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Singapore ranks 3rd for residential property investability

Posted on 9 Sep 2015 | Comments Off

Singapore has emerged as the world’s third-best market to invest in residential property, according to a new report by Savills.

In its new World Residential Investability Ranking, Savills ranked Singapore below the United States and the United Arab Emirates and above the United Kingdom based on market recovery and economic growth.

Notably, Savills ranked 14 leading countries and their cities and resort locations that have consistently attracted investor interest in recent years.

While it lists the US as number one, the firm said that local considerations also have to be taken into account.

“There is a world of difference within the USA between top tech cities and languishing rustbelt ones,” shared Yolande Barnes, director of Savills world research. The firm tips San Francisco among the very best of their selected residential markets.

It listed the UAE second for residential investment potential, as the country’s domestic wealth creation as well as increasing demographic and regional demand continue to grow.

Singapore and the UK clinched the third and fourth place respectively, based on growth prospects and economic performance, alongside a growing population.

Meanwhile, China took the 11th spot while Hong Kong settled in the 12th place. Savills believe that current pricing in these locations are cyclically high and offer poorer value for short to medium term investors.

“These are still big and investible markets, but we’d expect to see rental growth and yield movement before they once again top our investability list,” Barnes said.

“It is vital that investors understand the long-term demographic, economic and supply-side drivers of demand – and, therefore, sustainable value – when making investment decisions. These can be different at a national and local level,” added Barnes.

“When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth. The absence of one or more of these variables can stall a housing market and the absence of two or more can send property values downward.”

Suburban condo rents under added pressure

Posted on 8 Sep 2015 | Comments Off

Rents at new completions within the city fringe area appear to be holding up, while rents at suburban condos are increasingly feeling the pressure, reported The Straits Times.

This comes as tenants move into more affordable units in central locations, often going for newer condos as well, said experts. “Suburban projects, and projects which do not have large-scale facilities, may lose out in the chase for tenants. Older developments are also losing tenants to newer developments,” said ERA Realty key executive officer Eugene Lim.

D’Leedon in Farrer Road, which was completed in Q4 2014, posted a median rent of S$4,288 per month in Q2 (S$3.57 psf per month), according to recent property data. While Lim described the rents as “decent”, they were still lower compared to rents at the nearby five year-old estate of Waterfall Gardens, which registered a median rent of S$3.92 psf per month in Q2.

Ku Swee Yong, CEO of Century 21, said the relatively lower rents at the 1,715-unit D’Leedon reflected the stiff competition for tenants after the project was completed in Q4 2014, which was also the period in which the rental market was on the downtrend. “Waterfall Gardens…does not have smaller units of one-bedroom or studios, so there is a certain amount of prestige even though it is older,” he said.

Meanwhile, rents at suburban areas were generally lower. Median rents at Woodhaven in Woodlands, which was completed in Q1, stood at $2,100 per month ($2.98 psf) in Q2, while the those at the nearby Casablanca were lower at S$2.65 psf, though quantum rents were on a higher median at S$2,800 for bigger units.

Median rents lower than S$3 are considered low, said Lim, noting that the tight labour rules led to a “very practical” leasing market in which tenants opt for 12-month leases. Growing completions will also continue to affect rents. “The mid-range budget of S$3,000 to S$6,000 is the most active, and within that range, a tenant will try to get the best possible deal.”

As such, suburban rents face more pressure compared to those within the central or city fringe areas, although bigger central city units may also be feeling the pressure, as fewer tenants can afford a monthly rent of around S$10,000.

“There are definitely headwinds in the upcoming demand for rental units,” Ku said, “With commodities at an all-time low and headwinds in financial services as well, expat headcount is likely to be flat, if not dropping.”