An ABSD poser, deals on the go and a tough season ahead

IF YOU are reading this newsletter, then you would likely agree that holding property for investment is a tried and true strategy for generating income and preserving capital.

But higher ABSD and tighter loan limits have thrown a spanner in the works for those eyeing Singapore residential property for their portfolios or retirement plans. The government’s fix for the rapid rise in prices entails sharply higher transaction costs that erases potential gains.

A Singaporean couple looking to jointly own two properties faces 20 per cent additional buyer’s stamp duty on the second property (and 30 per cent on subsequent buys). This is a position they can possibly avoid, by “decoupling” and buying the properties under separate names. Leslie Yee makes a case for lifting the ABSD on joint purchases of two homes, and yes, preserving marital harmony is one factor. 

Housing markets are slowly pulling back from their upwards advance. Residential landlords face lower rents in the coming year, as rents fall back from their pandemic-induced highs. A slowdown in leasing demand and spike in new home completions will put downward pressure on rents in 2024, as Jessie Lim reports. But the 30 per cent surge in 2022 won’t clear anytime soon. While tenants will see some relief, landlords may not back down by much as their holding costs have climbed.  

Prime luxury condos had a hard landing in the second half of 2023. April’s ABSD punch knocked the wind out of the high-end market, and sales shrank while prices dropped. Further marginal declines are projected.    

The public housing market also lost some momentum, but ended the year on a high. Resale prices for Housing and Development Board (HDB) flats closed out 2023 at an all-time high, showing a 5.8 per cent rise in overall prices year on year, according to SRX and 99.co data. This is nonetheless lower than the 8.8 per cent growth recorded in 2022.

Deals stirring

Scotts Square mall is on the market for S$450 million. Wharf Estates Singapore, formerly Wheelock Properties, is looking to sell the retail portion of its freehold development in the prime Orchard Road area. Wheelock had bought the site in 2004 for S$345 million, redeveloping it into two blocks of 338 luxury residential apartments and the four-storey retail mall. 

CapitaLand Investment’s The Ascott unit and CapitaLand Wellness Fund picked up Gaw Capital Partners’ Hotel G, a 308-room budget hotel at Bugis area, for just under S$240 million. The property will be upgraded and rebranded as lyf Bugis Singapore in mid-2024 under Ascott’s co-living brand lyf. 

A Keppel-managed fund completed its Wilkie Edge acquisition for S$348 million. BT reported in November that a joint venture between Lian Beng Group and Apricot Capitol were selling the office and retail space at Wilkie Edge in the Selegie area to Keppel. The Lian Beng-Apricot JV paid S$280 million for the asset in 2017, acquiring it from the-then CapitaLand Commercial Trust (CCT).  

Tough season 

Ahead of the earnings reporting period, alarm bells are ringing. 

Yanlord Land warned of record net losses for the year ended Dec 31, 2023. The Chinese developer’s total contracted pre-sales for the year are down 52.5 per cent to 32.4 billion yuan (S$6 billion). Lower selling prices led to impairment losses on its China development projects, while investment properties will also incur fair value losses. Yanlord bought out United Engineers in 2019 in a deal valued at S$1.6 billion, taking over UE’s commercial portfolio. It now holds several assets in Singapore - Rochester Mall and its hotel Park Avenue Rochester, three UE BizHub developments in the central, east and west areas, the WBL Building and a partial stake in The Seletar Mall.   

Manulife US Reit’s portfolio valuation fell 8 per cent to US$1.4 billion as at end-December 2023. The Reit expects to post a loss for FY2023 due to fair-value losses, and a decline in net asset value by about US$0.07 per unit. MUST’s manager said US office valuations remain under pressure and may fall further in 2024, “and perhaps beyond”. 

The coming reporting season could be sobering for Reit investors, Ben Paul writes in his Mark To Market column. CapitaLand Investment’s year-end profit warning, where it flagged a significant decrease in earnings due to fair value losses in overseas markets, points to the same for other Reits exposed to the same markets. Well-priced divestments will be key to recovering capital and tackling debt. 

For EC World Reit, matters were taken out of its own hands. The Reit said three China assets had been mortgaged, without its consent, to Fuyang local government-linked entities. About 268.6 million yuan (S$49.8 million) in rescue funds were provided to the Reit sponsor in an arrangement it was not aware of and did not consent to, it said. A probe is ongoing.

In other markets

Hong Kong halted government land sales of both residential and commercial plots for the first quarter, citing poor developer demand. Recent tenders flopped with no bids, resulting in just HK$12.3 billion (S$2.1 billion) in land revenue collected in the current fiscal year. At the city’s 2017 peak, land sales reaped HK$165 billion in revenue for the Hong Kong government.

A mortgage price war is in motion in the UK, with many home loan products priced lower since July. Some analysts are questioning if banks can meet profit margin forecasts. But profitability may be held up by lower bad loan provisions, if the economy and housing market prove resilient. 

In the US, prime Manhattan home prices rose for the first time in more than a year. High-end sales are surging, and lower mortgage rates could bring about a broader recovery. Residential deals closed at a median of US$1.2 million in the fourth quarter, up 5 per cent from a year earlier. While volume was lower, sales at or above US$5 million jumped in Q4. More than two-thirds of Manhattan buyers paid cash.

And if you’re headed for the City of Lights in the summer, you might want to think again.

Paris hotels are tripling their prices to more than 1,000 euros (S$1,451) on average for the opening night of the 2024 Olympic Games. For the night of Jul 26, a double room will cost 1,033 euros on average, compared with 317 euros two weeks earlier on the night of Jul 12, a late-December poll showed. Half of hotels polled say they are already fully booked that night. Some 16 million people are expected to descend on the Paris region for the Olympics.