Property Cycle

IT WORRIES me that home sales in the suburban sector, in particular, are continuing their run-up even now ('Home hunters still in buying mood'; yesterday).


My concern is that the average working middle-class buyer is jumping into the market now after missing out on the bull run that has been going on since 2006, with a brief respite in 2008.


Many cannot afford the full cost of the properties and therefore go for new launches, where they pay only a small deposit. Many are not trained in financial investment and economics, and their late entry may put their finances in peril.


Being from the capital management industry, I wish to point out to these late investors that much institutional (smart) money has long left the real estate markets in Singapore and Asia.


The price indices of real estate in Seoul, Hong Kong, Beijing and Shanghai have peaked simultaneously.


International capital has flowed out of the Bric (Brazil, Russia, India and China) emerging markets since early this year, causing their currencies to fall almost 12 per cent on average.


Market risks have been increasing since the beginning of the euro credit crunch late last year.


I hope those who are buying properties for speculative investments or for their own use will consider these developments. They should understand that markets rise and fall regardless of how benign interest rate cycles seem to be.


To safeguard genuine home buyers, the Government should implement more measures limiting foreigners to buying only new high-rise properties from developers that can be resold only to Singaporeans.


A similar policy has enabled Australia to escape most of the property bubbles affecting much of the world.


If bubbles are absent, Singaporeans will be less tempted to buy reactively and follow the undesirably hard-to-reverse boom-bust cycles.

Home hunters still in buying mood

HOME hunters have been snapping up units over recent weeks and propping up developer sales amid a market slump, but some consultants expect the June tally to be weaker than last month's.

New private home sales for last month were 1,702 units, excluding executive condominiums, but Mr Tan Kok Keong, OrangeTee's research and consultancy head, said the June figure could come in as much as 10 per cent lower.

Buyers have been especially keen on suburban and city fringe projects such as the newly launched Cradels, where 65 units have been sold since its launch last Saturday.

The freehold condominium near Novena MRT station has a total of 125 units costing about $1,500 per sq ft.

A one-bedroom unit of nearly 500 sq ft starts from about $600,000.

Tong Eng Group's Tropika East, which launched on June 9, has sold 59 of its 105 units, with 14 moved in the past two weeks.

Three-bedroom units are priced from about $1.3 million.

The 376-unit Sea Esta in Pasir Ris has sold about 250 units since its preview on June 10.

One-bedroom units of 517 sq ft or more are available from $488,000. Three-bedroom units of at least 904 sq ft start from $760,000.

Qingjian Realty has sold more than 250 units out of the 410 released at its River Isles in Punggol. The 610-unit condominium, launched on June 2, is priced from $830 psf to $850 psf.

Far East Organization has sold 27 units over the past week across its projects, with Seahill and Seastrand the top performers.

Sales also held up in the luxury sector. Aurum Land's 1919 at Mount Sophia has sold out its 75 units since the June 9 launch.

Units cost at least $1.12 million, and were sold for $2,000 psf to $2,200 psf.

OrangeTee's Mr Tan said he was surprised at 1919's showing, given the slump in the luxury segment, although he noted that the project is near schools and other facilities.

'Mass market sales have been quite good because the pricing is in line with neighbouring launches in those areas... a factor for good sales,' he said. He expects June sales to dip 5 per cent to 10 per cent from last month, due to the lack of big launches.

Weak sentiment stemming from Europe's debt crisis and faltering stock markets have also affected buyers, said Chesterton Suntec International research head Colin Tan.

'It is slow, but still moving... there is still underlying core demand that continues to absorb the supply that is being pushed out,' he said.

Separately, Bugis Cube, a commercial development, has sold 77 strata-titled retail units, out of 91 available, since its launch last Saturday.

Bugis Cube, opposite Bugis Junction, is owned by Griffin Real Estate Investment Holdings.
Units there are selling for between $3,000 psf and $7,200 psf.

Each unit is priced between $564,000 and $10 million, and will host shops, food and beverage outlets and clinics.

Big-ticket bungalow deals reasonably priced

Some big-ticket bungalow deals took place recently on Sentosa Cove (pictured) and the Good Class Bungalow (GCB) areas of mainland Singapore.

One Singaporean bought a two-storey freehold bungalow with five bedrooms and a study at White House Park for S$24.8 million or around S$1,650 psf. RealStar Premier represented the buyer while the seller was represented by DTZ.

At Jervois Hill, a 15,095 sq ft property was sold for S$21 million by Newsman Realty. It was bought in 2010 for S$19 million from Vincent Tan Kim Yong, Group Chairman and CEO of Advanced Integrated Manufacturing Corp.

Over in Sentosa Cove, a 99-year leasehold property was sold for S$22.2 million or around S$2,787 psf.

Samuel Eyo, Director of Prestige Homes at Savills Singapore, said that end-users have dominated the GCB market and transacted prices are reasonable.

KH Tan, Managing Director of Newsman Realty, noted that the GCB market picked up in the first half of this year from a slowdown after the additional buyer's stamp duty (ABSD) was implemented in December last year.

“I would say prices are quite stable these days.”

He added that transactions at Sentosa Cove saw a notable decline due to the 10 percent ABSD for foreigners who are not permanent residents (PRs).

Sentosa Cove is the only place in Singapore where landed homes can be bought by non-PR foreigners subject to approval by the Land Dealings (Approval) Unit.

Rogue agents get warning letters

A CRACKDOWN is under way on property agents who lodge misleading advertisements for industrial sites.

More than 20 warning letters have been issued to agents this year and some unauthorised uses are being investigated.

The move - a joint effort between the Council for Estate Agencies (CEA) and the Urban Redevelopment Authority (URA) - is in line with the Government's push to weed out rogue tenants and landlords in industrial areas.

Businesses such as shops and tuition centres have been using industrial sites, which have lower rents than commercial premises, but they have been accused of pushing up costs as they compete for space with genuine industrialists.

The CEA has investigated 32 property agents this year who allegedly marketed industrial units wrongfully.

Some cases are pending, but letters of advice have been handed to 23 agents who 'did not check the classification of the premise use and wrongly advertised industrial units at various developments such as Oxley Bizhub, One Commonwealth and One Pemimpin', CEA's deputy director for licensing Yeap Soon Teck told The Straits Times.

Similarly, the URA said it has investigated some users at places like The Alexcier in Alexandra Road, First Centre in Serangoon North and Midview City in Sin Ming Lane and given them time to stop the unauthorised use.

The sites were used for commercial purposes such as business consultancies, accountancy and book-keeping services and schools.

On Wednesday, the agencies issued a joint circular to remind agents and landlords that it is their responsibility to give accurate information to potential buyers. It stated that properties slated for industrial use should not be marketed for 'business' - which can be misinterpreted as offices - or 'offices', which are not allowed in such buildings.

The onus is also on developers to ensure accurate information on marketing materials and that appointed agents do not mislead buyers.

Misleading marketing of units will breach the CEA's Code of Ethics and Professional Client Care, which can lead to fines of up to $75,000 and/or suspension or licence revocation.

The URA said that if the unauthorised use does not cease within a stipulated timeframe, the penalty for these users could be a fine of up to $200,000 or a one-year jail term or both.

URA rules stipulate that at least 60 per cent of the total floor area of an industrial site has to be used for core industrial activities like warehousing and production. The remaining space can be taken up by some non-industrial uses like ancillary offices and staff canteens.

Shops and offices should be located in commercial sites, such as shopping malls.

A three-year reprieve was recently granted for religious groups using such spaces.

Property agents said it is standard practice to make the approved use of the place clear to the potential buyer. They add that some tenants could have been misled by agents out to make a quick buck.

An agent from Vestor Realty said the buyers should always check with URA to be sure.

Ms Chia Siew Chuin, director of research and advisory at Colliers International, said that the definition of allowable uses should be reviewed to make it more relevant to today's business models.

'The guidelines could have been set some time back, and business models have evolved since then,' she said.

'For instance, some segments of the business might appear to be office-like and lighter in nature with advanced technologies... but they are still part of the manufacturing process... these are not clear-cut cases.'

Ms Chia noted that the circular is a sign that the Government is keeping an eye on the industrial sector.

It is also a move to protect layman buyers, who might find that the workings of the industrial market are not as straightforward as residential's.

The Straits Times noted several accountancy firms at Midview City in Sin Ming Lane. An accountant in his 20s, who gave his name only as Mr Chia, said he moved there as he thought it was a 'good deal', compared to prices in the Tanjong Pagar area. He paid about $600,000 for the 1,400 sq ft of space.

He said he liked the working environment. 'I checked the occupants before I decided to buy. If there was a large proportion of manufacturing or heavy industry to services, I wouldn't have come here.'

Singapore developers turning to foreign architects to lure buyers

Local developers looking to add value to their new projects are turning to world-renowned overseas architects, with 14 developments being backed by 12 foreign designers.

Since the mid-80s, Singapore’s residential property market was already welcoming architects like Paul Rudolph and Moshe Safdie. Now, they are joined by other renowned names such as Ole Scheeren and Daniel Libeskind.

“It is a branding thing and using a foreign, renowned architect for condominium here to get a premium for the development and in terms of design wise, they do come out with nicer design,” said David Neubronner, Head of Residential Project Sales at Jones Lang LaSalle.

As a result, projects are being priced at around five to 10 percent above market values. One analyst noted that with the Safdie name, Sky Habitat (pictured) saw a 30 to 35 percent premium over other developments.

“The use of brand-name architects is part of the old success model which is designed to stand out from the crowd. But, everyone can do that so there is no advantage anymore,” said Tay Kheng Soon, Principal Architect of Akitek Tenggara.

Jerry Tan, Founder of Jerrytan Residential Pte Ltd, said that the practice could be “part of their marketing spiel and to add a bit more pizzazz into the whole scheme of things”.

While developers like CDL, CapitaLand, Far East and Keppel Land have turned to world-renowned architects for their projects, SC Global has picked local designers.

“There is no shortage of talent in Singapore with our local architects as you can see with some of our top buildings that the SIA has awarded, and some of them have even gone to win international awards,” said Theodore Chan, President of the Singapore Institute of Architects.

Big-ticket property deals are bouncing back, and the trend is likely to continue

[SINGAPORE] Investment sales of property - which cover big-ticket transactions - have rebounded to about $6.4 billion in the second quarter as at June 19, according to preliminary figures from Savills Singapore. Such deals had taken a hit in the first quarter, when the figure dived to $4.8 billion (from $7.9 billion in Q4 2011).

Q2's surge has been fuelled by the residential and office markets, including sales of Tower 15 on Hoe Chiang Road, KeyPoint on Beach Road and strata office units at Burlington Square, Tung Centre and The Adelphi.

Savills defines investment sales as deals of at least $10 million. It includes sales of Government Land Sales (GLS) sites, acquisitions by real estate investment trusts and residential collective sales below that threshold.

Taking into account outstanding state tenders - such as for the private housing sites at Farrer Drive and at Pheng Geck Avenue scheduled to close on June 21 and June 28 respectively - as well as other caveats for various sectors of the property market, the final Q2 investment sales tally could reach about $7 billion. This would take the figure for first-half 2012 to almost $12 billion.

Savills' executive director (investment sales) Steven Ming expects investment sales to continue apace in the second half, possibly resulting in a full-year total of $21-25 billion. "This assumes macro economic conditions improve and that financing continues to be available. Availability of debt is one of the main lifelines to the real estate investment market. Absence of debt will lead to falling investment volumes," he cautions.

As the government will continue to roll out the same quantum of private housing land in H2, the public sector is likely to dominate investment sales in H2. "Should concerns about the macro economy begin to fade and the bid-ask gap narrow, the second half of 2012 could see a resurgence of transactions in the private sector," Mr Ming added.

Last year, total investment sales hit $29.6 billion, down slightly from 2010's $31.4 billion, based on Savills' figures.

CBRE executive director (investment properties) Jeremy Lake forecasts that the full-year 2012 number will be double the first-half figure - with activity in all sectors."The eurozone's problems have been around so long that people are becoming used to it; and stock markets go up and down all the time. Those who believe the bottle is half empty will continue to sit on the sidelines or offer prices that are unacceptable to owners, whereas those who consider the bottle to be half full are likely to agree on price with sellers i.e. there is no price gap," he said.

Wealthy Asians continue to be interested in Singapore real estate, said Mr Lake, though big institutional players such as European and US funds have been quiet here. A noteworthy exception would be US-based private equity giant Blackstone Group, which made its first major Singapore property acquisition in Q2 - the $210 million purchase of StarHub Green, an industrial building at Ubi Avenue 1.

Investment sales reflect the confidence of major property players in the sector's mid to long-term prospects.

According to Savills' figures, investment sales in the residential sector so far this quarter have reached $3.6 billion - about $1.1 billion or 46 per cent higher than Q1 2012. A big chunk of this came from GLS sites, amounting to $2.5 billion, up 38 per cent from Q1.

The commercial segment too posted a $914 million or 91 per cent quarter-on-quarter jump to $1.9 billion. However, investment sales of industrial properties fell 32 per cent quarter on quarter to about $766 million.

In the collective sales market, figures from Credo Real Estate show that five deals totalling $328.8 million have been inked this quarter as at June 20, down from the six deals at $456.6 million in Q1.

Credo Real Estate managing director Karamjit Singh notes that all collective sales over the past 21/2 years have been below $250 million apiece. And the trend is set to continue.

"The 10 per cent ABSD has effectively killed off very large residential en bloc sales because a developer, in order to stave off paying ABSD, would be required to not just complete the new project on site but sell out the entire development within five years of the date of being awarded the site by the sales committee. After taking into account one year or so for legal completion and vacant possession, the developer would have only four years or so left to achieve this. For a big project, that is a risky proposition," he adds.

New high on returned homes / Buyers return 150 private homes in May

Private home buyers returned 150 units to developers last month at projects such as Sky Habitat, The Tampines Trilliant and Hillsta - the highest number in at least five years. These units, bought in April, made up 5.7% of the more than 2,600 non-landed homes, including ECs, sold that month, analysis by property research firm Square Foot Research shows. Despite the high absolute figure for returns, experts say that in percentage terms, the rate is in line with last year's. 

They add that the spike in absolute numbers is largely due to April's robust sales which had buyers snapping up the most number of units in almost three years. Return rates are defined as returned units as a percentage of total non-landed sales in the previous month. These rates have remained largely below 6%, the property research firm's data shows. Home buyers sign an option typically lasting three weeks and can back out during this period. But those choosing not to exercise their options forfeit 1.25% of the price. This works out to $12,500 for a $1 million condo. Shoebox units, smaller than 50 sq m each, formed about 20% of the 2,496 non-EC units sold last month.

 While the 150 returned units represent a five-year high in terms of absolute numbers, the percentage return rate was higher in the earlier part of the year. For instance, while 52 units were returned in January, that translated to a return rate of 9 per cent. This may have been caused by the tough round of cooling measures unveiled last December. Last month, 15 units were returned at Hillsta, 11 units Trilliant and 10 at Sky Habitat. In April, buyers returned 17 units at Riversound Residence and 9 each at Ripple Bay and Twin Waterfalls. Dennis Wee Group's senior manager of research and consultancy Lee Sze Teck said buyers might return units if they find more attractive options elsewhere or have simply changed their minds. Buying sentiment is still healthy and positive, he noted, and if the local economy is doing well and jobs are still secure, then despite the shadow of the euro zone crisis, buyers might still keep their purchased units.

To celebrate its strong sales, property developer Far East Organization will be offering small discounts this month, ranging from one to three percent for several projects, including euHabitat.

Far East achieved a new sales record of 2,200 units for the first five months of this year, up from about 1,500 units over the same period last year and 750 units in 2010.

“To mark this achievement, we are offering special discounts for various projects in June only,” said the developer.

“We've seen healthy demand for our projects across the island, and we believe our special celebratory offer will make our products even more attractive to home buyers and investors.”

According to the URA’s (Urban Redevelopment Authority) new home sales figures for May, Far East’s SeaHill project (pictured) was among the best-selling condos, with units ranging from S$1,170 psf to S$1,759 psf.

In addition, other Far East properties recorded healthy take-up rates.

The 748-unit euHabitat in Eunos sold 681 of the 733 units released at a median price of S$1,288 last month.

Another property, The Clift at McCallum Street, sold 253 units of the 312 available at a median price of S$2,720 psf.

According to consultants, property developers have given out such discounts before. However, the discounts might not go a long way in attracting buyers, noted an agent who declined to be named.

“Far East always gives the best discounts, but buyers also know that they generally market projects at higher prices.”


CALL me now at +65 82112033 if you are interested to view any of Far East unit.

Housing supply to hold firm in second half of 2012

Residential supply will likely hold firm in the second half of this year as developers continue to be active in the Government Land Sales (GLS) Programme.

According to Chia Siew Chuin, Director of Research & Advisory at Colliers International, an additional 28 to 30 new residential sites will likely be added to the confirmed and reserve lists, which could yield up to 14,000 homes.

“The government cannot afford to significantly decrease the supply of private residential land so long as housing prices remain high, and demand for both private housing units and development land remains robust.”

Meanwhile, Kim Eng analyst Wilson Liew predicts that around 6,000 to 6,500 homes could be rolled out under the confirmed and reserve lists respectively.

The figures, which are some 10 percent below the number of units offered in the H12012 GLS Programme, is intended to “partly offset the higher-than-expected actual number of units launched from previous rounds of GLS, as some developers have been pushing out smaller-than-normal units”.

However, Chua Chor Hoon, Head of Asia-Pacific Research at DTZ, feels that residential supply will be similar to previous levels, but added that some restrictions may be placed on the number of units per plot to regulate the proportion of shoe-box units.

In an earlier report, National Development Minister Khaw Boon Wan said that shoe-box units remain a concern, even though recent measures have worked to ease the public housing crunch.