Downtrend in private home prices picks up momentum

THE drop in private home prices gathered momentum in the third quarter. The Urban Redevelopment Authority’s latest flash estimates show that its overall private home price index is down 1.3 per cent from the second quarter. This follows a 0.9 per cent fall in Q2 and marks the biggest quarterly drop since the index peaked in Q3 2013.

Year on year, the index is down 4.2 per cent. It has fallen almost 8 per cent over eight straight quarters since its recent high.

JLL national director Ong Teck Hui said that the sharper quarter-on-quarter decline may suggest that sellers are starting to blink first – after a long-drawn battle. “For those who need to sell, they would have realised by now that prices are only going to fall further and easing of cooling measures is not going to happen anytime soon.”

URA’s flash estimates released on Thursday showed that prices of non-landed private homes fell in all three geographical regions in Q3, led by a 1.6 per cent drop for the suburbs or Outside Central Region (OCR). Property consultants said that this was primarily caused by the launch of High Park Residences in Fernvale Road – with high volumes recorded at an average price of sub-S$1,000 per square foot. Without the cooling measures, they might have been sold at S$1,100 psf, which suggests a price drop of about 10 per cent.

The 1.6 per cent drop is steeper than the 1.1 per cent dip in Q2.

In the city-fringe or Rest of Central Region (RCR), the fall was 1.5 per cent, again steeper than the 0.6 per cent dip in Q2. In Core Central Region (CCR), prices slipped 1.3 per cent, after retreating 0.6 per cent in Q2.

While sales of new projects are thought to have driven price falls in the OCR, the price drop in CCR is likely to have been led by secondary market transactions, say analysts.

On the million-dollar question, whether the 8 per cent drop thus far in the URA benchmark index would be enough for the authorities to consider rolling back or at least tweaking some of the property cooling measures, Knight Frank executive director of residential services Tay Kah Poh said: “I don’t think the policymakers will take this drop as sufficient . . .”

However, the developers’ argument that the URA index masks many instances where prices have fallen more than the index has some merit, he argued. “There may be a case to look at a higher degree of granularity in price declines in the market that may not be captured fully in the index, which is an aggregation of the whole market – especially since the risk of over-leveraging has been substantially addresssed by the TDSR (total debt servicing ratio).”

Industry observers told BT that the authorities are unlikely to begin tweaking the property dampening measures given the looming big-picture risks – including the economic slowdown in China and the impending rise in interest rates by the US Fed.

Said one seasoned market player: “Removing any cooling measures at this juncture may offer only temporary relief for the property market. If the Singapore economy worsens and goes into a tailspin – and there is an increase in households falling behind in mortgage payments, for instance – it would be more timely to remove the cooling measures then as part of a comprehensive package to stimulate the whole economy.

“If the government were to start adjusting the measures now, it may be seen as helping the developers . . .”

CBRE Research head of Singapore and South East Asia Desmond Sim acknowledged that the rate of price descent has been gentle compared with the previous two corrections that were impacted by global events.

Agreeing, R’ST Research director Ong Kah Seng said: “The 8 per cent drop is considered marginal in magnitude and might not have put prices better in terms of buyers’ affordability and expectations”.

In contrast, URA’s index fell a total of 24.9 per cent over four quarters (Q3 2008 to Q2 2009) during the global financial crisis and 20 per cent from Q3 2000 to Q1 2004 (the dotcom bubble burst, 911 and Sars episode). The index retreated 44.9 per cent between Q3 1996 and Q4 1998 (the introduction of the May 1996 property cooling measures, followed by the Asian financial crisis).

Amid the current cycle’s soft landing, buyers’ interest remains generally sluggish, said R’ST’s Mr Ong. “Only projects and properties with strong selling points are quickly snapped up – if they are offered at attractive prices. Properties with mediocre selling points that do not have significantly lower prices continue to face difficulty garnering buying interest.”

He expects the OCR to take a bigger price hit than the CCR and RCR in Q4 2015 and Q1 2016 – due to substantial completions of new private homes in the suburbs, which will intensify competition on both the leasing and resale fronts.

OrangeTee.com senior manager of research and consultancy Wong Xian Yang said: “Going forward, the market is expected to remain soft, in view of uncertainties in the global economy; softness in the rental market due to tight foreign labour policies and high completions of new homes; cooling measures; and rising interest rates.”

Mr Sim of CBRE expects price corrections to continue at a moderate pace, as long as the current slew of cooling measures are still in place.

Based on the Q3 flash estimates, URA’s overall private home price index has retreated 3.2 per cent since Q4 last year. Nicholas Mak, executive director at SLP International, estimates the full-year decline to be 3.8 per cent to 4.5 per cent.

JLL’s Mr Ong said: “There is certainly a risk of sharper price declines in the future, especially if economc conditions deteriorate, which could exacerbate pressured selling.”

Back in May 1996, he recalls, following the implementation of the anti-speculation measures, prices did start to ease; however, when the Asian financial crisis struck in 1997, prices quickly spiralled downwards.

“This time around, we can also expect the current economic slowdown to have an impact on residential price declines – depending on its magnitude and duration.”

Source: The Business Times, 2 October 2015

URA private home price index falls for 8th consecutive quarter

PRICES of private homes have fallen for the eighth consecutive quarter.

The Urban Redevelopment Authority (URA) said on Thursday morning that its flash estimates for the third quarter of 2015 reflect a 1.3 per cent quarter-on-quarter (q-o-q) drop in the overall private residential property price index. This is a bigger drop than the 0.9 per cent q-o-q fall in Q2 2015.

Prices of non-landed private residential properties declined in all market segments.

In Core Central Region, prices fell 1.3 per cent in Q3, compared to the 0.6 per cent decline in the previous quarter.

Prices in the city fringe or Rest of Central Region, fell 1.5 per cent, compared to the 0.6 per cent decline in the previous quarter.

In the suburbs or Outside Central Region, prices eased 1.6 per cent, compared to the 1.1 per cent decline in the previous quarter.

Source: The Business Times, 1 October 2015

Roxy-Pacific to buy freehold residential site near Marine Parade for S$21.5 million

Property developer Roxy-Pacific has agreed to acquire a freehold residential site near Marine Parade for S$21.5 million, it said in a bourse filing on Wednesday.

The plot, at 26 Sea Avenue, has a total land area of 19,474 sq ft and an existing plot ratio of 1.4 under the 2014 Master Plan for residential apartment development.

For that size, the purchase sum works out to roughly S$789 per sq ft per plot ratio.

The acquisition, done through its unit Roxy Capital, will be financed by internal funds and bank borrowings and is not expected to have a material impact on the group’s earnings and net tangible assets per share for the current financial year, it said.

Roxy-Pacific shares were not traded on Wednesday. The counter last traded at S$0.49 on Tuesday, half a cent up from Monday.

Source: The Business Times, 30 September 2015

Shophouses in Geylang up for sale at S$1,350 psf

A ROW of five adjoining shophouses under a single title along 236-244 Geylang Road has been put up for sale by broker JLL.

The indicative price for the freehold property is S$28.8 million, or around S$1,350 psf on the total built-up area of 21,349 sq ft.

The property is held under a single title, and has seven carpark lots. There is a Chinese restaurant and a provision shop on the ground floor, and an office and an association on the upper floors.

Earlier this year, OCBC sold a shophouse at 382 Geylang Road, which has a built-up area of around 3,300 sq ft, for S$5.1 million. This works out to S$1,545 psf on the built-up area.

According to the Urban Redevelopment Authority (URA) website, a strata-titled shophouse in the Geylang Conservation Area went for S$4 million in February 2014.

Source: The Business Times, 30 September 2015

His jumbo flat has four bedrooms and three halls

He describes his home as a “halfway house” for family members who are in need.

His parents stayed with him for about seven years after his mother had a knee operation, before moving back to their own flat.

Now, his 53-year-old sister, who is currently waiting for her new flat, has moved in with her two children.

Together with Mr Ramdzan Minhat, 51, his wife, three children and a maid, nine people live in this jumbo executive flat at Woodlands Avenue 1.

In the early 1990s, HDB converted hundreds of unsold new flats in Woodlands and Yishun into jumbo flats by knocking down the walls of two adjoining flats.

A total of 395 jumbo executive apartments in Yishun and 90 units of seven-room HDB flats in Woodlands were offered to the public back then.

Mr Ramdzan’s home is made up of a four-room unit and a three-room unit. It has a combined space of about 1,700 sq ftwith four bedrooms and three halls – the living, dining and family rooms.

Mr Ramdzan, who runs a jewellery business, says: “The family hall is like the games centre, where the kids play with their PlayStation and Wii.

“It is also my work area because I work from home most of the time.”

Mr Ramdzan bought the resale flat about 16 years ago for $433,000, a drop from its previous market value of about $600,000.

He had cashed out from the sale of his first home – a four-room flat at Woodlands Avenue 9 – before the property market crashed.

A similar jumbo unit now goes for $699,000, based on listings on STProperty.

Mr Ramdzan, who has always like big spaces, says the flat was already combined into a jumbo unit when he bought it.

And all that extra space is perfect for entertaining guests and accommodating his extended family.

Mr Ramdzan, who has five siblings, says: “We do a lot of entertaining. We host our family and friends at least twice a month. There’s easily eight to ten of them, excluding us.”

During Hari Raya Aidilfitri, the number of guests can easily swell to 30.

Every week, the extended family also gathers for religious or Arabic language classes at his home.

When he hired interior architect firm M3 Studio to give the flat a makeover last November, he wanted a Mediterranean theme.

He used Mediterranean tiles for the kitchen backsplash and tiles with bolder patterns and colours for the walls of the two toilets, each of which has a dry and wet area.

He says: “We have two entrances, so that two persons can use them at the same time. There’s also a stool in the toilet where my elderly parents can sit while they shower.”

CUSTOM-MADE

Mr Ramdzan even designed his own furniture and got a manufacturer to make them to his liking.

His favourites are the rattan furniture in the living room and the ‘smoking corner’ along the corridor, which is part of the flat.

He says: “It is sturdy and the look is classic. I can always refurbish it and change the fabric. It is also easy to clean. I just use a blower to blow away the dust.”

When he moved in about 15 years ago, he and his children got their hands dirty decorating the feature walls of the dining and living rooms.

He says: “We used our hands and fingers to make prints and marks.”

He has also brought back many souvenirs from his overseas work trips, such as an old leather suitcase from Germany and a piece of driftwood from Batam that cost close to $1,000. He displays it in the family room.

He says: “Our home is like a retreat.”

Flats sold, big and small

LARGEST

Based on transactions tracked by SRX Property, the largest unit sold was a 297 sq m HDB terrace at Jalan Ma’mor.

For non-landed HDB units, the largest executive flats are at Sin Ming Avenue and Bright Hill Drive, all measuring 243 sq m.

SMALLEST

In the private market, a unit measuring 50 sq m or smaller is considered a shoebox unit.

HDB shoebox flats that have transacted since 2001 are mostly two-room flats, some one-room flats in Bukit Merah and three-room flats in the central area and Queenstown.

The smallest HDB flat sold was a one-room unit at Telok Blangah Crescent, measuring only 31 sq m. The second-smallest units were two-room flats at Jalan Bukit Ho Swee, at 34 sq m.

Source: The New Paper, 27 September 2015

Developer rejected $26m offer for South Beach unit

The developer of the South Beach Residences condo in the inner city turned down an offer of $26 million for one of its penthouses last year because it wasn’t the right time to launch the project.

The firm’s spokesman told The Straits Times yesterday: “We did not want to conduct any piecemeal sale of South Beach Residences. The plan has always been to launch sales when conditions are right. Currently, the high-end property market is very quiet.”

The 190-luxury apartments, which are expected to be completed in the first half of next year, are part of the mixed-use South Beach project in Beach Road.

It integrates four heritage buildings that were used by the military, including the NCO Club of the old Beach Road Camp, with two new tower blocks.

The joint venture between City Developments and IOI Group will include about 500,000 sq feet of office space, 190 apartments, a 654-room hotel, about 37,000 sq ft of retail space and a 29,000 sq ft private club.

The hotel component, which had a preview opening on Sept 3, has around 150 rooms in operation, with rates from $490 a night.

Mr Jan Buttgen, the hotel’s general manager, said on Wednesday: “We are rolling out our room inventory in stages. This will allow us to ensure that everything is perfect for our guests.”

CDL, which has been silent on the project’s luxury residential project, responded to a Straits Times query on Wednesday to say that the homes range from 950 sq ft for a two-bedroom unit to 6,500 sq ft for a five-bedroom penthouse.

Every unit will have a panoramic view of the skyline, said a South Beach spokesman, adding that all six penthouses will have a private swimming pool.

The tenants in the office tower, which has around 96 per cent occupancy, include Commonwealth Bank of Australia, City Serviced Offices, pharmaceutical group Sanofi, Rabobank and Bain and Company.

Many have been moving in since January, said CDL.

Source: The Straits Times, 26 September 2015

Singapore’s housing sector shifting towards oversupply: BNP

SINGAPORE’S housing market could shift towards oversupply from 2016, with prices bottoming out in 2018/19 due to record-high supply, tight immigration policies and rising interest rates that dampen demand, BNP Paribas said in a report.

The excess supply could build up and peak in 2020, before easing, analyst Chong Kang Ho said of the base case scenario.

“We expect physical prices to continue their fall and bottom out in 2018/19E (c17 per cent fall from peak to trough) ahead of supply peaking in 2020E,” Mr Chong said.

For the base case, BNP Paribas expects the oversupply cycle to be milder than in the 1997-2006 cycle, given its assumption of proactive supply cuts, barring external shocks.

“As we forecast physical prices to be falling in 2016/17E, we expect property stocks to range-trade during this period,” said Mr Chong, who has kept a neutral outlook on the property sector as he believes that developer stocks have largely priced in the upcoming oversupply.

BNP Paribas has cut its target price of CapitaLand by 4 per cent to S$3.94 a share, but kept its “buy” call for its diversified earnings base and attractive valuations. The stock is trading at 51 per cent discount to its revalued net asset value.

The research house has kept its “hold” call on City Developments as its overseas projects will take time to contribute to earnings. BNP Paribas has cut its target price for City Developments by 7 per cent to S$8.73.

Source: The Business Times, 25 September 2015

Sept BTO launch merged with Nov’s to let more benefit from new housing policies: Khaw

THE Ministry of National Development (MND) has decided to delay the September build-to-order (BTO) launch by a few weeks, so that three housing policies that were recently tweaked can benefit as many Singaporeans as possible, starting from the very next BTO launch.

This is after taking into account the fact the new policies require time for implementation, National Development Minister Khaw Boon Wan said in his blog on Wednesday.

He had in August also mentioned this in passing to reporters in a doorstop interview at HDB Hub at Toa Payoh.

MND had originally scheduled two BTO launches for the rest of this year, in September and November.

“Looking at the timing of the November BTO launch, we decided that a practical way is to merge the two launches into one mega launch in November,” Mr Khaw explained.

“This will mean a bumper crop of about 7,000 BTO flats in six HDB towns across the country: Bidadari, Bukit Batok, Choa Chu Kang, Hougang, Punggol Northshore and Sengkang.

“In addition, we are ready to market 5,000 balance flats in a concurrent Sale of Balance Flats exercise. This means a combined launch of 12,000 new flats in one go. I am sure home buyers will be able to find a flat that will suit their budget and needs.”

Three major housing policies were recently tweaked to improve affordability and build flexibility into housing options for Singaporeans. These include a new Two-Room Flexi Scheme which offers shorter lease options for elderly households, an increase in the income ceiling for new HDB flat buyers, and changes to widen the eligibility criteria for Special CPF Housing Grant.

Source: The Business Times, 23 September 2015

12,000 new flats to be launched in November

SINGAPORE – The last two Build-to-Order (BTO) flat launches this year will be merged into one “mega launch” in November.

This means a “bumper crop” of about 12,000 new flats will go on sale that month, said National Development Minister Khaw Boon Wan in a blog post on Wednesday.

Of these, 7,000 will be BTO flats in six towns – Bidadari, Punggol Northshore, Bukit Batok, Choa Chu Kang, Hougang and Sengkang.

The remaining 5,000 will be Sale of Balance Flats – flats not sold in previous BTO exercises.

Two BTO launches were originally scheduled in September and November this year. The September exercise would have launched flats in Punggol Northshore as well as the highly anticipated Bidadari estate.

Mr Khaw said the September exercise was delayed to give time for the implementation of new housing policies, such as a new Two-Room Flexi Scheme, an increase in the income ceiling for new flats, and enhancements to the Special CPF Housing Grant.

He said: “As implementation of any new policy does require some time, we therefore decided to delay the September BTO launch by a few weeks, so that these initiatives can benefit as many Singaporeans as possible starting from the very next BTO launch.

“Looking at the timing of the November BTO launch, we decided that a practical way is to merge the two launches into one mega launch in November.”

Out of the 7,000 new BTO flats, about 2,100 flats will be in Bidadari and 2,700 in Punggol Northshore.

Source: The Straits Time, 23 September 2015

Is it time to lift property curbs?

Some stakeholders have renewed their calls for property cooling measures to be relaxed, especially now that the general election is over and a new Cabinet will be unveiled soon.

These measures – introduced over eight rounds from 2009 to 2013 – have sent transaction levels plunging, with knock-on effects on industries from construction to banking and legal services.

While real estate firms and those in sectors affected by the slowdown would welcome some easing, potential buyers may feel that prices have not fallen enough.

National Development Minister Khaw Boon Wan said at a rally earlier this month that the market has been “moderating very nicely”, thanks to cooling measures. “I believe most Singaporeans support the (measures) and prefer the current situation to four years ago,” he added.

But what about 12 months down the road?

HOUSING PRICES

Experts feel that the Government will wait further before any changes are made, as prices have had a limited decline, given the stratospheric levels they hit in the recent boom. As of the second quarter, prices are down 6.7 per cent from the heights they reached in the third quarter of 2013, suggesting the measures have acted just as the Ministry of National Development (MND) intended, namely to “avert a major market correction and facilitate a soft landing for the housing market”.

Just two months ago, Monetary Authority of Singapore managing director Ravi Menon had referred to the more than 60 per cent rise in prices – from the market trough in the second quarter of 2009 to the third quarter of 2013 – and declared that the softening so far is “really not all that much”. “It’s still premature to consider removing any of the cooling measures that are in place,” he added.

But look to next year and it’s possible that property prices could have fallen 12 per cent to 15 per cent by then, which makes it possible that the Government may lift some of the Additional Buyer’s Stamp Duty cooling measures, RHB Research said in a recent report.

Beyond looking at the size of the fall in prices, the Government is likely to be monitoring other barometers, such as mortgagee sales and rising interest rates.

The market is not showing signs of distress, which could otherwise spur the Government to act.

“Nobody is in negative equity and prices have been falling, but not to an alarming extent,” said Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.

While mortgagee sales have risen, they are unlikely to shoot up as the employment rate remains high, noted Ms Grace Ng, deputy managing director of Colliers International.

The number of mortgagee sales is expected to hit 200 by the end of this year but that would still be lower than in 2008 during the Lehman Brothers crisis when 270 properties were affected.

It is also lower than the 452 properties put up during the Asian financial crisis in 1998 and far lower than the 2,462 mortgagee listings in the 2004 market downturn.

Although sales transactions of new private homes have fallen sharply, selective buying is taking place, with some projects remaining popular, going by the recent launches of High Park Residences and North Park Residences.

“(The Government is watching) in case there are signs that distressed sales are starting to climb as a result of a real slowdown in buying interest, or if demand is absent due to lack of confidence, but that doesn’t seem to be what we are seeing at the moment,” said CIMB Private Banking economist Song Seng Wun.

A new Cabinet would also need time to settle in and review if some of the cooling measures should be tweaked. This means any changes could come at the end of this year at the earliest, and more likely after Chinese New Year, industry watchers note.

They may be waiting to see how macroeconomic conditions play out when more supply comes onstream, experts say.

For the moment, if Singapore remains at full employment and interest rates are still low, there should be buyers aplenty if measures are tweaked, which could cause prices to shoot up again, noted Mr Song.

On the manpower front, economists expect the labour market to stay tight, with steady wage growth for some time to come, said Barclays economist Leong Wai Ho.

Central banks around the world are also generally keeping a low interest rate policy to support growth.

Barring a jarring shift in macro conditions – such as an external shock that could lead to more job losses in Singapore and a structural shift in demand – the Government may not see enough reason yet to support a market that is cooling as the measures intended and not headed into distress, said Mr Song.

PRESENT PRESSURES

Unsold stock remains aplenty at 19,081 private homes in August, most of them larger units, according to data from Savills.

Last Wednesday, the head of Singapore’s property developers’ body warned that a perfect storm was brewing in the form of weak economic sentiment, a worsening supply-demand imbalance and rising vacancy rates. “As far as the Government is concerned, perhaps the market has not dropped so much…(But) if you wait for the market to worsen, you may not catch it at a right time,” Mr Augustine Tan told The Straits Times.

In a nation where home ownership is 95 per cent, there are risks when prices moderate. “Many people have outstanding mortgages and these do not disappear when asset values drop,” said Mr Ku Swee Yong, Century 21’s chief executive officer.

Many people have also used their Central Provident Fund money to buy homes rather than allow it to accumulate interest for use in retirement, so dropping home values can hurt retirement plans in a big way.

Proponents for a lifting of cooling measures sooner rather than later add that prices are unlikely to see a sharp rebound as the conditions that previously fuelled prices no longer exist.

Credit is no longer cheap and readily available and with Seller’s Stamp Duty in place, people are no longer “flipping” properties so sub-sales have been on the decline, said ERA Realty key executive officer Eugene Lim.

The biggest worry in the market is oversupply, which is already being reflected in rising vacancy rates, which hit 9.1 per cent for condominiums in the second quarter.

A total of 19,941 private homes were completed last year and a further 42,606 private homes will be completed this year and next.

“Given the influx of homes, rising vacancy rate and increasing uncertainty on interest rate hikes and Singapore’s economic growth, we could be headed towards a slippery slope if the measures are tweaked too late,” said Ms Alice Tan, head of consultancy and research at Knight Frank.

WHAT’S NEXT?

Going into next year, it is possible that prices may fall faster than they have so far. This is because market demand will face a double whammy from rising interest rates and slower economic growth translating into slower wage growth for the top 20th percentile of income earners, who typically form the demand for private properties, said UOB economist Francis Tan. “The three-month Singapore interbank offered rate (Sibor) will be on a consistent rise next year as it is pegged to the normalisation of interest rates in the United States, which should happen any time soon,” he said.

Those considering purchases will have to factor in higher interest payable for their monthly mortgage, which will further dampen transaction volume and cause more price falls.

And while the labour market has been tight, it is mainly tight at the lower end, including occupations such as cleaners, production operators and sales service staff.

The private property market is generally accessible to only the top 20th percentile of income earners, and their wage growth is tied to economic growth. “In a time when our economic growth is the slowest since the global financial crisis, I do not think income growth for this segment will be what we had seen previously,” said Mr Tan.

Eventually, it will be further weakening demand and increasing completions in the next year that will send prices down and spur the Government to take action.

Source: The Straits Time, 23 September 2015