Property Market slowing down?

The political instability in the past two months partially affected the market. The number of new build units in Bangkok dropped but the market in the outskirt areas of the capital and upcountry continuously grew during the first half of 2010. However, according to the report, the market value is expected to grow only 3-5 per cent, lower than the previous expectation of 5-8 per cent.

PD House’s research and business development department also conducted an online survey of 2,548 people on consumer attitudes nationwide on the preferred financial source for new home building. The survey showed that almost 80 per cent of the target group would get a loan from banks rather than use their own savings. This is quite the opposite to the results conducted 5-6 years ago where over 60 per cent preferred using their own savings to build a new house.

Sitthiporn Suwannasut, Chairman and Director-General of PD House Home Builder Centre, said that over 70 percent of its clients would apply for a mortgage to build their new home during the past 5-6 months.

“This is a growing trend. In the past, consumers thought that it was difficult and complicated to get a home loan from the banks. Some didn’t even realise that they were allowed to do that. But now it’s something different,” said Sitthiporn. “Most people believe that their dreams of having a new house could become true more easily once they manage to get a loan while some don’t think they can save enough money to keep up with the increasing house prices”.

SOURCE: Property-Report.com

This means each owner could get an average of $1.625 million from the sale.

The sale price also translates to a land rate of about $632 per square foot, per plot ratio at a Gross Plot Ratio of 1.4.

Currently, 83 per cent of owners have given consensus to the sale and the sales committee is hopeful that it will obtain the go-ahead from the remaining owners, according to property consultant Credo Real Estate.

The site has been zoned for residential development with an allowable height of five storeys.

Fragrance is looking at owners vacating Culford Garden by end of this year, said Mr Karamjit Singh, managing director of Credo Real Estate.

Mr Colin Tan, head of research and consultancy at Chesterton Suntec International believes that this is a reasonable enbloc price, given that the apartments are already almost 25 years old, and the hot property market now. “This could be why the developer is keen for this enbloc,” he added.

The freehold site has a combined land area of 44,093 square foot and being in District 15 it is a short drive from amenities and food outlets in East Coast Park, and accessible to the Central Business District via the East Coast Parkway. Julie Quek

Accordingly, the company plans to launch a new project comprising units with utilisation space of between 800 square metres and 1,000 square metres and a starting price of Bt22,000 per square metre.

There will be four designs offered: Spanish, California, modern and contemporary.

Pramote said that while some customers have delayed building residences due to the country’s political problems, those who signed contracts from last year till the first quarter of this year have continued to build.

This is a good time to build a residence, he said, because construction raw-materials prices are now stable. Customers who sign contracts to build residences now will receive good value, he said.

Four Pattana expects total revenue to hit Bt615 million this year, up 19 per cent from Bt518 million last year.

The company last month won a contract worth Bt30 million from Home Builder Show 2010. This is not factored in to the above revenue target, Pramote said.

By SOMLUCK SRIMALEE
THE NATION
Published on March 29, 2010

Prices of non-landed private homes held steady in February, a new index set up to track residential property prices here shows.

The Singapore Residential Price Index, or SRPI, showed that private home prices across the island rose just 0.2 per cent month-on-month in February 2010, after climbing 2.2 per cent in January.

But the gains come on the back of a 22.2 per cent rise in 2009 – putting the index’s current value just 0.4 per cent below its peak in November 2007.

The new index, which is compiled by the Institute of Real Estate Studies at the National University of Singapore, was set up last week to serve as a resource for developing property derivatives in Singapore. It tracks month-on-month price movements in the private non-landed residential property market using a basket of 364 completed projects.

By contrast, the official Urban Redevelopment Authority (URA) private residential property price index, which is released every quarter, includes transactions at new launches and sub-sales.

According to the URA index, private home prices hit a recent high in the second quarter of 2008 – before falling for the next four quarters. Home prices then recovered somewhat, rising 15.8 per cent in Q3 2009 and 7.4 per cent in Q4. But the URA index is still some 6.6 per cent off its recent Q2 2008 peak.

Analysts said that the SRPI moved up only slightly in February as most of the market activity centred around new launches.

Developers sold 1,196 new homes in February 2010 (slightly less than the 1,480 new homes sold in January). But market watchers said that in the resale market (sales of units in completed projects) there was a larger month-on-month fall in the transaction volume.

‘The new index is for completed properties and most of the price movements and market activity over the last few weeks have been seen for new launches,’ said Colin Tan, director of research and consultancy at Chesterton Suntec International. ‘Prices at completed properties are also more stable as these projects tend to draw a different type of investors as compared to new launches.’

Tay Huey Ying, Colliers’ director for research and advisory, similarly said that the index was flat in February 2010 as only properties completed between October 1998 and September 2009 are included in the basket.

Associate Professor Lum Sau Kim, who leads the group that compiles the new index, said one key feature of the SRPI is that it is not too affected by new launches. It is also designed to not be unduly influenced by low transaction volumes in a quiet market.

She attributed the marginal movement in the index for February to the Chinese New Year season, when buying activity traditionally tapers off.

The SRPI also showed a drop in home prices in the central region (postal districts 1-4 and 9-11) in February. Prices there fell 0.1 per cent last month after climbing 1.6 per cent in January.

For the whole of 2009, prices in the central region rose 27.3 per cent. But prices in the central region are still around 10 per cent off the pre-crisis peak, according to the index.

Elsewhere, prices in the non-central areas rose 0.5 per cent in February after climbing 2.7 per cent in January. Private home prices in the non-central regions have now exceeded the pre-crisis peak.

Analysts predict that when the URA flash estimates are released early next month, it will show that private home prices climbed 5-8 per cent in the first quarter of 2010.

That works out to S$734 per square foot per plot ratio. This includes a possible development charge of S$25 million.

Under the 2008 Master Plan, the site is zoned for ‘Business 1′ use. But the Urban Redevelopment Authority (URA) would consider re-zoning the site from industrial to residential use with a gross plot ratio of 2.8.

The site, located near Lorong Ampas, is currently occupied by a seven-storey light industrial building.

Collier’s executive director Ho Eng Joo said he expected the site to attract a pool of keen buyers.

That’s because it is located at the city fringe and in a mature enclave, well-served by a host of amenities.

He said the site could be redeveloped into a residential development consisting of 182 apartments with sizes ranging between 500 and 1,000 square feet.

The tender closes on 28 April.

CLAIMS that the Government is partly to blame for Singapore’s short supply of land and high property prices have been firmly rebutted by the Ministry of National Development (MND) yesterday.

President of the Real Estate Developers’ Association of Singapore (Redas), Mr Simon Cheong, questioned on Wednesday the need for government intervention to halt the rise of private home prices, adding that it should shoulder some of the responsibility for short land supply and escalating property prices.

The ministry said yesterday in a statement that it ‘disagreed totally with his view’. MND pointed out that the Government’s objective was to maintain ‘a healthy property market’.

‘A property market bubble, if allowed to form, may not only impact housing affordability, but also severely impact the economy when it bursts,’ it said.

Mr Cheong – who is also chairman and chief executive of developer SC Global – had claimed that because the supply side was managed by the public sector, market forces were often not wholly free to respond to demand.

He noted that land values were largely determined by the Government’s reserve price system, but a site’s reserve price is not revealed.

The president of the Real Estate Developers’ Association of Singapore (Redas), Simon Cheong, came out strongly yesterday to say the government should allow the property market here to operate fully as a free market.

Mr Cheong, who was speaking at the launch of a new price index for private homes in Singapore, also asked if the state should be so concerned with private housing prices when the segment serves only 16.5 per cent of the overall population.

Mr Cheong, who is also chief executive of SC Global Developments, said that he was commenting on the market despite being personally advised not to do so for fear of it being a ’sensitive topic’.

‘But, on balance, in the interest of Singapore’s property market, I decided to do so,’ he said. ‘If Redas members who are fighting in the foxhole everyday for the interest of a healthier property market do not speak up, then who will?’ Real estate developers in Singapore now have the unenviable task of having to step up their game very quickly to satisfy demand, he said.

In Singapore, the government, which owns more than two-thirds of all land, controls the land supply. Land price here is largely determined by the reserve price system.

‘As the supply side of the development equation is managed by the public sector, market forces are often not wholly free to respond to demand,’ Mr Cheong said.

To illustrate his point, he highlighted the results of two recent government land tenders, which he said illustrated the ‘conundrum and the dilemma developers face’ when they bid for sites in the government land sales programme.

A site in Tampines first put up for sale by the government in June 2008 was not sold after the sole bid of $118 per square foot per plot ratio (psf ppr) was rejected for failing to meet the reserve price.

But earlier this month in another tender exercise, it was awarded to the top bidder at $421 psf ppr – 3.6 times the previous price.

Similarly, a mixed-use site at Ten Mile Junction, which had a failed bid of $162 psf ppr back in April 2008, was awarded in February this year for $437 psf ppr.

In both cases, the higher bid prices generated more revenue for state coffers but also accentuated the demand-supply mismatch.

‘With a higher land cost, these developers must now sell at higher prices just to maintain an equitable level of profitability.’

Mr Cheong also questioned recent government measures designed to keep private housing affordable, such as the introduction of a stamp duty for sellers and the removal of the deferred payment and interest absorption schemes.

While some felt private property was being priced out of their reach, he pointed out that it served only 16.5 per cent of the demography. ‘Should it (the state) intervene to restrain the rise in property values to make private housing more affordable or should it be left to market forces?’

Mr Cheong also said that a certain level of speculative activity in the marketplace can, in theory, improve the liquidity of real estate assets and catalyse the sales of new developments.

When demand exceeds supply by a large margin, speculators provide investors with another source of a scarce commodity at a price premium. And encouraged by the higher prices, developers respond by launching more developments for sale and, in so doing, narrow the gap with demand, Mr Cheong added.

He concluded his speech by pointing out that there are various factors that make real estate the preferred asset class in the near term, such as pent-up demand for mass-market housing and high liquidity, with some $301 billion of cash deposits in banks and another $67 billion of investible CPF funds reported last year.

‘Is it any wonder then that the recent measures to cool the private property market did not quench the thirst of genuine home buyers and investors – local and foreign alike – who clearly have strong confidence in the fundamentals of Singapore’s real economy and its ascendancy as a global city in Asia?’ he said.

Mr Cheong added that he hopes that the launch of the new index will be ‘a step towards improving market transparency and help lessen future needs for frequent market interventions, allowing a freer hand for market forces to work out its own genius’.

Source : Business Times – 25 Mar 2010

PROPERTY investments still take pride of place in high-net-worth (HNW) individuals’ portfolios, accounting for a third of investments, a survey by Knight Frank and Citi Private Bank has found.

But only 13 per cent of wealthy respondents said they were planning to buy a new primary residence this year. While 37 per cent said they would consider a second home, almost half the respondents said they would not use debt to fund the purchase.

While survey respondents – who are Citi clients – are cautious, about 70 per cent believe this year will be a good year to invest in property, followed by 68 per cent in favour of equities. The least favoured asset class was bonds. The survey was conducted in January.

No details are available, however, on how many respondents took part.

Says Aamir Rahim, Citi Private Bank Asia Pacific chief executive: ‘Although equity and property markets have bounced back sharply, the survey responses suggest wealthy investors remain concerned about the state of the global economy . . .

‘When making property investment decisions, capital growth prospects are the main driver, followed by asset stability and then yields.’

He adds: ‘Although relatively few respondents were planning to purchase a new primary residence this year, a significant proportion do see buying opportunities in the current market . . . It’s clear that the wealthy still see property as a vital part of their investment portfolios and feel comfortable with it.’

Capital appreciation

Property has a weighting of roughly 33 per cent among the survey respondents, followed by equities’ share of 24 per cent. Some 35 per cent of respondents expect equities to be the best-performing asset class in 2010, followed by hedge funds and property.

Among the types of property exposures, residential property is expected to fare the best, followed by commercial property and agricultural property.

The big question is the capital appreciation potential of some of the real estate markets which rose significantly last year.

Based on Knight Frank’s Prime International Residential Index, Shanghai real estate registered the steepest upward trajectory with a 52 per cent rise last year. This was followed by Beijing’s 47 per cent and Hong Kong’s 40.5 per cent. Singapore ranked fifth in terms of the pace of price change, with a rise of 17 per cent, on par with Johannesburg.

Among other markets, the biggest plunge was in Dubai where prices fell 45 per cent. This was followed by Western Algarve in Portugal with 30 per cent.

Liam Bailey, Knight Frank’s head of residential research, said prime residential properties saw a polarisation last year. Asian cities – especially in China – recovered strongly, but most other locations continued to fall.

‘I do believe that we will see this gap narrow again in 2010. It seems unlikely that property prices in cities such as Shanghai can continue to grow at these kinds of rates. In many (other) locations, there was positive growth in the latter half of 2009.’ New York real estate, for example, rose 2 per cent in the second half, but fell 12 per cent in the whole year.

Mr Bailey said fiscal intervention by administrations in Beijing and Washington means those cities are increasingly viewed as financial as well as administrative hubs – that is, having an impact on the cities’ prime property markets as banks gravitate towards them.

‘Although there are still questions over the state of the global economy,’ he said, ‘property remains a core part of the wealthy’s investment portfolios . . . Current price falls will be viewed by many as a buying opportunity, but as the data from our Prime International Residential Index shows, these windows of opportunity do not always remain open for long.’

Boost from IRs

On Singapore property, in particular, Knight Frank’s residential division head Peter Ow expects prime prices to climb another 10-20 per cent this year and outperform the overall market. Buying interest is expected from China, India and Indonesia.

‘The opening of the IRs (integrated resorts) will present more leasing opportunities for high-end residential properties and will help create new residential enclaves, strengthening the overall living experience of these new clusters,’ he said in the report.

Mr Bailey points out that low interest costs have protected potentially distressed owners and reduced the supply of property for sale. At the same time, low savings rates have spurred the wealthy to move out of cash and into property in search of yields. This has driven demand for property higher and against the backdrop of tight supply, has pushed values upwards in some locations.

‘Ironically, the unintended consequence of government economic stimulus packages has been to support demand and pricing in top-end residential markets – probably not something governments would readily admit to.’

The obvious question is whether current pricing is sustainable. ‘Our view is that most prime markets are suffering from an undersupply of stock and this will help maintain prices in the short term. Looking further ahead, however, it is those locations that offer a genuine lifestyle attraction to the world’s wealthy, rather than just an investment opportunity, that will prove most sustainable,’ he wrote.

Source : Business Times – 24 Mar 2010

In the first three months of the year, sales of residential Government Land Sale sites have come up to nearly S$935 million.

Activity in the commercial sector, as well as the industrial sector, also picked up.

CBRE said that in light of the improved climate, total investment sales have amounted to S$4.4 billion in the first quarter so far.

That is some 16 times more than the S$274 million in the same period last year.

The private investment sales market has so far accounted for 77.2 per cent of the quarter’s total investment sales, while investment sales in the public sector have contributed the remaining 22.8 per cent.

The commercial investment market has also been active, chalking up 24.5 per cent of total investment sales in the quarter with S$1.08 billion to date.

In the industrial sector, CBRE said there have been 26 known transactions so far during the quarter – making up 26.3 per cent of total investment sales.

CBRE’s Executive Director of Investment Properties, Jeremy Lake, said that compared to a year ago, this year’s prospects in the investment sales market are positive and more than S$15 billion worth of investment sales could be transacted during the year.

He added that while most of the major investment sales transactions last year were dominated by Asian investors, there is now a diverse pool of buyers. – CNA/ms

Property agents have apparently collected cheques from buyers for the 99-year leasehold development in Shenton Way, according to sources.

Pre-marketing is common these days, with agents busy drumming up interest before the preview, so some buyers try to get in early.

‘On the ground, there seems to be a lot of interest, but the real test will come next week when it is previewed,’ said one agent.

A property expert added: ‘New launches are hot today, but the older condos are forgotten.’

The 39-storey downtown condominium – called 76 Shenton – is being developed by Hong Leong Holdings. It is at 76 Shenton Way in Tanjong Pagar on the site that used to house the Ong Building, next to Lippo Centre.

Prices range from just below $1,700 per sq ft (psf) to $2,500 psf, with units on the 23rd to 27th floors being quoted at $1,900 psf to $2,200 psf.

It will have 202 units – all below 1,000 sq ft – and seven shops.

‘Smallish units are still in play and attracting strong buying support,’ said Mr Michael Ng, managing director of Savills Singapore, linked to one of the marketing agents, Huttons.

Knight Frank is the other marketing agent.

‘The bite-sized units are very palatable… City living is also finally taking off now that the Marina Bay Sands integrated resort will open soon.’

The project will have 134 one-bedders ranging in size from 592 sq ft to 624 sq ft and 68 two-bedroom units of 969 sq ft to 980 sq ft.

The Residences at W Singapore, being developed by City Developments in Sentosa Cove, will also be released for sale next week, as will Ho Bee’s Sentosa Cove project, Seascape.

Hong Leong is also in final preparations to launch the 65-unit Nathan Suites in the Bishopsgate area, said its spokesman.

Talk is that the freehold Nathan Suites – located next to Regency Park – will sell for around $2,000 psf.

Apart from these high-end projects, developers are also preparing to release mid-range residences.

These include Frasers Centre-point’s 393-unit project on the old Flamingo Valley site in Siglap and Far East Organization’s 104-unit freehold project, The Sound, in Telok Kurau.

The spate of launches comes amid a buoyant market, with sentiment especially high for new releases.

Developers sold 2,676 new private homes in the first two months of the year, more than the 2,552 homes sold in the first quarter of last year.

Cheung Kong (Holdings) sold at least 160 units of The Vision in West Coast Crescent recently for a whopping $1,000 psf to $1,200 psf after a few rounds of marketing.

This article was first published in The Straits Times.