A NEW index tracking the property market shows that developers and other industry players remain positive but believe conditions will cool down from the bullish levels seen in recent months.

More developers also believe the slowing global economy and an increased supply of new development land may hit market sentiment over the next six months.

The Real Estate Sentiment Index, which was launched at a seminar yesterday, also points to rising interest rates and an excessive supply of new property launches as market risks. The index has been jointly developed by the Real Estate Developers Association of Singapore (Redas) and the department of real estate at the National University of Singapore (NUS). It is based on data collected in a quarterly survey of Redas members to get a snapshot of market sentiment. The poll started in the first quarter.

The reading for the second quarter stood at 5.9, down from 6.8 in the first quarter. This shows that while industry players are still positive, they expect market conditions to worsen.

With empirical data, it is always about the past, said Dr Yu Shi Ming, head of NUS’ department of real estate.

‘With the index, we hope that as soon as a policy is announced, we can get a sense of how the industry feels,’ he said.

Redas chief executive Steven Choo said that apart from its members, policymakers, banks and other firms may find it useful.

There have been about 70 respondents for the survey each quarter – about 60 per cent are developers and the rest consultants and other industry figures.

About 51 per cent of developers polled for the second quarter expect prices of new launches to rise, compared with 85 per cent in the first quarter. About 68 per cent expect more new units to be launched over the next six months, compared with 83 per cent in the first quarter.

About half of the developers polled feel the level of interest for public and private development land will remain unchanged in the near term. Developers are most concerned with rising land prices, followed by the cost of building materials and labour.

At Redas’ seminar yesterday, Rider Levett Bucknall’s managing partner, Mr Winston Hauw, said: ‘It’s good to tender this year as there’s more uncertainty next year. We think prices will go up slightly next year.’

Source: Straits Times, 30 Jul 2010

But Q2 consensus as indicated by net balances weaker than in Q1 poll

MORE respondents polled for Real Estate Developers’ Association of Singapore’s (Redas’s) and NUS Department of Real Estate’s (DRE’s) Q2 2010 survey were still positive rather than negative on the overall performance of the prime and suburban residential markets over the next six months. However, the consensus as indicated by the net balances was weaker compared with the Q1 survey.

A net balance of +32 per cent of respondents in Q2 said that they expect better future market performance (over the next six months) in the prime residential sector, down from a +54 per cent net balance in Q1.

Likewise, the net balance of respondents who indicated better future market performance for the suburban private housing sector also slipped from +38 per cent to +27 per cent.

For an assessment of current market performance (now compared with six months ago), the net balance also declined from +79 per cent to +43 per cent for the prime residential sector. In the suburban housing segment, the net balance for current performance fell from +69 to +47 per cent.

Net balance is defined as the difference between the proportion of respondents who have selected positive options (such as ‘Better’) and the proportion of respondents who have selected the negative options (such as ‘Worse’).

The respondents who selected the neutral option (such as ‘Same’) are omitted from the calculation. A ‘+’ sign in the score denotes a net positive sentiment (optimism) and a ‘-’ sign indicates net negative sentiment (pessimism). The derived net balance scores are not weighted by the size of the respondents’ business.

Market watchers said the survey findings tallied with ground feedback. Generally, sentiment for the private housing market was less upbeat in Q2 as the sovereign debt problems in European economies unfolded. Some potential buyers also felt priced out of the market after rapid price increases and took a break during the World Cup and June school holiday season.

On the other hand, the outlook for the Singapore office sector improved in April-June as net office take-up continued to increase against the backdrop of the Republic’s economic recovery.

Reflecting this, the survey shows net balance of +63 per cent in Q2 for future performance of the office sector, an improvement from the Q1 figure of +43 per cent. A lower percentage of developers in Q2 expect stronger interest in land sales – both the Government Land Sales (GLS) Programme and private sector en-bloc sales market – over the coming half year compared with those polled in Q1.

About half of the developers in the latest survey said that the level of interest for both sources of land will remain unchanged in the next half year.

Only about 27 per cent of developers surveyed in Q2 expect more interest in the GLS Programme in the next half year, down from 71 per per cent in Q1.

Similarly, in Q2, 31 per cent of developers forecast a higher interest level in the en bloc sales market, down from 61 per cent in the preceding quarter. Of developers polled in April-June, about 24 per cent and 15 per cent foresee lower interest in GLS and en bloc sales respectively in the next half year.

Developers were also asked to identify the potential risks that may adversely impact market sentiment in the next six months.

In the second quarter, about 73 per cent and 63 per cent view a global economic slowdown or decline and an increase in supply of new development land respectively as the key threats – significantly higher than the 56 per cent and 44 per cent recorded in the previous quarter.

Other major risk factors listed by developers in the latest Q2 survey include rising interest rates (49 per cent of developer respondents) and excessive supply of new property launches (54 per cent).

Notably, about 49 per cent of the developer respondents were concerned with government intervention to cool the market over the next six months, significantly lower than the 81 per cent registered in Q1 this year.

Following government measures to cool the market in September last year and February and the record GLS programme for second half 2010 announced in May, the market probably read that the danger of further cooling measures has receded for now, say market watchers.

Among development cost concerns over the coming half year, developers said that their biggest worry is rising land prices, building materials cost and labour cost, with 90, 76 and 73 per cent respectively of developers polled expressing a moderate to high level of concern.

Interestingly, the percentage of developers who are ‘very concerned’ about escalating land cost fell from 83 per cent in Q1 to 35 per cent in Q2. ‘This could be due to the unexpected or suddenness of the spike in land bid prices seen at state tenders in Q1. In contrast, the ‘shock effect’ probably lessened as more tenders closed in the second quarter. However, I must emphasise that rising land cost is a very major issue for the development business,’ says Redas CEO Steven Choo.

Source: Business Times, 29 Jul 2010

New industry-backed index to measure sentiment shows mood has sobered slightly

(SINGAPORE) In a historic move, the Real Estate Developers’ Association of Singapore has teamed up with the National University of Singapore’s Department of Real Estate (DRE) to develop a Real Estate Sentiment Index (RESI), and it shows a lower reading for the second quarter of this year than for the first quarter.

Developers and industry players continue to express positive sentiments but expect market conditions to be less robust, Redas and DRE said.

More respondents were still positive (rather than negative) on the overall performance of the prime and suburban private residential markets over the next six months but the consensus as indicated by net balances weakened in the second quarter compared with the first quarter.

On the other hand, the net balance for offices improved substantially, in tandem with improving sentiment in this segment in April-June.

The survey also found that 51 per cent of developers polled for Q2 expect price growth for new residential launches, down from 85 per cent in Q1.

About 68 per cent of developers surveyed in Q2 expect more units to be launched over the next six months, down from 83 per cent in the Jan-March period.

The findings of the survey will be officially released this morning at the Redas Property Prospects Update 2010 seminar at Orchard Hotel.

Some market watchers welcomed Redas efforts in coming up with an objective method of gauging the confidence level of senior executives of property developers – and making it public. ‘It’s good to hear from the horse’s mouth,’ said DTZ executive director Ong Choon Fah.

Redas CEO Steven Choo noted that ‘while business expectation surveys are available for the manufacturing and service industries, there is currently no indicator specifically tracking sentiment in the fast-paced real estate market of Singapore’.

Some industry watchers also pointed to the refreshing change at Redas. ‘Previously, something like this, showing a slowdown in sentiment, would have been considered extremely sensitive and developers may have tried to hide it. Now they’re more open about it,’ said an observer.

Mrs Ong said: ‘Releasing the RESI shows just how far Redas has come. It reflects the maturity of the property market and stakeholders. It’s important to give the true market signals to all stakeholders – including home buyers and government – if we’re going to have a sustainable property market based on sound fundamentals.’

Redas and DRE developed the quarterly structured-questionnaire survey, which is conducted among senior executives of Redas member firms – mostly developers but also property consultants, architects, quantity surveyors and other professionals.

Dr Choo, who assumed the post of Redas CEO nearly a year ago, says: ‘The partnership between NUS and Redas has ensured academic rigour and added credibility to the new index. We are confident that in time, RESI will become an authoritative index and a highly-valued forward indicator for the property market, as well as an invaluable tool to guide the market and industry players, including investors and policymakers.’

Redas received about 70 responses for each of the Q1 and Q2 surveys – from largely the same people.

The survey measures respondents’ perceptions of current market conditions/ performance (now, compared with six months ago) and future expectations (over the next six months).

The RESI comprises three indices. The Current Sentiment Index, where respondents are asked to rate overall Singapore real estate market conditions now compared with six months ago, fell from 7.2 in Q1 to 5.8 in Q2. The Future Sentiment Index, where respondents rate overall property market conditions over the next six months, also slipped from 6.4 to 5.9.

As a result, the Composite Sentiment Index, which is the average of the two indices, declined from 6.8 in Q1 to 5.9 in Q2.

The index ranges from 0 to 10, with a score below 5 indicating deteriorating market conditions. A score above 5 shows improving market conditions. The Q2 score shows that developers and industry players continue to express positive sentiments and expect market conditions to remain favourable, but less robust than before.

Source: Business Times, 29 Jul 2010