Tuesday, 9 October 2012

News Update - 9 Oct 2012


RESIDENTIAL MARKET
Bank, property stocks take it on the chin
Bank and property stocks fell yesterday as the market weighed the possibility - following last week's mortgage curbs - that the government was prepared to step in with more measures to check property prices.
Developers were largely sanguine about the potential impact such measures would have on sales but consultants saw more tightening ahead.
"The new cap on the loan tenure announced last Friday is unlikely to have any significant impact on the property market in the long run if there's liquidity and interest rates remain low," said Wong Heang Fine, chief executive at CapitaLand Residential Singapore.
Keppel Land too held the view that "well located properties with good attributes" should continue to see healthy sales given that there is still "genuine demand" for homes.
Said a Hong Leong Group spokesman: "As these measures have just been released, the market will take time to absorb the news and we will assess the situation accordingly."
Hong Leong's Bartley Residences sold a total of 20 units over the weekend, while the previous weekend saw 14 units sold.
Property watchers largely agreed that the latest measures - which saw residential property loans capped at 35 years and loan-to-value (LTV) ratios tightened - are mostly preventive rather than punitive in nature.
UOB economist Alvin Liew stressed that further measures cannot be ruled out until prices achieve greater stability.
Even though supply of both public and private housing has been ramped up, it will take a while for these homes to come onstream. If prices continue to face upside pressure, the risk of more measures being introduced remains, Mr Liew said.
Specifically, the next round of policy measures might be targeted at addressing low interest rates, said Standard Chartered analyst Regina Lim.
"Measures (introduced) could have more bite if they effectively reduce the spread between the average net rental yield and mortgage rate, which has widened to 200 basis points (bps) currently from zero in 2006. We estimate that the average net residential rental yield in Q2 2012 to be 2.5-3.5 per cent, while the average residential mortgage rate has fallen to circa one per cent currently," she said.
Meanwhile, property counters fell in trading yesterday. Luxury developer SC Global lost six cents (or 4.9 per cent) to end the day at $1.175. Wheelock Properties lost 2.5 cents (1.3 per cent) to close at $1.84.
The benchmark Straits Times Index (STI) too saw a drop of 31.22 points to finish at 3,076.65, weighed down by property developers.
CapitaLand was the worst performer on the STI, falling 11 cents (3.3 per cent) to $3.19. City Developments Ltd fell 28 cents (2.3 per cent) to end trading at $11.67.
Bank counters fell too. DBS dropped 21 cents (1.5 per cent) to end trading at $14.25, followed by UOB which fell 26 cents (1.3 per cent) to $19.58. OCBC saw the smallest dip, percentage-wise, falling four cents, or 0.4 per cent, to $9.45.
Assuming that residential sales do weaken, it could lead to slower mortgage growth with a lag effect of two or more years, said DMG & Partners Research banking analyst Leng Seng Choon.
"Banks that recorded stronger housing loan growth over the past two years are in a better position to keep their customers without having to be aggressive in their interest rates. As both OCBC and UOB recorded two-year housing loan CAGR of 19 per cent - more than double DBS's 8 per cent - we see this new ruling to benefit OCBC and UOB more."
Source: Business Times – 9 October 2012
Two adjacent freehold plots in GCB area up for sale
Two adjacent sites totalling 45,155 sq ft of sprawling freehold land in the Chee Hoon Avenue Good Class Bungalow Area in the Dunearn/Adam Road location have come on the market.
The indicative price is $1,600-$1,800 per square foot of land area, which works out to around $72.2 million to $81.3 million.
The most recent transaction in the Chee Hoon GCB Area was that of No 28 Chee Hoon Avenue, which changed hands in November last year at $1,660 psf, she noted.
The latest property on the market comprises two land lots of 18,989 sq ft and 26,166 sq ft at Jalan Asuhan, off University Road. The site can be accessed via Dunearn, Bukit Timah and Adam roads.
Potential buyers may choose to buy one or both plots. The property is on one of the highest points in the neighbourhood offering a panoramic view.
Source: Business Times – 9 October 2012
Home loan curbs 'will hit older buyers'
Investors in a weak financial position and buyers in their 40s and 50s will feel the effects of the latest property rules most acutely, analysts say.
The changes, unveiled by the Monetary Authority of Singapore last Friday, are similar, in effect, to higher interest rates, they said.
Some older buyers who already have a loan may abandon plans to buy an investment property, the analysts added.
The central bank set a maximum of 35 years on all home loans. For new loans, the loan-to-value ratio has been lowered if the loan exceeds 30 years, or if the loan period extends beyond the retirement age of 65.
Older buyers will be forced to take shorter loans if they do not wish to pay a larger amount upfront. In some cases, the monthly rental received from these properties may not even be sufficient to cover their monthly mortgage.
For instance, a 50-year-old investor will now be able to get a maximum loan term of only 15 years if he wants to avoid the stricter loan-to-valuation limits.
This means that if he buys a three-bedder at Sunville in the Serangoon area for $1.2million, his monthly repayment on a 15-year loan will be $4,367 (assuming he has another loan). Previously, assuming he met the bank's credit assessment criteria, he could have taken a 25-year loan with a monthly mortgage of only $2,773. The rent for such a unit would be about $3,800.
Source: The Straits Times – 9 October 2012
Most developers unlikely to give discounts: Experts
At least one property developer here is offering an effective discount on homes in the wake of the latest cooling measures.
But property experts do not expect all developers to follow suit.
Far East Organization's immediate response was to give a 2 per cent furniture voucher for units at its newest launch, eCO, to mitigate the effects of the new home loan rules.
It is now giving a 1.5 per cent sweetener - in the form of furniture vouchers - until Thursday, for eCO at Bedok South Avenue 3.
Far East is also offering furniture vouchers for other projects in response to the measures.
At the weekend, it sold a total of 51 units at various projects. eCO was the top performer.
Qingjian Realty (South Pacific) said it sold 15 units at two projects, River Isles and Riversound Residence in Punggol.
"As our buyers tend to be younger, it does not affect the sales for the two projects. Hence, we did not offer any discounts to mitigate the recent cooling measure," said Mr Li Jun, Qingjian's deputy general manager.
It was a similar story for city centre condominium V on Shenton.
Mr Michael Ng, group general manager of developer UIC, said the measures did not affect sales much. Five units were sold at the weekend.
"Our buyers are mostly upper-end investors who have ready cash," he said.
"(The new rules will affect more) the heartlanders who are looking to buy a second or third property... They will have to think more carefully."
But Allgreen Properties, behind recent launch Riversails, said weekend sales were slightly slower than sales in the previous week. Since last Friday, 80 units have been sold.
"We think there was probably a marginal impact... as with any knee-jerk reaction," said sales director Yong Voon Chen.
"We understand the latest measures imposed and fully agree with the thinking behind them. However, we believe the impact will be minimal in the long run," he added.
Koh Brothers, behind projects such as Parc Olympia in Pasir Ris, also said it was not offering perks or discounts now.
"Based on our experience, buyers in Singapore generally do not take up loans above a 35-year period. Hence, we do not expect the newly implemented cooling measure of a loan limit cap to significantly affect buyer sentiment," the developer said.
A City Developments spokesman said: "As these measures have just been released, the market will take time to absorb the news, and we will assess the situation accordingly."
Source: The Straits Times – 9 October 2012
$1m HDB flats 'best value' for money
A growing group of cashed-up home buyers - armed with a budget of $1 million or more - is waiting for premium Housing Board flats.
They are usually private-property downgraders or young couples armed with budgets that would previously take them to condominium showflats only, said real estate agents.
With the growing price differential between private property and HDB flats in prime locations such as Bishan, Queenstown and Clementi, they find that a premium HDB flat which commands a seven-figure sum is actually the best value for their money.
Data from the Singapore Real Estate Exchange showed that in five HDB towns - Clementi, Bukit Merah, Bishan, Toa Payoh and Queenstown - the price per square foot (psf) of flats has increased 15.5 per cent in the past two years.
In contrast, the price psf for non-landed private properties in those areas has increased by 27.7 per cent in the same period - giving rise to a widening price gap.
Nationwide, the gap has also grown but at a slower pace. Over the past two years, the psf price of resale flats grew 16 per cent, while that of private residential units grew 23.4 per cent.
It is also difficult to find condo units above a certain size in these locations, said agents.
The executive flats which have sold for more than $900,000 this year average about 1,600 sq ft.
The $1 million Mei Ling Street executive maisonette, at 1,615 sq ft, cost $620 psf. This is about half of what units in the nearby Queens condominium go for.
Certain flats, like the executive maisonettes in Queenstown and Bishan, cause a feeding frenzy among agents every time one comes up for sale.
Residents report real estate agents' fliers slipped daily under their doors, phone calls every week, and even late-night house visits from agents.
Source: The Straits Times – 9 October 2012
Flats near former rail station for rent
Two blocks of flats, which once housed staff of Malaysia's railway operator, will be offered for rental to lower-income households next month.
The 318 units near the now-defunct Tanjong Pagar Railway Station will be leased out under the Housing Board's Public Rental Scheme (PRS) and Interim Rental Housing (IRH) scheme.
The flats have been left vacant for about a year after train services between Malaysia and Singapore were relocated to Woodlands in July last year.
Painting and refurbishment works are being carried out in Blocks 1 and 2 in Spooner Road which comprise one-, two- and three-room flats.
Of the 318 units, 208 are one- and two-room flats which will be offered under PRS. The remaining 110 are three-room flats which will come under the IRH scheme.
The move is part of HDB's drive to increase the supply of public rental flats to 57,000 units by 2015.
Such flats are heavily subsidised and targeted at lower-income households.
Households earning $800 or less pay between $26 and $165 in rent each month.
Those earning between $800 and $1,500 pay $90 to $275.
The flats - with a tenancy period of two years and subject to renewal - will be allocated to applicants on the HDB's waiting list, said a spokesman.
The IRH scheme is targeted at households currently in the queue for public rental flats and which need urgent accommodation.
The scheme is also for households which need some time to work out their finances before they are able to afford open-market rents or to buy smaller flats.
The flats under this scheme will be rented out for one year.
Households will each pay about $300 per month in rent, and two families usually share one unit. Families are matched according to race, religion and family size.
In addition to the two blocks of flats, the Singapore Land Authority is inviting interested parties to bid to rent a bungalow in the area - for uses such as a childcare centre or eldercare facility.
The area around Spooner Road has been earmarked for residential use under the Urban Redevelopment Authority's 2008 Masterplan.
A URA spokesman said it has not yet determined when redevelopment will begin.
Source: The Straits Times – 9 October 2012
COMMERCIAL MARKET
Prime office rentals continue slide in Q3
Even as vacancies improved in the prime office market in the last quarter, rentals continued their downward trend, suggesting that recovery is unlikely in the near term.
The sharpest decline in vacancies was seen in the Marina Bay sub-market, which fell three percentage points from Q2 to 9.8 per cent in Q3. Orchard Road was the only exception, where the vacancy rate rose a touch to 2 per cent from 1.5 per cent in the second quarter, though it remained a tight market.
Despite the slight improvement in the vacancies, overall Grade A rent in Q3 2012 fell 3.6 per cent from the previous quarter to $9.13 per square foot (psf).
The largest drops were recorded in the core CBD areas of Marina Bay and Raffles Place, where rents slipped by 2.5 per cent and 3.9 per cent, respectively.
Rentals in the City Hall and Marina Centre vicinity fell 1.8 per cent in Q3 after remaining flat in the previous quarter.
A comparison of rental trends across all sub-markets in Q3 showed that the office market had softened but at a more moderate pace than the first half of the year.
Although analysts expect a continued decline in vacancies over the next quarter that should help stabilise effective rents in the CBD, short-term recovery is unlikely given the cautious demand and the more than 1.2 million sq ft of vacant space due to come onstream in the next six months.
Year-to-date, total net absorption totalled 1.69 million sq ft, surpassing 10-year average net absorption of 1.12 million sq ft. But this still lags behind annual net absorption levels in 2010 (four million sq ft) and 2011 (2.1 million sq ft).
Source: Business Times – 9 October 2012

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