Compared to developing nations with far stronger population growth rates, Australia is expanding pretty quickly for a developed country.
Last month, Australia’s population officially ticked past the 25 million mark, according to the latest data by the Australian Bureau of Statistics (ABS) – 33 years earlier than projected!
Over the last three years, the nation’s population grew by around 400,000 people per year. If this trend continues, the number might reach 26 million in the next two to four years. This is no mean feat considering that the population Down Under was only at the 10 million mark back in 1960.
Nett migration has continued to outpace births, with the highest migrant numbers coming from China and India.
Newly elected Minister for Cities, Urban Infrastructure and Population, Alan Tudge, in outlining plans for the country’s immigration policy, is not in favour of reducing skilled migrant numbers.
“My view has always been that Australia can be a bigger country. But, ideally, you have a broader distribution rather than very rapid growth in some areas,”he said.
Melbourne and Sydney are expected to grow to the size of New York city by 2050 as migration numbers continue to grow.
To date, Melbourne has the fastest-growing population rate in the country. Naturally, this has something to do with Melbourne’s ranking as the World’s Most Liveable City for seven consecutive years, receiving a perfect score from The Economist for healthcare, education and infrastructure.
“There’s a buzz about the city that keeps bringing the world’s best to enjoy Melbourne,” said the Australian government in a statement.
Victoria has an estimated population of 5.71 million, ranking second in the country with a population density of 25 people per sq km. The state accounts for 25% of the entire Australian population.
And, for the first time ever, Victoria finally overtook New South Wales as Australia’s strongest economy in CommSec’s latest State of the States report.
Victoria’s high population growth has also supported house prices and rental values in Australia, and is a reason why the Melbourne market has remained strong.
In quarterly data by JLL Australia, apartment price growth for Greater Melbourne (for both new and existing stock) increased 6.6% y-o-y to 1Q2018, which is above the five-year annual average rate of 4.5%. Rental vacancy remains tight in the city.
The recent 2018 Global Real Estate Transparency Index by JLL ranks Australia’s property market as the most transparent in the Asia-Pacific region. This, and the all the things that make Australia such an attraction — good governance, strong healthcare and education systems, etc — are a great draw for property investors and millionaires.
What do you think of Australia’s population growth for the Australian economy and property market as a whole? Leave your comments in the box below! For more details on investing in Australian property, call us at 65-3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at firstname.lastname@example.org!
By Noorasikin Ali
Additions & Edits by Vivienne Pal
Exactly one week ago, Malcolm Turnbull saw his three-year reign at the helm replaced by former treasurer Scott Morrison, following much political chaos within the ruling Liberal party. Australians and foreign investors alike will be keeping an eye on what happens to the economy and housing market. Here’s a snapshot of the new Australian PM.
Former treasurer, Scott Morrison is Australia’s new Prime Minister, replacing Malcolm Turnbull who stepped down after three years following a bitter tussle in the Liberal Party leadership.
Scott Morrison, or ScoMo, is also Australia’s 30th Prime Minister — the sixth, in fact, in the last 11 years alone. In a closed-door meeting of Liberal lawmakers last week, Morrison won 45 votes to 40 over right-wing populist Peter Dutton. Morrison was known as the most conservative members of the Liberal’s moderate wing.
ScoMo the Regular Joe
The Prime Minister is an observant pentecostal Christian who grew up in a Christian home, in the beachside suburb of Sydney. Married with 2 daughters (after a long 18-year wait and 10 attempts at in vitro fertilisation), Morrison had a brief career as a child actor, appearing in several TV commercials. He achieved some notoriety as managing director of Tourism Australia when he approved an $180m international advertising campaign that was subsequently banned in Britain for crass language.
ScoMo on Politics & Immigration
Morrison’s exposure to politics began at a young age. At 9, he handed out “how to vote” pamphlets on behalf of his father, a former policeman and local councillor who served as mayor for a spell. He was elected member of parliament in 2007, holding several positions in government, including minister of Social Services, minister of Immigration & Border Protection and, up until last week, Treasurer.
ScoMo was (in)famously an ardent supporter and enforcer of a contentious policy which turned away immigrants who tried to enter Australia illegally by boat. These asylum seekers were detained in offshore camps.
Conversely, when it comes to skilled migrants, Morrison is clearly a supporter and was known to rebutt former Prime Minister Tony Abbott’s proposal to cut migration rates.
According to Abbott, the current intake of permanent migrants had affected house prices and wage growth in Australia. He suggested that immigration numbers to be cut by 80,000 a year.
The suggestion did not sit well with ScoMo who felt that Australia had benefitted tremendously from skilled migrants.
“If you cut the level of permanent immigration by 80,000 it would cost the budget, it would hit the bottom line — the deficit — by $4 billion to $5 billion over the next four years,” Morrison quickly countered.
“Basically the economy (would not be) growing at the same level and people who come as skilled migrants pay taxes, make a net contribution to the economy.
“Currently two-thirds of permanent migrants have skills needed by the economy. A cut in overall numbers would reduce the skilled total and emphasise family migration which ultimately gets more dependent on welfare,” he added.
Australia’s foreign migrant inflow continues to drive the growth of the housing market.
ScoMo & the Housing Market
Morrison is a supporter of APRA’s regulatory controls, believing that it would help in rebalancing the market. This, according to an analysis in the Australian Financial Review, is part of what makes him a “property person’s prime minister”. He is no stranger to real estate, having worked as national policy and research manager for the Property Council of Australia for 6 years and, according to industry captains, has “shown a deft touch in managing fears around the overheated investment market”.
Morrison is well aware of the conditions of the housing market in Australia but holds a firm belief that the country is not headed towards a housing market crash, citing APRA’s regulatory controls to credit access will help create a smooth landing.
To date, Australia holds the record for not going through a recession for 26 years. During ScoMo’s watch as Treasurer, Australia’s economy grew 1% in 1Q2018 and 3.1% annually, placing Australia on top of advanced economies in terms of economic growth.
Up until now, not a single Australian Prime Minister has completed a full term. The frequent upheavals have left foreign allies uncertain, according to experts.
In his speech, the newly minted prime minister said, “We will provide the stability, the unity, the direction, and the purpose that the Australian people expect from us.”
What happens from here is anyone’s guess. There are supporters and naysayers on both sides of the political divide, but ScoMo has, at the very least, until May 2019 when the country goes to the polls, to prove himself and the Liberal Party worthy.
How do you think Scott Morrison will fare as the new Prime Minister of Australia? Share your thoughts with us in the comment box below. If you’re keen to learn more about investing in Australian property, call us at 016-228 8691/ 9150 (MY) or (65) 3163 8343.
By Noorasikin Ali
Additions & Edits by Vivienne Pal
Today marks Pakatan Harapan’s 100th day in power since the political earthquake that shook Malaysia — the 14th General Election.
The pressing question is whether the nascent government has delivered on its word and lived up to the expectations of Malaysian voters thus far.
The last three months for Pakatan has been like a walk on the proverbial tightrope, with the coalition struggling to deal with the threat of bailing investors and a sovereign downgrade, and a national fiscal debt that has turned out to be more critical than expected.
A survey carried out by the Merdeka Centre earlier this month (August 2018), found that Malaysian citizens were largely satisfied with Pakatan Harapan ministers, but with some concerns about the economy, and racial and religious rights.
As part of its election manifesto, the government had pledged to deliver 10 promises in 100 days, but not all of these promises have been fulfilled.
Tun Dr Mahathir Mohamad, the Prime Minister, said that the reason behind the government’s inability to fulfil the 10 promises was because they had to prioritise other important matters.
“The government’s focus is not only on the 10 promises in 100 days, the government has a lot of work to do and this includes ‘cleaning up’ the government which was tainted with corrupt practices and abuse of power during the past administration,” he said.
Harapan Tracker, a website which monitors the government’s performance, gave Pakatan a score of 45%, a cumulative average from its two scores of “the letter of the promise” (30%) and “the spirit of the promise” (60%).
Housing Not Part of 100-day Pledge
The housing sector, in particular, was not included in Pakatan’s list of 100-day promises.
Many Malaysians are concerned about housing, and rightly so. There has been a glut of high-end residential property and a scarcity of affordable housing in the country — an imbalance that has caused many Malaysians, especially those from the bottom 40% of income earners (B40), to be unable to afford their own homes.
Dr Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (Ideas) said the spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand and easy credit conditions.
“The mix of elements generated a bubble which reached its peak between 2012 and 2013.”
Zuraida Kamaruddin, the new Housing Minister, has embarked on a consolidation of all affordable housing projects under the Ministry in an effort to streamline the building of affordable homes. Certain projects like the 1Malaysia Housing Programme (PR1MA) were previously placed under the Prime Minister’s Department.
The new National Affordable Housing Council is expected to begin its work this month (August 2018) once papers regarding its set-up are finalised by the Cabinet. The council will monitor the construction of affordable housing, coordinate databases and implement a self-renting scheme for the B40 and M40 (middle 40% of income earners) groups nationwide.
Ms Zuraida also plans to set up a one-stop online platform for affordable housing that would enable buyers to submit an application online, and find out their approval status within days.
In an effort to further bring down the price of housing in Malaysia, Finance Minister Lim Guan Eng announced that building materials and construction services will be exempted from the upcoming Sales and Service Tax (SST). The SST is set to kick in on Sept 1.
Under the previous Goods and Services Tax (GST) regime, building materials and construction services were subjected to a 6% tax. However, players in the construction industry are not optimistic that the tax exemption will impact house prices significantly.
Datuk Steve Chong, chairman of the Real Estate and Housing Developers’ Association (Rehda) in Johor, thinks that the exemption is insufficient to bring down the prices of homes.
“We believe that the savings is too small to be passed on to homebuyers which will not in any way translate to a significantly lower price for homes in future,” he said.
Malaysian Institute of Architects (PAM) president Ezumi Ismail added that raw materials only accounted for less than a third of the total development cost, and other factors contributed to high housing prices.
“The rest … would consist of the cost to purchase the land and other compliance charges that come with the building the houses or units. SST may reduce the house prices but it may not be much.
“Some projects require the developers to construct basic infrastructure and facilities that are supposed to be built by utility companies. The added cost would then be (pushed) back (to) the consumers. It would be better if the authorities come up with a building master plan that could address these issues,” he added.
A new National Housing Policy is expected to be announced in September with a considerable number of changes, one of which includes the rental-tenancy market.
The rising supply of residential properties, particularly condominium and apartment units, has caused rentals to continue to drop in Kuala Lumpur.
Previndran Singhe, CEO of Zerin Properties said, “It is a tenant market right now as they have plenty of choices. There have been drops in rental in KL, generally around 10%.”
“Some owners have to reduce their rents because their units are already old and they will not be able to compete (with newer properties) if they don’t upgrade their homes.”
There isa silver lining in sight. Yet, it may be a long while before housing issues are fully addressed in the country. Until then, what stands to remain is the loftiness of house prices in prime areas like the Klang Valley and Penang — and to a certain extent, Johor Bahru — which will impact not just first home buyers, but also local property investors.
With economists slashing economic growth forecasts due to weak economic data (ahead of Bank Negara Malaysia’s release of GDP 2Q2018 figures), and potentially more fiscal tremors ahead, a single 5-year term may not be enough for the government to make the changes it wants to.
Investors should continue to maintain a wait-and-see stance before embarking on investment-related decisions in the local property market or, alternatively, look beyond Malaysian shores. Virata T of CSI Prop says that investors can still get good returns on properties in countries abroad.
“With rental yields dropping locally, investors wanting to invest in property could look overseas to get better returns on investments. There is a rising interest among Malaysian investors for this type of investment,” he said.
“Up-and-coming cities in countries with a stable economy like the UK and Australia, are particularly attractive as they provide good returns while reducing investors’ exposure to economic risk.”
What do you think of Pakatan’s performance so far? Leave us a comment below!
If you are curious about investing overseas and the returns you can obtain thanks to low vacancy rates, call (+65) 3163 8343 (Singapore), 016-228 8691/ 9150 (Malaysia), or email us at email@example.com!
Victoria, for the first time ever, has finally overtaken New South Wales (NSW) as Australia’s strongest economy, according to CommSec’s latest State of the States report.
CommSec (Commonwealth Securities) is Australia’s largest online stockbroking firm operated by the Commonwealth Bank of Australia. Each quarter, it releases its State of the States report, which is an economic performance report of Australia’s states and territories. The report covers eight major economic indicators including population, employment, housing, investment, and construction.
Victoria has never owned the top spot in the report’s nine-year history until now, thanks to strong population growth numbers which have been instrumental in driving construction activity. The state currently ranks first in economic growth, dwelling starts and construction work done. In economic growth, Victoria is ahead at 26.5%, followed by NSW at 25.7% and Northern Territory at 25.6%, while Western Australia remains in the last place by 7.6%.
NSW, long standing at the top spot for economic growth in the last four years, slipped to second place due to declines in a number of housing indicators.
The gap between the two states, however, remains narrow, leading to the possibility of a change in positions over the next 12 months, said CommSec’s chief economist Craig James.
In terms of population growth, Victoria maintains its position as the clear winner, having toppled other states since 2015. Victoria currently holds a population growth rate of a cool 2.3% above the Australian Capital Territory (ACT) at 2.15% and Queensland at 1.67%.
Meanwhile, the Northern Territory has the lowest population growth at 0.23%.
Victoria is poised to remain in the lead for population growth with research predicting that population figures will reach approximately 6.26 million in 2018.
High population growth will continue to drive the broader economy — by fuelling retail spending and housing demand.
Thus, Victoria’s meteoric population growth will continue to spur Melbourne on as it maintains its credentials as Australia’s “most attractive city” due to stronger rental growth supported by tight vacancy.
As it is, Melbourne — Victoria’s capital city — is predicted to have a swell in population due to its huge student population and migration. In 2016, the Australian Bureau of Statistics (ABS) reported Melbourne as having the most epic population growth of any Australian city, making up almost a third of Australia’s population growth. The contrast is quite significant, with 2.4% in Melbourne compared to 1.2% in the rest of Australia.
With the current undersupply of housing, and demand driving prices, it appears that Melbourne will continue to remain, for some time to come, Australia’s Most Attractive City for global property players in the Asia Pac region.
Looking to purchase a property in Melbourne City? Hit us up — we’ve got limited stock of one of the best residences in one of the most coveted locations in the city. Or, just connect with us to find out more!
By Noorasikin Ali
Additions & Edits by Vivienne Pal
Evidence has emerged to suggest the ongoing Banking Royal Commission will impact availability of financing for house purchases. However, experts say that this is unlikely to have much effect on house prices in the long term. The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost
The Australian Banking Royal Commission was established last December, after years of public pressure, to investigate alleged misconduct by Australia’s financial services entities.
So far, proof of appalling behaviour by Australia’s major banks and financial planners from the past decade has surfaced, which include alleged bribery, forgery of documents, the repeated failure to verify customers’ living expenses before approving loans, and selling insurance to people who are unable to afford it.
In the aftermath of the scandals, several high profile finance executives have resigned, while shares of Australia’s major banks have all fallen at least 20% from highs reached before last May’s budget.
Commonwealth Bank, Westpac, and National Australia Bank shares are about 23% below their peak of late April 2017, while ANZ’s stock has fallen 20%.
Even as the Royal Commission goes on, tighter lending standards have already been enforced by the Australian regulator, with some self-imposed, as banks attempt to realign lending practices with responsible lending principles.
What the experts say
There has been concern that as tightening regulations reduce availability of financing, demand for property will follow suit, causing a drop in house prices. Several experts have chimed in on the matter.
JP Morgan’s Australian economics team suggests that the Royal Commission will cause slower credit growth, job losses in the finance sector and slower household consumption, which will lead to declines in house prices in the short term.
While JP Morgan believes the fallout from the Royal Commission creates short term downside risks for the Australian economy, in the long run it will leave Australia’s finance and household sectors, as well as the broader economy, on a stronger footing than is currently the case.
All else being equal, JP Morgan is of the view that this should be positive for the longer-term investment and productivity outlook.
Rachel Ong, Professor of Economics at Curtin University says that the stricter regulations are not likely to impact house prices.
“The tightening of banks’ lending standards and stricter credit controls should lead to a reduction in demand for properties.
“However, this prospect is unlikely to translate into any meaningful reductions in property prices. Property prices in Australia have remained persistently high since the early 2000s,” she says.
Brendan Coates, Fellow from Grattan Institute, says that any short term reduction in house prices is unlikely to have much of an impact.
“Tighter lending standards to reduce the amount of money prospective homebuyers could borrow would push down property prices, at least in the short-term. But the effect is likely to be modest, because banks have already tightened lending criteria in recent years,” he says.
Maria Yanotti, Lecturer of Economics and Finance, from University of Tasmania, is of the opinion that the Royal Commission is more likely to affect the supply of financial services, than demand for loans.
“As a consequence of the commission’s findings we would like to think that financial institutions will have to put in place better compliance processes and stop cost-saving or income-generating practices that disadvantage or put consumers at risk. These new processes and practices will translate into higher costs for the financial institutions, which will be passed on to consumers via higher interest rates and/or lower access to finance.
“This situation will result in lower demand from those looking to own a home, in favour of higher demand for rental housing. But the effect of higher interest rates may not be strong enough to decrease demand for property by real estate investors and businesses.
“The real drivers of property prices are land availability, construction costs, population growth, and to a lesser extent finance access and cost,” she observes.
It seems apparent that falls in property prices are unlikely to make much of an impact, or are merely confined to the short-term, giving a good outlook for investment in Australian property for investors keen to get a bargain whilst capital growth has slowed.
What are your thoughts about the impact of the Banking Royal Commission on property in Australia? Drop us a comment below. If you are interested in Australia and, particularly, Melbourne’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at firstname.lastname@example.org!
Melbourne overtakes Sydney as the top Australian location for offshore real estate investment dollars in Asia Pacific.
Melbourne seems to be collecting more notches on its bedpost. Not only has it been named the Most Liveable City seven consecutive times; it was also named Happiest City. A new survey has now pegged it as Australia’s Most Attractive City for global property players in the Asia Pac region.
A new survey has revealed Melbourne as the No. 1 Australian city for global property players in the Asia Pacific region.
Property sales and research firm CBRE launched their Investor Intentions Survey 2018, which polled a total of 366 respondents, including real estate funds, developers and companies.
Of those polled, 70% were based in Asia, 18% in Western Europe, the Middle East and North America, and 12% in the Pacific.
The survey found Melbourne overtaking Sydney as the preferred Australian location for offshore real estate investment dollars, as Sydney fell down the yearly rankings from first to sixth. Brisbane came in at eighth place — which was Melbourne’s position last year.
Melbourne’s rise as Australia’s “most attractive city” was “due to its stronger rental growth supported by tight vacancy”.
“Although asset pricing poses a major obstacle, investors remain keen to purchase real estate for risk diversification. Investors’ focus is on income growth as capital value appreciation will increasingly be driven by income growth,” the report stated.
CBRE expects a slowdown in Chinese outbound investment to continue following the introduction of new capital controls by the Chinese government last year.
“This year’s survey indicates that Chinese investors are less keen to invest overseas in 2018. While overall interest remains reasonably firm, fewer investors intend to invest more than they did in 2017.
In their latest report in March this year, UDIA found that the state government will need to increase approvals and commencements of new housing by more than 10% in order to meet demand.
The Victorian government has committed more resources to speeding up the approval process of new suburbs, but the delivery of necessary infrastructure such as sewerage and roads remains a bottleneck.
UDIA Victoria CEO, Danni Addison, said that the supply of new housing being delivered right now was being driven by high population and employment growth.
“The numbers tell us that despite record high levels of building activity, we’ve still got a way to go before we can stop playing catch-up and ensure there’s enough new housing to meet the demands of population growth,” she said.
Data released by SQM Research in June 2018 showed that demand for property in Melbourne has stayed at a constant high. Vacancy rates remained incredibly tight at 1.4%, the same as 12 months before.
Rental rates in the city however, have sharply increased by a total of 3.5% since the the last 12 months, giving potential for high returns on investment, whilst capital growth has slowed.
What are your thoughts about investors flocking to Melbourne’s property market? Drop us a comment below. If you are interested in Melbourne’s potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at email@example.com!
CRYPTOCURRENCY: BANE OR BOON? Despite being declared legal tender in many countries across the globe, cryptocurrency continues to draw an equal measure of flak and fealty.
BREAKING NEWS: Yesterday, Bithumb, a South Korea-based cryptocurrency exchange announced the suspension of its deposit and withdrawal services after $35m worth of cryptocurrencies were stolen by hackers.
Bithumb is one of the busiest exchanges for virtual coins in the world and the second local exchange targeted by hackers in just over a week. The news sent ripples through the market with Bitcoin and Ethereum recording price falls, according to CoinDesk, a news site specialising in digital currencies.
Cryptocurrency: A Precarious Medium
This is not the first nosedive in the cryptocurrency world. Digital currencies — like the stock market — are highly reactive, recording multiple tumbles in recent history.
The price of Bitcoin, the world’s best known digital currency, has been tracking a downward spiral since the start of 2018, plummeting heavily from the Dec 2017 price of $18,960 to $6,762 at time of publication.
Still, cryptocurrency has risen from obscurity and is now legal tender in many countries across the globe. And, it continues to draw flak and fealty in equal measure.
The inherent nature of cryptocurrency and the world of blockchain ensures no possibility of double-spend as the system is built to be irreversible and transparent to the peers within its ecosystem. Cryptocurrency has also been touted as the hottest investment opportunity currently available. The potential rewards (and risks) are huge; its value can fluctuate by as much as a few hundred dollars in a single day and, potentially, one can either make (or lose) a lot of money in a short period of time. One can also trade in it, purchase goods with it, earn money from it (through mining), and it is recognised as a form of payment in some jurisdictions.
Cryptocurrencies are high-risk investments and, as such, their market value is highly volatile, fluctuating like no other asset’s. It’s easy to lose (or make) a tremendous amount of money in a day. Cryptocurrencies are not backed by a central bank/organisation, and are therefore unregulated to a certain extent. It is subject to price manipulation. Its security is questionable, as clearly demonstrated in yesterday’s Bithumb heist, as well as incidences of hacking in the past. Perhaps the biggest theft in the short history of cryptocurrency happened in 2014, when more than $450m in bitcoins disappeared from customers’ accounts in the Mt Gox exchange in Tokyo.
Rat Poison Squared
This year, Google, Facebook and Twitter announced a crackdown on cryptocurrency ads on their sites in a move to protect investors from fraud.
Bank of England Governor Mike Carney has been highly critical of cryptocurrency while Bill Gates has gone on record about betting against cryptocurrency, describing it as a “kind of pure ‘greater fool theory’ type of investment.”
More famously, Warren Buffet, in yet another rail against digital currency, described Bitcoin as “rat poison squared” and that it’s “creating nothing”.
“When you’re buying non-productive assets, all you’re counting on is the next person is going to pay you more because they’re even more excited about another next person coming along,” Buffet said in an interview with CNBC.
BitMex CEO Arthur Hayes, however, is unfazed by Bitcoin’s volatility, predicting that the cryptocurrency will hit $50,000 by the end of the year.
Cryptocurrency may well be the investment of the decade with incredible returns, agrees Virata Thaivasigamony of CSI Prop, a property investment consultancy with offices in Kuala Lumpur and Singapore.
“But it needs to approached with a combination of care and sheer ballsiness,” he adds.
“Investment is a very personal matter. For me, cryptocurrency pales in comparison with something tangible like property investment. Real estate has more stability, proving time and again to be a hedge against inflation and a great asset for diversification. Investing in real estate traditionally outperforms most asset classes in risk-adjusted returns. When compared to bitcoin, it is unequivocally the safer investment.”
As inflation rises, so, too, do rents and housing values. In an inflationary environment, real estate assets react proportionally to inflation. And real estate has incredible tax benefits and cash flow incentives.
Ultimately, investing in cryptocurrency — as with all other investments — is a gamble. A question to ask yourself before embarking on any investment is: how risk-averse are you?
We are colossal fans of property investment (duh!) and we make no apologies for it. Still, we remain curious about the many other types of investments out there and would love to hear your thoughts in the comment box below. If you’re a die-hard property investment fan like us, and are thinking of expanding your UK and Australia property portfolio, hit us up: we’ve got some good stuff for you.
Conventional wisdom, especially among Asians, dictates that you should invest in property. CSI PROP takes a closer look at investing in the Singapore property market and compares it to property in other markets overseas.
Property in Singapore is prohibitively priced
Being a tiny island surrounded by water on all sides with not much space available for construction, the only way to build is up — creating the familiar high-rise skyline of Singapore.
With the severe lack of land, it is no surprise that property prices in Singapore are one of the highest in the region — the second highest in Asia after Hong Kong, according to S&P Global Ratings.
The prohibitively high prices of property raises the bar for investors, only allowing for the more affluent section of the population, with ample capital, to invest in the market.
The Prime Minister of Malaysia, Mahathir Mohamad had announced recently that the Kuala Lumpur to Singapore High Speed Rail development will be postponed until further notice.
Following this announcement, envisioned property price growth for the Jurong area in Singapore and the Iskandar region in Johor is unlikely to materialize, much to the dismay of investors.
Government intervention has, so far, kept housing price growth in Singapore in check. A report by S&P Global Ratings found that cooling measures and an accommodative monetary policy have helped to control house price inflation.
Until recently, that is. Despite warnings from the government, house prices in Singapore surged by 9.1% over the past year, after nearly four years of price declines.
This led the government to pull the brakes on the property market yet again. Its most recent cooling measures — possibly the 12th, to date — have been the strongest seen in the island nation in five years.
The government has now slapped an additional 5% stamp duty on property purchases for individual home buyers and tightened limits for housing loans.
First-time buyers who are Singaporeans or permanent residents are exempt from the increase.
Foreigners/foreign investors now pay 20% on stamp duty compared to 15% previously, whilst entities will have to pay 20%, an addition of 10% to previous rates. An extra 5% acquisition tax has also been imposed on developers buying land to build residential properties, which can only translate to an increase in property prices for the buyer in the end.
The government also tightened loan-to-value (LTV) limits by 5% for all housing loans, ostensibly in a move to make property-flipping more prohibitive
Following the government’s drastic measures, new private home sales are expected to reduce by 15% to 20% year-on-year for the whole of 2018, reported Singapore Business Review.
As it stands, developers have already sold 41.7% less private residential units (654) than the previous month, according to the Urban Redevelopment Authority.
Developers volumes were 20.2% below the year before.
The recent action by the Government to control inflation may be good news to home buyers, but from an investment perspective, capital gains from investing in Singapore property may be lacking compared to investments elsewhere.
Poor rental yields
Singapore’s rental market remains in the doldrums, despite signs of a property market recovery from last year.
Property prices do not always have a direct relationship with rentals. Singapore’s rental market is very much driven by foreign demand, given that over 80% of Singaporeans own a HDB flat.
Overall gross rental yields for non-landed private homes from January 2017 to January 2018 hovered just around 3.2% — the lowest in a decade.
The weak rental market deflates returns on investment in Singapore property, lessening its attraction for investors. Stamp duties, property tax, legal fees and agent commissions further cut into profits.
In Singapore, residential property that you own, but are not physically living in (whether rented out or vacant) is taxed from 10% to 20% depending on the house value. Commercial properties have a flat tax rate of 10%.
In June, rentals for private condos and apartments in Singapore fell 0.2% per cent, while HDB rents fell 0.8% per cent in June from the previous month, with volumes continuing to decline as well, according to real estate portal SRX Property.
The rental income that you are able to earn from local property will be impacted by the high property tax, putting a damper on returns.
The United Kingdom
With less-than-stellar returns in Singapore property, it is no wonder that many investors are looking beyond its shores to overseas markets like the United Kingdom and Australia, which can be far more lucrative.
The UK currently faces a severe shortage of homes — in England itself, there is a backlog of 3.91 million homes, according to research by Heriot-Watt University.
The high demand and low supply for housing in the United Kingdom has driven capital growth. Local economies in the regional cities are booming due to initiatives like the Northern Powerhouse, which bring regeneration and infrastructure improvements to England’s North.
Cities in the Northern Powerhouse like Manchester have recorded price growth of an amazing 12.7% last year, with Liverpool following closely behind at 10.8%. This is an indication of the potential that these cities have to offer for the savvy investor.
Singapore currently holds the title of being one of the largest institutional investors in student property in UK and beyond, in recent years. Mapletree and GIC had spent a combined S$2.15 billion on student housing in the UK in 2016, in cities like Leicester, Birmingham, Nottingham, Oxford, Edinburgh, Manchester and Lincoln.
Just this month, Centurion Corp bought a student housing property in the British city of Manchester for S$33.66 million.
Australia faces a similar dilemma to the UK, with the last decade of construction failing to keep up with the country’s record population growth.
Melbourne, in particular, is one of the fastest growing cities Down Under. This city is slated to overtake Sydney as Australia’s most populous city according to the Australian Bureau of Statistics (ABS).
The Urban Development Institute of Australia warned last year that Melbourne could have a shortfall of 50,000 houses by 2020.
Commsec Senior Economist Ryan Felsman commented, “if you look at Melbourne there’s 120,000 people moving to it per annum, but only 75,000 houses being built.”
Whilst the 5 Australian capitals collectively experienced a 0.7% drop in capital growth for the 12 months leading up to May 2018, property in Melbourne performed beyond expectations, growing by 3.3%.
Singaporeans are putting money into Australia. Last year, Cushman & Wakefield reported that Singapore overtook China as the largest source of foreign capital for Australian commercial real estate, as the Chinese government tightened restrictions on overseas investments for its citizens.
Investments into Australia from Singapore quadrupled from about $1bn in 2010 to an excess of $4bn in 2017.
Alice Tan, Knight Frank Singapore director of consultancy and research commented, “Australia has been a popular overseas property destination for Singaporeans, especially for the recent two generations,”
“It continues to maintain its appeal as evident from recent survey findings from Knight Frank’s 2018 Wealth Report, where Australia ranked second on the list of top five destinations where Singapore Ultra High Net Worth Individuals (UHNWIs) plan to buy prime property in 2018,”
“Australia’s economic resilience, adaptability and 26-year record of steady growth provide a safe, low-risk environment in which to invest and do business,” she added.
Cushman & Wakefield regional director for capital markets in the Asia-Pacific region, Priyaranjan Kumar added: “Outside of Singapore, Australia and UK boast two of the most transparent and stable property markets globally for Singapore investors who are largely very institutional in their approach to investments.”
Savvy investors can jump on the foreign property investment bandwagon and take advantage of the supply-demand imbalance in countries like Australia and the UK for more rewarding returns on their investments.
What are your thoughts about investing in the Singapore property market? Drop us a comment below. If you’re interested to tap into the attractive potential that overseas markets have to offer, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at firstname.lastname@example.org!
Melbourne’s population is set to keep growing, driving the need for improved and expanded transport-related infrastructure. Opportunities continue to abound for the investor as the city’s planned and ongoing transport expansion leads to jobs creation, driving the demand for more housing.
Melbourne looks set to expand its transportation systems in the air, on land and beneath the ground to keep up with its rapid population growth — so rapid, in fact, that Melbourne is set to surpass Sydney as the largest city in Australia by 2031.
Major infrastructure development plans, totalling to over $60bn, are underway, with most projects set for completion by the 2020s and 2030s. For property investors, this translates as good news. Increased job opportunities and continuous effort to preserve Melbourne’s unprecedented quality of life will ultimately continue to attract home buyers and renters alike. After factoring in the chronic undersupply of houses throughout the city, paired with population and economic growth, investors should arrive at one solid conclusion: Melbourne’s property market is a promising one.
Air: Melbourne Airport Needs A New Runway
Melbourne Airport CEO Lyell Strambi has announced the need for a third airport runway to keep up with booming passenger numbers, following the airport’s celebration of nine consecutive years of passenger growth.
Over 35 million passengers passed through Melbourne Airport during the 2016/17 financial year, and this number is expected to almost double by 2033. This inevitably makes the establishment of the new runway one of Melbourne’s top priorities. The runway, set to operate by 2022, will not only reduce delays as more arrivals and departures take place, it will also supply numerous jobs during construction and operation.
Melbourne Airport is known to be a major employer in the local region. About 16,000 people are currently employed at the airport, with 67% of these jobs filled by people whose homes are within a 15km radius of the airport. It is predicted that by 2033, the number of jobs directly related to Melbourne Airport’s operations will grow to 23,000. Furthermore, with a burgeoning number of travellers arriving in Melbourne Airport, the tourism industry throughout Victoria will surely provide even more jobs!
Land: New Road Fills The Missing Link
What is also set to improve tremendously is accessibility by car, as plans for three separate roadworks commence throughout the state of Victoria. The North East Link, the largest of the trio and currently, the largest transport infrastructure in Victoria, is a $16.5bn construction that will fix the missing link in Melbourne’s freeway network. The project will shorten travel times between Melbourne’s north and south-east by up to 30 minutes, take 15,000 trucks off local streets daily and deliver kilometres of new walking and cycling paths. During construction (expected to begin by 2020) and early operation, thousands of jobs will be created.
Perhaps the most interesting transport development plan in Melbourne is the $1.3bn rail loop and driverless trains that will connect a proposed $30bn ‘super city’ at East Werribee, known as the Australian Education City. Preliminary works to assess the feasibility of this new heavy rail connection have been done as part of the ongoing proposal.
The multi-billion dollar project would see land at East Werribee become home to 30,000 dwellings in medium to high-storey towers, with universities, schools and a research and development hub. Up to 80,000 residents and 50,000 students are planned for the precinct which would see local and overseas universities collaborate to provide world-class education across several campuses. Global tech leaders, such as Cisco and IBM, are eager to snatch a piece of this colossal project.
Underground: Two New Rail Tunnels Need To Be Constructed By 2035
Melbourne City Council has proposed the idea of adding two new rail tunnels — Melbourne Metro 2 and 3 — under the city by 2035. The rail tunnels will join Melbourne Metro 1, the first stage of this underground transport expansion that has been slated to operate by 2025.
Council documents reveal that, should all go according to plan, the second tunnel that links Newport to Clifton Hill via Fishermans Bend, will operate by 2028 or earlier. This tunnel would quadruple passenger capacity for the Werribee line corridor and boost east-west accessibility. Those from the south-west and north-east, too, will find this line adding considerable convenience to everyday travels.
As described in the council paper, Melbourne Metro 3 could be built by 2035. The project would be the second airport rail line linking to Southern Cross, via Arden Macaulay and Maribyrnong. By 2028, trips to Tullamarine Airport is expected to be equal to that of Heathrow Airport today — three rail lines currently service Heathrow.
The various transportation schemes currently in the works will welcome the rising population in Melbourne. To the savvy investor, the widely cited population and economic growth within this coastal capital reads as a precursor for high housing demand. Those with concerns regarding the environmental impact of these projects can be rest assured that measures taken will be passed through strict approval processes before arriving at the least detrimental conclusion.
“Infrastructure projects – electricity, roads, airports, water systems and telecommunications are the foundations of modern economies. They have a huge multiplier effect (a dollar spent on infrastructure leads to an outcome of greater than two dollars)”*. Astute investors realise the mileage that such multiplier effects bring to the investment dollar. If you’re planning to leverage on that and are looking for fantastic property investment options in Melbourne, hit us at at 03-2162 2260 or email@example.com or text us in the comment box below!
The Hermes diamond and Himalayan Nilo Crocodile Birkin handbag at Heritage Auctions offices in Beverly Hills, California September 22, 2014. Image credit: REUTERS/Mario Anzuoni/File Photo
The iconic Hermes Birkin handbag is said to be a worthy investment, outperforming gold and the S&P 500 in investment returns and stability. CSI Prop investigates how this bag holds up against brick and mortar.
So the Birkin smashed the almighty Box Office of Buzzwords a few days ago when a raid at one of former Malaysian PM Najib Razak’s residences uncovered the haul of the century: 284 boxes of luxury handbags, a good number of which were in the signature Hermes orange hue.
The former PM’s missus, as the entire world probably knows by now, is a huge fan of the Birkin. Word on the street is that a rare, record-setting Hermes Birkin could be among the 284 handbags seized during the raid. The purse, which has white gold and diamond hardware, fetched an eye-watering $221,755 at an auction in Hong Kong in 2015 — the most expensive bag sold at auction at the time.
One wonders if Datin Sri Rosmah’s collection could give Victoria Beckham a run for her Birkins (note: Mrs B apparently has 100 Birkin handbags). Especially since a New York Times article reportedly quoted a broker’s estimation of Datin Sri Rosmah’s Hermes Birkin collection to be worth at least US$10 million.
Whatever the rumour, it looks like the cat’s finally out of the handbag…err, bag.
So, what has a handbag got to do with property, you might ask. Here’s our cheeky comparison between bag and brick — after all, both are investments in their own right and share many similarities. Or do they? You decide.
TOP 5 BRICK VS BAG
Time = Perfection
It takes Hermes artisans a minimum of 5 years training before they’re allowed to independently create a Birkin. The artisan makes a Birkin by hand from start to end, a process which takes possibly up to 48 hours.
A house, however, takes a good many months or years to complete, requiring the skill of experts from various fields in order for it to withstand way more than ahuff, a puffand a blowing down by the Big Bad Wolf.
Undersupply = Exclusivity
Birkins are expensive because they are scarce, with only 200,000 bags in circulation around the world. One cannot simply buy a Birkin without a purchase history at the store or knowing someone who has bought a Birkin, before getting on the wait list.
Property prices are also governed by the rule of demand vs supply. The UK is experiencing a critical undersupply of homes, and the government is facing challenges in achieving its goal of building 300,000 homes a year to even out the demand-supply balance. This continues to push property prices upward, making it increasingly difficult for first-time house buyers to get on to the property ladder. Oh, and for the record, you can’t own a property just like that either — you need to clear checks by the regulators first. Think AML, bank loan approvals, that sort of thing.
The Right Price
The price of the humblest Birkin starts at around $12,000. It could go all the way up to more than $200,000. That’s the price of a house in some parts of Petaling Jaya, according to a report in The Star.
Property is expensive, too; the greater the undersupply, the higher the price. Take Melbourne property as an example. AUD$500,000 could likely get you a landed property, but we’re talking some 16km away from the city centre. For AUD$550,000 you may get a 2-bedroom apartment in the stylish Palladium Tower apartments in Melbourne CBD, but apartments in this part of the city, at this price, is becoming a rare find (call us if you’re interested; we can hook you up).
According to research by Baghunter, the price of the Birkin had risen by an average of 14.2% since its launch, outperforming traditional investments such as the S&P 500 and gold markets. A Himalaya Birkin handbag made from the albino Nilo crocodile hide with white gold and diamond hardware and auctioned in 2014, was reported to cost as much as a 2-bed/2-bath apartment in the heart of Brisbane!
Interestingly, Savills predicts that property in the UK will grow by 14.2% over the next five years in spite of Brexit-related uncertainty. One might argue that this was a drop from the 28% price growth between 2013 and 2018 but, hey, that was during the good times. Like, pre-Referendum. We remain confident that the UK will recover after a spell of uncertainty following Brexit in 2019.
In Australia, meanwhile, the average price of a property in Melbourne had increased bymore than 6-fold from A$142,000 to A$943,100 today!
And we haven’t even talked about rental yields yet! Investment in the UK commercial property sector such as purpose built student accommodation and commercial care homes, can fetch handsome yields of up to 9%!
The Show-Off Factor
Of course, all said and done, one can debate that you could bring a Birkin anywhere and show it off to anyone, while a property is most ‘inconveniently’ tied to the location in which it is built.
OK, that’s true but, hey, you can’t live in a handbag, can you?
Birkin worshippers will probably have more compelling reasons why the Birkin makes a fantastic investment, and naysayers would have equally compelling arguments for rebuttal. Perhaps we could all put ourselves in the shoes (or sandals) of the current Prime Minister and think on how to have a bata (better) management of our finances. What are your thoughts? Share with us in the comment box below. Or if you think your money is better spent on property investment, give us a call at 03-2162 2260! Don’t be birkin up the wrong tree now!