RESIDENTIAL MARKET
Busting the myth of a hot property market
When you read about units being snapped up at a record pace, you might think that the property market is sizzling.
But buried beneath the headline numbers, two distinct trends appear to puncture this myth.
Not only is the average unit size sold by developers much smaller now, compared to the pre-global crisis peak year of 2007, but islandwide the average price per square foot is also much lower. That's because more units are being sold in the suburbs instead of the Core Central Region (CCR), where properties are costlier.
In fact, the state of the property market looks very different when viewed from the perspective of total square footage and total dollar quantum of apartments/condos sold by developers, rather than the number of units.
Although developers sold more non-landed private housing units last year and in 2012 (on an annualised basis) than in 2007, the total area of these units and their dollar value were lower than 2007's levels.
The total area of 13.43 million sq ft in the non-landed units developers sold last year was also about 19.2 per cent lower than the 16.62 million sq ft they sold in 2007.
The average size of private apartments and condos sold by developers in CCR - which includes the traditional prime districts 9, 10 and 11, the financial district and Sentosa Cove - has declined by 30.2 per cent from 1,639 sq ft in 2007 to 1,144 sq ft last year. It dipped further to 1,052 sq ft in H1 2012.
In the Rest of Central Region (RCR), the average size of units sold has shrunk almost a third from 1,338 sq ft in 2007 to 898 sq ft last year before contracting further to 831 sq ft in H1 2012.
In the Outside Central Region (OCR) - home to mass-market condos in suburban locations - the figure slipped 25.3 per cent from 1,292 sq ft in 2007 to 965 sq ft last year. In H1 2012, the figure was 876 sq ft.
Taken individually, the average psf primary market prices achieved in each of the three regions last year and in H1 2012 surpassed those in 2007. But the total islandwide dollar value of the units sold by developers in 2011 and 2012 (annualised), at $16.9 billion and $16.3 billion respectively, are shy of 2007's $22.7 billion.
Commenting on the shrinking average home size, Roxy-Pacific Holdings executive chairman Teo Hong Lim observes this is due not just to a proliferation of shoebox units but a general contraction of unit size across the board - two, three, four bedders - as developers try to keep lump sum investment sums affordable to buyers.
He also highlights that since the 2009 rule change to include bay windows and planter boxes as part of gross floor area, the saleable area of an apartment has shrunk by about 5-6 per cent even if it has a similar internal layout as before.
Source: Business Times – 3 August 2012
Chateau Eliza offered for collective sale again
CHATEAU Eliza, a freehold residential re-development site along Mount Elizabeth, is back on the market after three failed collective sale attempts.
This time, the owners are looking to lower the current reserve price of $108 million further, said marketing agent Knight Frank.
"To date, 79 per cent of the owners have agreed to lower the current reserve price, subject to a five-day cooling off period."
Based on the current asking price of $108 million, this works out to about $2,042 psf per plot ratio (psf ppr) based on the proposed gross floor area (GFA) of 52,887 sq ft that a new development could build on the site. No development charge is payable.
With an additional 10 per cent balcony area, it translates to $1,925 psf ppr, based on the potential GFA of about 58,176 sq ft with a development charge of some $4 million payable.
The breakeven cost is expected to be between $2,600 psf and $2,650 psf.
Located just off Orchard Road, Chateau Eliza comprises 37 apartments of 829 sq ft to 3,337 sq ft, on a land area of about 18,000 sq ft. Under the 2008 Master Plan, the land is zoned for residential use with a plot ratio of 2.8.
The tender will close on Aug 14 at 3pm.
Source: Business Times – 3 August 2012
Public grading for property firms next year
PROPERTY agencies will soon be publicly graded, just like hawker stalls and security guard firms.
The Council for Estate Agencies (CEA), which regulates them, told property agency bosses on Monday that it intends to start releasing grades next year, based on the quality of their agents.
The grades will primarily be decided by the number of complaints lodged with the CEA from the public against an agency, as well as instances of disciplinary action taken against its agents.
The CEA also said at the briefing that it is unlikely to issue letter grades like "A" or "B", but rather bands such as "Excellent", "Fair", and "Poor".
In response to queries from The Straits Times, the CEA would only say that it encourages agencies to "constantly improve the services delivered by their salespersons and put in place effective processes to manage complaints when service lapses occur".
Details on new initiatives to raise professionalism will be shared when they are confirmed, it added.
When it is implemented, the proposed grading system will be the CEA's latest step to professionalise the industry since the agency was set up in 2010.
But the proposal is already encountering some resistance from real estate agencies.
Property agency bosses are worried that frivolous complaints and a simplistic methodology will result in worse grades than they deserve, they said.
Chief among agencies' concerns is that the criteria disregard the number of transactions each agency chalks up.
The CEA currently provides each agency with its own quarterly number of complaints per 100 agents. Last year, the agency that topped the charts had 5.7 complaints per 100 agents.
"It is simplistic to divide only by the number of agents," said ERA Realty key executive officer Eugene Lim, who stewards some 5,000 agents.
He pointed out that ERA agents, for example, carry out an average of 3,300 resale and rental transactions a month.
If 10 complaints are lodged, that works out to a 0.003 complaint rate; but its statistic per 100 agents would be a higher 0.2.
"It's not fair to a company that does a very high volume compared to the rest," said Mr Lim.
There are also smaller agencies which do not have more than 100 agents.
The Straits Times understands that the CEA intends to use a different set of criteria to grade such smaller agencies.
Bosses also claimed that the "majority" of complaints that streamed in from the public to the CEA have been frivolous.
Examples of frivolous complaints include cases where tenants have security deposits forfeited by a landlord.
There have also been instances of complaints against agents for not including their CEA registration numbers in advertisements, even though these ads were published before the CEA came into existence.
Despite these concerns, property agencies are resigned to the public grading system, and expressed hope that the CEA will work with them to iron out the kinks.
Source: The Straits Times – 3 August 2012
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