Sep 03 2011

Freehold bargains still around

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. 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

Sep 03 2011

Asia to hit rough winds, say analysts

Slowdown in the West will eventually affect region, they warn

ASIA is expected to face a rough year ahead, as it confronts the twin problems of slowing economic growth and high inflation, said analysts yesterday.

The slowdown in the world’s advanced economies will eventually affect Asia, putting to rest the notion that Asia is immuneto the woes in the West.

The International Monetary Fund has just slashed growth forecasts for both the United States and Europe, although it said that both regions are likely to avoid a double-dip recession.

But unlike the recession that followed the financial crisis in 2009, there is no strong fiscal support from the governments to boost economic growth in Asia, Credit Suisse economists wrote in a research note yesterday.

‘Now that the Western world is teetering on the brink of recession we believe the outlook has dimmed further,’ said Credit Suisse.

‘Unfortunately there is little to suggest that large parts of Asia remain anything other than highly susceptible to growth developments in the US and Europe.’

The bank has trimmed its 2011 full-year growth forecasts for several Asian nations, including China, India and Korea.

Credit Suisse is also slashing its economic growth predictions for Asian countries for next year, noting that the economic malaise in the West will not be short-lived.

Singapore, for instance, is expected to grow by 4.5 per cent next year, down from the earlier forecast of 4.8 per cent.

‘The downturn may not prove to be all that severe, certainly compared with that during the great financial crisis, but, equally, any improvement next year looks set to be muted,’ said Credit Suisse.

Bank of America Merrill Lynch economist Chua Hak Bin offered an equally pessimistic take on Singapore’s growth prospects for the rest of the year.

He has upgraded the probability of Singapore falling into a technical recession this year, defined by two consecutive quarters of contraction.

Based on economic and financial indicators, there is now a 59 per cent chance of a recession here, up from the 41 per cent chance he had previously calculated.

Another report by HSBC suggested global manufacturing is set for a sharp deceleration for the rest of the year.

Purchasing manufacturing indexes, which are lead indicators for factory output, point to a sharp slowdown for the rest of the year, said HSBC.

‘Trade, especially, will be hard hit, which poses a major challenge to Asia’s smaller, more export-dependent economies like Taiwan, Korea, Singapore and Malaysia,’ said the bank.

But the presence of high inflation in the region also means that Asian central banks are not able to move so quickly or freely to shore up slowing growth, it said.

Central banks look to cut interest rates in order to boost growth – but low rates can fuel inflation.

‘What’s equally worrying is the sudden recurrence of price pressures. This may prevent central banks from easing swiftly to shore up growth, and could weigh on household spending just at the wrong time.’

Singapore-based electronics manufacturer Hisaka Holdings said demand for its products has dropped in recent months but is viewing the slowdown as a chance to restock its inventory.

‘This slowing down could be a good breather for the company after 10 months of mad demand rush, provided that its duration is limited,’ said Hisaka chief executive Jackie Cheng.

He added that the company is attempting to counter the ‘industrial fluctuations and uncertainties’ by diversifying its business beyond electronics.

Source: Straits Times, 3rd Sept 2011

Sep 02 2011

Cautious round of bids for Punggol condo site

ECONOMIC uncertainty has led to a more cautious round of bids for a condominium site in Punggol.

Eight contenders – including heavyweights like Frasers Centrepoint and Hong Leong – vied for the 99-year leasehold plot at Punggol Field Walk.

A $170 million bid jointly submitted by Capital Development and ZACD Investments topped the list. ZACD’s shareholders include Ms Sim Kain Kain and Mr Yeo Choon Guan, former directors of property consultancy SLP International.

The bid works out to $323 per sq ft per plot ratio (psf ppr) – about 20 per cent lower than the top bid of $363 million, or $406 psf ppr, for a similar plot at Punggol Central and Punggol Walk bought by the Sim Lian Group last December.

Mr Ong Teck Hui, head of research and consultancy at Credo Real Estate, said a crowded property market in Punggol could also be to blame. ‘(There are) some 2,600 units coming on from several new projects. These include Boathouse Residences, A Treasure Trove, The Luxurie… Some are near MRT stations and will provide stiff competition for buyers.’

Analysts said the cautious sentiment was expected given the turmoil in global markets. But they were surprised at the number of developers fighting for what they deemed a ‘mediocre suburban site’.

Many said this could signify developers are still upbeat about the prospects of mass market homes despite recent policy changes that now make public housing a more affordable option for more buyers.

The site has a plot ratio of 3.4 and can be built up to maximum floor area of 524,952 sq ft. An estimated 550 units can be built on this plot of land.

Punggol Plaza retail outlets are nearby but a new mall and other amenities are being built at Punggol Central, two LRT stations away, said Mr Li Hiaw Ho, executive director at CB Richard Ellis.

Homes at nearby executive condo project RiverParc Residence are selling at a median price of $694 psf, leading analysts to speculate that units at this condo will likely be priced above $800 psf.

The winning submission will be announced at a later date.

Source: Straits Times, 2nd Sept 2011

Aug 27 2011

Condo heroes

Condominium developers are upping the stake by offering luxurious facilities such as spa pavilions

It is no longer enough for condominiums to boast a pool, gym, clubhouse and tennis court. Developers are adding fancy facilities such as a spa, sports bar, rock-climbing wall, luxury dining room and even a bird-watching tower to make their projects stand out.

Take the 417-unit Soleil@Sinaran condo at Novena, which was recently given its temporary occupation permit.

It has its own spa on the premises, run by well-known local chain Aramsa Spa. Soleil is believed to be the first in Singapore to tie up with a spa operator to run the facility in a condo.

Adding to the wow factor is that the swanky spa consists of three wooden- decked pavilions that each has two massage beds, a hot tub and a shower area, located in full view of the pool.

They are a striking sight amid the condo’s lush greenery and although they are out in the open, curtains can be drawn for privacy.

The spa pavilions are not the only fabulous feature Soleil residents can enjoy on top of the usual pool, gym, tennis court and barbecue pits.

The condo has two sports bars on its 20th floors, for residents only, where they can watch football matches while enjoying a beer. Developer Frasers Centrepoint Homes is finding an operator to run them.

The condo ‘high’ life craze includes Meadows@Peirce in Upper Thomson Road, which has a three-storey bird-watching tower where residents can spot birds nestling in the greenery at nearby Peirce Reservoir.

At Tree House condo in Dairy Farm Road, developer City Developments is building three tree houses on its premises, which ‘offer a different experience of play for the young and young at heart’, says Mr Anthony Chia, its director and head of projects.

One Devonshire condo in Killiney Road, meanwhile, scales new heights with a three-storey rock-climbing wall.

Fancy something not so ‘out there’? At Palm Gardens condo in Choa Chu Kang, there is a bowling alley at the clubhouse, while upmarket Nassim Park Residences has a luxurious dining room.

Over at The Orchard Residences, residents can rent wine lockers to store their wines.

The chief executive of real estate firm ECG Property, Mr Eric Cheng, says of the trend: ‘Telling potential buyers their units can have a pool view no longer cuts it, as condos now all have pools.’

Indeed, Soleil’s additional facilities were what attracted Korean-Australian expatriate Verena Lim, 29, to buy a two-bedroom unit there.

‘The spa and the sports bar caught my attention as they have not been seen before in condos here,’ says Ms Lim, a vice-president at an Australian investment company.

Frasers Centrepoint Homes worked with Aramsa Spa to design the pavilions, and the developer’s assistant general manager of sales and marketing, Mr Elson Poo, notes: ‘In line with the strong interest in spas, we have incorporated spa facilities so residents will be able to enjoy the convenience of a spa experience right on their doorstep.’

Indeed, Ms Lim, who usually goes for spa treatments in Orchard Road once a month, says she will switch to the spa at her home, because ‘there’s no reason not to use the one downstairs’.

Like other owners, she has just received her keys and is in the midst of moving in, and adds that she will be making a booking soon.

Residents need to make appointments for their treatments such as massages and facials two weeks ahead. The cost is the same as at Aramsa Spa’s outlet in Bishan Park. A 60-minute massage, for example, costs $108.

However, spa manager Kelvin Tay says that although there are no additional charges, residents have to purchase a minimum of $200 worth of treatments a session for transportation charges to be waived.

Mr Tay adds that other developers have also approached the spa to set up shop at their condos, but declined to elaborate.

As for other unusual condo facilities such as Palm Gardens’ two-lane bowling alley, a spokesman for developer Keppel Land says: ‘Such innovative and lifestyle features make for stronger value offerings in our homes.’

According to retiree Danny Nai, chairman of the condo’s management corporation strata title (MCST) committee, the bowling alley is very popular with residents, who pay $5 an hour for its use. Bowling shoes and balls are provided. ‘We have bookings every night and the alley is packed on weekends.’

Over at One Devonshire, the idea for its rock-climbing wall on one of its sky terraces was proposed by the project’s landscape developer, Belt Collins.

Ms Anna Tabo-Nair, a project manager at Belt Collins, says it offers residents a different experience. The condo already has a pool, barbecue pits, clubhouse, gym, tennis and squash courts and several gardens. ‘But for residents who want something different, they can go to the rock-climbing wall,’ says Ms Tabo-Nair.

The idea went down well with the condo’s developer, Allgreen Properties.

Ms Tabo-Nair says the hand grips needed to climb the rock wall go up to 3m high, ‘so it is still very safe, and there will not be any supervision needed’.

She believes it will be a hit with residents when the condo is completed next year.

As for the dining room at Nassim Park Residences – a project by United Overseas Land (UOL) Group and which was completed earlier this year – it has a pool view, can seat 14 people and comes with a plush lounge. It also comes with a fully equipped kitchen, so residents can hire their own private chefs to do the cooking.

UOL Group’s deputy general manager for marketing, Mr Anthony Wong, says: ‘We have in mind the lifestyle of these home-buyers; we envisage frequent socialising and dinner parties. Therefore, we provided a well-furnished dining room, lounge and kitchen where owners can invite their friends over and have a chef whip up a good meal without having to clean up their own place afterwards.’

A resident who declined to be named says the dining room ‘is decorated like a hotel private lounge’. The room is done up in dark wooden panels and has a sofa and thick carpets.

UOL Group also developed Meadows@Peirce, which, along with the talking-point bird-watching tower, also has a sky-gazing jacuzzi near the pool.

Mr Wong says enthusiastically: ‘The design fuses outdoor and indoor spaces to create a sanctuary of peace and tranquillity. We created the bird-watching tower and the sky-gazing jacuzzi facilities in line with its nature-based theme.’

But added facilities come with an additional price – a higher monthly maintenance fee.

‘There would be more facilities to maintain, so naturally the maintenance fees would be higher,’ says Mr Francis Zhan, chief executive of Association of Management Corporations in Singapore, which represents more than 3,000 MCST committees of condos here.

He adds that the extra facilities are usually in upmarket condos, where monthly maintenance fees can range from $800 to $1,600.

In comparison, the ‘mass market condos usually charge about $300 to $400 monthly in maintenance fees’.

Ms Eleana Teo, executive director at Knight Frank Estate Management says, ‘For estates with more varied facilities and an in-house team of concierge and/or guards, residents would have to pay around 10 to 30 per cent more in terms of maintenance charges to finance such expenses.’

ECG’s Mr Cheng says that ‘with so many condo launches, projects must have their selling point, hence these facilities’.

Added facilities will ‘attract’ buyers, he says, ‘even if they may not use the facility, they still want to have it.’

Even if the condo is not in an ideal location, its facilities will pull in buyers, as ‘buyers are attracted to the condo’s offerings. Plus it is easy to get around Singapore these days’.

One home-buyer, however, is not convinced by these condo ‘carrots’. Housewife Mary Lee says: ‘Location and the design of the apartments are more important. The facilities are good to have, but apart from the pool, I may not use the others and don’t see the point of paying to maintain them.’

Source: Straits Times, 27th Aug 2011

Aug 26 2011

2 executive condo sites up for tender

Pasir Ris, Yishun plots are first since raising of buyers’ income ceiling

TWO executive condominium (EC) sites have been put up for tender, the first since the buyers’ income ceiling was raised.

The first is on a 199,951 sq ft site in Pasir Ris Drive 3. It has a plot ratio of 2.1, so it could yield 390 units.

The land is connected to Pasir Ris MRT station and near Tampines Expressway. Meridian Junior College and Casuarina Primary School are in the area.

Analysts expect up to seven bids with offers of up to $125 million, which would translate to about $300 per sq ft per plot ratio (psf ppr).

The tender closes on Oct 11.

The other sale is for a 292,283 sq ft site at the corner of Yishun Avenue 7 and Canberra Drive that could house up to 725 homes.

Sitting on the northern fringe of Yishun New Town, the site is near Yishun MRT station and bus interchange while Chong Pang Community Club and Yishun Stadium are in the area.

Property experts tip a top bid of between $183 million and $197 million, or between $250 psf ppr and $270 psf ppr. The tender closes on Oct 25.

Mr Png Poh Soon, head of research and consultancy at Knight Frank, believes this plot will attract less interest than the Pasir Ris plot, which is nearer to the sea and Pasir Ris Park.

New rules mean those earning up to $12,000 can now buy an EC unit. Previously, those earning up to $10,000 were allowed to buy such homes.

Industry insiders expect that while ECs will garner more interest due to the increased buyer pool, developers will not be rushing in for the sites, which have leaseholds of 99 years inclusive of a four-year construction period.

But Mr Png believes the EC sector remains positive, helped by the greater flexibility developers now have in pricing such projects.

‘At the current low interest rate… EC units can be priced up to $1.6 million, up from $1.3 million previously,’ he said.

But ultimately, how much buyers are prepared to pay will determine how great the demand for ECs will be, said Mr Ong Kah Seng, Cushman and Wakefield’s senior manager of Asia-Pacific research.

‘While more developers will be open to EC developments, the bid prices submitted are… unlikely to be excessively optimistic. This is in line with a general cautious economic and property environment,’ he said.

The Urban Redevelopment Authority has also launched two other residential sites which could yield a total of 770 units.

One in Jalan Loyang Besar is sized at 185,938 sq ft and expected to attract between five and eight bids.

It could accommodate around 355 units and attract offers of up to $180 million. The tender closes on Oct 4.

The other is a 322,368 sq ft site in Flora Drive and could yield 415 homes. Top bids are tipped at about $158 million. The tender closes on Oct 19.

Source: Straits Times, 26th Aug 2011

Aug 22 2011

Sellers lower COV expectations

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

Aug 21 2011

To buy or not to buy, that is the question

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

PropNex chief executive Mohamed Ismail advised home buyers to broaden their search beyond just new projects to resale properties as well, as such projects can be cheaper.

There are some older freehold or 999-year leasehold projects in the Hillview estate or Flora Road in Pasir Ris, for example, whose per sq ft prices are about 20 per cent cheaper than new 99-year leasehold launches, he noted.

‘In both instances, look for homes that offer potential for further upside, such as the Jurong area which the Government has a masterplan for, or possibly Paya Lebar which has also been earmarked to be a commercial centre outside of the city,’ he said.

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 buyers are looking for an investment, they can afford to be more selective and possibly wait it out. But they also need to be disciplined with their initial strategy, SLP’s Mr Mak said.

For example, once prices fall by their targeted 5 per cent, buyers should enter the market immediately rather than try to catch the bottom.

‘If not, you might just miss the boat because this might be a V-shaped recovery like the last time… But people are usually scared to enter the market when it’s down,’ he added.

In 2009, the market rebounded within a few months, with sales and prices of new private homes picking up significantly from April – a turnaround from the first quarter that year when sellers were cutting prices just to offload their homes.

However, if buyers are looking for a home to live in for the longer term, pricing becomes less of a factor to consider.

Instead, other factors such as the project’s location and its surrounding amenities such as good schools that fit into a buyer’s lifestyle and needs should be considered as well.

‘Owner-occupiers should not be too disturbed by the volatility – the ups and downs of home prices in the medium term – since they are prepared to keep the property for five years or more. By then, the economic landscape in Singapore and the global front may have improved,’ CBRE’s Mr Tan said.

Investors, on the other hand, should bear in mind the imposition of the sellers’ stamp duty within the first four years of purchase.

Interest rates, while low now, need to be factored into the equation.

‘Home buyers should take up a mortgage which they can service comfortably without over-stretching their financial resources, bearing in mind that interest rates may go up from 2012.

‘Choose a property that is within easy reach of the MRT and in a neighbourhood that is easily accessible to amenities such as shopping malls, markets, foodcourts, schools. These properties are likely to cost more but they will be able to hold their values better,’ Mr Tan said.

•ECs or mass market homes

Those in the middle-income group – the so-called ‘sandwich class’ with a household income of $8,000 to $12,000 – will now have more choices for homes with the income ceiling being raised.

PropNex’s Mr Ismail, however, noted that ECs should be priced about 20 per cent to 25 per cent lower than comparable mass market homes to make up for the sale restrictions. If not, they are not a worthwhile buy, he said.

ECs, like other HDB flats, are subject to a minimum occupation period of five years. After that, they can be sold only to Singaporeans and permanent residents. They become private property after 10 years, and can then be sold to foreigners. A home buyer who is eligible to buy an EC, should take advantage of the opportunity, CBRE’s Mr Tan said.

After all, an EC will be partly privatised after five years of occupation and it will have the potential to enjoy price appreciation to the level of private homes in the neighbourhood, he added.

However, the owner has to be mindful that he has to keep the EC for seven to eight years – including its construction period and a five-year mandatory occupation period. Owners of private homes, in comparison, need only to hold the unit for four years if they want to avoid paying the sellers’ stamp duty.

•Ensuring affordability

Affordability was the one thread that all experts emphasised as being critical in any purchase decision.

Industry players say this typically means that a household uses less than 40 per cent of its disposable income to service its monthly mortgage.

‘Make sure that the remaining 60 per cent is enough for your other commitments and you’re not overly stretched… Even in the case that interest rates rise, you can still finance the mortgage,’ Propnex’s Mr Ismail advised.

OrangeTee’s Mr Tan added that buyers should also factor in other potential stresses before buying a home.

‘If you lose your job for three to six months, would your savings and CPF funds still be enough for you to cover the mortgage?’ he asked.

While potential buyers often hope for prices to fall, this typically happens when the economy is not doing well and when their job is less secure – which, ironically, makes it harder for them to commit to a big-ticket purchase, Mr Tan noted.

On the sidelines of a recent Real Estate Developers’ Association of Singapore event, Frasers Centrepoint group chief executive Lim Ee Seng also advised young people buying property for the first time not to try to time the market, and to take a long-term perspective instead.

‘It’s very hard for you to time the market. Even people like us don’t know exactly when the property market is going to go up or come down.

‘The most important thing is you must be able to afford it. If you can, and the price is within your range, the location is what you want, it is your first house and you’re going to stay there long-term – maybe 20 to 30 years – you just go ahead and buy,’ he added. This is because in the past 30 years, despite the ups and downs in real estate prices, there has still been a 10 per cent compounded price growth a year, he noted.

Developers at the event noted that it is more important for buyers to be realistic, not to overstretch themselves or to see property as a speculative investment.

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

Source: Straits Times, 21st Aug 2011

Aug 21 2011

More people living in rental flats

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

Aug 20 2011

Some homes still fetch good rental yields

Yields of some condos reach above 5% despite slowing economy: Study

RENTAL properties are less profitable for landlords in these tougher economic times, but there are still some condos where yields can reach 5.7 per cent.

Adam Park Condo, Blossoms@Woodleigh, Far Horizon Gardens and The Jade all have yields above 5 per cent.

Areas such as Sengkang, Woodlands and Chua Chu Kang have yields ranging between 4.4 per cent and 4.8 per cent, according to a study by Kim Eng Research.

They are all above the national average of 3.7 per cent, down a touch from last year’s 3.9 per cent average yield.

But prime areas such as Orchard, Newton and Sentosa failed to measure up, with yields between 2.4 per cent and 2.8 per cent.

Rental yield is the annual rent divided by the property’s sale price.

Kim Eng analysed gross yields based on the Urban Redevelopment Authority’s rental and caveat data for non-landed developments with at least 10 rental contracts signed in the second quarter of this year.

Market experts say the quantum prices of properties in a neighbourhood play a significant role in determining the average rental yield.

‘If you buy a mass-market home for $1.5million, you might be able to get between $4,000 and $6,000 in rent, depending on location,’ said Dennis Wee Group director Chris Koh. ‘That’s compared to a Sentosa place that could cost up to $3 million and bring in only $8,000 a month,’

ERA Realty key executive officer Eugene Lim said leasehold properties are normally cheaper than freehold ones. Many leasehold properties are in suburban neighbourhoods, so this may have helped lift rental yields.

‘Tenants aren’t concerned about whether a property is freehold or has a 99-year lease. All they want is somewhere that looks nice in a convenient location,’ said Mr Lim.

Shoebox units, typically less than 500 sq ft in size, come with lower sale prices.

Kim Eng cited Parc Imperial, a 138-unit Pasir Panjang project near the upcoming Haw Par Villa MRT station that comprises mainly smaller flats. The project has a rental yield of 5.7 per cent. Resale units recently sold for an average of $1,333 psf, with median rents hitting $6.28 psf per month.

Attributes like proximity to good schools, MRT stations and other facilities will always stand investors who are chasing good rental yields in good stead, said Mr Koh.

But predicting how rental yields will pan out over the next few quarters is difficult because there are several big unknowns.

Analysts say the fluidity of the property market means some investment decisions may change over time, making it tricky to pinpoint exactly how many properties will come up for rent.

‘Investors may get an apartment with the intention to flip it, but if they can’t sell it at the price they want they’ll rent it out instead,’ said Mr Colin Tan, head of research at Chesterton Suntec International.

He pointed out that property prices could be close to or at their peak, and that there is uncertainty over how long low interest rates will last.

‘Risk levels remain high, but if all the factors work out in their favour, the returns for these investors will be good,’ he said.

Source: Straits Times, 20th Aug 2011

Aug 20 2011

Rents of high-end homes to dip further

Larger supply, smaller expat packages put pressure on rents

RENTS of posh homes might keep falling in the light of an increased supply and less generous housing packages for expatriates.

High-end home rents have dipped by about 2 per cent in six months, according to GPS Alliance associate agency head Jack Teo, while as an OrangeTee agent said, some of his clients have had to cut rents by about 5 per cent to 7 per cent to land a tenant.

Upscale projects such as The Orchard Residences, Cliveden at Grange and The Orange Grove have recently been completed and they have added to the number of units on the market.

Property agents said landlords asking for a monthly rent of more than $10,000 are now finding it harder to find tenants.

Pressure on rents is also coming from cost-conscious firms putting expat staff on local terms. This means they no longer get a separate housing allowance but must budget for rent from their salaries instead.

‘Multinational corporations have lower budgets now so there’s no longer a separate housing package. And when a tenant has to budget out of his pocket, he is usually more sensitive to price and tends to want to spend less,’ said the OrangeTee agent.

The quieter market can also be partly attributed to a seasonal drop as expats usually look for homes from May to early July before the August school term starts.

Mr Markus Tay, managing director of Luxe Group, said it takes about two to five months to find a tenant for luxury homes now – about 30 per cent more time than six months ago. The market had started slowing then as the supply of homes started to enter the market.

Although landlords eager to score a tenant have cut rents, prices have not declined much overall, he added. GPS’ Mr Teo noted that owners are usually willing to look again at their pricing after vacancies of about three to six months, but others have holding power and might be unwilling to budge from their initial asking price.

The high-end market might firm up again next year once the number of posh completions start to slow and the segment stabilises, he added.

Experts said upscale homes are usually owned by wealthy individuals who see their purchase as a form of investment and wealth preservation, and so are are less concerned about achieving high rental yields.

Rental yields for prime areas are among the lowest across the island, according to a Kim Eng report. Orchard Road yields were just 2.8 per cent, Sentosa homes offered 2.6 per cent while homes in Newton languished in last place with 2.4 per cent.

Suburban yields were as high as 4.1 per cent in Tampines and 4.8 per cent in Sengkang – the most attractive estate in the rental market.

Source: Straits Times, 20th Aug 2011

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