Property market: Dark clouds ahead?

SINGAPORE - Stick a hand out anywhere in Singapore and you're likely to touch a millionaire. A paper millionaire, at least.

The Republic has the highest concentration of millionaires in the world. Try 17 per cent of all households here, according to a 2012 report by The Boston Consulting Group.

But so much of it is tied down to property. Spoils from property account for 58 per cent of their overall wealth, according to a 2013 Barclays report.

Things have been good after the global financial crisis in 2008 with money pouring in.

But market watchers say things are set to change with forecasts of higher interest rates and more units coming into the market. More than 30,000 units, including HDB flats, will be completed by the end of the year.

And those relying on rents to pay off their investment properties may have no idea the water is slowly coming to a boil. Real estate agents The New Paper contacted have seen the signs.

In 2006, property agent Harold Teo would regularly have about 15 groups of people viewing a condominium unit for rent. Now the game has changed.

He said: "Now it's 15 landlords looking for that one elusive tenant. And those who are less stubborn will even slash prices to secure a tenant."

They are even willing to reduce rent by up to $500, said Mr Teo, for an apartment originally demanding $4,000 a month.

What has changed? Mr Teo calls it the perfect storm - fewer foreigners, less money and more units.

Salary levels raised

In 2011, one fifth of Singapore's 142,000 employment pass holders were affected when qualifying salary levels were raised.

"Singaporeans demanded that fewer foreigners be allowed in and that's already happening. Then those who do come in have less money to spend. To top it off, potential tenants have more to choose from," he explained.

Potential tenants don't even bother bargaining for a better price, said property agent Jansen Tan. "They will just call to enquire about the price. If they are not interested, they can easily find another unit somewhere else," he said.

More than 16,000 private property units will be completed by this year. While the rental index crept up 0.8 per cent in the first quarter of the year, it was only marginally higher than the 0.7 per cent increase int he final quarter of 2012.

"It is stable now, but the downside is greater because there has been a record number of new apartments. The supply is greater than the rate of foreigner inflow," said Chesterton Suntec International's director of research and consultancy Colin Tan.

He added: "But the impact is felt progressively. For instance, the wait for a tenant might take four weeks instead of three weeks."

Real estate agents said the take-up rate of rental units in town - districts 9, 10 and even 15 - is the worst hit. Rental in town for a 1,400 sq ft unit is at least $7,000 a month. But landlords are not budging. For now.

"Even suburban apartments have been hit," said Mr Teo, who has a listing at One Leicester condominium at Potong Pasir. "I had an owner refusing to reduce rent for a studio unit from $3,100 to $2,900. The unit has been vacant for two months. Meanwhile, those owners with existing tenants are cutting their rental rates to keep them. There aren't enough tenants."

Chesterton's Mr Tan pointed out that the new property tax rule next year may mean that landlords wouldn't want their units to remain vacant for long.

From Jan 1 next year, they will have to pay the extra property tax as if they are not renting their units. The concession for vacant rental units has been abolished. And marginal property taxes for investment properties will be increased from the current 10 per cent to 12 per cent to 20 per cent.

"This means that they will have to find a tenant and may have to aggressively offer a lower price," said Mr Tan.

S'PORE DEBT LEVEL

2012 - 75 per cent of GDP

2000 - 38 per cent of GDP

Lsat year, property debt was 111 per cent of household income, according to a Standard Chartered report.

linheng@sph.com.sg

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