TOP in massive numbers in 2009 and 2010.

    Do you know what is the normal rental / interest ratio?

    I am a property investor / landlord for the last 15 years and I know that the ratio is normally 1.5-2.5% / 2-3% for the last decade. Now the ratio is 2.5% - 3.5% / 0.5% - 1%.....frankly the ratio is almost 4 - 10 times what I am used to. You see mathematically when the interest rate goes close to zero this ratio becomes like this.

    If you have money sitting in the bank then you will know what I mean. Very disheartening to get 0.5% interest. Even loan interest rate is only 1.5% now.

    I firmly believe property market will pick up.

    People talk about supply glut. But think about it, how much the population of Singapore went up last year. That is 10 times the whole supply pipeline. Ofcourse figures are figures so I take it with a pinch of salt. But one thing is for sure, the low rental / high interest ratios of the past are gone forever.
    Last edited by Localite; 26th June 2009 at 12:39 PM. Reason: typo

  10. #10
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    Default Comparison

    Quote Originally Posted by Property_Owner
    HDB shophouse. 10 to 12%
    Friend, you've got to compare like to like. The ratio for pte apartment rental / interest has gone up signficantly was the point. So people will be tempted to get into the market.

    Different asset classes offer different risk - returns and that's a different topic.

    Singaporeans are very house proud. Not just because of yield or ratios. But they believe in the long run you will always be better off owning property.

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