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High-end homes poised for a rebound
Q What were the best and worst things (market-wise) that happened to you this year?
A The best thing was the revival in the collective sale market, which I hope will continue to power on next year. The worst was that Colliers was a bit late in riding the wave because we were building up the capital markets and investment services (CMIS) team at Colliers International.
That said, we still managed to clinch a number of high-profile collective sale projects, including Jervois Gardens, Pearlbank Apartments, Parkway Mansion, City Towers, Tulip Garden, Grange Heights and Hawaii Tower.
After four years of subdued activity, the residential collective sale market started to get lively in 2016, with three deals done - Shunfu Ville, Raintree Gardens and Harbour View Gardens - with a total value of $1 billion.
I had anticipated a strong pick-up and worked at strengthening our CMIS team this year. However, the surge in the number of deals from May outpaced the efforts to expand the team. We are always on the lookout for more talented industry professionals to join the team.
I would say, at this stage, that I am confident about our deal pipeline in the months to come. With many more developments lined up to be put on the market, it appears that the "collective sale window" is unlikely to shut any time soon. The outlook seems promising at this point.
Q How has 2017 been for the real estate industry?
A I reckon if there was a buzzword to sum up the sector in 2017, "confidence" would probably be it - going by the developers' aggressive bids for sites, the boost in new home sales and the turnaround in office property market.
It is fair to say that this year was a turning point for the real estate market, fuelled by the rosier outlook for the Singapore economy, which is expected to grow at 3 per cent to 3.5 per cent. The more positive economic growth helped to boost market confidence and business sentiment, which made people more confident about job prospects, and encouraged some of them to buy homes.
To be honest, it was a year of two halves. There was a general sense that optimism was returning, but I feel that the market became a lot more vibrant after four collective sales went through in May to June.
Those four deals - One Tree Hill Gardens, Rio Casa, Goh & Goh Building, and Eunosville - with a total value of $1.5 billion, already trumped the transaction figure for the whole of last year. After that, the collective sale market got fired up. More than $8 billion worth of residential collective sale transactions were done from January to Dec 15.
Developers have been eager to acquire land because of the dwindling unsold inventory. After nearly four years of decline in home prices, buyers started to find value, spurring new home sales.
For the whole of this year, we think new home sales (excluding executive condos) could hit up to 11,000 units - an increase of 38 per cent from 7,972 units last year.
The commercial property sector also performed well this year, with landmark deals taking place, including the eye-popping $2.1 billion paid for Asia Square Tower 2, and the $1.6 billion Beach Road commercial site tender.
Q How do you see 2018 panning out?
A Barring any unexpected external shocks or policy changes, I think the property market is undergoing a multi-year upturn, largely driven by the residential and commercial sectors.
This upturn will be underpinned by a more positive economic growth outlook amid the Government's ongoing efforts to transform industries.
I think overall private home prices would have remained flat this year but could climb by about 5 per cent to 8 per cent next year on the back of higher land prices, smaller-format homes and improving sentiment.
Given the rising optimism and healthy home sales, it is unlikely that the Government will relax any of the cooling measures next year.
In fact, the Monetary Authority of Singapore recently warned about "excessive exuberance" in the property market, following the spate of collective sales and rising land prices.
The potential mismatch between the influx of new units from the redeveloped collective sale sites and market demand was a concern.
Based on the 2006-2016 historical average take-up of 12,453 units a year, it would take more than a year for the market to absorb the homes that could be redeveloped from all the collective sale deals since 2016.
I think the risk of a private residential supply glut can be mitigated if the launches are paced over time. It would also help if developers are given more time to sell their projects, allowing the market to find its equilibrium.
Perhaps the Government can consider extending the timeframe for developers to sell units under the additional buyer's stamp duty and qualifying certificate rules.
Q Going into 2018, please offer some tips to home buyers.
A First, buyers should always take a long-term view towards investing in property. They should consider their financial circumstances and housing needs carefully before committing to a purchase.
Barring unforeseen events, I believe the positive momentum seen in the private residential market this year should spill over into 2018. In particular, the high-end homes segment is poised for a rebound after prices slumped by about 20 per cent since June 2013.
Luxury apartments here will continue to appeal to foreign investors owing to their competitive pricing, which is about half the price of comparable homes in Hong Kong on a per square foot basis. Luxury home prices in Shanghai are also fast catching up with those of Singapore.
I expect prices of homes in the core central region to potentially rise by 8 per cent next year amid more stable economic outlook.
Those looking to buy in the resale market should take note of the age of the development, especially when the collective sale fever is sweeping through the market. Typically, most collective sale cases involve residential developments that are more than 20 years old.
My advice is to look at properties that are around 10 years old if you are buying a place to live in. It would not only minimise any disruption from a collective sale, but also allow you to maximise the capital investment that went into renovating the unit.
You could probably live in the unit for at least another 10 years before owners propose selling the development via a collective sale.
It is also important to think about the seller's stamp duty (SSD). For example, if you buy a very old property now and the development gets sold collectively within the next year, you are liable to pay a hefty SSD at a rate of 12 per cent.
Get the lowdown from our other experts:
- Hou Wey Fook: Chief investment officer, DBS Bank
- Joseph Kwok: President, Financial Planning Association of Singapore
- Luke Lim: Managing director, PhillipCapital
- Patrick Teow: President, Life Insurance Association