Increase due to limited stock: DTZ report

PRICES of resale homes are still on the rise but at a slower pace, with landed homes and homes in non- prime areas leading what growth there is, says a new private-sector property report.

The DTZ report found that the increase in the average resale prices of landed homes was due to their limited stock.

Prices of leasehold landed homes in non-prime districts rose the most, by 3.8 per cent in the third quarter of this year compared with the second quarter.

Demand for landed property has been steady over the past two years, said property experts.

‘Buyers of landed property enjoy the luxury of the space that such homes offer… Landed homes are also perceived as a good property asset to preserve their wealth,’ said Mr Nicholas Mak, head of research at SLP International.

Prices of freehold landed homes in the prime districts of 9, 10 and 11 rose 2.8 per cent.

Analysts said transcation volumes in the prime districts had slowed. This could explain why prices of landed homes in these areas are rising more slowly than those of their non-prime counterparts.

Condominiums in suburban areas registered a 2.5 per cent growth in resale prices in the third quarter.

Earlier this week, the Urban Redevelopment Authority issued flash estimates suggesting new private home prices had risen just 1.3 per cent in the third quarter, a drop from 2 per cent in the second.

DTZ said the demand is mostly for property in the suburban areas. This is due to two factors: public flat owners upgrading to private homes, and first-time buyers and investors taking advantage of low interest rates to buy property.

Ms Chua Chor Hoon, head of DTZ South-east Asia research, said: ‘Many of these buyers are buying for owner-occupation and investment beyond four years due to the seller’s stamp-duty measure.

‘They probably take a longer-term view and are thus less worried about the current global economic uncertainties.’

She added that if the global outlook worsens and the economy continues to slow, it would eventually affect buying sentiment and lead to weaker sales.

The report also found that prices of luxury apartments in the prime districts were stagnant, a sign that the deteriorating global outlook and higher prices have led buyers to be selective and cautious about property purchases in this segment.

Ms Margaret Thean, DTZ’s executive director of residential, said: ‘Some projects still experience price increases. In a slower market, prices of the better-designed and well-located projects will hold better.’

DTZ noted that the activity in the secondary home sale market has dipped.

Transactions in the secondary market, which include both sub-sales and resales, averaged out at slightly more than 1,200 units a month in July and August.

That is 23 per cent lower than the monthly average of 1,665 units sold in the secondary market in the past 12 months.

But the report said lodging caveats is voluntary and can be delayed, so the actual number sold might have been higher.

Terraced houses in the Mount Elizabeth area. Prices of landed homes in the prime districts of 9, 10 and 11 rose, but sales slowed. — ST PHOTO: ALPHONSUS CHERN

Source: Straits Times, 7th Oct 2011

Modest top bid of $141 million shows developers cautious amid global economic turmoil

AN UNUSUALLY strong field of 13 developers slugged it out in a close fight for a Pasir Ris residential site, in contrast to the recent tepid response to land tenders.

Still, the top bid – from a Hoi Hup Realty consortium – was not particularly high.

The bid came in at $141 million, which translates to $361 per sq ft per plot ratio (psf ppr).

The 99-year leasehold site is at the junction of Jalan Loyang Besar and the yet-to-be completed Pasir Ris Rise.

The top bid’s $361 psf ppr price is 10 per cent lower than an adjacent site at the junction of Jalan Loyang Besar and Pasir Ris Drive 4; this site sold for $403 psf ppr in May.

Market experts say worries about the global economy have led developers to be more selective about which sites to bid for – and to offer more cautious bids.

The last time a government land sale site attracted this much attention was in August, when 15 parties tendered for a residential site in Upper Serangoon Road. Tuan Sing Holdings clinched that particular site for $185 million.

Credo Real Estate’s head of research Ong Teck Hui said the high level of interest could indicate that developers felt there would be less competition for the Pasir Ris Rise site.

They might, therefore, have gone in with cautious bids, he said. The lowest nine submissions for this tender exercise ranged from $308 psf ppr to $205 psf ppr, reflecting this strategy.

The top bid was only 1.6 per cent more than the second highest offer of $139 million and 3.2 per cent higher than the third highest of $137 million.

The response may have been spurred by the continuing demand for mass market homes, said Colliers’ head of research and advisory Chia Siew Chuin.

Ms Chia said this sentiment could have been supported by the primary sales activity and price rises of private non-landed homes in suburban areas in recent months.

Another possibility, said Mr Li Hiaw Ho, CBRE Research’s executive director, is that developers feel residential land supply in Pasir Ris is more limited than other areas like Punggol and Sengkang.

In those areas, many land sites have been earmarked for development.

‘In addition, it shows that developers are confident of residential demand going forward, (demand from the upgrader segment) in particular,’ said Mr Li.

The site measures 185,938 sq ft and can be built up to a maximum gross floor area of 390,472 sq ft.

It is a 10-minute walk from Downtown East. Other amenities such as the White Sands shopping mall and Pasir Ris MRT station and bus interchange are a little further away.

However, Pasir Ris Park and the beach are close enough to walk to, a feature of the area on which Hoi Hup intends to capitalise, should it be awarded the tender.

A Hoi Hup spokesman said the new condominium development would be designed to ensure a sea view for as many of the units as possible.

The development will consist of six blocks, each up to 13 storeys high, yielding 400 apartments. This new project could be launched for sale in as little as nine months.

CBRE’s Mr Li noted that homes at nearby Seastrand are being marketed at an average of $930 psf, adding that more than 80 per cent of the condo’s 473 units have been sold as of the third quarter.

Units at another nearby project – NV Residences – were selling at an average price of $840 psf between July and September.

NV Residences, launched a year ago, consists of 642 units. Around 95 per cent of these homes have been sold to date, said Mr Li.

Industry observers say the $141 million bid for the Pasir Ris Rise site would translate to a breakeven cost of about $750 psf, with some analysts predicting the new condo development could launch at around $900 psf.

Source: Straits Times, 5th Oct 2011

A LIMITED supply of new shop spaces is helping reverse a three-year decline in prime rents in Orchard Road, a property consultancy has found.

CB Richard Ellis (CBRE) found that rents for the three months to Sept 30 rose 5 per cent from the previous quarter to $31.60 per sq ft (psf) a month.

This is the first quarterly increase since the third quarter of 2008.

Ms Letty Lee, CBRE director of retail services, said Orchard Road malls are almost at full occupancy.

‘New-to-market brands continue to actively explore taking up Orchard Road space, encouraged by fresh opportunities offered by newly available large prime space, including the recent exit of Borders at Wheelock Properties,’ she said.

‘Rentals should hold steady for the fourth quarter.’

Prime shop rents have softened over the past few years as a flood of new shopping malls such as Ion Orchard, Orchard Central and 313@Somerset opened along the prime shopping belt.

But this has also led to retailers expecting greater visibility and accessibility for their stores now, Ms Lee said.

Older malls have revamped to stay relevant with new layouts and concepts.

The retail scene was also dominated by fast fashion brands in the third quarter, Ms Lee noted.

The entry of Forever 21, Cotton On and Uniqlo spurred two other fast fashion brands to chance their arm.

Aeropostale opened outlets in VivoCity and CityLink Mall as well as a 22,000 sq ft store in Ion Orchard.

H&M opened its 30,000 sq ft flagship store in Orchard Building, while Abercrombie & Fitch announced that its 21,000 sq ft shop in Knightsbridge will open in December.

Prime suburban rents increased by 2.9 per cent to $29.75 psf a month quarter-on-quarter, CBRE’s data found.

The fourth quarter will also give shoppers more options with the 45,000 sq ft Greenwich V in Seletar Road and the 207,000 sq ft JCube in Jurong expected to be completed.

The firm estimates that a further 657,000 sq ft of retail space will be completed next year while 1.57 million sq ft will enter the market in 2013.

Source: Straits Times, 5th Oct 2011

GLOOM has settled over the office market with analysts turning negative and pulling back their rental estimates by as much as 25 per cent over the next year.

This slide is on the back of deteriorating global economic conditions and a large amount of new office space that is due to become available soon.

Citi property analysts Wendy Koh and Tan Chun Keong said in a research note on Monday that the firm is cautious on the office outlook, given that 1 million sq ft of new space due for completion this year is still without tenants.

This means just 65 per cent of the

2.8 million sq ft of office space due for completion this year has so far attracted tenants, and the analysts expect rents to come under pressure in the coming months.

The uncertain economic outlook has led to a significant dip in demand for office space as businesses suspend or abort expansionary plans. — ST FILE PHOTO

Prior to this, Grade A office rentals in the Raffles Place area had risen sharply – by 19.7 per cent – in the first nine months of the year, according to Colliers International estimates.

Inquiries on office space have also slowed and estimates for rentals and office values are now expected to be 20 per cent lower, the Citi analysts added.

Standard Chartered property analysts have slashed their office rental forecasts by 25 per cent.

‘Our… checks with office landlords and leasing agents suggest that tenants have scaled back expansion plans and recent pre-commitments have been secured (about) 10 per cent below our expectations,’ they said in a note last month.

UOB Kay Hian property analyst Vikrant Pandey said the demand slowdown is due to the weakening hiring pace and cost-cutting exercises at banks.

‘Banks in Singapore were aggressively hiring in the first nine months of the year, but we anticipate that the pace will slow with the more uncertain economic environment,’ he said.

An average of 2.1 million sq ft of office space a year will be completed over the next three years. These include the redevelopment of the Market Street carpark and suburban commercial space in Jurong and Paya Lebar, Mr Pandey noted.

Kim Eng Research agreed that the uncertain economic outlook has led to a significant dip in demand as businesses suspend or abort expansionary plans.

‘Coupled with the increased supply of both primary and secondary space going forward, rents are likely to be kept further in check,’ it said.

CB Richard Ellis said Grade A office rents rose 4.3 per cent in the three months ended Sept 30, while Colliers’ data found office rents inching up by just

2 per cent, its lowest quarterly growth since the second quarter of last year.

Experts noted that the tender for a recent commercial site in the Central Business District in Robinson Road drew a subdued three bids and a top bid of just $882 per sq ft per plot ratio.

This fell short of market expectations and points to developers possibly turning cautious on the office sector, they added.

Source: Straits Times, 5th Oct 2011

PRIVATE-home prices inched up an estimated 1.3 per cent in the third quarter as buyer resistance and jitters over the global economic outlook took hold.

The modest rise follows 2 per cent growth in the second quarter and underlines a trend of moderating price rises that has been going on for eight quarters.

Values are expected to continue moderating, with experts estimating gains of between 1 per cent and 2 per cent in the fourth quarter.

But while yesterday’s flash estimates from the Urban Redevelopment Authority point to a softening market, private home prices are still 15.9 per cent above the 2008 peak and 13.4 per cent ahead of the heady days of 1996.

The trend ahead looks to be flatlining or down, say experts, who cite stock market falls and a global economic slowdown coming on top of four rounds of cooling measures.

Buyers are more cautious and price-sensitive, with market activity focused mainly on the more affordable mass-market segment.

Mr Png Poh Soon, Knight Frank’s head of research and consultancy, said concerns over the frail United States economy and the deteriorating euro zone debt crisis have weighed down prices.

‘Sentiment is somewhat affected, leading to a lingering air of caution among home buyers,’ he added.

‘Property investors are also keeping a keen watch over economic developments that will unfold in the coming months. In the worst-case scenario, some are bracing themselves for a recession and a plausible interest rate increase should the capital market freeze up.’

CB Richard Ellis Research executive director Li Hiaw Ho noted that home prices are ‘stabilising’.

Prices rose 5.6 per cent in the first nine months of this year, well under the 14.4 per cent growth in the same period last year, said Mr Li.

Yesterday’s flash estimates highlighted how different market segments are performing.

City centre non-landed home prices increased 0.8 per cent in the three months to Sept 30, down from a 1.6 per cent rise in the previous three months. This was the smallest rise since the third quarter of 2009 when the market first rebounded.

City fringe home prices held steady at 1.1 per cent, while suburban home prices shot up 2.1 per cent from a 1.7 per cent rise in the three months before.

Colliers International’s director of research and advisory, Ms Chia Siew Chuin, said ‘the edging up of (suburban home) prices is supported by sustained, strong underlying demand in the mass-market segment despite global economic uncertainties’.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, agreed that this was ‘not surprising’ as the mass-market segment has been relatively buoyant, supported mainly by demand from owner-occupiers.

But price gains in the future are likely to be linked to particular projects, as home buyers in this segment are also getting cautious in the light of the economic uncertainties, said Cushman & Wakefield’s Asia-Pacific research senior manager, Mr Ong Kah Seng.

Source: Straits Times, 4th Oct 2011

PRICES of resale HDB flats continued to increase in the past three months but National Development Minister Khaw Boon Wan said efforts to ramp up supply of new flats should help stablise prices soon.

The Housing Board’s (HDB’s) flash estimate of the third-quarter resale price index is 187.1 – or 3.8 per cent higher than the previous quarter.

Mr Khaw, in his latest blog post, said HDB is ‘making good progress’ in meeting the needs of first-time applicants who are newly-weds.

Last month , for example, HDB put up for sale 8,200 build-to-order (BTO) and sale of balance flats (SBF) – including units in mature estates such as Bukit Merah and Clementi – to cool the demand for resale flats.

The balance flats were wildly popular, with some in mature estates seeing 50 times as many buyers as there were units available, while the BTO exercise registered an average application rate of 1.7 times.

Mr Khaw expects half the 15,500 first-time applicants to get flats.

‘This September launch has redressed part of the shortage in public housing. Our efforts in ramping up HDB flat supply will help stabilise the market. We are beginning to see some light at the end of the BTO tunnel,’ he wrote.

Experts said the continued buoyancy in resale-flat prices is a sign that homeowners are now more reluctant to put their units up for sale.

ERA Realty key executive officer Eugene Lim said property owners in general have become more cautious about selling their homes and getting another, after the Government lowered the loan-to-value limit to 60 per cent for those with existing property loans.

He added that cash-over-valuations (COVs) continue to boost resale-flat prices. COVs are cash premiums paid above the official value for resale flats.

Industry experts estimated that the COV was between $35,000 and $37,000 in the last quarter.

Mr Lim said the market may continue in this fashion unless there are policy changes that can increase the supply of resale flats for sale.

PropNex chief Mohamed Ismail predicts that resale-flat prices will have climbed by as much as 11 per cent by the end of the year.

‘In spite of this, we are expecting prices to stabilise with the introduction of more new BTO and SBF flats,’ he said.

Mr Nicholas Mak, research head of property consultancy SLP International, estimates that resale-flat prices will have increased by up to 14 per cent by year’s end, as it will take time for the effect of HDB’s large BTO launches to be felt.

Mr Lim noted that new flats may not appeal to all first-time buyers , due to the waiting time of at least 21/2 years for the units to be completed.

Private-property prices, however, are showing signs of moderation. The Urban Redevelopment Authority’s private residential property index rose 1.3 per cent in the past three months, compared to 2 per cent in the previous quarter.

Non-landed properties in Outside Central Region areas chalked up the highest price increase of 2.1 per cent.

Those in the Core Central Region and Rest of Central Region had 0.8 per cent and 1.1 per cent rises respectively.

The Core Central Region includes prime areas like Orchard Road and Newton.

The Rest of the Central area includes Outram and Rochor.

PropNex’s Mr Ismail said the strong showing by properties outside the central regions is due to recent launches of mass-market condominiums in those areas.

Source: Straits Times, 4th Oct 2011