21 Jul, 2009
Developers begin raising prices of new projects
Brisk weekend sales indicate continuation of strong momentum
By Fiona Chan
SALES of new condominium projects continued at a robust pace last weekend, despite some developers starting to test the market with slightly higher prices.
Buyers picked up 120 units at Waterfront Key in Bedok Reservoir at an average price of $735 per sq ft (psf), even though that price is higher than that at the neighbouring Waterfront Waves condo, where units are going at $700 psf on average.
Both are 99-year leasehold projects and are being jointly developed by Far East Organization and Frasers Centrepoint.
In the Upper Changi area, Hong Leong Group sold 50 more units of The Gale on Flora Road at prices ranging from $650 to $725 psf – up from $650 to $700 psf the previous weekend. This makes 265 units sold to date at the 329-unit freehold development, or about 80 per cent.
In the higher-end segment of the market, City Developments (CDL) has also raised prices for its newly launched Volari@Balmoral by 2 per cent, after it saw a fairly good take-up rate over the weekend.
CDL released 65 units out of a total of 85, and sold about 55 of them. The average price of the units sold was over $2,000 psf, it said in a press release.
The developer added that almost half the buyers were foreigners. Prices start from $2.7 million for a two-bedroom unit.
The transactions over the weekend indicate that this month’s home sales figures are likely to maintain the strong momentum started in February, which has seen more than 1,000 new homes sold every month.
Another interesting point: fewer buyers appear to be taking up the interest absorption scheme, which allows them to defer the bulk of their payments until their apartment is completed but often at a higher price.
Only a third of the buyers at The Gale took up the interest absorption scheme. About 20 per cent of Volari@Balmoral’s buyers opted for the scheme, which means they paid 2 per cent more for their units.
At Waterfront Key, ‘practically all’ the buyers went with the normal progressive payment scheme, said Far East Organization’s chief operating officer Chia Boon Kuah. This could be because interest absorption for this project comes at a 4 per cent premium.
When asked why the prices were higher at Waterfront Key than at Waterfront Waves, Mr Chia mentioned the project’s ‘thoughtful facilities’, including three outdoor villas and two ‘island villas’, as well as the fact that all units would have views of either the park, reservoir or pool.
The developers released 176 units at Waterfront Key last Friday. A further 102 units will be released during the project’s public launch this Saturday. The condo has 437 units in all.
Of the buyers last weekend, about 60 per cent were HDB upgraders, said Mr Chia. They bought mainly the smaller units: all the 57 two-bedroom units from the first to 15th storeys have been sold, at prices starting from $593,000. The four-bedders, which are 1,518 sq ft in size, are going for up to $1.42 million each.
12 Jul, 2009
The invest guide to the current property run
Recession? What recession? The residential property market is on a roll with owner-occupiers, speculators and investors rushing in to buy during what they see as the bottom of the market. Demand has shot through the roof and prices are rising. But is it a boom or just a blip? Property Correspondent Joyce Teo considers key aspects of this most unlikely boom to see if there is an answer to the puzzle.
1. Suburban boom
Unlike the 2007 boom, which was in high-end and prime homes, this buying rush began with the pick-up in demand for mass-market homes.
HDB upgraders are leading the way. They may have missed out on the previous bull run and now want in.
It all started with the Caspian, a large 99-year leasehold project in Jurong West that attracted hordes of visitors. The ‘Caspian effect’, as one industry source calls it.
The 712-unit project sold 300 units at between $340,000 and $990,000 – an average of $580 per sq ft (psf) – over three days in early February.
New mass-market projects such as Double Bay Residences in Simei and Mi Casa in Choa Chu Kang followed.
Developers also re-launched older projects at lower prices, such as The Quartz in Buangkok.
Jones Lang LaSalle’s head of South-east Asia research Chua Yang Liang said people are significantly better off than in 2000 and since mass-market property prices have moved down from the peak, the units remain very attractive.
After the flurry of mass-market launches in the first quarter, buying spilled over into the mid-tier and upper end segments, said property consultants DTZ.
New private home sales are estimated at up to 6,900 units in the first half of the year, surpassing the 4,268 sold in the whole of last year, it said.
But with HDB upgrader demand still going strong, developers continue to target this group.
New releases of mass-market projects include Oasis @ Elias in Pasir Ris and The Gale in Flora Road, where units were offered for preview sale at $600 to $700 psf on Friday.
2. Interest absorption
Just how buyers pay for their new homes has changed since the last big buying rush.
The era of the deferred payment scheme may be over, but not the concept.
The interest absorption scheme (IAS) offers a similar arresting proposition – pay 20 per cent of the property upfront and become an owner.
The rest of the payments will be deferred until the project’s temporary occupation permit period.
Unlike the deferred payment scheme, IAS requires you to take up a bank loan at the time of purchase but the developer absorbs the interest payments until the project has been finished.
Dr Chua said stable HDB prices and the availability of credit in the form of IAS have helped spur demand.
IAS became very popular earlier this year and helped drive sales at mass- to mid-market developments, particularly if the scheme was offered at no additional cost.
Some have argued that the popularity of the IAS shows that this boom has plenty of staying power as buyers using the scheme would have met the banks’ credit assessment criteria.
But some cash-rich buyers may opt out of the scheme if it is offered at an additional cost of 2 per cent to 5 per cent above the property price, experts said.
* Experts warn euphoria may not last long
At The Wharf Residence, IAS take-up was very low as the scheme was offered at a 5 per cent premium.
Although the deferred payment scheme is now defunct, developers who obtained approval before it was halted in late 2007 can still offer it.
The 152-unit One Devonshire in Devonshire Road is one such project. It offered IAS at a 2 per cent price premium and deferred payment at a 3 per cent premium.
While some did go for either of the two schemes, many opted for the normal progress payment, even though they had to pay for 30 per cent of the project upfront as construction has started.
3. Small is beautiful
When demand nearly evaporated last year, some developers went back to the drawing board to reconfigure projects to offer smaller, more affordable units.
The freehold 293-unit Alexis @ Alexandra, near Queenstown MRT station, was an instant hit, selling out after its February launch.
Most of the flats were small – it has 114 one-bedroom units of just 366 sq ft to 527 sq ft and costing around $450,000 each – and 77 one-plus-one bedroom units at around $550,000 each.
Alexis was ample proof that size matters little as affordability is key. Small is beautiful, in other words.
Launches of more projects with small units followed.
Once termed ‘Mickey Mouse’ units as they seemed rather unreal, tiny apartments of 400 sq ft to 500 sq ft have become common enough to be simply referred to as the typical studio units or one-bedders.
Because they are unlikely to appeal to owner-occupiers with families, buyers tend to be speculators or investors looking to flip or rent them out to singles or couples.
4. VIP previews
The VIP preview is clearly for very important persons but at some developments these days, you become truly important the minute you show keen interest. Entry to a special preview is instant when you call to register interest.
The advantage of attending a condo preview is getting the first bite of the cherry.
You are among the first to buy and can take your pick and often, preview prices are lower than launch ones.
That said, different developers have different strategies. Some may launch just the low floors or the less appealing units at attractive levels during the preview.
‘Soft launches are one of the ways to test the market. If the market is good, they will probably push up the prices at the official launch,’ said Credo Real Estate executive director Tan Hong Boon.
Projects holding previews at the moment include the 34-unit Ferrell Residences in Bukit Timah Road. It is going for $1,550 psf to $2,000 psf, or from $3 million.
5. Where are prices now?
Early estimates of the official property index show that the fall in private home prices has slowed. But experts said caveats lodged indicate that prices have actually risen recently on strong demand.
DTZ said price recovery has been happening across the board since May.
CB Richard Ellis analysed caveats lodged in the top five districts. It found that the median prices of new 99-year leasehold apartments rose to $655 psf in the second quarter, up 7 per cent from the first quarter.
In the resale and sub-sale market, prices climbed from $600 psf to $628 psf.
In the freehold and 999-year leasehold segment, median prices of new homes have dropped nearly 13 per cent to $951 psf.
But resale and sub-sale prices have climbed by 12.7 per cent in the same period to $850 psf.
The euphoria may continue for just a few more months, experts said.
‘People are getting ahead of themselves a little bit,’ said IP Global managing director and founder Tim Murphy, who is keen on Singapore over a five- to 10-year period.
‘There seems to be a lot of activity and we are not sure how much of that is underpinned by fundamentals.
‘Some of these properties have gone up 10 per cent to 15 per cent in the last quarter. We think it’s a little bit frothy for us.’
Jones Lang LaSalle’s Dr Chua said a pullback in the market is ‘not unimaginable’ should the larger economy not show any positive growth.
July 12, 2009
Know these terms
* Annual Value (AV):
This is used as the basis to compute property tax for properties in Singapore. The tax rate for owner-occupied residential properties is
4 per cent a year. The tax rate for all other properties is 10per cent.
AV is the gross annual rental value that a property is expected to fetch when rented out, less what the landlord pays for expenses related to repairs and maintenance.
A document that any person who claims to have an interest in the property may lodge against the title of property at the Registry of Land Titles.
* Caveat emptor:
Latin for ‘buyer beware’. It is a legal term meaning the risk in a transaction rests with the buyer, unless specifically stated otherwise or unless fraud or deception can be proven. Most countries now have strict laws protecting buyers from shoddy workmanship, finish and quality.
* Cluster housing:
Cluster housing is a hybrid development that combines conventional housing with the features of condominium housing, with strata titles, shared facilities such as swimming pools, landscaped gardens and other amenities. The buildings should not exceed four storeys.
* Common property:
Any premises not included in the strata lot but within the strata-titled development. Examples of common property include communal facilities such as the swimming pool and clubhouse, as well as areas like lift lobbies and staircases.
* Detached houses/bungalow:
A type of landed housing that comprises a detached dwelling house, usually not more than three storeys high. The minimum plot size is 400 sq m and the frontage is 10m.
* Management corporation or MCST:
A body established under the Land Titles (Strata) Act that consists of all the owners of the units in a strata-titled development. The management corporation owns, controls and manages the common property.
* Plot ratio:
Plot ratio determines the maximum gross floor area (GFA) allowable on a plot of land. A plot ratio of two means that the GFA allowable is two times the site’s area.
A residential building designed as a single dwelling house unit on the ground level, and forming part of a row of no fewer than three residential units with common ownership of land.
* Vacant possession:
Vacant possession is delivered when the buyer is allowed to use the property immediately without anyone else still living in it or using it.
July 13, 2009
No fear of property gains tax on show
Investors, home seekers throng property launches over weekend
By EMILYN YAP
FEAR and uncertainty over how gains from property sales would be taxed vanished as quickly as they came last week.
Home seekers still thronged showflats over the weekend and smaller apartments remained popular picks.
Turnout at property launches was healthy, observed DMG & Partners Securities analyst Brandon Lee, who visited a handful of showflats in the last few days.
News that the government could change income tax laws on profits from property sales did not seem to have an adverse impact, he said.
Word got round last Wednesday of a proposal to make current laws clearer – by guaranteeing that anyone who sells only one property in any four-year period will not be taxed on the gains.
This left many industry players wondering if sellers who failed to meet the criterion would automatically be taxed. Their fears were eased when the government said that this was not the case.
Given how much property prices have fallen, there is still a chance to profit – with or without taxes – said Mr Lee in a note last Thursday. ‘Even if a maximum 20 per cent personal income tax rate is levied on profits, the seller should still reap healthy income.’
Investors seemed to recognise this and joined genuine homeseekers at showflats for new projects, such as Parc Imperial at Pasir Panjang, Ascentia Sky along Alexandra Road and Sophia Residence at Mount Sophia.
According to agents, buyers had taken up around 80 per cent of Parc Imperial’s 138 units by yesterday afternoon.
Studio and two-bedroom apartments at the freehold project were the most popular, with prices starting from $1,200 psf.
At Luxus Hills, a recently-launched 999-year leasehold landed development at Ang Mio Kio, 63 of 78 units have been sold. Prices ranged from about $1.75 million for intermediate terrace homes to $2.05 million for corner terraces.
Existing properties also found buyers. In four days, The Straits Trading Company sold 10 units at Gallop Green, a freehold estate near Farrer Road which received Temporary Occupation Permit in 2002.
Prices averaged $1,400-$1,435 psf and buyers comprised owner-occupiers and investors, said the company’s executive vice-president Eric Teng.
July 9, 2009
Property market continues riding on buying mood
By UMA SHANKARI
PROPERTY market activity continued in the first week of last month as more private homes were launched – or re-launched – to ride the buying momentum.
Bukit Sembawang Estates said yesterday that it has sold 50 of the 78 units at Luxus Hills, a 999-year leasehold landed development at Ang Mio Kio, in a preview. Intermediate terrace homes were sold for an average of $1,085 per sq ft of land area, while corner terraces went for an average of $980 psf.
BT understands that agents have also started to market prime projects, including GuocoLand’s 272-unit freehold Sophia Residence, City Developments’s 85-unit project on the former Garden Hotel site and Wing Tai’s 346-unit Ascentia Sky in Alexandra Road.
For Sophia Residences, asking prices range from $1,400-$1,600 psf. For CityDev’s project, agents are quoting $1,800-$2,000 psf. At Ascentia Sky, a limited number of units have been released at prices ranging from $1,150- $1,350 psf.
Other developers are re-launching projects. CapitaLand is believed to have re-launched Latitude in the River Valley area last week. Asking prices range from about $1,600-$1,900 psf, a significant decline from $2,600 psf fetched for the 11 units sold from September 2007 to April 2008. Far East Organization re-launched Silversea a few weeks ago, selling some units at $1,250-$1,400 psf.
Developers can be expected to expedite new launches and continue promoting already-launched projects over the next two weeks as the Hungry Ghost month – which is traditionally slow for property sales – draws near.
Sales at recently launched projects have continued apace. ‘We visited show flats for a few mid and prime projects last weekend,’ said DMG & Partners Securities analyst Brandon Lee in a July-6 note. ‘More developers are now offering additional price discounts of 2-5 per cent during soft launches to incentivise buyers.’
Prices rose 4.8 per cent quarter-on-quarter in Q2, Mr Lee said. ‘Along with a flat stock market performance, we believe this has led to a less fervent show-flat turnout. However, sales volumes remain healthy.’
In an update, Far East Organization said yesterday that it has sold 130 apartments at its 280-unit Vista Residences at Thomson.
Separately, Credo Real Estate yesterday released for sale by tender a cluster of 18 shophouses at Joo Chiat/Onan Road. The properties are owned by a family trust, which is seeking offers in the region of $25 million to $30 million. The freehold site is 35,440 sq ft and the total gross floor area of the shophouses is 62,489 sq ft.
July 9, 2009
The market stirs
THE buzz has returned to the property market. Developers’ home sales have recovered impressively since February. Private home prices have begun to pick up after hitting a low in the first quarter.
The revival in home buying is being fuelled by pent-up demand, low interest rates and a lack of trust in financial instruments after the Lehman Minibond fiasco. Some buyers are also motivated to make a commitment sooner rather than later for fear of missing the boat.
However, short-term factors are also at play, such as the spectacular stockmarket rally from March to mid-June. But the stock market is hard to predict, and with the Singapore economy still in recession, the jury is out on whether the property market will continue its recovery.
Still, some may find this a good time to buy. It would, of course, be wise to keep an eye on the debt-service ratio as a proportion of income and to set aside reserve funds for loan payments. One also has to be savvy when shopping for a mortgage.
For those eyeing overseas property, the weaker Singapore dollar has made investment more costly.
The articles in this supplement give some pointers for a decent property investment strategy. And as always, remember that property is a long-term commitment and that it’s best to buy within one’s means.
July 9, 2009
Residential leasing – the laws of demand and supply
By JACQUELINE WONG AND DESMOND SIM
RENTS of private residential property have been correcting since August last year, in line with the weak economy. While the traditionally busy period in April saw a surprise 2 per cent spike in rental values, the question is whether a more sustainable recovery is in sight. To get an answer to this, we have to look at the supply-demand dynamics in the residential market.
A quarter of Singapore’s 4.84 million residents are foreigners, and this is the group that drives the leasing market. This is because Singaporeans generally don’t rent, choosing to live with their parents until they can buy their own homes.
Employment in the services sector grew by over 30 per cent in 2007, especially in financial and professional services, according to numbers from the Ministry of Manpower. This is a major factor accounting for the surge in the expatriate workforce. Foreign employment stood at 1.06 million, or 35 per cent of the total workforce of 2.95 million.
The profile of the expatriate workforce has evolved through the years. Expatriate employment is no longer limited to top management posts and now includes middle management and executive functions. There is a wider variety of expatriates as well – from Europeans and Americans to other Asian nationalities; and from singles to couples with teenage kids. Depending on demographics and employment status, their accommodation preferences vary.
For expatriates, location is a key consideration. They would prefer to stay 1) near transportation and amenities (MRT station, malls, even expatriate clubs), 2) near schools, and 3) close to the workplace. Residential projects that meet these criteria will generally see steady demand which means they can command good rentals.
* Expatriate packages
Expatriate packages have been revised with the changing times. It is rare today to see the typical full expatriate relocation package that covers housing, car, club and school costs. With tighter budgets, mid-management expatriates are now mostly offered a package under localised terms that covers accommodation costs. Or it may be a hybrid package that offers a mix of benefits.
The expat housing terms usually fall into three categories. The first, a corporate lease, allows the landlord to deal directly with the employer. It is most commonly adopted for a full expatriate or hybrid relocation package.
The other two forms of leases, namely 1) corporate lease with personal indemnity and 2) personal lease, are usually signed under a package with localised terms. Under these terms, the employee is responsible for the expenses under the lease. The only difference is that under a personal lease, the leasing contract is between the employee and the landlord. Under a corporate residential lease with personal indemnity, the employer signs the leasing contract with the landlord while the personal indemnity is borne by the employee.
Under the latter two leases, the tenant bears the burden of any additional cost in a lease should it exceed the allocated budget. If the rent is below the allocated budget, the tenant who takes up a personal lease enjoys the savings. For the tenant who uses the corporate residential lease with personal indemnity, any savings on rent is split between the company and the tenant. This burden of costs/savings will have a major impact when it comes to rental negotiations.
A collective sale frenzy in 2006 and 2007 saw a slew of prime residential projects taken off the market for redevelopment, especially in districts 9, 10 and 11. There were close to 100 such developments transacted in the two years, which reduced the leasing inventory by about 6,000 units.
In the interim, the impact of this large withdrawal has been greatly felt. Of course, this removed stock will eventually return to the market as new supply. While this will give tenants more choices, landlords will face greater competition, especially if the economy doesn’t improve and demand remains muted.
There are an estimated 4,000 prime residential units due to be completed by 2011. These include both luxury (usually with larger units) and typical prime units. Following the popularity of luxury units during the property boom, there are a few such projects scheduled to come into the market in the next two years. They include The Marq (66 units), The Hilltops (241 units), Ritz Carlton Residences (58 units), Ardmore II (118 units), Grange Infinite (68 units) and Orchard Residences (175 units).
This does not include the projects sold en bloc to developers for redevelopment into luxury condominiums which have yet to get their sales licences. As such, the names or number of units in these developments are not known. Among these projects are Ardmore III (Wheelock Properties), Pin Tjoe Court (Pontiac Land Group), Anderson 18 (joint venture between Wing Tai and City Developments), The Ardmore (SC Global), Lucky Tower (City Developments), Beverly Mai (HPL Properties) and Grangeford (OUE).
Rents are expected to come under severe pressure when ample new supply comes onstream at a time when market demand is weakening.
* Overview and outlook
With the dampened sentiment in the corporate sector, housing budgets have seen cuts of 10-20 per cent. Expatriates, especially those on personal lease or corporate residential lease with personal indemnity, will be motivated to downsize or be on the lookout for discounted rents as they seek greater savings.
The softening demand and the new supply of some 2,000 non-landed units in the first quarter have put further downward pressure on rents. Some large completed projects include Rivergate (545 units), The Suites at Central (157 units) and the remaining City Square Residences (estimated at 439 units). In addition, there were about 1,600 previously en bloc units that have been released back into the rental market as short-term leases at much discounted rental rates.
These are the main reasons for the major rental correction of about 18 per cent over the past few months. Any recovery of the leasing market in April 2009 can be attributed to the following factors. Traditionally, the months from April to July are the seasonal highs in lease take-ups and renewals. Leases are usually signed to coincide with the summer break in international schools.
Islandwide demand has remained fairly stable as the retrenchment of the expatriate workforce in the financial sector was offset by new hires in other industries such as R&D and biomedical science. In addition, there has been restructuring of some financial institutions where business units in Europe and the US have been relocated to Singapore to tap into Asia’s growing wealth.
A recent survey of five large, Singapore-based moving companies by the American Chamber of Commerce in Singapore has shown that inbound shipments rose more than 10 per cent from 2007 to 2008 and outbound shipments increased nearly 8 per cent from 2007 to 2008. However, they are expected to drop by 2 per cent in 2009.
As a cautionary note, there could be a delay in the correction of expatriate demand as most expatriates today hold personal employment passes (PEP). Under this scheme, PEP holders do not need to re-apply for a new employment pass when changing jobs. They also can stay for up to six months here without any valid employment compared to only two months previously. Should the employment market remain weak, we may begin to see a delayed exodus of these expatriates if they do not get re-employed soon.
Leasing demand may also soften as more expatriates weigh the attractions of buying their own home as opposed to leasing it. With the current low interest rates and discounted housing prices, it is possible that expatriates who have been living in Singapore for some time may seek a more permanent accommodation and residential status.
Having said that, supply remains limited this year, especially for larger luxury units. Existing projects such as The Claymore, Claymore Point, Four Seasons Park, Ardmore Park, The Colonnade, Regency Park, and Yong An Park are enjoying high occupancies. As such, renovated units in these older developments are still commanding high rentals.
Similarly, supply of quality residential projects in prime districts remains limited this year. The spillover demand for luxury projects will likely benefit these sub-markets. Residential projects in the prime districts are still the preferred choice for many expatriates.
But with more completions in the pipeline, impending supply remains the biggest concern for the market. Unless the global economy picks up and expatriate inflows increase, prospects for the leasing market here will be bearish, particularly in the luxury segment.
Jacqueline Wong is head of residential and Desmond Sim is associate director of research, Jones Lang LaSalle