Source from Straits Times
http://www.straitstimes.com/archive/saturday/premium/money/story/rental-yields-suburban-luxury-homes-stay-stable-20150131


HOME values and rents might have fallen in the past year, but investors in suburban and luxury condominiums might still enjoy a silver lining.

Despite the weak leasing market brought on by a housing glut, the hit on rents has not been as acute as the dip in prices, a report by Knight Frank showed.

This has propped up rental yields - the percentage return investors achieve on their properties - in these markets.

In simple terms, rental yields are derived by dividing the rental income by the price of the property. The goal is to pay as little as possible for a rental property and get as much rent as the market will bear to earn a strong return.

Average prices of high-end homes fell 7.7 per cent in the fourth quarter to $2,133 per sq ft (psf) from a year earlier, Knight Frank's analysis of a basket of properties showed, while average monthly rents fell 7.9 per cent to $5.35 psf in the same period.

That translates to a fourth quarter rental yield of 3.02 per cent - from 3.01 per cent a year earlier.

At Ardmore Park, for instance, home values in the fourth quarter last year were about $2,700 psf - well down from $3,600 psf a year earlier, caveats lodged with the Urban Redevelopment Authority showed. Monthly rents at the 330-unit freehold development, however, still eked out a small gain from $5.80 psf to $5.82 psf.

For mass-market condos, average values slipped 5.6 per cent to $1,020 psf while average monthly rents fell 6 per cent to $3.09 psf. Gross yields, as a result, held steady at 3.64 per cent in the fourth quarter from 3.65 per cent in the same period a year earlier.

But Ms Alice Tan, research head at Knight Frank, noted that investors who had picked up properties for a higher price a year ago would still face a squeeze in rental yields if leases were renewed in today's soft leasing market.

For the first time in four years, fourth-quarter rents fell 3 per cent while vacancy rates of private homes soared to 7.8 per cent - an almost 10-year high.

She added that yields are also affected by a property's tenure as freehold condos tend to fetch lower yields than their leasehold counterparts. Rents are typically determined by a unit's location, which excludes the premium investors have paid for the property's longer tenure, said Ms Tan.

City-fringe projects have taken the biggest hit. Average monthly rents in the fourth quarter slipped 8.9 per cent to $4.53 psf from a year earlier, as a deluge of 2,442 new mid-tier units heated up leasing competition last year.

Prices slipped just 4.9 per cent to an average of $1,570 psf, which dragged rental yields down from 3.61 per cent to 3.45 per cent.

But landlords of prime properties have also started to lower rental expectations since last October, noted Ms Tan, after prolonged vacancies.

"This may swing the demand back to city centre, and could happen very quickly in the next quarter," she said.

"Everyone is looking around because there's just a lot of supply."

Source from Business Times
http://www.businesstimes.com.sg/banking-finance/dec-bank-loans-growth-slows-to-near-5-yr-low


BANK lending in December grew at 5.9 per cent from a year ago - the slowest pace since March 2010 - preliminary data from the Monetary Authority of Singapore showed on Friday.

Compared to November, it actually stagnated amid weak business loans, which have been contracting for most of the second half of 2014.

Loans through the domestic banking unit - which mainly reflect Singapore-dollar lending - stood at S$608 billion in December.


Business loans, which have shown clear weakness in the later part of last year, contracted 0.4 per cent to S$372 billion in December compared to a month ago. This reversed from the 0.8 per cent growth posted in November.

The hit in December came from a sharp 6.4 per cent fall in manufacturing loans compared to a month ago, reversing from slight gains made in November. Trade loans also declined for the fourth straight month. On a yearly comparison, trade-loan growth eased to a four-year low.

While construction loans - which make up the single-largest part, or about a quarter, of all business loans - were up 0.9 per cent in December, this was weaker than the 1.6 per cent growth posted in November.

On a yearly comparison, business loans grew just 6.4 per cent - a level not seen since August 2010.

"Key drivers of business loans are facing more subdued growth prospects going ahead," said Selena Ling, head of treasury research & strategy at OCBC Bank.

Consumer loans edged up slightly by 0.5 per cent from a month ago to S$236 billion in December. This mostly reflects higher housing loans, which make up three-quarter of loans to individuals. The gain compared with a 0.4 per cent lift in November.

With analysts' expectations for further softness in the domestic property market amid cooling measures and the rising interest rate environment, Ms Ling said it may be premature to conclude a sustainable improvement in consumer and housing loans is on the cards.

For 13 months now, year-on-year growth in consumer loans has been in single-digit territory, reflecting the raft of cooling measures introduced by the government. The total debt servicing ratio, which limits borrowings to 60 per cent of a person's gross monthly income, was put in place in 2013.

Source from Business Times
http://www.businesstimes.com.sg/real-estate/bargain-hunters-watch-for-further-slide-in-prices

ALEX Zou joined about 100 Singaporeans who packed shoulder-to-shoulder into an auction at the Amara Hotel on a Friday afternoon looking for a cheap home to buy.

The bargain hunters who stuffed themselves into the 50-seat conference room are another sign of the decline of Singapore's housing market.

After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a decline in the number of foreign buyers. Banks auctioned 118 repossessed homes last year, about 10 times the number in 2013, said Mok Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle Inc.

As the auctioneer at the hotel bellowed apartment prices and scanned the room for bidders, Mr Zou held back in anticipation of better deals later this year. "I have been coming to these auctions hoping to find a bargain," Mr Zou, 50, said. "Hopefully prices will fall more."

During the housing boom in Singapore, prices soared 40 per cent to a record in 2013, spurred by low interest rates and demand from foreign buyers. As prices peaked, the government capped borrowers' total debt repayments at 60 per cent of their income, making it harder for Singaporeans to refinance loans, and placed additional taxes on home purchases by foreigners and levies on property sales.

The measures cooled the market: Singapore's home prices fell 4 per cent in 2014, the first year-on-year decline since 2008.

The restrictions have had the biggest effect on landlords and the rental market. Landlords face a rise in vacant apartments as more new properties come on the market this year and the pace of foreigners arriving in Singapore slows.

Vacancy rates for private residential homes rose to 7.8 per cent during the fourth quarter, up from 6.2 per cent in the same period a year earlier and the highest level since the last three months of 2005, data from the Urban Redevelopment Authority show.

City Developments Ltd, Singapore's second-biggest developer, warned last year that the local housing market may face "fire sales" and mortgage defaults due to falling rents, especially for high-end homes.

Rental prices of residential properties fell by 3 per cent last year compared to a 0.9 per cent increase in 2013, URA data show.

"Some of the properties in the auction are those where the owner has multiple properties and he can't rent them," said Grace Ng, deputy managing director at broker Colliers International in Singapore. "If the government measures are not relaxed or removed we could see more sales" by homeowners who are in default.

Only a small portion of Singaporeans are having difficulty repaying their mortgages. Less than 1 per cent of mortgages were in arrears, with payments more than 30 days past due, as of Sept 30, according to the Monetary Authority of Singapore's latest financial stability report released in December.

The authority said it's closely monitoring non-performing loans after the slight increase in defaults to 0.36 per cent from 0.28 per cent of the total outstanding mortgages between the first and third quarters of 2014. The increase was "attributed to a handful of high-end housing projects", the MAS said.

More than 20,000 new homes will come on the market in 2015 and a similar number in 2016, up from about 17,911 in 2014, according to the URA.

Just as supply is rising, the demand for rentals is falling. The number of employment passes issued in the first half of 2014 rose only 0.9 per cent to 176,600. That compares with a more than 20 per cent jump in each of the two years to 2011.

Homes in some prime residential enclaves were offered at auction last year, data from Colliers showed. These included units at newer developments such as Marina Bay Residences, The Sail at Marina Bay, Reflections at Keppel Bay and Turquoise in Sentosa Cove.

"Besides the stringent loan curbs, which made it difficult for local homebuyers to secure loans, particularly for properties with higher price tags, the falling yields as a result of the softer rental market have also deterred investors from committing to purchases of investment homes," Ms Ng at Colliers said.

Sales of repossessed apartments could climb by a third this year as credit remains tight and home prices decline, said Mr Mok of Jones Lang LaSalle.

Mr Zou, the homebuyer, is hoping to get a deal on a three-bedroom apartment in the same Singapore suburb where he currently rents, he said. He expects more homes to be repossessed and a further decline in prices.

"There are no bargains available yet," Mr Zou said. "For now, I'll wait and watch the market." BLOOMBERG