The State of Asian Private Residential Prices In This Pandemic
Palace magazine’s regular columnist Alexander Karolik Shlaen sheds light on the interesting developments in the Asian property markets during this global pandemic.
You have been following closely the Singapore property market over the past months. The current market, despite the health crisis and related “Control Breaker” in place, seems to be resilient especially on the high side (District 9, 10, 11). How do you explain such resilience?
A study by the IMF showed that Singapore’s private residential prices appear to have decoupled since 2013 from the global chase for yields. The demand by foreign investors for the local property was so strong that the Singapore regulators had to undertake extreme measures in recent years. This jubilant love for Singapore properties, said the study, which was released within the annual Financial Stability Review of the Monetary Authority of Singapore (MAS) end of last year, was behind the steep rise in prices. By targeting sources of risks including transactions of speculators, foreigners and corporates through stamp duties, the cooling measures undertaken by the local authorities since 2013 have limited excessive property price increases. In fact, it made the prime residential property undervalued. And it left the playground to mostly local buyers and investors. Simply put, high-end properties in Singapore is so undervalued that the wealthy foreigners don’t mind paying the 20 per cent stamp duty. Read about Singapore’s CCR property market here.
What are some new developments in Singapore which you feel buyers should be paying attention to?
I feel that the secondary market is so much undervalued that no new launch can compete with the better located and lower-priced secondary properties. So, I would look at the prime secondary properties on the market. For the location and quality-wise, my preferred new development would probably be the Boulevard 88 and 3 Orchard-By-The-Park.
How is Sentosa doing? It is now much of a resale market. What are the latest trends and highlights?
Sentosa is by far is one of the most undervalued of high-end secondary markets. It is further depressed because the local buyers tend to overlook the leasehold properties, and Sentosa is only just that a 99-year leasehold. Foreigners do not have as much issue with the leasehold as in many other countries there are even shorter leases on land and that doesn’t discourage buyers to buy in prime locations of Hong Kong, PRC, Bangkok or London. Hence, Sentosa has great deals to be picked up by smart investors.
Do you envision the Singapore government to ease within the next 8 to 10 months some of the real estate market cooling measures put in place since 2012?
I wish so, but it is unlikely to happen simply because the prices are already very realistic if not undervalued, due to all these cooling measures. Hence, the prices do not even go down much despite the unprecedented economic hurdles brought upon us by the epidemic. So, it does not look like the property market is in destress and hence the government is unlikely to lessen the measures. The new launches are priced to the higher land prices which developers paid in the last few years amidst the collective sales fever. The developers though seem to offer discounts to have a faster turnover, and eventually, the price increases are passed on to buyers of the new property. But the price increase did not materialise yet in the resale segment! Last year, the average price of new homes sold in the prime locations (CCR) stood at just under S$3,000 psf, versus the average transacted price for resale units which are just a tad above S$2,000 psf. These Singapore prime property prices are significantly cheaper if compared to the similar type of locations in Hong Kong, Manhattan, or London.
Hong Kong is currently facing more political turmoil with China intending to play a larger role in the city and ending de facto the One Country Two Systems policy put in place in 1997. What consequences for Singapore? Could this affect substantially the office and residential property market in 2021 and after?
Hong Kong is probably in the same situation as the rest. Despite its current troubles, its property market is still not baulking a zilch, in truth, prices are still rising even in this global pandemic. There will always be individuals that will feel safer away from the Communist Government and these will be some PRC citizens. But overall, it seems that there is not enough supply of residential in Hong Kong and the strong demand is still outstripping it. Office space is a different story. There will be a slowdown in business as in any other country where companies will try to engage their staff to work from home whenever is possible. Hence, it is possible that the demand for offices will ease.
Within SEA, how would you rank Malaysia and the latest real estate developments in Kuala Lumpur? Do you see Penang emerging as a secured and promising market to invest?
Malaysia did not materialise as a good investment for retail investors in recent years, generally speaking. Residential property did not appreciate and quite the opposite; seems to depreciate as the secondary market in both KL and Penang is weak. Furthermore, the local currency depreciated quite a bit against all major currencies, adding to the loss of investors.
You have been bullish about the Philippines property market and especially second-tier cities there as investment vehicles. What have been the trends in the past two years? What advises would you give to investors looking at this specific market?
Philippines property market is doing well, especially in the secondary market where there is still never enough properties to accommodate the increasing middle class. Thousands of Filipinos are joining the middle class daily and this transition is only accelerating. This is going to be the biggest growth story of the residential property market in this huge country of over 100 million population. The government is smartly decentralising away from the over-populated and traffic-clogged Metro Manila and provincial centres are growing in importance and in population day by day.
What is the best advice you would like to give to real estate investors who are facing one of the worst economic and health crises?
Do not panic and do not worry about your residential property value reduction if you are a landlord. The more gyrations in the financial markets, the more people will tend to switch to invest in a much more stable property market. If you are looking to buy a new property, naturally now is a great time, as there are discounts on the seller side and the interest rates are the lowest and it will stay so for a long while. It is a great time to consider investing in property.
About Alexander Karolik Shlaen
Alexander Karolik Shlaen, Executive MBA, is the founder of the Singapore-based Panache Management Pte Ltd which represents Aston Martin, Tonino Lamborghini and Formitalia design lines in Asia. Panache Management is involved in property & technology investment and provides luxury interiors and design for exclusive real estate, private jets and super yachts. Shlaen sits on the board of directors of a Singapore stock exchange traded company. He has appeared in various regional & global media and has written the Luxury Expert columns of regional magazines since 2009. Shlaen was also the chairman of the judges’ panel for Asia Property Awards and is frequently sought to attend established business forums and events. Learn more on PanacheManage.com