Private home sales hit new low

JUST 131 new private homes were sold last month, down from 193 in November, capping the worst year for new sales in Singapore since 1990.

There were only 4,287 homes sold last year - a striking plunge from the boom year of 2007 when a record 14,811 private home units changed hands.

At least it beat the low in 1990, when just 2,526 new private units were sold.

Developers have caught the miserable mood of the market and launched only 157 units of new private homes in December, according to Urban Redevelopment Authority (URA) data yesterday.

That was even lower than the 174 units in October, when buyers and sellers were in shock from the deepening global crisis.

Total launches last year were at a four-year low of 6,114 units, down 56 per cent from a record 14,016 in 2007, according to Colliers International.

Resale deals also fell, from 20,985 units in 2007 to between 7,400 and 7,600 homes. Sub-sale deals fell from 4,863 units in 2007 to between 1,600 and 1,650 units last year, according to CBRE Research estimates.

Yet despite the dreadful sales numbers, property prices held their own.

'Developers generally withhold project launches to monitor the market situation, instead of resorting to drastic measures to reduce prices,' said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

But with economic conditions subdued, home-seekers are increasingly realistic, looking now at functionality before frills, he said.

The URA price index, on the rise since the second quarter of 2004, reversed direction only from the third quarter last year when it declined 2.4 per cent.

Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang, expects it to contract further by another 5 to 7 per cent this quarter on the back of weak take-up, after an estimated 5.7 per cent fall in the fourth quarter.

Buying interest should pick up when prices fall further, experts said.

'Should more projects be attractively re-priced in 2009, the number of units launched and take-up can expect to sustain or marginally improve, as there is some latent demand from bargain hunters,' said Mr Mak.

CBRE Research executive director Li Hiaw Ho added: 'The continued moderation of prices should kick-start some level of activity to the market.' Sales of new homes this year are likely to improve to around 5,000 to 6,000 units, he said.

But it will take some time to happen. There may be even fewer launches this month as developers are expected to continue to hold back in anticipation of goodies in next Thursday's Budget, said Colliers International's director for research and advisory, Ms Tay Huey Ying.

Many prospective buyers are preparing for Chinese New Year so sales this month may hit a new low, said Ms Tay.

Indeed, the entire first quarter or even the first half will likely witness slow sales due to the economy and banks tightening credit, property consultants said.

Last month's top-seller was the 104-unit Newton Edge in Makeway Avenue, which sold 43 units at a median price of $1,200 per square foot.

Mr Li attributed the favourable interest to the affordable range of $500,000 to $900,000 for a majority of the units, which are 440 sq ft to 915 sq ft in size.

'The units are a bit squeezy but you are paying less than a million for a property in Newton,' said an industry player.

The Straits Times - Joyce Teo, Property Correspondent

Developer sales plumb new depths

(SINGAPORE) The year gone by was one to forget for developers as they managed to sell just 4,351 homes in 2008, representing the lowest figure in at least 10 years - diving beyond the previous troughs of 5,156 and 5,520 units in 2003 and 1998 respectively.

The sales in 2008 were also significantly lower than the annual 10-year average (1998-2007) of 8,200 units.

Developer sales fizzled out in the last month of 2008, registering just 131 transactions - less than five a day.

The number of projects with licences for sale in December has, however, risen to 8,350 units, up from 6,512 units in the previous month.

Only 157 new homes were launched in December, the lowest figure since developer data was made available in mid-2007. CBRE Research executive director Li Hiaw Ho said: 'This shows that developers kept their launch activity to a minimum as they monitored the market.'

But not all developers held back.

Macly Capital sold 43 units of the 104-unit Newton Edge on Makeway Avenue at the median price of $1,200 psf. Mr Li said the strength of the project lay in the affordable quantum of $500,000 to $900,000 for a majority of the units due to their small sizes ranging from 440-915 sq ft.

Pricing is likely to have been a factor also. An earlier report by UBS noted that Newton Edge was priced lower than VIVA at Suffolk Walk nearby, where 15 units were sold in Q3 2008 for around $1,550 psf.

Hayden Properties' The Ritz-Carlton Residences in Cairnhill also chalked up healthy sales at what appeared to be discounted prices. Eight units were sold at a median price of $3,086 psf.

Hayden Properties director (sales and marketing) David Neubronner revealed that the buyers comprise project shareholders and directors, with just one third-party transaction.

'The purchase prices by the related parties are preferential rates, and the purchase price paid by the third party reflects current market pricing,' he said.

Mr Neubronner added that the unit purchased by the third party is located on a lower floor and was priced at $3,700 psf, which is only an 8 per cent decrease from the initial launch price of $4,000 psf.

Colliers International director for research and advisory Tay Huey Ying noted that mid-tier projects in the Rest of Central Region (RCR) dominated launches in December, accounting for 72 per cent of the units launched during the month. 'This, following the domination of high-end projects in recent months, could be an indication of the weakening holding power among small and mid- tier developers,' she added.

RCR projects that sold in the month include 10 units at Nova 88 at a median price of $988 psf and nine units of The Aristo Amber at a median price of $1,002 psf.

'This decline in demand has led to the contraction in the islandwide URA property price index (PPI) of some 5.6 per cent as the market attempts to generate more activity through price reductions,' said Jones Lang LaSalle local director and head of research (South East Asia) Chua Yang Liang. 'Historically, take-up has been leading the PPI. On the back of this contraction in take-up in Q4'08, we can expect the PPI to contract further, possibly by another 5-7 per cent in Q1'09,' he said.

Nevertheless, some developers have been continuing to prepare developments for launch.

UOL is expected to launch a 646-unit development at Simei Street 4 billed as a luxury condominium for upgraders in the first half of 2009.

Frasers Centrepoint is also preparing to launch a development on Boon Lay Way. A spokesman said: 'Caspian, our 712-unit development on Boon Lay Way, is launch-ready. At this point, we are still finalising several details, with regard to the actual launch period, pricing, etc, and will announce them once we are ready.'

It is also understood that Far East Organization is preparing to launch a development in Choa Chu Kang this year.

Notably, all developments are in the Outside Central Region where property prices are not expected to fall as significantly as in the mid-tier and high-end segments.

The Business Times - Arthur Sim

It's tougher to get loans

It may be harder for home buyers to secure bank loans now.

'Banks are a bit more cautious these days,' says Mr Chris Koh, director at Dennis Wee Properties. Two other property experts that Life! spoke to agree.

ERA Asia Pacific's director Eugene Lim says banks now take longer to process home loan applications. 'During good times, loans would be approved within 24 hours. Currently, it can take as long as two weeks,' he says, adding that it is a sign that banks are running more detailed checks.

They are also less willing to offer a loan quantum of 90 per cent, which was the norm during good times, says Mr Vincent Koh, vice-president of HSR International Realtor.

Loan quantum refers to the size of a loan in relation to a property's market valuation. Industry players say there have been cases where the bank's valuation of an apartment is lower than what a seller is asking for.

'Most usually offer 80 per cent now,' says Mr Koh of HSR.

Industry insiders say loans are generally smaller or harder to secure for the following people:

1) Those on commission-based income or are self-employed, compared to employees on fixed salary.

2) Applicants who are single, compared to married couples with dual income.

3) Those who have just started work.

To make up the shortfall, these home buyers will have to dig deeper into their savings or their CPF accounts.

Mr Gregory Chan, OCBC Bank's head of consumer secured lending, says the bank assesses and approves each loan application on the basis of the customer's credit worthiness.

'Ultimately, the loan quantum is determined by property valuation and credit worthiness of the applicant,' he says.

Among the factors considered are the individual's financial commitments, income and credit history.

United Overseas Bank's head of loans division, Mr Kevin Lam, says customers with a good credit record and stable income can be assured that UOB will consider their loan applications favourably despite the current economic environment.

Regardless of the size of the home loan, Mr Dennis Khoo, general manager of retail banking products at Standard Chartered Bank, says that in times of economic stress, it is prudent for customers to consider a smaller loan to ensure that they do not over-extend themselves.

'We recommend that customers work with their relationship managers to identify their individual situation and preferences, before selecting a home loan package,' he adds.

The Straits Times

The comforts of home prices

WHILE many will be worrying about losing the roof over their heads, 2009 may just be the year for some to find a new one. From luxury to mass market offerings, homes are now more affordable to a wider and more diverse group of buyers.

And with diversity comes stability, says Jones Lang LaSalle South-east Asia research head Chua Yang Liang.

One of the few voices of optimism in 2009, Dr Chua says that affordability has improved by some 5-24 per cent and that in any market, 'there will always be opportunity'. 'While we do not deny that the market has to correct in the short term, the medium to longer term opportunities are looking brighter by the day,' he adds.

The market has already started to correct with the official property price index having fallen for three consecutive quarters.

Dr Chua adds: 'People should invest on their own terms and not try to plan based on market trends.'

Those who insist on definitive evidence of market trends can look to business cycles.

Cushman and Wakefield managing director Donald Han says that the property market tends to lag some 6-12 months behind local economic growth indicators. While Mr Han says it is difficult to pinpoint when a cycle troughs or peaks, 'it is okay to buy or sell at some 10 per cent off from these levels'.

But Mr Han also pointed out that the average holding period for investors is between three and five years with owner occupiers holding for between four and eight years. 'And as market cycles get shorter over time, one's commitment to buy must include commitment to hold over and beyond these market cycles,' he added.

Property cycles are difficult to predict. Estimates for when the bottom of the current cycle will come are at least six months apart.

UBS Investment Research appears to be the most optimistic, saying that the property market slide may turn as early as in the third quarter of the year.

'In the last trough in Q3 '98, the URA residential price index - which tends to lag the market - had already weakened for six quarters and residential vacancy rates had risen for eight quarters before a recovery began. GDP growth also hit a trough of minus 4 per cent in Q3 '98,' UBS notes in a recent report.

But UBS also believes that sales volume could stay weak until vacancy rates peak. And it expects private housing vacancy rate to rise to 10-11 per cent by end-2009.

Goldman Sachs reckons the bottom of the market is more likely to be mid-2010, highlighting that since 1980, there have been three private residential property down cycles, each of which lasted between 2.5 and 3.5 years.

Expecting a further 26 per cent and 31 per cent declines in mass and prime residential prices respectively by 2010, Goldman Sachs says: 'At these new prices, affordability would improve to levels where we believe buyers would be lured back.'

Homes will definitely become cheaper but will they also become more affordable?

Affordability is generally defined as housing costs as a percentage of household income.

Goldman Sachs says that affordability needs to improve for volumes to recover too. 'We believe that even if the macro economy stabilises and confidence returns to the Singapore market, residential demand is unlikely to quickly recover, as the affordability ratio for the average household has dipped and is less favourable when compared to 2001 levels,' it added in a recent report.

Focusing on the top 30 per cent of households, it also notes that the current monthly mortgage payment for private mass residential as a proportion of take-home income is high at 43 per cent, compared with 33 per cent during the Q2-Q4 2001 period.

And affordability will further deteriorate if banks tighten credit on mortgages or loan quantum, and the government cuts employers' CPF contribution to stimulate the economy.

'Relative affordability' may have improved, but Chesterton Suntec International's head of research and consultancy Colin Tan asks: 'Does it change the market situation?'

'While some contend that affordability of the private residential market has improved, the reality is that the vast majority of properties currently on the market are still not affordable to the general population,' he adds.

As Mr Tan notes, CPF cuts could be a big deterrent for potential home buyers. Saying that any cut could have a 'psychological' impact, he adds: 'Right now, uncertainty over actual rate cuts - whether one per cent or 5 per cent, will deter people from buying. And when it happens, there will be uncertainty about future cuts. Although the government will probably do the cut once, this can play on the mind of potential buyers for a long time.'

Indeed, one does not have to look too far back to realise how irrational buying property really is, regardless of price and affordability.

'In the last two to three years, many people bought property thinking that prices would continue to rise,' remembers Chua Chor Hoon, DTZ Research senior director.

Interestingly, the opposite is also true.

The Business Times

Read this before you rent a place

The process of finding a rental home may be smooth for some but a nightmare for others.

Late last month, a Malaysian couple and a Japanese expatriate were duped by a conman posing as the property manager-cum-landlord of a terrace house in Serangoon Gardens.

He 'leased' the same house to both parties and then ran off with $10,300 of their money. The two parties have made police reports but there is no guarantee that they will get the money back.

Rental scams surface from time to time and many of them involve HDB flats, property agents said.

While there are no foolproof ways of avoiding one completely, there are precautions tenants can take to ensure they do not fall prey to a scam.

Dealing with agents

First of all, tenants should engage or deal with a property agent from a reputable or established company, said PropNex chief executive Mohamed Ismail.

While this is obviously not foolproof, it does provide a level of protection if anything were to go wrong. 'At least there is a company to go to for help,' he said.

Firms like his will carry out their own investigations and take appropriate action, such as helping the tenant to get his money back or terminating the agent's services if need be, he said.

Second, check with the agent's property firm or the website of the Institute of Estate Agents (IEA) to see if the agent you are dealing with is a legitimate one, advised Mr Ismail, who is also the IEA's first vice-president.

On the IEA website, click on Central Register Scheme and type in the agent's particulars. If the agent has quit or been terminated, his name would have been taken off the list.

But note that the IEA's list is not comprehensive as its membership is not compulsory. For instance, a major agency, HSR Property Group, is not on the list.

Thirdly, do not pay a property agent a large sum in cash. 'If you pay cash, he can misappropriate the money,' said Mr Ismail.

Instead, tenants should pay using a cheque or cashier's order which states the owner's name.

Before signing the lease

Property agency bosses also advise potential tenants to do some homework and find out about standard practices before committing to a lease.

There was a case last year where a 20-year-old student from China paid eight months' advance rental for a four-room Punggol flat to someone who claimed to be the landlord, but who turned out to be the sub-tenant of the flat and a conman.

The student told The Sunday Times on Thursday that she was chased out of the $1,600-a-month flat by the owner, who had returned home after a trip, the day after she moved in. The sub-tenant had disappeared by then.

What she should have done was to get proof of the property's ownership or ask to meet the owner, agency bosses said.

Property agents are supposed to do due diligence to ascertain the ownership of the property they are handling, so tenants can ask to see the documentation. The owner's property tax statement would be good.

If you are dealing with the managing agent, ask for documentary proof such as a power of attorney or a letter from the owner authorising the agent to act on his behalf, said C&H Realty managing director Albert Lu.

Minimising losses

HSR Property Group's executive director, Mr Eric Cheng, said the student would not have been cheated of so much money if she had known that it is the norm in Singapore to pay just a deposit and one month of advance rental.

Tenants can also negotiate for a lower deposit, he said. It is up to the landlord to say yes, although in the market, the norm is a one- month deposit for a one-year lease and a two-month deposit for a two-year lease.

Mr Lu said tenants should pay the advance rental only upon the handing over of the keys to the property, to minimise their risk.

But legitimate owners can sometimes be cheats too. Tenants should therefore pay their rent on a monthly basis, advised Mr Cheng.

He has encountered cases where tenants were happy to pay six to eight months in advance rental for a lower rent, only to find out later they had been cheated.

In one case, the legitimate owner sold his flat soon after the lease was sealed and disappeared, said Mr Cheng.

Tenants just have to be vigilant, said Mr Lu. 'If the rent is too good to be true, then you have to beware.'

Based on past instances, there is a high chance of a scam happening if the rental is too cheap, he said.

The Straits Times - Joyce Teo, Property Correspondent

Q4 private home price slide is worst in decade

IN its worst showing since Q4 1998, the official private home price index slid 5.7 per cent in Q4 last year over the preceding quarter. For full-year 2008, the index fell 4.3 per cent, reversing a 31.2 per cent jump in 2007.

Property consultants are predicting a further decline of 10-20 per cent this year in the benchmark index, with upmarket homes continuing to be the worst hit, as in 2008. This sector was the most overheated during the run-up in 2006 and 2007.

'The bid-ask gap is very high; any buyer that comes in now wants to make sure he's buying at very attractive prices to cushion against future risk. As a result, most transacted prices are quite distressed,' said DTZ executive director Ong Choon Fah.

BT understands buyers are looking at prices at least 20 per cent below Q3 2008 levels before they are willing to commit.

URA's non-landed private home price index for Core Central Region (CCR) fell 6.3 per cent quarter-on-quarter in Q4, or a full-year drop of 5.5 per cent. CCR includes the prime districts, financial district and Sentosa Cove. In the Rest of Central Region, the price drop was 5.5 per cent for Q4, and 4 per cent for the full year. Outside Central Region, a proxy for suburban mass-market locations, suffered the smallest declines, of 4.7 per cent in Q4 and 1.6 per cent for the whole year.

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The declines in URA's indices were far smaller than the price drops estimated by property consultants. CB Richard Ellis said that last year, average prices of new luxury homes under construction fell 30 to 35 per cent for prime districts 9 and 10, while those in Marina Bay and Sentosa Cove eased 10-13 per cent.

URA's price indices are weighted according to the moving average mix of transactions for the preceding 12 quarters, and this tends to make changes in the indices more muted during sharp market swings.

For this year, JP Morgan analyst Chris Gee said: 'The critical factor that will affect private home prices in 2009 - probably more importantly than the economy and jobs market - will be banks' financing of property. Banks seem happy to lend to the right type of buyers, but they're more conservative on valuations and tighter on loan-to-value.'

As for developers, smaller players have already started to chop prices. 'Among bigger developers, some are restructuring their portfolios and re-evaluating their risk positions,' DTZ's Mrs Ong noted.

A seasoned developer pointed to a diversity of strategies among developers, according to their financial strength, profit margin for each project and their view of when the recovery will take place. 'Some will cut and sell; some will package things that effectively give more discounts; some will lease instead of selling; some will just sit it out and wait for better times.

'Projects will be slowed down or delayed, stretching out the supply coming into the market, which in itself is a regulating mechanism,' he said.

In the public housing segment, the Housing & Development Board's (HDB) resale flat price index still inched up 1.5 per cent quarter-on-quarter in Q4 to scale a new peak. But this was slower than the 4.2 per cent rise posted in Q3.

ERA Asia Pacific associate director Eugene Lim said: 'We've been seeing more transactions with decreasing cash-over-valuations (COVs). The days of transactions with above $50,000 COVs are over.'

He is predicting a sub-1 per cent rise in the HDB resale flat price index for each of Q1 and Q2 this year. 'If the recovery takes longer, we may see the price index flatten in H2 2009 before decreasing, if the situation worsens.'

Knight Frank director Nicholas Mak predicted a 5 to 10 per cent correction in HDB resale flat prices this year, as the weakening economic conditions filter into the HDB market.

ERA's Mr Lim noted that 'in uncertain times, home buyers go for the 'safer' option of HDB flats to ease their financial burden'. He estimated 30,000 to 31,000 HDB resale transactions were done in 2008 - surpassing the 29,436 in 2007.

As for the private housing sector, CBRE predicted developers may sell 5,000-6,000 units in 2009, as falling prices boost take-up. It put the figure for last year at 4,300 to 4,400 units - just 30 per cent of 2007's record volume. Sales also slowed in the secondary market. CBRE estimated about 7,400 to 7,600 resale deals were done last year - against nearly 21,000 transactions in 2007. The 1,600 to 1,650 subsale deals it estimated for 2008 were also a far cry from the 2007's figure of 4,863.

Source: The Business Times - Kalpana Rashiwala

Some bargains for house hunters

The property market is off to a quiet start this year, with some developers even closing their show-flats temporarily in response to dwindling crowds.

But as home prices continue to fall, house hunters tempted back into the market do have some places to go shopping.

Several small developments are coming on the market, while other projects that have been launched earlier are giving discounts or other buying incentives.

In the Balestier area, developer Roxy Homes is soft-launching two freehold boutique projects this weekend - Nova 48 in Prome Road and Nova 88 in Bhamo Road, both off Balestier Road.

Nova 48 has 48 units while Nova 88 has 88. Both are priced at about $1,000 per sq ft (psf), with a one-bedroom unit of 506 sq ft in size starting at about $500,000.

Another upcoming launch is that of Alexis in Alexandra Road. The freehold development has about 300 units and is less than 10 minutes' walk to Queenstown MRT Station, according to property agents.

Indicative prices are about $900 to $1,000 psf, according to agents. The developer is offering a payment scheme similar to deferred payment, where buyers can pay 20 per cent upfront and then nothing until completion.

Closer to town, the Heritage Group is holding private previews for Vivace, a new 999-year leasehold project to be built at the former Tong Watt Mansion near Robertson Quay.

The 85-unit development has mostly small units, ranging from one-bedroom apartments of 388 sq ft in size to penthouses of 990 sq ft. Prices are understood to start at about $580,000, or about $1,500 psf.

There are also a number of developers that have cut prices or are offering carrots to buyers.

Novelty Group, for instance, has lowered the price of its Lucida project along Thomson Road. The 62-unit development was launched at close to $1,600 psf early last year, but is now selling at about $1,200 psf.

The one-bedroom units are 624 sq ft in size, while two-bedroom apartments are 1,066 sq ft.

In the East Coast, the asking price for Mountbatten Suites has fallen from $1,100 psf at its launch to over $900 psf now. The developer is reportedly offering deferred payment and absorbing stamp and legal fees.

Frasers Centrepoint is also giving renovation vouchers to buyers of its Woodsville 28 project in Potong Pasir. Two-bedroom units come with a $20,000 voucher, while buyers of a three-bedroom unit get $30,000. Prices remain at $850 psf on average for the freehold development.

For the rest of the year, interested buyers can look out for three offerings from City Developments, which is planning to launch Phase 2 of Livia in Pasir Ris, The Arte in Thomson Road, and the Quayside Isle in Sentosa Cove.

While the prices for the last two projects have yet to be finalised, prices start at $797,000 for a three-bedroom apartment at Livia.

Far East Organization is also understood to be planning to launch the latest phase of cluster houses in its Greenwood landed housing development, as well as a new 99-year leasehold project in Choa Chu Kang.

Source: The Straits Times - Fiona Chan, Property Reporter