Singapore Property Review

Koreans become major players; foreign buying hits record 2,864 units

By KALPANA RASHIWALA

(SINGAPORE) Foreigners, including permanent residents, bought a record 2,864 private homes in Singapore in the second quarter, up 34 per cent from the preceding quarter and more than twice the 1,221 private homes that they invested in during the same period a year ago.

But even this brisk buying was dwarfed by Singaporeans, who accounted for 68 per cent of caveats lodged for private home purchases in Q2 this year, up from 65 per cent in Q1.

In contrast, foreign buyers’ and PRs’ share of total private home purchases slipped to 25 per cent in Q2 2007, from 27 per cent in Q1 2007.

Companies, meanwhile, accounted for the remaining 7 per cent of private home buyers in Q2 2007, reflecting strong collective sales as well as acquisitions by numerous funds investing in residential property, according to DTZ Debenham Tie Leung’s analysis of caveats captured by Urban Redevelopment Authority’s Realis system.

DTZ’s report also showed Koreans are growing in prominence and accounted for 6 per cent of foreign buyers in Q2, their highest share ever. Koreans’ share among foreign buyers has been growing steadily over the past year.

The figure used to be around one to 2 per cent in 2004 and 2005, but rose to 2 to 4 per cent in various quarters last year. Koreans hardly featured as buyers in the 1990s.

The 185 private homes Koreans bought here during April to June 2007 reflected a 76 per cent quarter-on-quarter increase.

Growing purchases by Koreans reflect not only acquisitions by Korean nationals residing here, some drawn to Singapore by their children’s education, but also efforts by major Singapore developers to market their projects in Korea, DTZ executive director Ong Choon Fah observed.

Indonesians and Malaysians continued to be the largest groups of foreign buyers, accounting for 22 and 18 per cent respectively of overall private home purchases by foreigners in April to June 2007. This was followed by buyers from India, United Kingdom and China.

Nearly 96 per cent of the 2,864 private homes foreigners picked up in Q2 were private apartments/ condos, with landed homes making up the remaining 5 per cent.

The 2,743 apartments/ condos foreigners bought in Q2 comprised 2,062 units purchased in the secondary market - up 44 per cent from Q1 and a record quarterly figure - and 681 units acquired from developers in the primary market.

A further split of the secondary market purchases showed that 455 units were acquired in the subsale market and 1,607 units in the resale market. The latter figure was up 37 per cent from the preceding three months and a fresh high.

Resale deals are secondary market deals in developments that have received their Certificates of Statutory Completion, while subsales involve projects that have yet to do so.

DTZ attributed the strong foreign interest in resale properties to the current buoyant leasing market. Given the tight supply of rental properties in the prime districts, many expats are choosing to buy homes. Their preference is for completed properties that they seek to occupy themselves.

The 455 subsale apartments and condos that foreigners bought in Q2 represented a 32 per cent quarter-on-quarter increase and was the second highest quarterly figure ever - trailing only the 485 units snapped up in Q4 1995.

The Sail @ Marina Bay, Sky@eleven and Icon were among the projects popular with foreign buyers in the subsale market in Q2.

In the resale market, the most highly-sought after developments among foreigners included Sanctuary Green, Pebble Bay and Water Place (all in the Tanjong Rhu area), Queens and Valley Park. In the primary market (units purchased directly from developers), Casa Merah, RiverGate, One-north Residences and The Solitaire were among foreign buyers’ favourite projects.

Mrs Ong predicts that foreign buying will continue to be steady in the second half of 2007.

‘Sub-prime has taken some froth out of the market; but this affects more the specuvestors (who buy for capital gains but don’t mind holding on to the property, waiting for its price to rise). Foreign buyers, however, are purchasing more for owner occupation or long-term investment, drawn by Singapore’s success in reinventing itself. Property prices here are higher than two years ago, but then Singapore today is very different. It is a very desirable place to invest and live in,’ she said.

Source: Business Times

Fall in subsale deals as sub-prime fallout and Ghost Month cool buying fever

By ARTHUR SIM

(SINGAPORE) In the traditionally quiet ‘Ghost Month’ of August - when property transactions slowed dramatically - two significant trends emerged.

The Urban Redevelopment Authority released its update on private residential properties yesterday, showing that sales by developers actually went up compared to July. But caveats lodged in August showed that there was a sharp drop in subsales, signalling a cooling down of speculative activity.

At the same time, Colliers International pointed out that compared to July, August saw far more activity in the mass market.

The trends emerged against the backdrop of the US sub-prime mortgage shock, which served as a reality check for those gripped by the market frenzy of earlier months. In tandem with the Hungry Ghost month, this reduced the total number of transactions in August to 2,875, compared to 4,492 in July.

Developers launched 1,847 units in August, and sold 1,720.

And Colliers International estimates that about 47 per cent of the units launched and around 40 per cent of those sold were in the mass market segment.

‘This trend differed from that of last month in which the bulk of 45 per cent of the units launched were mid-tier units located in the rest of central region (RCR). Mass market units only accounted for 27 per cent in July 2007,’ said Colliers’ director for research and consultancy, Tay Huey Ying.

Although Ms Tay believes it is still too early to say if developers’ focus has now shifted to the mass market, she added: ‘The high-end and luxury segment has dominated the market since 2005, but from what we are seeing, it does now seem to be more evenly spread.’

Prices growth appeared to be somewhat muted. ‘Median prices of developments with units sold in both July and August rose marginally by an average of 2.7 per cent only,’ Ms Tay said.

The US sub-prime crisis and the lack of high-profile launches could have contributed to the slowdown, she added.

The development which saw the highest growth in median price in August was The Orchard Residences. Its median price rose 25.8 per cent. However, only two units were sold - one at $5,500 psf and another at $4,687 psf. A spokesman for CapitaLand said the $5,500 psf penthouse was bought by a foreigner.

The penthouse, which is expected to have cost between $23 million and $27.5 million, has set the record for the most expensive property in Singapore on a per square foot basis.

Prices for most properties, however, are seen to be stabilising.

Ms Tay expects overall prices to ‘resume with the return of market confidence’, but added that price growth will be more ‘controlled’.

Interestingly, more stable prices have been accompanied by a drop in subsale activity. Colliers’ analysis of caveats lodged in August show that it now stands at 7 per cent of the total volume of property transactions. In July alone, subsale activity was almost twice as high at 13 per cent.

But, overall, market confidence is still intact, noted CB Richard Ellis executive director Li Hiaw Ho, who pointed out that prices still rose in August - albeit more slowly.

‘The very prime projects were marketed at above $3,600 psf while those in the fringe area were sold at above $1,200 psf,’ he said.

Two hot launches - The Parc Condominium and Soleil @ Sinaran - accounted for over 60 per cent of developer sales. Mr Li said median prices of Soleil @ Sinaran, at $1,410 psf, and The Parc Condominium, at $870 psf, were ‘within expectations’.

‘For the rest of the third quarter, price levels are expected to remain stable,’ he said.

Although the mass market prices have been slower to rise, Savills Singapore director of marketing and business development Ku Swee Yong believes the increases on a year-on-year basis are significant.

‘Last year, most buyers’ definition of prices for a mass market development would have been around $600 psf,’ he said. Based on URA’s monthly figures, only 71 units, or about 4 per cent of the units sold in August, cost under $750 psf.

Source: Business Times

By Channel NewsAsia’s US Correspondent Daniel Ryntjes | Posted: 19 September 2007 1311 hrs

WASHINGTON : Stocks rallied on Tuesday after the Federal Reserve slashed US interest rates.

The cut in the federal funds rate by a half a percentage point to 4.75 percent ignited a powerful rally on Wall Street, with stock indexes surging by more than 2.5 percent.

The Federal Open Market Committee headed by Ben Bernanke, in a unanimous decision, also cut its discount rate for direct central bank loans by 50 basis points to 5.25 percent.

Economists say that fears of a recession in the United States may have receded with the decisive action by the central bankers.

The Fed has taken this dramatic step - more than most in Wall Street had expected - because it is worried about the effects of recent credit problems impacting the broader American economy.

Fred Bergsten, Director, Petersen Institute for International Economics, says it is good for the global economy: “Confidence has been shaken by what’s going on in the housing market, and so the fact that the central banks are clearly on the case, and the Federal Reserve shows it can react swiftly and in a major way is nothing but good news for the world economy.”

With inflation in check, the Fed still has room to manoeuvre in order to steer the US economy away from recession.

Source:  CNA/ch

Posted: 19 September 2007 0238 hrs

WASHINGTON : The Federal Reserve on Tuesday slashed its base federal funds rate by a half point to 4.75 percent, in what analysts called a bold move to stimulate an economy imperiled by housing and credit market stress.

The Federal Open Market Committee, in a unanimous decision after a one-day meeting, also cut its discount rate for direct central bank loans by 50 basis points to 5.25 percent.

“Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time,” the FOMC said in a statement.

The statement said that despite “moderate” economic growth in the first half, tighter credit conditions create a “potential to intensify the housing correction and to restrain economic growth more generally.”

The cut in the federal funds rate is likely to lead to a lowering of borrowing costs across the economy, for consumers and businesses alike. The Fed, which has not cut rates since 2003, had held this rate at 5.25 percent since June 2006.

“I think the Fed delivered a healthy dose of monetary medicine to the economy and housing market,” said Scott Anderson, senior economist at Wells Fargo.
 

“I think it will be viewed as an aggressive move by the Fed to avert an economic recession.”

The policy-setting committee, which was forced to reconsider its tough monetary stand when financial markets were roiled by fears of a wider economic crisis, had been widely expected to cut interest rates.

But analysts had been divided on whether the central bank would move by a quarter point or a bolder 50 basis points. Some economists said a cut might fuel inflation or bring back the easy-money conditions that created the problems.

“Readings on core inflation have improved modestly this year,” the FOMC said.

“However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.”

The panel said developments in financial markets since the last regular meeting “have increased the uncertainty surrounding the economic outlook” and that it would “continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”

The wording suggests the central bank is not promising further rate cuts but would wait to see if economic and credit conditions return to normal, said analysts.

“It’s a signal that they’ll assess the economic risks as the data come in,” said Craig Alexander, deputy chief economist at TD Bank Financial Group.

“It may be the Fed does not want the market to price in a major easing cycle.”

Avery Shenfeld, economist at CIBC World Markets, said that although the Fed is trying to send a message not to count on any more reductions, “I doubt the Fed is done. I think they are right and that the economy is softening.”

Andrew Busch, analyst at BMO Financial Markets, said however that the rate cut is a rescue for those who “made poor credit decisions without the consequences of market discipline.”

“Like a teenager with a car and no curfew, we’ll be having more problems down the road from these actions. But for now, who cares? Everyone’s happy and it keeps the politicians at bay,” Busch added.

The US economy expanded at a robust 4.0 percent pace in the second quarter, but many experts view that as a statistical fluke that belies soft conditions. The loss of 4,000 jobs in August, say some, point to deep problems as the housing slump and credit problems drag on growth.

In August, the Fed announced a half-point cut in its discount rate in an effort to open credit markets and reduce the stigma associated with direct loans from the central bank. - AFP/de

Source: CNA

GDP may rise 1.4% points with 75 basis point cut in Fed rate: Citigroup

By OH BOON PING

SINGAPORE’S economic growth may jump by another 1.4 percentage points, if the key US interest rate is cut by 75 basis points, says Citigroup.

In a report, its economist Chua Hak Bin said he expects the Fed funds and discount rate to be slashed by 50 basis points (bps) to 4.75 per cent and 5.25 per cent respectively at the upcoming Federal Open Market Committee meeting.

Also, he sees another possible cut of some 25 bps before year-end, which will ‘lift Singapore’s gross domestic product growth by 1.4 per cent points’.

Based on Citigroup’s analysis, this is almost double and far higher than the average of 0.8 per cent across Asian economies, because of Singapore’s heavy dependence on external demand and sensitivity of domestic interest rates to US interest rates.

GDP may rise 1.4% points with 75 basis point cut in Fed rate: Citigroup By OH BOON PING SINGAPORE’S economic growth may jump by another 1.4 percentage points, if the key US interest rate is cut by 75 basis points, says Citigroup. In a report, its economist Chua Hak Bin said he expects the Fed funds and discount rate to be slashed by 50 basis points (bps) to 4.75 per cent and 5.25 per cent respectively at the upcoming Federal Open Market Committee meeting. Also, he sees another possible cut of some 25 bps before year-end, which will ‘lift Singapore’s gross domestic product growth by 1.4 per cent points’. Based on Citigroup’s analysis, this is almost double and far higher than the average of 0.8 per cent across Asian economies, because of Singapore’s heavy dependence on external demand and sensitivity of domestic interest rates to US interest rates. Expectations of rate cuts came after the recent financial market troubles, which have affected US consumption outlook. For example, ‘US housing prices have declined by an average of 8 per cent, but elevated levels of unsold homes suggest that further corrections are likely’. Fed rate cuts will thus help cushion and reduce the potential negative impact from slower US growth. The research house also thinks the Singapore economy is less sensitive to any US economic downturn, due to the diversification away from segments more sensitive to US business cycles, such as the electronics and pharmaceutical sectors. In all, Citigroup says a one percentage point fall in US GDP growth cuts Singapore’s GDP growth by about 1.7 per cent point. Indeed, its projected cut in rates may possibly lift Singapore’s GDP growth by more than necessary if US consumer spending does not slow as sharply as expected, aggravating the current pressures arising from supply bottlenecks. Citigroup believes that the rate cut will strengthen the Sing dollar by 0.6 per cent, improve the current account surplus to GDP by 0.3 per cent point, and increase the fiscal balance to GDP by 0.2 per cent point. However, the impact on local interest rates is likely to be modest, thus limiting the impact on mortgage rates and property market. For example, the three-month Singapore Interbank offered rate is expected to shed only about 10 to 20 basis points to about 2.6 per cent in six months’ time, if the US rate cut is realised. ‘This is because short-term interest rates had already fallen sharply in the early part of the year and the ongoing upward adjustment since represents some normalisation.’ Stronger domestic investment growth may also start putting upward pressures on rates early next year. Overall, Citigroup expects mortgage rates to fall by possibly 10 to 20 bps. On the property front, Citigroup’s analyst Wendy Koh sees a supply crunch amid strong employment growth and falling vacancy rates. She expects residential rental rates to rise by 20-30 per cent a year. This came as a record 113,800 jobs were created in the first half of this year, and Citigroup sees residential occupancy rates rising higher next year to over 97 per cent.

Source: Business Times

Published September 18, 2007

Target up from $35b set 3 months ago, with some $12.7b deals done since July

By UMA SHANKARI

PROPERTY investment sales could hit $50 billion by the end of 2007, CB Richard Ellis (CBRE) predicted yesterday - increasing its full-year target from the figure of $35 billion it set just three months ago.

Source: Business Times