News Update - 31 Jan 2013

RESIDENTIAL MARKET

MAS on Asia govts' moves to cool property markets

Targeted interventions by governments to cool heated property markets across emerging Asia have achieved some degree of success, said Monetary Authority of Singapore (MAS) managing director Ravi Menon yesterday.

They allowed policymakers some freedom to experiment without relying too much on possibly counterproductive interest rate or exchange rate policies.

But these interventions - such as tightening loan-to-value ratios and stamp duties - need to be put in a more structured context, he said at Citibank's 10th annual Asia-Pacific Investor Conference.

"While these targeted interventions have achieved a measure of success, macroprudential policies in emerging Asia have been deployed in a relatively eclectic and even ad-hoc manner.

"As these countries return to more normal times, there is a need to formalise and institutionalise the modus operandi of these policies, for greater transparency and policy effectiveness."

Mr Menon was giving an overview of the global economy and what can be done to ensure its return to normalcy. While economic prospects this year look brighter, the global economy and financial markets are still fragile and vulnerable to shocks, he said.

Easy global liquidity conditions caused by money-printing central banks in advanced economies have caused asset prices to surge in some Asian countries, Mr Menon noted.

Residential property prices in Korea, Taiwan, Hong Kong, and Singapore, for example, have increased by 35 per cent on average since 2009, while nominal wages have risen by only 13 per cent.

"As long as monetary conditions in the advanced economies remain easy, emerging market economies face the risk of misallocated resources and disruptive capital flows, which in turn can affect both price stability and financial stability," he said.

One policy response is to allow exchange rates to rise. Since mid-2009, most regional currencies in Asia have appreciated by 3 to 10 per cent in nominal effective terms. But allowing exchange rates to appreciate rapidly to contain inflation might attract even more capital inflows, and runs the risk of driving down exports and stalling the economy, he said.

Likewise, interest rates are too blunt a tool to deal with "sector-specific excesses" like in real estate. Hike rates too aggressively to affect credit conditions and asset prices, and there will be a high cost on the rest of the economy, he said.

Here, the MAS does not use interest rates as a tool to combat inflation. It is currently allowing the Singdollar to appreciate gradually.

Asian governments have been trying other ways. Earlier this month, Singapore announced its seventh attempt to cool property prices in the last three years, with higher stamp duties and tougher loan eligibilities. Hong Kong, too, has tightened mortgage lending, imposed a buyer's stamp duty and is boosting land supply.

Meanwhile, Mr Menon also said that other key reforms needed by emerging Asia governments include boosting domestic demand, deepening and broadening its financial markets, and raising efficiency and productivity.

Source: Business Times –31 January 2013

 

Office rents set for recovery: CCT

Singapore's office rents are set to rebound from their first annual decline in three years as new supply shrinks and more businesses expand, according to the biggest office property trust in Asia outside of Japan.

Rents in the city are reaching a trough and demand may rise as the country positions itself as a regional business hub, said Lynette Leong, chief executive officer of CapitaCommercial Trust (CCT).

Supply for the next three years will be about 0.8 million square feet a year, down from 1.3 million sq ft over the past two decades, she said.

"Rents are poised for a recovery," Ms Leong said in Singapore on Jan 24. It's "a no-brainer that rents are not going to go down very much further so it's more when the rents will turn and to what extent", she said.

Ranked by the World Bank as the easiest place to do business for a seventh year, the country that's smaller than New York City is also emerging as Asia's wealth management centre, driving demand for banking services with an increase of millionaires.

Singapore office rents are the 19th-highest globally, according to CBRE Group Inc, and are cheaper than Hong Kong, Tokyo, Beijing and New Delhi.

CapitaCommercial estimates new demand accounted for 1.5 million sq ft to 1.8 million sq ft annually in the past three years, Ms Leong said, without giving a forecast for 2013.

Singapore's office rents fell 0.3 per cent in the fourth quarter, extending the decline in 2012 to 1.3 per cent, the government said on Jan 25. They climbed 8.4 per cent in 2011 and 13 per cent in the previous year, government data showed.

The country's millionaire households expanded 14 per cent in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17 per cent, the highest in the world, followed by Qatar and Kuwait.

Additional office space in the past two years came mainly from the downtown Marina Bay area, with banks including Standard Chartered plc and Barclays plc taking bigger offices. Standard Chartered relocated from 11 buildings across the city to one tower in the new office area, while Barclays moved from six to two in the district.

Average gross rents of prime office space declined 11 per cent in 2012 and could fall 5 per cent to 10 per cent this year, Colliers International said in a Jan 25 report. Leasing rates climbed 14.6 per cent in 2011, the property brokerage said.

New tenants took up 1.9 million sq ft of space last year, a 17 per cent drop from the five-year high of 2.3 million sq ft in 2011, Colliers said.

Singapore's economy expanded 1.2 per cent last year, less than a quarter of the pace in 2011. Growth is expected to range between one per cent and 3 per cent this year, based on official estimates.

The city also became the first in Asia to introduce curbs on industrial properties. The government on Jan 11 imposed as much as 15 per cent in stamp duties on sellers of warehouses and logistics buildings to curb speculation after prices doubled in the past three years and outpaced the increases in rents. - Bloomberg

Source: Business Times –31 January 2013

News Update - 30 Jan 2013

RESIDENTIAL MARKET

Khaw: Need for 700,000 more homes by 2030

Enough land has been set aside for 700,000 more homes here by 2030 - more than half the 1.2 million households currently - to cater to a growing population.

This is part of a plan to provide good and affordable housing for Singaporeans detailed in the Population White Paper yesterday, as the population may reach 6.9 million by then.

"To support that kind of trajectory, we estimate that we will need another 700,000 new homes," said Minister for National Development Khaw Boon Wan at a press conference.

The idea is to create a sufficient buffer, he said.

The White Paper acknowledged that Singapore had fallen behind in its planning and investment for infrastructure development, and accordingly discussed other improvements, such as a better and more extensive transport system.

Mr Khaw called for patience and understanding as solving the issue will take time.

"We are determined to address the current problem and definitely the overcrowding will ease," he said, noting that housing matters can be improved at a slightly faster pace than transport.

"If you decide to build a line, it might take you 10 to 12 years," he said. "Housing, you decide to start building and (in) four to five years, you can realise those houses."

Of the 700,000 homes that can be built, about 200,000 are already under construction.

Of the remaining half a million houses, many will be in new towns, such as Tengah, Tampines North and Bidadari.

There will also be new homes built in mature estates where land is available. "We do want our children, when they get married, to stay nearby," Mr Khaw said.

More details will be revealed in a Land Use plan report by the MND later this week.

Having a buffer stock also keeps prices in check, market watchers said.

However, Mr Khaw warned that building this buffer comes at a cost.

"Underdo and you have today's problem. Overdo and it's too costly for taxpayers. Like all things, we have to find that sweet spot and achieve that balance going forward," he said.

Mr Khaw noted how MND was heavily criticised not too long ago for over-building homes, which led to a lot of empty flats.

The government also responded to concerns that Singapore could become as congested as cities such as Hong Kong at the conference.

Deputy Prime Minister Teo Chee Hean said Hong Kong's population density is about 22,700 per square kilometre (sq km), while Singapore's is about 11,000 per sq km. Even with a 6.9 million population, Singapore's population density will be around 13,700 per sq km.

Source: Business Times –30 January 2013

 

Condo site near Lakeside station attracts 12 bids

A 99-year private condo plot about 450 metres from the Lakeside MRT station attracted 12 bids yesterday, in an indication that developers' interest in prime suburban sites may not have been curbed by the round of property-cooling measures unveiled this month.

However, industry players and market watchers offered mixed readings of MCL Land's top bid of $651.33 per square foot per plot ratio (psf ppr), which was 3.3 per cent above the second highest bid of $630.57 psf ppr from the UOL Group. The top six bids were within a 10 per cent range.

Some property consultants said MCL's bid exceeded their expectations; in November, when the site was launched, they had forecast that the winning bid would come in at up to $600 psf ppr.

Even then, he commented that "the tender result shows that market confidence has not been dented by the latest cooling measures, effective Jan 12 - at least for the higher bidders".

Some developers said yesterday's top bid would have been even higher if not for the cooling measures.

The site, bounded by Jurong West Street 41 and Boon Lay Way, is next to the Canadian International School; it is also adjacent to another condo plot available for application under the government's reserve list.

Koh Teck Chuan, chief executive of MCL Land, told BT that if not for the latest cooling package, the group's bid would have been higher - probably $710 to $720 psf ppr.

In May last year, MCL paid $705 psf ppr for a condo plot near Jurong East MRT station, where it is developing a 738-unit project; this is expected to be launch-ready by mid-year.

Suburban residential land prices have moved up since last May, Mr Koh pointed out. Moreover, the Jurong East location, where a new commercial hub is coming up, offers more "positive attributes" than the area around Lakeside MRT station two stops away. He noted, however, that the Lakeside plot would have a plus in the form of unobstructed views of Jurong Lake.

"We bid lower for the Lakeside land parcel than we would have if there had been no cooling measures because, No 1, we'll have to factor in a slower pace of sales and, No 2, we'll have to pay development charges for the private enclosed space and roof terrace."

Mr Koh agreed with some property consultants' suggestion that, based on its $651 psf ppr bid yesterday, MCL could break even at about $1,050 psf and look at posting an average selling price of around $1,300 psf.

ERA Realty Network's key executive officer Eugene Lim said that units in Lakefront Residences nearby are changing hands in the subsale market at between $1,100 and $1,300 psf.

Analysts noted that the 12 bids at yesterday's tender were identical to the number of bids received for the Jurong East tender last May as well as the tender for a site in Ang Mo Kio Avenue 2 near the future Mayflower MRT station, which closed on Jan 8 with a top bid of $790 psf ppr.

Yesterday's tender was supposed to have closed on Jan 15, but the Urban Redevelopment Authority postponed it to yesterday to give developers more time to weigh the impact of the measures.

Source: Business Times –30 January 2013

 

3,300 BTO flats for sale in latest launch

The Housing Board (HDB) is rolling out 3,346 flats in mature and non-mature estates, the first to feature a new priority scheme for married couples with young kids.

The flats in the first launch of Build-To-Order (BTO) projects for the year are in Ang Mo Kio, Kallang-Whampoa, Tampines, Choa Chu Kang, Hougang and Yishun.

The Government recently tweaked the rules to help families with children younger than 16, and who had not obtained a housing grant, to secure a new flat.

Previously, they were grouped with newly married and engaged couples in vying for the allotment of at least 85 per cent of new flats for first-time applicants.

Now, 30 per cent of the BTO flat supply and half of leftover units on offer will be reserved for families with children below 16. This amounts to at least 7,000 new flats this year, based on the projected supply of 23,000 units.

Analysts were divided over whether there will be a rush from this group to buy the new flats.

The units set aside for this group will be released to other first-timers if they are not taken up, said an HDB spokesman.

Prices start from $140,000 for a 700 sq ft, three-room unit in Choa Chu Kang.

Eligible first-timers can get up to $60,000 in grants.

Units in mature estates cost more. New five-room flats in Ang Mo Kio, for instance, sell for up to $575,000 without grants. Prices of comparable resale units can go up to $628,000.

ERA Realty spokesman Eugene Lim said the BTO launches will continue to do well due to the variety and number of units available, as well as sky-high resale prices.

Another 3,890 new flats will be launched in March in Bukit Batok, Punggol and Sengkang.

Source: The Straits Times –30 January 2013

 

Expat housing here 2.7% pricier this year

The average cost of relocating staff to Singapore has increased 2.7 per cent to average US$5,510 per month this year - third highest in Asia and eighth globally.

Taking currency fluctuation into account, however, the cost of renting an apartment in Singapore in US dollars has fallen slightly, said Lee Quane, regional director, ECA International, Asia.

"(In US dollars), we actually observe a small decrease in rental price. This contrasts strongly with a year ago when the US dollar was a lot weaker against the Singapore dollar," said Mr Quane, noting that in 2011, rents increased more than 15 per cent once converted into the greenback.

According to data from the human resources consultancy - which uses rental prices of three-bedroom apartments in areas commonly inhabited by expatriates as the benchmark comparison - rents for an unfurnished three-bedroom apartment in Districts 9-11 and East Coast average US$5,510 per month, 50 per cent higher than the regional average.

Companies are managing the increase in costs by expanding the locations in which they expect employees to reside, and scaling back on accommodation packages for certain employees, said Mr Quane.

"Ten years ago, we'd primarily be focusing on Districts 9,10,11 because that's where about 80-90 per cent of international assignees lived. However, as accommodation costs have increased, companies have not necessarily increased their housing budget in line with rental values."

So employees who want to continue to enjoy the same standard of accommodations have had to look outside of the core central region, to East Coast and even Woodlands, he said.

Looking ahead, Mr Quane said he does not expect rents to increase more than 5 per cent this year.

"Companies have not been moving staff into Singapore at the high rates we saw previously. So that's going to have an impact in terms of demand . . . (And while) we're not seeing Singapore catch up with Hong Kong in terms of accommodation costs, accommodation costs in Singapore are much higher than they were a few years ago. So several of the cost advantages that companies had relocating staff here have disappeared."

The average cost of renting a three-bedroom apartment in Asia rose one per cent year-on-year to US$3,640 per month. This figure is 20 per cent higher than the global average of US$3,030 per month, which slipped one per cent year-on-year.

Within Asia, the biggest rental price increases in the region were witnessed in mainland China; the most pronounced increase was seen in Beijing, ranked 19th globally (up from 26th last year) following a year-on-year increase of over 12 per cent.

Rents for a three-bedroom apartment in Hong Kong, the most expensive location in the world, averaged US$11,550 per month, despite a 2-3 per cent correction.

Source: Business Times –30 January 2013

News Update - 29 Jan 2013

RESIDENTIAL MARKET

Central Region condos saw biggest price fall in December

Prices of completed private apartments and condos generally fared worse in December over November, according to latest figures from the National University of Singapore.

The university's December flash estimate for the Singapore Residential Price Index (SRPI) series showed that the most marked price deterioration was in Central Region, which is defined as Districts 1-4 (including the financial district and Sentosa Cove) and the traditional prime residential districts of 9, 10 and 11. The sub-index for Central Region (excluding small units) fell 1.3 per cent month-on-month in December, reversing a 2.2 per cent gain in November.

The sub-index for Non-Central Region (again excluding small units) rose 0.5 per cent in December, a more modest gain compared with November's 1.3 per cent rise.

According to the flash estimates, prices of small units (up to 506 sq ft) islandwide remained unchanged in December. In November, they rose 1.1 per cent.

The overall SRPI dipped 0.3 per cent in December, after rising 1.7 per cent in November.

NUS' Institute of Real Estate Studies (IRES), which minted the SRPI series, said that starting this month, the base period for the series is March 2009 (instead of December 2001 previously) as the indices bottomed in March 2009 and this change better reflects the movements in price.

Associate Professor Lum Sau Kim of IRES observed that transaction volumes for units in the SRPI basket registered declines from November to December in both 2012 and 2011 - due to "the end-of-year effect" of the holiday season. "And the volume declines were accompanied by a corresponding contraction in prices," she explained.

Commenting on the sharp reversal in the Central Region sub-index between November and December last year, she said: "Our SRPI Central Region sub-index had been boosted in November 2012 by several transactions in areas that had been relatively quiet for much of the year, such as in Sentosa. Hence, there was an increase in the Central Region sub-index on a marked-to-market basis. In December 2012, the price signals were generally subdued."

The SRPI series tracks prices of completed non- landed private homes but excludes executive condos, which are a public-private housing hybrid.

For the whole of last year, the sub-index for Non-Central Region was the star performer, climbing 8.8 per cent, followed by the small unit sub-index, which rose 5.7 per cent. The Central Region sub-index slipped 1.2 per cent, taking the overall SRPI 4 per cent higher last year.

In 2011, prices rose 11.3 per cent in Non-Central Region, 10.6 per cent for small units and 5.1 per cent for Central Region. The overall SRPI increased 8.7 per cent.

Source: Business Times –29 January 2013

 

Buyers' rights in building defect disputes

While recourse is available for homeowners following the purchase of a new home or a renovation stint, this is not to say that any and all defects can be claimed against the developer and/or renovation contractor.

Being able to differentiate between what is contractually binding and what is mere marketing speak is of great importance.

"Marketing speak should generally not be trusted or relied on to impose any legal obligations on the developer. The developer's legal obligations to the purchasers are contained in the sale-and-purchase agreement," said Rodyk & Davidson partner Ling Tien Wah.

Even so, marketing agents must not say anything to mislead or misrepresent, or make empty promises, otherwise the purchasers may potentially have a cause of action for misrepresentation or breach of contract, he added.

The sale-and-purchase agreement - which exists to govern the sale of uncompleted private residential properties - provides for a one-year defects liability period during which the developer is required to rectify, at his own cost, any defects in the units.

Such defects must be made good by the developer within one month of having received a written notice from the homeowner.

Failing this, the buyer can send a notice of intent, stating the homeowner's intent to carry out the rectification work and estimated costs to the developer.

The purchaser may then proceed to rectify the defects by engaging his own workmen and recover the cost from the developer. Such costs can be deducted from the sum held by the Singapore Academy of Law.

In the event that latent defects are observed beyond the one-year defects liability period, purchasers can still take civil action against the developer, said a spokesman from the Urban Redevelopment Authority (URA). "Beyond the one-year defects liability period, purchasers can still take civil action against the developer for latent defects due to negligence or breach of contract, within six years from the date that the damage arose, or three years from the date that the damage was discovered, whichever is later."

However, developers should first be given an opportunity to rectify any genuine building defect, whether patent or latent, that the purchasers claim the developers are liable for.

Specifically, consumers should write in to the developer instead of contacting them over the phone.

Said Rodyk's Mr Ling: "If this fails to resolve matters, then the parties should still try their best to resolve the issue amicably and also consider referring the dispute for mediation to try and reach an amicable settlement in the matter. Taking civil action against developers for defects (whether patent or latent) should be the option of last resort.

"Purchasers should seek legal advice as to whether or not their claim against the developers for latent defects is already time-barred. If the claim is not time-barred, and the matter cannot be resolved amicably, then the purchasers have the option of instructing their lawyers to commence a civil suit against the developers for the latent defects if the purchasers wish to go down that route."

In the same vein, the Consumers Association of Singapore (Case) has a model renovation contract available on its website that consumers can download to help consumers make more informed decisions.

"The renovation contractor is bound by the contract signed with the consumer. As such, the contractors have to fulfil the contract terms to provide satisfactory service to the consumers," said Seah Cheng Choon, executive director of Case.

Case asked consumers to keep in mind that renovation contractors have their field of speciality - that is, those who are good at HDB renovation may not be so for other properties and vice versa.

"In this regard, consumers must be mindful that their contractors must have enough expertise to guide them through the slew of permits required in a renovation job," it said.

To ensure this, consumers should check the credentials of their renovation contractors and ask for a list of works done. For HDB dwellers, it is important to engage an HDB-approved contractor.

"During works-in- progress, it is essential to monitor the works as sometimes inferior products can be 'buried' by contractors within their works. (If the defects are spotted) beyond the defect liability period, proof will be difficult," Case said.

Indeed, unsatisfactory work and pricing are two common gripes reported to Case, which counts complaints against renovation contractors among the top three disputes it received.

The number of disputes received by Case has been on the uptrend, jumping from 946 in 2009 to 1,313 in 2010. Case's data shows that complaints rose further, to 1,532 last year, from 1,488 in 2011.

"A possible reason could be the increase in real estate transactions in recent years," said Mr Seah. "As more people are buying properties, there is increasing need for contractor services."

Source: Business Times –29 January 2013

 

COMMERCIAL MARKET

Feb launch for units at Tg Pagar medical centre

Far East Organization is banking on upcoming commercial developments and residences in the CBD area to fuel demand for medical services as it readies to launch 48 units in its Mediplex@SBFCenter for sale next month.

Located near Tanjong Pagar MRT station, the Mediplex@SBFCenter on Robinson Road will occupy the third to fifth levels, with units ranging from 667 sq ft to 1,292 sq ft in size.

Marketing efforts are expected to commence from the middle of next month while the medical centre is slated for TOP by end-2016.

Aside from the medical centre, the SBF Center will feature 197 offices consisting of 192 smaller strata units ranging from 592 to 1,442 sq ft and 10,549 sq ft for five floor plate offices. The Singapore Business Federation (SBF) will relocate its offices as a major tenant and partner.

The medical units in the private healthcare centre are reportedly being marketed at between $3,800 and $4,000 per sq ft (psf) under a 99-year lease.

Medical suites at centres such as Novena Specialist Centre are selling at $4,100 to $4,200 psf, while Mount Elizabeth Medical Centre went at $7,300 psf last October.

"Coupled with the vibrant working population of about 200,000 professionals in the CBD and limited available supply, we see the potential for a dedicated medical suite development to fill the growing demand for medical and healthcare services from both the working and residential population in the heart of the CBD," said Chia Boon Kuah, chief operating officer (property sales) for Far East.

He noted that the Tanjong Pagar area is expected to undergo a transformation in the long term as more residences, hotels, offices and other commercial and lifestyle amenities come onstream.

Far East is targeting specialties such as dentistry, diet & nutrition, licensed traditional Chinese medicine, physiotherapy and others.

"Based on our interactions with doctors, medical practitioners, and medical specialists, we believe there will be demand to own purpose-built medical suites in a dedicated facility within the CBD where there is limited supply of strata-titled units available for sale," added Mr Chia.

Far East, which has a healthcare portfolio that includes Novena Medical Center and Novena Specialist Center, is also setting up another medical centre this year at Pacific Plaza called Scotts Medical Center.

Source: Business Times –29 January 2013

 

Rentals in suburban malls expected to dip

With the bulk of retail space due to come onto the market located in the suburbs, expect to see slight downward pressure on rents for space in some of these areas.

Prime retail space in the Orchard area, however, is expected to see stable yields due to a more limited supply coming onstream, although some uncertainty over how the area will perform exists, given the global economic climate.

This is the general prognosis experts have of the retail property sector in Singapore.

They also expect investors to show higher interest in strata retail space given the latest cooling measures that hit the residential and industrial property sectors, but note that the bulk of retail space available are owned by single landlords.

Consultants say that an estimated 1.9 million square feet of retail space is set to come onstream this year. The majority of this space is held under a single ownership structure by a commercial developer or reit (real estate investment trust) and is for rental income. As much as 80 per cent of this space is expected to be located in the suburbs.

Orchard Road

2013 is the only year with proposed completion of retail projects along Orchard Road up till 2016. This could help rents to stay stable.

The space has also been well-received. Three projects are expected to be completed in 2013 and they include the AEIs (asset enhancement initiatives) of The Heeren, Orchard Gateway and the redevelopment of 268 Orchard Road.

It was reported that The Heeren will be fully occupied by department store Robinsons, and that Orchard Gateway is already more than half pre-committed, with tenants like Crate & Barrel, Religion, Swatch Megastore and Nike's new concept store called Amplify Women's. The library@orchard will also be situated at Orchard Gateway.

In total, the three projects are likely to result in a 5 per cent increase in retail space along Orchard Road, less hefty than the 15 per cent increase in retail space seen in 2009, which saw the addition of malls like Orchard Ion, Orchard Central and 313@Somerset.

But there are other factors that impact rents of retail space, such as foot traffic and retailers' ability to generate sales.

And while retail sales this year are generally expected to be augmented by fairly healthy tourist arrivals on the back of new and reinvented visitor attractions in Singapore, there are risks surfacing for the Orchard shopping belt.

Jurong Gateway

Much of new shop space that will come onto the market this year will be located in the Jurong Gateway area, which will see two new malls spring up. Jem, by Lend Lease, has an estimated shop gross floor area (GFA) of 573,000 square feet. Westgate, a retail cum office development by CapitaLand, will offer an estimated shop GFA of 426,000 sq ft.

The malls are reportedly over 80 and 50 per cent leased, respectively, ahead of their expected opening.

The new malls may lead tenants of existing malls in the west to take flight from their current place of residence

Over the longer term, however, these existing malls that are differentiated from the typical mass market malls, such as JCube - which positions itself as an entertainment mall - and IMM - an outlet mall - could help them to retain their niche audience.

Suburban malls are generally able to widen their tenant base as the size and spending power of residential catchments increase. Suburban malls no longer cater purely to retailing low-end daily necessities but have evidently attracted new international retailers. Coupled with strength of management from Reit/funds landlords, prime suburban rents are expected to remain steadfast with an optimistic horizon.

Strata retail

Strata-titled retail space is expected to see heightened interest among investors this year, as a result of the cooling measures introduced by the government to the residential and industrial property markets.

Investors flush with liquidity are likely to support prices of commercial properties, especially in light of the freshly implemented cooling measures which will filter out some investment dollars from the residential and strata industrial markets.

Some new strata retail space is expected to come onto the market, but they do not make up a significant proportion.

Of the 1.9 million sq ft of retail space due to come on stream this year, just 46,630 sq ft, or about 2 per cent, is strata space.

Investors also need to understand the product and consider factors such as the location of the space.

The long term

But while take-up rates at malls, both suburban malls and those located in the Orchard area, appear to be holding up, there exists some longer term challenges that could potentially hit the market.

Discretionary spending by local residents may continue to slide given the uncertain and bearish economic outlook.

The prevailing problems of manpower shortages and the increasing resistance against further rental increases from tenants will all have a bearing on demand, and consequently retail rents.

Some malls are expected to be able to weather these challenges better than others.

New malls that are well-positioned with good accessibility and high foot falls are better considered.

Existing malls that are successful - tried and tested - have a good following, are more likely to have a long list of retailers who are 'waitlisted' to get in. But such strong demand may not be the same across all malls.

Source: Business Times –29 January 2013

News Update - 28 Feb 2012

RESIDENTIAL MARKET

Residential property buys via SPV may not escape ABSD

Corporate entities seeking to avoid paying the additional buyers' stamp duty (ABSD) by buying shares in special purpose vehicles that own properties could come under the scrutiny of the tax authorities.

The Inland Revenue Authority of Singapore (IRAS), in a letter responding to a Business Times article on such deals, said: "When the company buys a residential property, it will be subject to ABSD, and at the highest ABSD rate of 15 per cent. Under the Stamp Duties Act, the Commissioner of Stamp Duties may disregard or vary any arrangement to counteract any reduction in or avoidance of duty payable by that person.

"The Inland Revenue of Authority of Singapore audits stamp duty transactions to detect transactions that are conducted for tax avoidance purposes."

Transaction of real estate through SPVs is not a new phenomenon; funds in particular are known to do it. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more attractive for companies to consider this route.

This is because the ABSD applies only when investors buy the units of a development directly, but it does not apply when the transaction is through the sale of shares in companies - even if they own real estate.

Experts had said therefore that this would be especially attractive for corporate entities, especially those looking to purchase luxury residential property.

Source: Business Times –26 January 2013

 

URA Q4 stats show signs of speculative buys

The Urban Redevelopment Authority's (URA) fourth-quarter real estate statistics show evidence of the investment and speculative activity that drove various segments of the Singapore property market last year and led to the latest cooling measures.

Home buyers in the private housing market, for instance, picked up far more homes from developers last year (22,197 units) than in the previous year (15,904 units). However, fewer homes changed hands in the resale market, which covers secondary market deals involving completed properties, last year (12,811 units) than in 2011 (14,046 units).

To deter speculation in residential properties, the government introduced a punitive SSD regime in early 2011, where SSD rates of 16, 12, 8 and 4 per cent were slapped on those who bought private homes on or after Jan 14, 2011, and sold them in the first, second, third or fourth year respectively of purchase.

As for non-residential properties, a disparity in performance of the URA's price and rental indices last year points to speculative demand.

Prices of offices and shops increased in 2012, albeit by a smaller magnitude than in 2011, despite falls in rents.

The URA's All Industrial price index shot up by 25.8 per cent last year, outstripping a 10.1 per cent increase in rentals.

The URA's office price index rose 1.4 per cent while the rental index dipped 1.3 per cent last year. Its shop price index gained 2 per cent while rents slipped 0.3 per cent. The same trend applied to the private housing segment, with the 2.8 per cent gain in the overall private home price index in 2012 outperforming a 2.1 per cent rise in the rental index .

Earlier this month, the government imposed SSD for industrial properties, with the rates set at 15, 10 and 5 per cent on properties bought on or after Jan 12 and sold in the first, second and third year respectively of purchase.

The number of caveats lodged for subsales of strata factory units jumped from 70 in 2011 to 189 last year.

In particular, subsales picked up substantially in the fourth quarter of last year, with 80 caveats, higher than the 64 units in Q3, 29 in Q2 and 16 in the first quarter of last year.

For shops, subsales climbed from 11 deals in 2011 to 45 deals last year. However, for offices, there were only three subsale transactions each in 2011 and 2012.

The strata shops market on the whole (primary and secondary markets) was buoyant in 2012, with 1,295 caveats lodged (amounting to $1.59 billion in transaction value), double the 636 caveats ($0.69 billion) in 2011.

On the 2.7 per cent Q-o-Q drop in the URA index for multiple-user factory space in Q4 last year, after the index rose 10.1 per cent in Q3. New project sales are higher in value than secondary market deals and help to lift the index. In Q3, nearly half of the sales volume was from new projects, whereas in the fourth quarter, the proportion dropped to 35 per cent.

Source: Business Times –26 January 2013

 

OCR completed condos fared better

In the private residential segment, the prices of completed, non-landed private homes in the Outside Central Region (OCR) led fourth-quarter gains, rising 5.6 per cent quarter-on-quarter in the fourth quarter last year.

In the price indices compiled by the Urban Redevelopment Authority (URA), the index for uncompleted homes in the OCR inched up at less than half the pace: 2.4 per cent.

The OCR covers suburbs such as Punggol, Woodlands and Jurong, where mass-market condominiums are located.

This pattern - where the rise in price was higher for resale, non-landed homes than for uncompleted ones - was generally replicated across the island in 2012.

Prices in the OCR for completed homes climbed 8.8 per cent last year, double the 4.4 per cent appreciation for uncompleted properties. This also happened in 2011, when a 10 per cent surge in completed home prices was double the 5.1 per cent rise posted for uncompleted homes.

In the Core Central Region - which includes the prime districts 9, 10 and 11, the financial district and Sentosa - URA's completed non-landed home price index rose 1.5 per cent quarter-on-quarter in Q4 2012. For uncompleted homes, the figure dipped 0.4 per cent.

For the full year 2012, completed home prices gained 3.2 per cent, against a 1.7 per cent decline for uncompleted properties.

In the Rest of Central Region, which covers city-fringe locations, prices for both completed and uncompleted homes rose an identical one per cent q-on-q in Q4. Yet, for full-year 2012 and 2011, the prices of completed non-landed properties in the region still rose more than for uncompleted ones.

URA's overall private home price index - covering both completed and uncompleted as well as landed and non-landed homes across the island - rose 1.8 per cent in Q4.

This was a bigger gain than Q3's increase of 0.6 per cent. Full-year 2012, the index appreciated 2.8 per cent, half the 5.9 per cent rise in 2011.

Source: Business Times –26 January 2013

 

HDB resale prices seen remaining stable

Even as prices of resale flats hit new peaks in the fourth quarter of 2012, consultants say that prices should remain stable in the coming year, following the seventh round of cooling measures.

The Housing & Development Board's (HDB) Resale Price Index rose 2.5 per cent over the previous quarter to breach the 200-point price-index mark to hit 202.9 in the fourth quarter, resulting in a 6.6 per cent increase in resale flat prices for the whole of 2012.

According to HDB's data, Bukit Merah had the highest median resale price for a five-room flat at $765,000; Queenstown fetched the highest median price for a four-room flat at $710,000.

While this drives resale prices to a fresh peak, the price hike seen last year is lower than the 14.1 per cent rise seen in 2010 and the 10.7 per cent hike in 2011, said HDB.

Consultants concur that the seventh round of cooling measures - which include permanent residents (PRs) having to raise an additional 5-7 per cent for ABSD, restrictions on the Mortgage Servicing Ratios (MSR), not allowing PRs to sublet their whole flat and requiring PRs to sell their flat after purchasing a private residential property in Singapore - will put a lid on price increases.

Eugene Lim, key executive officer at ERA Realty Network, said he expects prices to remain stable for now, and that prices will moderate once cash-over-valuation (COV) transactions moderate.

According to ERA Research, overall median COV rose 11.67 per cent quarter on quarter to hit $33,500 in the fourth quarter. The median COV for a five-room flat was $38,000, up 15.15 per cent from the previous quarter, while COV for a four-room flat rose 16.67 per cent to $35,000.

Resale transactions in the fourth quarter fell by about 14 per cent, from 6,560 cases in the third quarter to 5,631. For the full year of 2012, the total number of resale transactions was 25,094, a slight increase of about 2 per cent over 2011.

HDB said the cooling measures announced by the government on Jan 11 will help to moderate demand for HDB flats and stabilise resale prices.

In addition, some 110,000 new flats will also be completed in the coming years.

"HDB has ramped up its Build-To-Order (BTO) supply significantly over the past few years and we will keep up the pace of new flat supply into 2013. Coupled with the new cooling measures, this will help keep public housing affordable for Singaporeans," said HDB in a statement.

It plans to launch at least 23,000 BTO flats this year. The first batch of 3,346 BTO flats in Ang Mo Kio, Choa Chu Kang, Hougang, Kallang/Whampoa, Tampines and Yishun will be offered for sale later this month.

Source: Business Times –26 January 2013

 

Mixed-use developments draw homebuyers

Mixed-use developments integrating residential and retail components have become an attractive proposition for homebuyers, notably couples and young professionals, according to Far East Organization.

Chia Boon Kuah, chief operating officer for property sales, said this after a recent offering, the 99-year-leasehold The Hillier, sold its last residential units last weekend.

The homes at the 528-unit SOHO development at Hillview Avenue 2 commanded an average price of $1,474 per square foot and should be ready by 2016, after launching for sale in January last year.

The Hillier comes with an adjoining two-storey mall known as HillV2, which was over 60 per cent leased as at yesterday.

The success of The Hillier follows a trend for other similar mixed-use residential projects over the last few years from Far East.

Its Tennery SOHO development at Woodlands Road, integrated with the Junction 10 Mall, sold all 338 homes within a year of its launch in December 2010.

Close to all the 319 units at the Greenwich in Seletar, as well as the 992-unit Watertown in Punggol have also been transacted since their launches in August 2010 and January 2012, respectively. Both projects come with a retail component.

"Many of these buyers are couples or young professionals who are seeking not just a roof over their heads, but a home that resonates with their desired lifestyle, allowing the merging of live-work-play spaces," Mr Chia said. He noted that Far East developments are appealing to a new breed of buyers who want a combination of a more spacious location that can be outside of the city centre but remains close to retail amenities and major transportation networks.

Accordingly, "we plan our developments and create residential concepts based on the site's locational attributes and features as well as our understanding of homebuyers' aspirations", Mr Chia said.

For example, the HillV2 mall joined to The Hillier will feature an assortment of lifestyle outlets, from Market Place by Cold Storage to cafe Dean & DeLuca and Wine Connection Bistro, when it is completed next year. The development is also near the future Hillview MRT station and two expressways.

Within The Hillier itself, residents can expect usual condo facilities, such as a pool, a jacuzzi and a tennis court.

Familiarity plays a part too. Sizeable demand for these mixed residential-retail developments came from people who already knew the area well.

Despite the latest round of property-cooling measures - many of which target the residential market - Far East is still upbeat about its prospects.

"As the market adjusts to the new measures, we remain confident that the strong economic fundamentals and growth prospects of Singapore will continue to support a sustainable property market," Mr Chia said.

Source: Business Times –26 January 2013

 

Cooling measures not a concern, says foreign developer of luxury condo

The latest property cooling measures may be targeting foreign buyers, but at least one property firm believes that the steps will not curb foreign appetite for Singapore properties.

China Sonangol Land plans to continue expanding in Singapore and is not too bothered by the latest cooling measures.

Mr Alain Fanaie, chief executive officer of the developer's parent company, China Sonangol Group, said he was "not really concerned" about the impact of the recent cooling measures.

He expects buying activity to return in about six months' time.

The latest cooling measures rolled out on Jan12 include raising the additional buyer's stamp duty (ABSD) for foreigners from 10 per cent to 15 per cent.

At its maiden project TwentyOne Angullia Park, a high-end freehold condominium in Orchard Road, five out of the 54 units have been sold since its soft launch in April last year.

All five buyers are foreigners - mostly Indonesians - and the change in ABSD "doesn't make a substantial difference for them", Mr Fanaie said.

Also, they bought the units to live in, rather than as investments.

"For high-end properties, it's mainly for foreigners and the motivation for them is very different. It's not their main residence and they are coming to Singapore for other reasons."

The appeal of Singapore lies in its strong infrastructure, and foreigners believe property prices will still rise in the long term, he said.

He added that since none of the buyers took out loans to finance their purchases, they were not hit by reductions in loan-to-value (LTV) ratios.

Units at the 36-storey project are priced at between $4,000 and $5,000 per sq ft, and cost at least $4.7 million each. The smallest is a 1,163 sq ft two-bedroom unit and the largest is a 7,718 sq ft penthouse.

The development sits on a 49,113.6 sq ft land plot, the site of the former The Parisian condominium, and was unveiled to the public last Saturday.

Construction is already under way and the project is expected to be completed by June 2014.

China Sonangol Land, set up in 2008, is a unit of China Sonangol Group, which is headquartered in Hong Kong.

It is planning to develop another freehold condominium in East Coast this year, the 109-unit Amber Skye, which it is jointly developing with OKP Holdings.

Amber Skye will be launched in the second half of this year.

Mr Fanaie said Singapore will be a growing part of China Sonangol Land's portfolio, which includes commercial properties in Jakarta.

The developer plans to focus on residential properties in Singapore, but is also considering developing offices.

Source: The Straits Times –28 January 2013

 

Rentals keep up with rise in home prices

Rentals have kept pace with the rise in private home prices, but not across the board.

"Rental yields remain at 3.7 per cent islandwide," Maybank Kim Eng said in a report that compared 2011 and 2012 rentals at projects with more than 10 rental contracts.

The minimal change in the figure indicates condominium rental rates have generally kept up with the increase in prices last year.

However, not all districts fared equally. The worst showings were in Newton and Sentosa, with yields compressing to just 2.2 per cent last year.

Median rentals fell by 15 cents per sq ft (psf) in Newton and 12 cents psf in Sentosa last year, which Maybank Kim Eng said was likely due to the rise in completed supply in those areas.

Condos in Newton that received their temporary occupation permit last year include the 30-storey freehold condo Trilight, which has 205 units.

Maybank Kim Eng estimated that net yields could be as low as 1.8 per cent in Sentosa.

The chart-toppers were Woodlands, Jurong and Choa Chu Kang, which offered rental yields of 4.4 per cent last year.

Sengkang, a former favourite with rental yields of 4.4 per cent in 2011, has seen its yields decline to 4.2 per cent last year, Maybank Kim Eng said.

The research house noted that yield compression last year was most apparent in the city fringe.

Newton and Bukit Timah rental yields fell by between 0.25 and 0.31 percentage point, reflecting a greater appreciation of resale values relative to rental rates, Maybank Kim Eng said.

The Urban Redevelopment Authority (URA) said yesterday that private residential prices increased 2.8 per cent year-on-year last year, a slowdown from the segment's 5.9 per cent price rise in 2011 from the preceding year.

At the same time, rents for private residential properties grew 2.1 per cent last year from those of 2011, a slower pace than the 3.8 per cent rise in 2011, URA said.

But property consultants said they are already seeing signs of moderation in rental rates.

"Rentals have started to slow as (a greater) supply of complete units appears in the market," said ERA Realty key executive officer Eugene Lim.

Source: The Straits Times –26 January 2013

 

COMMERCIAL MARKET

Alexandra Central units put up for quick resale

Some investors are already trying to flip the shop units they bought just days ago at the yet-to-be-completed Alexandra Central, a sign that they had invested in the project hoping to make a quick buck.

A Business Times check showed that at least 19 of the 114 retail units that were sold by the developer last Monday, appeared to be on the market again by Saturday. Only one unit of each size was included in this tally.

On website Commercialguru, agents had, on Saturday, put up listings to sell more than 15 shop units that buyers had previously snapped up. Some of these agents re-posted the listings yesterday.

Property agents have also been sending text messages marketing these units, while at least two advertisements appeared in the Classifieds section of The Straits Times on Saturday.

Prices listed ranged from about $3,720.93 per square foot for a 24 square metre (258 sq ft) unit, to as high as $8,600 psf for a 10 sq m (107.6 sq ft) unit.

Said one property agent: "There are many units at Alexandra Central now on the market, you just have to let me know your budget and my guys will find one for you."

One 15 sq m (161.5 sq ft) retail unit on the third floor, which was bought on Monday at $710,000, was being marketed for sale at $850,000 on Saturday.

Another 18 sq m shop (193.8 sq ft), which was purchased from the developer at $833,000, had agents trying to sell it for $1.02 million.

Late last week, the Urban Redevelopment Authority (URA) indicated that it may extend cooling measures to the commercial property sector if transactions rise above what it deems to be the comfort level.

It said in response to queries from The Business Times: "We are monitoring the various segments of the property market closely, including the commercial sector. We will introduce measures if required to moderate investment demand and prevent over-heating in the property market."

The launch of 99-year leasehold Alexandra Central last Monday featured a packed showroom. All but two of the 116 strata shop units available were sold.

It was estimated that at least 20 buyers on average were competing for each unit, while a shop space on the third storey had as many as 155 interested buyers.

The project's popularity came amid expectations among market watchers that commercial properties are likely to see higher interest following the recent round of cooling measures that hit the residential and industrial markets about two weeks ago.

Shop space went for $4,000 psf to over $7,000 psf at the launch. Alexandra Central consists largely of small shops, with units ranging in size from 10 sq m (107.6 sq ft) to 667 sq m (7179.5 sq ft).

What remained unsold by the developer last Monday was a 102 sq m (1,097 sq ft) food and beverage unit on the second floor of the project, and the largest, 667 sq m unit on the third floor that was not launched for sale - though agents were trying to gather interest in the unit.

Agents were still trying to sell both units yesterday.

When completed, Alexandra Central will be located next to Ikea and on the site of the former Safra building in Alexandra Road. The overall development includes a 450-room hotel managed by Park Hotel Group. Construction is expected to be completed by June 2016. It is developed by Chip Eng Seng.

Source: Business Times –26 January 2013

 

Commercial property in Changi up for tender

A freehold commercial property at the corner of Changi Road and Lorong 105 Changi has been put up for sale by tender.

No 160 Changi is offered for sale on a vacant possession basis. This came after its owner, AIA Singapore, shifted operations that used to be housed there up until late last year to its other properties in Singapore.

No 160 Changi is currently a 4-storey building with two basement levels that include 23 carpark lots. It sits on a site area of about 18,000 square feet (sq ft) about 300 metres away from Eunos MRT station and has a permissible gross plot ratio of 3.0.

No development charge is payable on the property.

A hotel could also be considered for the site, subject to approval by the relevant authorities, due to its commercial zoning.

This is the first significant freehold commercial property with potential for redevelopment to be launched this year, and the buyer will benefit from recent property cooling measures, which have largely spared commercial properties.

Furthermore, the buyer can gain from the upcoming Paya Lebar commercial hub nearby, which has 12 hectares of space available for development.

Recent projects in the vicinity prior to that, including the Icon@Changi, Wis@Changi and Centropod@Changi, were able to fetch prices from about $2,300 per square foot (psf) to $4,300 psf.

The tender will close on March 8 at 4pm.

Source: Business Times –28 January 2013

 

INDUSTRIAL MARKET

First drop in industrial property prices in three years

Industrial property prices fell unexpectedly in the last quarter of 2012 - the first decline in three years and a sign that caution is taking hold among investors.

Prices dipped 0.7 per cent in the period compared with the previous three months after climbing for 12 straight quarters, according to the Urban Redevelopment Authority (URA) yesterday.

Overall, the URA industrial property price index rose 25.8 per cent last year from the preceding year, lower than the 27.2 per cent year-on-year increase in 2011.

The index is now 14per cent above its previous historic peak in the first quarter of 1997.

Analysts said industrial prices could moderate this year due to the seller's stamp duty imposed on the sector two weeks ago.

The overall price decline in the fourth quarter surprised experts, as values for multi-user warehouses shot up 9.4 per cent over the same period from the preceding three months.

The rise in warehouse values was outweighed by a surprise 2.7 per cent sequential decline in prices of multi-user factories after they rose a sharp 10.1 per cent from the second quarter to the third.

Analysts said factory demand could have softened due to a weaker economic outlook.

Manufacturing output has fallen sequentially for the past three quarters and anticipated factory orders have shrunk every month since July.

Stiffer competition due to a spate of new industrial launches also led developers and sellers to lower their price expectations.

But while industrial prices fell, rents rose 3.9 per cent in the fourth quarter from the preceding quarter, outstripping the 1.2 per cent quarter-on-quarter rise in July through September.

Analysts said they expect industrial prices to moderate or flatten in the short term, due partly to the seller's stamp duty.

Analysts also flagged a possible oversupply this year and in 2014.

They pointed to the URA's quarterly report yesterday which said that 31.2 million sq ft of new supply will come onstream this year and 15.6 million sq ft next year.

Source: The Straits Times –26 January 2013