Thursday, June 30, 2011

Profit margins for DBSS developers 'look high'

(SINGAPORE) Developers can make gross profit margins of up to 76 per cent from the public housing projects they develop under HDB's design, build and sell scheme (DBSS), data compiled by BT shows.
Five out of the seven DBSS projects launched since 2008 earned their developers gross profit margins of at least 28 per cent, BT estimates.

This is comparable to the 30-40 per cent gross profit margins that property groups can earn when they develop private mass-market projects.

But in some cases, DBSS margins were even higher. Sim Lian Group, for example, stands to make a gross profit margin of around 76 per cent from its recently launched Centrale 8 in Tampines - even after it announced prices that were lower than previously indicated.

In absolute terms, Hoi Hup Sunway reaped the highest gross profit for its 1,203-unit The Peak @ Toa Payoh - netting some $257 million in all.

On the other extreme were Sim Lian Group's 360-unit Parc Lumiere in Simei, and Qingdao Construction's 480-unit Natura Loft at Bishan, which earned the developers $45 million and $48 million respectively.

BT added the land cost and the building cost - using a generous construction cost estimate of $200 per square foot per plot ratio (psf ppr) - in order to calculate the total development cost for each project and arrive at the breakeven price. Industry watchers said that the construction cost could be as low as $160 psf ppr in some cases.

But the back-of-the-envelope calculations do not take into account expenses such as finance, marketing and administration.

The estimated total development cost was then matched against total sales revenue. For this, BT first took the average of the lowest and highest prices for each type of unit - three, four, or five-room flats - in a project, then multiplied the average cost of each type of flat by the total number of such flats available in the development.

Some of the projects still have unsold units, industry players said - although the numbers are not significant.

Analysts said that the profit margins look high. But they pointed out that since developers do not need to take 'public interest' in account, they will price the flats as high as possible.

'I am surprised that the margins are so high,' said International Property Advisor chief executive Ku Swee Yong. 'All the more reason for us to re-examine the raison d'etre for DBSS in view of the need for a massive supply of affordable flats to satisfy the past five years of pent-up demand.'

PropNex chief executive Mohamed Ismail Gafoor noted that private developers have a duty to their shareholders to maximise profit margins. 'So, I think the fundamental issue concerns HDB, which actually provides the opportunity for private developers to make this money.'

In particular, not having a check on DBSS flat prices skews the market, he said.

The DBSS scheme was first introduced by the government in 2005 to provide a more upmarket option for buyers as compared to basic build-to-order (BTO) flats, which are sold directly by HDB.

But DBSS flats are also supposed to be a more modest option compared to executive condominium (EC) units, at least in theory, Mr Mohamed Ismail said. This is because eligibility, ownership and resale restrictions for public housing cease to apply for ECs after 10 years - effectively making them private homes.

At Centrale 8 in Tampines, flats were initially priced at up to $750 psf - a price tag more commonly seen for private condominiums and higher than for most EC projects.

This contravenes the government's aim to provide various types of homes - from the most affordable BTO flats, to DBSS flats, then EC units and then finally private homes - for homeseekers with varying levels of financial clout, Mr Mohamed Ismail said.

Analysts have noted that the price gap between DBSS and EC units has narrowed in recent years.

Nicholas Mak, head of research at SLP International, noted that in addition to giving homebuyers more options, the DBSS scheme was also mooted to give private developers a slice of the public housing market (since the property market was in the doldrums six years ago) and also to allow for more innovative building and design for HDB projects.

No more property 'specialists' from Aug 1

PROPERTY agents will no longer be allowed to make grandiose advertising claims when new guidelines come into force in a month's time.
They will be banned from giving themselves misleading titles such as 'specialist' or 'expert'.

All figures in their publicity materials will have to be properly sourced and they will no longer be able to promise that HDB flat sellers will receive a certain cash premium.

The guidelines, which kick in on Aug 1, follow a rising number of complaints about misleading property advertisements which make exaggerated or unsubstantiated claims.

The Council for Estate Agencies (CEA) announced the new guidelines in a statement yesterday.

They apply to print, online and mobile phone advertisements. Agents who infringe the rules can be fined up to $75,000, suspended or have their licences revoked.

CEA's director of regulatory control Lee Say Kee said: 'The guidelines will provide clarity on the dos and don'ts of advertising, thereby raising professional and ethical standards in the industry.'

Some guidelines had already been spelt out in the Estate Agents Act last year, but the latest measures flesh them out in more detail.

Larger property firms told The Straits Times the move will help make sure members of the public are not misled.

Dennis Wee Group director Chris Koh said: 'The previous guidelines were still vague, and some of my agents have approached me for clarification.

'Now at least, they can refer to the official set of rules. It's also good to do away with terms like 'specialists' as there is no clear definition of it.'

PropNex chief executive Mohamed Ismail said the firm took steps in April to ensure the existing rules were followed to the letter.

We hired more staff to vet new marketing materials and also organised talks to educate the agents,' he added.

Bosses of smaller firms also welcomed the new guidelines.

Ms Janice Chan, director of Asia Breeze, said: 'It's obvious hogwash when people promise a guaranteed sale, so this is a step in the right direction.

'Now the question lies in how these rules are enforced.'

Mr Lee said the CEA will conduct random checks on publicity materials put up by property firms and their agents, and act on tip-offs from the public.

Some websites are already taking steps to make sure agents are really who they claim to be.

An iProperty spokesman said the company has made it compulsory for agents to display their registration numbers on its online advertisements.

The site has about 74,000 property listings from more than 14,000 agents.

House hunter Melanie Khoo, a 25-year-old creative executive, said the new guidelines could not have come at a better time as she is looking to buy a house this year.

'The more honest the ads are, the less time I need to sift through them and check if they are legitimate. I can also make better buying decisions then,' she said.

As well as advertising, the guidelines touch on the sale, purchase and lease of residential properties.

Since Jan 1, all property agents have had to be registered with the CEA, and since March 1, they have had to carry an Estate Agent Card which displays their name and licence number and recent photograph.

The CEA, which started work in October last year, is part of the Government's bid to raise the industry's professionalism through regulation and disciplinary powers.

So far, it has issued 23 letters of advice, which carry no penalty, to property firms and agents after receiving more than 100 complaints relating to misleading ads.

It took its first unregistered property agent to court earlier this month.

According to the latest published figures, there are 1,515 licensed property firms and 32,221 registered property agents in Singapore.

Anyone with information on property agents who break the rules can visit to file their complaints.

Wednesday, June 29, 2011

Resale home prices rising at faster rate: DTZ

RESALE home prices continue to head north in tandem with pricier new launches in the second quarter, as the latest DTZ Research report shows steeper gains across all segments of the property market.
Industry experts cite various reasons for this upward price trend as the effect of January's cooling measures begins to wane.

DTZ's head of South-east Asia research, Ms Chua Chor Hoon, said asking prices of resale homes are continuing to trend upwards as sellers benchmark their home prices against those of new launches.

But with more caution in the market due to the expectation of housing policy reviews after the elections and as price resistance increases, the pace of price gains is likely to moderate for the rest of the year, she added.

Mr Tan Kok Keong, OrangeTee's head of research and consultancy, added that the resale market is driven mainly by owner-occupiers, and they are now back in the market after the initial knee-jerk reaction to the cooling measures.

Cushman & Wakefield's senior manager of Asia-Pacific research, Mr Ong Kah Seng, said the overall price increase could be partly attributed to buyers snapping up resale properties, as such homes are cheaper alternatives to new sales.

Resale homes are also more attractive to some buyers as they offer immediate occupation or an instant rental income stream.

'The overall 2.5 per cent May price increase, however, does not reflect that the previous round of measures was ineffective, as this increase follows after consecutive months of subdued price gains following the cooling measures in January,' he added.

Suburban leasehold condos saw the largest jump, with prices rising by 3.9 per cent in the second quarter, from the previous quarter. This is a significant increase from the 0.8 per cent seen in the first quarter of the year, DTZ's analysis found.

Freehold condos in the prime districts of 9, 10 and 11 and luxury condos also registered higher quarterly resale prices, with a 3.3 per cent and 1.7 per cent gain respectively, against the rather flat prices in the previous quarter.

A monthly index by the National University of Singapore (NUS) has found resale prices of completed non-landed homes strengthening by 2.5 per cent last month compared with April's prices.

This also represented a faster pace of price increase as April's gain was a more subdued 1.1 per cent. While central home prices rose by 3.5 per cent, non-central home prices inched up by 1.7 per cent.

Cushman's Mr Ong viewed the higher price increases for central homes in the NUS index as possibly 'encouraging rather than cautionary' as this is the only segment with prices yet to return to their previous peak in 2008.
National Development Minister Khaw Boon Wan has been meeting developers and other stakeholders - sometimes even one-on-one - to get their take on the property market since he took over the housing portfolio in late May, sources say.
With the meetings, Mr Khaw is working to cover as much ground as possible in his quest to understand the various aspects of the real estate industry in Singapore before he formulates any new policies, the sources said.

BT understands that Mr Khaw has had in-depth, one-on-one meetings with key developers such as Far East Organization, City Developments, SC Global Developments and Wing Tai Holdings.

He will speak to more developers and will also meet industry bodies such as the Real Estate Developers' Association of Singapore (Redas).

In addition to meeting developers, Mr Khaw has also met the heads of some property agencies - including ERA Realty and Prop- Nex, who together handle more than half of all HDB resale transactions - as well as analysts and academics in a bid to get a good feel of the property market.

Sources said that Mr Khaw discussed the upcoming supply of HDB and private homes, the impact of the last round of government measures to cool the market (introduced in January) as well as other issues that impact Singapore's property market.

'It is Mr Khaw's style to consult widely and frequently,' said a spokesman from the Ministry of National Development (MND) in response to a query from BT.

'The meetings with the developers, contractors, architects, academics and property analysts are to help familiarise himself with the issues, and gain further insights into the property market. He intends this to be a continuous process of engagement.'

A source who was present at one of the meetings said that Mr Khaw acknowledged that he is not an expert in this field.

'He also assured that he is not a person who will change things just for the sake of changing things,' the source said.

Those present at the meetings were mostly impressed that Mr Khaw took the time to solicit their views.

'I have been in the business for umpteen years and this is the first time I've been asked for my views by the minister,' said an industry veteran who was asked to one of the meetings.

Mr Khaw took over the housing portfolio last month, and immediately started a blog where he promised to consult widely with experts, customers, industry players and Singaporeans. He has also used his blog to sound an alert that a huge pool of 53,000 new homes will be looking for buyers over the next few years. He also urged potential buyers to treat smaller- sized (or shoe-box) units with caution.

He also said in one post that privately built design, build and sell scheme (DBSS) flats should not be compared with ordinary HDB flats, in a response to public anger about flats with a price tag of up to $880,000 at a recent DBSS launch.

Said Citibank in a report this week: 'We believe his (Mr Khaw's) constant updates via the blog will help to alleviate some fear among potential buyers to prevent panic buying.' The report had a section titled The New Minister and His Blog.

Monday, June 27, 2011

Low rates to stay down

HOME owners can rest easy: Interest rates will stay at rock-bottom levels at least for another year, say economists. But that's just another 12 months of bad news for savers, who will have to keep looking for higher returns. The possibility th...
HOME owners can rest easy: Interest rates will stay at rock-bottom levels at least for another year, say economists.

But that's just another 12 months of bad news for savers, who will have to keep looking for higher returns.

The possibility that interest rates could be on their way up was raised after the Monetary Authority of Singapore (MAS) proposed a standard factsheet for banks offering home loans. It was meant to highlight how their loan repayments could rise if interest rates go up.

National Development Minister Khaw Boon Wan has also warned that interest rates cannot stay low forever.

Interest rates have fallen to record low levels and stayed there since the United States Federal Reserve slashed its own interest rates to near-zero, to boost growth amid the global recession.

The three-month Singapore dollar Swap Offer Rate, a popular benchmark rate used for home loans, hovers at just 0.2 per cent today, but was more than 3 per cent five years ago, while the three-month Singapore Interbank Offered Rate (Sibor) has stayed at a record low of 0.44 per cent since January.

The low interest rates here are in contrast to higher rates in the rest of Asia, as central bankers have hiked rates to combat the higher prices of food and fuel.

But Singapore has remained the exception. The MAS uses the exchange rate as its monetary policy tool to fight inflation, given the large export dependence of the economy.

As a result, Singapore's interest rates have tended to move closely with the US Fed funds rate.

There appears to be little upward pressure on interest rates here.

A Straits Times check with six banks that offer term deposits and home loans showed that none had raised interest rates or the spreads on its home loans this year.

Citibank said its one-year term deposit rate had even been lowered from 0.3 per cent to 0.25 per cent in January, and it continues to offer mortgage rates at Sibor plus 0.7 per cent.

A sign of uncertainty over interest rates could be evident if more home buyers turned to fixed rates rather than floating packages.

Mr Peng Chun Hsien, head of secured finance solutions at Citibank, said the proportion of applicants requesting fixed rate loans compared with those wanting floating rate loans has actually dipped from about one-third to less than one-tenth, with 'rates looking rather benign'.

The low-interest-rate environment has led to a surge in demand for property.

But buyers know that these low rates will eventually have to rise, said Mr Patrick Liew, chief executive of property agency HSR.

OCBC Bank economist Selena Ling said: 'While the fact is that interest rates will eventually rise, the question has been when.'

The possibility of a Fed rate hike at the end of this year had strengthened as the global recovery appeared to be on solid ground earlier this year, she said.

But a recent spate of disappointing economic data out of the US, an escalation of fears in Europe as Greece heads towards a debt default and the supply disruptions caused by the Japanese earthquake and tsunami have now put paid to that notion.

Ms Ling said: 'We are not looking for a big spike in Singapore interest rates. If anything, cues from the Bank of England and the Fed show that essentially because of a growth slowdown, they will keep monetary policy soft for longer.'

Barclays Capital economist Leong Wai Ho forecasts a Fed rate hike only in July next year.

'The rates rises will be immediate, so it is quite conceivable that by the end of July 2012 we could see mortgage rates in Singapore rise by 75 basis points,' he said.

So a rise in borrowing rates is imminent, but not immediate. And for now, home buyers appear little moved by the looming rate hike, said ERA Realty key executive Eugene Lim.

'Generally, people are aware that interest rates will go up, but because they are very, very low now, it is not a big concern for them. Buyers say: 'How far can it go up?' They believe that they will have time to take evasive action if necessary,' he said.

Gap in offer, asking prices widens, GCB sales fall through it

(SINGAPORE) Property agents have been reporting a slowdown in Good Class Bungalow (GCB) transactions as the gap between offer and asking prices widens. However, at least $750 million worth of deals have already been sealed so far this year for this...
(SINGAPORE) Property agents have been reporting a slowdown in Good Class Bungalow (GCB) transactions as the gap between offer and asking prices widens. However, at least $750 million worth of deals have already been sealed so far this year for this ultra-elite segment of the housing market on mainland Singapore. The final tally for the first half can be expected to be higher as more deals are sealed and caveats lodged.

Last year saw a record $2.3 billion of GCB transactions.

The latest deals in Singapore's GCB Areas include a 21,388 square foot plot (bare land which can be developed into a bungalow) in Leedon Park which was transacted for about $29.8 million or $1,395 per square foot (psf) of land area. The buyer is said to be a seasoned Singaporean GCB investor.

A bungalow on Dalvey Road too has been sold this month for $34 million or $1,688 psf while another property in Binjai Park changed hands last month at $17 million or slightly over $1,300 psf. The Swiss Club Road location is said to have seen a transaction recently for $1,150 psf involving a property on land of about 21,670 sq ft, which would amount to nearly $25 million.

Among Singaporeans who bought a GCB this quarter is Enviro-Hub Holdings executive chairman Raymond Ng Ah Hua, who is said to have acquired a property in April on Yarwood Avenue on sprawling land of 69,546 sq ft. At $59.5 million, this is also the biggest GCB transaction so far this year. The price works out to $856 psf. On site is an old bungalow with a tennis court, set amid greenery; the plot can potentially be subdivided for redevelopment into three smaller GCB plots.

CB Richard Ellis director (luxury homes) Douglas Wong, who specialises in GCBs, attributes the slower GCB market this year partly to withdrawal of speculative activity following the introduction of hefty seller's stamp duty (SSD) - of 16 per cent for those who buy a private home on or after Jan 14, 2011 and sell it within a year. The reduction in loan-to-value limit to 60 per cent for those already with an existing housing loan has also affected some GCB buyers who own multiple properties, he added.

'However, prices have remained firm as owners have holding power. In fact, their price expectations have kept on going up due to the limited supply of GCBs. As a result, many owners are not willing to sell unless the price is irresistible,' says Mr Wong. 'Also, if they were to sell their GCBs, they know it will be difficult to find replacement GCBs, plus the January cooling measures will apply to any new purchase,' he added.

Agreeing, RealStar Premier Group managing director William Wong said this situation has contributed to an increase in the buyer-seller price gap. Market watchers expect the slowdown to continue next quarter.

'Owners of some boutique GCBs (on about 15,000 sq ft land area) in prime areas like Tanglin are asking for $2,300- 2,500 psf but the price which buyers are willing to commit now is only $1,800-$2,000 psf,' according to Mr Wong.

A record GCB price of $2,037 psf was achieved in February for 16 Cluny Road.

Newsman Realty managing director KH Tan predicts GCB prices may rise about 10 per cent for the whole of this year.

Savills Singapore executive director and head of prestige homes Steven Ming said: 'While GCB pricing has already appreciated significantly over the past 12-18 months, we could still see some new benchmark prices being achieved over the next few quarters.

'At the end of the day, GCBs are limited in supply, while on the demand side, the buying universe has expanded beyond just the traditional buyers - wealthy Singaporean families, new IPO millionaires, captains of industry and high-flying professionals - to include ultra-high net worth new citizens keen to buy into this exclusive market segment.'

Among the big transactions this quarter is a bungalow on 33,551 sq ft of land in Ewart Park, which is understood to have been bought by a unit of Ng Bok Eng Holdings and some members of the Ng family in May for nearly $38.6 million or $1,150 psf. The late Ng Bok Eng, a philanthropist, was dubbed 'king of cloves',

Joel Lou, director and shareholder of Just Commodity Software Solutions, which provides commodity trading and risk management software solutions, is believed to be the buyer of a bungalow in Oei Tiong Ham Park which was transacted recently for $16 million or $1,188 psf.

The list of GCB transactions brokered by RealStar lately include deals at Dalvey Road, Maple Lane, Yarwood Avenue and Fifth Avenue.

GCBs, an exclusive housing form on mainland Singapore governed by stringent planning requirements, typically have a minimum land area of 1,400 square metres (15,069.50 sq ft). However, when GCB Areas were gazetted in 1980, they included some slightly smaller existing sites. These are still considered GCBs as they would be bound by the other GCB planning rules if they were to be redeveloped. For instance. such plots cannot be subdivided further and they cannot be built more than two storeys high.

Sunday, June 26, 2011

COV for HDB resale flats up again

After falling for two quarters, cash premiums paid for Housing Board (HDB) resale flats are on the rise again.

Fresh data obtained by The Sunday Times from real estate agencies shows the median premium, or cash over valuation (COV), paid in the April to June period has risen to about $30,000.

This is almost 50 per cent higher than the $21,000 median COV registered for the first quarter.

Last week's figures reverse the trend of COVs falling after the Government moved last August to cool the housing market by restricting financing and tightening home ownership rules.

With sustained high demand for homes coming up against tight supply, the median COV is now close to the official record of $30,000 logged in the third quarter of last year.

COV is the amount a buyer pays over and above the valuation of an HDB resale flat. Because it must be paid in cash, it has a significant impact on affordability, and it is often used as an indicator of demand in the market.

The new figures were sourced from three of Singapore's biggest property agencies - PropNex, ERA Asia-Pacific and the Dennis Wee Group (DWG) - which together account for about two-thirds of HDB resale market sales.

Spokesmen at smaller agencies - such as C&H Properties' key executive officer Albert Lu - said their data also shows an increase of median COV to about $30,000.

But agency bosses note that their numbers might be slightly higher than HDB's when official figures are finally released, because their sales data is captured at an earlier point of the buying process - when a buyer exercises his option to purchase a home.

HDB is set to release flash estimates for the second quarter this week.

The agencies' data shows the median COV rising across most estates, with the increase especially pronounced in popular areas such as Bishan, Central and Queenstown.

According to PropNex, whose figures are based on sales closed from April to mid-June, the median COV for all flat types hit an eye-popping $55,000 in Central, $54,000 in Queenstown and $35,000 in Bishan.

These are steep increases from the median overall COVs of $27,000, $23,000 and $29,500 logged in the respective towns in the first quarter, according to official HDB figures.

Property analysts say the turnaround of COV levels is due to increased buying interest this quarter, and this is also reflected in the rising median resale flat prices.

Data from all agencies shows prices inching upwards across all flat types.

Based on DWG sales, for example, the median price of four-room flats went up by $4,000 in June to $398,000 compared to first-quarter figures. ERA Realty data shows the median resale price of five-room flats rose to $573,000 before dropping to $535,000 in June, compared to $550,000 in the first quarter.

Experts say that even though valuations are catching up with prices, COVs are still rising because of two factors.

First, demand is still strong because home buyers priced out from the private property market - which has also seen record high prices - are turning back to the HDB resale market.

Second, the supply of resale flats is shrinking as more owners are also taking their homes off the market, thanks to the effect of the recent rule changes.

'Flat owners are reluctant to sell as many have been affected,' said DWG director Chris Koh, referring to recent moves stipulating that banks can lend only 60 per cent of a home's value on a second property.

This has made it difficult for any home owner who wants to buy a new home before he sells his current one, causing many of them to simply put off selling altogether.

C&H's Mr Lu said demand in the resale market will likely remain high even though HDB is ramping up the supply of new homes. This is because these will take time to be built and enter the resale market.

Another interesting trend that has emerged from the data is that sales volume has dropped sharply from May to June.

DWG brokered 664 transactions in May, and 516 so far this month. At PropNex, the number of sales dipped from 434 in May to 142 to date.

On top of the shrinking number of sellers, some analysts attribute the June phenomenon to what they call the 'Khaw effect', referring to the slew of remarks made by newly minted National Development Minister Khaw Boon Wan since he took office.

Market observers say developers, home buyers and investors alike are adopting a wait-and-see attitude as they await clearer signals from the ministry.

In particular, they are looking to see if the Government will move to cool the market further if prices continue their upward march.

Still, most of Mr Khaw's recent moves have been targeted at the market for new flats which cater to young couples, noted ERA Realty key executive officer Eugene Lim.

'Key demand drivers of the resale market are upgraders and downgraders, permanent residents and those who cannot wait for new flats.'

But he added that further big price hikes are not likely as prices have already hit some resistance, especially for the larger flat types.

Mr Lu said agents are reporting that young buyers are holding back from buying resale flats after Mr Khaw said that HDB will look into offering more of its flats in mature estates, and this will also help cool demand somewhat.

This is exactly what potential home buyer Yvonne Koh, 27, and her boyfriend are hoping for.

'We were thinking about resale flats but the COVs are going up. Now, there is a wider range of flats offered by HDB, so we will wait for the new flats,' she said.

Who the resale HDB flat buyers are

The profile of buyers driving the hot Housing Board (HDB) resale market has been revealed - and it seems private property owners and permanent residents (PRs) still make up a sizeable chunk of the demand for such homes.

Together, these two groups comprise almost 30 per cent of transactions, according to new figures released by National Development Minister Khaw Boon Wan in his latest blog post yesterday.

He also announced in the same posting that HDB will be combining the June and July launches of its new build-to-order (BTO) flats into one exercise in mid-July.

Earlier, he had flagged larger launches as a way to give flat buyers a wider choice of flat types and locations, and to reduce the potential number of unsuccessful attempts on their part.

The new figures released by Mr Khaw looked at the 2,162 HDB resale transactions closed last month.

They showed that a fifth of buyers were permanent residents (PRs), 8 per cent were private property owners and about a quarter - 23 per cent - were newly married couples, or first-timers.

The latest data surprised some industry experts, given that new rules last August introduced by Mr Khaw's predecessor Mah Bow Tan had restricted home ownership of resale flats for the first two groups.

Mr Mah revealed last year - before the implementation of the new rules - that 10 per cent of buyers in the resale HDB market were private property owners, while PRs made up 20 per cent.

The rules required private property owners who bought resale flats to dispose of their private property within six months. PRs who had overseas properties in their home countries also had to declare and dispose of them before they could buy an HDB flat.

Venturing explanations as to why these rules did not seem to have a deep impact, analysts said that people were likely selling private homes - with prices now at record highs - and buying HDB resale flats because it seemed a safer option for now.

Mr Colin Tan, research and consultancy director at Chesterton Suntec International, said that such buyers could be downgrading for good, or waiting for the market to correct before buying private homes again.

'There have also been a spate of en bloc sales, so these cash-rich owners are likely to turn to the HDB resale market,' he added.

PropNex chief executive Mohamed Ismail said the new ownership rules had not put PRs off.

'These families prefer to buy a home in Singapore as rental rates are high. They will do so even if it means disposing of their overseas property,' he said.

ERA Realty key executive officer Eugene Lim expressed surprise at the proportion of first-timers in the resale market. Based on his own agency's data, they made up less than 10 per cent of sales.

'The figures show that first-timers still feel the three- or four-year wait for new flats is too long and they are still looking at the resale market,' he said.

Mr Khaw noted that the data showed demand for all flat types was evenly distributed, with four- roomers enjoying an edge.

Second-timers were also the largest group of buyers, although they preferred smaller flats compared to first-timers who picked larger ones, he said.

'Earlier rounds of cooling measures, increased supply of BTO flats, latest BTO launch prices, the state of the economy and loan interest rates will combine to impact our housing market,' he wrote.

'The interactions are complex and do not work entirely in a mechanical way. There will be fluctuations and short-term volatility, at both volume and price levels. We will have to be patient to allow these changes to work their way through the market.'

Although Mr Khaw did not reach any concrete conclusions based on the data, some analysts said his musings could signal that something was brewing.

Mr Tan, for example, said that while such data improved transparency, the minister could be releasing it to justify future policy moves.

Friday, June 24, 2011

Moderate bids for Clementi residential site

A CROWDED field of 12 developers lined up for a residential site in Clementi but their moderate offers suggest an air of caution has entered the mix. Far East Organization topped the tender with a bid of $175.8 million - or $461 per sq ft (psf) ...
A CROWDED field of 12 developers lined up for a residential site in Clementi but their moderate offers suggest an air of caution has entered the mix.

Far East Organization topped the tender with a bid of $175.8 million - or $461 per sq ft (psf) per plot ratio (ppr).

This was 1 per cent higher than second-placed Centurion Re's $173.9 million bid but still below market expectations of up to $220 million. Other bidders included Chip Eng Seng, MCL Land, EL Development and Allgreen Properties.

Mr Ong Teck Hui, Credo Real Estate's head of research and consultancy, noted that while interest was keen with 12 bidders - more than the three to four bids in recent tenders - bid prices were not excessive.

'The (bids) for this site and the Flora Drive site suggest that developers could have become more selective,' he said.

'Mediocre sites could see low interest level with subdued bids while more attractive sites are able to generate stronger participation with moderate bidding.'

CB Richard Ellis Research executive director Li Hiaw Ho had estimated bids of between $214 million and $221 million - or $560 to $580 psf ppr - for the land at the junction of West Coast Link and West Coast Crescent.

This is the second residential site tender to close after the Government announced a bumper release of land.

The Flora Drive residential site tender in Upper Changi closed last week with three bids and at the lowest unit price since last November.

Some experts say that the bids for both sites indicate that developers expect prices to soften.

Colliers International's director of research and advisory, Ms Chia Siew Chuin, said the Clementi project is likely to break even at about $800 psf to $840 psf and sell for up to $940 psf.

This would be lower than prices achieved at nearby 99-year leasehold projects. Caveats lodged last month show that a unit at The Vision sold at $1,106 psf while those at Blue Horizon were transacted at an average of $970 psf, she said.

Mr Chng Kiong Huat, Far East's executive director of development and planning, said the proposed development will consist of one tower of serviced apartments, a second tower of one- to four-bedroom units and possibly some townhouses.

Time to slay the DBSS 'monster'

THREE years ago, when prices of flats under the Housing Board's Design, Build and Sell Scheme (DBSS) started hotting up, my colleague Chua Mui Hoong called for a stock-taking of the programme. She warned that when public housing is built by the ...
THREE years ago, when prices of flats under the Housing Board's Design, Build and Sell Scheme (DBSS) started hotting up, my colleague Chua Mui Hoong called for a stock-taking of the programme.

She warned that when public housing is built by the private sector, the Government will have a tricky time balancing the interests of home buyers and developers. The DBSS could become 'a monster of the market's making', she wrote, with developers profiting from high premiums slapped on homes and buyers seduced by unrealistic expectations of capital gains.

Today, the 'monster' is rearing its ugly head - in the form of a record-setting $880,000 five-room flat.

This was the 'indicative' price that developer Sim Lian Group had put on the highest-end units in its DBSS project Centrale 8 in Tampines.

A public uproar ensued over the prices. Three days ago, Sim Lian released a 'confirmed price range' of its Centrale 8 units with five-room units costing up to $102,000 less, at $778,000. Its three-room flats are now priced up to $445,000, down from $510,000 before.

Sim Lian insists the initial prices were just 'indicative' anyway. But property analysts say it is unusual for any developer to lower prices by such a big margin, and that the developer was bowing to public pressure.

Going by the complaints online and in letters to the press, the fundamental issue seems to be this: DBSS flats are built on HDB land and subject to HDB eligibility rules, and are public housing. If so, why are private developers allowed to profit from building them and charging sky-high prices?

And the nub of the issue: Who does the DBSS scheme benefit ultimately?

Back in 2005, the DBSS was announced by then National Development Minister Mah Bow Tan. The scheme essentially had three objectives.

First, to give private developers a slice of the public housing pie (the property market was in the doldrums then). Second, to pave the way for HDB projects to be gradually outsourced to the private sector. Third, to allow for more innovation in building and design, and give better value-for-money to flat buyers.

It was called a 'bold experiment'. For the first time, private developers would set prices for public housing. Previously, they could design and build them, but prices were set by HDB.

In the years that followed, the scheme won the support of the market. Developers were keen to bid for the land, often sited at excellent locations. They could price the flats to get buyers, who liked their designs and convenient locations.

The first DBSS project launched in 2006, The Premiere @ Tampines, also developed by Sim Lian, had flats priced from $138,000 for two-room units to $450,000 for five-room flats. Parc Lumiere in Simei launched in 2009 attracted long queues.

Why is the scheme in disrepute now?

For one, market conditions have changed. There was no supply crunch then. Families could buy new flats directly from HDB from its stock of unsold flats, or from its new Build-to-Order (BTO) projects. They could also buy from the resale market. The steady supply kept DBSS flat prices in check. Developers knew predatory pricing would leave them with unsold units.

Today, a tight supply situation has caused prices of new and resale HDB flats to soar. HDB's stock of completed flats are snapped up, and there are many buyers jostling for new BTO flats.

Developers naturally want to maximise profits and will price their flats at the highest levels buyers can bear.

Sim Lian paid about $260 per sq ft (psf) for the land. Analysts estimate the break-even cost for Centrale 8 at about $450 to $500 psf.

At this range, and at the original price of $880,000, or $750 psf, Sim Lian's mark-up was 50 per cent to 67 per cent. Even at the lowered price of $663 psf, the premium is still a hefty 33 per cent to 47 per cent.

Compare that to The Premiere, where land cost was about $114 psf, break-even cost was about $240 psf and the average selling price was about $300 psf - a profit margin of about 25 per cent.

So ,to answer the question of who benefits from the DBSS scheme, it seems that even if the HDB gets higher land tender prices from developers' bids, the developer is the biggest winner.

What of buyers? They were supposed to benefit from having more choices in HDB flat designs. But HDB flat buyers these days have many choices: Standard flats under the BTO scheme, or premium BTO flats with better finishes.

There is also the Design and Build scheme, where private architects design and build the flats. HDB has also built several high-profile BTO estates such as Dawson and the iconic Pinnacle at Duxton designed by award-winning architects.

Some buyers might have been lured into paying high prices for DBSS flats believing in their capital gains potential. But agents are sceptical about this, pointing out that DBSS estates are not gated like private condominiums or even executive condominiums. They do not have facilities like swimming pools.

The raison d'etre for the DBSS in 2005 must be reviewed in the light of today's market conditions and expectations.

That DBSS flats can still find buyers at prices of $700 psf is immaterial.

The bigger question is whether HDB should take back its role as developer of public housing. Implicit in the DBSS concept was the notion that HDB might eventually want to 'outsource' more of the developer's role - and risk - to the private sector.

While this may sound attractive, it ignores the reality that voters in an era of rising inflation and stagnating or slow wage growth want affordable public housing. They prefer the state, not the market, to provide this.

In any case, citizens will hold the Government - not private developers - to account if prices of public housing become unaffordable. It is thus politically illogical for the state to devise a scheme which lets private developers set high prices and enjoy fat profits from public housing, when the political price for those high prices will be paid by the Government.

The DBSS was indeed bold and risky. The risks are only beginning to be understood. The Government should just be bold again - and pull the plug on it.

The only losers will be developers, which can no longer look forward to 60 per cent profit margins from public housing.

Thursday, June 23, 2011

Two choice sites in Serangoon for sale

TWO choice sites in Serangoon are up for sale, with experts expecting healthy interest despite the recent bumper land supply rolled out by the Government. The sites, both of which are 99-year leasehold plots, can yield about 410 homes in total a...
TWO choice sites in Serangoon are up for sale, with experts expecting healthy interest despite the recent bumper land supply rolled out by the Government.

The sites, both of which are 99-year leasehold plots, can yield about 410 homes in total and are on the confirmed list of the government land sales (GLS) programme for the first half of the year.

A 0.87ha site at the junction of Upper Serangoon Road and Pheng Geck Avenue, next to Potong Pasir MRT station, can accommodate about 330 flats in blocks of up to five storeys.

The other sale site is a 2.84ha plot at Serangoon Garden Way and is zoned for landed housing. About 80 homes can be built on it, but strata-landed houses will not be allowed, the Urban Redevelopment Authority (URA) said yesterday.

Experts expect this site to receive a lot of interest, as demand for such properties has been strong given the limited supply.

Mr Nicholas Mak, head of research at SLP International, said that landed home prices have risen by 70 per cent in the past two years.

Bids of $480 to $520 per sq ft (psf) of land area - or up to about $160 million - can be expected, with between six to 12 bidders, Mr Mak said.

Mr Ong Teck Hui, Credo Real Estate's head of research and consultancy, expects bids to come in above $100 million - or around $320 psf of land area.

The site's proximity to the Central Expressway is a drawback as some homes could be affected by noise and dust pollution, experts said.

Mr Ong added: 'Nevertheless, as the market has been starved of landed housing sites and this is a Serangoon Garden location, we are likely to see fair interest.'

The last landed housing site put on sale was in September last year at Sembawang Greenvale. The plot, which could accommodate 115 homes, went for $546 psf of land area on average.

Another site at the junction of Chestnut Avenue and Almond Avenue that can fit 35 landed homes is expected to go on sale in October.

Mr Ong said the other Serangoon site is also expected to receive up to eight bids. However, developers are likely to be more cautious in view of the growing supply from earlier GLS tenders, impact from the possible raising of the HDB income ceiling and the increased supply of build-to-order flats, he said.

Mr Ong expects a top bid of $500 to $600 psf per plot ratio (ppr) - or up to $196 million.

This unit price is in line with the $607 psf ppr bid received for a nearby site sold in June last year, which has since been developed into Nin Residence

Khaw Boon Wan's blog postings rattle developers, but buyers welcome them

NATIONAL Development Minister Khaw Boon Wan's frequent blog postings about the property market are making some developers jittery, with one even branding the comments as 'scary'. Property players say Mr Khaw's online musings - which are coming a...
NATIONAL Development Minister Khaw Boon Wan's frequent blog postings about the property market are making some developers jittery, with one even branding the comments as 'scary'.

Property players say Mr Khaw's online musings - which are coming at a rate of up to four updates a week - blur the line between personal opinion and official policy.

They also fear his comments have already swayed market sentiment and are turning buyers more cautious.

But others in the industry welcome a new line of communication, while home buyers seem to relish the air of candour from the ministry.

One of the minister's most pointed blog entries was written earlier this month, when he fanned fears of more cooling measures by stating that 'sharp property price increases cannot go on forever'.

He also sounded an alert that a hefty 53,000 new homes will be looking for buyers over the next few years.

Mr Khaw used his blog to announce last month that the construction of build-to-order Housing Board (HDB) flats would be ramped up to a record 25,000 units this year, with the pace of building expected to continue next year.

Property agents and developers reported slower sales after Mr Khaw's remarks, while early signs indicate that land bids have turned cautious as developers await clearer moves from the Government.

Mr Jonathan Phua, general manager of business development at developer Tee International, said the minister's blog has cast a shadow over the market.

'I think, from now, most developers will be more prudent in bidding for land, and we can expect to see home prices stabilising,' he said.

A managing director of a boutique developer said the blog was 'scary' and 'too fluid', adding that the postings seemed like an unofficial press release.

He also said the blog, by hinting at more measures, had itself created a cooling effect, possibly reducing the need for additional intervention.

'There needs to be a clear line on whether his blog is just consultative or official,' he said on condition of anonymity. 'It is not fair to developers and stakeholders to try to keep track. I would prefer a more consistent direction coming from the National Development Ministry instead.'

The blog's address - at - seems to indicate that the entries are being written in Mr Khaw's capacity as minister, rather than merely reflecting his personal views.

Another blog issue that has developers concerned involves the review of HDB's $8,000 monthly income ceiling for buyers of new build-to-order flats.

Mr Khaw's blog has made the ceiling increase sound inevitable, from what was a 'review' previously, developers say.

However, no indication has been given on when this might happen, what the ceiling might be raised to or if the ceiling for design, build and sell scheme (DBSS) flats and executive condos will be affected.

Yet, developers say, they have to figure out a way to price these uncertainties into their land tenders.

Some are also uneasy about the time lag between when Mr Khaw's thoughts are published online and an actual policy shift. Small- to mid-sized companies that lack deep pockets are more concerned.

However, other developers are less perturbed over the blogging minister, saying the advent of social media meant the faster dissemination of information was inevitable.

Roxy-Pacific executive chairman and chief executive Teo Hong Lim said the basis of the Government's policy - to achieve a stable market - has not changed. The blog also provides another line of communication, making Mr Khaw more accessible, he added.

Mr Teo stressed that his company has always adopted mid- to long-term planning strategies to take it beyond any possible short-term measures or changing sentiments caused by Mr Khaw's blog.

'There are ways that we can manage our risks. For example, we can choose to buy freehold land to differentiate ourselves from government land sales sites or buy sites in locations where HDB flats will not be built... Life goes on,' he said.

Most home buyers also welcome the blog, saying its frequent updates and easy access - compared to sporadic official press releases - allow them to be more informed of possible policy shifts.

Marketing manager Leonard Chong, 28, said: '(Mr Khaw's) postings seem to be more candid, which makes him more personable... His frequent updates suggest that he is tracking closely what is happening on the ground.'

Tuesday, June 21, 2011

Asia tops the world in home price increases

HOME price rises in the Asia-Pacific region have been leaving the rest of the world in their wake over the past year, but the region's real estate boom is beginning to show signs of strain. Increasing interest rates, tighter bank lending rules ...
HOME price rises in the Asia-Pacific region have been leaving the rest of the world in their wake over the past year, but the region's real estate boom is beginning to show signs of strain.

Increasing interest rates, tighter bank lending rules and other cooling measures have helped dampen overheated markets from Shanghai to Singapore and Sydney.

However, experts say still-low interest rates mean the risk of bubbles re-emerging in places like Hong Kong and Taiwan remain.

Hong Kong Chief Executive Donald Tsang told Bloomberg in Melbourne yesterday that home prices in the Chinese city were 'quite frightening', with increases of 2 per cent a month over the past 30 months.

A Knight Frank report out yesterday found that global home prices rose only 1.8 per cent from a year ago - the lowest annual growth rate since the fourth quarter of 2009 - but values in Hong Kong, Singapore, India and Taiwan defied gravity, shooting up more than 10 per cent.

Hong Kong had the fastest first-quarter price growth of 24.2 per cent year-on-year, according to Knight Frank, which tracks 50 economies.

Singapore was fifth, with a 10.5 per cent jump, while China - using values in Beijing and Shanghai - was eighth, with an 8.4 per cent rise.

Russia, Dubai and Ireland were the worst performers, with price falls of as much as 14 per cent year-on-year.

Knight Frank's head of residential research Liam Bailey said half of the places surveyed had flat or negative price growth in the first quarter.

While Asia cemented its lead as the top-performing continent with a robust growth of 8.4 per cent, North America languished with a 0.4 per cent dip.

Those high Asian figures are sparking concerns over potentially overheated markets. Said Mr Bailey: 'While many housing market experts consider the United States to represent the greatest risk to the stability of global housing markets, our view is that Asia still poses something of a threat.

'There is still potential in China, Taiwan and Hong Kong for their housing markets to become overheated and bubbles to appear once more, if government intervention proves insufficient.'

Demand from the mainland is a key driver of Hong Kong real estate, with Chinese buyers accounting for about a quarter of all property purchases, he noted. This has sent prices surging 70 per cent since the start of 2009.

Hong Kong's government has since raised minimum deposit levels, increased land supply and imposed extra transaction taxes to curb rising prices.

Amid the worry over soaring prices, some experts point to early signs indicating that Asia's property boom is finally stalling.

Mr Vishnu Varathan, an economist at Capital Economics (Asia) in Singapore, told Bloomberg yesterday: 'Credit conditions have become more onerous, and that has helped take some steam out of the property market across Asia.

'Gains in property markets around the region have slowed, but they haven't decisively peaked.'

China's prices rose at a slower pace in major cities in April, even as they quickened in smaller ones.

In India and Australia, prices are also falling after the two countries implemented the steepest interest rate increases among major economies, while those in Singapore and Hong Kong have been experiencing a moderate increase.

Mr Bailey expects the global housing market's slowdown to continue, with prices bottoming in the fourth quarter, assuming Asian markets continue to cool and government intervention is successful.

However, a slow recovery in global house prices is expected next year, he added.

Top Global unit clinches Braddell Park for $85m

IT may be the school holiday season but activity continues in the collective sales market. A unit of Top Global Limited, listed on the Singapore Exchange, has clinched Braddell Park for $85 million or $665 per square foot per plot ratio. In the Su...
IT may be the school holiday season but activity continues in the collective sales market. A unit of Top Global Limited, listed on the Singapore Exchange, has clinched Braddell Park for $85 million or $665 per square foot per plot ratio.

In the Sunset Way location, Brookvale Park has been put up for en bloc sale with an asking price of $550 million or $950 psf ppr.

Braddell Park is a 45-unit apartment at Jalan Lateh, off Braddell Road and Upper Serangoon Road.

Under the 2008 Master Plan, the site is zoned for residential use with a plot ratio of 1.4 and an allowable height of up to five storeys. The sale was brokered by Credo Real Estate.

The site is freehold and has a land area of 91,360 square feet.

Singapore Land Authority has granted an in-principle approval for the sale of an adjoining piece of state land measuring some 6,540 sq ft, thereby allowing the purchaser to enlarge the site to about 97,900 sq ft and build up to a gross floor area (GFA) of 137,060 sq ft - sufficient for a new condo project with about 130 apartments averaging 1,000 sq ft, depending on layout and configuration, Credo said in a news release on Monday.

If the developer chooses to purchase the adjoining state land parcel, its effective land rate of the amalgamated site may be lowered to around $639 psf ppr.

'The locality has seen major transformations with NEX mall at Serangoon Central and the completion of the MRT interchange between the North-East Line and the Circle Line,' said Tan Hong Boon, deputy managing director of Credo.

'Coincidentally, the Woodleigh MRT station, which is some 350 metres away from the site, commenced operations today after being closed in 2003.'

Top Global is controlled by Sukmawati Widjaja, who has a 30 per cent stake in the consortium that is developing a retail/theatre, hotel and residential project on the landmark Capitol site.

The sale is subject to the approval of the Strata Titles Board, if necessary.

Brookvale Park, off Sunset Way, has been put up for collective sale with an asking price of $550 million or $950 psf ppr, inclusive of an estimated development charge (DC) of $16.77 million.

The 373,000 sq ft, 999-year leasehold residential site is zoned for residential use with a gross plot ratio of 1.6 and a maximum height of 12 storeys under Master Plan 2008.

If the successful developer fully utilises the 10 per cent bonus balcony allowance, the unit land price works out to a lower $892 psf ppr (including an estimated DC of $35.4 million), said CB Richard Ellis, which is marketing Brookvale Park's collective sale.

'At this price, the potential developer can expect to break even at below $1,400 psf,' said Charles Hoon, director of investment properties, CB Richard Ellis.

'New residential launches in nearby Bukit Timah Road such as Floridian and Jardin have recently transacted at a median price of $1,700 to $1,800 psf. The Trizon, situated nearby at Ridgewood Close, off Mt Sinai Drive, recently transacted between $1,500 and $1,800.'

The site enjoys easy access to the downtown Central Business District (CBD) and the Marina Bay Sands integrated resort via the Alexandra Expressway (AYE). The Orchard Road shopping belt is also easily accessible via Holland Road.

'Developers can take advantage of the site's unique hilly characteristics to incorporate balconies into their design scheme,' said Mr Hoon.

'We expect strong local and foreign interest, in particular, parties who are considering a 'freehold equivalent' site in prime District 21.

'Brookvale Park is likely to be the only condominium site available in this locality.'

CB Richard Ellis is the sole and exclusive marketing agent for this tender exercise, which closes on July 28 at 3pm.

No big new launches = lower sales

THE powerful combination of cautious buyers and a lack of large new launches continued to put a dampener on new home sales over the past week. Far East Organization sold 63 units across its properties - excluding Eight Courtyards - over the past...
THE powerful combination of cautious buyers and a lack of large new launches continued to put a dampener on new home sales over the past week.

Far East Organization sold 63 units across its properties - excluding Eight Courtyards - over the past week, with Woodhaven being the top seller with 46 units snapped up.

The 337-unit development has now shifted 125 homes at an average price of $931 per sq ft (psf) since its private preview began earlier this month.

Far East's Waterfront Isle sold three units while two units each were sold at Waterfront Key and Waterfront Gold over the week.

The cluster-housing project Eleven@ Holland being developed by Clydesbuilt Group off Old Holland Road has found buyers for 14 units at an average of $1,050 psf since its June 11 launch.

The Woods in Jurong has lodged 30 sales at an average of $485 psf over the same period while Far East and Frasers Centrepoint's Eight Coutyards in Yishun has sold 18 units this month.

Experts say the lack of large new launches at the weekend meant reduced interest and so lower sales, although they also point to an increasingly careful mood among buyers.

Ms Wendy Tang, Knight Frank's director of residential services, said the crowds at showflats have thinned, possibly due to the school holidays but maybe also in response to the cautionary comments about the market being made by National Development Minister Khaw Boon Wan on his blog.

'There has definitely been some impact, with some buyers holding back,' she added. 'Those not in urgent need of a flat are taking their time and going round to different showflats before making up their minds.'

The mood has not killed off sellers' expectations entirely, given the move to put Brookvale Park in the Sunset Way bungalow estate up for tender with an asking price of $550 million.

Marketing agent CB Richard Ellis said this works out to $892 psf per plot ratio (ppr), inclusive of an additional 10 per cent balcony allocation and subject to any development charge payable. A developer can expect to break even at $1,400 psf, it said.

Credo Real Estate also announced the $85 million - or $665 psf ppr - collective sale of Braddell Park yesterday to Top Global subsidiary Global Star Development.

The owners stand to receive between $1.56 million and $2.29 million each of gross sale proceeds. The site can be redeveloped into about 130 apartments of an average of 1,000 sq ft each, Credo said.