Push factors: Concerns that interest will fizzle out, Hungry Ghost month

HOME hunters can expect a wider choice as property developers look to bring forward project launches in a bid to ride a strong wave of home-buying.

They have been encouraged by a stunning surge in private home sales; figures this week show May sales at 1,668 units – the highest level since August 2007.

Sentiment has improved significantly in recent months, in line with stock market rises, while the sale prices of new homes appear to have crept up from the lows they sank to earlier this year.

But there are increasing concerns this buying wave may not be sustainable. Some analysts argue that the pace of the upswing is too fast and too furious, given that rents are falling amid the weak economy and that a plentiful supply of new homes is coming onstream.

And with the stock market taking a breather, there are worries this will hurt demand. Consultants say some buyers had bought property with the money they made from stocks.

Also, the heat has been confined mostly to certain property launches. HSR Property Group executive director Eric Cheng said the action in the resale market is largely in mass market properties.

Given this, developers with launch- ready projects are likely to be keen to get sales under way quickly. Apart from rushing to get sales permits in order to catch the buying wave, developers would also want to launch before the Hungry Ghost month, said Mr Cheng.

Hungry Ghost month – the 7th month of the lunar calendar – starts on Aug 20 this year. Superstitious buyers may not want to buy a home during this period.

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Coming up
One Devonshire
Where: Killiney Road, near Somerset MRT station
Developer: Allgreen Properties

Spring@Langsat
Where: Langsat Road, near Eunos MRT station
Developer: SingBuilders

Parc Seabreeze
Where: Marine Parade Road
Developer: Tiong Aik

Source: Straits Times, 17 June 2009

This weekend, SingBuilders will be launching 26-unit Spring @ Langsat near the Eunos MRT station at an average price of $820 psf. A preview last month saw nine units sold at prices ranging from $822 psf to $1,010 psf.

Propnex, which is marketing the project, said the launch decision was made just last week. ‘Market sentiment is good. This is the best time in eight months to launch,’ said its chief executive Mohamed Ismail.

This weekend will also see the launch of the freehold Parc Seabreeze in Marine Parade. Agents have advertised it at prices of $1,200 psf to $1,400 psf.

Far East Organization is also expected to launch the freehold 280-unit Vista Residences in Jalan Datoh soon.

A classified ad gives the special preview date as June 24 and the price at $980 to $1,200 psf. It is near The Arte – launched at $880 psf in March and sold at a median price of $933 psf in May.

Soft marketing has started for the the 437-unit Waterfront Key project in Bedok Reservoir, the 388-unit Oasis@Elias in Pasir Ris and Frasers Centrepoint Homes’ 330-unit leasehold project near the Woodleigh MRT station.

Waterfront Key is the second of four condos to be built by Far East and Frasers Centrepoint on the former Waterfront View estate site. The first, Waterfront Waves, was relaunched in the first quarter at a reduced average price of $600 psf, down from $800 psf early last year.

To capitalise on the better mood, Wing Tai recently soft launched Belle Vue Residences at Oxley Walk while Allgreen Properties started a special preview for the freehold 152-unit One Devonshire near Killiney Road last week.

DMG Research said in a report yesterday that it expects the sales momentum to persist for the next six to nine months.

Already, the strong sales momentum has reignited interest among developers in buying sites. DTZ Debenham Tie Leung (SEA) yesterday put up two sites for tender – the first two official distressed sales sites – to take advantage of the improved sentiment.

‘There’s been a trending up of take-up rate so this is a window of opportunity for developers to launch their projects,’ said its senior director for investment advisory services Shuan Poh.

DTZ was appointed by the receiver and manager of Consult Asia to sell the two sites. One is at the corner of Changi Road and Still Road and the other in Balestier Road. ‘There are developers who sold their projects very well recently and are eagerly looking for more mass and mid-market sites to launch or to invest in. If they want to rush the Changi site, they can take as little as three to four months to get everything ready for launch,’ said Mr Poh.

Vista Residences
Where: Jalan Datoh (Balestier)
Developer: Far East Organization

Buyers respond well to scheme introduced at some projects

(SINGAPORE) Some developers here are turning to rental guarantees to lure buyers in the current down-market.

Under such schemes – which are offered only for certain units within selected projects – developers help buyers secure tenants, and also ensure that the owner gets a minimum pre-determined yield.

Far East Organization, for example, offers rental guarantees for selected units in selected projects such as Orchard Scotts, Vida, River Place, Tanglin View and Icon.

‘Through our marketing efforts over the years, we found that investors do not have the time to lease out or manage the tenancy of their apartments that they have bought from us,’ said Chia Boon Kuah, chief operating officer for property sales at Far East Organization.

‘Therefore, in 2006, we rolled out the rental guarantee scheme to assist our investment buyers in leasing out their properties. With our own in-house leasing and estate management teams, we are able to provide a seamless one-stop service to our buyers.’

For Vida, which is located in Cairnhill Rise, Far East is now offering a guaranteed rental yield of 5 per cent a year. This, according to Far East, can potentially work out to a return on invested equity of about 10-13 per cent a year.

‘Vida is a superior investment as we are offering a yield or return on invested equity of around 10-13 per cent per annum,’ said Far East in a recent letter to potential buyers.

Several other developers are offering schemes along the same vein.

At Belle Vue Residences, Wing Tai Holdings is offering a guaranteed return of 20 per cent on the downpayment a buyer makes if he picks up a unit using the deferred payment scheme. (DPS).
Under the scheme, the buyer will have to pay 20 per cent of the property’s price as the
downpayment. For a property worth $4 million, for example, this works out to $800,000.

But under Wing Tai’s scheme, he will get some of that money back.

Buyers who use the DPS to buy units in Belle Vue will get a guaranteed income of 10 per cent a year for two years on their downpayments. The guarantee will kick in once Belle Vue receives its temporary occupation permit (TOP) at the end of 2010. Using the same example as earlier, the buyer will get some $160,000 two years after TOP.

Market watchers said yield guarantee schemes are generally well-received in a down-market.
Investors, for example, snapped up units at high-end residential development Gallop Gables after The Straits Trading Company offered a two-year guaranteed rental yield of 7 per cent on 10 units there in April. All 10 units at the freehold Farrer Road estate sold in three days.

Elsewhere, at its preview for The Mezzo, Soilbuild Group Holdings offered a 6 per cent annual rental guarantee for two years, apart from the interest absorption scheme. The rental guarantee kicks in right after the TOP date. Soilbuild said recently that the launch of the first phase of The Mezzo was ‘met with an encouraging response’.

Market sources told BT that at least a few more new upcoming projects will offer variations of such schemes. Developers have historically offered such schemes to entice buyers when the property market is weak.

Hong Leong Group’s 71-unit luxury development Cuscaden Residence had such a scheme when it was launched in 2004 shortly after the Sars scare. Wing Tai Holdings also offered something similar for Duchess Crest in Bukit Timah in 1998, during the Asian financial crisis.

However, yield guarantees are a popular option for developers, said Joseph Tan, CB Richard Ellis’ executive director for residential. This is because such schemes force developers to manage units once they have been sold.

A check with Singapore’s three largest listed developers – CapitaLand, City Developments and Keppel Land – showed that none of them are currently offering any kind of rental guarantee schemes.

Units with yield guarantees could also come at a higher price, said Peter Ow, executive director for residential at Knight Frank. For example, developers who offer the interest absorption scheme at their properties usually charge a price premium of 2-3 per cent for units sold under the scheme, Mr
Ow pointed out. This is because the developers have to absorb the interest costs that would otherwise have been borne by the buyers. The same principle applies for units offering yield guarantees, he said.

Source: Business Times, 26 May 2009