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28th December 2014

Singapore Real Estate

Aussie properties hot in Singapore

Nearly 100 launches this year, more than double the number last year

Source: Straits Times / Invest

Local investors have had a wealth of choice when it comes to Australian property this year, with a wide range of projects on offer.

Almost 100 developments Down Under have been launched in Singapore over the past 12 months, more than double the number last year, said Mr Gavin Sung, head of international property sales (Asia-Pacific) at Savills.

They are getting a warm welcome from local buyers, who are showing an increased appetite for overseas real estate in the wake of tough cooling measures and falling returns at home.

Britain has long been the preferred destination but the lure of bricks and mortar in Australia is exerting a strong pull.

"More Australian developers have found it a good opportunity to market their properties overseas, and local agencies here have been looking for more income streams and selling international properties," said Mr Sung.

The larger-scale launches this year included the 100-storey Australia 108 condo in Melbourne being developed by Aspial Corp unit World Class Land, the 92-storey Aurora Melbourne Central integrated project by Malaysian developer UEM Sunrise and Hiap Hoe's Marina Tower Melbourne mixed development.

World Class Land sold 133 of 193 units at the 1,105-unit project at its launch weekend last month, with prices from A$410,000 (S$440,000) to A$580,000 for one-bedders and A$520,000 to A$899,000 for two-bedroom units.

More than 95 per cent of 941 residential units at Aurora Melbourne Central were sold about a month into its October preview, with 15 per cent of units sold snapped up by Singaporeans. Its one-bedders have an average price of A$418,000 while its two-bedroom units cost A$605,000 to A$792,000.

Marina Tower Melbourne, which comprises two residential blocks with 461 units in all and a 269-room hotel, is 75 per cent to 80 per cent sold. Its one-bedders cost A$400,000 to A$490,000 and its three-bedrom units are A$1.25 million to A$2 million.

Most Singapore investors have been buying apartments, but landed properties have been catching on as well, said Mr Peter Thng, executive director of Reapfield Property Consultants.

A four-bedroom landed home, typically costing about A$370,000 to A$480,000, can be cheaper than a two-bedroom apartment.

While capital gains vary across the states and the types of housing, an investor can expect capital gains of 4 per cent to 8 per cent a year, with landed properties leading the pack, said Mr Thng.

Gross rental yields are about 4 per cent to 6 per cent in Melbourne. Net yield can be about 2.5 per cent to 4.5 per cent a year once expenses such as body corporation charges, similar to maintenance fees in Singapore; rates, which are like conservancy charges; and management fees are taken into account, Mr Thng said.

Gross rental yields are slightly lower in Perth and Sydney at about 3 per cent to 5 per cent, due to higher purchase prices in Sydney and Perth's smaller population. Vacancy rates in Sydney and Melbourne are about 2 per cent to 4 per cent, and slightly higher in Perth.

Rental demand is expected to remain strong due to sizeable inward migration into key cities and migration from overseas, experts said.

There is a considerable housing shortage in Sydney and Brisbane, noted Mr Peter Summers, chief executive of Australian developer AVJennings.

While a striking number of residential units in Melbourne are coming onstream, most banks in Australia regulate the number of sales that can be achieved offshore, which artificially ensures the market is not overstimulated with offshore buyers and investors, said Mr Andrew McCasker, property finance head of South and South-east Asia at the National Australia Bank. "That said, the more supply that comes on the market, the more pressure placed on rentals," he said.

Australia has become an even more attractive investment destination in recent months, thanks to a fall in interest rates there, which means cheaper mortgages, and the weakening of the Australian dollar against the Singapore dollar, noted Mr Sung.

Other pluses are forecasts of population growth and the vast amounts of land still available for development. It is also relatively cheaper compared with other markets around the world, including New York and London.

"Investing in Australia is quite blue-chip in nature and returns are predictable," said Mr Thng of Reapfield.

-By Rennie Whang