Why NOT Singapore or Hong Kong?

Beautiful skyscrapers of Singapore

The growing imbalance between household income and house price growth has caused a severe affordability crisis. Most households can no longer afford to buy a property in major cities without a substantial inheritance, not to mention rents that continue to consume a significant share of the monthly income.

The skyscrapers in Singapore, though magnificent and tall, are proof of the island’s lack of space — after all,  with land so limited, the only way to go is up.

Singapore was rated by S&P Global Ratings as the second highest region in Asia for house prices, thanks to growing foreign demand for private housing.

The increase in Singapore property price index in 2018 from Urban Redevelopment Authority (URA)
The increase in Singapore property price index in 2018. Source: Urban Redevelopment Authority (URA).

Prices of private homes are still inching higher, albeit at the slowest pace in five quarters (June 2017 – June 2018). Data by the Urban Redevelopment Authority (URA) shows that private residential prices in Singapore increased 0.5% in the last 3 months, compared to a 3.4% advancement in the June quarter.  All this despite additional property curbs imposed by the government, the latest being the implementation of the Additional Buyer’s Stamp Duty (ABSD) and Loan Limit,  to avoid a property bubble burst, which potentially has the risk of destabilizing the nation’s economy.

ABSD imposed by Singapore, Source: Knight Frank
Latest cooling measures: ABSD imposed by Singapore government.  Source: Knight Frank

The ABSD rates were raised by 5% for citizens and permanent residents (PRs) buying second and subsequent homes, and by 10% for entities, said the finance and national development ministries, as well as the Monetary Authority of Singapore (MAS) in a joint release. There will be no change in rates for citizens or PRs who are first-time buyers.

“The government has been monitoring the property market closely. We are very concerned that prices are running ahead of economic fundamentals,” said Lawrence Wong, Minister for National Development in an interview with Channel NewsAsia.

Among Asian countries, Hong Kong, Singapore and Tokyo are at a bubble risk, with Hong Kong being highest on the list.
Among Asian countries, Hong Kong, Singapore and Tokyo are at a bubble risk, with Hong Kong being highest on the list. Source: UBS

The UBS Global Real Estate Bubble Index 2018 shows Singapore and Hong Kong amongst major cities at risk of a property bubble burst, Hong Kong being the top of the list at a whopping 2.03%. Singapore, though rated fair-valued (0.44), is close to being overvalued.

Ultimately, the growing imbalance between household income and house price growth has caused a severe affordability crisis. Most households can no longer afford to buy a property in major cities without a substantial inheritance, not to mention rents that continue to consume a significant share of the monthly income.

Stratospheric Property Prices at the Fragrant Harbour 

The Hong Kong property market has retained its vibrant momentum. Residential market prices have risen again by more than 10% over the last four quarters (as at Sept 2018), raising the city’s UBS Global Real Estate Bubble Index score higher within the bubble-risk zone.

Since 2008, property prices have doubled while rents have gone up by 15% and incomes have remained unchanged in real terms. The market is chronically undersupplied. Over the last decade, its affordability has fallen the most among many other cities in the European and Asian region.

Even for highly-skilled workers, property ownership is now out of reach. With citizens priced out of their own market, political measure has mounted to curb price growth. Recently, the government announced an occupancy tax for vacant, completed units to encourage developers to sell them as quickly as possible, in an effort to improve supply.

As high as the initiative taken by the authorities to prevent further crisis in the market and to decelerate house price growth, a sharp correction seems nearly unlikely.

A Change of Focus

It is now apparent why investors from Singapore and Hong Kong are looking beyond their own shores to invest their money. Countries such as the UK and Australia are a top choice for property investors looking for good returns.

In the UK, investors are  increasingly shifting their focus from London  to regional cities such as Manchester and Liverpool, due to growth potential and market demand.

The latest data from Private Finance has shown that Manchester and Liverpool are among the UK’s top 10 cities for strong rental demand, promising prominent rental yields of 4.8% and 4.6%, respectively.

Meanwhile, the increase in the foreign student population  continues to drive demand for accommodation, adding to the appeal of the UK property investment market, particularly in top university cities.

Shaun Church, Director of Private Finance, commented that while recent (April 2016) stamp duty changes may have dampened landlords’ appetites, buy-to-let property still remains a viable investment. He added that strong rental incomes matched with declining mortgage costs mean that investors can still enjoy a level of return on their investment they’d be hard pressed to find elsewhere.

Investing Down Under

House price growth in Australia has slowed in recent months, led by Sydney and Melbourne. A forecast done by BIS Oxford Economics suggests that the Australian housing market is in for soft landing.

Taking inflation into account, BIS predicts that modest price declines will take place in most capital cities over the next 12 months, but that the situation will turn around, transforming into growth over the next 3 years.

The growth potential of Australian housing market over the next 3 years
The growth potential of Australian housing market over the next 3 years. Image credit: Michael Yardley’s Property Update.

Hence, despite the current downfall, the Australian housing market — supported by low interest rates, a relatively stable economic environment and a strong and promising population growth — is unlikely to  crash.

The high number of skilled foreign migrants flocking Down Under will further strengthen the underlying demand for houses. This may well be a good time to have an eye on the Australian market.

Image Source: https://edition.cnn.com/travel/article/singapore-50-reasons/index.html

 

 

Birmingham, the next ‘LONDON’?

Urban regeneration has transformed Birmingham into a big capital city
Urban regeneration has transformed Birmingham into a big capital city

As the world progresses into a new era and populations grow, cities, too, will evolve, transforming from nondescript outer suburbs into big capital cities, like Manchester, Liverpool, Birmingham – even Kuala Lumpur. Infrastructural growth is the main catalyst for the changes that attract migrants, causing an increment in population numbers. Thus, small cities become capital cities.

In the UK, some of the most exciting cities today in terms of population, job and infrastructural growth are Birmingham, Liverpool and Manchester.

Research compiled by Centre for Cities cites Birmingham as the second fastest growing city after Liverpool from 2002 – 2015, increasing from 9,800 to 25,800 people — 7 times faster than London over the same period. This is impressive, given how London had completely eclipsed Birmingham in the past. How the tides have changed!

Knight Frank reports that the number of people living in Birmingham will rise by 171,000 to a total of 1.3 million people by 2039, especially with the expansion of the HS2 high-speed rail line being built in central Birmingham and nearby Solihull, followed by other regeneration projects.  A sweet enticement to new investors indeed.

Birmingham: One of the Best Performing Cities in England & Wales

In the face of this renaissance, this booming city, also fondly known as “The City of A Thousand Trades” maintains its status as the heartland for British industry. The growth of the motor car as well as manufacturing continues to support the industrial sector in England and Wales,  creating more job opportunities and attracting more people — many of whom have relocated from London.

Between 1998 and 2015, job growth in Birmingham hit 30%, representing around 30,600 jobs in total.

Biggest Growth in City Centre Population & Jobs in England and Wales

Source: BirminghamLive
Source: BirminghamLive

However, despite the massive development and job growth, Birmingham is facing a shortage of housing. Between 2011 and 2016, only an estimated 8,000 new houses were built, whereas the actual demand was around 20,000.

The latest data by Hometrack shows that Birmingham is at the third place of house price growth in England, after Manchester and Liverpool, whilst London remains at the bottom.

Manchester clinched top spot at 7.4% growth, followed by Liverpool at 7.2%, and Birmingham at 6.8%. London stayed somewhat flat at only 0.7%.

The average price in Birmingham was at £161,200, slightly lower than Manchester at £166,100, and Liverpool, at £121,900.While price growth in London has been static, house prices there are more than double the national average at £494,800!

Source: Hometrack
Source: Hometrack

Clearly, cities in the Northwest received high capital gains over the last 12 months, yet there is still much room for growth.

Source: Hometrack
Source: Hometrack

The outlook for the housing market in Birmingham appears rosy, thanks to its economic growth thus far.

The region’s strong performance is mainly attributed to its manufacturing sector. In 2016, manufacturing made up 11% of employment in Birmingham, compared to the average for UK cities of 8.8%.

Due to costly house prices, as well as lesser employment opportunities, many Londoners, especially millennials, are relocating to Birmingham,and the other booming cities of Manchester and, Liverpool .

Ultimately, urban regeneration has played a vital part in these cities’ transformations, influencing the movement of millennials towards greater opportunities such as education, jobs and employment options. Savvy investors are starting to see the opportunities in store for Birmingham. Are you an investor? Are you thinking of making your money work for you? Then then you don’t want to miss out

Image source:

Malaysia’s Waning Property Market

https://www.propertyguru.com.my/property-news/2017/3/147831/malaysia-second-china

Malaysia had its fair share of ups and downs in 2017. While the overall Malaysian economy fared well throughout the year, international notoriety for the 1MDB scandal and plunging property market proved to be it’s not so subtle undoing.

According to Bank Negara Malaysia governor Muhammad Ibrahim, the ringgit did strengthen by 14.6% last year, with the upswing greatly credited to market forces. Such forces did not, however, include the property market.

The Malaysian Reserve reports that due to an excess of housing supply, economic and political concerns as well as exorbitant house prices, local high-end and low-end properties seem unlikely to recover from its fall in 2017 anytime soon.

According to National Property Information Centre (Napic), the first quarter of 2017 showed 130,690 unsold residential properties throughout the country, demonstrating the oversupply currently besetting the nation — also revealed was that the top five highest rental yields recorded last year were lower than those in 2015.

The total unsold units in Napic’s findings include overhang (completed, but unsold) units, unsold under construction units, as well as SoHo (small office/home office) units and serviced apartments.

Napic data reveals that the total number of unsold residential properties reached 130,690 -- the highest number in 10 years. Source: Napic; Image credit: http://bit.ly/2CtnTIm
Napic data reveals that the total number of unsold residential properties reached 130,690 — the highest number in 10 years. Source: Napic; Image credit: http://bit.ly/2CtnTIm

The majority of unsold housing spaces fall under the above-RM250,000 category; 83% of them, to be precise. Of this 83%, 61% of the total unsold units comprise high-rise properties, of which almost 100% were priced above RM250,000.

Housing affordability remains a primary problem in the Malaysian property market. A summary of what Affin Hwang Investment Bank Bhd analyst Loong Chee Wei told The Malaysian Reserve is as follows: the property market is far from an upturn due to the rising cost of living and the disconnect between society’s income and affordability level.

The commercial sector in Malaysia also faced a major downturn due to a glut in the market. True vacancy rates in Klang Valley malls were up to 60% in some areas, according to a Financial Times (FT) article acknowledging the country’s continued obsession with building more shopping space despite chronic oversupply.

What best illustrates the critical oversupply in Malaysia is the value of unsold and unutilised a properties which rounded off to a whopping RM35.5 billion.

Total unsold residential properties by state in Malaysia as of 1Q 2017. Source: Napic; Image credit: http://bit.ly/2CtnTIm
Total unsold residential properties by state in Malaysia as of 1Q 2017. Source: Napic; Image credit: http://bit.ly/2CtnTIm

With the previously mentioned conditions in mind, the local property market is set to welcome a buyers market. Local property investors seeking great returns would find it in their best interest to manage expectations as property sales in Malaysia are not as attractive as they used to be.

Rising Ringgit, Rising Opportunities for Investment Overseas

Public Investment Bank Bhd’s research arm has reported that Malaysia is slated to become the second fastest growing economy in Asean. The Malaysian economic outlook for 2018 and a steady growth of the local currency have opened doors for investors who are looking to leverage on flourishing property markets overseas.

The UK and Australia are home to a high-yielding, growing property market where the currency is stronger, hence rental returns and appreciation are at a higher value than the ringgit.

Moreover, these countries are home to a critical undersupply of houses unlike Malaysia, following a high population growth due to migration, job creations and educational opportunities. Furthermore, regeneration schemes that are taking place in the UK and Australia, such as the Knowledge Quarter in Liverpool and the ‘super city’ project in Melbourne, will further drive population growth.

“The UK and Australia have strong growth potential. The population and its demand for housing have grown faster than supply, causing property prices to keep appreciating. It is also because of this, that there is a strong rental market,” says property expert Virata Thaivasigamony of CSI Prop.

“With the current and forecasted performance of the ringgit, alongside the weakened pound and Australian dollar, investors now have the opportunity to invest from a position of strength. Diversifying investments is key to hedging against uncertainties both locally and globally.”