Just three months ago, a plot next door went for a far higher price

ECONOMIC uncertainty is likely behind the poor response to a residential site in Upper Serangoon Road that ended up going for a song.

Allgreen Properties emerged tops in a three-cornered tussle for the 265,012 sq ft site with a bid of $270 million or $291 per sq ft per plot ratio (psf ppr).

That looks like a giveaway given that just three months ago, a 99-year leasehold plot next door at the junction of Buangkok and Sengkang East Drives went for $391 psf ppr.

It is the first time in a long while that Allgreen Properties has topped a tender exercise, said analysts, who added that the developer has been cautious with bids in recent months.

Property experts said the Allgreen bid, if successful, would be the lowest price for a non-landed site since City Developments paid $280 psf ppr for a Chestnut Avenue site in August 2009 that was developed into the Tree House condominium.

Allgreen was followed by a consortium of Frasers Centrepoint, Far East Organization and Sekisui House with an offer of $253 million, or $273 psf ppr for the 99-year leasehold. A unit of Chip Eng Seng bid $261 psf ppr.

Experts cited a number of reasons for the lacklustre bidding.

Mr Ong Teck Hui, head of research and consultancy at Credo Real Estate, said the low offers were a clear sign that residential land sales are softening amid a more uncertain economic climate.

He added: ‘The bids are getting more cautious with more buffer being provided in anticipation of a more difficult market.’

Mr Nicholas Mak, head of research and consultancy at SLP International, noted that the low number of bids could be a sign that developers did not see the site as that attractive.

‘(The developers) could be saving their resources for other site tenders which would be launched soon,’ said Mr Mak.

But he cautioned that the lower land prices might not translate to lower home prices.

‘Allgreen Properties would likely sell the condominium to be developed on this site at the going market price at the time of its launch,’ he added.

The nearest MRT station – Hougang – is some distance away. However, the site’s proximity to Punggol Park and Serangoon Reservoir will appeal to nature lovers and exercise enthusiasts.

The land can be built up to a maximum gross floor area of 927,545 sq ft, possibly yielding 860 apartments.

Units at neighbouring Boathouse Residences have been transacted at an average of $880 psf.

Analysts predicted an approximate break-even price of between $630 and $660 psf.

Source: Straits Times, 8th Sept 2011

But these units are often in less attractive areas, or in poorer condition

SKY-HIGH home prices might be the talk of the town but there are still bargains to be had – if prices are anything to go by – even in this fevered market.

At least 47 freehold homes have sold for $600 per sq ft (psf) or less – and under $1 million – so far this year, according to caveats lodged with the Urban Redevelopment Authority. That is sweet music for home hunters faced with prices that have been edging above $1,200 psf even in new suburban projects.

Buyers have been finding lower-priced freehold homes around the Geylang, Hougang and Pasir Ris areas, though a cheap property can mean it is in a dodgy neighbourhood or has no end of problems.

The cheapest home sold this year by unit price was a 2,433 sq ft apartment in Lorong 20 Geylang that went for just $251 psf – or $610,000 – in June.

Ballota Park condo in Pasir Ris also had three apartments changing hands for under $1 million and at $600 psf or under, while Wing Fong Mansion in Lorong 14 Geylang had six.

Surprisingly, there were also two units in prime District 11 that fell into the bargain-bin category. A 1,098 sq ft flat at Shelford Regency in Bukit Timah was snapped up at $546 psf – or $600,000 – while an 861 sq ft home at Novena Court was bought for $581 psf, or $500,000.

The 47 transactions comprise only a tiny fraction of the 9,437 secondary transactions of non-landed homes – excluding executive condos – in the market this year. Experts say many of the units could be in older developments, in less convenient locations, in original condition or include private enclosed spaces that reduce the size of the unit’s livable space.

Chesterton Suntec International research head Colin Tan noted that many of the Geylang apartments are in seedy red-light districts. Some of the units could also be rented to foreign workers.

‘There could also be a financing issue where loans for such units are seen as higher risk, so potential buyers might have to fork out cash instead, further reducing the pool of buyers,’ he added.

Cushman & Wakefield’s Asia-Pacific research senior manager Ong Kah Seng said such deals, especially for homes at $500,000 and below, have been falling. The number sold below $1 million has also fallen from 74 per cent of all non-landed transactions in 2005 to 45 per cent last year, Cushman’s analysis showed.

‘The decline in their share is significant, largely due to a run-up in private residential prices over the years,’ he said. ‘(It) also meant there are much fewer lower-cost choices available for buyers who may have to compromise on the accessibility, locality, the size or age, and tenure of their home to meet their budget.’

But bargain-hunters might still bite. Smartloans.sg chief executive Vinod Nair estimates that an 80 per cent loan of $800,000 on a $1 million home on current interest rates means a monthly mortgage of just $2,700 on a 30-year loan.

But Mr Ong said buyers should also note that some properties have limited resale value in terms of locality, or require higher maintenance costs due to age.

Kim Eng analyst Ooi Ti Tung said that completed freehold units below $600 psf are attractive as the replacement cost of such units is at least $650 psf, comprising land and construction costs.

Source: Straits Times, 3rd Sept 2011

Fewer first-time buyers expected in resale market, due to new HDB rules

HOME owners hoping to sell their Housing Board flats seem to have tempered their expectations of reaping eye-popping cash premiums, after the HDB raised the income ceiling for new flats and housing subsidies.

The new rules, which open up more housing options for couples, singles and the elderly, are expected to change the mix of HDB resale flat buyers, say property agents.

With these three groups possibly going for new flats instead of buying homes off the resale market, sellers are lowering their expectations of getting a tidy amount in cash-over-valuation (COV), the sum paid by buyers above the valuation of a flat.

C&H Properties real estate agent Daniel Tan said: ‘Before, it was the standard for many sellers to ask for $50,000 to $80,000 for COV. Now, many of them have lowered this to below $50,000.’

Four-room and five-room flats up for resale in Woodlands, Ang Mo Kio and Bedok have registered dips in their asking COV amounts, he added.

This trend seems to be in response to the raising of the income ceiling from $8,000 to $10,000 for couples looking to buy new HDB build-to-order flats or to apply for the Central Provident Fund housing grant or an HDB loan. The HDB has also raised the income ceiling for executive condominium units from $10,000 to $12,000, and raised the income ceilings for singles and elderly people too.

Industry observers told The Straits Times that although it is still early days, since the new rules kicked in only last week, they expect the number of first-time buyers in the HDB resale market to shrink, as they can now also go for new flats or executive condominium units.

National Development Minister Khaw Boon Wan had previously revealed on his blog that the proportion of first-time home buyers in the HDB resale flat market was about a quarter, or 23 per cent; among singles, it was 15 per cent.

At roughly 30,000 resale flats changing hands each year on average, this means about 7,500 first-time buyers could potentially move to the HDB’s queue for new flats.

ERA Realty key executive officer Eugene Lim estimates that 30 per cent to 40 per cent, or up to 3,000 of these buyers, could switch over each year.

This group is likely to include couples who do not need housing urgently and whose combined monthly income hovers just above the $8,000 level, which previously barred them from buying new HDB flats.

But Dennis Wee Group director Chris Koh thinks the proportion will be lower – perhaps 10 per cent.

He said: ‘The primary reason is that first-time buyers will still be attracted to resale flats because they won’t need to wait three years for their home.’

And because the HDB has also lifted the ceiling for the CPF housing grant, more buyers can now take advantage of this to buy a resale flat, he added.

But both Mr Lim and Mr Koh agreed that more singles above age 35 could enter the resale market now, as more of them qualify for the HDB’s revised $15,000 grant for singles earning up to $5,000.

However, the number will not be significant enough to move overall price trends, they added.

The overall effect of the new rules on the market is that COVs could now cool and moderate the rate of price increases in the resale market.

But Mr Lim cautioned buyers against expecting prices to start falling any time soon, because the supply crunch in the resale market still exists; it will take some time for the HDB’s new flat supply to reach the market before it will cool.

The resale market will still be supported by other buyers, such as permanent residents who prefer buying to renting, and private property owners cashing out of their private homes and downgrading to public housing.

‘With more new flats, some resale buyers will swing over, but we do not expect an exodus… At the rate at which things are moving, the only thing that can bring down overall COV and resale prices is a recession,’ he said.

PropNex chief executive Mohamed Ismail predicts there will still be real demand for housing in the next six months, although the HDB’s record-high launch of 8,000 new flats slated for next month may meet some of it.

‘Overall, resale HDB prices will still increase marginally, but as supply comes on, the overall housing situation should stabilise,’ he said.

Mr Ong Teck Hui, Credo Real Estate’s head of research and consultancy, noted that the change in the profile of buyers in the HDB resale market will have a knock-on effect on the private market.

‘But the main threat is the potential softening of the economy arising from deterioration in external conditions. If it is a significant slowdown, we may expect demand to moderate, leading to an easing of COV and resale prices.’

Source: Straits Times, 22nd Aug 2011

Outlook for housing market is uncertain, making it hard for would-be home buyers and investors to decide

Home buyers, both occupiers and investors, have been scratching their heads more than usual lately on the vexing question of when to enter the market.

Even leaving aside the current global stock market and economic turmoil, it is a perplexing picture.

Will private home prices keep inching upwards, as they have done persistently even after the various market cooling measures brought in by the Government?

Or will the warnings of an oversupply of new homes, coming from certain quarters, prove to be accurate and lead to a sharp slide in prices?

Trying to evaluate the outlook for the local property market has been made even more baffling as a result of policy shifts on public housing, which have been thrown into the mix recently.

Prime Minister Lee Hsien Loong announced during his National Day Rally speech last week that the income ceiling for new build-to-order (BTO) HDB flats will be raised from $8,000 to $10,000, while that for executive condos (ECs) will go up from $10,000 to $12,000.

As a result, an additional 99,161 households will be eligible for BTO flats and an estimated 68,700 additional households for ECs, UOB Kay Hian property analyst Vikrant Pandey has calculated.

The pace of building will also be ramped up sharply, with 25,000 BTO flats to be launched both this year and next – an unprecedented 50,000 new HDB flats in total in just two years.

These changes in the public housing sphere are set to send ripples through the closely linked private market, shrinking the private demand pie especially for suburban mass market homes as middle-income buyers relook their choices.

Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, estimates a possible 5 per cent to 15 per cent decline in annual demand for new private housing, translating to 700 to 2,000 units.

This is provided public housing supply keeps pace with the increased demand by this group of new eligible buyers, he said.

The Government has also released a bumper supply of state land – largely in suburban areas – to try to stem rocketing prices in the private market.

This has led to concern about an oversupply in the next few years as the potential inventory builds up.

Coupled with a tighter immigration policy, demand could further slow.

This has sparked growing talk that suburban home demand will soften as prices head for a correction. This might cause home owners chagrin, but home hunters would welcome such a price slide.

More cooling measures unlikely

Some home buyers might be hoping for a fifth round of government measures – after the latest in January – to further cool the market and bring prices down.

However, experts say that this is unlikely for now, with the combination of growing macroeconomic uncertainties and the shadow of an oversupply of homes in the primary market.

Private home prices have also been moderating for seven consecutive quarters, inching up just 2 per cent in the recent April to June quarter.

In addition, land prices have come down at some recent government land sales tenders, indicating that the once bullish sentiment has become more subdued – although competition for good sites is still keen.

An RBS report by analysts Fera Wirawan and Bryan Lim said the measures to cool home prices seem to be concentrated on the HDB market. They also see lower policy risks now – in terms of a fresh round of cooling measures for private homes – in view of current global economic uncertainty.

‘In addition, potential measures to stem speculative demand in the private home market could have limited impact, given the highly punitive policy introduced earlier (in January),’ the report noted.

Where are prices headed?

Experts differ on where they see prices headed, with some predicting firm home prices in the light of low interest rates for the next two years and the strong holding power of developers and households.

Location also comes into play, with choicer sites – especially those close to MRT stations or transport nodes – expected to hold up better in the event of softening demand.

Those who expect prices to fall mostly see it happening in 2013 and 2014, as the construction of many suburban projects reaches completion.

Prices for the rest of this year are likely to hold firm, said Mr Joseph Tan, CB Richard Ellis (CBRE) executive director of residential.

But experts admit that the market outlook has been clouded by the global market volatility, the European sovereign debt crisis and risks of another global recession, with the United States economic recovery stalling.

How these events pan out in the next few months will have an impact on the take-up of new launches and where prices are headed, they predicted.

Goldman Sachs analyst Paul Lian said in a report released this month that he leans towards an oversupply of housing in 2013 to 2014 but is mindful of arguments made to the contrary.

‘At the very least, the quantum shift from undersupply to either balanced or oversupply is sufficient to take the edge off home prices,’ he noted. He expects prices to moderate by 15 per cent over the next 18 to 24 months.

SLP International research head Nicholas Mak sees a more than 50 per cent chance of a correction in the next three years. Whether this will be a short blip or sharp drop, however, depends on how the macroeconomic situation plays out.

RBS’ analysts, however, expect mass market homes to be in short supply till 2014 due to the population jump in the past five years and the lower-than-average home completions in the past decade.

The population rise over the past five years averaged 3.5 per cent a year compared to the 1.9 per cent a year growth from 1996 to 2005, they noted, driven by an increase in the number of non-Singaporeans.

‘Work permit holders who earn less than $1,800 per month accounted for the largest group of non-Singaporean citizens. This had heightened demand for mass residential homes and the segment would continue to be undersupplied until 2014,’ the report added.

When and what to buy?

This has thrown up the question of when buyers should make their move, in the light of the various factors and uncertainties in the market.

While home buyers often try to time the market, experts say that this is very difficult.

Affordability should be the key consideration instead.

Buyers also have to consider their motivations for purchase – budget, urgency of need and availability of what they like, for example – and the type of product they are looking for.

•Resale home or new launch

Mr Tan Kok Keong, OrangeTee’s head of research and consultancy, also said that buyers should be more cautious in purchasing new homes with benchmark prices as the downside risk for such units is greater during a downturn.

•Investment or owner occupation

‘If you can afford only a Japanese car, don’t go and buy a Mercedes,’ Mr Lim advised.

Source: Straits Times, 21st Aug 2011

Trend due to widening income gap and growing number of lonely seniors

For the past 18 years, Mr Adam Teo’s home has been a two-room rental flat in Toa Payoh, littered with books, toys and clothes.

Moreover, the 24-year-old is now his family’s sole breadwinner, supporting his mother and two younger siblings.

Years ago, his father became mired in gambling debts, and eventually left home without a trace. Mr Teo had to drop out from his polytechnic diploma course.

He now works as a packing assistant and takes on odd jobs such as distributing fliers, just to feed the family and pay his siblings’ school fees.

Ask someone like Mr Teo if he aspires to have a home he can call his own, and the answer is invariably ‘yes’.

‘Our goal is to buy a flat eventually, but life is getting harder, and things more expensive,’ he said.

The role of the rental flat, meant for the poor and needy who cannot afford their own home and lack family support and other housing options, has come into sharp focus again following the recent National Day Rally.

Recognising that there are Singaporean families who cannot afford to buy flats, Prime Minister Lee Hsien Loong announced in his rally speech that he was raising the rental supply to 57,000 by 2015. The previous target, announced earlier this year, was 50,000 by next year.

The Housing Board’s current stock of rental flats hovers at about 46,000, spread over areas such as Ang Mo Kio, Toa Payoh, Bedok, Tampines, Bukit Merah, Jurong and Woodlands.

The HDB, responding to queries from The Sunday Times, said the 7,000 new flats would be built in areas such as Punggol, Sembawang, Sengkang, Yishun and Bukit Batok, among others.

Rental flats are managed by the HDB. They come in one- and two-room options. Their monthly rents after subsidy range from $26 to $275.

As of last month, there were 1,572 applicants in the rental queue. Waiting time is about 61/2 months.

But the period of peak demand seems to have passed. That was in 2008 when there were about 4,000 applicants, with the waiting time stretched out to as long as 21 months.

More households are renting now, with the number having grown to 45,000, up from 40,556 households reported in 2008.

On average, about 1,800 rental flats are returned to the HDB per year, mainly due to tenants buying their own homes or moving out to live with family members.

Asked for her views on the increased supply, Ms Lee Bee Wah, chairman of the Government Parliamentary Committee for National Development, said it should help ease the waiting time.

During the rally, PM Lee also said the HDB would postpone the demolition of some Selective En Bloc Redevelopment Scheme (Sers) blocks. These would be turned into rental flats to cater to more families who need this leg up.

Families made up 83 per cent of the 2,300 rental applications last year, while singles made up the rest under the Joint Singles Scheme.

Under Sers, selected older blocks, some in prime areas, are redeveloped to optimise land use.

Currently, about 1,400 of the 2,200 Sers flats are offered at rental market rates while 800 are set aside for interim rental housing, which caters to the less needy.

These units are leased to operators like EM Services, LHN Group and the Katong Hostel, who take in Singaporeans, permanent residents, students and those with employment or S-Pass permits.

The HDB said ‘there are several vacated Sers sites that are leased out in the interim, before demolition’, and that it is looking at other Sers sites for use for rental housing in the future.

Earlier this year, some observers – pointing to the clamour for more rental flats for the needy – had urged the use of such flats for this purpose, as a matter of priority.

The HDB has also said that it has stepped up regular enforcement in stopping the illegal subletting of rental flats. There were 300 such cases from 2009 to last year, and 37 such cases so far this year.

The recovered flats have since been reallocated to needy families.

Analysts said that while the Government is tackling the immediate problem, the larger issues, centred on the housing of the poor and needy, are more complex and need further study.

Associate Professor Tan Khee Giap from the Lee Kuan Yew School of Public Policy said the ‘worrisome’ trend of the increased demand for rental housing is the economic outcome of a widening income disparity, caused by rapid globalisation.

Last year, while Singapore’s gross domestic product hit a high of 14.5 per cent, the Gini coefficient – a measure of income inequality on a scale of 0 to 1, with 0 denoting perfect equality – also rose to 0.452, up from 0.448 in 2009.

Prof Tan said that those who need subsidised rental flats now will have difficulty affording even the most basic flats later on.

‘A solid infrastructure needs to be in place to allow single-income households to become double-income earners if possible. And to ensure these families remain small, and their children are properly taken care of and educated,’ he added.

About 44 per cent of rental applicant households last year earned below $800 a month, while the rest earned between $801 and $1,500 a month.

Already, Prof Tan said, the Workforce Development Agency (WDA) is partially correcting these imbalances through the retraining of workers, but ‘it would take time, perhaps an entire generation, to address these issues’.

PropNex chief executive Mohamed Ismail said the larger picture is that the existing stock is just not enough to cater to people who fall through the cracks.

‘Perhaps some are going through a bad patch and have to sell their homes. These people need time before they can get back on their feet. Increasing rental flat unit numbers is a clear signal that the Government is recognising the problem,’ he said.

The Government, he noted, is already helping them, especially the first-timers.

He cited, as an example, new Build-To-Order two-room flats, which were expected to cost about $120,000 before the grants, costing $80,000 or less with the grants.

‘Bear in mind that there will always be people, a small minority, with very different motivations from others, and who are content to rent and have no intention of owning a home,’ he added.

But most rental unit residents The Sunday Times spoke to expressed optimism and hope for a better future.

Dispatch rider Muhammad Irwan, 25, said he was saving up, and that he and his mother, a single parent, will be able to afford a place of their own in six years.

‘One day I hope to stop paying rent, and that my mum and I will each have a room of our own,’ he said.

Technician Jeffrey Chua, 47, said it was important to focus on the happier things to keep spirits up.

‘I’m not educated, and my pay does not rise with the cost of living. Everything I do now is for the sake of my two sons. I’ll be happy if their future is bright.’

Seniors need them most

With new rental flats being added, the issue of who gets priority has to be looked at, noted Ms Lee.

‘We need to prioritise, to give to those who need it. Besides divorcees with children, those old, lonely people who can no longer find work, and cannot afford market rental rates, deserve the most attention,’ she said.

Neighbourhood-based voluntary welfare organisations (VWOs), such as the Lions Befrienders Service Association, have also noticed a rise in the number of seniors living alone in rental flats.

It takes care of 2,600 needy old folks above 65 years of age, all of whom live in such housing.

Said the organisation’s spokesman: ‘With an ageing population, the number of seniors living alone will increase. It’s a constant challenge to find volunteers to provide them with social support and uplift them.’

The Thye Hua Kwan Moral Society’s director of senior activity centres and health, Mr Joseph Cheong, said: ‘This generation of people, in their 70s and 80s, are living longer with better medical care. With no social support, they have nowhere else to go, so the least we can do is to make their lives easier.’

The VWO is responsible for about 2,030 rental flats.

In Singapore, the average life expectancy at birth last year was 81.7 years, up from 75.3 years in 1990.

Ms Lucy Tan, 65, the centre manager of Peace Connect, which takes care of 2,296 rental flats, believes more can be done in housing estates to prepare for the silver tsunami.

She said some one-room units may be unsuitable for seniors as they are cut off from the residential community or have little ventilation. ‘If ageing-in-place is to be encouraged, then more deliberate social planning is needed. But to be fair, HDB, by and large, has done a fine job in upkeeping the flats,’ she said.

These smaller units could also cause strained relations, said Ms Peh Kim Choo, assistant director of Hua Mei Care Management Service, which is under the Tsao Foundation.

Currently, one of the ways seniors can qualify for rental housing is to register under a joint application.

‘Sometimes this does not work, as it puts two total strangers with different lifestyles together in a very small living space. And that often creates a hotbed that breeds conflicts,’ she added.

Source: Straits Times, 21st Aug 2011