News Update 20 April 2012

RESIDENTIAL MARKET


Home sales to foreigners dive 78 per cent

HOME purchases by foreigners plummeted 78 per cent in the first quarter as the effects of the 10 per cent additional buyer's stamp duty hit hard.

Most foreigners have retreated hastily from the market, buying just 293 homes in the first three months of the year.

This is 78 per cent down from the 1,358 homes bought by foreigners in the fourth quarter.

Permanent residents (PRs) are not included as foreigners in these figures.

Among PRs, home purchases dipped just 7.5 per cent to 790 units, while Singaporean purchases fell 12 per cent.

Experts say the implementation of ABSD has caused foreigners to pull out of the market in a knee-jerk reaction as they reevaluate their options. They say some foreigners might still see long-term potential in Singapore's property market and are attracted by rebates offered by some developers to cushion the impact of the tax, but others are simply watching and waiting. Uncertainty in global markets might have also taken its toll on foreign purchases.

Source: The Straits Times – 20 April 2012

Shoebox flats rake in higher rental yields

 

TINY 'shoebox' homes here are raking in much higher rental yields for investors than other apartment types but experts warn the good times might not last.

Data from the Singapore Real Estate Exchange (SRX) found that gross yields for shoebox apartments were 5.4 per cent in the first three months of the year.

This is well above the 2.5 to 3.5 per cent yields that residential properties typically return to investors.

The SRX shoebox yield was based on the average rent of $6.51 per sq ft (psf) per month for the 197 leasing deals inked in the period. The average unit price of the 123 shoebox homes sold then was $1,450 psf.

Experts say investors have flocked to the shoebox segment in droves, attracted by the affordable prices - typically less than $1 million. In fact, about one in seven buyers picked up new homes 500 sq ft and smaller last year.

This is more than double the rental yield of 2.4 per cent in the luxury segment. It also dwarfs the 3.6 per cent yield in the mid-end segment and 4.1 per cent yield for mass market homes.

But these high yields are not expected to last as an increasing supply of completed shoebox homes enters the market.

The number of these small homes is expected to double from about 4,100 units later this year to 8,200 units by the end of 2015.

While a dip in prices of shoebox flats could cause yields to rise temporarily, yields are likely to trend towards the norm of 2.5 to 3.5 per cent in the long run as supply picks up.

Source: The Straits Times – 20 April 2012

70% of residential units in Katong Regency booked

Property giant UOL Group has put out its first mixed-use development for sale in 2012.

Some 70 per cent of residential units in Katong Regency were booked on its launch. Of these, the sale of about 130 units have been confirmed.

Kam Tin Seah, Senior General Manager (Investment & Strategic Development) at UOL, said: “It is a very well associated kind of Tanjong Katong address. So you would expect the core demand to still come from this immediate neighbourhood.”

Located at the junction of Tanjong Katong Road, the site used to house the former Lion City Hotel and Hollywood Theatre. It is a mixed development which consist of 244 residential units and commercial space.

Prices for the residential units range between S$950,000 for a 550 square feet one bedroom unit, and S$2.52 million for a three bedroom pent house unit of 1,970 square feet. That works out to about S$1,475 to S$1,727 per square foot.

Analysts said the pricing is at the steep end, compared to units at nearby developments, which are about five to 10 per cent cheaper.

Still, buyers response are expected to be healthy. Analysts said this is because the government is planning to rejuvenate the area.

The apartments will sit above the upcoming ONE KM mall. To be managed by UOL, the retail development will have a total net lettable area of 210,000 square feet with some 150 retail tenants. Some of the buyers have said that they like the retail mall as there is a lack of malls in the Katong area.

Source : Channel NewsAsia – 19 Apr 2012

News Update - 19 April 2012

RESIDENTIAL MARKET


Showflats to show fact, not fiction, come May

The days of "artificially" enlarged showflats decked up with made- to-measure furnishings are numbered, following changes to the Housing Developers Rules (HDR) yesterday.

Developers will now need to provide drawn- to-scale location plans and a breakdown of a unit's floor area by its various components - comprising bedrooms, balconies and bay windows - to help buyers better visualise the amount of usable space.

In addition, developers will also need to obtain a buyer's consent for any alterations to the layout of a property (such as changes in the location of facilities) and offer more information on the project before the option-to-purchase is issued.

Shoebox units have become increasingly popular and there are concerns about whether buyers - who predominantly hold HDB addresses - truly understand how small these units really are.

It is widely known that many of such showflats do not demarcate the living space, planter and balcony area clearly, giving an inaccurate impression of a unit's actual size.

Developers are also unlikely to build showflats for all the different unit types in a development as it would not be practical. Hence, much is left to the imagination of buyers.

Still, most consultants do not expect demand for shoebox units to take a big hit following these measures. Smaller units remain sought after as they are affordable - being priced around the $1 million mark - amid a low-interest-rate environment. A huge number of them will be rolled out over the next few years.

Other changes that will take effect come mid-May include the need for developers to offer buyers details on their past projects in Singapore, prior to the issuance of the option-to-purchase.

The amendments to the HDR will apply to sales of all private residential properties with effect from May 18, regardless of the launch date of the project.

URA noted that some of the changes proposed previously, such as directions on setting up showflats, will require amendments to the Housing Developers (Control & Licensing) Act and will be implemented only in the later half of this year.

Source: Business Times – 19 April 2012

'Beware oversupply of shoebox flats'

PROPERTY analysts have issued a blunt warning to investors keen to buy so-called shoebox apartments in hopes of capital gains and good rental returns.

The strong interest in these units - mainly 500 sq ft or smaller - is playing a central role in fuelling the robust demand in the overall private property market.

Analysts at major research firms cautioned that investors should look before they leap even though the price tags look tempting, given the units' small size.

They said investors should understand that thousands of these tiny homes are set to flood the market in the next year or so, which could mean headaches in getting a tenant - or a good resale price.

The analysts said most buyers for such units tended to be investors rather than owner occupiers, many of whom lived in HDB flats that were larger than the shoebox units they were buying.

The BNP report also stated that tighter immigration rules may mean investors would face even more difficulty finding enough tenants for the units.

'Facing an uncertain demand ahead, we believe the physical market could start to feel the first pains of oversupply as early as (the second half of next year) via softening rents and buyer sentiments,' it said.

The researchers also warned that rising interest rates could dampen home demand. 'Coupled with other risks such as an earlier-than-expected climb in interest rates, this could indeed have a significant impact on the financial well-being of HDB households, which typically have less holding power,' said Nomura.

Likewise, the BNP report warned that a rise in mortgage rates could hurt home affordability, 'unless household income rises faster or home prices fall faster'.

Source: The Straits Times – 19 April 2012