Singapore
Unlike Hong Kong, Singapore's slower capital value growth has been amply underscored by the health of its rental market, with demand driven by tenants coming from overseas.
Both capital and rental value price growth for the SEU slowed in the first half of 2012, to 1.5% and -1% respectively, compared to 3.6% and 4.2% in the previous half year. It appears that government attempts to cool the markets by increasing supply may be working.
The rental market has suffered only inasmuch as expatriate housing budgets have shrunk due to multinational companies’ cost-cutting measures. This temporary effect is expected to continue this year, resulting in 2012 rent falls of -5%. But this will be ameliorated in the longer-term by high levels of immigration, which the Singapore government continues to encourage.
Nonetheless, the mainstream market remains strong, buoyed by a strong economy, growing wages and one of the highest home ownership rates in the world. This will prevent any more significant slowdown in the short-to-medium-term.
Paris
Until the end of last year, Paris had enjoyed some of the strongest house price growth in the old world cities we monitor. These values outstripped annual rental growth and were driven by investor appetite, as well as an influx of wealthy international buyers.
But this came to a halt in 2012, with capital values falling by -3.4% for the SEU in the first half of the year. This softening is partly due to the withdrawal of a previous economic stimulus, implemented in response to the eurozone crisis. The crisis itself has also discouraged some overseas investors, who are reluctant to put money into euro-denominated assets.
In addition, the appointment of François Hollande as the president has brought a change in policy toward the wealthy. Proposals include increasing tax on rental income from 20% to 35.5% (retrospective to
1 January 2012), and raising capital gains tax when people sell properties, from 19% to 34.5%.
Meanwhile, those who have property and other assets in France worth over €1.3 million are facing significantly increased annual taxes.
New York
Unlike much of the rest of the United States, New York is a supply-constrained market. This has helped it through the national property downturn, which began in 2006. It has experienced much lower repossession rates than other parts of the US and, although values fell substantially after 2008, the falls have not been as great as in other US cities.
In the first half of 2012, the value of real estate occupied by the SEU grew by 1.1%. This growth was concentrated mainly in the higher price bands. A lack of new condominium supply (which overseas buyers can purchase more freely than co-operatives) has been a key driver. Upward price pressure is likely to continue as foreign buyer numbers are increasing, taking advantage of safe-haven credentials and a weak US dollar.
Rents for the SEU increased last year by 8.2% and continue to rise. At June 2012 exchange rates, New York is now the most expensive of our 10 cities in which to rent. So, as interest rates fall to record lows, occupiers are now looking to the sales market as a more affordable alternative. Bold, income-seeking investors might also follow their cue.
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