Tuesday, August 30, 2011

Resale home prices post slower growth

OVERALL prices of resale non-landed homes crept up marginally last month, largely fuelled by a stronger rise in prices of so-called shoebox units.
But even prices of these tiny homes, typically about 500 sq ft or less, rose at a more subdued pace of 1.4per cent, compared with 2.4 per cent in June.

Flash estimates for the Singapore Residential Price Index (SRPI), which monitors transactions of non-landed completed projects, indicated overall price growth of just 0.2 per cent, lower than the 0.7 per cent recorded in June.

Ms Petra Blazkova, head of Singapore and South East Asia research at CB Richard Ellis, said she has observed a dip in demand for small homes.

But she added that this fall in interest might be a blip caused by uncertainties brought on by the economic crises in the United States and Europe.

'In the long term, we will continue to see more interest, possibly until 2012. The supply of such homes remains steady and smaller units are seen

as a more affordable class of property for those

who are interested in putting their money in property,' said Ms Blazkova.

Knight Frank's research head, Mr Png Poh Soon, agreed. He said property buyers may also be banking on the long-term potential of such homes, especially if they are in good locations, such as the upcoming commercial hub in Paya Lebar.

Prices of suburban homes were fairly stable, moving up 1.2 per cent, unchanged from the previous month, while prices of homes in central districts declined by 1.3 per cent.

While the figures indicate that buyers are still keen on resale suburban properties, analysts anticipate that revisions to the income limits set for public housing will dampen that demand.

The higher income ceiling will allow more home hunters to buy HDB flats.

Many industry experts say the true effects of this policy change will probably be felt when newer public housing projects are rolled out.

They said that in the next few months, prices of resale homes could reflect a shift to public housing from buyers who would have otherwise chosen to purchase private property.

Market watchers say the latest 0.2 per cent rise in resale prices is a good sign, and indicates that the market is finding some balance despite the uncertainties clouding buyer sentiment.

Some buyers are more cautious about what their next move will be.

However, Mr Png said he has observed another group of home purchasers who are taking advantage of what they deem to be a good investment opportunity.

'(This) group is made up of people who still believe that with interest rates remaining low, property is a less volatile investment than putting money into the stock market.

'Even if prices drop, these people will hold on and rent their apartments out.'

Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-East Asia, expects slower growth of prices in line with doubts over global economic conditions.

Although he expects the resale market to face some fluctuations, he said it is likely prices for this segment will stabilise throughout the rest of the year.

Dr Chua said prices for both new and resale property might appreciate between 1.5 and 2 per cent in the remaining quarters, growing 7 per cent for the whole of 2011.

Subdued price rises seen for upgrader private housing

THE upgrader segment of the private housing market is likely to see more subdued price increases going ahead, Wing Tai chairman Cheng Wai Keung said yesterday.
This is because the upcycle for this segment is at a mature stage and there is a higher risk of impact from policy changes to public housing, he continued.

There is, instead, more room for price growth in the high-end market - driven by wealth generation, liquidity, limited supply, and given that prices generally are still around their 2007 levels.

Giving his take during Wing Tai's full-year results briefing, Mr Cheng said of prospects for the upgrader or mass-market segment: 'I cannot say this is the peak of the market but the probability that it will remain high is shorter by the day. Everything has a cycle, and if you continue to be in the upcycle, the probability that it will turn is so much closer. I cannot predict when it is going to be coming. But all I can say is the longer you stay at this level, the higher the probability that it will turn.'

He posed another question: 'If developers are not seeing that the market is toppish, why are all developers now pushing out their (upgrader) projects as quickly as possible?'

Besides the maturity of the upcycle in this segment, Mr Cheng notes that the upgrader market is more affected by the Housing & Development Board market, which may potentially see excess supply based on the step-up in launch supply of new HDB flats this year and next.

Analysts have discussed at length the likelihood of a siphoning-off in demand from the entry-level private condo market to the public housing market.

Wing Tai deputy chairman Edmund Cheng also told BT that winning land bids for mass-market private housing sites at state tenders are too high, leaving little profit margin for the developers.

He expects bids to come down in the near future, describing the current phase as the tail end of strong demand for homes in this segment. 'The last one and a half years, two years, you can see there's so much demand ... stronger than the supply side. It is coming to a tail end. So it's important that government must balance it to ensure that there is no oversupply ... (it) does not flood the market (with sites).'

Wing Tai will be more circumspect when bidding at land tenders. As Mr Cheng Wai Keung said at yesterday's analyst and media briefing: 'I am not going to compete with 15 developers for a piece of land. Just look at the lowest and highest (bids); the range is so wide; someone is making a mistake,' he added.

He said: 'In a property cycle, in the early stage, you can get any land you want. But when you reach the maturity stage of the cycle, you have to be more selective whether you're able to see value.

'I believe that for the upgrader market, increase in price will be a bit more subdued so I think that the upside would be limited.

'For the high end I don't see that there is any adjustment. I think the low end may have a higher probability of performing not as (well) as the high end.'

For now, Wing Tai still has stock of high-end residential projects in Singapore which it will continue to sell - including two new projects along posh Ardmore Park, L'VIV in Newton which is under construction, the completed Helios Residences at Cairnhill Circle, and Belle Vue Residences at Oxley Walk.

Mr Cheng also pointed out that Wing Tai's gearing has been declining steadily. 'We are most well prepared to take bold action.'

Overseas, the group will continue to invest in Malaysia. 'We believe land there is value for money; risks are not very high. And we will continue looking at China.'

Saturday, August 27, 2011

Condo heroes

It is no longer enough for condominiums to boast a pool, gym, clubhouse and tennis court. Developers are adding fancy facilities such as a spa, sports bar, rock-climbing wall, luxury dining room and even a bird-watching tower to make their projects stand out.
Take the 417-unit Soleil@Sinaran condo at Novena, which was recently given its temporary occupation permit.

It has its own spa on the premises, run by well-known local chain Aramsa Spa. Soleil is believed to be the first in Singapore to tie up with a spa operator to run the facility in a condo.

Adding to the wow factor is that the swanky spa consists of three wooden- decked pavilions that each has two massage beds, a hot tub and a shower area, located in full view of the pool.

They are a striking sight amid the condo's lush greenery and although they are out in the open, curtains can be drawn for privacy.

The spa pavilions are not the only fabulous feature Soleil residents can enjoy on top of the usual pool, gym, tennis court and barbecue pits.

The condo has two sports bars on its 20th floors, for residents only, where they can watch football matches while enjoying a beer. Developer Frasers Centrepoint Homes is finding an operator to run them.

The condo 'high' life craze includes Meadows@Peirce in Upper Thomson Road, which has a three-storey bird-watching tower where residents can spot birds nestling in the greenery at nearby Peirce Reservoir.

At Tree House condo in Dairy Farm Road, developer City Developments is building three tree houses on its premises, which 'offer a different experience of play for the young and young at heart', says Mr Anthony Chia, its director and head of projects.

One Devonshire condo in Killiney Road, meanwhile, scales new heights with a three-storey rock-climbing wall.

Fancy something not so 'out there'? At Palm Gardens condo in Choa Chu Kang, there is a bowling alley at the clubhouse, while upmarket Nassim Park Residences has a luxurious dining room.

Over at The Orchard Residences, residents can rent wine lockers to store their wines.

The chief executive of real estate firm ECG Property, Mr Eric Cheng, says of the trend: 'Telling potential buyers their units can have a pool view no longer cuts it, as condos now all have pools.'

Indeed, Soleil's additional facilities were what attracted Korean-Australian expatriate Verena Lim, 29, to buy a two-bedroom unit there.

'The spa and the sports bar caught my attention as they have not been seen before in condos here,' says Ms Lim, a vice-president at an Australian investment company.

Frasers Centrepoint Homes worked with Aramsa Spa to design the pavilions, and the developer's assistant general manager of sales and marketing, Mr Elson Poo, notes: 'In line with the strong interest in spas, we have incorporated spa facilities so residents will be able to enjoy the convenience of a spa experience right on their doorstep.'

Indeed, Ms Lim, who usually goes for spa treatments in Orchard Road once a month, says she will switch to the spa at her home, because 'there's no reason not to use the one downstairs'.

Like other owners, she has just received her keys and is in the midst of moving in, and adds that she will be making a booking soon.

Residents need to make appointments for their treatments such as massages and facials two weeks ahead. The cost is the same as at Aramsa Spa's outlet in Bishan Park. A 60-minute massage, for example, costs $108.

However, spa manager Kelvin Tay says that although there are no additional charges, residents have to purchase a minimum of $200 worth of treatments a session for transportation charges to be waived.

Mr Tay adds that other developers have also approached the spa to set up shop at their condos, but declined to elaborate.

As for other unusual condo facilities such as Palm Gardens' two-lane bowling alley, a spokesman for developer Keppel Land says: 'Such innovative and lifestyle features make for stronger value offerings in our homes.'

According to retiree Danny Nai, chairman of the condo's management corporation strata title (MCST) committee, the bowling alley is very popular with residents, who pay $5 an hour for its use. Bowling shoes and balls are provided. 'We have bookings every night and the alley is packed on weekends.'

Over at One Devonshire, the idea for its rock-climbing wall on one of its sky terraces was proposed by the project's landscape developer, Belt Collins.

Ms Anna Tabo-Nair, a project manager at Belt Collins, says it offers residents a different experience. The condo already has a pool, barbecue pits, clubhouse, gym, tennis and squash courts and several gardens. 'But for residents who want something different, they can go to the rock-climbing wall,' says Ms Tabo-Nair.

The idea went down well with the condo's developer, Allgreen Properties.

Ms Tabo-Nair says the hand grips needed to climb the rock wall go up to 3m high, 'so it is still very safe, and there will not be any supervision needed'.

She believes it will be a hit with residents when the condo is completed next year.

As for the dining room at Nassim Park Residences - a project by United Overseas Land (UOL) Group and which was completed earlier this year - it has a pool view, can seat 14 people and comes with a plush lounge. It also comes with a fully equipped kitchen, so residents can hire their own private chefs to do the cooking.

UOL Group's deputy general manager for marketing, Mr Anthony Wong, says: 'We have in mind the lifestyle of these home-buyers; we envisage frequent socialising and dinner parties. Therefore, we provided a well-furnished dining room, lounge and kitchen where owners can invite their friends over and have a chef whip up a good meal without having to clean up their own place afterwards.'

A resident who declined to be named says the dining room 'is decorated like a hotel private lounge'. The room is done up in dark wooden panels and has a sofa and thick carpets.

UOL Group also developed Meadows@Peirce, which, along with the talking-point bird-watching tower, also has a sky-gazing jacuzzi near the pool.

Mr Wong says enthusiastically: 'The design fuses outdoor and indoor spaces to create a sanctuary of peace and tranquillity. We created the bird-watching tower and the sky-gazing jacuzzi facilities in line with its nature-based theme.'

But added facilities come with an additional price - a higher monthly maintenance fee.

'There would be more facilities to maintain, so naturally the maintenance fees would be higher,' says Mr Francis Zhan, chief executive of Association of Management Corporations in Singapore, which represents more than 3,000 MCST committees of condos here.

He adds that the extra facilities are usually in upmarket condos, where monthly maintenance fees can range from $800 to $1,600.

In comparison, the 'mass market condos usually charge about $300 to $400 monthly in maintenance fees'.

Ms Eleana Teo, executive director at Knight Frank Estate Management says, 'For estates with more varied facilities and an in-house team of concierge and/or guards, residents would have to pay around 10 to 30 per cent more in terms of maintenance charges to finance such expenses.'

ECG's Mr Cheng says that 'with so many condo launches, projects must have their selling point, hence these facilities'.

Added facilities will 'attract' buyers, he says, 'even if they may not use the facility, they still want to have it.'

Even if the condo is not in an ideal location, its facilities will pull in buyers, as 'buyers are attracted to the condo's offerings. Plus it is easy to get around Singapore these days'.

One home-buyer, however, is not convinced by these condo 'carrots'. Housewife Mary Lee says: 'Location and the design of the apartments are more important. The facilities are good to have, but apart from the pool, I may not use the others and don't see the point of paying to maintain them.'

Friday, August 26, 2011

2 executive condo sites up for tender

TWO executive condominium (EC) sites have been put up for tender, the first since the buyers' income ceiling was raised.
The first is on a 199,951 sq ft site in Pasir Ris Drive 3. It has a plot ratio of 2.1, so it could yield 390 units.

The land is connected to Pasir Ris MRT station and near Tampines Expressway. Meridian Junior College and Casuarina Primary School are in the area.

Analysts expect up to seven bids with offers of up to $125 million, which would translate to about $300 per sq ft per plot ratio (psf ppr).

The tender closes on Oct 11.

The other sale is for a 292,283 sq ft site at the corner of Yishun Avenue 7 and Canberra Drive that could house up to 725 homes.

Sitting on the northern fringe of Yishun New Town, the site is near Yishun MRT station and bus interchange while Chong Pang Community Club and Yishun Stadium are in the area.

Property experts tip a top bid of between $183 million and $197 million, or between $250 psf ppr and $270 psf ppr. The tender closes on Oct 25.

Mr Png Poh Soon, head of research and consultancy at Knight Frank, believes this plot will attract less interest than the Pasir Ris plot, which is nearer to the sea and Pasir Ris Park.

New rules mean those earning up to $12,000 can now buy an EC unit. Previously, those earning up to $10,000 were allowed to buy such homes.

Industry insiders expect that while ECs will garner more interest due to the increased buyer pool, developers will not be rushing in for the sites, which have leaseholds of 99 years inclusive of a four-year construction period.

But Mr Png believes the EC sector remains positive, helped by the greater flexibility developers now have in pricing such projects.

'At the current low interest rate... EC units can be priced up to $1.6 million, up from $1.3 million previously,' he said.

But ultimately, how much buyers are prepared to pay will determine how great the demand for ECs will be, said Mr Ong Kah Seng, Cushman and Wakefield's senior manager of Asia-Pacific research.

'While more developers will be open to EC developments, the bid prices submitted are... unlikely to be excessively optimistic. This is in line with a general cautious economic and property environment,' he said.

The Urban Redevelopment Authority has also launched two other residential sites which could yield a total of 770 units.

One in Jalan Loyang Besar is sized at 185,938 sq ft and expected to attract between five and eight bids.

It could accommodate around 355 units and attract offers of up to $180 million. The tender closes on Oct 4.

The other is a 322,368 sq ft site in Flora Drive and could yield 415 homes. Top bids are tipped at about $158 million. The tender closes on Oct 19.

Tuesday, August 23, 2011

Some property sites pack them in, some leave more breathing space

(SINGAPORE) Five projects on sites sold under the 2006-2010 state land sales programmes will yield at least 50 per cent more units than the state's estimates for these sites indicated in the respective Government Land Sale (GLS) Programmes, shows a study by Savills Singapore.
At the other end of the spectrum, there are sites whose developers are building fewer units than the numbers indicated in the GLS Programme, including two projects from Hong Kong tycoon Li Ka-shing's Cheung Kong Holdings - The Vision in the West Coast area and Thomson Grand at Upper Thomson Road. The 361-unit Thomson Grand, released last month, does not have any one bedders. And two, three and four-bedders have relatively generous sizes, starting from 904 sq ft, 1,346 sq ft and 1,658 sq ft respectively. In addition, the project has strata terrace houses, with strata areas of 5,102-6,566 sq ft.

Thomson Grand's total 361 units is about 10 per cent shy of the 400-unit potential supply for the site on which it is being developed as stated in the H2 2009 GLS Programme.

Two Far East Organization projects will also yield fewer units than the estimate in the GLS Programme - Mi Casa condo at Choa Chu Kang Drive and the recently released Boathouse Residences at Upper Serangoon View. The latter is a joint venture with Frasers Centrepoint and Sekisui House.

Far East has stronger representation in the list of projects that will yield more units than estimated in the GLS Programme - with projects such as The Tennery in Bukit Panjang, The Greenwich in Seletar, Woodhaven in Woodlands and euHabitat at Jalan Eunos. All four projects have substantial proportion of total units between 500 sq ft and 800 sq ft, in some cases in what is dubbed SoHo-style one-bedders.

'Over the years, Far East Organization has built a large portfolio of successful themed and well-laid out residential projects. Last year, we introduced the SoHo apartments with higher floor-to-ceiling height at our mixed-use developments The Greenwich in Seletar Hills and The Tennery located above the Ten Mile Junction LRT Station, which were well received by homebuyers,' said Far East's chief operating officer for property sales, Chia Boon Kuah.

In June and July this year, the property giant unveiled two condo projects, Woodhaven and euHabitat, which not only have SoHo-style apartments and normal condo units but also incorporated strata townhouses. 'These different housing options . . . cater to the varying needs of home buyers,' Mr Chia said.

Market watchers note that foreigners (including Singapore permanent residents) may purchase strata landed homes within developments with condominium status without seeking approval from the Land Dealings (Approval) Unit.

Said Mr Chia: 'Our townhouses at Woodhaven and euHabitat have seen demand from both Singapore permanent residents and foreigners.'

Whether buyers are foreigners or Singaporeans, a strong draw of such strata landed homes within condo projects is the access to a wider range of facilities and a larger landscaped area.

Based on Savills' study, Kovan Grandeur at Tampines Road has the highest percentage of 'surplus units' over the estimates in the GLS Programme. The 74 apartments in the project are 111 per cent higher than the 35 units stated in the H1 2010 GLS Programme.

'As the site for Kovan Grandeur was planned for either a landed or apartment project, the GLS Programme's estimated supply for the site could have been based on a landed development, resulting in the substantial discrepancy between the actual number (74 units) and estimated number (35 units),' suggests Savills Singapore research head Alan Cheong.

Other projects in the 2006-2010 GLS sites with the actual number of units exceeding the estimate in the GLS Programme by over 50 per cent include The Woods at Westwood Avenue (86 per cent 'surplus' units), The Tennery (69 per cent), Suites at Orchard (57 per cent) and Skysuites@Anson (53 per cent).

West Coast development put up for collective sale

HONG Leong Garden Shopping Centre, a 138-unit development at West Coast Way, has been put up for collective sale.
Marketing agent Credo Real Estate said the development, located next to the Hundred Trees condominium, currently comprises 72 apartments and 66 shop units built in the 1980s by the Hong Leong Group.

The 956-year leasehold site has an area of 150,816 square feet.
Under the 2008 Master Plan, the site is zoned 'Residential with Commercial at 1st Storey' with a gross plot ratio of 1.6, and an allowable height of up to 12 storeys.

More than 80 per cent of the owners (by share value and strata floor area) have agreed to sell the property.

Credo said in its press statement yesterday that the Singapore Land Authority (SLA) has also granted in-principle approval for the amalgamation of the adjoining state land parcel of about 13,482 sq ft.

This means that the sale site can potentially be enlarged to 164,298 sq ft with total gross floor area at about 262,877 sq ft.

The sellers are expecting offers of between $160 million and $170 million, or about $752 to $794 per square foot per plot ratio, after factoring in the estimated land premium for the state land parcel and a development charge.

Tan Hong Boon, Credo's deputy managing director, said: 'The appeal of the subject site lies in the flexibility of the commercial and residential mix in the new development.

'Depending on the creativity of the developer and subject to approval from the authorities, the site may be transformed into a condominium development with a trendy self-contained hub that offers an array of amenities and dining options to the residents in the development as well as to the resident catchment in the neighbouring housing estates.'

Mr Tan also said that given its potential for a unique mixed-use product and the scale of the investment, the Hong Leong Garden Shopping Centre site should attract keen interest from medium- to large-scale developers.

The tender closes at 2.30pm on Sept 19.

More units cranked out as home sizes shrink

(SINGAPORE) A study by Savills Singapore has put some hard numbers to the big lure of small apartments. Developers have been squeezing out more units on sites bought at state land tenders in recent years than was initially estimated.
The study was based on 51 private housing sites including seven executive condo (EC) plots sold under the 2006-2010 Government Land Sale (GLS) Programme and took in projects launched up to Aug 10 this year.

The total number of private homes actually generated on these sites will exceed the GLS Programme estimates by about 11 per cent. Excluding EC sites, the surplus supply is slightly higher at 12 per cent.

Urban Redevelopment Authority's spokesperson said: 'The estimated number of residential units in the GLS announcement is intended to serve as a guide only.'

Once developers that have bought sites at state tenders receive planning approvals, URA uses actual supply numbers for estimating pipeline supply.

Savills' study shows that the supply from projects on each of eight sites exceed the supply estimate in the GLS Programme by more than 40 per cent. Savills found that a substantial portion of units in these developments are below 800 sq ft, and in some cases, even under 500 sq ft.

While shoebox units have fuelled the trend of developers minting more units in their projects, this was mitigated by ECs, a public-private hybrid housing form targeted at families and where units are larger. The government began selling EC land in 2010 after a five-year hiatus.

Another finding in the study is that the trend of producing 'surplus' units over the GLS Programme supply estimate gathered momentum after 2007. Private residential sites tendered under the 2007 GLS Programme generated just about 3 per cent more units than estimated in the Programme. This surplus increased to 9 per cent for sites sold in the 2008 GLS slate, 14 per cent for 2009 plots and - if EC sites are included - 15 per cent for 2010 GLS sites. If EC sites are excluded, the last figure would be 19 per cent.

During the 2007 luxury housing boom, large apartments were in vogue, but demand for them thinned when the Global Financial Crisis erupted in 2008. 'When the home buying recovery began in 2009, developers took to building smallish units to make the lumpsum apartment price more affordable to a larger pool of buyers while achieving higher per square foot prices,' notes Savills Singapore research head Alan Cheong. Besides shoebox units (loosely defined as below 500 sq ft), sizes of two and three-bedders have also shrunk to 'compact' units at some projects.

Savills highlighted that projects with more than 40 per cent 'surplus units' generally have a substantial portion of small units. Examples include Allgreen's Suites at Orchard at Handy Road, where 47 per cent of the project's total 118 units are below 800 sq ft, and the 360-unit Skysuites@Anson at Enggor Street, with 44 per cent of units under 500 sq ft and 88 per cent below 800 sq ft.

Far East Organization projects The Greenwich at Seletar Road, The Tennery in Bukit Panjang and the recently launched Euhabitat at Jalan Eunos have 50 per cent, 67 per cent and 59 per cent respectively of units below 800 sq ft - though all units are above 500 sq ft.

Savills' figures show that 'surplus production' tends to be smaller for EC plots - in line with the fact that EC projects do not include one bedders. If EC sites are excluded, the proportion of surplus private homes on sites sold under the 2010 GLS Programme against the supply estimate was 19 per cent. If ECs are included, the surplus is just 15 per cent.

This difference is more pronounced for plots in the H2 2010 slate, with 19 per cent 'surplus units' if EC sites are excluded and 13 per cent if they are included. This is on the back of three EC projects released on H2 2010 sites - the 315-unit Belysa in Pasir Ris, the 602-unit Blossom Residences at Segar Road and 504-unit RiverParc Residence in Punggol.

URA said it regularly reviews space standards, that is, gross floor area per housing unit, used to estimate the number of homes that can be generated from GLS sites for residential developments. 'The most recent review, which covers residential projects in all locations..., was done in 2010 and the updated space standards were adopted since the H1 2011 GLS Programme,' its spokesperson said.

DTZ South-east Asia chief operating officer Ong Choon Fah observed that over the past 15-20 years, the typical size of a three-bedroom apartment has shrunk from about 1,600 sq ft to 1,200 sq ft, with compact three bedders at 1,000-1,100 sq ft.

Sunday, August 21, 2011

Some homes still fetch good rental yields

RENTAL properties are less profitable for landlords in these tougher economic times, but there are still some condos where yields can reach 5.7 per cent.

Adam Park Condo, Blossoms@Woodleigh, Far Horizon Gardens and The Jade all have yields above 5 per cent.

Areas such as Sengkang, Woodlands and Chua Chu Kang have yields ranging between 4.4 per cent and 4.8 per cent, according to a study by Kim Eng Research.

They are all above the national average of 3.7 per cent, down a touch from last year's 3.9 per cent average yield.

But prime areas such as Orchard, Newton and Sentosa failed to measure up, with yields between 2.4 per cent and 2.8 per cent.

Rental yield is the annual rent divided by the property's sale price.

Kim Eng analysed gross yields based on the Urban Redevelopment Authority's rental and caveat data for non-landed developments with at least 10 rental contracts signed in the second quarter of this year.

Market experts say the quantum prices of properties in a neighbourhood play a significant role in determining the average rental yield.

'If you buy a mass-market home for $1.5million, you might be able to get between $4,000 and $6,000 in rent, depending on location,' said Dennis Wee Group director Chris Koh. 'That's compared to a Sentosa place that could cost up to $3 million and bring in only $8,000 a month,'

ERA Realty key executive officer Eugene Lim said leasehold properties are normally cheaper than freehold ones. Many leasehold properties are in suburban neighbourhoods, so this may have helped lift rental yields.

'Tenants aren't concerned about whether a property is freehold or has a 99-year lease. All they want is somewhere that looks nice in a convenient location,' said Mr Lim.

Shoebox units, typically less than 500 sq ft in size, come with lower sale prices.

Kim Eng cited Parc Imperial, a 138-unit Pasir Panjang project near the upcoming Haw Par Villa MRT station that comprises mainly smaller flats. The project has a rental yield of 5.7 per cent. Resale units recently sold for an average of $1,333 psf, with median rents hitting $6.28 psf per month.

Attributes like proximity to good schools, MRT stations and other facilities will always stand investors who are chasing good rental yields in good stead, said Mr Koh.

But predicting how rental yields will pan out over the next few quarters is difficult because there are several big unknowns.

Analysts say the fluidity of the property market means some investment decisions may change over time, making it tricky to pinpoint exactly how many properties will come up for rent.

'Investors may get an apartment with the intention to flip it, but if they can't sell it at the price they want they'll rent it out instead,' said Mr Colin Tan, head of research at Chesterton Suntec International.

He pointed out that property prices could be close to or at their peak, and that there is uncertainty over how long low interest rates will last.

'Risk levels remain high, but if all the factors work out in their favour, the returns for these investors will be good,' he said.

Real estate sector in for a correction?

DO we have the making of a perfect storm in the real estate market?
High real estate prices, especially in the public housing market, was one of the hot button issues in the recent general elections. In response, the government vowed to spare no effort in slowing down the price ascent.

Various measures have been implemented to dampen demand. Higher stamp duties and tighter mortgage financing policies are just two of them.

Immigration policy, another hot political potato, has also been tweaked. It is now more difficult to get employment passes, permanent residency (PR) or citizenships in the Lion City. Among the stories I've heard: a Chinese owner of a few businesses in Singapore with a few properties under his name was rejected when he applied for PR or citizenship. Another practically grew up in Singapore, and now in her early 30s, is running a few of her own small enterprises. She too was rejected. A friend was sent by her Taiwanese employer from Penang to Singapore a few months back. Her application for an employment pass was rejected and she's appealing.

Foreigners or new citizens are big sources of demand for housing, be it for purchase or rental purposes. The tightening of immigration policy will further reduce demand for housing.

Meanwhile on the supply side, the Housing and Development Board is cranking up its apparatus to supply what is described as a pent-up demand for public housing. Just this week, the HDB said that it would be launching a record 8,000 flats next month to meet households' demand for public housing. It will launch another 4,000 Build-to-Order (BTO) flats in November, taking this year's total BTO supply to 25,000 units.

Next year, home seekers can look forward to another 25,000 BTO flats and some will even be in sought-after mature estates such as Tampines and Kallang/Whampoa.

'In two years, we'll be building an entire Ang Mo Kio town,' National Development Minister Khaw Boon Wan said. There are around 48,000 dwelling units in Ang Mo Kio.

'That's why I'm so confident that in three years' time, four years' time, when all these units start materialising, whatever pent-up demand of applicants, the problem would have been largely resolved,' he said this week.

Meanwhile on the private property market, the supply is going to be massive as well. As at Q2 2011, there were 57,520 units of uncompleted private residential units. That's some 22 per cent of the current total supply.

Some of the demand for this supply is likely to be siphoned off to the public housing market. Prime Minister Lee Hsien Loong announced over the weekend the raising of the income ceiling for those who qualify to buy HDB flats. So this group, who might otherwise buy private properties, now has the option to buy the cheaper public housing flats.

All these plans of course were made when the property market was still strong, and the global equity markets showed some semblance of stability.

The picture appeared to have changed drastically in the last two weeks, although the sudden change in sentiment can be said to be rather intriguing.

As a seasoned portfolio manager put it: 'This current sell-off is rather strange. The market knows about the sovereign debt issues in Europe and the US. The US debt ceiling issue had been hogging the headlines for months. I can't figure out the trigger for the sell-off that we have now. In 2008, nobody expected Lehman Brothers to collapse. So the panic then was understandable.'

Anyway, that's what we have today. Fear is back in the market. And where the stock market goes, so too the property market, maybe with a lag of two quarters.

From the first chart, you can see that a sustained decline in stock market will almost certainly result in the softening of the property market.

In addition, the stock market is also a leading indicator of the economy. If indeed the decline we are seeing is a harbinger of tough economic times ahead, then buyers will be more cirscumspect in deciding to part with their cash to buying big ticket items.

But of course the property market is not likely to decline in the same degree as the stock market. From its recent peak in October 2007 to its trough in March 2009, the Singapore stock market plunged by some 60 per cent.

The private residential property index meanwhile fell by about 25 per cent from the second quarter of 2008 to a low in the second quarter of 2009. That's a brief decline of just a year. But a 25 per cent decline in the property price is more than enough to wipe out 100 per cent of the equity an investor might have in his or her property.

Interestingly since then, the property index has risen above its 2008 peak - by about 14 per cent based on the Q2 2011 numbers. On the other hand, the stock market, as at Aug 1 before the sell-off in the last two weeks, was still 10 per cent below its 2007 peak.

So, might we see a bigger correction in the property market this time round? Again, it all hinges on how bad the bloodbath in the stock market is going to be, and its implication on the real economy. If the worst comes to pass, then the outlook for the property market is definitely less than rosy.

Meanwhile, I just want to update a chart I did two months back. It showed the total return for investment properties bought in the various periods and held till end 2010. I forgot to total up the rental income earned throughout the years in my previous calculation.

In the new chart, you can see that with the exception of those bought in 2008, private residential properties have yielded positive return for investors who bought any time since 1999.

The thing is, given the way the stock market is going, investors who got into the real estate market in the last four to five quarters may have to wait a while more to see any substantial capital gains on their investment.

So property investment, like in any other investment, is just as much about timing, timing, timing.

Just to recap, for the second chart, the return for the property investment includes price appreciation and rental income. The assumption is that the property investor bought into the market at various points in the past 12 years and held on till end 2010. Calculations are based on a 100 sq metre condominium.

The purchase price of the property is raised by 8 per cent to account for the various fees, and likewise the selling price was reduced by 2 per cent. Deducted from the capital appreciation are the interest charges paid to the bank during the holding period of the property.

Interest rates are pegged at 1.5 percentage points above one-year interbank rates. Meanwhile, rental income is net of management fees. The rental cash flow is then further reduced by 15 per cent to account for property tax and rental income tax.

Friday, August 19, 2011

Private home sales in Q2 rise 21.6%

SINGAPORE) Sales of private homes rose 21.6 per cent quarter on quarter in Q2 2011 and the number of units bought by mainland Chinese buyers hit a new high, according to a new report from DTZ.
The property firm, which analysed caveats lodged for both new and secondary sales, said that the number of transactions rose to 8,458 in the second quarter of this year from 6,958 deals in Q1.

Mainland Chinese buyers continued to be the top non-Singaporean purchasers of residential properties in Singapore for the second consecutive quarter. In absolute terms, purchases by mainland Chinese buyers accounted for 640 units of all private residential transactions - which is a new high and more than the 527 units purchased in Q1 2011.

The total proportion of private homes bought by all foreigners stayed at a record high of 16 per cent in the second quarter of 2011 - the same ratio as in the first three months of the year and the highest quarterly percentage recorded since data was made available for analysis in Q1 1995.

'The bulk of private residential purchases by foreigners continued to be in the high-end market segment,' said DTZ's head of South-east Asia research Chua Chor Hoon. Of the total private residential purchases by foreigners, 43.3 per cent cost $1.5 million or more.

DTZ, which downloaded the caveats from URA Realis on August 5, also found that the ratio of buyers with HDB addresses has been inching up over the last three quarters.

Such buyers bought 38.7 per cent of all private homes in Q2 2011, up from 37 per cent in Q1 2011 and the 34.6 per cent in Q4 2010.

And in a reversal from past trends in 2010 and Q1 2011, more purchasers with HDB addresses bought units of sizes below 1,000 sq ft as compared to purchasers with private addresses.

DTZ found that 50.3 per cent of buyers who picked up units below 1,000 sq ft in Q2 2011 had HDB addresses, which is an increase over the 47.5 per cent in Q1.

A separate analysis of caveats by Knight Frank similarly found that more HDB upgraders bought small, or 'shoebox', units in Q2.

Some 16.4 per cent of home buyers with HDB addresses bought shoebox units (which Knight Frank defined as units with sizes up to 550 sq ft) in Q2 2011, higher than the 14.6 per cent in Q1 2011 and significantly higher than the 8.6 per cent in Q2 2010, Knight Frank said. The firm downloaded caveats on August 16. 'A significant group of these HDB buyers may be investors looking for rental yields in a low interest rate environment,' said Knight Frank research head Png Poh Soon.

'Based on their budget, shoebox units with a lower price quantum appeal to these buyers.'

Looking ahead, analysts noted that concerns over the US and Europe debt problems and the slowing economy have led to more cautious sentiments in the private residential market.

Said OCBC Investment Research analyst Eli Lee in a recent report: 'We expect developers and buyers alike to remain cautious for the remainder of H2 2011 and sales volume to soften going forward.'

In Singapore, purchase demand for private homes will still be supported by economic growth and the low-interest rate environment in Singapore, DTZ's Ms Chua said.

Condo's buyers list litany of complaints

INVESTORS who bought 53 units at the upmarket condo Grange Infinite in the Orchard Road area have launched a High Court action claiming they are not as luxurious, stylish or elegant as promised.

In a litany of complaints, the buyers - a group of investment funds which spent $388 million in all - also say the fittings in the units are not 'exceptionally superior' as advertised.

In a rarely seen showdown, the funds - managed by ARA Asset Management - issued a writ of summons last month against Grange Properties, an associated firm of listed developer Chip Eng Seng.

Investors who buy apartments in bulk might attempt to sell the units individually to secure higher prices or offload them en bloc as prices head north.

The funds allege breaches of some terms in the sales and purchase agreement and misrepresentations in relation to the bulk sale in March 2008.

While disputes between owners and developers are not uncommon, the escalation of such disputes to legal action is rare, as developers are usually keen to protect their reputations, experts say.

For example, in February, City Developments was sued by residents of Emery Point, who had accused it of being negligent over defects there. The case was ultimately resolved amicably out of court.

ARA claims marketing for the 68-unit Grange Infinite said it would be of 'exceptionally high standard of luxury, style and elegance' and have exceptionally superior furnishings. Australian architecture firm Hassell was also to have played a significant part in the project, the writ said.

However, these claims were untrue and the representations were made either fraudulently or negligently, the statement added. Hassell did not have a significant role in the construction and the project had numerous design flaws, it said.

These included the lack of a smoke extraction system at the outdoor cooking area and a spa pool located right next to it, resulting in a lack of privacy for groups using both facilities concurrently.

The writ also said the project was neither safe nor fit for human habitation at the time of notice of vacant possession, as stainless steel handrails and studs supporting balcony glass barriers and elsewhere were incompletely welded.

This posed a danger to residents, it claimed, as the barriers could dislodge and fall from the balconies. Any rectification was also carried out in a sloppy and slipshod manner with no regard to aesthetics, it said.

The funds carried out improvement works on some of the units to make them more saleable - and intends to do so for the rest of the unsold units as well.

Losses and expenses will be incurred as a result of missing out on potential buyers and hiring experts to look at the defects, among other things, they say.

ARA made the bulk purchase at a discounted price of about $2,600 per sq ft (psf) even as some units were individually sold for about $3,200 psf then.

Twelve of their units were sold before the project was completed, leaving 41 units that are now the subject of the suit. Three were sold after improvement works, leaving 38 units still in the funds' possession.

In its defence issued on Monday via its lawyers, however, Chip Eng Seng denied all allegations, emphasising that the plaintiffs are sophisticated and experienced property investors.

It maintained that the development has attained 'an exceptionally high standard of luxury' and that the funds had entered into the bulk purchase partly due to the discounted price.

Each unit, for example, is served by a private lift and equipped with fittings from high-end brands such as Gaggenau for its kitchen appliances.

On the incomplete welding of the stainless steel handrails, Chip Eng Seng said it took immediate steps and the issue has been - or is nearly - resolved. Hassell is also the architect that designed the project, the firm maintained.

The 36-storey upmarket condo is on the former Grange Tower site, next to the Indian High Commission. It was jointly developed by Chip Eng Seng and Citadel and completed this year.

Chesterton Suntec International research head Colin Tan said that the potential loss for ARA might have been huge for them to resort to legal action for a project that they are trying to sell.

'It could be because the luxury market is not moving and prices have not recovered. This is compounded by the fact that the development is already completed.'

Just this month, Chip Eng Seng granted an option to purchase the remaining 2,368 sq ft unit at Grange Infinite for $6.6 million - or $2,808 psf.

Luxury non-landed home prices are still about 6 per cent below their 2008 peak, despite the property boom that has seen all other segments surpass their historical highs.

In fact, some high-end projects are still struggling to find buyers despite already being completed, as sales volumes and interest remain relatively muted.

Wednesday, August 17, 2011

Serangoon Gardens site fetches $105m

THERE was more interest than expected in a landed housing site in Serangoon Garden Way, although the prices tendered did not set the world on fire.

Experts said the level of interest reflects the strong demand for such homes amid limited supply.

There were 16 bids for the land, which has a 99-year lease, with a combined offer from City Developments (CDL) and Hong Leong Group's subsidiary Hong Realty the highest.

Its bid of $105 million - or $343 per sq ft of site area - was 10 per cent ahead of the $95.1 million tendered by ZACD Investments.

ZACD's major shareholders include Ms Sim Kain Kain and Mr Yeo Choon Guan, former directors of property consultancy SLP International.

Other bidders included SK Land, EL Development, MCL Land, private equity fund Lucrum Development, Chip Eng Seng and a unit of Kheng Leong.

Bergendale Investments lodged the lowest bid of just $22.2 million - 79 per cent below the top offer.

About 80 homes can be built on the 2.84ha plot, but strata-landed houses will not be allowed, said the Urban Redevelopment Authority.

SLP International research head Nicholas Mak said terraced units of 1,500 sq ft to 2,000 sq ft of built-up area might have a break-even price of about $1.9 million.

Mr Ong Teck Hui, Credo Real Estate's head of research and consultancy, said the tender attracted more interest than he expected.

'The keen interest by so many parties is due to the fact that landed sites are scarce so developers who are keen to develop landed homes have no choice but to bid for sites such as this,' he added.

'Furthermore, landed homes are generally in good demand and Serangoon Gardens is a popular location among landed buyers.'

CDL told The Straits Times that it is exploring a proposed terraced housing development, with a launch expected next year.

'CDL is familiar with the Serangoon Gardens area, having launched Goldenhill Villas, a freehold terraced-housing development just minutes away from the Lorong Chuan MRT station, in 2004,' the firm added.

Experts say the Serangoon Gardens site's proximity to the Central Expressway is a drawback as some homes could be affected by noise and dust pollution.

SLP's Mr Mak said developers are chasing land with strong selling attributes.

Landed property is a hot commodity and is limited in supply compared to non-landed homes. The average landed home price has seen percentage gains of roughly double those for condos and apartments over the past three years, Mr Mak added.

And Mr Ong noted that landed homes comprised 35 per cent of the total private residential stock 10 years ago, but the proportion has dipped to 27 per cent.

Over the same period, non-landed stock also grew by 55 per cent, while landed supply expanded by just 6 per cent.

More than 42,000 non-landed units are under construction but only about 2,000 landed ones were being built as of June, so the supply gap will be even more pronounced.

Mr Mak estimates that prices of landed homes will climb 5 to 8 per cent over the rest of the year, further building on growth of about 8 per cent in the first six months.

A site at the junction of Chestnut Avenue and Almond Avenue that can accommodate 35 landed homes is expected to go on sale in October, with experts expecting more than 10 bidders.

Berjaya Land proposes to buy turf club land

THE Penang Turf Club (PTC) is proposing to sell 21.7ha or about a fifth of its site to Berjaya Land for RM459 million (S$185 million) in cash.
Both parties have entered into a conditional sale-and-purchase agreement. The purchase price values the prime freehold land at about RM8 million per acre or RM184 per square foot, Berjaya Land said in a filing to the stock exchange yesterday.

The property developer, which is part of tycoon Vincent Tan's stable of companies, intends to build a gated and guarded community comprising bungalows, semi-detached houses, condominiums and apartments on the land over a five-year period.

It estimated the gross development value at RM1.52 billion.

Located within the PTC about 3.2km from Georgetown, the land is close by neighbouring developments such as the upmarket low-density residential area of Jesselton Height.

Significantly, it is also part of the land on which the previously mooted Penang Global City Centre (PGCC) was to be built.

A mega development said to be worth RM25 billion on 104ha of PTC land, the PGCC was launched in 2007 by public-listed Equine Capital during the administration of former prime minister Abdullah Ahmad Badawi, but never took off and was shelved after a new state government came into power in 2008.

Whether the current Pakatan Rakyat-led administration will approve Berjaya Land's plans remains to be seen given its previous opposition to the PGCC. The controversial project had been criticised by Penang residents as far too dense, with many stating they would rather maintain the open space, notwithstanding the economic benefits of the 'iconic' development.

Indeed, Berjaya Land's proposed acquisition is conditional upon planning permission approval for the development from the relevant authorities as well as PTC members agreeing to the disposal.

Berjaya Land, which beat rival developers said to include IJM, SP Setia and IGB in the PTC tender, said the property is generally an undulating site with the majority of its terrain in Class 1 slope classification, that is less than 15 degrees gradient. Its present usage includes horse stables, equestrian activities and part of an 18-hole golf course.

Jerry Chan Fook Sing, chairman of the Penang branch of Real Estate And Housing Developers' Association Malaysia, views the price as favourable for Berjaya Land provided the relevant approvals can be secured. 'It's good because land in the Jesselton area is going for upwards of RM400 psf although that is on a nett basis.'

Noting the height controls in the Jesselton area of six units per acre and two-storey restrictions, he observed residents in the vicinity would likely not oppose bungalows and semi-detached houses but would be more wary of proposed high-rise buildings.

Even so, the state government's response will be of immediate interest. Many Penangnites are still sore the land had been re-zoned from open space to mixed development under the previous Barisan Nasional state government - a conversion they believe was to facilitate the PGCC.

Berjaya Land said the proposed acquisition would increase its land bank for future development in Penang given the strong demand for high-end landed properties in the state, and that it expects to complete the purchase within four years of the agreement.

More housing options for buyers now

SICK of being held to ransom by ever-ballooning rents, Ms Michelle Lim, 31, and her husband have been on the hunt for a home of their own for a year now.
But they have not found the going easy, with the prices of HDB resale flats and private properties - the only types of properties open to them - at eye-popping levels.

She and her husband, who are both in sales and make a combined income of about $10,000, were thus cheered yesterday by the lifting of the income ceiling for new flats and housing grants.

Unchanged for the last 17 years, the ceiling is now $10,000, up from $8,000.

The couple now have several options: They can apply for a new build-to-order (BTO) flat, consider an executive condo (EC) unit, or buy a resale flat with a housing grant from the HDB. They are also eagerly awaiting HDB's sale-of-balance flats (SBF) exercise next month, which offers completed or almost completed flats. This is their preferred option for now.

National Development Minister Khaw Boon Wan said yesterday that a record 8,000 flats under HDB's BTO and SBF schemes will be launched next month.

Ms Lim said: 'We can't wait three to four years for a home, so we hope to get lucky. If not, we'll have to consider other options, such as buying a resale flat with the grant.'

Yesterday's changes to the rules also opened up an alternative source of financing for the couple: HDB now allows couples earning up to $10,000 to apply for HDB loans, which typically have more stable or lower interest rates.

Ms Valda Lee, 29, and her fiance are among the many who have appealed to the Ministry of National Development about their housing situation.

The couple, who earn above $10,000 monthly, have been house-hunting in the resale and private property markets for more than a year.

'But now, at least ECs are an option too,' said Ms Lee, a manager who was also unsuccessful in her application for a flat under HDB's Design, Build and Sell Scheme because she and her fiance bust the $10,000 income ceiling.

But some couples are not exactly popping the champagne yet. For example, Mr Jeffrey Cai, a 30-year-old who works in IT, foresees that the higher ceiling will mean more competition for flats.

'We've applied more than three times and did not even get to select a flat. Now, with even more people applying, the chances will be even slimmer,' he said.

Two other groups of home buyers - the single and the elderly - were also cheered yesterday.

Graphic designer Toh Siew Peng, 37, who earns slightly more than $3,000 and has been living with her aunt, said she was very happy to hear that she 'finally' qualifies for a grant to buy a flat.

She has set her heart on a three-room one, but it all depends on the price.

Mr Colin Tan, who heads research at Chesterton Suntec International, yesterday commended the income ceiling revision as timely.

'Many people have been calling for the ceiling to be raised for many years. Now that it has been raised, people will have more choices,' he said.

He said he expected the immediate impact on the housing market to be minimal. In the longer term, however, the changes may remove buyers from the private property market, since BTO flats lock people in for several years.

'Even if private property prices correct, there may be fewer buyers,' he said.

Record 8,000 flats to be launched in Sept

(SINGAPORE) The Housing & Development Board (HDB) will be launching a record 8,000 flats next month to meet households' demand for public housing.
More singles too, will find flats within reach. HDB is raising the income ceilings and housing grants for certain schemes to help this group purchase resale flats.

HDB announced these moves yesterday, together with details on other housing policy changes shared by Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday.

Mr Lee had said that the income ceiling for HDB flats would go up to $10,000 from $8,000, and that for executive condominiums (ECs) would rise to $12,000 from $10,000.

The 8,000 flats which HDB is releasing next month will comprise 5,500 build-to-order (BTO) flats and at least 2,500 flats under a sale of balance flats exercise. Under such exercises, HDB offers balance flats from earlier BTO launches, surplus replacement flats under the selective en-bloc redevelopment scheme, and repurchased flats.

Prices of BTO flats in next month's launch will be affordable, said National Development Minister Khaw Boon Wan yesterday. For balance flats, prices will be higher because they will be ready or near completion.

HDB will launch another 4,000 BTO flats in November, bringing this year's total BTO supply to 25,000 units.

Next year, home seekers can look forward to another 25,000 BTO flats and some will even be in sought-after mature estates such as Tampines and Kallang/Whampoa.

'In two years, we'll be building an entire Ang Mo Kio town,' Mr Khaw said, illustrating the scale of the operation. There are around 48,000 dwelling units in Ang Mo Kio.

'That's why I'm so confident, that in three years' time, four years' time, when all these units start materialising, whatever pent-up demand of applicants, the problem would have been largely resolved.'

HDB has also turned its attention to singles. For instance, it lifted the monthly income ceiling under the single Singapore citizen scheme to $5,000 from $3,000, and the CPF housing grant to $15,000 from $11,000. These apply to single citizens buying resale flats (up to five-roomers) with a CPF housing grant and HDB loan.

PropNex Realty noted that there will be greater interest from singles in applying for resale flats, though the impact may not be significant as these buyers make up a small group.

HDB added yesterday that the $10,000 HDB income ceiling will apply to the purchase of new flats, the purchase of resale flats with a CPF housing grant, and the taking up of a HDB loan for a new or resale flat.

For ECs, the CPF housing grant will be tiered. First-timers with a household income of $10,000 or less can receive a grant of $30,000; those with a household income of more than $10,000 to $11,000 can receive a grant of $20,000; and those with a household income of more than $11,000 to $12,000 can receive a grant of $10,000.

The various changes took effect yesterday. Applications to buy new or resale flats and applications for HDB loan eligibility letters which HDB receives from Aug 15 will come under the changes.

For ECs, the changes will cover projects launched for public sale from Aug 15. This leaves out remaining units at EC projects launched before yesterday.

Private home sales ride July rebound

(SINGAPORE) The number of private homes sold by developers rebounded in July after falling for the prececeding two months, but the outlook remains tinged with uncertainty about the state of the financial markets and the economy.
The jury is also out on the extent to which the increase in income ceiling for buyers of new HDB flats and exec condo (EC) projects will siphon off demand for mass-market private condos.

Urban Redevelopment Authority's figures show that developers sold 1,386 private homes (excluding ECs) in July, up 17.3 per cent from 1,182 units in June.

Developers sold 568 ECs last month, up from 212 units in June and the best showing since a five-year hiatus in new EC project launches ended in October last year. This was buoyed by the release of two projects in July - Riverparc Residence in Punggol and Blossom Residences at Segar Road. Including ECs, developers' sales surged 40.2 per cent month on month to 1,954 units in July.

Other than ECs, which are a hybrid public and private housing, chart-topping projects in July included new projects with attractive location attributes - Skyline Residences near Telok Blangah MRT Station and with views of Keppel Golf Links and the sea (167 units sold at a median price of $1,902 psf); The Miltonia Residences, with a view of the Orchid Golf Course and Lower Seletar Reservoir (124 units sold), Thomson Grand, boasting views of Island Golf Course and Lower Peirce Reservoir (108 units) and Seastrand in Pasir Ris (116 units), notes CBRE Research.

The rebound was helped by low home loan rates, the return of home buyers after the June school holidays and possibly some buyers speeding up their decisions to avoid buying during the Hungry Ghosts Month, which started on July 31.

'The Government's earlier announcements on increased public housing supply and income ceiling revision have not impacted on the market significantly so far, as evidenced by the rebound in buying activity in July,' said Credo Real Estate executive director Ong Teck Hui. 'However, it's harder to gauge their impact on the private housing market over the longer term,' he added.

In the first seven months of this year, developers sold 9,425 private homes (excluding ECs) - close to the 9,966 units they sold in the same year-ago period. Some market watchers say this points to robust demand.

However, Nomura Singapore analyst Sai Min Chow points out that the latest July sales number (excluding ECs) was down 10.8 per cent year on year. He also highlighted that the inventory of launched but unsold units has risen from 3,480 units in July 2010 to 5,010 units in July 2011 and reiterated his warning that 'inventory build-up in the primary market in Q3 2011 to Q4 2012 is likely to fast track a price correction'.

CBRE noted that interest in upmarket projects remained selective in July - a unit at The Orchard Residences was sold at $4,299 psf. On Cairnhill Circle, two units at Hilltops fetched $3,319 psf and $3,528 psf and a couple of units were transacted at Helios Residences for $3,084 psf and $3,488 psf.

After July's strong sales, most market watchers expect a slowdown again this month due to the Ghosts Month as well as greater caution among buyers in the face of turmoil in financial markets and weak sentiment on the global economic front. Jones Lang LaSalle is predicting 900-970 unit sales in August. Colliers too forecasts the figure could slip below the 1,000-unit mark. Credo's figure is 800-1,100 units.

Many analysts reckon that some of the demand for new mass-market private condos could be siphoned off into new EC projects, as the household income ceiling for new EC buyers has just been raised from $10,000 to $12,000. However, Knight Frank chairman Tan Tiong Cheng suggests this may not happen if developers are nimble with pricing.

'Seeing the writing on the wall, developers who have already bought land for mass market private condos and who have sufficient margin, could elect to lower their price expectations a little if they wish to move units.

'Some potential buyers who were previously stretched by developers' pricing strategy for new private condo launches may then be wooed back.

Colliers' consultant (research and advisory) Tay Huey Ying points to two potential bright spots for the private home sales market - low interest rates and a potential influx of another round of hot money from troubled western nations.

DTZ Southeast Asia chief operating officer Ong Choon Fah offers some advice to those trying to find their ways in murky waters: 'To each his own, and potential buyers have to do their homework and know how much risk they can afford to take.'

Monday, August 15, 2011

More qualify for new flats, ECs as govt raises income ceiling

(SINGAPORE) Home seekers had much to cheer about yesterday as the Government announced an increase in the income ceiling for HDB flats to $10,000 from $8,000, followed by a raise in the income ceiling for executive condominiums (ECs) to $12,000 from $10,000.

It also kept a bumper supply of new flats in the pipeline, promising to launch another 25,000 build-to-order (BTO) units next year.

The higher income ceilings mean that more people can now qualify for new flats sold directly by HDB (which are typically cheaper than resale flats) or for ECs (a hybrid of public and private housing). 'This is something that people have been waiting for,' said PropNex chief executive Mohamed Ismail. 'It will be warmly welcomed, especially by those couples who are at the crossroads right now.'

But the good news for buyers was perhaps a mixed report for flat sellers and some private developers. As more could turn to BTO flats and ECs, the impact on demand for resale flats and mass market condominiums is now up in the air.

Prime Minister Lee Hsien Loong announced the higher income ceilings in his National Day Rally speech yesterday evening, to applause from the audience.

Previously, a couple's combined monthly income could not cross $8,000 if they wanted to buy a new flat from HDB.

But there are more couples earning just below $8,000 now - people are getting married later when they are at more senior positions in their careers, and there are also more women working. 'They are quite worried,' Mr Lee said. 'Because if you are earning $7,500 and you get a promotion, you are not sure whether that's good news or bad news.'

The Government is expecting the higher income ceiling to boost takers for BTO flats and is preparing to roll out 25,000 such units next year - a number similar to this year's.

Earlier in May, the Government had indicated that a review of the HDB income ceiling was on the way. In the weeks leading to the General Election that month, the affordability of public housing had emerged as a hot topic.

Since then, industry watchers have been speculating about the extent of the changes and several were right on the money. 'The market has already taken note,' said Credo Real Estate executive director Ong Teck Hui.

Some observers expect the higher income ceiling for ECs to siphon off some demand for mass market condominiums. There will be more competition, said ERA Realty key executive officer Eugene Lim.

Jones Lang LaSalle head of research and consultancy for Singapore Chua Yang Liang estimates that annual new housing demand in the private market could drop by as much as 5-15 per cent, or around 700-2,000 units. Nevertheless, the average private residential property price islandwide should be able to grow at 0-1.5 per cent per quarter, unless global uncertainties douse buying sentiments further, he said.

As for the HDB market, Credo's Mr Ong expects the higher HDB income ceiling to draw some demand away from resale flats, but he does not think the impact will be major. 'I think at this point in time, we are more concerned about the recent financial market turmoil and the changes in the economic outlook and how it's going to impact demand later on,' he said.

Global Property Strategic Alliance chief executive Jeffrey Hong was also confident that resale flats will remain attractive because of their location in mature estates. 'I don't see a great drop' in demand, he said.

Rental flats were also under the spotlight yesterday, with Mr Lee announcing an increase in their supply. The government will add 7,000 rental units in the next two years, and postpone the demolition of some blocks under the Selective En-Bloc Redevelopment Scheme so that they can be used as temporary rental units.

The moves will help cut waiting time for rental flats but the government also has to address the deeper social issues faced by households needing such flats, he said.

'Overall, I promise you, we will keep housing available and affordable for Singaporeans,' Mr Lee said.