HDB offers a range of lifestyle options for the majority of the population. ADAM TAN explores the new public housing landscape

IF the Resale Price Index (RPI) released by the Housing & Development Board (HDB) is anything to go by, public housing in Singapore is gaining popularity by the day. Quarterly results have recorded just four dips in over five years, with the RPI growing a modest 3.2 per cent annually for the past decade.

Despite the rising prices, a very visible explanation for this increasing preference for HDB flats would be the evolving lifestyle landscape of public housing estates. Public housing no longer means a collection of cookie-cutter buildings across the island offering exactly the same designs for each flat type.

The fact is that public housing for the masses has come a long way from its beginnings in 1960. The early flats and their surroundings were far simpler than flats and estates built today, with the objective being to house the burgeoning population as quickly as possible.

Fast forward to today and the landscape is very different. New blocks now have lifts on every floor. Individual units and blocks are better designed and estates now incorporate more recreational facilities within them, such as jogging tracks, gardens and exercise areas. Each cluster of flats has its own identity, from the colour of the flat blocks and the design of the playgrounds, to the layout of the greenery in the estate and the amenities offered nearby.

Living in the heartlands has certainly changed over the years, with malls near most estates and an improved infrastructure connecting the residents to the rest of the island via the MRT and Light Rail Transit (LRT) network. Bus services have also improved for greater connectivity.

And it all boils down to an improvement in living standards for the masses. The HDB has progressed from merely providing roofs over people’s heads, to proffering a range of lifestyle options for the mass population.

The Pinnacle@Duxton

A prime example is The Pinnacle@Duxton at Cantonment Road, the landmark public housing development that offers a higher standard of living than previously seen in public housing. Housed in seven 50-storey blocks, The Pinnacle@Duxton also holds the record for being the tallest public housing buildings in Singapore.

Flats for The Pinnacle@Duxton were completed in December 2009 and its new residents enjoy facilities like the two unique skybridges, which create possibly the world’s longest continuous sky garden. These skybridges play a leading role in the lifestyle of residents there.

The skybridges, located at the 26th and 50th storeys, offer views of Chinatown, Marina Bay, Mount Faber and the city. Besides that, the skybridge on the 26th floor also incorporates a residents’ committee centre, children’s playground and exercise facilities such as a jogging track, senior citizens’ fitness corner and outdoor gym.

The anticipated demand for the skybridges is such that there are restrictions in place to maintain a level of comfort and safety for all visitors and users. For instance, only 1,000 people are allowed onto the skybridges at any one time and the 26th floor skybridge is reserved exclusively for residents. Furthermore, non-residential access to the sky garden on the 50th floor is chargeable at $5 per person per entry, to help defray maintenance costs.

Rounding off the estate’s amenities are a food centre and daycare centre, while sports and recreational facilities can also be found within the estate. In terms of accessibility, six bus services go to The Pinnacle@Duxton while Outram Park and Tanjong Pagar MRT stations are but a short stroll away.

Two other notable public housing projects are the recent build-to-order (BTO) launches by HDB, namely SkyVille@Dawson and SkyTerrace@Dawson.

Once built, these two BTO projects will be among the closest HDB flats to the Orchard shopping belt. Besides their proximity to Orchard Road, there are also various amenities nearby. These include a supermarket, eateries, parks, schools and recreational facilities.

Mainly because of the location, these public homes are naturally priced on the high side. During the balloting exercise held in September 2008, the price range of 5-room flats at The Pinnacle@Duxton, at $545,000 to $646,000, was comparable only to the median resale prices for 5-room flats in the Central area, Marine Parade and Queenstown (Table 1).

Similarly, the price range for a 5-room flat at SkyVille@Dawson and SkyTerrace@Dawson, at their launch in mid-December 2009, was $532,000 to $643,000. The median price for such units was below the median resale prices for 5-room flats only in Bukit Merah, Queenstown and Marine Parade ( Table 2 below).

For those who may baulk at paying such high prices for public housing, but still crave a vibrant lifestyle in the surrounding environs, Punggol is an increasingly viable, and more cost-efficient, alternative.

In the last 12 months, six out of the 16 BTO projects launched were located in Punggol. The prices of flats there ranged from $228,000 to $322,000 for 4-room flats, and no more than $409,000 for a 5-room flat, roughly 60 per cent of the price tag for the units in SkyVille@Dawson and SkyTerrace@Dawson. In addition, the BTO projects at Punggol also introduced studio, 2-room and 3-room flats to the estate, providing more variety for future residents there.

One factor behind the focus on Punggol is the Punggol21 Master Plan. There are government plans to remake the estate into a vibrant waterfront town, a recreational and housing hub that is also set to be Singapore’s first eco-town for the tropics.

Work on the waterway is set to be completed by the end of the year, and will offer the targeted 21,000 public and private homes along its banks the allure of waterfront living. By end-2011, there will be about 23,000 completed flats in Punggol.

Another exciting development in public housing is Clementi Town Centre. The former bus interchange is set to be unveiled this year as a new 40-storey complex housing a new air-conditioned bus interchange, a five-storey mall, a community library, Town Council office and 388 units of public housing. This will be the first time that a single complex will house public residences, commercial properties and a transportation hub.

In a bid to act as an example of a typical 21st Century HDB town, Punggol is being designed as an eco-town. It will act as a test-bed for various eco-friendly and energy-saving initiatives, such as solar panels to harness energy for lighting common areas, a rainwater collection system and the Energy SAVE Programme. The latter is designed to reduce energy usage in households by 10 per cent over the next five years. These new measures are all part of HDB’s sustainability efforts and Punggol is set to spearhead them.

Then, in January this year, HDB launched the tender for two executive condominium (EC) sites in Sengkang and Yishun. ECs, while considered public housing, offer facilities that are comparable to private condominiums, and have a monthly household income cap of $10,000. These will be the first ECs to be launched since mid-2005, simply because the gap between public housing and mass market private properties had been relatively narrow for years.

However, even as household incomes have been rising, the prices of new launches in the mass market have also been going up.

There is therefore a growing segment of the population whose household income of above $8,000 makes them ineligible for new HDB flats, yet for whom the prices of mass market properties are beyond their means. The demand from this ’sandwich class’ makes the re-introduction of ECs a welcome move from the government.

Staying affordable

In short, all these new developments point to the future of public housing: a richer lifestyle offering enhanced connectivity, more choices for dining, entertainment and education, as well as other amenities, and all within a convenient distance.

And while the government has made it clear that it will not control prices in the property market, it has also stated that public housing will always remain affordable.

Naturally, there will be estates where the prices of public housing units are similar to those of some mass market private properties, but, geographically, prices will never overlap.

To illustrate, one could opt to stay in a centrally located HDB flat or opt for a private property unit in the Outside Central region. That is why Singapore’s public housing will never challenge entry-level private housing.

The choice between one and the other all depends on how status-conscious the buyer is, and whether there is a need for private amenities.

As there is a minimum occupancy period for the new projects, there should be no effect on the resale prices of surrounding flats. The HDB resale price index is expected to see an overall 5-8 per cent growth this year, barring any unforeseen financial crises.

The writer is corporate communications manager, PropNex Realty Pte Ltd

Source : Business Times, 25 Mar 2010

EUGENE LIM reckons the current huge base of upgraders, downgraders and PRs is likely to grow and prop up demand for resale HDB flats

THE HDB resale market has been sizzling of late. In fact, prices have hit their highest level since 1990 when the Housing & Development Board started tracking resale HDB flat prices through its quarterly resale price index.

Prices of resale HDB flats rose 3.9 per cent in Q4 2009, for an 8.2 per cent rise for the year. This took the resale index to its all-time high of 150.8 points.

Last year’s performance follows from a rise of 17.5 per cent in 2007 and 14.5 per cent in 2008. Over the last three years, resale prices have increased by some 40.2 per cent, or an average of 13.4 per cent a year.

Resale volume, as shown by the number of resale applications registered quarterly, hovered around 28,000 to 29,000 units annually from 2006 to 2008.

Last year, the total volume jumped by more than 8,000 units to 37,205 resale applications. Resale volume for 4-room flats saw the largest increase of more than 13,600 units over 2008; followed by 3-room flats with an increase of nearly 10,400 units. Five-room and Executive flats saw a smaller increase of over 9,800 and almost 3,000 units respectively.

HDB’s numbers also show that the median cash-over-valuation (COV) across all flat types was $24,000 in Q4 2009; double the $12,000 in Q3 2009; and the highest since Q2 2007 when such figures were made available. In particular, the Q4 2009 median COV of $20,500 for 3-room and $25,000 for 4-room flats have exceeded their peaks of $19,000 and $20,000 in Q3 2008 by 8 per cent and 25 per cent respectively.

Why the market is hot

Various reasons have been cited as the cause for the sizzling market in resale flats.

One view is that there are not enough HDB flats to meet demand as there are massive over-subscriptions whenever the HDB launches new flats through its build-to-order (BTO) programme.

However, it was reported in Parliament recently that while the HDB released 13,500 new flats last year and plans to release another 12,000 or more this year, in recent selection exercises, one-third of the flats were rejected on the first day of selection, when all the flats were available. So, the idea that there are not enough HDB flats to meet demand is not true.

Some have pointed to permanent residents (PRs) as the culprits who have been pushing prices up. PRs cannot buy new flats directly from the HDB and can only buy from the resale HDB market.

While PR buyers currently make up some 20-25 per cent of resale transactions, it was reported by the government that the median COV paid by PRs was the same as the nationwide median COV in the past two quarters. Cases of PRs paying high COVs are an exception, forming only 14 per cent of the 58 cases of resale transactions with COV exceeding $70,000.

A third view is that private property owners are the ones pushing up prices.

But according to the government, their numbers are not large enough to have a significant impact on prices. This group accounts for less than 20 per cent of resale transactions with COV exceeding $70,000.

While no one group can be blamed for driving up prices, they all add to the total numbers.

Resale HDB transaction volume jumped by almost 8,800 to more than 37,000 units in 2009. This is significant for any one year, especially when annual resale volume has been in the 28,000 to 29,000 range in recent years.

New policy changes

In response to calls to rein in potentially runaway prices, the HDB recently announced several policy changes. Two of them are likely to have some impact on the resale HDB market.

The first is the standardised minimum occupation period (MOP) for non-subsidised flats. This policy change is designed to curb speculation in HDB flats.

Data from HDB shows that the proportion of flat owners who sell their units within three years of purchase rose to 8.9 per cent for the first 10 months of last year. In 2008, 7.9 per cent of buyers sold their units within three years.

In comparison, less than 7 per cent of buyers sold their flats within three years between 2005 and 2007. There were concerns that some buyers were using HDB flats to speculate in the property market and driving up prices in the process.

To reduce the number of people speculating in HDB flats, the time that buyers are required to stay in their flats before reselling them – the MOP – will be increased to three years for all flats bought in the resale market without a CPF Housing Grant.

Before this change, the MOP was 2.5 years for buyers who took a HDB concessionary loan and just one year for buyers who either took a commercial bank loan or did not take any loan.

Based on ERA’s transactions last year, 50 per cent of buyers took loans from commercial banks while 10 per cent bought with cash. This means that before the policy change, 60 per cent of the buyers would be able to resell their properties after just one year.

By standardising the MOP at three years, the turnover rate is slowed down from one year to three years. This has the effect of preventing flippers from pushing up resale prices with their short-term objectives.

Next, HDB will now allow buyers to take a second concessionary loan from the agency even if they downsize or move to a flat of the same size. Previously, only upgraders qualified for a second concessionary loan.

This may actually lead to an increase in market activity due to an increase in downgraders, and it could boost resale prices for smaller flats.

However, it is still early days and we would need to continue monitoring the market.

What else can be done?

One populist view is that the rampant subletting of flats is a key factor in driving up flat prices, and the recent slew of measures to curb speculative buying and selling of HDB flats did not address this issue.

Under current rules, buyers of resale HDB flats can sublet the entire flat after three years if they did not take a government grant.

According to government numbers, of the 682,000 HDB flats that are eligible for subletting, only 3 per cent are sublet, suggesting that most flat owners are buying for occupation, and not rental.

However, the rental market indirectly influences the price of resale flats. For example, a 3-room HDB flat will yield a return of almost 7 per cent with a median rent of $1,500 a month at a median resale price of $260,000. There is no way one can achieve a 7 per cent return by investing in private residential property.

Also, the continued price rise in the private property market makes HDB flats very attractive in terms of capital outlay and yield.

Home owners, realising that they can make money from rentals, may be unlikely to sell their HDB flats even if they go on to buy private property. This leads to a drop in the number of resale flats in the market, hence driving up prices.

Also, ‘investors’ may be attracted to buy HDB resale flats to rent out immediately. Though this infringes HDB’s subletting rules, some may find a yield of 7 per cent too attractive to pass up. These buyers may already own a private home and are not in need of a HDB flat.

With such attractive returns, it is no surprise that some, if not many, may be prepared to flout the rules. Whether this group is large or small, it adds to overall demand for flats and therefore impact resale prices.

It may be an opportune time for the HDB to relook the current subletting rules that were implemented in 2007 following amendments made in 2005 and 2003 to allow HDB home owners to monetise their flats.

Before 2003, owners were not allowed to rent out their flats unless they were going overseas to work or had other valid reasons. Another way is to step up policing. Unless the current rules are enforced strictly, some people will continue to flout them.

Going forward, with the improving economy, we can expect the HDB resale market to remain buoyant for the rest of the year.

As for COVs, they are likely to stabilise as there is beginning to be some resistance to the current quantums.

With more new flats being built and priority given to first-timers, this group is shunning the resale market for obvious reasons.

However, the current base of upgraders, downgraders and PRs remain huge and is likely to grow, and they are propping up demand for resale HDB flats.

The writer is associate director, ERA Asia Pacific

Source : Business Times, 25 Mar 2010

Emil Chau also buys one as showbiz stars dip into S’pore property market

Hong Kong movie superstar Jackie Chan and his good friend singer/songwriter Emil Chau, who were in town recently for last Sunday’s Thong Chai Charity Night, also picked up some properties in Singapore.

The duo bought four apartments at Lippo Group’s freehold Centennia Suites worth over $10 million last week. The four units are on the mid- to high floors of the 36-storey condominium project, which is being built on the former Kim Seng Plaza site, opposite Great World City and facing the Singapore River.

Mr Chan is said to have picked up three units – two, three, and four-bedroom apartments – making up an entire floor.

Mr Chau, who is now known as Wakin, purchased a three-bedder. The two men visited the Centennia Suites showflat on Friday last week.

The 97-unit District 9 development, which is expected to be completed in 2013, is now almost half sold.

The average price is about $2,000-2,100 per square foot. The range of prices achieved is $1,900 psf to nearly $2,200 psf. Lippo began selling the project last month.

Mr Chan is no stranger to the Singapore property market. In late 2007, he bought the former Jinriksha Station at Neil Road for $11 million.

Lippo and Mr Chan have also had business dealings before. Mr Chan used to own a unit at Grangeford Apartments, which was sold through an en bloc sale to Lippo’s listed arm Overseas Union Enterprise a few years ago.

Mr Chau was born in Hong Kong but lives and works in Taiwan. The singer has a loyal fan base in Singapore. He has also acted in a few of Mr Chan’s films, such as Mr Nice Guy and Gorgeous.

Last year, international action star Jet Li bought a Good Class Bungalow at Binjai Rise for $19.8 million. The property has a freehold land area of about 22,700 sq ft.

Source: Business Times, 25 Mar 2010

Redas chief says state intervention on supply side not always helpful

The president of the Real Estate Developers’ Association of Singapore (Redas), Simon Cheong, came out strongly yesterday to say the government should allow the property market here to operate fully as a free market.

Mr Cheong, who was speaking at the launch of a new price index for private homes in Singapore, also asked if the state should be so concerned with private housing prices when the segment serves only 16.5 per cent of the overall population.

Mr Cheong, who is also chief executive of SC Global Developments, said that he was commenting on the market despite being personally advised not to do so for fear of it being a ’sensitive topic’.

‘But, on balance, in the interest of Singapore’s property market, I decided to do so,’ he said. ‘If Redas members who are fighting in the foxhole everyday for the interest of a healthier property market do not speak up, then who will?’ Real estate developers in Singapore now have the unenviable task of having to step up their game very quickly to satisfy demand, he said.

In Singapore, the government, which owns more than two-thirds of all land, controls the land supply. Land price here is largely determined by the reserve price system.

‘As the supply side of the development equation is managed by the public sector, market forces are often not wholly free to respond to demand,’ Mr Cheong said.

To illustrate his point, he highlighted the results of two recent government land tenders, which he said illustrated the ‘conundrum and the dilemma developers face’ when they bid for sites in the government land sales programme.

A site in Tampines first put up for sale by the government in June 2008 was not sold after the sole bid of $118 per square foot per plot ratio (psf ppr) was rejected for failing to meet the reserve price.

But earlier this month in another tender exercise, it was awarded to the top bidder at $421 psf ppr – 3.6 times the previous price.

Similarly, a mixed-use site at Ten Mile Junction, which had a failed bid of $162 psf ppr back in April 2008, was awarded in February this year for $437 psf ppr.

In both cases, the higher bid prices generated more revenue for state coffers but also accentuated the demand-supply mismatch.

‘With a higher land cost, these developers must now sell at higher prices just to maintain an equitable level of profitability.’

Mr Cheong also questioned recent government measures designed to keep private housing affordable, such as the introduction of a stamp duty for sellers and the removal of the deferred payment and interest absorption schemes.

While some felt private property was being priced out of their reach, he pointed out that it served only 16.5 per cent of the demography. ‘Should it (the state) intervene to restrain the rise in property values to make private housing more affordable or should it be left to market forces?’

Mr Cheong also said that a certain level of speculative activity in the marketplace can, in theory, improve the liquidity of real estate assets and catalyse the sales of new developments.

When demand exceeds supply by a large margin, speculators provide investors with another source of a scarce commodity at a price premium. And encouraged by the higher prices, developers respond by launching more developments for sale and, in so doing, narrow the gap with demand, Mr Cheong added.

He concluded his speech by pointing out that there are various factors that make real estate the preferred asset class in the near term, such as pent-up demand for mass-market housing and high liquidity, with some $301 billion of cash deposits in banks and another $67 billion of investible CPF funds reported last year.

‘Is it any wonder then that the recent measures to cool the private property market did not quench the thirst of genuine home buyers and investors – local and foreign alike – who clearly have strong confidence in the fundamentals of Singapore’s real economy and its ascendancy as a global city in Asia?’ he said.

Mr Cheong added that he hopes that the launch of the new index will be ‘a step towards improving market transparency and help lessen future needs for frequent market interventions, allowing a freer hand for market forces to work out its own genius’.

Source: Business Times, 25 Mar 2010

The market is likely to chalk up more than $200 million worth of transactions this year, says GRACE NG

IT was a stellar year for auctions last year despite the unfavourable market conditions. About $168.4 million worth of properties were sold at auctions in 2009, doubling the $83.67 million done in 2008.

The residential sector was the star performer, chalking up $88.4 million worth of transactions, or slightly over half the total sales value. The retail sector was the next best performer, with $43.4 million worth of sales.

Strong interest was seen for shops and shophouses, as investors chose to park their money in higher yielding investments rather than keep it in the bank for paltry interest rates. The sector that saw the highest growth rate was industrial property. Sales value jumped 223 per cent, from $6.2 million in 2008 to $20 million last year.

Buoyant market pushes up sales

Mirroring the buoyant sales in the primary residential market, residential properties at auctions saw a 250 per cent jump in sales value in 2009. The figure soared from $25.2 million in 2008 to $88.4 million last year.

More residential buyers are turning their attention to auction sales because the properties available at auctions are deemed to be better value for money as most of the older properties tend to have much larger land or built-up areas.

In addition, buyers who are owner-occupiers can move into the property when the sale is completed, which is typically three months after the payment of deposit. In comparison, purchasing from a developer could mean a wait of about two years before the property is ready for occupation.

Popular picks in 2009

# Landed properties: Terrace and semi-detached. In our land-scarce country, owning a landed property remains the aspiration of many Singaporeans. It is also a status symbol, as these properties are only available to Singaporeans and permanent residents with approval from the Land Dealings (Approval) Unit.

Even though landed properties do not come with facilities like those found in cluster housing or condominiums, they remain popular, as such properties usually have a private garden and car porch and do not have maintenance charges. Thus, it is not surprising that landed houses have become popular at auctions.

In 2009, terrace houses costing around $1 million and below were in demand because of their affordability. Five terraces were sold at prices ranging from $820,000 to $1.25 million.

Corner terraces and semi-detached houses, especially those that sit on large land areas, were the favourites, as these properties are rarely available. A total of 11 semi-detached houses were sold during the year at prices ranging from $1.05 million to $3.7 million. The majority of the transactions were below $2 million and the properties had land areas ranging from 2,400 sq ft to 4,414 sq ft.

Buyers also favoured semi-detached houses with large land areas. Nine of the 11 semi-detached houses sold at last year’s auctions had land areas in excess of 3,500 sq ft.

The popularity of this type of property can be attributed to the fact that newer semi-detached houses have smaller land areas of about 2,150 sq ft, which could translate to a higher price per sq ft.

# Apartments with large floor areas: With developers building smaller apartments – some of them dubbed Mickey Mouse flats – in their new developments, the older and larger apartments have become a popular alternative at auctions with owner-occupiers as well as upgraders.

Apartments in the secondary market are generally larger with a 2-bedroom unit averaging 800 sq ft, a 3-bedroom 1,250 sq ft and a 4-bedroom unit 1,800 sq ft. In comparison, new apartments today are much smaller starting from 300 sq ft for a studio, 527 sq ft for a 2-bedder and 861 sq ft for a 3-bedder.

Given the limited number of large apartments in the primary market, many throng the auction halls in search of their ideal apartments. Apartments ranging from 1,000 sq ft to 1,299 sq ft were popular at auctions. Eighteen out of the 42 units sold last year fell within this category.

The apartments bought were at various locations. At International Plaza at Tanjong Pagar, a 1,033 sq ft 2-bedroom apartment was sold at auction for $800,000. At Shanghai One in River Valley, an 883 sq ft 2-bedroom unit went for $1.08 million and in Oxford Road, a 1,097 sq ft 2-bedroom apartment in Kentish Green was sold for $620,000.

# Properties below $1million: Apartments and condominiums below $1 million were popular too, as evidenced by the 27 successful transactions seen in this category out of the 42 made available at auctions.

# Apartments in prime districts: The other property type that was sought after at auctions in 2009 was high-end apartments. Apartments located in the prime inner city and District 10 under mortgagee sales were in demand. Two apartments at The Clift were sold for $605,000 and $1.047 million. Another two apartments at Four Seasons Park were sold for about $4.8 million each.

What will be popular in 2010?

In line with the recovery in the high-end sector, homes in districts 9, 10, 11, as well as prime inner city and Sentosa, will continue to be popular at auctions. We can expect to see an increase in sales of homes in these areas this year. The proportion of apartment sales is likely to rise to 35 per cent compared with 29 per cent achieved last year.

The opening of the two integrated resorts (IRs) will enhance Singapore’s reputation as a world-class city. Residential properties located near the two IRs were given a boost in value as a result, and were in demand as buyers aimed to cash in on the market.

Apartments such as The Sail and Marina Bay Suites, as well as properties in Sentosa Cove, will be sought after by investors and owner-occupiers alike.

Prices of high-end homes in the Core Central Region are still about 11 per cent below their Q1 2008 peak. Improving market sentiment in line with the recovery in the economy, ample liquidity and a low interest rate environment, as well as a hunger for alternative investment opportunities, are factors pointing to a recovery.

As such, we are likely to continue to see owners taking the auction route this year to sell their high-end properties in hopes of achieving the best price through competitive bidding.

We could also see some developers exploring auctions as a mode of sale for their properties if the high-end market picks up steam.

Some developers had success when they used an auction to sell their high-end properties. For instance, 12 parcels of bungalow land in Sentosa Cove were successfully auctioned off in 2006 for a total value of $86.34 million.

And in 2007, another developer successfully auctioned 12 luxury apartments at The Botanika for $52.92 million, which set new benchmark prices for the area.

The competitive bidding helped these developers achieve record prices for their developments, and they also gained international exposure as the auctions were beamed live via satellite to cities such as Hong Kong, Jakarta, London and Sydney to tap foreign buyers.

With an improved economy, the number of properties sold at auctions this year should rise to more than 140, from the 118 seen in 2009.

More activity is expected in the high-end residential sector and this is likely to boost the sales value at auctions. As such, the market is likely to chalk up more than $200 million worth of transactions this year.

Grace Ng is deputy managing director (agency & business services) and auctioneer, Colliers International

Source: Business Times, 25 Mar 2010

Singapore set to emerge as premier gateway city in region, say JUNE CHUA and CHRISTINE SUN

ONE year into the global financial crisis that almost brought all major economies to their knees, Asia staged an impressive rebound at the end of 2009 with an ensemble of massive government stimulus packages.

Despite lingering doubts about the debt-laden European economies, Asia is expected to continue its strong recovery in 2010. The guarded optimism should continue to boost business confidence and revive corporate spending here.

While the local residential and retail sectors were beneficiaries of the market exuberance, the office sector is still suffering the brunt of the financial meltdown. Office vacancy remains above equilibrium as supply outstrips demand. On the back of tenant relocations and corporate downsizing in the first half of 2009, it is estimated that 300,000 sq ft of shadow space has emerged in the Raffles Place and Marina Centre areas.

Consequently, Grade A office rents, which had been rising at a double-digit rate since 2007, tumbled from a peak of $15.10 per sq ft per month in Q2 2008 to $8.80 psf in Q4 2009. Taking into account the incentives provided by landlords, effective office rents now range from $6 to $8 psf per month.

Between 2010 and 2013, the rental correction may slow down as leasing demand rises to mop up the new supply entering the market. With the gradual return of business confidence, more companies are expected to revisit their office space planning with a view to expansion.

Recent trends seem to affirm this proposition as the market saw a slowdown in the surrender of unused space and a withdrawal of shadow space.

Nevertheless, the 10-year average demand of 670,000 sq ft per annum is well below the new supply entering the market at an average rate of 2 million sq ft per annum.

Grade A rent fell by 35 per cent last year and is predicted to continue falling albeit at a slower rate of 20-25 per cent this year before a plausible bottoming out in 2011/2012.

On a more positive note, the prospect of distress may bring the potential for opportunities.

First, the delayed rental recovery supported by sound market fundamentals might bode well for the Republic in the short term. Singapore and Hong Kong are often the preferred Asian cities for incorporation or expansion of businesses among foreign investors.

In a recent Savills survey that compared the top five buildings in each market, Hong Kong ranked first in terms of prime office costs, followed by Tokyo, then Singapore and Seoul in third place.

Due to limited supply, Grade A rents in Hong Kong are expected to rise between 5 and 10 per cent this year. The spike in rents could be further exacerbated as Hong Kong is likely to face a severe shortage of office space once current vacancies are filled.

Little is also expected in the way of new supply in Hong Kong with a mere one million sq ft per annum is likely to be added between 2010 and 2013.

A rising cost base in Hong Kong with the consolidation of regional office markets could result in many multinational corporations relocating their businesses to lower cost centres such as Singapore. Singapore’s advantage lies in its financial stability, cultural affinity and strategic location.

Hence, Singapore may outpace other Asian Tigers to be a premier gateway city for MNCs to expand their influence here in South-east Asia. In recent years, over 7,000 MNCs have set up their operational bases here, with more being expected to expand further as office rentals decline to more affordable levels.

Secondly, a more sanguine outlook for the office investment market has emerged with the turnaround of capital values in the latter half of 2009. Average Grade A capital values held steady at $1,700 per square foot (psf) in the fourth quarter of 2009, ending five quarters of decline.

In January 2010, a private fund of AEW Asia purchased Robinson Point for $203.25 million or $1,527 psf, a 20 per cent uplift from the $1,280 psf paid for Parakou Building, another office building located further down the street, in May 2009.

Outside the CBD, City Developments Ltd (CDL) sold the Office Chamber at Jalan Besar for $13.2 million or $940 psf in December 2009, and its majority stake in the 999-year leasehold North Bridge Commercial Complex near Bugis Junction for $46 million or $1,194 psf of strata floor area in November last year.

In the strata-office market, average capital values at Suntec City and The Central have increased by 5.7 per cent and 9.8 per cent quarter-on-quarter to $2,000 psf and $1,686 psf respectively in Q4 2009.

Due to more steady income derived from contractual rental streams, the office investment market could be an attractive alternative in the current market. As the office sector continues on its road to recovery, we could expect more investors to diversify into the office market.

Therefore, buying interest in the investment market is expected to gain momentum in 2010 and an increase of 5-10 per cent in Grade A capital values is likely for the full year. Buyers may also be looking to capitalise on possible long-term rental growth beyond 2010/2011.

Thirdly, the commercial landscape of Singapore is set to be rejuvenated with the emergence of a two-tier Grade A office market. New Grade A offices such as Marina Bay Financial Centre (3 million sq ft), Ocean Financial Centre (one million sq ft) and Asia Square (2.3 million sq ft) have begun to lace the city facade, raising Singapore’s office standards several notches higher with more efficient layouts, state-of-the-art facilities and larger floor plates.

Vacancies in the older Grade A and B buildings will continue to intensify. The situation could be exacerbated when tenants move out of existing buildings to new buildings like Marina Bay Financial Centre Towers 1 and 2 this year. This would continue to weigh down rents and may prompt landlords of older office buildings to upgrade or redevelop their investment properties to remain viable.

June Chua is director, commercial leasing, and Christine Sun is senior manager, research & consultancy, Savills (Singapore) Pte Ltd

Source: Business Times, 25 Mar 2010

POSH property seems to be back in vogue, with one recent launch snapped up and new high-end developments slated for previews in the coming days.

Home-hunters showed keen interest in Keppel Land’s Reflections at Keppel Bay over the weekend, and projects in Sentosa, Nathan Road and Shenton Way are also apparently generating interest.

But while prices are robust and tipped to move up, they are still below the boom-time levels with some experts suggesting that developers are keen to cash in on the buoyant market while they can.

Reflections at Keppel Bay, a development of 1,129 apartments on the southern coast, saw a strong weekend response with 29 of the 30 units launched sold. Prices averaged $2,200 per sq ft (psf) although they hit as high as $2,600 psf.

That priced two-bedders at about $2 million, a three-bedroom unit at $2.5 million and a four-bedroom apartment at $6 million. This was the first time two-, three- and four-bedroom units were being sold from the centre tower, known for having the best waterfront views.

The 99-year leasehold development has six glass towers of 24 and 41 storeys and 11 shorter blocks of villa apartments.

Keppel Land chairman Choo Chiau Beng said yesterday that positive economic sentiments, the improved job market and the buzz sparked by the integrated resorts have helped re-ignite the property market.

Since Reflections’ launch in 2007, almost 98 per cent of its 700 released units had been sold as of last month. It is expected to be completed in 2012.

Keppel Land’s chief executive of its Singapore residential unit, Mr Augustine Tan, said the weekend response had been very good and that 20 more units are being slated for release.

He expects to launch a total of 100 to 200 units this year. About 70 per cent of buyers were Singapore citizens while the rest were permanent residents and foreigners, he added.

Although the luxury segment has not moved as much as the mass market, Mr Tan expects demand to pick up this year with prices increasing by about 5 per cent to 10 per cent.

City Developments is having a media preview of the 228-unit Residences at W in Sentosa Cove today. Industry sources say that it could be priced for about $2,500 psf to $3,000 psf. Developer TID will release the 65-unit freehold development Nathan Suites on Nathan Road, in the prime District 10, at the end of the month at an average price of $2,100 psf.

The 39-storey 76 Shenton downtown condo developed by Hong Leong Holdings also previews today. Prices range from just below $1,700 psf to $2,500 psf.

However, Chesterton Suntec International’s research and consultancy director Colin Tan said the luxury end is still struggling to reach its peak, with prices about 20 per cent lower than in 2007.

‘(Developers) might have thought the optimism in the mass market would spread to the luxury end, but that has not been the case. They know that good times won’t last forever so they might just be trying to get what they can now,’ he said. He also noted that the slew of luxury projects being launched might not necessarily mean sustainable recovery.

Rather, it could be a sign of developers getting nervous since the market share for high-end residences is limited. They might just be jostling to get their slice of the pie, he added.

Source: Straits Times, 25 Mar 2010

A NEW index that tracks the price of private non-landed homes month by month has been created to help owners, investors and other property watchers keep a handle on the fast-moving market.

The Singapore Residential Price Index (SRPI), as it is called, has been formulated by the National University of Singapore (NUS) after two years of research.

It functions much like the Straits Times Index for shares but instead of following certain stocks, the SRPI is based on the transacted prices of a selected basket of completed non-landed private homes.

The only other index that tries to get a grip on the property market is one put out by the Urban Redevelopment Authority, but that is only published quarterly.

It is compiled based on all types of private home transactions and is intended to provide a broad indication of price trends.

The new index, which has a narrower focus, was launched yesterday by Senior Minister of State for National Develop- ment Grace Fu.

Ms Fu told the function at the Four Seasons hotel that the index can help analyse price trends and assist investors in making more informed decisions.

Associate Professor Lum Sau Kim, who led the NUS project, said formulating the index was motivated by industry interest in property derivatives.

These financial products can give investors exposure to real estate or help others manage risks in their investments.

The SRPI reflects such risks. It is based on a basket that broadly represents the target market, so landed homes, forming such a small segment, are excluded.

It also excludes projects that are more than a decade old, those that are small, rarely traded, or targeted for en bloc sale.

The basket will change every two years to reflect changes in the completed stock of private non-landed homes.

Its initial make-up comprises 74,359 units in 364 projects across 26 postal districts, completed between October 1998 and September last year.

Only completed homes are used so as to reduce the influence of new launch prices and sub-sales, which may not reflect the market. Care will also be taken to dampen the effect of one-off deals or over-the-top prices.

‘Once it is an index that people trade on, it has to be very robust to guard against manipulations,’ said Savills Singapore managing director Michael Ng.

While property derivatives may be some time away, the SRPI’s immediate benefit will be in providing reliable price data, said Mr Simon Cheong, president of the Real Estate Developers’ Association of Singapore.

Mr Cheong said it is all the more timely as the non-landed homes sector is going through ‘a particularly volatile period with shorter cycles where market watchers are eagerly looking for more transparency and greater clarity on market movements’.

Cushman & Wakefield managing director Donald Han added: ‘We’re seeing higher volumes and rapid movements in prices, so there’s a need to have a monthly coverage of property prices.

‘The SRPI will have a more accurate picture. It helps to reduce panic.’

Updated on the 28th of each month, the SRPI is on the NUS website at www.ires.nus.edu.sg/srpi_main.aspx

Source: Straits Times, 25 Mar 2010

THE Government has to shoulder some of the blame for the short supply of land and high property prices, said Mr Simon Cheong, president of the Real Estate Developers’ Association of Singapore (Redas), yesterday.

Mr Cheong told the audience at the launch of a new property price index that land values are largely determined by the Government’s reserve price system that features in all state land tenders. Yet a site’s reserve price is not revealed.

‘During periods of high volatility, it is not able to respond quickly enough to real-time changes happening in the marketplace,’ he said.

Mr Cheong, who is also chairman and chief executive of developer SC Global, picked out two recent government land tenders to illustrate the ‘conundrum and the dilemma’ developers face in bidding for such sites.

A single bid for a Tampines site was rejected in June 2008 for being too low but was awarded in March at $421 per sq ft per plot ratio (psf ppr), or 3.6 times higher.

A Ten Mile Junction mixed-use site also had a failed bid of $162 psf ppr in April 2008 but went for $437 psf ppr, or 2.7 times higher, in February.

‘Had the two sites (along with other tenders) been awarded back then at ‘market prices’, the current demand-supply mismatch scenario in the residential market may have been more smoothened and price increases for such mass market projects more muted overall,’ said Mr Cheong.

Such a blunt assessment of the supply situation and other factors driving the market buoyancy by a Redas chairman is unusual. Mr Cheong acknowledged as much, saying he had been advised to avoid commenting about the market for fear of it being a sensitive topic. He said public housing has become an important de facto driver of private property prices.

A strong HDB resale market fuelled the ongoing upgrading process and it was the mass-market segment recovery – fuelled by demand from HDB upgraders – that has led the recovery in the general private residential market.

He also addressed private housing affordability and asked whether the state should be so concerned about where private housing prices are heading when it serves only 16.5 per cent of the population.

‘Should it intervene to restrain the rise in property values to make private housing more affordable or should it be left to market forces?’

Affordability is not only influenced by rising values. There is also short-term demand and available supply imbalances or too much credit expansion in the financial system, said Mr Cheong.

‘Someone who uses very little bank borrowings to buy and exit properties is not a speculator in the same sense as one who leverages aggressively… As we see it, buying what you cannot afford is speculation,’ he added.

Signs of heightened speculative activity were part of the reasons for the Government to introduce measures last September to cool the market. It came out with further steps in February.

‘But what or how much buying is considered excessive? Is it measured by volume, value or quantum? Should the market be left on its own to decide?’ asked Mr Cheong.

The continued buoyancy is caused by various factors such as high liquidity, the upsurge in population and foreign buying.

The pent-up demand in the early phase of economic recovery in mass-market housing, for example, was interrupted by the global financial crisis and never ran its course in the last property cycle, he said.

‘Is it any wonder, then, that the recent measures to cool the private property market did not quench the appetite of genuine home buyers and investors?’

Mr Cheong added that the new price index will hopefully be ‘a step towards improving market transparency and help lessen future needs for frequent market interventions, allowing a freer hand for market forces to work out its own genius’.

Source: Straits Times, 25 Mar 2010

I REFER to Mr Bobby Jayaraman’s letter, ‘New measures won’t help market bloom’ (Feb 23). There may be room to re-examine market statistics in greater detail and consider sharper tools to tackle specific problems instead of slapping stamp fees on sellers across the board.

The Urban Redevelopment Authority keeps statistics of property transactions. Nineteen different headings are listed for each transaction, including ‘purchaser address indicator’ which describes whether a buyer is from HDB or private housing, and ‘type of sale’ which describes whether a sale is new, resale or sub-sale.

A quick comparison of non-landed property sales in districts 9, 16 and 27 over the past year shows different transaction patterns in different locations.

For example, in district 9, 20 per cent were reported to be buyers with HDB ‘address indicator’ and 21 per cent of the 2,500 transactions were ’sub-sales’. In district 16, only 10 per cent were ’sub-sales’ with 45 per cent buyers with HDB ‘address indicator’ in the 1,710 cases. In district 27, the total number of sales was 239, with 161 with HDB ‘address indicator’.

Armed with such info, the authorities can use sharper tools to correct market imperfections caused in particular locations or by particular groups of people.

Patrick Sio

Source: Straits Times, 25 Mar 2010