Rents to hold steady despite en bloc influx

MORE units at developments sold enbloc are expected to be released onto the rental market, as developers look to ride out the market downcycle by renting them out, instead of leaving them empty.

But the additional supply of apartments from these developments should not weigh heavily on an already falling rental market, property consultants said.

Several developments that were sold en bloc last year and intended for demolition and redevelopment were put back onto the rental market this year, following the deterioration of market sentiment.

There has been a thin but regular stream of such developments since early this year. They are typically leased out at rents that are at least about 20 per cent below market level, said Knight Frank director of research and consultancy Nicholas Mak.

More will follow next year as some developers have yet to take possession of their collective sale properties. For instance, Airview Towers in the River Valley area will be leased out from February next year, for a one-year period.

Units there will be rented out at more than $2,000 to less than $4,000 a month.

An owner there said their rent-free period will end in February, but a few units are already being leased out to quite a number of foreigners on work permits.

Two other developments, Spottiswoode Park and Oakswood Heights, on Spottiswoode Park Road are also likely to be put on the rental market early next year, said a market watcher.

Mr Mak said these developments are unlikely to add much downward pressure on rents as there are not many of such developments, which come with just basic facilities and a short lease.

Secondly, they are mostly rented out to existing tenants or ex-owners of the development, he said. 'Thirdly, not all the units in the developments are fit for rental. One reason why these developments went for en-bloc sale is because they are rundown,' said Mr Mak.

Also, as the projects are meant for redevelopment eventually, developers are unlikely to spend a lot of money to spruce them up, consultants said.

'Rents in general, like capital values, reflect the physical condition of the stock, the tenure, location et cetera,' said Jones Lang LaSalle's South-east Asia research head, Dr Chua Yang Liang.

As the reported rents must also account for the transient nature of the leases, the depressive effect of such rents on the general market is marginal, he said.

Rents of private residential properties here have fallen and are expected to fall further next year. Average prime rents are now at $4 to $4.40 psf, slightly down from $4.20 to $4.60 psf in the third quarter, according to CB Richard Ellis.

Other collective sale developments being leased out include Fairways in Telok Blangah, Grangeford at Leonie Hill, Lucky Tower in Grange Road and even Merlin Mansion in the East Coast Road area.

Fairways is offering a one-year lease at rents from $1,900 a month while rents at Grangeford start from about $3,500 for a two-bedroom unit. Both were bought around the middle of last year.

Developments that have already been in the rental market for months include Leedon Heights off Holland Road, Sophia Court in Adis Road and Lincoln Lodge off Newton Road.

Source: The Straits Times - Joyce Teo

Firms shelve supply of 1,000 new apartments

(SINGAPORE) At least 1,000 projected new apartment units can be expected to be withdrawn from immediate supply in Singapore's property market, as properties that were sold en bloc in recent years are put back on the market for rental.

The latest of these is Lucky Tower at Grange Road which was bought by City Developments Ltd (CDL) in May 2006.

A CDL spokesman said that the entire development of 91 units has been leased to a master tenant that intends to sub-let the units.

According to data complied by Savills Singapore, Lucky Tower was expected to be redeveloped into a 178-unit condominium. However, with redevelopment pushed back, these units are not expected to come on to the market anytime soon.

Another development, the 192-unit The Grangeford at Leonie Hill, acquired by OUE in 2007, has also been put back on the rental market.

OUE is controlled by the Lippo Group and Malaysian tycoon Ananda Krishnan. Lippo Realty executive director Thio Gim Hock said that approximately 70 per cent of the units have already been leased, mainly to expatriates.

On why it decided to defer redevelopment, Mr Thio said: 'The market does not look good for this year or the next.'

It is understood that asking rents for The Grangeford start at about $3,500 for 1,110 square foot two-bedroom units and about $4,500 for a 1,700 sq ft three-bedroom unit.

The Pontiac Land Group has also started to lease out Pin Tjoe Court, which it acquired in September 2006. Senior vice-president (residential leasing) William Teh said that it expects to redevelop the site next year. 'Till then, we are offering very short-term leases, and this is not representative of typical rental in the market,' he added.

Frasers Centrepoint said that Flamingo Valley, which it acquired in early 2007, has been put on the rental market with close to 60 per cent of the 185 units leased out.

Other en bloc developments back on the rental market include Furama Towers, Fairways Condominium, Sophia Court, and Lincoln Lodge.

The increasing number of en bloc sites put back on the rental market is expected to further depress already weakening rentals.

Referring to this 'hidden leasing supply', Japanese investment house Nomura said: 'The move by developers to return en bloc units back to the leasing market to cover to a degree of the holding costs is not unanticipated.'

In the case of Grangeford, assuming a gross rent of $3.40 psf for the 396,483 sq ft apartment block, Nomura estimates that it could secure net income of $14.6 million, equating to a 2.3 per cent yield over its $625 million acquisition price, 'providing some relief to covering the site's holding costs'.

Regardless of 'hidden leasing supply', rentals are already expected to fall. Still, Knight Frank director (research and consultancy) Nicholas Mak believes that the 'hidden supply' of leasing units will not make much of a dent on the rental market. For starters, he notes, many of these en bloc developments have already reached a state of disrepair.

Pointing out that the 108-unit Fairways is about 10 per cent leased, he says that many of the units have been 'stripped bare'.

He also noted that these units have short leases and tenants may be given only one-month's notice to vacate.

Another consequence of deferred en bloc redevelopment is the impact this has on future supply.

Savills Singapore estimates that based on the en bloc deals between 2005 and 2007, over 23,000 new units could be added to the market.

But, as Nomura notes, supply has been increasingly pushed to 2012. As at the third quarter of this year, it found that some 16,762 units are scheduled for completion in 2012, versus the previous quarter's estimate of 14,179 units.

Based on an analysis of official data since Q499, it also found that actual completions lagged behind forecast completions.

The Urban Redevelopment Authority (URA) has also clarified that while developments are deemed 'under construction' in its database, this does not necessarily mean construction has begun.

A spokesman for URA said that it considers a project to be 'under construction' once the Building and Construction Authority records indicate that a project has been issued a permit to commence structural works.

As at Q308, there are 10,007 units under construction. URA said: 'As developers do not have to inform the government of actual ground-breaking after obtaining the permit to commence structural works, URA does not have information on the number of units, expected to be completed in 2009, which have actually broken ground.'

However, it added that it understands that actual construction for a project typically begins within 1-3 months after the developer obtains the permit to commence structural works for the project.

The number of developments that could be deferred will remain unknown. CB Richard Ellis executive director Jeremy Lake pointed out: 'Even if the property has been demolished, a meaningful number of projects will be delayed as construction costs are expected to fall over the next 18 months.'

Source: The Business Times - Arthur Sim

10,450 deferred payment homes weigh on prices

PRICES in the the already fragile property market could be battered even more from next year if some of the 10,450 homes bought on deferred payment are dumped by cash-strapped buyers.

The danger is that when final payments are due at completion stage, buyers faced with falling values may just sell at fire-sale levels, putting even more pressure on prices.

And a key reason for buyers to dump units is that in today's tight credit markets, risk-averse banks will demand that buyers put in more of their own cash before they will agree to lending the balance.

Take a flat that was bought for $1 million with a deposit of $100,000. The buyer must provide $900,000 on completion but if prices have fallen too far, the bank will not come to the party with a loan for the full amount.

So the buyer either dips into his own pocket or cuts his losses and sells - likely into a falling market.

The numbers, revealed for the first time by the Urban Redevelopment Authority (URA) yesterday, are sobering.

Two-thirds of the 10,450 uncompleted homes will come on stream in the next two years - 4,560 in 2009 and 2,540 in 2010.

They were sold from 2005 to this year. That includes a period when many properties were being snapped up by eager buyers with little regard for price.

Deferred payment was introduced during the Asian financial crisis to boost the market, but scrapped late last year. It was blamed for encouraging speculation, as buyers could secure a property for little cash down and then flip it for a profit before a brick had been laid.

Down payments are 10 to 20 per cent with the rest deferred until completion a few years down the track.

To make things worse, the URA said that the 10,450 new homes include sub-sale units.

They were likely bought at even higher prices from speculators, who had already flipped the units for a profit.

The figures also show that the homes are spread far and wide - about 4,000 each in the core central and city-fringe areas and the rest in the suburbs.

Analysts say that the real danger lies in the 1,270 prime units in the core central region that will be completed in 2010. These were boom-time buys.

Knight Frank managing director Tan Tiong Cheng said possible defaults will likely come from people who bought at the height of the market last year.

'It is cause for concern but it is not a big problem when you look at it in percentage terms,' he said.

In contrast, projects slated for completion next year were bought in 2005 and 2006 when prices were not that high, so chances of defaults are slim, added Mr Tan.

Prime area projects in Orchard Road, Sentosa Cove and Marina Bay like Marina Bay Residences, One Shenton and The Orchard Residences were known to have lured the speculators.

Some of these projects also attracted consortia, which bought one floor at a time, but yesterday's data did not offer any insight into such buyers.

'This is the 'high-risk' group, particularly as banks have become cautious and demand has fallen,' said Standard Chartered economist Alvin Liew.

Jones Lang LaSalle's South-east Asia research head, Mr Chua Yang Liang, said: 'The 10,450 number seems large but...if buyers can get loans, the problem won't be as severe as some people think.

'But psychologically, buyers may see it as a reason to bring prices down.

Responding to the news, the Real Estate Developers' Association of Singapore said the figures released by the URA underscored the popularity of the scheme.

It maintained that the scheme was beneficial to the market and reminded buyers that although they can sell their units to other buyers on the market, they cannot easily repudiate sales contracts and return the homes they bought to developers.

Source: The Straits Times - Joyce Teo, Property Correspondent

Long-term property investors should bet on S'pore: Analyst

SINGAPORE looks a pretty good bet for long-term property investors, given its strong savings rate, low corporate taxes and near-full employment, according to a key real estate player here yesterday.

And if prices fall further next year, it would be a good time to buy, said Mr Christopher Fossick, Jones Lang LaSalle's managing director for Singapore and South-east Asia at a media briefing at the firm's office. There is a consensus that the economy will go through a tough time next year, which means it will be tough for everybody, including those in property, he said.

'If prices are lower, that provides opportunities,' Mr Fossick added. He pointed out that Asia, particularly Singapore, given its status as a financial services hub, is better off economically than the United States and Europe. The level of household borrowings and corporate loans here is lower than in the US and Britain, he said.

He quoted a recent report commissioned by London Mayor Boris Johnson that said that the rising status of regional hubs such as Dubai and Singapore is threatening London's position as the world's financial capital.

He listed some of the key factors that should continue to attract investors here. Singapore's corporate tax rate of 18 per cent, he said, is a tad above Hong Kong's 17 per cent but below the 29 per cent rate in Britain and the 40 per cent levy in the US.

There is near full employment and a strong savings culture here. Singapore has a gross national savings rate of 45 per cent, compared with 11 per cent in the US, 14 per cent in Britain and 32 per cent in Hong Kong. Also, about 76.5 per cent of Singapore's population are working, compared with 67.1 per cent in the US and Britain.

Property is always a medium- to long-term proposition, he added. Most investors treat it as such and have an investment horizon of more than 24 months. Jones Lang LaSalle's regional director and head of markets, Mr Chris Archibold, said the office market will have a lower take-up rate over the next year but most of the expected new supply will not come to market until late next year anyway.

There are a lot of institutional investors on the sidelines waiting to enter the Singapore market, according to Mr Fossick.

'They are saying, come 2009 and 2010, there will be opportunities to buy properties in Singapore,' he said. 'Obviously, it's going to be at some discount from prices we saw in 2007.'

Source: The Straits Times - Joyce Teo

$25m Punggol makeover

THINK water and you will have a good idea of the main theme running through the winning design for an ambitious $25 million makeover for Punggol.

The blueprint revealed yesterday aims to revive the coastal town's heritage as a fishing village by capitalising on its maritime setting.

There will be a 10km cycling trail in a rustic setting along the 4.2km waterway and a pedestrian 'kelong-like' bridge to recapture the old fishing days.

The waterway will also boast a coastal promenade and a host of water activities.

At the heart of the waterway in Punggol's town park will be a 'heartwave' wall boasting a mini waterfall.

Visuals on the wall will depict the history and development of Punggol from its early days to a 21st century town.

All this and more was unveiled yesterday by National Development Minister Mah Bow Tan at the HDB Hub, where he announced the winner of the Punggol Waterway Landscape design contest launched in May.

Local firm Surbana International Consultants and its partner, Japanese firm Sen Inc, beat 10 local firms. Merit prizes were awarded to Arc Studio Architecture + Urbanism and Co-Design Architects.

Mr Johnny Wong, HDB's deputy director of building research, said the Housing Board was won over by Surbana's concept of incorporating Punggol's unique identity into the waterway's landscape.

Construction will be completed by 2010.

Mr Mah said the Punggol project is on schedule 'and has been progressing steadily even during this economic downturn'.

Since August last year, the HDB has launched more than 5,000 flats under its build-to-order (BTO) projects in Punggol. BTO developments are built only when a certain demand is met.

The HDB plans to offer about 3,000 flats for sale annually in Punggol, subject to demand. And by the end of 2011, there will be about 23,000 flats completed.

Mr Mah said that even with the slowdown, he expects 'sufficient take-up for these flats' as people are still getting married and young families are being formed.

The HDB is targeting the sale of the first site - a mixed commercial and residential development - to the private sector in mid-2010.

Mr Mah said there will be a demand for such sites by private developers in new towns if there is a critical mass of people living there.

'The main thing is to make sure the town itself is well populated...then the commercial developers will find it worthwhile,' he said.

Mr Mah also said that Punggol flats will remain affordable for all income groups.

About 500 rental units are being built, and about 550 of the 5,000 Punggol flats launched recently were two- and three- room flats, which cater to lower-income families. The rest will be four- and five-room flats.

Mr Mah also launched a separate design competition for Punggol's Waterfront public housing yesterday.

Architects can design a masterplan for a 26.6ha housing district west of Punggol's town centre. Shortlisted firms will go on to design in more detail a 4.9ha site along the Punggol Waterway.

The HDB plans to offer these waterfront homes by mid-2010.

Source: The Straits Times - Jessica Cheam

New private home sales 'could fall to 18-year low'

ONLY 192 new private homes were sold last month, sparking concerns that total sales this year could plunge to levels not seen since 1990.

CBRE Research tips a total sales figure of around 4,300 units - a striking plunge from the boom last year when a record 14,811 new private homes changed hands.

If the projection pans out, private home transactions this year will be the lowest in 18 years when 2,526 units were sold in 1990.

And there is not much cheer on the horizon either with the 'sluggish sales momentum' likely to persist as the economy is expected to weaken further, said CBRE Research executive director Li Hiaw Ho.

The Urban Redevelopment Authority (URA) data yesterday showed that last month's sales were up slightly on the 118 units shifted in October but down from September's 376.

The latest numbers add up to 4,200 private homes sold in the first 11 months.

Sales at a few projects held up reasonably well, probably due to competitive pricing, say experts. Developers launched 382 units for sale last month - up from 159 in October when the market was in shock - but half the 767 units launched in September. It was also below the 12-month average of 541 units, said Knight Frank.

'The increase in November signalled some hope for the private residential market, although general homebuying sentiments remained weak and possibilities for a recovery remained remote,' said its director of research and consultancy Nicholas Mak.

Many sales were made at just five developments with many projects not attracting a single buyer. Last month's top seller was Rosewood Suites in Woodlands, a 99-year leasehold project that moved 42 units at between $512 per sq ft (psf) and $687 psf.

Two prime projects also did relatively well. Newton Edge sold 34 units while 19 went at RV Suites in River Valley Road.

Mr Li said the two have mostly small units, which help contain the absolute price at $550,000 to $900,000 per unit, based on their median prices of $1,201 psf and $1,350 psf respectively.

Buyers snapped up 15 units at Evania in Upper Paya Lebar at between $612 psf and $650 psf after prices were apparently cut from above $800 psf at the launch in March last year, said Mr Li. 'Price remains a critical factor to move sales, as seen by the good response.'

And 11 houses at Andrews Terrace, a project in a new landed estate called Sembawang Greenvale, sold at prices starting from $1.3 million each.

Suburban homes accounted for 53 per cent of developers' sales last month, which shows that there is a pool of genuine buyers out there, said Ms Tay Huey Ying, director for research and advisory at Colliers International.

But prime properties dominated last month's launches. Developers have stepped up releases since August, a reversal of the first-half trend when they held back prime homes, she said. 'This could be an indication of weakening holding power among smallish and mid-tier developers with prime development sites.'

Homebuying sentiment and launch activity should remain subdued in the month ahead as the economy further contracts and the employment market is anticipated to tighten further, said Mr Mak.

'Buyers will remain very cautious, even if some re-pricing sets in.'

Source: The Straits Times - Joyce Teo, Property Correspondent

Developer sales perk up with new launches

(SINGAPORE) The launch of new developments helped pull up developer sales to 192 units in November, up from just 112 units in October.

The number of units launched by developers increased from 159 units in October to 382 units in November.

Urban Redevelopment Authority's (URA) monthly real estate data also revealed that the number of launch-ready units hit 6,512 units in November, a marginal rise over October but an increase of 3,840 units from a year ago.

Rosewood Suites in Woodlands by EL Development (ELD) sold 42 units in November, the most units sold, followed by Newton Edge (34 units) and RV Suites (19 units).

ELD is a unit of local builder Evan Lim & Co. Managing director Lim Yew Soon said that the pricing - at an average of $580 psf - 'may be on the low side' but added, 'We expect construction costs to come down next year so we took a bit of a risk with a lower margin'.

Still, Mr Lim conceded that, 'the price may not be sustainable in the long run', and ELD could begin to raise prices.

He also believes that a price war among developers is not likely because most developers bought sites at about the same price. 'And unless a developer goes bust, there is no reason for them to sell at a loss,' he added.

PropNex CEO Mohamed Ismail said that prices for existing developments in the same area such as Casablanca are going for between $500-$550 psf. He said that Rosewood Suites is 'extremely attractive in today's market' especially considering that new public housing flats are about $300 psf with Design, Build and Sell Scheme (DBSS) flats at about $450 psf.

PropNex was the marketing agent for Rosewood Suites and Mr Ismail added that most of the buyers were HDB upgraders.

Both Newton Edge and RV Suites are in the core central region (CCR) and Colliers International director for research and advisory Tay Huey Ying noted that more than half the 382 units launched were in the CCR.

She added: 'Developers have been stepping up launches of prime properties since August 2008, in a reversal of the first half's trend where developers tended to hold back launches of prime properties. This could be an indication of weakening holding power amongst smallish and mid-tier developers with prime development sites.'

Ms Tay believes developers are likely to continue with the current launch momentum and could launch some 450-500 new units in December 2008, bringing the total launch volume for 2008 to some 6,500 units, less than half of last year's launch volume of more than 14,000 units.

Ms Tay expects developers' sale volume to hover between 150-200 units. This would bring sales volume for the year to less than 4,500 units, or less than a third of last year's volume of more than 14,000 units.

Other developments that registered better sales in November were Evania at Upper Paya Lebar Road and a landed housing project at Andrews Terrace.

CBRE Research executive director Li Hiaw Ho said: 'Price remains a critical factor to move sales, as seen by the good response to these projects.' He also said that prices for units in Evania have apparently been reduced from above $800 psf when it was first launched in March to $610 psf-$650 psf.

Knight Frank director (research and consultancy) Nicholas Mak expects home-buying sentiments and launch activity to remain subdued until after the Chinese New Year in January.

'Buyers will remain very cautious even if some re-pricing sets in,' he added. 'Since the economic drag is expected to persist into 2009, developers may be increasingly open to considering creative marketing tactics and soft discounts to attract buyers,' he added.

Already, Knight Frank notes that the lowest priced non-landed unit sold in November was in Rosewood Suites at $512 psf while the highest priced non-landed unit is Orchard Scotts, which sold for $2,006 psf (The highest-priced unit sold in Orchard Scotts was $2,407 psf).

DTZ executive director Ong Choon Fah also reckons the market is seeking 'clarity' on the economy and could wait for the January Budget measures before moving.

And while some hope for the return of the deferred payment scheme, Mrs Ong believes that if it is brought back, 'It won't be in its former form'.

Source: The Business Times - Arthur Sim

Condo-style HDB flats losing allure

PRICEY condo-style HDB flats have not been spared in the property downturn, going by what has been left for sale at Park Central @ AMK.

While over 70 per cent of the project's 578 units have been sold, the larger five-room units costing $600,000 to $670,000 each are still available.

These levels put the flats in the same price bracket as older condominiums, which might prompt some potential HDB buyers to turn to the private home market, where prices are falling.

Developer United Engineers announced the figures yesterday, and also said foundation works had begun at the Ang Mo Kio estate, which is being developed under the HDB's design, build and sell scheme (DBSS). Under the scheme, public flats are designed, built and sold by private developers.

Sales at Park Central have been favourable in view of the challenging economic climate, said Mr David Liew, the managing director of the group's integrated facility management and property development business.

Buyers include young couples, retirees and those with proceeds from collective sales, the group said.

The DBSS concept has been quite popular, but some experts fear the fall in private condo prices could leave buyers spoilt for choice.

Price is the key factor in DBSS projects as they are targeted at HDB buyers whose household income must not exceed $8,000 a month.

'It's a price-sensitive sector. These buyers can choose between HDB flats and lower-end condos,' said Associate Professor Sing Tien Foo, the deputy head of the National University of Singapore's real estate department.

'During a downturn, the price gap between these segments will narrow, so demand (at DBSS projects) may be affected,' he noted.

Most DBSS flats are priced at $500,000 to $700,000 each, roughly the level for executive condos, said ERA Asia Pacific associate director Eugene Lim. 'There is already an overlap.'

For a $600,000 unit, the monthly instalment on a 30-year, 80 per cent loan is about $2,000, assuming an interest rate of 2.6 per cent.

When the property market was rising in 2006, DBSS products met the needs of buyers who could not afford private homes.

The first such project, Premiere @ Tampines, was an instant hit, drawing 5,700 applications for 616 homes in late 2006. Although it sold only 500 flats initially, long queues formed when the remaining units were released for sale.

City View @ Boon Keng received 3,500 applications for 714 flats early this year, but only 460 were sold. Nearly 90 per cent of the flats have since been taken up, including all the three-roomers.

Park Central, Singapore's third DBSS project, garnered more than 2,300 applications. Prices average $490 to $500 per sq ft, putting the four-roomers at between $400,000 and $500,000 each.

The fourth DBSS project - Natura Loft in Bishan - saw about 680 applications for 480 flats last month. Its four-room units go for $465,000 to $586,000 each, while its five-roomers cost $600,000 to $739,000.

Once prices go above $600,000, the flats will be competing with old leasehold condos, executive condos and bigger executive flats, said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

Unlike exec condos, which are initially subject to sale restrictions similar to those on public housing units, but become fully private after 10 years, a DBSS unit is just a value-added HDB flat, he said.

Indeed, demand for DBSS flats might be more severely affected than that for other segments as potential buyers have more choices, said Dr Sing.

Nevertheless, Mr Mak feels the DBSS concept is sustainable if the Government accepts lower land prices.

The problem is that most developers of DBSS sites bought them in good times.

There are two DBSS projects slated for launch in the first half of next year: one in Simei and a huge project of nearly 1,200 units in Toa Payoh.

Source: The Straits Times - Joyce Teo, Property Correspondent

More move-in apartments available

As the property market heads into a down cycle, there will be more and more completed condominium developments with unsold units.

At the end of the third quarter, the number of unsold units in completed non-landed developments stood at 759, up from 461 a year ago.

'This number may increase given the weak homebuying sentiment which is expected to persist,' said Knight Frank director of research and consultancy Nicholas Mak.

Buyers can buy these unsold units directly from the developers.

Going ahead, there could also be a pool of sellers of newly completed, unoccupied developments eager to let go of their units. Because of the economic uncertainty, some owners of newly completed developments may be looking to offload their property instead of holding on to a big investment.

Although most of the projects targeted for completion next year received a good take-up rate during the good years in 2006 and last year, some of them would have been sold at high prices.

'Some buyers who have stretched their financial limits and bought multiple units may sell these units on the resale market, so potential buyers will have more choices,' said Mr Mak.

For example at The Sea View, a recently completed condo near the bustling Parkway Parade mall, there are unoccupied high-floor units going for $930 per sq ft (psf). Caveats filed this year showed that deals had been done at $1,000 psf and above.

Other recently completed condos that still have new units available include Lakeshore in Jurong West, Icon in Tanjong Pagar, Park Infinia at Wee Nam in Lincoln Road and St Regis Residences Singapore in Cuscaden Road.

The advantage of completed homes is that they offer immediate occupation, be it for owner-occupiers or for investors looking for immediate rental returns.

Retiree Khin May Myint, 69, who bought a 1,200 sq ft unit in the 99-year leasehold Lakeshore at $920 psf in October, said: 'We feel more secure buying directly from developers as everything is new and in good condition.'

The price she paid was much higher than when the development was first put up for sale at $460 psf in late 2003.

She paid close to resale prices, she said, but the developer had more units for buyers to choose from.

A potential buyer who declined to be named said: 'I like new units because they have no history. I am sure there are other superstitious buyers out there who do not like to buy a home that has been occupied and gives off bad vibes.'

On top of the new projects, there are also older developments with unsold units.

The 230-unit Rafflesia condo, opposite Raffles Institution in Bishan, received its temporary occupation permit in 2003 but still has several vacant units. Caveats lodged for the 99-year leasehold condo this year showed that deals were mostly done below $900 psf, not far from its launch price of $750 psf to $800 psf back in 2000.

Developer Far East Organization is offering the new units at $900 psf, but they come with a guaranteed 4-per-cent annual rental yield for three years and a one-year warranty on defects. The 12-month liability period for defects usually comes only with new condos.

Some developers may lease out unsold units before selling them. Such units would be good for those looking for instant rental yield, said property experts.

But those looking to move into new apartments should check if the units had been leased out previously, they said.

Mr Mak said some developers of completed projects may lower the prices of unsold units while others may have a policy of not lowering prices.

Still, as competition increases, some projects may be re-priced, he said.

Source: The Straits Times - Joyce Teo, Property Correspondent

Why Sibor is down?

There is widespread market expectation that the US Federal Reserve will cut its Fed funds target rate to 0.25 per cent from 1 per cent at its meeting next Tuesday. Sibor closely tracks this rate.

Continued measures by the Singapore authorities to pump liquidity into the system.

Source: The Straits Times -Gabriel Chen

Lower Sibor attracts more home buyers

INSTALMENTS for many home loan borrowers are set to fall after the all-important interest rate at which banks lend funds to one another nosedived to about 0.9 per cent this month.

Many home loan packages are pegged to this rate - known as the three-month Singapore Interbank Offered Rate (Sibor) - so when it goes down, so do Sibor- linked home loan instalments.

According to economists, the three-month Sibor should remain at these depressed levels into the new year.

OCBC Bank economist Selena Ling said the three-month Sibor is reacting to a couple of factors.

One is the widespread market expectation that the US Federal Reserve will cut its Fed funds target rate to 0.25 per cent from 1 per cent at its meeting on Tuesday.

The Sibor closely tracks this rate.

Another factor: continued measures by the Singapore authorities to pump liquidity into the system, against a backdrop of global and domestic recession.

In September, the three- month Sibor spiked to 2 per cent as the global credit crunch hit home here. Banks were afraid to lend to one another for fear of not getting repaid.

With the rate coming down sharply, more and more home buyers are looking at Sibor- linked loan packages.

Mr Geoffrey Ying, head of the mortgage division at financial advisory firm New Independent, estimates that six out of every 10 customers he is seeing are enquiring about Sibor-linked packages not only for high-end units, but also for HDB flats.

A year ago, when Sibor was significantly above 1 per cent, only three or four customers out of 10 would show interest.

It is easy to see why Sibor- linked packages have become the talk of the town, given the potential savings.

Suppose you want to buy an HDB flat. The best rate in the market is the 2.6 per cent annual rate for those qualifying for an HDB concessionary loan. This rate is pegged at a level 0.1 percentage point above the prevailing CPF ordinary account interest rate.

By comparison, at Standard Chartered Bank, for example, if you choose a two-year lock-in, its Sibor-linked package works out to Sibor plus a spread of - in this case - 0.95 per cent.

So if three-month Sibor stands at 0.9 per cent, you pay an annual rate of 1.85 per cent - lower than the HDB concessionary rate.

Still, financial experts say homebuyers must be careful. When Sibor falls, borrowers with a loan pegged to it gain as they will be paying a lower interest rate. But conversely, if the benchmark rate heads up, mortgage instalments also rise.

'We think though, that Sibor still has the potential to spike up, given that risks still remain out there,' a United Overseas Bank spokesman said.

Borrowers need to think carefully about choosing between two loan options, experts say.

Since January 2003, when banks were first allowed to provide loans for HDB flats, many homebuyers have opted for Sibor-linked packages as Sibor was very low, said Mr Leong Sze Hian, president of the Society of Financial Service Professionals.

In June 2003, the three-month Sibor bottomed out at 0.5625 per cent, but then surged to as high as 3.56 per cent three years later.

Mr Leong said that historically, the HDB rate of 2.6 per cent has been lower than rates for Sibor-linked packages.

More importantly, homebuyers with an HDB concessionary loan who switch to a bank loan cannot go back to the HDB if bank rates suddenly rise above the board's 2.6 per cent concessionary rate.

Experts think that banks are far more inclined than the HDB to repossess properties in the case of loan default.

'During the economic slowdown, there'll be people who'll struggle to meet monthly payments. Sure, Sibor- linked rates are low now, but if you want certainty, you'll choose HDB's,' said Mr Patrick Lim, associate director of financial advisory firm PromiseLand.

Take Mr David Lee, for instance. The 35-year-old engineer said that even though he is paying more now because he chose an HDB concessionary loan, he is not going to switch to a Sibor- linked package any time soon.

'I don't mind the slightly higher rate for peace of mind,' he said.

Mrs Ong-Ang Ai Boon, director of the Association of Banks in Singapore, is on record as saying that 'repossession would be a last resort, after all other measures have failed'.

Source: The Straits Times -Gabriel Chen

Property investment sales slow to a trickle

(SINGAPORE) The weak property market sentiment and tight financing have combined to compress the total investment sales of Singapore real estate to just $17.8 billion, year-to-date. This is a third of the record $54 billion achieved for the whole of last year, according to CB Richard Ellis data.

Just $290 million of investment sales have taken place in Q4 this year (up to Dec 9).

Investment sales are a gauge of developers' and investors' medium- to long-term confidence in the property sector.

CBRE defines such deals as transactions with a value of at least $5 million, comprising government and private sales of land and buildings (both strata and en bloc). It also includes change of ownership of real estate via share sales.

Market watchers are not upbeat about the investment sales climate in the near future. CBRE forecasts the tally for next year could come in at a modest $5-10 billion, a level last seen in 2004.

CBRE executive director Jeremy Lake says: 'With market uncertainty and economic risks appearing to be on the downside, many investors will remain on the sidelines of the property market, waiting for signs of price stabilisation before investing. With the global economy likely to enter a protracted downturn on the back of the deepening financial crisis, transaction volumes in property are expected to remain low over the next few quarters.'

Agreeing, DTZ senior director Shaun Poh says: 'I would not be surprised if we don't see any major transactions for the next three to six months. Potential investors are waiting for property prices to come down. Even property funds that have raised money can't make acquisitions because of the difficulty of raising the debt component to pay for the purchase - despite trying to source for financing in overseas markets like Hong Kong and London in some instances.'

CBRE's Mr Lake too notes that 'as credit market conditions worsen and lenders further reduce their risk appetite, capital available for property investment would become even scarcer'.

'In addition, cheap investment opportunities may arise in other asset classes, diverting capital away from property,' he added.

The property consultancy group's quarterly breakdown of investment sales shows that they have been sliding since Q3 last year, when a whopping $16.5 billion of deals were sealed. The performance in each quarter of this year has been lower than the corresponding periods of 2007, sliding to $290 million this quarter.

While the residential sector still accounted for the lion's share or 35 per cent of total investment sales deals so far this year, this was lower than the 61 per cent share last year. Also, the $6.25 billion transacted value of residential investment sales year-to-date (as of Dec 9) was 81 per cent below the full-year 2007 figure.

The collective sales market was dormant as developers remained mindful of the lukewarm response to new residential launches, rising construction costs and tighter credit measures, CBRE observed. Only seven collective sales worth a total $371 million have been sealed so far this year, against the record $12.4 billion from 111 transactions in 2007.

The Good Class Bungalow (GCB) market has also slowed considerably in 2008. A total of 48 GCB transactions worth $763.7 million have been done this year, down from $1.2 billion from 90 deals in 2007.

Office investment sales of $5.4 billion so far this year are 62 per cent below the $14.3 billion for full-year 2007. Ongoing turmoil in the global economy contributed to further deterioration in business sentiment, which subsequently had an impact on the office leasing market and capital flows in the local office sector.

'This resulted in no major en bloc office transactions in the second half of 2008. Hence, the office investment market is expected to remain quiet in the next few months,' CBRE said.

Sizeable office investment deals in the first half of this year included One George Street ($1.7 billion or $2,600 per square foot of net lettable area), Singapore Power Building ($1.01 billion or $1,836 psf), The Atrium Orchard ($839.8 million or $2,249 psf), Hitachi Tower ($811 million or $2,901 psf) and 71 Robinson Road ($743.75 million or $3,125 psf).

Bucking the trend was the industrial property sector which contributed $3.32 billion of investment sales deals this year, 66 per cent higher than last year and also the best showing since 2002. About half of the tally for this year was accounted for by JTC Corporation's $1.7 billion divestment of its industrial portfolio to a joint venture involving Mapletree Investments, Arcapita and Mapletree Industrial Fund.

Source: The Business Times - Kalpana Rashiwala

Govt suspends industrial land sales

SALES of state-owned industrial land have been suspended for the first half of next year in the light of economic uncertainty.

Only industrial land on the 'reserve list' system will be available. These sites go up for tender only when a developer indicates an interest.

The Trade and Industry Ministry said it will also transfer a 5ha site at Tampines Industrial Avenue 4 meant for outright sale this year to the reserve list for the first half of next year. It was the only site confirmed for sale in the latter half of this year.

The reserve list for industrial land for the first half of next year comprises eight sites, six carried forward from this year.

Two new sites, in Kaki Bukit Road and Woodlands Industrial Park, replace two reserve list sites that were sold in October.

The ministry said yesterday the modifications were made in view of the significant changes in the global economy.

Demand in the industrial market, which has been largely insulated from the impact of the global financial crisis for most of this year, is declining while prices and rents are starting to fall, said consultants.

The suspension of outright sales - which follows the Government's earlier move to suspend outright sales of other types of land for the same period - is timely, they said.

The credit crunch, weak sentiment and oversupply means there would be no takers even if there were outright sales of industrial sites, said Mr Dominic Peters, director of industrial services at Savills Singapore.

Colliers International's director for research and advisory, Ms Tay Huey Ying, added: 'It is wise to not force-feed the market with additional supply.'

Industrial prices and rents have started to come off, with some buildings experiencing rent declines of up to 20 per cent, said Knight Frank's head of industrial business space, Mr Lim Kien Kim, adding that 'rents are very negotiable now'.

Rents of high-tech buildings and the industrial space in business parks will be hit the hardest, consultants said.

Rates rose to as much as $5 per sq ft this year, thanks to spillover demand from the office sector as companies looked for cheaper alternatives, but demand for office space has now softened.

Mapletree Investments, which took over JTC's ready-built facilities in July, said its occupancies remain very high, and that it will help the 'few tenants' who may be facing various difficulties paying rent.

JTC earlier told The Straits Times that it is monitoring the market situation closely and will take appropriate action to offer tenants rental assistance if necessary.

But the industrial market is not expected to crash, considering it did not run up very much, said consultants.

'Just as the rents were going up, the market took a turn,' said Mr Peters.

Consultants expect rents of standard factories to dip about 10 per cent to 15 per cent next year, while rents of high-tech and business park space could fall by 20 per cent to 30 per cent.

Source: The Straits Times - Joyce Teo, Property Correspondent

Property exposure of banks well below limit

EVER since the market gathered steam in 2005, property-related loans have grown steadily. In fact, they were the key drivers of non-bank loan growth over the past two years, according to the Monetary Authority of Singapore (MAS), which released its Financial Stability Review yesterday.

Now, as a chill settles over the market again, concerns are being voiced over banks' exposure to the property sector. Brushing aside these worries, the MAS said that the overall property exposure of banks stands at just 18 per cent, well below the regulatory limit of 35 per cent. Of course, some banks may be closer to the threshold. 'Most banks' property exposures were well below the limit, with a few banks' property exposures closer to the limit,' MAS said.

Home loans are not included in the regulatory limit as they are typically very low risk. They accounted for 28.4 per cent of non-bank loans.

Banks' exposures to building and construction (B&C) firms are generally well-diversified with no bank having exposures concentrated in any particular property firm, it said. Lending to the B&C sector accounted for 18 per cent of total domestic banking unit (DBU) non-bank loans in September 2008. The asset quality of B&C loans has remained high, with the non-performing loan (NPL) ratio remaining low at less than one per cent.

'Going forward, the NPL ratio of B&C loans is expected to rise, given the economic downturn and ongoing corrections in the property market,' MAS said.

However, it does not expect this to affect the financial soundness of the banks as their loan portfolios are generally well diversified.

MAS said that the leverage ratio of the property sector has remained at almost the same level as before the Asian financial crisis, at around 60-80 per cent.

'Generally, the small property developers are more highly geared than the large property developers, with the small developers' debt to equity ratio at 76 per cent, compared to the large developers' 62 per cent in Q2 2008,' it said.

While there has been a substantial moderation in the interest coverage ratio since Q2 2007 for both small and large property developers, their earnings are still more than adequate to cover their interest liabilities in Q2 2008 with earnings at about 8.6 times of interest expense, it said.

On housing loans, the MAS said that they 'typically turn in low single-digit NPL ratios and have a low risk profile with 75 per cent of housing loans accounted by owner-occupied residential properties'.

In addition, Singapore banks' mortgage exposures are currently in the form of direct loans. Unlike in the US, there has been no securitisation of mortgages and repackaging into complex products, which had contributed to lax lending standards and the mispricing of risk, it said.

It added that the growth of property-related loans has tapered off recently, reflecting falling home demand and property transactions.

Source: The Business Times -Siow Li Sen

Common Abbreviations

DPS - Deferred Payment Scheme
BTO - Build-To-Order

Common Abbreviations

TOP - Temporary Occupation/Occupancy Permit
COV - Cash Over Valuation

Buyers paying less cash for HDB resale flats

The private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away.

Yet, the HDB resale flat market remains active and prices are still fairly strong.

However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown.

While prices have not dropped, the cash amount that buyers typically pay on top of the flat's valuation has fallen more significantly, experts said.

This cash-over-valuation sum - or what the market refers to as the COV - is usually a must for most transactions, especially in a booming market.

Now that the HDB market outlook is less upbeat, some deals are even likely to be done at valuation, which means no COV is required.

'We started to see the impact of all the bad news only in the past month,' said C&H Realty managing director Albert Lu.

'News of the stock market falling and retrenchments impact buyers' sentiment. Now, they are saying: Maybe we should wait.'

To entice those sitting on the fence, sellers have lowered their COV expectations by as much as 50 per cent, said Mr Lu.

Most COVs now roughly range from $5,000 to $30,000 for selected areas, according to Mr Eugene Lim, associate director of ERA Asia Pacific.

'Until recently, a COV of $5,000 was almost unheard of.'

A property agent said she is finalising a deal for an executive flat in Hougang in which the seller is willing to sell at valuation, without any COV.

'I noticed that there are more ads asking for zero cash,' she said. 'Old flats that need a lot of renovation could be sold for zero cash.'

The Housing Board's third quarter data showed that COVs mostly ranged from $10,000 to as much as $50,000. The overall median COV was $19,000, down from $20,000 in the second quarter and $21,000 in the first.

It rose to a high of $22,000 in last year's fourth quarter, from $17,000 in the third quarter and just $7,000 in the second.

'In view of the current sentiment, HDB resale flat valuations should stay flat going forward,' said Mr Lim. 'So if COV is coming down, prices will eventually come down.'

Prices, however, will not plunge as there is a large base of potential buyers, he said.

Within the HDB market, the segment for small flats will likely be busier than the one for bigger flats. Already, property experts say the market for bigger flats - five-room flats and executive flats - have started to slow down.

This led Mr Lu to project that prices of bigger flats could fall by 1 to 2 per cent in the fourth quarter.

ERA's Mr Lim expects prices of these flats to drop by around 5 to 8 per cent in the first half of next year.

Prices of smaller flats, they said, could remain steady.

While prices are likely to fall, sales volume may hold or even rise going forward, said Mr Lim.

Demand remains strong as there are newly-weds and permanent residents looking for HDB flats.

The demand is evident from HDB's build-to-order (BTO) flat sales. Recently, the sales of its new premium-quality BTO flats at Punggol Arcadia appeared to have met with fairly strong demand, even though they were priced from $356,000 to as much as $416,000 for a five-room unit. There were three times as many subscribers as the number of units available.

HDB said they are cheaper than other comparable HDB resale flats nearby, which cost between $375,000 and $462,000.

'New flats are sold according to what they would fetch on the open market, but with a generous discount which is the subsidy that buyers enjoy,' said an HDB spokesman.

'When the market goes up, HDB prices also move up. But when the market goes down, new flat prices are reduced.'

In any case, HDB flat prices are largely more manageable than the price of a private home.

'In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option' than private homes, according to a recent ERA study.

It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units.

'Many people were downgrading from private properties to HDB flats,' explained Mr Lim.

It is a scenario that could happen again next year as the economy weakens further, he said.

As to the extent of the price or volume movements for the whole of next year, that will depend on the state of the economy, experts said.

Source: The Straits Times -Joyce Teo

Flat trend

"In view of the current sentiment, HDB resale flat valuations should stay flat going forward. If COV is coming down, prices will eventually come down."

MR EUGENE LIM, associate director of ERA Asia Pacific

Get the low-down on home loan top-ups

(SINGAPORE) With the slide in property prices and a looming long economic downturn, some borrowers may be forgiven if they harbour thoughts of getting calls from their banks to top up their home loans.

But banks told BT that as long as borrowers are current in their monthly loan instalments, they will not ask for fresh valuations which could then lead to a top-up.

A DBS Bank spokeswoman says a key consideration when granting loans is the repayment ability of the customer.

'As such, when the customers are promptly servicing their monthly repayments, the bank will not usually require the customer to top-up the housing loan.'

Even those who took up loans on the deferred payment scheme (DPS) need not worry about the fall in the value of their homes, she says.

'Customers who took up loans on the deferred payment scheme would have had the approval granted based on the valuations at the point of the submission of their loan applications. And likewise, the approval will take into account the repayment ability of the customer.

'By the same token, when the loan is disbursed, as long as the customer can meet the monthly repayment amounts, the bank will not usually take any other course of action against the customer, even if valuations of these properties are now lower than that at the time of purchase.'

In reply of BT queries, a Monetary Authority of Singapore spokeswoman says non-performing housing loans are currently low.

'While we expect these to rise, the increase will not be significant,' she says.

'Banks in Singapore do not generally repossess a property once a loan is in default. Repossession is usually a final step after exhausting other avenues with the borrower, such as restructuring the loan,' she adds.

The MAS, however, does not intervene in such commercial decisions by the banks, she adds.

A United Overseas Bank spokeswoman says it is currently not the bank's practice to require a fresh valuation for DPS properties.

DPS borrowers typically begin paying their instalments some two years after they bought their homes.

Some observers are expecting a rash of defaults on the part of DPS buyers when the properties are completed and loan drawdowns begin.

Vibha Coburn, Citibank's head of secured finance solutions, says it is not the bank's usual practice to ask for top-ups in the case of existing borrowers who are servicing their loans on an ongoingbasis.

'While we may conduct valuations on properties held within our loans portfolio, these would form part of our internal portfolio management and due diligence processes,' she says.

The UOB spokeswoman says the bank periodically reviews its mortgage portfolio, including the update of property values.

Source: The Business Times - Siow Li Sen And Arthur Sim