Cash premiums for HDB resale flats dive 30%

Cash-over-valuation (COV) for resale flats has dropped significantly in both mature and non-mature estates, making them more affordable to home buyers.


Data from property agencies shows that overall cash premiums fell 30 percent in the first quarter of 2012, compared with a 10 percent drop seen in Q4 2011. This comes as prices of resale flats edged up 0.6 percent in Q1, reflecting the slowest pace of growth since 2009. 


Meanwhile, 5,892 resale flats were transacted in the first quarter of this year, down 0.5 percent from the 5,921 recorded in the same period last year. 


The bumper crop of 8,000 new units announced for sale this year and the additional 5,000 units scheduled for release next month have impacted the market.  


Observers said that last month’s announcement to reserve a higher percentage of new executive condo (EC) units for second-timers also shifted buyers’ sentiment. 


“If people can buy Build-to-Order (BTO) flats, they will buy,” said Lee Sze Teck, Senior Manager of Research and Consultancy at Dennis Wee Group. “Resale flats are for those who don't qualify, or who cannot wait.”


Donald Han, Special Adviser at HSR Property Group, said the “assurance that there's enough supply for those who want to buy flats has hit home. The masses have gotten the message”. 


The price decline was particularly steep in areas like Pasir Ris and Woodlands. Cash premiums dropped to an average of S$20,000 for three- to five-room flats in Woodlands while Pasir Ris saw the biggest fall as COVs for executive flats hit S$35,000, from S$58,000 in the previous quarter.


COVs in more popular estates like Queenstown fell between S$4,500 and S$25,500 for three-room flats while cash premiums for four-roomers held steady at S$50,000.  

“The central locations still collect a premium,” noted Chris Koh, Director of Chris Koh International. “But for the rest of the towns in the outskirts, the COV is coming down quite quickly.”

Private house prices fall a little: URA

Latest data from the Urban Redevelopment Authority (URA) shows thatprivate home prices declined marginally by 0.1 percent in Q1 2012 compared to the 0.2 percent rise seen in the last three months of 2011. 

This marks the first quarterly decline since Q2 2009 when prices fell continuously for nine consecutive quarters. 

In the Core Central Region (CCR) and Rest of Central Region (RCR), non-landed home prices slipped by 0.6 percent, a notable contrast to the 0.5 and 0.1 percent rise seen in the previous quarter. 

But the Outside Central Region (OCR) saw prices climb 1.1 percent, a little higher than the 0.6 percent hike in Q4 2011. 

In terms of rentals, private residential properties recorded a weaker 0.3 percent growth compared to the previous quarter’s 0.4 percent rise.

Meanwhile, developers launched a total of 6,903 uncompleted private residential units in Q1 2012, up from the 4,105 last quarter, while units sold totalled 6,458 compared to the 3,525 homes sold in the previous quarter. 

In addition, the URA noted that “take-up of shoe-box units (i.e. smaller than 50 sq m) accounted for 27 percent (or 1,764 units) of new sales in the quarter. Lower-priced units less than S$750,000 accounted for 42 percent (or 2,766 units) of new sales in Q1 2012, much higher than the 25 percent (or 911 units) seen last quarter.”

“Overall, many of these units are located in the suburbs, as 82 percent of the new units sold by developers were from OCR,” it added.

At the same time, resale transaction volumes declined to 1,906 units in Q1 2012, the lowest since Q1 2009 and shared just 21.8 percent of overall sales – a historic low since 1999 when such data was first collected. 

Private home resales spring back to life

Savills Singapore's analysis shows that resale volumes for March have recovered to levels seen before the ABSD kicked in. The turnaround was sudden, as the resale market had remained jittery even while buyers were returning to property launches in the first two months of the year. However, since March, agents say that some of the eye-popping psf prices achieved at new launches have helped to jumpstart interest in the secondary market for completed properties, where prices look more attractive.  Savills' analysis of URA Realis caveats data shows 1,142 resale deals for private homes (excluding ECs and en bloc sales) done in March - double the 565 caveats for February and more than three times January's volume of 314 transactions. The March number also exceeds December's volume of 776 and November's 981. The March 2012 resale volume is still 23% below the 1,480 caveats lodged in March 2011. The final tally for March 2012 could rise as more caveats stream in over the next few weeks. Savills' analysis, based on caveats captured by URA Realis as at April 24, also showed 332 resale transactions being done so far this month.

Leasing demand for S’pore residential properties remains robust

Leasing demand for residential properties in Singapore remained robust in the first two months of this year as transactions hovered above 3,000 each month, according to Savills Research.

Its data showed that there were 3,446 leasing transactions in February 2012, down 5 percent on-month. But Savills said February’s transactions were still higher than the 2,767 transactions recorded a year ago.

Based on deals closed by Savills, the average rent for studio apartments and one-bedroom units was S$6.21 per square foot per month in Q1 2012.

Savills said selected small-format units were seen fetching attractive rents, particularly for the centrally-located properties.

These included a 600-square-foot unit at The Suites at Central along Devonshire Road, which was rented for S$5,000 per month.

It was followed by two 592-square-foot units at Martin Place Residences along Martin Road, which were let at S$4,200 per month.

By square footage, the highest rent was for a 458-square-foot studio apartment at Iluminaire on Devonshire which was rented at S$8.73 per square foot per month.

Savills said rents were equally attractive among the smallest units.

Three 334-square-foot units at Prestige Heights along Balestier Road were let for between S$2,200 and S$2,450 per month or between S$6.40 and S$7.34 per square foot per month.

Based on data released by the Urban Redevelopment Authority, island-wide median rents of all non-landed properties, excluding executive condominiums, continued to rise to S$3.53 per square foot per month in February, increasing 1 percent on-month and 8 percent on-year.

Savills said the leasing transaction value for the first two months has reached S$35 million, 15 percent higher than the previous year.

The average monthly rent of high-end non-landed residential properties tracked by Savills was S$5.17 per square foot per month in Q1 2012, dipping 2 percent on-quarter.

On a year-on-year basis, prime rents fell 5 percent from S$5.45 per square foot per month in Q1 2011.

Savills added that with a continual relocation of expatriates from troubled economies in the West, leasing demand continues to strengthen in Singapore, putting greater upward pressure on rents.

Demand for retail strata units remains strong

The proliferation of mixed developments in suburban areas in recent years has pushed up sales for shops substantially, with demand for strata-titled retail units experiencing strong growth.

More than 600 shop units were sold last year, more than double the 300 units sold in 2009.

At the Promenade @ pelikat in the Upper Serangoon area, comprising 270 retail units and 164 residential units, shop prices start at S$2,350 per square foot.

208 units were launched under Phase One two weeks ago and developer Oxley Holdings says 90 per cent of the shops have been sold.

Analysts say demand for such strata retail units will remain strong going forward.

Executive director of Credo Real Estate, Ong Teck Hui, said that the increase in the supply of shops over the last five years was about 5 per cent and “because of that, vacancy rate has remained low, at about 5 per cent.”

“What we have seen is a stronger volume of sales for strata shops over the last two years, at a rate of more than 600 units per year,” he added.

Prices of strata-titled commercial units have risen by some 20 per cent in the last couple of years, analysts said.

“Market yields for these properties tend to be higher, commensurate with the risk that you take,” head of research at Jones Lang LaSalle Chua Yang Liang said.

The yields for residential properties, depending on the location and market conditions, can be as low as 2% and as high as 3.5% to 4%, Chua added, “whereas in commercial market the yields tend to be better, between 4% and 6%.”

More individual investors are also increasingly looking at strata-titled shops as a viable investment option, especially in the suburban areas — accounting for some 75 per cent of all investors in those markets.

“A lot of the individuals may have actually switched portfolios from residential to one of retail,” special advisor at HSR Donald Han said.

“The rationale behind it is that your retail strata titled investment does not attract the additional buyer’s stamp duty, it has less complications, or less lure towards meeting any government cooling measures as well.”

For the whole of 2012, analysts expect 600 to 800 units of strata-titled retail units to be sold.

About 125 units of such properties have been sold in the first two and half months of this year, HSR said.

They include units at Centropod@Changi, The Commerze@Irving, Millage and Robinson Square.

Govt to continue with upgrading projects for HDB estates: PM Lee

The Housing & Development Board (HDB) marked the end of the Main Upgrading Programme (MUP) for first-generation public housing estates on Saturday after 22 years.

Speaking at the completion ceremony of the final precinct at Ang Mo Kio Avenue 10, Prime Minister Lee Hsien Loong said it is not the end of the road for government upgrading of public housing.

It is now replaced by newer schemes, including the Home Improvement Programme (HIP), and Neighbourhood Renewal Programme (NRP), where enhancements are more targeted and owners have more choice.

MUP was introduced in 1990 to enhance public housing living.

Mr Lee said it has benefited more than 130,000 households in more than 120 precincts at a cost of S$37 million.

But for the government to continue to do this, Singapore must continue to get her fundamentals right.

Mr Lee said Singapore must continue to have a vibrant economy, peace and stability as well as a good government. He also urged Singaporeans to continue supporting one another in the community.

As the country’s population ages rapidly, Mr Lee also called on Singaporeans to have a positive mindset toward elders.

Mr Lee said this earlier on Saturday at a welcome party for Teck Ghee Vista – new replacement flats built under the Selective En Bloc Redevelopment Scheme (SERS).

In his address, Mr Lee highlighted the importance of recognising the contributions of the nation’s seniors.

He said it is only right for the society to support them in their silver years. On that note, Mr Lee encouraged residents to show support when the government starts to build studio apartments, nursing homes and day care centres in the different estates.

Driving home the importance of this, he said Singaporeans should treat the elderly the way they wish to be treated when they get old.

On the part of the government, he said it has implemented financial assistance schemes, including the Enhancement for Active Seniors and Silver Housing Bonus, announced during Budget 2012.

Citing Teck Ghee Vista as an example of elderly-friendly living, Mr Lee said that besides facilities, it is also necessary to attract younger families to mature estates. And this is achieved through SERS.

Heartened by the manner in which the young and old manage to bond in Teck Ghee Vista, Mr Lee pointed out that this is the way it should be in all new towns.

He added that Teck Ghee Vista is a model of how the government had rejuvenated Ang Mo Kio.

The government started redeveloping the precinct sixteen years ago to make better use of the land and did so in three phases, from June 1996 to May 2011.

Private home sales to remain robust

The scorching pace of new private home sales continued unabated for the second consecutive month in March, when developers sold a total of 2,393 units, down marginally from February’s 2,417.

Sales have not only returned to the levels before the additional buyer’s stamp duty (ABSD) was announced last December, as one analyst put it. Instead, it would be more accurate to say they have risen several notches higher – in my own estimate, 20 to 25 per cent more than last year’s levels.

The latest data brought total sales for the first quarter to a whopping 6,682 units. This is not only a record for a quarter but has even exceeded the total for some years – one as recent as 2008.

Many have commented that the robust sales have been mainly supply-driven, noting that developers launched a record 6,982 homes in the quarter. Actually, “liquidity-driven” would have been a more appropriate description, to put the spotlight on the real reason – historically low borrowing costs – and not project launches in themselves.

Will housing sales in the coming months continue at this pace? Actually, it is not a question of whether they can. They have to – or at least at a pace not too far from the one we are witnessing at the moment.

If not, how will the market clear the increased supply that developers are planning for, even as they continue to bid and search for sites? I would begin to worry for developers if sales revert to last year’s levels. Although not yet a big problem, unsold inventory is creeping up.

For now, even the high end of the housing market seemed to have caught some of the enthusiasm in the broader market. Almost twice as many homes in the above-$2,000 psf range were sold last month compared to February. Although the nationalities of the buyers have not been disclosed, I am quite sure that not a few are foreigners.

The Inland Revenue Authority of Singapore recently disclosed it had collected about S$110 million in additional buyer’s stamp duty between Dec 8 last year – when the ABSD took effect – and March 31 this year.

Of this amount, 65 per cent was paid by foreigners and non-individuals.

I worked back some of these numbers and found that the 1,072 properties bought by Singaporeans and PRs – on which 3-per-cent ABSD is paid – cost them an average of S$1.2 million each, excluding the ABSD.

On the other hand, the 369 properties bought by foreigners – on which 10-per-cent ABSD is paid – cost them an average of S$1.79 million.

For non-individuals such as corporates, the 37 properties bought cost an average of $1.46 million, excluding the 10-per-cent ABSD.

So, it would appear that foreign buyers have been discouraged but not entirely deterred.

Such statistics must gladden the hearts of high-end niche players such as SC Global, which this week unveiled its latest luxury project, Sculptura Ardmore, on the highest point of the exclusive Ardmore Park neighbourhood. For it re-affirms – to those who are still not convinced – that price is secondary to the product where this market segment is concerned.

That SC Global has chosen to launch its project now may signal that there is no better time to once again promote such high-end properties. Developers are the best readers of market sentiment. They will not launch if they are not assured of sales and they will not bid for sites if sales are going to grind to a halt.

What nobody can predict is when the next set of cooling measures, if any, will be announced.

Meanwhile, the eagerly anticipated launch of Sky Habitat in Bishan, dubbed Singapore’s priciest suburban condo, has taken place.

When I first read of the expected pricing of between S$1,600-S$1,700 psf, I had my reservations on whether the market will bite. This is because the developers – to their credit – were not exactly churning out shoebox units.

Judging by the reports put out by the equity analysts from the banks on Monday, the sales and estimated achieved prices did not exactly match expectations that the pre-launch hype had created. For me, though, I thought the launch performed creditably. I heard that the larger apartments actually sold better than the smaller ones – untypical of recent suburban launches.

So what made buyers pay more for larger apartments?

In the past, sales agents at project launches sold buyers the property and its location. Then they included lifestyle and proximity to popular schools. Today, it appears they are selling views just as hard.

The balconies, private terraces and three sky bridges at Sky Habitat all help accentuate the views for residents. If you do not have a private terrace, just go to the sky bridges. It helps that the project is surrounded mainly by low-lying developments.

The Pinnacle@Duxton comes to mind when it comes to selling views. If you cannot provide a good view for all occupants, there is the always the sky deck open to all residents. The sky bridges at Sky Habitat serve the same purpose for units which have less than spectacular views.

What, I wonder, will they sell next?

Keppel Land profit jumps 70%

Property developer Keppel Land has recorded a 70 percent jump in its Q1 profit to S$141.9 million, from S$83.3 million in the previous year. 

Earnings of its property trading segment grew 210.2 percent to S$133.4 million, from S$43 million last year. This was mainly due to higher contributions from Reflections at Keppel Bay and The Springdale development in China.

Property investment also performed well during the quarter, with net profit expanding 38 percent to S$20 million on higher contribution from K-Reit Asia following the acquisition of an 87.5 percent interest in Ocean Financial Centre.

However, Q1 revenue dropped 52 percent to $170.2 million, attributed to an S$89.4 million and S$98.3 million drop in revenue from local and overseas operations respectively.

In Singapore, this was underpinned by lower take-up of its projects, particularly The Lakefront Residences, which was partly cushioned by the new revenue stream coming from The Luxurie condo (pictured) in Sengkang. 

For the first quarter, Keppel Land sold 90 residential units, with most of the sales coming from The Luxurie.  

Meanwhile, Tower 3 of Marina Bay Financial Centre (MBFC) secured a 67 percent committed lease during the period, with new tenants like Rio Tinto, The Regus Group and Fitness First.

At the same time, Keppel Land sold 270 homes in its overseas projects during the period, with projects in China accounting for the bulk of sales (190 units), mainly from The Springdale in Shanghai and The Botanica township in Chengdu. 

Q1 new private home sales hit record high

The number of new private homes sold in the first quarter of this year crossed the 6,600 mark – a record high, according to analysts. But have prices of private home sales peaked?

Riversound Residences and the Palm Isles were among last month’s top four selling projects, all located in the suburbs.

March raked in over 2,300 new private homes, lower than February’s 2,400.

Still, the first three months of 2012 have seen monthly sales of private units peaking above 1,500 units – considered high by many analysts.

While analysts do not see a bubble forming in the property market, they said further cooling measures may only have a temporary effect. And the mid tier and high end market will still see correction of an estimated 15 per cent by the end of 2012, dragging overall prices by 5 per cent.

Chia Siew Chuin, director of research, Colliers, said: “When we talk about a property bubble, one has to be aware that we not only look at sales per se, but also at prices. The number of sales in this period is really supply-driven, but it is also likely to be at the expense of very little price movement we have seen in the market.”

Still, some analysts said developers are catering to demand, launching at least 2,000 units every month in 2012 – a figure only attained in April last year.

Chris Koh, director, Chris International, said: “The number of units being pushed out and the numbers being taken, you can see does not differ much. Like what we have shared, 2,500 units against a 2,300 take-up is actually a very healthy number.”

Contrasting market sentiment between the mass and luxury markets are likely to affect prices.

Ong Teck Hui, executive director, Credo Real Estate, said: “Where we are just talking about OCR where the volumes have been pretty strong, then the outlook for this year is fairly positive. We are likely to see a stable market with some slight upside in prices, perhaps 3-5 per cent. For CCR, in particular, the softening of prices is likely to continue.”

With the record high number of new private home units being taken up, analysts said 2012 is set to outperform last year’s sales of 16,000 units.

New or resale property? Homing in on the issue

There is a clear preference among buyers for new homes.

While buyers bought a record 18,920 new homes directly from developers last year, it is a different story where the secondary market is concerned.

The number of resale homes changing hands last year fell 25 per cent to 15,013 from 20,103 in 2010.

New sales, including those of executive condominiums (ECs), accounted for 46 per cent of all transactions lodged last year - the highest level since 2003 - according to an analysis of caveats lodged with the Urban Redevelopment Authority (URA).

Developers sold new units at projects like Flamingo Valley, euHabitat, d'Leedon, Reflections at Keppel Bay and H2O Residences last year.

Let's examine the different dynamics between new homes and resale homes.

Anti-speculation measures

Some experts believe that the slew of measures to cool the red-hot property market has caused buyers to favour new homes rather than the resale market.

The revised sellers' stamp duty of up to 16 per cent, introduced in January last year, penalise home buyers who re-sell their property within four years.

This gives an edge to new home sales.

Buyers of new launches know that by the time the apartment is physically completed in about three to four years, they are likely to be subject to less stamp duty or none at all if they sell it.

On the other hand, if they buy a resale home for investment, there may be some concerns with securing a tenant in the current uncertain global economic climate.

Hence, this trend towards new sales remains intact even as the resale market languishes with tepid volumes.

Financing

Investors may also prefer new homes as they can enjoy a progressive payment plan in which the purchase price of the home is paid in instalments based on the completion rate of the project, experts add.

Buyers can, thus, spread out their payments, rather than service a housing loan of up to 80 per cent of the purchase price of a resale unit right from the start.

Size and affordability

Buying from the resale market has its advantage.

Older, completed projects offer units that are typically larger in size than new launches. This is due to the trend of developers pushing out smaller apartments to maintain the affordability of homes on an absolute basis even as prices in terms of per square foot have climbed steadily.

Buyers keen on acquiring larger and more affordable living spaces should, therefore, look towards well-managed resale projects.

Mr Ku Swee Yong, chief executive of International Property Advisor (IPA), prefers completed units that an investor can 'see and feel'.

This allows for the quality of the home to be assessed and for the buyers to ensure that the management is upkeeping the common areas well.

'If you're buying an uncompleted unit on plan, you don't know what might be delivered to you,' he cautions.

Prices

Resale home prices are also generally lower compared to new homes. The demand for new homes has allowed developers to charge a premium through clever marketing and contemporary design.

Buyers looking at resale homes may find bargains - units priced below valuation - if they spend time doing their research.

Mr Colin Tan, research head at Chesterton Suntec International, says: 'Developers are in a healthy position but the secondary market has some weak spots, so there might be opportunities to find bargains from sellers who might be more leveraged and willing to sell.'

Credo Real Estate executive director Ong Teck Hui gives some examples of resale alternatives - that come with a bigger floor area and freehold title - in older projects.

In Seletar Hills, for instance, a three-bedroom, 1,227 sq ft apartment at Greenwich - a newly launched project, has sold for about $1.6 million - or $1,300 per sq ft (psf).

Yet further into the estate, units at an older freehold condo, Nim Gardens, have transacted for between $1.36 million and $1.48 million. With a floor area of 1,830 sq ft, this works out to just $740 to $800 psf.

Nearby, Mimosa Park also offers a similar price range with unit sizes of 1,755 sq ft and upwards.

If a buyer has a limited budget, say up to $1 million, he may not be able to afford these big units even if they are cheaper on a psf basis.

However, he can get a unit at that price from the new sale market, provided he is willing to settle for a shoebox unit - typically with a floor space of 500 sq ft or less.

Instant yields

Buying a resale unit may be a good bet if it is located in a tested market, like the Central Business District. As the buyer can lease out his unit immediately he can start earning back his capital investment right away.

'There are plenty of new homes in the pipeline so it is unclear how the rental market might be in a few years,' says Chesterton Suntec's Mr Tan.

'It is also unclear how many of these small apartments sold by developers recently will be received when completed since they are an untested market,' he notes.

If the purchased resale unit is already tenanted, there is certainty in the yield. In comparison, an uncompleted home sale can provide only the projected yield, IPA's Mr Ku says.

The allure of new homes

New homes have many advantages such as having a unit decked out in the latest brand-name fixtures and fittings.

The bumper supply of state land has also led to a plethora of new launches with developers offering creative product offerings such as themed-condos and throwing in various sweeteners like stamp duty absorption and furniture and shopping vouchers.

There is also the snob factor in being able to boast that your new home is designed by current renowned international architects like Zaha Hadid and Moshe Safdie.

Price gap between mass market, city homes narrowing

The price gap between private homes in the mass market and Core Central Region (CCR) is narrowing, with market watchers saying the gap has narrowed to just above 60 percent in Q1 2012 compared to 108 percent in Q2 last year.

This is due to mass market homes recording price increases at a much faster pace. 

According to a report by Channel NewsAsia, the average price of city homes in the second quarter last year hit S$1,850 psf while mass market homes recorded a median price of S$895 psf. However, mass market home prices have since climbed to around S$1,000 psf while prices of city homes have dropped to about S$1,660 psf.

“Long-term sustainable level is about 50-60 percent gap in the two markets,” said Chua Yang Liang, Head of Research at Jones Lang LaSalle (JLL).

“The price will have to slow down by that time. It will be driven by buyers moving out from the mass market into the high end. At that point in time, buyers will be saying ‘why do I buy in the suburbs when for just a bit more I can buy somewhere downtown?’.”

Several analysts noted that the strength in prices of mass market homes has been boosted by healthy growth of resale flat prices, which has risen more than 80 percent in the past few years.

However, analysts expect to see a decline in the resale flat market in the next two to three quarters. 

“We are going to see a plateauing of HDB resale mainly due to the contraction of your cash-over-valuation… In the first quarter we saw a contraction of about 12 percent. The mass market cannot continue to move upwards without seeing some stabilisation,” noted Donald Han, Special Advisor at HSR International Realtors.