Singapore Property Review

No panic mood this time round and developers are financially stronger unlike during the Asian crisis, but a lot depends on Singapore’s growth, construction bottlenecks and costs, and investors’ pricing power, writes KALPANA RASHIWALA

AFTER two years of exuberant growth, Singapore’s private housing market has come to a virtual standstill. Property launches and sales have slowed as local buyers adopt a wait-and-see attitude while foreign buyers, including institutional investors, are taking a similar approach in the wake of the sub-prime crisis. Despite a paucity of transactions, prices have not weakened. Ask most industry players and they will say that the fundamentals of the local property market are still intact. Veteran developer Kwek Leng Beng, executive chairman of City Developments, says: ‘Today, the mood is not one of panic, unlike during the Asian financial crisis in 1997. We are not in recession today, but rather, we are the victims of our own success. Because we did not anticipate that our economy would be firing on all cylinders, we have a shortage of almost every type of property today.’

Not only is the Singapore economy still growing, but the remaking of the Singapore story is still intact. Singapore’s transformation into a global city and its evolution into the mother of all hubs - financial/wealth management, tourism, education, healthcare, research & development, etc - are coming along nicely.

That and the development of two integrated resorts with casinos and the Republic hosting the Formula One race have served to boost Singapore’s profile among overseas investors, keen on parking some money in Singapore, including in its property sector.

Most developers appear to be keeping their cool despite the current lack of activity in the property market. After all, the established players have made nice profits in the past couple of years and have strong balance sheets. Most have stopped buying high-end residential sites for some months.

The effective cost of borrowing for developers today is 3-5 per cent, nowhere near the highs of almost 20 per cent seen during the darkest days of the Asian crisis a decade ago.

These days, developers reckon they can hold off new property launches, for some months at least. The strategy is that if they don’t launch projects, then they don’t need to drop prices to entice potential buyers. Thus, developers hope they can keep their hold on pricing.

Analysts say one major factor that could weaken developers’ pricing power is specu-vestors who bought multiple units in projects on deferred payment schemes earlier. The deferred payment schemes typically run out when the projects are completed, which is when buyers have to cough up big instalments. To avoid facing such a situation, and be forced to run around town looking for multiple housing loans - which they may or may not get - specu-vestors who bought multiple units may seek to offload their units, at below market prices if necessary, as the projects near completion. If significant numbers of specu-vestors dispose of units at lower than market prices, that may set lower price benchmarks for the overall market.

Another factor that could potentially cause weaker prices could be smaller and newer developers, who may prefer to price their projects more competitively to draw buyers - rather than wait.

Confidence will also hinge on macro factors - for instance, whether Singapore’s economic growth remains in positive territory and employment is secure. Construction bottlenecks and higher construction costs are also eating into developers’ margins.

Already, some private investors are understood to have formed informal ‘consortiums’ among friends, hoping to scoop up some good buys when property prices fall.

Some developers last month were saying the sub-prime crisis could clear by the first half of this year and that things will pick up in the local property market in the second half. Now, that view sounds optimistic, given the ongoing carnage in global financial markets, with no end in sight to the US sub-prime debacle. The staring match between buyers and sellers in the residential property market will continue. Who will blink first?

In the office market, prime office rents nearly doubled last year after rising about 50 per cent in 2006. Despite tight office supply in the immediate term, resistance from occupiers to higher rents is expected to put the brakes on landlords’ ability to achieve steep rental hikes this year. As well, the various projects on 15-year leasehold transitional office sites are expected to be completed within the next 12-15 months and should provide some short-term relief to the office crunch. If major financial institutions scale down their operations in Singapore, demand could take a hit. Post-2010, supply of completed Grade A office space will start increasing again. All these point to more competitive office rentals in Singapore in future.

Investment sales of office blocks have slowed, on the back of tighter bank financing. Even for residential development sites, relatively unseasoned players are finding it tougher to secure funding, because of tighter liquidity brought about by limited appetite in capital markets. With developers sated with prime freehold sites and given weak home sales, the collective sales market has also gone into slumber. Hopefully, there will be fewer en bloc fights among neighbours. Singapore property investment sales this year are expected to come in at about half of last year’s record $54.5 billion, CB Richard Ellis estimates.

All in all, we look set to have a quieter year in the property market. After the heady growth in the past two years, a consolidation will hopefully provide a time for reflection - and for planning the next move.

Source: Business Times - Property 2008 Special (Published 27 Mar 2008)

There are still pockets of new developments in Singapore that are priced below $1,000 per sq ft, writes PETER OW

HOUSE hunting can be challenging at a time when sellers are holding firm despite a quieter property market while buyers are expecting a steeper discount based on weaker sentiment from the US sub-prime woes. Those on a strict budget should note, however, that the record prices were achieved mainly by new launches in the first 10 months of 2007. This is also true in suburban locations as buyers pay more for new developments under construction. Nonetheless, there are still pockets of new developments in selected parts of Singapore that are priced below $1,000 per sq ft such as Bedok and Jurong.

Well, it may be the right time to start looking for a second home as an investment. Given the more cautious economic climate and rising inflation, price naturally becomes the most significant factor for a property purchase as that would have an impact on initial cash outlay and the long-term mortgage financing of the property. Here are seven key tips to note when shopping for a second residential property for investment. Before buying, ask yourself the following questions:

Land scarcity in Singapore should ensure sustainable capital growth in landed housing in the medium to long term, write STEVEN MING and AVIN SEOW

LANDED homes saw their strongest price rise last year since 1994 but they have yet to catch up with their non-landed counterparts, leaving room for more capital as well as rental growth in 2008. Prices of landed homes rose 23.4 per cent last year, going by the Urban Redevelopment Authority’s (URA) index of landed private residential property island-wide. This growth rate reaffirmed the upward trend, especially compared with the negligible growth in previous years - 0.6 per cent in 2004 and 2.4 per cent in 2005.

For landed homes in the suburban areas, average prices rose to $636 per sq ft, an increase of 45.1 per cent year-on-year. Landed homes in the prime districts of 9, 10 and 11 enjoyed healthy capital growth of 24.3 per cent to reach $961 per sq ft in 4Q 2007.

Good Class Bungalows (GCBs) were the star performers in 2007. According to URA numbers, average prices of GCBs surged 58.7 per cent year-on-year to $763 psf from $539 psf in 2006. The average cost of a GCB stood at $13.8 million in 2007, compared to $10.3 million in the preceding year. The trend of some GCBs being sold and resold within 12 to 18 months continued into 2007.

An example of this trend is a GCB at First Avenue that was sold for $10 million in September 2007, only to be resold at $12.5 million in October 2007, and then resold again at $16 million in December 2007. This is a whopping increase of 60 per cent in just four months.

Boasting a unique waterfront lifestyle, new 99-year leasehold homes on Sentosa Cove have redefined luxury landed living since their emergence in 2004. Expatriates and overseas investors have since lent much support to the capital growth in this segment. Average prices climbed 20.8 per cent to $1,463 psf by end-2007.

Another trend which we have observed is the increasing popularity of cluster housing. Since it resurfaced in 2000, this lifestyle concept has become ever more popular, especially among younger home owners and permanent residents. Cluster houses, offering shared facilities, blend the elements of landed property with condominium style living. Known as strata landed housing, these developments may be bungalows, terraced or semi-detached homes. Some developers have added more exclusivity to their projects by including a private swimming pool in each house. Notable launches last year were Dunsfold 18 and 8 @ Stratton in Stratton Green, both of which received good sales response.

There are several reasons for optimism across all landed housing segments this year. We believe that more capital gains can be expected this year since the price index of landed homes remains some 25 per cent below the peak of 2Q 1996. Landed homes have yet to see the sharp price rises of their non-landed counterparts. Emerging from a relatively low base, landed properties may be more appealing to investors this year.

Secondly, landed housing will always be considered a luxury in land scarce Singapore. This inherent scarcity should continue to lend support to the landed housing market. As such, GCBs look poised for yet another good year of capital value growth. It would not be surprising to see average GCB land prices cross $900 psf in 2008, due to the scarcity of such bungalows (there are an estimated 2,500 of them) coupled with the rising transacted prices on Sentosa Cove.

Similarly, landed homes on Sentosa Cove should continue to trend higher. Unlike those on the mainland, these houses have a broader market. There are no restrictions on foreign ownership of landed homes on Sentosa Cove. The continued influx of expatriates, together with the growing appetite of the rich for something unique and exclusive, is likely to fuel prices of these luxurious homes.

Rental yields are an attractive component of property investments, providing landlords with regular and stable income. Landed properties have become increasingly popular with tenants, with rents rising at their fastest pace in seven years. As at 4Q 2007, average rents of terrace houses and semi-detached houses climbed to $1.87 and $2.22 psf per month respectively, up 52 per cent year on year, while rents for detached houses rose by 23 per cent to $3.09 psf per month.

Rental growth is clearly outpacing capital growth for landed homes, and with the expectation that landed home prices will catch up this year, landed properties could offer an investor both healthy rental and capital gains in 2008 and beyond.

Given the above factors, the landed housing market should be able to attain capital gains of 10 to 20 per cent this year, notwithstanding the continued US credit turmoil. Singapore’s property market remains fundamentally sound, backed by a robust job market and an expanding economy. Perhaps the most fundamental fact is the scarcity of land in Singapore which should ensure sustainable capital growth in landed housing in the medium to long term.

Steven Ming is director at Savills Prestige Homes and Avin Seow, analyst, Savills Research & Consultancy.

Source: Business Times (Published 27 Mar 2008)

Related Links:

- Landed house in D11
- Cluster house in D11

New rules can’t prevent fights led by greed but tussles should be less explosive, writes KARAMJIT SINGHTHE year 2007 will go down as the most spectacular in the 13-year history of Singapore’s en bloc market. It was a story of massive fortunes made and lost. A record number of deals changed hands at a frenetic pace. Prices shot through the roof as it was a period when the perception of Singapore’s prospects had changed dramatically and local property prices appeared cheap relative to the major global cities that Singapore started being associated with. Funds and investors from overseas poured in, and developers and local speculators bought feverishly.

To be precise, it was the first half of 2007 that was truly phenomenal for the en bloc market. In just those six months, 58 en bloc deals involving 5,500 owners took place at a staggering value of $10.8 billion. That amount was close to the value of deals in the previous four years put together!

In 2007, several other records were broken too. Farrer Court created history by being the biggest en bloc deal ever sold. It was the first and only transaction to cross $1 billion. The 618 units at Farrer Court also made the largest pool of en bloc sellers to be successful. Fittingly, Singapore’s largest listed developer, CapitaLand, led the consortium that purchased it. They are proposing to build possibly Singapore’s largest condominium project comprising 1,500 units. (The current record stands at just over 1,200 units at Melville Park in Simei.)

The Westwood Apartments deal set the benchmark for being the most expensive residential site traded. It was sold in November 2007 at a land rate of $2,525 psf per plot ratio (ppr) to Malaysian developer YTL Corporation. As an indication of the extent to which prime land rates have surged, just 18 months before Westwood was sold, the nearby Beverly Mai was bought for less than half its rate - at $1,184 psf ppr. If Westwood had been sold 36 months earlier, chances are that it would have fetched only a quarter of the price it secured.

Amid all the exuberance were negative voices raised against en bloc sales, as well as legal tussles between owners and purchasers involved in collective sale developments. There were calls to restrict or ban such sales, especially for projects with heritage or architectural

There were also numerous complaints about how the process was handled, claims of bad faith and the railroading of minority interests. Above all, there were several high-profile legal tussles involving the purchasers, consenting sellers, non-consenting owners, and some owners who had consented but sought ways to rescind their sales agreement.

The vigour with which legal tussles were fought in some cases seemed to be correlated with how quickly property prices shot up after their sales took place. Many relied on technicalities as potential loopholes, while others were simply a case of minority owners being dead set against the sale.

The dissenting voices of the minorities in many en bloc projects - sold or not, irrespective of their motives - created the impression that the en bloc laws that had worked well for eight years needed an overhaul. On one hand, there are certainly areas where the rules could have more clarity. On the other hand, the voices were not totally representative, as the vast majority tend not to be vocal.

Recognising this and balancing various views, the government introduced a new set of laws in October last year that raised the standards on governance and disclosure. At the same time, some redundancies in the application process to the Strata Titles Board (STB) were removed and STB’s powers were enhanced to disregard non-prejudicial technicalities.

The market largely welcomed the new laws. Some, however, wondered if certain new provisions were really needed, like allowing owners who sign a collective sale agreement to withdraw their consent within five days. It also increases costs for en bloc sellers and makes the exercise more long drawn out.

By this time last year, 25 deals had taken place. So far this year, only one small deal has been reported. Such is the extent to which the en bloc market has slowed with the onset of the US sub-prime crisis in August last year. This points to the cyclical nature of such deals.

En bloc sales take place when developers are confident of the market, and the prospects of profits are high. When the outlook is cautious or uncertain as it is now - or worse, bearish - developers refrain from buying land or en bloc sites. Moreover, with tidy gains made in the bull market of the past two years, developers here can afford to sit on their land stock for a while longer until market sentiment improves.

This market lull will remain as long as the mood is cautious or there is no confidence in the health of the market. However, the expected growth in population due to immigration and the withdrawal of housing stock through last year’s en bloc sales mean demand and supply are still out of sync and it could take a while before they find equilibrium again.

Then there is the slew of exciting projects taking shape like the integrated resorts and hosting of the Youth Olympics. This points to latent activity in the Singapore property market.

When the sub-prime cloud clears, demand for land from developers should pick up and en bloc sales will be back on track. Activity in this round is unlikely to mirror 2007, as it would be taking off from a higher price base.

En bloc sales are the main source of prime freehold land. They will continue to play an important role in urban renewal in Singapore as they help revitalise the property market by stimulating demand.

Disputes in such sales are not likely to go away, even with the introduction of the new laws, as no amount of legislation can prevent disagreements or actions led by greed or dishonesty. However, the market is unlikely to see a repeat of the spectacular price rise of 2007 anytime soon. As such, tussles should be less explosive.

Karamjit Singh is the managing director of Credo Real Estate.

Source: Business Times

Comments: 

DreamHomeMaker: With the more challenging landscape of enbloc market, buyers should be more selective in buying such properties. The best bet would be on something that not only has  enbloc potential, but the property should still have it’s appear to be sold in the open market. Examples such as property like Cavenagh Court in District 9. Buyers stand to profit from at least $0.5 mil in the event of an enbloc, yet due to its location being close proximity to MRT, 0.5km away from ACS (a good school in Singapore, only those staying within 1km can get in) and rumours about up-coming shopping complex, such property will have strong open market appeals, casting as safety net to enbloc-investors. This way, if the bet on enbloc fails, investor still can recover cost thru open market. To be even more careful, one should try to look for low-floor and renovated unit. Why? In open-market, high-floor always commands premium, which is not compensated in the event of enbloc (units at the high floor and same size ones at low floor gets the same compensation), so therefore it makes sense to buy as low as possible in anticipation of enbloc. Due to enbloc potential, if one buys an un-renovated unit, one would be less likely willing to spend money to do up the place in fear of wasting the money if enbloc happens. Buying a renovated unit cast a safety for future value in the event enbloc does NOT happen, as a renovated unit usually sells better in the open-market. Yet, buying a renovated unit does not come in high premium as compared to buying a high-floor. This is because the renovated work done has already depreciated during the period in which the owner has stayed in, and has less effect on bank valuations then the premium of a high floor. In a nutshell, the key to successfully enbloc investment TODAY then is to find a enbloc-potential property that has strong open-market appeals due to future developments nearby, and a even smarter move is to find a low-floor renovated unit. This way, if enbloc happens, one gets a win-fall. If enbloc does not happen, one can still enjoy the beautiful renovated unit to stay till next cycle, OR simply sell off to the open-market to recover cost with small profit.

S’poreans buying more private homes but their share is still falling as foreigners outpace them

 (SINGAPORE) Take a walk down some of the poshest parts of Singapore and your eyes will confirm precisely what the numbers say. With its immigration-friendly policies and its growing attraction for wealthy individuals across the world, Singapore is seeing more foreigners than ever before parking their funds in private property here - especially in the Core Central Region (CCR).

Singaporeans, too, are buying more private property but, in relative terms, their share is dwindling because of the foreign influx.

Result: From a 77 per cent share in the purchases of private apartments and condo units here in 2000, Singaporeans have seen their slice drop to 63 per cent in 2007, according to a study by Jones Lang LaSalle. This is their lowest share since 1995, which is as far back as the caveats captured by Urban Redevelopment Authority’s Realis system go.

Conversely, foreigners (including permanent residents) accounted for 29 per cent of non-landed private homes purchased here last year - nearly double their 16 per cent share seven years earlier and also their highest ever.

Companies account for the remaining purchases.

Market watchers expect the trend to continue in the mid- to long-term. ‘We need the external talent to support Singapore’s economic growth in the long term, as the citizen population has not been replacing itself sufficiently,’ says JLL’s head of research (SE Asia) Chua Yang Liang.

JLL’s study shows the trend of declining ratio of Singaporeans among non-landed private home buyers was most apparent in CCR - which has been a hotbed of purchases by foreign investors.

Here, Singaporeans accounted for 47 per cent or less than half the caveats lodged for the purchase of non-landed private homes last year, while foreigners (including PRs) had a 41 per cent share, nearly double their 21 per cent share back in 2000, according to Jones Lang LaSalle’s analysis.

Foreigners who are not PRs have shot up the buying charts. They picked up 26 per cent of non-landed homes that changed hands in CCR last year, compared to their 11 per cent share seven years earlier. CCR includes the prime districts 9,10 and 11, Downtown Core location and Sentosa Cove.

DTZ executive director Ong Choon Fah likens the luxury residential sector in CCR to Central London, with a high proportion of foreign ownership. ‘We’ll have to accept that Singapore will be open to international competition, with funds and high net-worth individuals coming in. People who cannot afford to live in these areas will have to find alternative locations,’ Mrs Ong says.

JLL’s study showed that even in the Outside Central Region (which covers suburban locations and is a realm dominated by typical Singaporean home upgraders), the share of foreign buyers (including PRs) went up to 22 per cent last year from 13 per cent in 2000.

In the Rest of Central Region, which covers the mid-tier market, foreigners’ (including PRs’) share increased from 18 per cent in 2000 to 29 per cent in 2007. The percentage of non-landed homes bought by Singaporeans in the area fell from 74 per cent in 2000 to 61 per cent last year.

Jones Lang LaSalle analysis covered caveats lodged for the purchase of non-landed private homes in both primary and secondary markets (including subsales).

Overall, the absolute number of such properties purchased by all categories of buyers has increased over seven years. The total caveats lodged for purchases of apartments/condos more than tripled, from 9,347 in 2000 to 30,576 last year. Even though Singaporeans bought more than they did in 2000, their share fell as purchases by foreigners saw higher percentage gains.

Islandwide, the number of private apartments/con- dos bought by Singaporeans jumped 165 per cent from 7,225 units in 2000 to 19,154 units last year.

Over the same period, the number of private apartments/condos bought by foreigners (counting PRs as well) leapt 496 per cent from 1,491 units in 2000 to 8,884 units in 2007.

The increase was due partly to the influx of foreign talent into Singapore. ‘As birth rate of the citizen population is below replacement level, in-migration has been necessary to sustain economic growth. As at end-2007, Singapore’s total population stood at 4.588 million, with well over a million foreigners. This is a 33 per cent increase from the 750,000 foreigners as at-end 2000,’ JLL says.

Source: Business Times (Published March 27, 2008)

The property market in Singapore is “very exciting” for property investors, it has been claimed.

Rhiannon Williamson, director of Amberlamb.com, explained that while prices have been rising since the middle of 2006, they are yet to reach the heights they did prior to the Asian financial crisis.

“This suggests that there is maturity and common sense in the market, which gives both domestic and international buyers a great deal of confidence in Singapore,” she said.

Ms Williamson added that “intense” demand and “incredibly” low interest rates, as well as the fact that rental rates are expected to rise by up to 20 per cent in some areas, mean that the country is a “very healthy market” for overseas investors.

“Analysts from leading financial institutions are all in agreement that Singapore’s real estate market will remain highly buoyant and successful throughout 2008,” she concluded.

Figures released by Global Property Guide show property prices in Singapore increased by 24 per cent in real terms during the first nine months of last year.

This made it the world’s best performing housing market, the website added.

This article was brought to you by holidaylettings.co.uk, the UK’s No.1 holiday home website.

Economic uncertainty has deflated house price inflation in the west, while returns in emerging countries have bounded ahead, figures show.

Global house price inflation in quarter four of 2007 stood at an annualised 8.2 percent, down from 9.7 percent a year ago, the Knight Frank global house price index shows.

Bulgaria topped the index with growth of 33.7 percent, followed by Russia at 30 percent.

In the Far East, Singapore and Hong Kong also outperformed the market, with annual growth of 31.3 percent and 22.3 percent respectively, as did China, where prices grew 10.5 percent overall and by 20 percent in some cities.

 See full article…

Source: Javno - (March 17)

Macquarie Global Property Advisors (MGPA) says it expects office rentals in Singapore to remain hot, jumping by 10 to 25 percent this year.

The Australian private equity real estate fund management firm is converting two plots of land at Marina View into twin office blocks. The two towers, expected to be completed in 2012, will also house a luxury five-star hotel.

These land parcels drew top dollars from Macquarie Global Property last year. Costing a total of S$3 billion, the sites will soon enjoy a S$5 billion makeover.

Site B, which Macquarie won last December for just under S$953 million, and Site A, for S$2 billion in September - are both on a 99-year lease.

Formerly known as Marina View Parcels A and B, the two-hectare site will be transformed into twin luxury office buildings, one of which will also house a 220-room five-star hotel.

Macquarie expects to announce in the next 3 to 4 months who they will be working with on the hotel.

It says the towers, due to be completed between 2011 and 2012, are well-timed to catch the growing demand for office space.

Simon Treacy, CEO, Asia Investments, MGPA, said: “I think around Asia, we are extremely busy - we see good value emerging around the region. In Singapore, we also think that there will be increased demand in the office sector - rents are likely to grow 10 to 25 percent this year.

“I think over the medium term, people will be surprised because they’ve underestimated the demand in Singapore for modern international grade office space.

“And we’ve seen that in Japan for 2003 and this year in Hong Kong. And, I think it’s a reflection of the solid economy of Singapore and the ongoing growth in a lot of the financial service sectors and wealth management in particular.”

The towers will be more than 40 storeys high and designed by Australian architect Denton Corker Marshall, who also designed the Melbourne Museum and the Australian Embassy in Beijing.

About 60 percent of both buildings will be set aside for office use: Tower A will house 130,000 square metres, and Tower B, 113,580 square metres.

Besides this project, Macquarie Global Property says it is looking out for other bargains.

Mr Treacy said: “I think over the last two years, a lot of investors have probably overlooked and undervalued Southeast Asia. I think now people are seeing very good fundamentals down here, and I think our timing was very good in making a number of acquisitions. We still think there is a very good value in buying… over the next 6-9 months.”

Office rentals in Singapore have been surging because of growing demand and a lack of supply. But more office space is expected to enter the market.

The government is targeting to double office space in the Central Business District to an estimated 2.82 million square metres. - CNA/ch

Source: Channel NewsAsia - 18 Mar 2008

Related Link: Forbes says “Macquarie Global Property to spend 2 bln sgd to develop Singapore sites - report“