Keppel, other developers rev up for sales

KEPPEL Corporation and Keppel Land are releasing a new batch of 30 units at their Reflections at Keppel Bay condo today at an average price of $1,950 per square foot (psf), assuming buyers will take the deferred payment scheme (DPS).

Buyers who opt for the normal progressive payment scheme pay 3 per cent less. Sizes of units range from 900 sq ft to 1,600 sq ft. The 99-year development is still under construction.

Reflections at Keppel Bay comprises a total of 1,129 units, of which 638 were sold as at end-July, according to Urban Redevelopment Authority data released this week. In July alone, five units were sold at prices ranging from $1,641 psf to $2,195 psf.

Keppel is also riding on the current uptick in home buying to release for sale units at the completed Caribbean Residences nearby at an average price of $1,300-1,400 psf.

Caribbean Residences comprises a total of 168 apartments at the completed 99-year-leasehold Caribbean at Keppel Bay condo that the group had leased out as corporate residences earlier. The majority of the apartments are leased with tenancies ranging from six months to two years, and these units will be sold with the existing tenancies.

Most of the apartments at Caribbean Residences are located in two blocks which are eight and nine storeys high. So far, about 30 of the 168 units are said to have been sold in the past few weeks and the group is riding on the buyer interest to release more apartments.

‘However, not all the remaining units at Caribbean Residences are being put on the market at the same time,’ a Keppel spokeswoman said. The 30 units sold recently were mostly two-bedders.

Keppel is developing the two projects on the former Keppel Harbour site.

Property consultants say developers are working hard to release more projects, to take advantage of the pick-up in home-buying sentiment.

Next week, NTUC Choice Homes will preview its 39-storey Trevista condo in Toa Payoh. The 99-year-leasehold project will have a total of 590 units.

Singapore Land is also expected to begin selling next week Trizon, a freehold condo on the former Himiko Court site in the Mount Sinai area.

The 24-storey development comprises a total of 289 units.

SingLand bought Himiko Court in May 2007 for $336 million, or $821 psf of potential gross floor area, inclusive of an estimated $1.07 million development charge. Market watchers reckon Trizon may be priced about $1,400 psf on average.

Source: Business Times, 21 Aug 2009

Cash upfront for HDB resale flats doubles in a month

Private property exuberance spills into public housing, with units selling $10k over valuation

THE amount of cash needed upfront to buy an HDB flat resale roughly doubled last month as the exuberant sentiment in the private homes market spilled over into public housing.

Three property agencies told The Straits Times that the median cash-over-valuation, or COV, has shot up across all flat types and has gone above $10,000 for some units.

In two of the more startling examples, a five-room flat at Depot Road sold for $70,000 above its $490,000 valuation, while an executive flat in Pasir Ris sold for $35,000 above its COV of $550,000, according to figures from PropNex and the HSR Property Group.

COV is cash that buyers pay to a seller over and above a flat’s market valuation. It cannot be covered by a mortgage or CPF money, and so serves as an indicator of flat affordability.

What is surprising is the speed at which it doubled in a month, said Mr Colin Tan, Chesterton Suntec International’s research and consultancy director.

Figures from the Housing Board (HDB) for the April to June quarter showed that median COV was zero for five-room and executive flats.

But data from PropNex, ERA Asia Pacific and C&H Realty for last month showed that this now ranged from $5,000 to $13,000.

The three agencies have a share of about 70 per cent of the HDB resale market between them.

There was a similar surge for three- and four-room flat types: HDB data put median COV at $5,000 in the second quarter, but the agencies said it rose to the region of $10,000 to $15,000 last month.

Based on ERA’s sales, the median COV for three-room units rose from $6,000 in the second quarter to $14,000 last month. The median COV is a mid-point: Half the units were sold for a COV above that value, and half below.

Industry observers say that the COV rise was inevitable given that the optimism in the private market was bound to spread to HDB flats.

HDB flat prices have staged a surprising comeback amid the recession, reversing a first-quarter dip of 0.8 per cent to rise 1.4 per cent in the second quarter and reach a historical high.

Analysts now predict further price increases for resale flats for the third quarter on the back of climbing COVs – as long as buying momentum is sustained.

PropNex chief executive Mohamed Ismail said high demand for resale flats is supporting surging COVs, as supply remains tight.

A cascading effect in the market is driving buyers to more affordable sectors.

Chesterton’s Mr Tan said some buyers who are being priced out of the rebounding private market are turning to HDB resale flats.

Private home prices have started to climb, buoyed by high buying activity that saw a stunning 2,767 units sold last month.

This, in turn, has resulted in first-time HDB buyers, hit by soaring COVs, being forced out of the resale market and into new HDB flats, said ERA associate director Eugene Lim.

This is already evident: The HDB was flooded by 5,392 applications for 769 flats at the recent launch of Punggol Residences. Applications closed last week.

That is a subscription rate of seven times in a market where a typical rate is three or four times.

New HDB projects, which take three years to build, have not seen such numbers since the 2007 property boom.

However, C&H Realty managing director Albert Lu observed that most of the sales are still done at reasonable COV levels of around $10,000.

‘There are some unrealistic sellers asking for high COVs as in the last boom, but buyers can choose not to bite,’ he said.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak noted that mass market private properties have a strong link to HDB resale flats, and COVs will stop rising only when mass market buying interest dies out.

Banking executive Goh Hui Min, 25, is one HDB buyer who is glad she bought her five-room flat in Telok Blangah for $590,000 about a month ago before the latest COV rises.

‘I paid $35,000 below the flat’s valuation, which, given the current market, is quite a fabulous deal,’ she said.

Source: Straits Times, 20 Aug 2009

Private home sales up 52%

SALES of private homes hit a new high for the second straight month in July, surging about 52 per cent from June.

Low interest rates, relatively lower prices and a fear of missing the bottom are some reasons behind the strong sales. Although there were also signs of speculation, a significant portion of the sales was backed by real demand, said analysts.

According to the Urban Redevelopment Authority, 2,767 units were sold last month, compared to 1,825 in June. The total number of private homes sold in the first seven months of the year hit 10,017 units.

Property consulting firm Cushman and Wakefield director Donald Han said: “With another five more months to go, (sales could) potentially cross the 15,000 mark. It might go as high to 16,000 to 18,000; it will definitely be one of the records being set.”

Out of the total number of units sold last month, more than half were in the suburban areas, about 27 per cent of the transactions were in the city fringe areas, while 18.6 per cent were in prime districts.

The five best selling developments last month were The Gale near Changi airport, Meadows@Peirce at Upper Thomson Road, Waterfront Key along Bedok Reservoir Road, Sophia Residences near Dhoby Ghaut and Parc Imperial at Pasir Panjang.

Analysts say July’s sales numbers will be unmatched in August, due to the Hungry Ghost Month (Aug 20), which is a traditionally slow period for sales. Less than 1,400 units are expected to be sold then.

Source: Today, 18 Aug 2009

Prices inch up as home sales hit new highs

Record 2009 sales on the cards as developers seek balance between volume and price

(SINGAPORE) Even as news of the 52 per cent month-on-month jump in developer home sales to a stunning 2,767 units in July begins to sink in, analysts are revising their predictions for the full year.

The 1,825 units sold in June already constituted a record but that number was surpassed effortlessly last month as buyers, eager not to miss the boat, rushed in and developers rolled out tempting new offerings. They launched 2,878 private homes in July, up 75.8 per cent from the June figure. For a year that started gloomily, 2009 may shatter private home sales records.

From Jan 1 to July 31 this year, developers sold 10,017 private homes. The previous full-year record of 14,811 units set in 2007 is likely to be overtaken with some market watchers forecasting sales of up to 16,000 units for the full year 2009.

But it will be a toss-up between developers wanting stronger price appreciation and booking more sales, some property pundits say. Evidence of price increases at some projects has surfaced from a Colliers International analysis of the Urban Redevelopment Authority’s data on developer sales in July. Examples include Martin Place Residences, The Beverly at Toh Tuck Road, Concourse Skyline at Beach Road and Floridian in Bukit Timah.

In part, the higher prices can be explained by more transactions involving units on higher floors or with better orientation in July, compared to June. But developers have also become more confident about seeking higher prices as they’ve sold more units in ongoing projects. Also, new projects released in recent weeks have been priced higher than levels prevailing, say, in Q1 this year.

Frasers Centrepoint chief operating officer Cheang Kok Kheong says: ‘The price increase varies from segment to segment and from project to project. For the mass market, my gut feel is the increase has been about 10-15 per cent from the lows of January-February 2009.’

Knight Frank executive director Peter Ow says: ‘Buyers are price sensitive at this juncture. There’s a limit to how quickly developers can raise their prices. The jump in sales in July was driven by launches at prices that are still reasonable despite the fact that they are higher than Q1 launch prices.

‘When they see developers selling well at launches, it increases the fear factor in people who have not bought or invested yet – that they will miss the boat.’

Mr Cheang says his gut feel is that developers may sell a total of 15,000 to 16,000 units for the whole year.

Nicholas Mak, a property consultant, is gazing at the same sort of numbers, citing continuing optimism among buyers that the worst is over for Singapore’s property market.

CB Richard Ellis executive director Li Hiaw Ho reckons that there’s a good chance of surpassing the market peak of 14,811 units in 2007.

Apart from pricing, how many homes developers sell for the rest of this year will also depend on the type of projects they release.

According to the URA figures, the strong sales in July was led by the Outside Central Region (OCR) – where mass-market homes are typically located. It accounted for about 64 per cent of the 2,878 private homes that developers launched and 54 per cent or 1,502 of the 2,767 units sold.

The main projects that contributed to the high July sales in OCR included The Gale (294 units sold), Meadows @ Peirce (286 units), Watefront Key (191 units) and Optima @ Tanah Merah (132 units).

After the strong spate of sales, developers are left with fewer 99-year leasehold mass-market projects that buyers have hungered for this year. One of them, NTUC Choice Homes’ Trevista in Toa Payoh, goes on the market next week. There are also condos in Yishun and the West Coast bought on land at state tenders, which could be put on the market before year-end. In the mid-market segment, CapitaLand’s condo of about 1,000 units on the Gillman Heights site is also expected to be launched in the current half.

In Q2, the Rest of Central Region accounted for 751 or 27.1 per cent of primary market sales; top contributors included Parc Imperial (137 units) and Ascentia Sky (116 units). The Core Central Region had the smallest share of 18.6 per cent or 514 units. The star performers in this segment were Sophia Residences and Volari, with sales of 173 units and 79 units respectively in July.

Whereas home sales more than trebled in OCR from 432 units in June to 1,502 units in July, sales eased in both CCR and RCR over the same period.

Units costing up to $1,000 psf accounted for 57.5 per cent of developers’ July sales, not far off a 59.8 per cent share in June, according to Colliers’ analysis.

Still, Colliers International director for research and consultancy Tay Huey Ying points out that positive sentiment and improved confidence continue to spill into the higher market segments as seen in the surge in units priced above $2,000 psf that developers sold – from 37 units in June to 98 in July. The latest figure was boosted by the sale of 58 units in this price range at Volari at Balmoral Road.

However, there was no unit priced above $3,500 psf that changed hands in July, unlike June, when there was one.

Source: Business Times, 18 Aug 2009

July sales of new private homes at all-time high

A total of 2,767 units sold, with just over half in suburban areas

PRIVATE home sales rocketed to a record in July as buyers defied the economic downturn to propel the property market into unprecedented territory.

Prices are also on the same track with values rising amid the rush to seal deals.

Developers sold a whopping 2,767 units of new private homes last month. This easily beat the 1,825 units sold in June, itself a number that had never been reached in the 2007 boom.

The numbers ‘almost defy belief’, said PropNex chief executive Mohamed Ismail, who described the recovery as nothing short of amazing.

The buying splurge brought new home sales in the first seven months of the year to 10,017 units. This is only about 10 per cent below the full-year level in 2006 when the market was on its way up. It is also well up on the 4,264 homes sold in all of last year.

Developers are cashing in on the heightened interest. They launched 2,878 units in July, up from 1,637 in June, according to Urban Redevelopment Authority data yesterday.

Just over half the units sold last month – including the top three sellers – were in suburban areas, which attract largely locals.

Buyers snapped up 294 flats at The Gale in Flora Road at a median price of $696 per sq ft (psf). In Upper Thomson, Meadows @ Peirce launched 400 units in July and sold 286 at a median level of $919 psf.

Waterfront Key in Bedok Reservoir Road launched 310 units and sold 191 at a median price of $734 psf.

Projects such as Centro Residences and Ascentia Sky were sold at prices that have not been seen before in their areas.

There was also some interest in high-end homes – Sophia Residence in Sophia Road and Volari in Balmoral Road did well. The highest price done was at Nassim Park Residences, where four units sold for a median price of $3,273 psf.

‘With signs of the economy improving, home buyers are taking advantage of the opportunity to make their purchases,’ said CBRE Research executive director Li Hiaw Ho. ‘Investors have also turned to focus on property after having lost faith in financial structured products.’

Other consultants pointed to a positive stock market performance in July, increased supply, pent-up demand, as well as the affordable total quantum for smaller sized units.

They now say there is a good chance of this year’s sales surpassing the 2007 record of 14,811 units, though they do not see a repeat of July sales.

More are also sounding a note of caution over the price run-up.

While Mr Ismail believes this year’s sales will reach a record level, he said developers should not get carried away by the surge in demand. Marking prices higher would be ‘akin to throwing cold water on a fire’, he said.

Barring any unexpected shocks to the market, prices are likely to hit a plateau soon as they have risen too much too fast, said property expert Nicholas Mak.

He said sales could reach up to 16,000 units this year, with as much as 40 per cent coming from suburban areas.

CBRE Research said a few 99-year projects such as Trevista in Toa Payoh, a project in West Coast Crescent and another in Yishun Avenue 1 are expected this year. Trevista is already said to have attracted a long list of potential buyers.

However, Jones Lang LaSalle’s head of research, South-east Asia, Dr Chua Yang Liang, warned that in terms of overall islandwide demand, the take-up rate in July has slipped slightly compared with the previous months.

‘This suggests that developers might have been too zealous with the overall supply when demand still remains fragile.

‘Unless we begin to record positive growth in the larger global and domestic economies, the recent spike in demand and prices, if prolonged, may cause asset-driven inflation in the longer term, if wage increases do not keep in pace.’

Source: Straits Times, 18 Aug 2009

Ten Gallop Green units sold for about $1,400 psf

Singapore-listed conglomerate Straits Trading Co quietly released 10 units at its Gallop Green project for sale last month. The 53-unit, low-rise development on Wollerton Park, off Holland Road, comprises a mix of 13 townhouses and 40 apartments. Since completion of the freehold Gallop Green in 2002, all units had been held by the developer for investment and were fully leased.

The apartments are large four bedroom units and measure from just under 3,000 sq ft to 4,032 sq ft. Meanwhile, the townhouses are also sizeable, ranging from 4,075 to 4,952 sq ft.

All the 10 apartments that were released for sale were snapped up within four days at an ave rage price of $1,400 psf, says Eric Teng, executive vice-president (property) at Straits Trading. The units were sold via three marketing agents: DTZ, Knight Frank and Savills, and all the buyers were said to be Singaporeans and permanent residents. According to caveats lodged from July 17 to 24, units sold at Gallop Green ranged from $4.19 million for a 2,992 sq ft apartment to $4.52 million for a 3,229 sq ft apartment.

Marketing agents say the asking rent for a 3,013 sq ft four-bedroom apartment at Gallop Green is about $13,000 a month, or a rental yield of 3.7% to 5% a year, which is still considered more attractive than today’s bank deposit rates of 0.25% to 0.5%.

Over at the 140-unit, freehold Gallop Gables located on Farrer Road, which was also developed by Straits Trading and completed in 1997, the developer had sold some units but held back two blocks of apartments, or 38 units, for investment. Its subsidiary also held some units. In July last year, it had tried to put up the units for an en bloc purchase at an average of $1,500 psf by expressions of interest, but failed to find a buyer.

In March this year, 10 units were released for sale with a twoyear rental guarantee of 7% a year and they were snapped up within three days. Subsequent units were sold without the rental guarantee; yet, a total of 40 units was sold within six weeks at $1,118 to $1,300 psf, says Teng.

Investors were mainly attracted to the attractive pricing, the quality of the project, which is well maintained, and the large unit sizes. Most recently, a 2,500 sq ft apartment at Gallop Gables was leased at $11,500 a month.

The most recent transaction at Gallop Gables was in July, when a 1,733 sq ft apartment was sold for $2.39 million, or $1,380 psf. Two remaining units are still available for sale with an indicative price of $1,500 psf. In June, a 2,971 sq ft apartment changed hands in the resale market at $4.3 million, or $1,447 psf. At this level, prices of the 12-year-old condominium development are pretty much back to the peak prices seen in 2H2007.

“After the successful sale of the units at Gallop Gables, we had a lot of inquiries about Gallop Green. And, with the improved market sentiment, we decided to test the market with 10 units at $1,400 psf each,” says Teng. He does not expect to release any more units at Gallop Green for sale unless he sees “an arbitrage opportunity”, because the developer is enjoying a rental yield of 5% a year, based on the units that it is still holding on to.

Source: The Edge, 17 Aug 2009

On the road to recovery

How would you explain the recent pick-up in the property market despite a weak economy? Is it likely to be sustained? Is there any cause for concern at this stage?

Pauline Goh Managing Director CB Richard Ellis Singapore
DESPITE an economy that’s still in negative territory, there has been significant demand for private residential housing. New home sales totalled 7,250 in the first half of 2009 – up 70.0 per cent from 4,264 sold in the whole of 2008.

Several factors combined to bring about this pick-up. Potential home-buyers who had substantial savings when the economy was booming from 2005-07 were priced out of the private residential market as prices rose too quickly. Now that prices have corrected – some 25 per cent from the peak in Q2 2008 – buyers are taking advantage of the opportunity to purchase. In addition, investors have switched their focus to property after losing faith in structured products during the debacle that affected big-name financial institutions last year.

Kelvin Lum, Executive Director, L C Development
GLOBAL market conditions remain challenging due to weak economic fundamentals. But there has been positive data signalling some form of recovery in Singapore. Positive signs are also showing up in the United States, with home prices there rising in May for the first time in three years. The fact of the matter is, economies are faring better than they were a year back.

Recent positive indicators have likely fuelled the rallies in the equity markets and lifted investor confidence. With borrowing costs and deposit rates at all-time lows, investors are looking to re-invest in the real estate market to obtain a better yield and to hedge against inflation.

The pick-up is evident in the mass to mid-market residential sectors. The commercial and luxury residential sectors remain relatively subdued. In a market such as this, positive sentiment makes all the difference. The sustainability of the pick-up, therefore, depends on continued investor confidence which, in turn, will be driven by economic news out of the US and major regional markets such as China.

Barring unforeseen circumstances, players will likely support the equity markets, which in turn will have an impact on the sustainability of the property market. Although Singapore’s economic well-being depends on the economies of its major trading partners, it is unlikely that a correction – if any – will be as acute as that seen in 2008.

Gary Harvey, CEO, iPac Wealth Management Asia
LIKE most investment markets, in the latter half of 2008, the Singapore residential property market may have overshot on the downside. Demand almost dried up as a result of the extremely poor economic outlook. Moving through 2009, Singapore has not truly seen the forced sales that many parts of the world have experienced. Nor did the forecast number of foreigners leaving materialise. These factors, combined with low interest rates and the willingness of banks to still lend, have led to the property market returning to a more realistic level.

For the rally to be sustained, investors should now start focusing on fundamentals. Vacancy rates, rental yields and an increase in foreign investment will need to improve for any recovery to be sustained. I believe speculators should be cautious as we are in a market that depends on global trade. Any sign that recovery is not gaining momentum would be a cause for concern.

Darren Thomson, President and Chief Executive, Manulife (Singapore)
Chairman, Manulife Asset Management (Singapore)
WE are living in unusual times and should expect to see movements in markets that may make us feel uncomfortable. However, my experience of the Singapore property market is that it is somewhat erratic – which means that the unusual is usual.

Our market has a number of variables that others do not have to contend with. In particular, the proportion of foreign buyers and speculators may be disproportionate compared with other markets. And, of course, we have insufficient land.

Property is a popular asset class, and the imbalance of investor money – institutional and private – vis-a-vis the domestic home buyer market may be the key variable to analyse.

I have seen violent swings in the past four to five years in both directions. In particular, the speed of price movements can be quite remarkable. I have, therefore, conditioned myself to expect the unexpected.

The paradox is that I would become concerned if the property market became stable or less volatile. But that would be unusual, which is, er, usual?

Krishna Ramachandra Managing Director, Arfat Selvam Alliance
THE recent accelerated pick-up in prices has boosted hopes that the property market may be over the worst. As prices had fallen rapidly, market activity picked up as more bargain-hunters – confident that prices did not have much further to fall – joined the fray. The frenzy simply perpetuated itself. And as lenders loosened their lending criteria, prices started rising further.

These factors, combined with pent-up demand in the past nine months, defines the irrational way in which the property market has risen so quickly. I believe the market is likely to sustain itself and perhaps ride on the performance of the stock market.

In addition, there will be pockets of property – those directly affected by the opening of the integrated resorts, for instance – that will keep on rising after prices generally stabilise.

I think government intervention at this point would be premature. The banks are still relatively tight with credit, and those who are coming out to play – institutions and investors – do not need interventionist measures to rein them in. There is no sizeable bubble to be concerned about right now. On the contrary, the rising property market engenders positivism, which even if slightly misguided, is to be encouraged.

Dora Hoan, Group CEO, Best World International
SEVERAL factors have triggered the current price boom. Low interest rates due to the weak global economy makes investing in properties quite tempting. Investors have also become extra-cautious about complex financial products. For this reason, many have bet on Singapore as the safest place to park their money by investing in property here.

To add to that, there are signs of economic recovery, the stockmarket rally, and the pending completion of major tourism infrastructure projects. Population increase is also a significant factor in a nation with limited land, where the aspiration of every family is home ownership.

However, we should be on the lookout for speculative buying. We do not have to go far back to know what happens when greed gets the upper hand. In view of this, the responsibility of market players is to steer clear of unwarranted speculation that could send prices soaring out of control. That would hurt the economy at a time when it is barely recovering from a slump.

Glenndle Sim, Chief Executive Officer, Mencast Holdings
THE recent pick-up in the property market can be attributed largely to two pools of buyers – foreigners who are attracted to Singapore and plan to set up homes here, and Singaporeans who are picking up properties to buffer against inflation, or who have liquidity after withdrawing from equities when the stock market was down last year.

Foreign buyers are drawn to Singapore not only because of its political and social stability but also the ease of settling down in a comfortable and cosmopolitan city with many facilities. The open economy makes it attractive for people to start businesses and to work here. And the multicultural environment of different races, religions and nationalities makes it easier for foreigners to be assimilated.

Locals and foreigners will likely be willing to pay a premium for properties here as long as Singapore continues to be an attractive place to live and work. Going forward, prices may stabilise, with some dips. But they are unlikely to crash.

Liu Chunlin, CEO, K&C Protective Technologies
THE property market seems to have moved in tandem with the stock market and commodity prices. The same question of whether it is sustainable applies to the stock market and the property market. I believe recent market movements may be running ahead of the economic upturn.

The little bits of good economic news from the stimulus efforts here and abroad, plus recent commodity price increases, have fanned this sentiment. From what I hear, there have also been some genuine property buyers moving in. Having waited, they are now afraid of higher prices.

While a bit of such sentiment is good to stoke optimism, I believe the focus in the coming months should be on re-structuring, consolidation and regaining productivity. After all, jobs are still being lost and companies are still digesting the structural changes and trying to regain output.

My concern is that a premature pick-up in the property market, especially if it becomes heady, will add to inflationary pressures, force a serious correction later on and divert the focus from productivity efforts.

Cathlyn Leyau, Managing Director, FIL Skin, Body & Spa Intelligence
OVER-SUPPLY and recession are causing developers to sell units at lower prices to attract buyers, which has catalysed the recent hype in the property market. The plain fact is the property market may not recover before the stock market does. It has long been noted that a recovery in the stock market precedes one in the property market, and there is always a lead-lag effect. Buyers snapping up homes in recent weeks may be jumping into the market way before it has hit rock bottom. The property market remains largely weak, even though recent sales have sparked a glimmer of hope. The big concern is that many people may jump the gun and mistake the pick-up in property market as the first sign of recovery. There are lots of opportunities to do things with your money, but the big danger is that you might end up locked up for a long time. The key for investors is patience. Do not be misled by false dawns.

Choe Peng Sum, CEO, Frasers Hospitality
THERE has been a drop in real estate prices since the economic downturn in October last year. Hence, consumers who are on the hunt could be afraid to ‘miss the boat’ if they do not capitalise on some of the ‘good buys’ currently on offer. Unlike the past few years, however, I think that this time, consumers will tread with greater caution, and will not jump on the bandwagon. Further, the situation will be closely monitored and necessary action could be taken if the market gets too hot too fast.

Wee Piew, CEO, HG Metal Manufacturing
BEFORE the property bubble burst last year, the market was going from strength to strength fuelled by easy money and confidence that Singapore was re-inventing itself. Then came Bear Sterns, AIG and Lehman Brothers, which sent the property market, not just in Singapore but almost everywhere else, into a steep decline.

If there had not been a global meltdown last year, would Singapore’s property market have continued its run from 2007? I believe the answer is yes, because in the medium to longer term, Singapore’s re-invention story is still intact. I, therefore, believe the current pick-up in property prices is a continuation of the run from 2007. Yes, confidence has been badly bruised, but it is beginning to get back on its feet.

What is different now from 2007 is that while there has been a speculative element of late, buyers and investors remain cautious towards all investments – not just property – after the collapse of 2008. If you believe in the Singapore re-invention story, the property market will remain healthy, though hopefully at a less fanatic pace compared with 2007.

Another positive for the property market boils down to Economics 101. When you print money, inflation goes up and real assets go up. This is fundamental. So what have all the governments in the world been doing? Printing money. And not just printing money, but an unprecedented amount of it. A corollary is low interest rates, which I believe governments are likely to maintain for a while as economic recovery at this stage is still fragile.

All this means that property, like all other real assets, is likely to move up in price. We are already seeing this in many parts of Asia besides Singapore – for example, Hong Kong and China.

Tan Tiong Cheng, Chairman, Knight Frank
THERE is a general feeling that we have seen the worst in the global, regional and local economies. This is reflected in the stockmarket rallies since March. The local residential property market, being sentiment driven, has followed suit. Buyers, local and foreign, sense that we are poised for price recovery, and developers are capitalising on the opportunity to embark on new launches and clear previously launched projects. This explains the market activity in the past five months.

Many will recall that sales fell off a cliff after the Lehman collapse. Today, that fear has largely dissipated. As long as the economic numbers show an improving situation, coupled with greater job opportunities and a low interest rate environment, a sustained recovery can be expected. The danger is over-zealous buying leading to over-zealous pricing that chokes the market.

David Leong, Managing Director, PeopleWorldwide Consulting
SINGAPORE’S liquidity-driven economy has propped up not only the Straits Times Index but all asset classes. The 52-week range is 1,455.47-2,843.57 – a doubling. The Singapore dollar remains strong and stable, and functions as a channel for financial intermediation from investors in Asia, Europe and the Middle East. Such a channel will give rise to volatile cross-border capital flows that typically are driven by factors or reasons unrelated to local economic fundamentals.

The sharp spike in demand for property can be mostly attributed to such fund flows from overseas. It is patently clear that the domestic economic weakness cannot spur such frivolous consumption.

Foreign capital inflows can be unpredictable and volatile. The property pick-up is unlikely to be sustainable if this is the major force supporting it.

Domestically, we are seeing more local investors taking strong positions in the hope of economic recovery in 2010. With a high take-up rate at new property launches, there is clearly a certain momentum. Snapping up risky assets is also fuelled by attractive interest rates.

The economic tide seems to have turned. It is not about pessimism in the air, but how strongly the tide will turn to lift everyone up for fresher air.

Roland Mathys, CEO, Jurong Cement
I THINK there are two fundamental forces at play:

People in Singapore have a lot of wealth they need to put at work and, in the long run, property is a safe bet in a country with limited land and a formal policy to increase population to six million;

People realise that the money-printing exercise happening all over the world will ultimately result in high inflation, if not hyper-inflation, and the only way to protect your wealth is to invest in real assets.

Lim Soon Hock, Managing Director, Plan-B ICAG
I DO not believe the recent pick-up in the property market can be sustained. The recovery is more likely to be a ‘W’ shape, with a broad base and low vertex.

The recent rally is due to buyers who were bottom fishing, saw signs of pick-up, then panicked and made a bull run. These are also likely to be purchasers – locals and foreigners – who have access to loans or have cash on stand-by, and are taking advantage of more favourable prices.

I do not believe there are too many such people. Therefore, I do not believe the recovery can be sustained. My pessimism is largely due to the continuing global malaise. The world financial system remains unhealthy; global unemployment is on the rise, especially for PMETs; demand and consumption of goods and services is still weak and the global property market has yet to turn the corner. If there is one barometer of imminent economic recovery, it is the latter – the same factor that triggered the sub-prime crisis – that must pick up. Until then, in such an adverse environment, it is difficult to sustain a market rally, given that property purchases are big-ticket items.

Speculation thrives in such an environment, generally driven by the herd mentality. It needs to be kept in check to avoid a bubble that is completely out of step with the depressed state of the economy. In this regard, it is heartening to note that the government has sounded the alarm bells.

Pramod Ratwani, President and Executive Chairman, Consilium Software
THE underlying economic reasons which caused the downfall of property prices remain. The recent increase is mainly due to speculation plus some genuine demand from first-time buyers who were waiting for property to cool. There is risk for people looking for investment gains if prices were to pull back due to lack of demand and over-supply of completed housing that will start hitting the market in the next few months. This is likely going to be a ‘W’-shaped recovery and people need to be cautious in spending their hard-earned money.

Loi Pek Yen, Group CEO, CWT
GREED and fear drive prices. Barely half a year ago, gloom dominated and fear led to panic selling by some. Now, with low housing loan rates, fear of perceived inflation and fear of missing the boat, prices are being chased up. At the same time, greed has resulted in speculators loading up on property to cash in on the ascent. Property prices are rising in other part of Asia too – not just in Singapore. The pick-up is likely to be sustained so long as lending rates remain low.

Tan Ka Huat, Managing Director, CEI Contract Manufacturing
THE property pick-up seems to be the result of convergence of several factors:

Direct correlation with the STI and other Asian stockmarket indices.

Recent positive news on economic recovery.

The relatively high savings and cash holdings of Singapore households.

Expectations, coupled with bandwagon syndrome.

David Low, CEO, Futuristic Store Fixtures
IN comparison to the 2007 boom when saw prestige homes take centrestage, the recent spate of property sales is very much mass-market driven. The rush has been mainly triggered by low interest rates coupled with pent-up demand from those who did not capitalise on the last boom.

The pick-up will be sustained as long as long-term investment is pursued rather than speculation. Speculation is like a party – it can lead to a vicious hangover. And we are talking about mass-market buyers, so the negative effect can be alarming. So as long as prices do not escalate overnight, there should be no cause for concern.

Thomas Preben Hansen, CEO, Rickers Maritime
LOWER property prices, excess liquidity and low interest rates are likely to have been key drivers in the recent property rebound. With the benefit of built-in inflation protection, the property investment proposition could make good sense in today’s uncertain times.

However, investors and banks should be careful not to commit to excessive leveraging, as near-term returns could be volatile. A backlog of launches equals a substantial amount of supply in the pipeline, which could add to pressure on rents. A combination of falling rents and higher interest rates could rapidly erode yields in the near term.

With Asia set to lead the world out of recession, and talk of an ‘Asian century’, we can expect to see an acceleration in foreign investment and in the number of people seeking a career in Asia, all of which, over medium to long term, should stimulate property prices in Singapore.

Stefanie Yuen Thio, Head, Corporate, TSMP Law Corporation
THE reason for the rally can be summed up in something a Generation Y-er said: ‘If this is the world’s worst recession ever, it ain’t so bad.’

I don’t think people have truly felt the harsh reality of the recession in Asia. Governments have been incredibly adept at going into damage control, pumping billions into the system, shoring up lending and helping businesses stave off retrenchment. These were necessary measures from an economic and confidence viewpoint. But they had the side-effect of insulating most of the population from the naked reality of the economic crisis we’re going through.

Talk to people on the street and you may find, as I have, that there are some who have not been able to find a job for a year, and others – mostly under 30 – whose spending patterns have hardly changed since the boom days of 2007.

Because many have been sheltered from the real effects of the global financial crisis, I think we may be living in what is another, potentially much larger, bubble. And while we had quick-acting governments to come charging in to save us from the last one, who can we look to for salvation when the governments’ rescue plans run out of ammunition?

I think it’s crucial that we work out what went wrong and put in place measures to try to prevent similar mistakes. This is the responsibility not just of national regulators but also global banks and professionals who form the backbone of so many corporate structures. It’s time we brought corporate social responsibility out of the charitable arena and into the boardroom.

Deb Dutta, Vice-President, Asia-Pacific, Brocade
THERE is a general perception that the real estate market has bottomed out. As a result, people are rushing in, which is boosting property prices. I don’t want to rain on the parade but I do not quite agree with this optimism, despite Singapore’s limited land supply.

Singapore’s reputation and the government’s efforts to make the island a regional educational hub attract foreign students, which supports the rental market somewhat. At the same time, we have low interest rates, which is motivating upgraders to buy property, putting a somewhat positive spin on the market.

None of the factors that have driven the global slowdown have changed markedly – anywhere in the world. And Singapore does not have the critical mass to set its own trend.

I am starting to see promising signs, but we are definitely not out of the woods.

Reto Isenring, Managing Director, VP Bank (Singapore)
THE current popularity of property can be attributed to its tangible nature. Many investors were burned or turned cautious after the Lehman collapse. The resulting lack of confidence in financial regulations has dented the appeal of mutual and hedge funds, currency options and commodities, etc. So a lot of savings/assets have been sitting idle in almost-zero yielding accounts for the past year. Property prices have also fallen reasonably in the last year.

All of this has created the perfect backdrop for a surge of investment in property, driving prices up more than 20 per cent in the past three to six months alone. It also appears that many property purchases are for investment rather than owner occupancy.

With the amount of liquidity available, prices can be sustained in the short term. But unless rental demand and yield remain strong, the longer-term outlook for property can be bleak.

Teng Yeow Heng Michael, Managing Director, Corporate Turnaround Centre
THE recent pick-up in the property market is due to feel-good sentiment from the rise of the equity market. Funds are flowing into Asia again owing to fiscal stimulus injected by the various central banks a few months ago. Also, residents in Singapore who sold their homes previously in en bloc deals are looking for property to buy to occupy. Others are finding that the banks are offering very low interest rates on fixed deposits, and have decided it is better to park their money in property. Some are anticipating hyper-inflation in the years to come and are investing in property to hedge against this. Others are rushing into the fray so as not to miss the boat.

I do not think that this is a sustainable trend. The world is still in recession, though signs are indicating the worst may be over. It will take several years for things to get back to normal. Companies will continue to downsize even when the economy recovers, and when people lose their jobs they will have less appetite to invest in property.

Source: Business Times, 17 Aug 2009

Mass-market home prices ‘at 2007 peak’

Residential prices may fall about 20%: Analyst

ANTI-SPECULATIVE measures, falling rental yields and ballooning supply may drive residential property prices down by about 20 per cent, says an analyst.

Sounding a contrarian view that runs against current sentiments, RBS Singapore analyst Fera Wirawan warned that prices of some segments of the market have risen to 2007 peaks amid a strong upswing in buying levels.

Based on her analysis, prices of mass-market homes, or low-end private properties, are now at peak October 2007 levels, while prices of mid-tier and high-end homes are just 8 per cent and 22 per cent off their peaks respectively.

With prices surging 16 per cent to 26 per cent in recent months, the residential property sector may have peaked, Ms Wirawan cautioned.

‘The residential sector recovery was initially driven by pent-up demand and cheap capital values, but we now see speculation in all residential segments, particularly the mass segment,’ she said.

Average selling prices (ASPs) at recent property launches are 30 per cent to 80 per cent above the ASPs of nearby projects. This is markedly higher than the historical average of 20 per cent.

‘Capital values have been rising in the face of falling rents and a full supply pipeline, a phenomenon we attribute to low average mortgage rates of 2 per cent.’

She noted that the strong residential volumes were triggered by Frasers Centrepoint’s launch of the mass market Caspian project at an affordable $580 per sq ft in February, which attracted a high take-up owing to pent-up demand in the mass residential segment.

The positive sentiment from the sale of Caspian units quickly filtered through to the mid-tier and high-end segments.

This frantic level of buying, in annualised terms, almost matched the record number of new homes sold by developers in 2007.

Property developers here sold more than 7,000 private homes in the first half of this year, double what they sold in the same period last year.

When annualised, sales are only 2 per cent short of the record 14,811 sold in the 2007 boom year.

The low-end segment performed the best in the first three months of this year, contributing 63 per cent of the 2,552 primary units sold.

The second quarter, however, saw a change, with 40 per cent of the 4,552 units sold represented by the mid-tier segment, followed by 31 per cent in the high-end segment.

The broad-based recovery has fuelled a sharp rally of property counters such as City Developments and SC Global Developments.

The Singapore FTSE ST Real Estate index, which tracks Singapore-listed property stocks, has doubled from its March lows.

With increasing speculation, worsening affordability, declining rental yields and plentiful supply in the property development pipeline, prices are likely to cool, said Ms Wirawan.

‘The Government is watching the market and could implement anti-speculative policies if speculation in the market goes on unabated,’ she said. ‘We expect prices to fall 10 per cent to 20 per cent in the residential sector over the next 12 months.’

National Development Minister Mah Bow Tan said last month that signs of speculation are re-emerging in the property market and stressed that the Government is monitoring the the situation closely. His comments came after speculative pricing practices began to emerge late last month, especially in the mass-market segment.

Ms Wirawan pointed to the sale of Centro Residences, a mass-market 99-year leasehold project located at Ang Mo Kio, which was sold at between $1,100 and 1,200 psf.

That price, she said, was close to the price of a bulk purchase of Sui Generis, located at Balmoral Park, a prime area, which sold for $1,260 psf.

Industry players generally agree that it is not sustainable to price low-end properties at about $1,000 psf.

The Government recently made cautionary statements owing to concerns that such homes may become unaffordable to the mass-market home-buyer.

The warning, however, appeared to have fallen on deaf ears as property launches continued to attract throngs of buyers, including many Housing Board upgraders, over the first two weekends of this month.

DMG & Partners Securities analyst Brandon Lee said that he expects ‘residential sales momentum to continue’, while OCBC Investment Research analyst Foo Sze Ming said demand in the mass-market segment was more sustainable.

Source: Straits Times, 17th August 2009

An elite investment gets its day in the sun

Sales of Good Class Bungalows gather steam, with some predicting healthy price rise

(SINGAPORE) The Good Class Bungalow (GCB) market has sprung to life with high-net-worth individuals stepping up their purchases.
July was an especially action-filled month which saw about 20 GCB transactions worth a total of more than $300 million. To put this in perspective, the entire first quarter of this year saw GCB deals worth only $27.5 million.
The action picked up in April, when $56 million worth of GCBs were transacted. It gathered pace in May and June, each month seeing deals amounting to around $188 million. In July, the market went ballistic.

So far this year, around 50 GCB deals have been transacted, according to caveats data compiled by property consultants and information on the latest transactions obtained by BT.

The year-to-date tally of over $800 million is healthy, considering that the whole of last year saw just 51 deals worth $830 million.

GCB agents expect the sales flow to continue in coming months. CB Richard Ellis’s director, luxury homes, Douglas Wong said: ‘It’s likely that a total of 60-65 GCBs will be sold in the whole of 2009 – more than the 51 GCBs sold in 2008. The total quantum is likely to be around $1.1 billion to $1.2 billion, about 35-45 per cent higher than the quantum of $830 million in 2008.’

Savills Singapore director of investment sales & prestige homes Steven Ming says that ‘although we do not expect the spike in GCB sales that was seen in May to July to be sustained, we do expect to still see healthy buying activity continue for the rest of the year’. He expects 60-70 transactions for the whole of 2009.

Apart from the general feeling that the worst of the financial crisis is over, he cites the low mortgage and deposit rates as reasons for the GCB market revival.

Agreeing, Newsman Realty managing director KH Tan notes that high-net- worth individuals prefer GCB investments to letting their cash idle in banks. They are also wary of investing in financial products following the Lehman debacle, he said.

‘Another group of GCB buyers are foreigners who have become Singapore PRs and PRs who have become citizens,’ adds Mr Tan, who recently brokered the $38 million sale of a Cluny Park bungalow.

BT understands the property was sold by former Kim Eng Securities managing director Douglas Ooi to a buyer who also picked up No 3 Cluny Hill earlier this year.

‘When the IRs (integrated resorts) are ready, even more rich people from overseas will come to Singapore and become citizens. Some would be interested to invest in the GCB market,’ said Mr Tan.

Typically, one has to be a Singapore citizen before one can own a GCB. However, PRs are known to have been given permission by the government on a case-by-case basis to buy small GCBs with land areas of about 15,000 sq ft, depending on their contribution to Singapore, according to Mr Tan.

Major GCB deals in recent months include a site at Dalvey Road said to have been sold by a certain Thomas Chan Ho Lam, for $27.01 million. Interestingly, a person with the same name is also understood to have bought a bungalow at Belmont Road for $30.5 million last month from Ong Kok Thai, managing director of Vanguard Interiors and the Peranakan Place Group.

Meanwhile, GuocoLand chairman Sat Pal Khattar is believed to be the seller of a bungalow at Rochalie Drive, which fetched $18.32 million. BreadTalk founder and chairman George Quek is reported to have sold his 2 Swettenham Road bungalow for $29.2 million to developer Simon Cheong.

The GCB market peaked in 2006 with $1.23 billion of transactions involving 119 deals. The following year saw 87 deals for a total $1.15 billion, according to CBRE figures. In the first seven months of this year, 47 deals totalling $710 million took place, CBRE said.

However, BT has learnt there are about six other transactions not yet captured in caveats, located in places like Belmont and Leedon roads, Maryland Drive and Astrid Hill. If these were to be included, the year-to-date tally would cross $800 million.

GCBs are the creme de la creme of Singapore’s housing market, with stringent planning requirements.

There are only about 2,400 such bungalows in Singapore’s 39 gazetted GCB Areas.

Mr Tan estimates GCB prices could increase about 20 per cent on average over the next 12 months.

Says Savills’ Mr Ming: ‘GCBs, being limited in availability, are a highly sought-after investment among the well heeled. As more rich are created, demand for these exclusive bungalows will gradually outstrip available supply for sale.’

Source: Business Times, 13 Aug 2009

Hold firm, first-time home buyers

Patience, research and sticking to ‘affordable psf’ should result in a headache-free home

Two Sundays ago, my editor wrote in this column about property advice his parents gave him just before he bought his first home.

He was unaware, but on the day his column was published, I took the plunge and bought my very first property with my partner.

His words obviously resonated with me: My purchase was an apartment way below $1,000 psf and under $1million, and reasonably near an MRT station by 2015.

But beyond these guidelines, I discovered that buying the first home was a lot more difficult and agonising than I had ever imagined – a process determined by so many pressures and factors.

For the longest time, the classified advertisements on Saturdays were my best friend. I zoomed in on cheap private properties because my partner and I were deemed ineligible for HDB flats (he is neither a citizen nor a permanent resident).

I pored through every single column, rang countless property agents and viewed so many apartments that one blurred into the next, and I had to start remembering them by something like the colour of the owner’s cat.

At the start of the year, I had seen some potential homes, but told myself to be patient – wait till year-end for prices to bottom out.

Well, apparently, that period of time was the bottom, and I had missed the boat.

Asking prices for properties soared as much as $50,000 to $100,000 more in just the difference of a month from April to May.

Queues started appearing at new project launches, blank cheques were being written for agents and a certain euphoria started to grip the market.

As my search deepened, the further my heart sank, for my dream apartment seemed unreachable as unrealistic sellers priced in Singapore’s economic recovery even before any evidence of it.

All through the hype, I had to remind myself not to be pressured into making a rash decision just because Singaporeans’ infamous ‘kiasuism’ for property was manifesting itself again.

One key factor which kept me grounded was this: affordability.

According to one widely used international standard to measure housing affordability, the monthly mortgage payment should not exceed 20 per cent to 30per cent of a household’s total monthly income.

Do the sums to derive your comfortable monthly outlay, ask banks to calculate from that what your total home loan is, and you get what I call your ‘affordable psf price’.

Often, you will get tired of the hunt like I did sometimes, see a nice home out of this budget and contemplate upping the psf just to get the search over and done with.

At times like these, I wanted so much to believe the usual spiel that agents give about land-scarce Singapore and how home values will always rise, even if the price you pay now seems high.

But whatever you do, do not budge from this price.

A story I was told warned me this could only be foolhardy.

During the 1997 property boom, my friend’s parents had bought a unit in the area I was looking at – a time when it was highly fashionable to invest in new suburban homes to ride the property wave – not unlike now, actually.

But when the Asian financial crisis hit the region, the property boom-turned-bubble eventually burst. The value of their property plunged more than $200 psf thereafter and has still not recovered to the original level a decade on.

With this in mind, I did more homework, studying historic psf prices of the estate at its lowest and highest levels, and made sure I bought only at a price that had potential upside.

It baffles both me and some analysts I speak to that new suburban homes in Ang Mo Kio, for example, are selling for $1,100 psf.

Where is your upside when you are already paying city-fringe prices for suburban estates?

Be firm about saying no to unrealistic sellers who like to test the market with bullish prices if they are beyond your budget.

If everybody kept a level head about purchasing properties, it would certainly help avoid turning a property boom into a property bubble as in the last decade.

No matter how heartbreaking, I said ‘no’ to many dream homes before finding one with sincere sellers who sold at a price that was a win-win for both parties.

My home-hunting journey ended only after I had made hard decisions to narrow down my options to specific projects, doing research and keeping to my affordable psf price.

As a result, National Day this year has taken on a special meaning for me because for the first time as a citizen, I have a physical stake in the country.

Our very own home: a spacious apartment set on a hill at the edge of a rainforest, a quiet, green haven away from the hustle and bustle of the city.

Finding that first home can be an exhausting experience, but also a rewarding one if you safeguard yourself against huge risks which could otherwise come back to haunt you.

Good luck with the hunt, and Happy National Day!

Source: Sunday Times, 9 Aug 2009