Latest property measures will boost leasing activity, say analysts

Property analysts on Wednesday said the government’s latest measures aimed at the public housing resale market will boost leasing activity.

However, they are unlikely to affect the private residential market significantly in the coming months.

The new rules bar new permanent residents (PRs) from buying HDB resale flats till three years after they have obtained their permanent residential status in Singapore.

Property analysts said those looking to sublet their public housing flats could be first in line to benefit.

PRs account for about 20 percent of transactions in the HDB resale market.

Chestern Singapore said the majority of new PRs are likely to lease HDB flats in view of the restriction.

Donald Han, Chestern Singapore’s managing director, said: If you look at participants, PRs (in the HDB resale market), they are typically of a different category compared to PRs looking to buy private property, or even the mass market component.

“If you look at price-point basis, entry level for private property resale would probably be about S$800 per square foot and above, whereas your price point for entry to the HDB can be as low as S$400 psf, so it is about half in terms of affordability.”

With the higher demand for rental units, property consultancy Savills said HDB could perhaps consider setting up a private Real Estate Investment Trust catering to rental housing needs.

Alan Cheong, senior director of research & consultancy at Savills Singapore, said: “It will be like HDB building excess flats, renting out the flats to PRs, Singaporeans-in-transit, or even non-PRs — EP (employment pass) holders.

“You get, maybe, 8 to 9 percent yield, pretty healthy return, then allowing CPF holders to subscribe in the form of an HDB REIT, so they can reap the return and keep the money within the CPF.”

Looking ahead, some analysts said they expect 10 to 15 percent of new PRs to rent or buy units in the private home market, and that is unlikely to drive up rental yield or home prices substantially in the next few months.

Currently, rental yield for private properties is averaging around 3 to 4 percent, while that for HDB resale flats hovers around 6 percent.

Meanwhile, the demand for private homes may ease, especially from upgraders, who accounted for the bulk of buying activity in the suburban areas in recent years.

Market watchers projected that HDB resale prices will fall by 5 percent on average in the next two years, and that could affect the upgraders’ ability to buy private homes.

Analysts said some of the measures could also affect buyers’ ability to afford larger units in executive condominium (EC) projects. But overall, they expect EC demand and prices to remain fairly stable in the next three months.

Source : Channel NewsAsia – 28 Aug 2013

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