June Updates

Introduction

Don’t bring out the Champagne yet. Yes, the worst does seem to be over for now; but NO, it is not time for celebration yet.

At best, this is a situation like a doctor declaring a critically ill patient ‘stable’ but still needed in the intensive care unit. It does not mean that the patient will leap from the bed and ‘boogie’ again. How long the patient will remain bed-ridden and be highly dependent on intensive care remains an agonising mystery. Worse still, nobody can be sure that the patient will not suffer a relapse after a while.

This is the problem we are facing right now as many of our customers do not seem to be able to differentiate ‘stabilising’ from ‘full recovery’. Official statistics are still pointing to an economic contraction, though things are beginning to look ‘less menacing’. But to call this the beginning of the revival is ‘jumping the gun’ and uninformed.

The situation now is at best uncertain and ambiguous. Some economists said over the recent weeks that the world is entering a twilight zone of conflicting signs, with key indicators pointing towards a recovery but economic data continues to be grim and employers continue to trim jobs; and such view is echoed by the Ministry of Trade of Industry (MTI) in Singapore.

It is true that some semblance of confidence has crept back to the real estate market, resulting in heightened home-buying activities in March, April and May 2009. Some bargain hunting has definitely taken place with buyers hoping to own a piece of prime real estate at the posh locations with more affordable price. But the luxury market is still devoid of any actions despite the much taunted opening of Singapore’s first casino in six months’ time.

This month’s review will attempt the million dollar question of ‘is it’ or ‘is it not’ a real market revival.

(A) Overview of the Larger Economy

[A.1] Singapore Finance Minister not Optimistic

First and foremost, the Singapore Finance Minister Tharman Shanmugaratnam had said in late May that it was ‘still too early' to conclude that the world economy is in 'recovery mode'. For one, he did not believe that the ‘green shoots’ in some countries and specific industries will spread across the world economy; nor did he believe they would last.

His message was sombre and cannot be ignored, that is, 'a large part of the world economy is still contracting. Even among the optimists, the consensus is that the recovery, when it materialises, is likely to be weak, given the magnitude of the unresolved problems in the global financial system.

[A.2] IMF Forecasts Slow Recovery for the World

Economists from the International Monetary Fund (IMF) forecast that the Singapore economy will contract by 10% this year and then followed by flat growth next year.

Asian exports and investment spending, including Singapore’s, are likely to stay weak for years as easy credit in the US is all but gone, and demand by the heavily indebted US consumers for high and medium-tech manufactured exports, such as cars, cosmetics, and electronics products is likely to stay subdued for many years.

IMF figures also showed that Europe sank deeper into recession in Q1 2009. Data showed that France, Austria and Romania officially entered recession and Germany recorded its worst quarter on record. Likewise, the 16-nation euro zone shrank by a record 2.5%.

In Japan, car exports plunged almost 70% between September 2008 and March 2009. And exports to China from the rest of emerging Asia declined 80% in the same period. In the meantime, Japanese central bank data hinted that the Japanese economy may be facing a repetition of its 1990s deflationary spiral when falling prices led to weak consumer spending.

[A.3] Employees in Singapore Set to Get Lower Wages in 2009

A recent international ‘salary hikes’ Survey conducted by a human resource consultancy across the Asia-Pacific region in the January-February 2009 showed that 36% of the 89 companies polled in Singapore shared the same thought of freezing pay this year.

The survey also showed that employers in Singapore have trimmed their budgets for 2009 salary increments to a median 3%, down from 4.3% in November 2008.

This makes the pay hikes in Singapore the lowest at a time where salaries across the Asia-Pacific region are set to grow by a median 5%.

[A.4] MTI Believes Worst is Over; but Downside Risks Remain

And finally when some ‘slightly better news’ arrived from the Ministry of Trade and Industry (MTI) i.e. that the Singapore economy has probably bottomed and things have stopped getting worse, the government looks set NOT to increase the stimulus package beyond the original S$20.5 billion. This means that while many who are waiting for things to return to normalcy, there will be more ‘belt tightening’ for corporations as well as individual consumers as a second fiscal aid is unlikely.

MTI had announced that Singapore GDP shrank 10.1% in Q1 year-on-year, the sharpest on-year contraction since the country’s independence.

However, the biggest irony of all was that the Singapore stock market cheered the figure because it was better than the minus 11.5% initially estimated by MTI.

Besides, according to MTI, downside risks are still high because of the uncertainties in US banking, where lending continues to be restricted, and the risks of a second round of financial sector collapses cannot be totally ruled out.

In short, it is MTI’s unequivocal position that for now ‘it is not clear that Singapore has begun to rebound from the bottom’.

[A.5] Business Volume and Bank Loans Dropped in Tandem

Estimates from the Monetary Authority of Singapore (MAS) show a 0.3% slide in the total Singapore-dollar bank loans at $270 billion at end-April. The same official data showed that loans to businesses contracted by $92.3 billion, or some 5.7% over the half-year to end-April.

Loans to businesses fell 1.1% in April to $154 billion, the sixth consecutive monthly decline. Lending to the manufacturing sector dipped 3.1% over the month to $11.5 billion. And rather unexpectedly, loans to the building and construction sector also dipped 0.1% to $50.8 billion.

Only consumer lending was growing with total consumer loans rose 0.8% in April to $116 billion at the end of the month. That included $81 billion worth of housing and bridging loans, which grew 0.6% over the month. However, unpaid personal debts also rose in the midst of the economic gloom. All together, banks wrote off $15 million in credit-card bad debt in April, the most since December 2004.

[A.6] Inflow of Foreign Fund to Asia Stopped

In Hong Kong, foreign funds investing in equities there have started to move out in mid-May 2009. A net US$3.3 million flowed out in mid-May after US$59.4 million had been invested in the first week of May 2009.

Likewise, foreign cash flowing into funds buying China shares in Singapore dropped by almost half to US$273.3 million at the same time from a weekly average of US$501.4 million in late April and early May period.

Foreign investors have stayed muted over Singapore. They poured only about US$8 million into funds investing in local equities in mid-May. The bulk of trading on the bourse here is still driven by retail investors.

Some analysts are also worried that the sharp rise in valuations in emerging Asian markets might not be supported by a similar recovery in corporate earnings as their main export markets in the United States and Europe remain mired in recession.

(B) Overall Performance of Private Residential Property Segment

[B.1] Cautious Optimism Reinvigorated Private Home Sales

Data from the Urban Redevelopment Authority (URA), shows 1,207 new home units sold in April 2009. Judging by the way things go, it will not surprise anyone if new home sales in the second quarter were to reach 3,000 units.

The recent stock market rally across the globe has given the sentiment in the property market a huge boost. Developer sales in the January-April period have already reached 90% of the whole of 2008. In the first quarter (Q1) of 2009 alone, a total of 2,660 homes were sold.

[B.1.1] High-end homes in Core Central Region (CCR) sold well

High-end homes in CCR sold 322 units compared with only 133 homes sold in March 2009. The sale performance in CCR is a 19-month high.

What is interesting is that many projects witnessed higher unit price of above $1,000 psf, which was not seen in the past 18 months. This is evidence that the market sentiment has improved. However, one can also interpret that developers’ pricing strategy had attracted better buying interests.

The following comparisons in sale price may be able to throw some lights on the factor(s) causing the recent buying activities. In fact, it is not difficult to notice that the psf prices of new home units were much higher last year. It means that developers have indeed adjusted their asking prices in order to quickly offload unsold units.

Below are comparisons of sale prices between the whole of 2008 and April 2009 in some selected new condo/apartment projects in CCR.

• 22 units at Zenith at Zion Road were sold in January 2008 at a median price of $1,682 psf, compared with three recent transactions at a median price of $1,199 psf.

• 19 units at RV Suites at River Valley Road were sold in November 2008 at a median price of $1,350 psf, compared with 35 recent transactions at a median price of $1,180 psf.

• 12 units at Mount Sophia Suites at Sophia Road were sold in January 2008 at a median price of $1,719 psf, compared with 20 recent transactions at a median price of $1,231 psf.

• 16 units at Parc Sophia were sold in August 2008 at a median price of $1,474 psf, compared with two units sold in April 2009 for $1,018 psf and $1,070 psf respectively.

• 13 units at Mulberry Tree at Moulmein Road were sold in September 2008 at a median price of $1,337 psf, compared with four recent transactions at between $1,194 psf and $1,217 psf.

• Three units at Visioncrest were sold in July 2008 at a median price of $2,123 psf, compared to a median price of $1,651 psf in April 2009.

• Six units at Belle Vue Residences at Oxley Walk were sold in August 2008 at a median price of $2,044 psf, compared to two units sold at a median price of $1,503 psf in April 2009.

• Three units at Luma at River Valley Grove were sold in March 2008 at a median price of $2,754 psf, compared with one recent transaction at $1,548 psf.

• Two units at Lucida at Suffolk Road were sold in July 2008 at prices ranging between $1,442 psf and $1,459 psf, compared with eight recent transactions at a median price of $1,100 psf.

• A unit at The Lincoln Residences was sold in September 2008 for $1,435 psf, compared with 39 units recently transacted at prices ranging between $927 psf and $1,293 psf.

Source of data – URA

Conclusion: It appears that most developers have lowered the asking prices significantly so as to clear the inventory of ‘leftover’ units in projects that have already been launched publicly since last year.

In fact, it will become more challenging for developers to offload ‘leftover’ units when the projects reach their TOP stage. This is because by the TOP stage, buyer’s attention will be shifted to the completed units for sub-sales.

* [B.1.2] Mid-tier homes in Rest of Central Region (RCR) did not disappoint either

In all, a total of 362 new home units in 33 projects were sold in RCR in April 2009, compared with 300 units sold in March. See table below for details.

Below are comparisons of sale prices between the whole of 2008 and April 2009 in some selected new condo/apartment projects in RCR.

• 100 units at Clover by the Park at Bishan were sold in July 2008 at a median price of $753 psf, compared with 16 units recently sold at a median price of $730 psf.

• 68 units at Concourse Skyline were sold in September 2008 at a median price of $1,592 psf, compared with 23 units sold recently at a median price of $1,164 psf.

• 47 units at The Peak @ Balmeg at Balmeg Hill were sold in September 2008 at a median price of $1,011 psf, compared with two recent transactions of between $935 psf and $950 psf.

• 34 units at Beacon Heights at the junction of St Michael’s Road and Mar Thoma Road were sold in August 2008 at a median price of $917 psf, compared with the four units sold at a median price of $771 psf in April 2009.

• Seven units at The Rochester were sold in July 2008 at a median price of $1,300 psf, compared with the current median price of $900 psf.

• Four units at Woodsville 28 were sold in August 2008 at a median price of $919 psf, compared with 34 recent transactions at a median price of $751 psf.

• One unit at Versilia on Haig was sold in August 2008 at $995 psf, compared with one recent transaction at $823 psf.

Source of data – URA

Conclusion: Most developers appear to have taken the correct professional advice and the leading market indicators by slashing their asking prices for projects in RCR – some by more than 25% – so as to lighten unsold inventory amidst growing uncertainties in the real economy. The pattern is also repeated in the mass market home segment in OCR.

*B.1.3] Sale of primary home units in Outside Central Region (OCR) slides

In all, a total of 523 new home units in 42 projects were sold in OCR in April 2009. However, when compared to the 779 new home sale figures in March 2009, there was a drop of 32% in sales volume.

The 779 new home transactions in OCR in March 2009 were contributed chiefly by the stellar performance of Double Bay Residences at Simei Street 4 and Mi Casa at Choa Chu Kang Ave 3. Both the projects continue to chalk up impressive sales in April; and they have both enjoyed slightly higher median price at their respective showrooms.

Below are comparisons of sale prices between the whole of 2008 and April 2009 in some selected projects in OCR.

• 22 units at Breeze By The East at Upp East Coast Road were sold in April 2008 at a median price of $948 psf (with the highest psf price at $1,080 psf), compared with three recent transactions at a median price of $740 psf.

• Seven units at The Amery at Lorong K Telok Kurau were sold in July 2008 at a median price of $877 psf, compared with three recent transactions at prices between $727 psf and $863 psf.

• Seven units at Lynwood Eight were sold in August 2008 at a median price of $734 psf, compared with a unit sold recently at $464 psf.

• Seven units at Naturalis at Lorong M Telok Kurau/Still Road were sold in September 2008 at a median price of $909 psf, compared with three recent transactions at prices between $827 psf and $881 psf.

• Four units at Park Natura at Bt Batok East Ave 6 were sold in February 2008 at a median price of $1,034 psf, compared with three recent transactions at $949 psf.

• Four units at The Lucent at Lorong N Telok Kurau were sold in October 2008 at a median price of $958 psf, compared with four recent transactions at prices between $620 psf and $750 psf.

• Three units at The Verte at Lorong H Telok Kurau were sold in September 2008 at a median price of $908 psf, compared with two recent transactions of between $682 psf and $687 psf.

• Two units at Botannia at West Coast Park were sold in January 2008 at a median price of $829 psf, compared with nine recent transactions at a median price of $690 psf.

• Two units at 3@Sandilands at Sandilands Road were sold in August 2008 at $863 psf and $841 psf respectively, compared with a recent transaction done at $724 psf.

• A unit at Bayou Residence at Upper Paya Lebar Road was sold in August 2008 at $854 psf, compared with another unit sold recently at $300 psf.

Source of data – URA

* [B.1.4] No transactions in luxury homes

However, for the fourth consecutive month, there has been no transaction in the luxury segment, where prices are typically higher than $2,500 psf.

It seems that the acid test for the ‘recovery theory’ is still the performance of the real economy which appears to be rather subdued despite all the euphoria at both the stock as well as the property markets.


[B.2] Unsold inventory very much Digested

As the market went through four consecutive months of heightened buying activities, the new home inventory has come down to a more decent level of slightly over three thousands.

However, the Achilles’ heel of the private home market in the second half of 2009 may be those new home units bought earlier under the now-defunct Deferred Payment Scheme (DPS). Mass defaults may derail the healthy showroom sales performance.


[B.3] Deferred Payment Scheme – the Achilles’ heel of private home market

The possibility of mass default by speculators who had booked their units under the now-defunct Deferred Payment Scheme (DPS) remains the Achilles’ heel of the new home market segment. When buyers default on payments, especially when a big group of them walk away from the sale contracts, it will have great impacts on the developers’ bottom-line; and the delay in payment may cost the developers millions of dollars in interest losses; and in the worst case scenario, may serious hamper the developers if they are unable to redeem their construction loans by the expected maturity date.

However, it is still too early to draw any meaningful conclusion from the isolated default cases. Firstly, probably for fear of encouraging more buyers to emulate the ‘no shows’, the aggrieved developers have kept the negotiations with the defaulters ‘hush hush’. As such, no discernable patterns can be deduced from the two default cases.

And, secondly, these are early days of ‘difficulties’ and only a small portion of the projected 10,000 newly completed condos/apartments have hit the sub-sale market. Hopefully, the global financial situation will improve when the massive supplies of new home units materialise by the final quarter of the year. Below are the brief facts of the default cases:

* [B.3.1] China buyer unable to pay upon TOP at Fernhill

The China buyer, Concordia Overseas, who failed to make balance payment to MCL Land for 20 units at The Fernhill at the corner of Orange Grove and Fernhil roads when the project received its Temporary Occupation Permit recently has successfully sold 19 of the units.

Reportedly, the sub-sale price was about $1,180 per square foot, below Concordia's purchase price of $1,410 psf. However, market rumors had it that all the 20 units were sold to local investors for a lump sum of $39 million.

Concordia Overseas had earlier taken advantage of the DPS in January 2007 for all the 25 units at The Fernhill. It paid the initial 20% of the purchase price to the developer and later sub-sold five units to foreigners at an average price of about $2,200 psf.

* [B.3.2] ‘Big-time buyer of The Suites @ Central unable to pay upon TOP

An unknown buyer of 51 units in the 157-unit The Suites @ Central project has been unable to make payment upon the project receiving Temporary Occupation Permit (TOP) in May 2009. The developers (i.e. Keppel Land and Chip Eng Seng) have since granted the buyer a six-month payment extension subject to monthly payment of $500,000 for the period of extension.

The big-timer had purchased the 51 units in a ‘package’ deal for an average price of $1,806 per sq ft under the DPS in June 2007 – just before the property bubble burst. Under the DPS, the buyer had paid the initial 20% down-payment, with the balance of $1,445 psf due after the project obtains its temporary occupation permit (TOP).

* [B.3.3] 11 individual DPS buyers of RiverGate units defaulted

Buyers of 11 units at the 542-units RiverGate project have been unable to pay up upon the issuing of Temporary Occupation Permit (TOP) in March 2009.

The 11 units were sold separately to individual buyers under the DPS at the same time when more than 90% of the projects were sold under the same deferred payment scheme.
However, unlike the above two default cases where the properties were bought at the height of the market bull run in 2007, RiverGate, a 43-storey freehold project was launched in 2005 at an average price of $1,080 psf and later in 2006 at $1,600 psf on average.

Conclusion: The situation will be more telling when projects launched and sold at or near the height of the market bull-run in 2007 receive their TOP. As of this point, the threat of mass defaults by speculators is still potent given the current economic gloom.

[B.4] Falling Condo Rents a Major Worry for Investors

The rental prices of high-end condo units in District 9 which are relatively new, with some having received TOP in late 2008. Of grave concern is the fact that most of the high-end units are unable to command the benchmark $6 psf per month rents.


(C) Overall Performance of Non-Residential Property Segment

* [C.1] Rents for ground floor shops in Orchard Road hold up

According to statistics from Cushman and Wakefield, the average monthly rental value for prime street-level retail space on Orchard Road dipped 1.1% in the six weeks between end-Q1 2009 and mid-Q2 2009, lower than the 4.6% quarter-on-quarter contraction seen in Q1 2009.

The average monthly rental value for prime ground floor Orchard Road retail space stood at $36.50 psf from $36.90 psf as at mid-May. The latest mid-Q2 2009 figure represents a fall of 5.7% since end-2008.

According to Knight Frank, ION Orchard, Orchard Central, 313@Somerset and Mandarin Gallery are among the new malls that will add a total 1.8 million square feet of net retail space in Singapore's prime Orchard Road shopping belt from now till mid-2010. This will be 40% increase from the current stock of 4.5 million sq ft.

However, despite the downward pressure on retail rents due to the on-going H1N1 pandemic and the reduced tourist arrivals, rents for ground floor space at Orchard Road will probably hold up better than rents for upper floors retail space. This is because street-level units facing Orchard Road are always in short supply.

* [C.2] Office Buildings in CBD Sold at Huge Losses

After a nine-month lull, two commercial buildings in the central business district (CBD), namely Parakou Building and Anson House, have changed hands. (The last major office investment sales deal was in June 2008 when City Developments Ltd sold the 999-year leasehold Commerce Point near Raffles Place MRT Station for $2,200 psf.)

However, while some property analysts see the sales as the return of investor’s confidence, the bad news was, both the transactions reeked of ‘desperation in an extremely challenging time’ where the sellers realise capital losses of $46.62 million and $44.5 million for Parakou Building and Anson House respectively. Below are the brief facts of the sales.

o [C.2.1] Parakou Building sold at a loss of $46.62 m

Parakou Building, at the corner of Robinson Road and McCallum Street, has been sold to a Cathay Organisation subsidiary at $81.38 million or $1,280 per square foot of net lettable area (NLA).

The $81.38 million transacted price for the 16-storey freehold office block is about 36% lower than the $128 million the seller, UK fund manager New Star Asset Management Group, paid for the property two years ago.

o [C.2.2] Anson House owner lost $44.5 m in sale

Anson House, a 13-storey office block along Anson Road, has been sold to an unidentified group of investors for about $85 million or slightly over $1,100 per square foot of net lettable area (NLA).

The sale price reflected a loss of $44.5 million as the Macquarie-managed fund had bought the office block for $129.5 million in 2007.

The office block has a remaining lease of about 87 years. The net yield on the investment based on the $85 million transaction price would be more than 6%.


* [C.3] Prime Office Rent Fall Continues

Based on figures released by the Urban Redevelopment Authority (URA), the office take-up rate has slid for two consecutive quarters of 366,000 sq ft in Q4 2008 and nearly 323,000 sq ft in Q1 2009.

The office market continues to be troubled by the upcoming new supply of 9.9 million sq ft net lettable area (NLA) of offices slated for completion from 2009 to 2013. This year alone, the new supply is projected at about 2.56 million sq ft, 83% above last year's 1.4 million sq ft

o [C.3.1] Prime Raffles Place office rents drop 33.5% Y-O-Y

According to data from Cushman & Wakefield, the monthly average rent for prime Raffles Place office is now $9.44 psf in May 2009. In percentage term, the average rent dropped 6.6% in the six weeks since the end of Q1 2009. However, the fall is much smaller than the 28.8% quarter-on-quarter drop registered in Q1 2009.

This brings the total year-to-date decline to 33.5% from $14.20 psf a month at end-2008.

o [C.3.2] Grade A Raffles Place office rents ease 8.7% Q-O-Q

The average Grade A Raffles Place rental eased 8.7% in mid-Q2 2009, again a more moderate drop than the first quarter's 27.7% Q-on-Q slump.

In the other micro-markets such as, Shenton, City Hall and Orchard, the overall prime office vacancy rate inched up 0.4 percentage point to 5.5% as at May 2009, milder than the 2.1-percentage point Q-on-Q hike to 5.1% in Q1 2009.

* [C.4] Distressed properties may flood markets

The GIC Real Estate chief said in a public seminar in May that distressed property assets may emerge in developed markets in the next two years as a result of refinancing difficulties. A ‘flood’ of distressed properties may develop if the credit markets remain tight as large volumes of loans mature in the near future.

Citing estimates from Goldman Sachs, another speaker at the public seminar, Professor Joseph Gyourko said that US$1.2 trillion worth of commercial property debt will mature in the United States from 2009 to 2011. And with the near shutdown of the commercial mortgage-backed securities market, some property owners will not be able to obtain refinancing.

Such a ‘flood’ will affect the capital value of all commercial properties in the entire world due to the inter-connectivity of the markets in the various global cities, of which Singapore is a part.

* [C.5] JTC Ready-Built Space Suffer Negative Take-Up

Net take-up of JTC ready-built factory space fell in Q1 2009. This has been the third straight quarter of negative growth in take-up rate for JTC Corporation.

The negative net allocation of 8,900 sqm in Q1 had resulted from 10,800 sq m of space leased out and 19,700 sq m of space surrendered. This is a sharp deterioration from the minus 1,200 sqm registered in Q4 2008, and the minus 500 sqm in Q3 2008.

A large decline in the amount of space leased or rented out accounted for the poor showing in Q1. The gross allocation of 10,800 sqm fell 46% quarter-on-quarter and 64% from Q3 2008.

o [C.5.1] JTC Ready-Built Space – Flatted Factories

A total of 19,700 sq m of space were returned in Q1 and the surrendering was 7% less than Q4 2008 and 35% less compared with Q3 2008. Most of the 64 companies which returned their flatted factories to JTC.

Support industries in logistics, services and construction together accounted for the bulk of terminations, at 53%. The precision engineering industry also fared poorly, making up another 26% of terminations.

* [C.5.1] Prepared Industrial Land

The only comfort is in the prepared industrial land segment in Q1 2009 where the net take-up rose 80% from Q4 2008 to 15.3 ha. However, the net take-up of prepared industrial land was 114.9 ha in Q1 2008 - more than seven times that in Q1 this year.

In terms of surrendering of leases, 13 companies returned prepared industrial land to JTC in Q1 – with electronics and precision engineering industries contributed to more than half of the terminations.

(D) Performance of Collective Sales

* [D.1] Regent Garden En Bloc Deal

The Court of Appeal has dismissed the appeal of the majority owners of Regent Garden, who had objected to Allgreen Properties making additional payments of $2 million to six minority owners to entice them to agree to the collective sale. The Court was of the opinion that there was nothing in the agreement between buyer and seller, or the law, to prohibit Allgreen making such additional payments.

Allgreen had earlier obtained an order from the High Court on 16 April 2008, compelling the majority owners to complete the sale and purchase of Regent Garden. Four months earlier in January 2008, the Strata Titles Board (STB) rejected the sale on the grounds that the valuation was too low and the deal was not done in good faith.

In deciding that there was no bad faith, the Court of Appeal said: 'A purchaser does not owe any duty of care, much less duty of good faith, to a vendor of property in relation to the price of the property. The general principle is caveat emptor.'
The Court of Appeal also said that if collective sales committees do not want to find themselves in a similar predicament vis-a-vis incentive payments, they can make provision for similar contingencies by providing for them in the Sale and Purchase (S&P) Agreement.

(E) Foreign Interest in Singapore Real Estate

* [E.1] Asia Property Investment Sales Dived

The cumulative weight of the current credit crunch, uncertainty over market direction and a significant gap between asking prices and what buyers are willing to pay combined to sink the investment sale market in Asia on the whole.

According to a report by CB Richard Ellis (CBRE), such sales slumped 83% quarter-on-quarter in Q1 2009 with Japan, Singapore and Hong Kong among the biggest victims.

Singapore was the hardest hit with only isolated investment sale transactions totalling some $204.2 million in Q1 2009. It is a decline of 51.8% from the previous quarter; and a fall of 97.7% from the same period a year ago.

The industrial property sector suffered the largest drop by market segment, plummeting 95% from the same quarter a year earlier. Office transactions sank 89%, while retail transactions shrank a much smaller 40%.

(F) News on Government Land Sale (GLS) Programme

There have been no major developments in this area.

(G) Overall Performance of HDB Resale Market

[G.1] Median HDB Flat Rents Falling

Median rents for five-room flats dropped from $2,000 to $1,800 a month in the first three months of this year, while those for four-room flats fell from $1,800 to $1,700.

The decline was across most locations, affecting central areas such as Bukit Merah as much as outlying ones, including Punggol.

But, according to the latest HDB data, two- and three-room flats maintained their median monthly rents at $1,100 and $1,500, respectively.

At Normanton Park near Queensway, for instance, a 1,200 sq ft three-bedroom apartment can be rented for about $2,300 to $2,500 monthly – down from about $3,000 at the peak of the market. This may attract HDB-dwellers to move over, as a five-room flat in nearby Holland, Queenstown or Telok Blangah would cost about $2,000 or more a month to rent.

The lower rents of nearby condos or apartments often affect the rents of HDB flats. If the current trend persists, HDB sub-letting rents will have some way to fall.

[G.2] HDB Resale Prices Easing in Most Heartlands

Despite decline in the overall transaction volume in April and May 2009, resale HDB flats at the top three best selling heartlands estates, i.e. Jurong West, Tampines, and Woodlands continue to attract droves of buyers and the median resale prices of 3-room, 4-room, and 5-room flats continue to rise.

*The resale volume of 5-room flats at Woodlands went up from 57 units to 62 units and the median price went up from $341.5 to $346.

* The resale volume of 4-room flats at Jurong West went up from 63 units to 66 units and the median price went up from $285 to $305.

In May 2009, the only flat type that enjoyed a rise in the resale volume was E-flat which rose to the highest 140 deals in 2009. However, resale prices for E-flats continue the downward trend in 8 out of the 10 most sellable estates. With Bt Batok enjoying an impressive rise in the resale prices as well as resale volume.