As projected supply of homes fluctuates, URA says it’s based on developer inputs

(SINGAPORE) A recent presentation on the estimated supply of private housing units in the pipeline has reignited the debate about the accuracy of official estimates.

The presentation – by real estate firm International Property Advisor (IPA) – highlighted the fact that the number of private homes that are projected to be completed each year has fluctuated broadly over time. The Urban Redevelopment Authority (URA) compiles the number on a quarterly basis.

Take, for example, the projected supply of private homes due to be completed in 2010. In the URA’s Q1 2006 publication, the agency said 6,115 units would be completed in 2010. But over the next several quarters, the number grew steadily and, by Q3 2007, it was estimated that up to 21,451 units would be completed in 2010 – a climb of 251 per cent in the forecast over just 18 months.

And when market sentiment dipped in 2008, the numbers were revised downwards. Anticipated completions for 2010 plunged to a low of 5,394 units in Q2 2009 – down 75 per cent over 21 months – before climbing again to 10,536 in Q3 2010.

IPA chief executive Ku Swee Yong, who made the presentation at a luncheon hosted by the Real Estate Developers’ Association of Singapore (Redas), said the fluctuation in the projected supply for 2010 was especially pronounced.

‘The estimates for 2010 were first published in Q1 2006. And since we were four-and-a-half years away from 2010, we would be right to expect that most developers would not have planned for projects so far ahead yet,’ Mr Ku said. ‘However, from 2009 onwards, as we progressed to within 12-24 months from the end of 2010, the completion numbers should have become more and more precise.’

But this was not the case, he said. In Q3 2009, URA’s publication said just 5,737 units would be completed in 2010; in Q4 2009, the figure was 7,584.

In its latest (Q3 2010) publication, URA said 10,536 private homes would be completed this year. More than 8,300 units have already been completed in the first three quarters.

Mr Ku added: ‘If some investors had made a decision to buy, thinking the supply (for 2010) was lower than the historical average (of 8,000 units), they could have since decided that they had made a wrong decision. They may find it tougher to get tenants due to the high number of new units that are being completed this year.’

In response to a query from The Business Times, URA said the estimated supply of private housing units in the pipeline is computed based on the expected completion dates of projects with planning approval (either provisional permission or written permission), which is obtained through URA’s quarterly survey of developers.

‘The expected completion dates of projects are estimated by the developers, and not projected by URA,’ said a URA spokesman. ‘The progress of the construction of various projects may be faster or slower than earlier estimated by the developers, who may revise the expected completion dates of their projects.

‘New projects which are issued with planning approval every quarter may also be added on. Similarly, projects for which planning approvals lapsed in the reference quarter are removed.

‘As a result, the estimated supply of new units that are expected to be completed over the next few years may change every quarter.’

The spokesman added that as the pipeline supply figures are published every quarter, the market is regularly updated of the changes, if any, so that they can make informed decisions.

Mr Ku likewise said that the estimated completion numbers for 2010, 2011 and 2012 probably fell sharply during URA’s 2008 publications as developers’ sentiment nosedived.

But analysts said that what is cause for concern now is that there are no pipeline figures for 2011 and 2012 that can be taken to be reasonably accurate – at a time when the sentiment in the real estate market is uncertain and more government measures to cool the property market could be on the horizon.

BT understands that the Ministry of National Development (MND) takes into consideration the pipeline supply when it plans its half-yearly government land sales (GLS) programme.

Analysts BT spoke to said they use URA’s estimated supply of private housing units in the pipeline as a ‘base’ to arrive at their own projections, which often vary significantly from those provided through official channels.

Market consensus is that as the end of 2010 approaches, Singapore can expect another climb in the number of expected completions for both 2011 and 2012.

The estimated supply of private homes due to be completed in 2011 has already fluctuated greatly since end-2006. In Q4 2006, URA said 5,876 new private homes would be completed in 2011. The estimate rose to 20,492 in Q1 2008 before dropping sharply to 9,196 in Q4 2009. In Q3 this year, an estimated 6,766 homes were expected to be completed in 2011.

Source: Business Times, 3 Nov 2010

Sentiment index for the next six months drops slightly following Govt’s recent curbs

PROPERTY companies are less optimistic about market conditions in the next six months, following the Government’s introduction of cooling measures in August.

According to the third-quarter Real Estate Sentiment Index (Resi), the future sentiment index – which gauges sentiment about the next six months – dropped to 4.8 from 5.9 in the second quarter of the year.

Released yesterday, the quarterly questionnaire survey developed by the Real Estate Developers’ Association of Singapore (Redas) and the National University of Singapore’s Department of Real Estate (NUS DRE) polled 71 Redas members, of which 61 per cent were developers.

Although slightly less upbeat, developers did not expect the market to weaken significantly over the next six months, the survey found.

But fewer of them expected more new residential units to be launched in the next six months – 44 per cent as compared to 68 per cent in the second quarter of this year.

On prices, those questioned suggest levels will moderate over the coming months.

More than half – 54 per cent – anticipated residential prices remaining unchanged over the next two quarters, and 34 per cent saw them becoming moderately lower. Just 12 per cent thought they would rise, compared to 51 per cent when the survey was last conducted in June.

In a statement released yesterday, Associate Professor Sing Tien Foo of the NUS Department of Real Estate said ‘the strong historical price growth is not likely to be sustained moving forward’.

Resi’s composite sentiment index – an indicator of overall market sentiment – also dropped to 4.8 from 5.9, indicating that respondents were less upbeat and expected more uncertain market conditions over the near term.

The survey found that respondents were negative about prospects for the suburban residential market, expecting it to perform less well over the next six months.

The sector had a ‘net balance percentage’ of minus 43 per cent.

This figure indicates the overall direction of change in sentiment according to the Resi report.

Some 76 per cent of respondents anticipated that recent government measures would have a significant impact on the HDB resale market over the next half-year, and 65 per cent thought they would hit mass-market private housing. About 45 per cent of developers did not expect to see a change in the level of interest in government land sale (GLS) sites and collective sales, but 47 per cent thought interest for government land sale sites would reduce over the next six months, compared to 24 per cent in the last quarter.

About 33 per cent of developers anticipate less interest in collective sales, compared to 15 per cent in the previous quarter.

Redas chief executive Steven Choo said the divergent views reflected short-term uncertainty about market movements, ‘but by and large, the development industry is expected to stay on course to meet demand in the housing market’.

Source: Straits Times, 29 Oct 2010

THE unleveraged return on Asian property was -0.2 per cent last year, according to a new report by IPD Asia.

IPD (Investment Property Databank) is a global firm that provides performance analysis for owners, investors, managers and occupiers of real estate.

Its Asia unit yesterday published its first report on the performance of Asian real estate, pooling data on China, Hong Kong, Japan, South Korea, Malaysia, Singapore and Thailand.

The firm drew on valuation data for 3,363 assets in 135 investment portfolios, with a total value of US$169.8 billion at end-2009.

The return on property was arrived at using the weighted total returns for the seven national markets, IPD said.

Total returns for the seven national markets ranged from -6.0 per cent for Japan to 15.4 per cent for Hong Kong. The unleveraged return on property in Singapore for 2009 was -1.5 per cent.

‘Of course, no real investor would ever receive the local currency composite because of the exchange rate effects of getting their return back into their home currency,’ IPD noted.

When this is taken into account, the Asia composite return goes down slightly to -0.5 per cent for the investor taking their return in US dollars, but rises to a positive 2.2 per cent for the Japanese yen investor.

Over a three-year period, the effects of currency are much more pronounced. Over this period, the total return from Asian property was 5.5 per cent per annum on a local currencies basis, -1.1 per cent for the investor taking their return in yen and 9.7 per cent for the US dollar investor.

Office property – representing just under 52 per cent of the Asia databank – was the worst-performing sector over both one year (-2.2 per cent) and the past three years (5.1 per cent), each on a local currency basis. Retail property was the best performer over both periods (5.1 per cent and 10 per cent) and industrial/logistics property returned 2.7 per cent in 2009 and 7 per cent per annum over the last three years.

From an international perspective, the performance of Asia real estate ranks in the lower half of countries for which IPD has published property returns in 2009 – but it is better than the -7.3 per cent local currency return of the IPD Global Index. Regardless of investor currency, the Asia composite return was lower than Pan-European composite but better than IPD’s market return for the United States.

Source: Business Times, 26 Oct 2010

Measures to dampen speculation hurting sentiment, say traders

THE sizzling residential property market has failed to radiate its heat onto property counters traded on the local bourse.

So far this year, property developers have outperformed the benchmark Straits Times Index (STI) by a mere 2 per cent.

The FTSE ST Real Estate Index, which tracks 43 property counters and real estate investment trusts, has done no more than closely shadow the STI.

A casual observer would have expected a far stronger showing by these stocks. After all, record prices have been achieved for mass market condominiums and sales have been brisk for new homes.

The sales figure last month rebounded by 82 per cent to 1,544 units from June to bring total sales for the first seven months to 9,957 units.

But property developers are trading at huge discounts to their valuations. One research house – DBS Vickers Securities – estimates the sector’s discount to valuations at a hefty 21 per cent. In contrast, three years ago, similarly buoyant sales had propelled real estate counters to trade at a premium to their valuations.

The depressed state of the counters is not confined to the local bourse. In Hong Kong, where residential property prices have been hitting record highs, property giants such as Cheung Kong and Sun Hung Kai Properties have had a similarly lacklustre run this year.

The malaise has affected all property counters, from regional plays with big exposure to red-hot markets like China to boutique developers with projects in Singapore.

Traders note that sentiment for real estate counters has taken a hit from various measures taken by markets, such as mainland China and Hong Kong, to dampen the speculative froth building up in their respective property markets.

On the mainland, these included measures to increase cash sums that lenders must set aside as reserves, as well as a clampdown on banks extending mortgages to borrowers who already own two properties.

In Hong Kong, they included a jump in the downpayment required for deals above HK$12 million (S$2.1 million) from 30 per cent to 40 per cent, and a move to increase land supply for developments.

Even the exuberance on the local property market appears to be tempered by caution among developers in their recent bids at land auctions.

DMG & Partners analyst Brandon Lee noted in a report yesterday that in the recent bidding exercise for a Yishun condo site, only the top bid was aggressive.

He said the other bids were all below expectations – a sign of developers’ wariness over potential oversupply as the Government releases more residential land.

Still, despite the angst over real estate counters, property giants with names recognised among international fund managers are doing fairly well.

They have fallen by a smaller margin from the record-high levels of 2007, compared with smaller developers.

For instance, City Developments has fallen 34 per cent since the record highs while CapitaLand is down 44 per cent.

But among smaller developers, Wheelock Properties and Allgreen Properties have slumped about 50 per cent, while boutique developer SC Global has plunged by 53 per cent.

In any case, future movements of counters are likely to be dictated by global considerations.

Poor existing home sales in the United States last month sent Wall Street into a funk yesterday, as the data raised fears of a return to recession in the world’s No. 1 economy.

But there are pockets of optimism among investors that the worst is over for the global property market. In a report last week, Henderson Global Investors said it believed the global real estate market is in the very early stages of a recovery and ‘property share prices are currently at fair value, or in the fundamental context, considered to be a little cheap’.

It noted that in Asia, sentiment varies from Japan, where the property sector is in the doldrums, to China, where investors are afraid of policy tightening to deflate a potential real estate bubble.

Henderson’s advice to investors is to pick property stocks carefully as investors are not rushing into them, partly because of the general uncertainties worldwide, and the painful memory of the recent US property bubble.

Source: Straits Times, 26 Aug 2010

Property consultant DTZ said buying sentiment in Singapore’s private residential market cooled in the second quarter due to the global uncertainty.

Market activity slowed in May and June due to a combination of the European debt woes, local stock market jitters and increased land supply.

DTZ said primary sales in the second quarter fell by 8 percent to 4,033 units, as developers slowed the pace of launches because of the subdued sentiment.

Sub-sales, an indicator of speculative activity, made up 10 percent of the non-landed transactions in the second quarter, lower than the previous quarter’s 13 percent

DTZ said the drop was due to the more subdued sentiment and the implementation of the seller’s stamp duty in February.

Luxury homes transactions also rose in the quarter as the share of purchases for units that are at least S$3 million edged to 10 percent of all transactions.

That’s a shade higher than the previous quarter’s proportion of 9 percent.

Most of the transactions amounting to S$3 million and above were done in the prime districts of 9, 10 and 11.

As for buyers, DTZ said the share of transactions involving HDB upgraders has stabilised at around the 34 to 36 percent mark for the past three quarters.

Despite the increase in prices, DTZ said the buyers are supported by the rising public housing resale prices.

Among non-Singaporeans, mainland Chinese buyers are closing in on overtaking the Indonesians as the second highest non-Singaporean purchasers group.

Mainland Chinese buyers made up 17 percent of non-Singaporean purchasers in the second quarter, while Indonesians constituted 18 percent.

Malaysians continue to be the top non-Singaporean buyers, accounting for 22 percent of total transactions by non-Singaporeans in the quarter.

Source: Channel News Asia, 23 Aug 2010

Index sees commercial real estate in region promising better returns than that in Europe

A NEWLY launched global property index covering commercial real estate sees Asia-Pacific markets as more attractive than those in Europe but less so than that in the United States.

The Fair Value Index, as it is called, is compiled by property consultancy DTZ and offers investors an insight into the relative attractiveness of global markets over a five-year investment period.

The Asia-Pacific region scored 67 on the index in the second quarter, outstripping the global score of 62 and beating Europe’s 49, but lagging behind the US’ score of 89. A score above 50 indicates a hot market as expected returns exceed risk-adjusted required returns. Anything below 50 means a market is cold.

Mr David Green-Morgan, DTZ’s head of Asia-Pacific research, said that Hong Kong, Singapore and Tokyo offer some of the most attractive opportunities across office, retail and industrial properties.

‘Hong Kong and Singapore, two traditionally volatile markets, are set to record strong rental growth, particularly in the office sector, over the next five years as they rebound from sharp falls in rents in 2009,’ he said. ‘This will result in strong capital growth, boosting returns for investors and placing both markets in the hot category across the board.’

While the office sector in the Asia-Pacific region is leading the way with a score of 70, all three sectors – office, retail and industrial – offer opportunities to investors with scores above 50. The Asia-Pacific’s retail sector is performing in line with the regional average at 67, while industrial stands at 61, DTZ said.

It added that the second quarter is in complete contrast to the same period a year ago when the Asia-Pacific all-property score was half of what it is now.

The economic recovery since then has improved liquidity and demand.

‘Despite a pause in investment activity in China and Japan recently, the attractive pricing in many markets is seeing an increased number of buyers who are encouraged by occupational resilience and the resumption of rental and capital value growth,’ DTZ said.

Mainland China continues to offer good value, led by office markets in Shanghai, Beijing and Chengdu. But office space in Guangzhou and Shenzhen and retail space in Shanghai are overpriced, according to the index.

Shanghai saw a number of retail construction projects in the lead-up to this year’s World Expo. While they will sustain the sector this year, the outlook for investor returns over the medium term is expected to be subdued, DTZ said.

Meanwhile, a CBRE report yesterday said that more than half of the office rental markets in the Asia-Pacific region have either stabilised or started growing during the second quarter. Dr Raymond Torto, CBRE’s global chief economist, said the region was the driving force behind the sector’s global recovery, with over half of the markets either at the bottom of the rental cycle or in growth mode.

‘Hong Kong, Shanghai and Beijing led the region’s markets due to a push for office space from the financial sector in central business locations… Singapore, Bangalore and Mumbai followed closely as employment levels improved and prime rents and incentives remained stable.’

Source: Straits Times, 20 Aug 2010

Outlook still favourable but mass market properties more popular

BUYERS are still showing relatively muted interest in the most luxurious homes in the city centre, the latest set of new home sales data shows.

But they are making a beeline for very popular mass market homes, followed by mid-tier units, the figures show.

Property experts say the outlook for the luxury sector remains favourable, though growth has slowed and current global uncertainties mean these prime high-end homes are unlikely to rebound this year as some experts had hoped.

A few months back, it was expected that luxury projects such as Ardmore3 and those on the former Grangeford and Parisian condo sites in the Orchard area would be launched in the first half year.

No major luxury projects were launched last year.

Developers of these homes have been cautious again this year. Bukit Sembawang recently said it will be launching the marketing of Paterson Suites in its current financial year ending March31 – unusually late in the game for a project that has already received its temporary occupation permit.

Underscoring the point, City Developments chairman Kwek Leng Beng last week said luxury homes had not sold as well as the industry had expected.

He said this segment would perform well – perhaps next year – only if the wider global economy stabilises.

Said Cushman & Wakefield managing director Donald Han: ‘Singapore may not be the place to make extraordinary gains but the good thing is the luxury market is still compelling.The market is just taking a breather. The earliest possible time for the return of interest in the luxury end market will be at the end of the year.’

While the prime segment (homes selling for $2.5million to $5million) saw some activity in the first half, transactions in the luxury ($5-$8million) and super-luxury (above $8million) segments have been rather scarce, said CBRE executive director, residential, Mr Joseph Tan.

‘Most homebuyers were generally more cautious towards high-priced projects under the present uncertain conditions on the global front.’

Still, Colliers International’s director of research and advisory, Ms Tay Huey Ying said the price rebound in high-end and luxury properties, which started in the second half of last year, had continued this year, though the pace of growth has moderated to more sustainable rates.

‘Developers are holding back their high-end and luxury launches because there has been some derailment in the strength of the economic recovery due to the euro zone crisis. There is also growing uncertainty in the recovery of the US economy. Prices are not yet at the levels they are aiming for.’

More investors are going for cheaper new properties – mostly those under $1,500 psf – as global uncertainties have put a lid on risk appetites, said Ms Tay.

The slight slowdown means that price growth in the high-end and luxury segments is likely to come in towards the low end of the firm’s forecast range of 15-20per cent for this year, she said.

Experts note that in the first half year, the Urban Redevelopment Authority’s price index for non-landed homes in prime districts was already up 10per cent, and is just 1.8per cent off the 2008 peak. This is just a tad slower than the 10.3per cent and 12.9per cent price gains seen for non-landed homes in the city fringes and suburban areas respectively.

CBRE expects high-end home prices – still about 5-10per cent below 2007 boom levels – to be stable till year-end.

While high-end prices are up this year, sales volume has not picked up significantly owing to fresh concerns on the global economic recovery’s sustainability.

But the number of high-end home deals of $3,000 psf and above has risen from eight units in the fourth quarter to 29 units and 35 units in the first and second quarters respectively, noted Savills Prestige Homes director Steven Ming.

‘This is an indication that pockets of luxury home buyers are still streaming into the local market,’ he said.

However, as high-end homes are very dependent on foreign demand, sales could recover to previous peaks in the next 12 to 18 months after macro-economic concerns have been sorted out, he said.

CBRE’s Mr Tan said developers have adopted a low-key strategy to marketing luxury projects, such as direct invitations for private previews and appointments.

For example, Far East Organization recently launched its luxury brand ‘Inessence’, and sold a handful of units in Boulevard Vue and Skyline @ Orchard Boulevard. Wheelock Properties and Hong Leong Group sold a few units at their respective new super-luxury projects, Orchard View and Sage.

Mr Tan said there is a ‘strong likelihood’ the high-end market will continue in this manner for the rest of the year.

However, the few possible high-end launches in September such as Twin Peaks and The Peak @ Cairnhill will test the market’s receptivity. If these launches do well, it will motivate developers to launch more high-end projects, he said.

joyceteo@sph.com.sg

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DEVELOPERS HOLDING BACK

‘Developers are holding back their high-end and luxury launches because there has been some derailment in the strength of the economic recovery due to the euro zone crisis. There is also growing uncertainty in the recovery of the US economy. Prices are not yet at the levels they are aiming for.’

Colliers International’s director of research and advisory, Ms Tay Huey Ying

Source: Straits Times, 19 Aug 2010

(SINGAPORE) Developers’ sales of private homes surged 82 per cent month on month to 1,544 units in July from the low of 847 units in June, according to latest official figures. This reflects a resumption in home buying, which had taken a breather during the school holidays and World Cup.

However, sales are expected to slip to around 800-1,000 units again in August, on the back of slower launches during the Hungry Ghost Month, say some property agents. After this ends on September 7, both launches and sales will pick up again, they reckon.

In the first seven months of this year, developers have sold 9,957 private homes (excluding executive condos), after last year’s strong sales of 14,688 units.

CB Richard Ellis expects the full-year figure will be about 14,000 units. Jones Lang LaSalle’s estimate is 13,000-14,000 while DTZ’s SE Asia research head Chua Chor Hoon puts the number at 13,000-15,000 units.

‘The outlook still remains positive against the backdrop of Singapore’s economic growth and the low interest rate environment but buyers will be more selective given that so many Government Land Sale sites are being sold; this will translate to greater choice of new projects.

‘Prices have also been on the rise, so potential buyers will be more discerning in picking properties that have better potential for rental income or capital appreciation,’ Ms Chua added. DTZ’s data shows that secondary market prices of completed private homes appreciated about 6-8 per cent in the first half of this year; her full-year forecast is an 8-13 per cent increase.

CB Richard Ellis executive director (residential) Joseph Tan reckons that developers are unlikely to test new price benchmarks when they resume launches next month. But prices are unlikely to fall below current levels either, as land prices remain high, he adds.

On the other hand, signs of buyer price resistance continue to prevail. Colliers International’s analysis of official developer monthly sales data released by Urban Redevelopment Authority shows that the proportion of private homes sold by developers priced at $1,500 psf and below was at its highest level in 10 months in July, at 88 per cent.

The Outside Central Region, where mass-market properties are typically located, accounted for 42.8 per cent of the total 1,544 units sold by developers in July, while the Core Central Region, where the most expensive homes in Singapore are found, had a 17.9 per cent share.

Nonetheless, a handful of buyers picked up properties at top-line prices in July, notes CB Richard Ellis executive director Li Hiaw Ho. The most expensive apartment/condominium unit (in terms of $ per square foot) sold by a developer in July was a unit at Boulevard Vue which fetched $4,600 per square foot. BT understands that Far East Organization sold the high-floor unit of 4,456 sq ft for $20.5 million.

URA’s data shows that other high-end deals last month included a unit at The Orchard Residences which sold at $4,099 psf and another at Skyline @ Orchard Boulevard at $3,719 psf.

The least expensive non-landed home was a unit at The Minton in Hougang which was transacted at $612 psf.

July’s surge in primary market sales came on the back of three major launches – 368 Thomson, Terrene at Bukit Timah and The Scala at Serangoon Avenue 3. Together, they made up 46.6 per cent of the total 1,544 units developers sold in July.

The top-selling project was The Scala, with 400 units transacted at a median price of $1,173 psf.

Also helping to boost last month’s sales were sell-out launches for three projects that comprised mostly one-bedders – the 51-unit Centra Studios at Lorong 25 Geylang, 99-unit Haig 162 and Leicester Suites (46 of its 47 units were sold last month). ‘Their success could be attributed to the affordably-priced small-format units they offered,’ says CBRE’s Mr Li.

Developers launched 1,335 private homes in July, up from 1,010 units in June.

Projects expected to be released after Ghosts Month include NV Residences in Pasir Ris, Twin Peaks on the Grangeford site, Cityscape in Mergui Road and Killiney 118.

Two executive condo projects – the 573-unit Esparina Residences at Compassvale Bow in Sengkang and Chinese developer MCC Land’s 406-unit The Canopy in Yishun – are slated for release in October, say market watchers.

Source: Business Times, 17 Aug 2010

Ghost festival and lack of big launches spell lean month ahead, say experts

SUPERSTITION is likely to get the better of some buyers during the rest of this month as the effects of the traditionally quiet Hungry Ghost Festival begin to be felt.

During the festival – which started yesterday and will last until Sept 7 – superstitious individuals shun major commitments such as buying a property or getting married. And experts predict that this year’s festival looks set to spell a lull in sales amid a lack of new major launches.

This time last year, NTUC Choice Homes defied superstition with the successful launch of its 590-unit Trevista in Toa Payoh.

But it is unlikely there will be any similar major launches to buoy sales during this year’s festival, experts said.

City Developments’ 642-unit Pasir Ris project is planned for release in the current quarter, but no firm date has been given. No major launches were staged over the weekend.

Mr Peter Ow, managing director (residential services) at Knight Frank, said: ‘This year’s Hungry Ghost month will be quieter because whatever needs to be launched has already been pushed out.’

There were a few new launches in the run-up to the festival, with many units snapped up.

Yesterday, Far East Organization reported brisk pre-festival interest over the past week in The Greenwich in the Seletar Hills area.

Another 94 units of the 319-unit project were sold following the start of a private preview on Aug 2, when it moved 80 units. It has sold 174 homes in total, with the average price achieved rising to $1,025 per sq ft from $980 psf last Monday.

Nearly half of the units sold have been one-bedroom units of 603 sq ft to 721 sq ft, priced from $657,000 to $850,000.

Far East said it was on course to launch the project early next month.

At the 46-unit Suites@Topaz in Potong Pasir, there are just a few penthouses left after sales started around the middle of last week, said an industry source.

He said there may be some project launches of fewer than 200 units each this month, if developers are able to get all the necessary documents in place.

Meanwhile, the 172-unit Terrene sold its remaining unit last Saturday. And Hong Leong Holdings said it sold 35 units of its 468-unit The Scala over the long weekend, leaving fewer than 15 units left.

Mr Steven Tan, executive director of OrangeTee’s residential division, thinks it is sentiment and a lack of major new launches, rather than superstition, that will underpin the predicted quiet August.

‘Nowadays, people don’t really care about the Hungry Ghost month. It’s all about the sentiment, which is not very strong at the moment,’ he said.

And experts report that sales have generally slowed because developers are holding their prices.

‘If I am pricing a project to sell, I would push it out now. There will be interest. But if I want to hit benchmark pricing, I have to be careful with the timing of the launch,’ said Knight Frank’s Mr Ow.

He pointed out that developers had no need to rush given that they are depleting their land banks.

‘With recent tender prices being so high, there is even more reason for them to hold back their launches to wait for firmer prices,’ Mr Ow said.

Source: Straits Times, 11 Aug 2010

Residential property demand has surged in many Asian cities as speculators and homeowners alike clamour to get a piece of the action before prices exceed their threshold buying level.

We have seen volume and prices of new launches in Singapore rising unabated. In 3Q09, the Property Price Index, a national price index developed by the Urban Redevelopment Authority on residential stock island-wide, took a sudden upturn, jumping by an amazing 15.9 per cent – the largest “initial turn” ever recorded during a recovery since 1975, suggesting that the market could have over-corrected in the previous quarters.

Monthly new sales also recorded a similar surge, particularly in the month of January, which saw sales tripling from the previous month.

The average monthly sales of 1,437 recorded over the first three months of this year is already 1.7 and 5.7 times the monthly average of 850 and 250 transacted over the corresponding periods last year and in 2008, respectively.

This exuberance in the residential market set off cautionary bells, spurring the Government to introduce several contractionary measures as early as Sept 14 last year.

Contractionary measures seek to reduce demand, for example, an increase or introduction of stamp duty or capital gains tax. Conversely, expansionary policies are those that seek to improve demand, such as lower interest rates and a higher loan-to-value ratio.

More intervention, but less bite?

For the past 30 years, the Government has been involved in the property market in a number of ways, from the sale of State land to steer urban development to the imposition of taxes to ensure the smooth operation of the residential market.

In the final two decades of the last century, the State did not intervene in the market as much as it has over the first decade of this new millennium. The State intervened over nine times from 1980 to 1999, especially towards the later part of the period.

But just in the past 10 years from 2000 this year, the Government has already introduced several property-related policies on eight occasions.

For the first time, contractionary measures were introduced immediately after a shock to the real economy. For the past 30 years, the State has adopted mostly expansionary policies.

Following the recession in 1984 to 1985, there were two policies that helped increase the demand for private housing market by allowing CPF funds to be used for the purchase of private properties. And after the Asian financial crisis, stamp duties were suspended to spur demand.

Interestingly, since the collapse of Lehman Brothers, the State has introduced contractionary measures – the removal of interest absorption and interest only loans schemes, reduction of the loan-to-value ratio and the introduction of a seller stamp duty. These measures were aimed at cooling the overheated property market that had been brought forth by the lower interest rate necessary to encourage growth in the larger economy.

Emergence of the soft policy era

The impact of these policies is not necessarily hard-hitting, especially as some of them have been restrained.

For example, the current seller stamp duty is only imposed on those who sell within a year of purchase compared to the three years when a similar policy was introduced in May 1996.

The impact of the policy is soft even though the market seems more heated today than it was in 1996. The average quarterly increase in the property price index over the past three quarters before the introduction of the recent policy is 9.4 per cent compared to 4.8 per cent per quarter over the same period when the policy was introduced in 1996.

The sales volume following the introduction of these policies showed they did not seem to have an immediate effect on the market.

The average monthly new sales over the first three months of this year hit a high of 1,437, exceeding one-and-a-half times the recorded figure for the same period a year ago.

Recent policies could have been more aggressive but it would not help the larger economy over the short to medium term.

The condition facing policy makers today is different. The recent financial crisis has required the injection of state funds to spur domestic consumption. This, coupled with the low interest rate environment, has added inflationary pressures to the physical assets.

While a growing property market would lend some initial lift to the local economy, an asset-led inflation could potentially damage the recovery. The policy makers have the unenviable task of balancing these two countervailing factors.

As China’s late paramount leader Deng Xiaoping once said: “Cross the river by feeling for the stones”.

In other words, a soft and consultative approach to market regulation is a better option today than a heavy-handed one.

The long and arduous path to the property market recovery after 1996′s anti-speculative policy would also serve to remind us of the damage that overly-aggressive policies could do to the market.

Expect more adjustments

We expect the State to retain the soft approach towards the regulation of the property market. There is sufficient free play in the current policies for the State to tweak according to varying conditions.

For example, the stamp duty policy could be extended from the current one year to those transactions within three years of the purchase.

The main concern is the sustainability of the property market. The recent jump in prices has exceeded the real growth in the economy. There have been only a few occasions when that happened and these usually occur immediately following a correction.

The mid-term economic forecast for Singapore is expected to remain at 4 to 5 per cent. As long as the property price growth is moderate and does not exceed the real economy for an extended period of time, the market should remain healthy.

Otherwise, a market correction can be expected, either as a result of market forces or government intervention.

The writer, is Head of Research, South-east Asia, at property consultancy Jones Lang Lasalle.

Source: Today, 6 Aug 2010