October updates.

Introduction

Two years after scrapping the Deferred Payment Scheme which effectively truncated the spectacular bull-run in 2007, the government has wielded the big axe again – this time by scrapping the Interest Absorption Scheme (IAS) and the Interest Only Loan (IOL). This move may well have the same effect on the property market like two years ago.

Following Minister Mah Bow Tan’s announcement to withdraw IAS and IOL, the Monetary Authority of Singapore (MAS) has also announced the probable increase in capital requirements for local banks. The de-facto central bank also made clear its stand on medium-term price stability for the property market.

In fact, the MAS’ recent policy stance will have a much deeper impact on the demand for private homes because one can now expect to see more stringent credit controls by lenders in general.

(A) OVERVIEW OF THE LARGER ECONOMY

[A.1] SINGAPORE NOW HOME TO FIVE MILLION PEOPLE

Singapore will be home to more than five million people by 2010. We now have 4.99 million residents as a result of a 3.1% increase in the population, primarily through the very ‘pro-active’ immigration-friendly policy. This is despite more economic migrants having ‘gone home’ since jobs have become tough to come by recently. The growth in population was the slowest since 2007.

There is now a sizeable numbers of permanent residents (PRs) and guest workers on permits, relative to the citizen component. The Singapore population profile is a one-third foreigner content of 1.8 million. It breaks down to 1.25 million transients and 533,000 PRs.

[A.2] JOBLESS RATE FELL FOR THE WRONG REASONS – MANY GRADUATES PURSUE FURTHER STUDIES

According to a Straits Times report on 16 September 2009, eight in 10 local residents were chronically unemployed as of June this year. This means that they had been unsuccessful to land themselves a job after 25 weeks of searching. The majority of them are university graduates in their 30s and 40s, and the lowly-educated in their 40s.

In all, Singapore lost 13,900 jobs in the first half. This is 26% lower than the estimate of 18,800 by the Ministry of Manpower (MOM).

A September report by MOM showed unemployment at 3.3% in the second quarter (Q2) of 2009. At the same time, the resident unemployment rate fell from 4.8% to 4.6%. But the reason for the decline was that many stopped seeking jobs to pursue courses, which means they are no longer counted as unemployed.

Manpower Minister Gan Kim Yong was quoted as saying that the employment outlook remains uncertain; and the labour market is likely to remain weak for the rest of the year.

(B) OVERALL PERFORMANCE OF PRIVATE RESIDENTIAL PROPERTY SEGMENT

New home sale volume in September 2009 was well supported by the remnant projects which had earlier received the authority’s blessing to use the now-defunct Interest Absorption Scheme (IAS). With a respectable 1,143 new units transacted in the aftermath of the scrapping of the IAS and Interest Only Loans, the grand total of new home units sold thus far this year is standing tall at 12,959 units. The whole year sale volume for new home units might even surpass the historic peak achieved in 2007.

Transacted prices are also very respectable with the freehold Hundred Trees in the old Hong Leong Garden site commanding a median price of $941 psf, with more expensive units going beyond $1,200 psf.

[B.1] NEW HOME SALE EASED IN SEPTEMBER 2009 COMPARED MONTH-ON-MONTH

However, when compared month-on-month the new home sale volume has eased in August 2009 and further in September. Sales volume in the new home segment appears to be on a slippery slope. But the buying mood can still be considered generally optimistic with good units still flying off the shelves within days of the project’s launch.

[B.1.1] OCR was the star performer this year.

The total transactions at the respective regions over the past 9 months, with the Outside Central Region (OCR) chalking up the most impressive sales volume so far this year.

In fact, while CCR and RCR had lost 66.15% and 40.30% respectively in sales volume in September 2009; the sales volume in OCR gained 6.0% in September 2009 with strong sale performance coming from the aforesaid freehold Hundred Tree project in the west coast area.

In all, 43.67% of all the new home units sold so far this year took place in the outlaying areas, with only 21.82% and 34.5% sold at the Core Central Region (CCR) and the Rest of Central Region (RCR).

[B.2] LUXURY MARKET SHOWED SOME SIGN OF LIFE BUT IT MAY BE TOO EARLY TO POP CHAMPAGNE

The luxury market segment saw some ‘pink’ signs in August 2009 with 11 new home units in the District 9 and 10 areas changing hand at higher than the psychological benchmark of $2,500 psf, including the following:

THREE units at The Orchard Residences were sold at $2,780 psf, $3,499 psf and $4,099 psf respectively.
THREE units at Nassim Park Residences were sold at $2,782 psf, $2,829 psf and $3,403 psf respectively.
THREE units at Orchard View were sold at $3,057 psf, $3,155 psf and $3,181 psf respectively.
ONE unit was sold at The Hamilton Scotts at a median price of $3,313 psf.
ONE unit at Scotts Square was sold for the highest median price of $4,304 psf in August 2009. This was a rare phenomenon this year.

Likewise in September 2009, NINE brand new luxury units broke the psychological barrier of $2,500 psf with some super-rich individuals shelling out more than $3,000 psf to acquire SIX out of 10 units launched at Seven Palms at Sentosa Cove. Here are the statistics:

SIX units at Seven Palms Sentosa cove were sold at a median price of $3,273 psf. The cheapest unit went for $3,091 psf and the highest psf price was $3,353 psf.
TWO units at Nassim Park Residences were sold at a median price of $3,062 psf; with the lowest psf price at $2,856 psf and the highest psf price at $3,268.
One unit at District 9 Alba condo by Far East Organisation was sold at $2,500 psf.

While the higher-than-$3,000 psf prices were not unprecedented, it had been a long while since the high-end market was abuzz with such optimism.

In fact, according to a Straits Times report on 16 September, two transactions at above the $4,000 psf level were recorded for August 2009 - Scotts Square ($4,304 psf) and The Orchard Residences ($4,099 psf). The last time the market saw transactions at above the $4,000 psf mark was in May 2008 when four units at Scotts Square were sold at prices ranging from $3,779 to $4,612 psf.

[B.3] TRANSACTIONS OF HIGH-END HOMES IMPROVED OVER THE PAST TWO MONTHS

[B.3.1] More high-end homes in District 9 exceeding the psychological $2,500 psf mark

In August 2009, out of the total 287 transactions in District 9, only FIVE transactions [Table 2.1] or a mere 1.74% of the total exceeded the psychological benchmark of $2,500 psf. In the meantime, 52 or 18.12% out of the total transactions exceeded the $3,000,000 mark.

In September 2009, there were so far 117 transactions in District 9; however already FOUR transactions [Table 2.2] or 3.42% (1.7% in August 2009) of the total had surpassed the psychological benchmark of $2,500 psf. And 32 or 27.35% (18.12% in August 2009) of the total transactions exceeded the $3,000,000 mark. The September sales data will be further updated by URA later this month and the total number of transactions will be different.

[B.3.2] More high-end homes in District 10 exceeding the psychological $2,500 psf mark

In District 10, a total of 263 high-end homes were transacted with TEN transactions [Table 2.3] or 3.8% of the total exceeding the psychological benchmark of $2,500 psf. Out of the total transaction, 95 or 36.12% of them exceeded the $3,000,000 mark.

In September 2009, there were so far a total of 148 transactions in District 10, but already SEVEN transactions or 4.73% (3.8% in August 2009) of the total had exceeded the psychological benchmark of $2,500 psf. Out of the total transactions, 46 or 31.08% (36.12% in August 2009) of them exceeded the $3,000,000 mark.

However, the budding high-end property market may well be snubbed by the recent global stock market correction and the policy stance of the Monetary Authority of Singapore (MAS) to ensure medium-term property price stability. Furthermore, with the MAS’ call to increase capital requirements of local banks, the liquidity that fuelled the recent rally may be severely curtailed from now on.


[B.3] NEW HOME SALE PERFORMANCE IN DIFFERENT REGIONS

[B.3.1] Sale of NEW home units in Core Central Region (CCR) dropped in September

FACTS – 29 projects in CCR reported at least one transaction in September 2009, compared with a month ago where 42 projects there did so. The highest median price achieved in September 2009 was $3,356 psf by Seven Palms at Sentosa Cove, which was 22.02% lower than the highest median price of $4,304 psf achieved by a unit at Scott Square in August 2009.

In terms of transaction volume in CCR, there was a 66.14% drop in September 2009 compared with a month ago.

Below are comparisons of sale prices between September 2009 and the previous months in some selected new condo/apartment projects in CCR.

In the drop zone

In SEPTEMBER 2009, 5 units at Belle Vue Residences at Oxley Walk were sold at a median price of $1,627 psf, compared with 17 units sold at a median price of $1,831 psf in August 2009. In July 2009, the median price was $1,869 psf. A year ago in August 2008, the median price was $2,044 psf. It was a drop of 11.14% in September 2009 compared with a month ago.

In SEPTEMBER 2009, 5 units at Latitude at River Valley area were sold at a median price of $1,751 psf, compared with 27 units sold at a median price of $1,786 psf in August 2009. It was a 1.96% drop in the median price.

In SEPTEMBER 2009, 17 units at Sophia Residences were sold at a median price of $1,459 psf, compared with 43 units sold at a median price of $1,504 psf in August 2009. It was a 2.99% drop in the median price.


On the way up

In SEPTEMBER 2009, 10 units at Madison Residences at Dunearn Road area were sold at a median price of $1,661 psf, compared with 37 units sold at a median price of $1,686 psf in August 2009. It was a 1.5% rise in the median price.

In SEPTEMBER 2009, 14 units at Viva condo at Suffolk Walk at District 11 were sold at a median price of $1,623 psf, compared with 203 units sold at a median price of $1,537 psf in August 2009. It was a 5.59% rise in the median price.

FINDING – Despite the withdrawal of IAS and IOL, there has been no drastic fluctuation of prices in CCR. The biggest drop in median price was registered at Belle Vue Residence where the median price dropped 11.14% compared with a month ago. However, median prices of the majority of the projects moved within a very narrow range of between 1% and 6% in both directions.

[B.3.2] Sale of NEW home units in Rest of Central Region (RCR) eased in August/September

New home sales in the Rest of Central Region (RCR) slide in two consecutive months in August and September 2009 from 722 units to 431 units compared with 751 units sold in July 2009.

FACTS – The number of new home projects that reported at least one transaction stagnated at 32 projects in September 2009 while the sales volume dropped 59.7% in the same period.

Below are comparisons of sale prices between September 2009 and the previous months in some selected new condo/apartment projects in RCR.

In the drop zone

In SEPTEMBER 2009, 3 units at Dakota Residences at Dakota area were sold at a median price of $950 psf, compared with 11 units sold at a median price of $956 psf in August 2009. It was a 0.6% drop in the median price.

In SEPTEMBER 2009, 59 units at Trevista at Toa Payoh were sold at a median price of $938 psf, compared with 413 units sold at a median price of $943 psf in August 2009. It was a 0.53% drop in the median price.


On the way up

In SEPTEMBER 2009, 5 units at Concourse Skyline at Beach Road were sold at a median price of $1,753 psf, compared with 10 units sold at a median price of $1,528 psf in August 2009. It was a 14.72% rise in the median price.

In SEPTEMBER 2009, 9 units at Ascentia Sky at Alexandra Road were sold at a median price of $1,254 psf, compared with 36 units sold at a median price of $1,221 psf in August 2009. It was a 2.7% rise in the median price.

In SEPTEMBER 2009, 17 units at Clover by the Park at Bishan were sold at a median price of $788 psf, compared with 21 units sold at a median price of $774 psf in August 2009. It was a 1.8% rise in the median price.

Source of Data: URA website

FINDING – The narrow movement in sale price in RCR mirrored that of CCR – with the exception of Concourse Skyline where the median price of the FIVE transactions in September 2009 were 14.72% dearer than the median price of the 10 units sold there a month ago. Except that, the drop in the primary sale volume in RCR also coincided with the general softness in prices.

[B.3.3] Sale of NEW home units in Outside Central Region (OCR) edged up in September 2009

The sales volume at OCR edged up in September 2009 after dipping in August 2009. A total of 560 units were sold from OCR with Hundred Trees being the star of the month.

Price wise, the improvement in sale volume did not lead to increase in sale prices. Except Centro Residences at Ang Mo Kio which hit a median price of $1,184 psf, most others are transacting in competitive prices with the freehold Hundred Trees hitting the highest psf price of $1,219 and a median price of $6 shy of the psychological $1,000 psf mark.

Below are comparisons of sale prices between the June 2009 and July 2009 in some selected projects in OCR.

In the drop zone

In SEPTEMBER 2009, 15 units at Oasis@Elias at Elias Road were sold at a median price of $639 psf, compared with 30 units sold at a median price of $636 psf in August 2009. It was a 0.47% drop in the median price.

In SEPTEMBER 2009, 15 units at Livia at Pasir Ris area were sold at a median price of $646 psf, compared with 24 units sold at a median price of $651 psf in August 2009. It was a 0.76% drop in the median price.

In SEPTEMBER 2009, 7 units at Waterfront Waves at Bedok Reservoir area were sold at a median price of $690 psf, compared with 21 units sold at a median price of $691 psf in August 2009. It was a 0.14% drop in the median price.

In SEPTEMBER 2009, 14 units at Meadows @ Peirce at Upper Thomson area were sold at a median price of $868 psf, compared with 52 units sold at a median price of $894 psf in August 2009. It was a 2.9% drop in the median price.


On the way up

In SEPTEMBER 2009, 15 units at Double Bay Residences at Simei were sold at a median price of $708 psf, compared with 32 units sold at a median price of $704 psf in August 2009. It was a 0.56% rise in the median price.

In SEPTEMBER 2009, 8 units at Waterfront Key at Bedok Reservoir area were sold at a median price of $772 psf, compared with 22 units sold at a median price of $765 psf in August 2009. It was a 0.92% rise in the median price.

Source of Data: URA website

FINDING – The price movements in OCR were negligible if any. This is probably due to the fact that the withdrawal of IAS and IOL has yet to filter down to the heartland areas as most of the projects being marketing right now are still enjoying the benefits of the financial schemes.

However, it remains to be seen how the newer projects that do not have the convenience will fare in the months to come.

[B.4] MORE LOSSES IN SUB-SALE DEALS

According to an August 2009 Straits Times report, losses in sub-sale deals have quadrupled in the first eight months of this year. More than 340 sub-sales of condos and apartments ended in the red within that period.

For example, out of the 71 sub-sale deals done at Casa Merah in Tanah Merah, 16 deals or 22.53% resulted in losses averaging $30,601.

Most sellers made gains at Rivergate, which was completed in the first quarter of the year, but 10 suffered hefty losses of around $371,355, with one of them losing $985,000.

At popular projects like The Sail @ Marina Bay, eight out of 19 sub-sale deals this year were done at an average loss of $949,343. According to a separate ST report, the six sub-sale deals done at Alexis in Alexandra Road this year had average gains of $62,833.

Those who lost money in the sub-sale market in January to August this year chalked up an average loss per unit of $267,616.

According to the same August ST report, the vast majority of those who sold their properties in the sub-sale market from January to August this year held their units for at least two years. Over half (52%) bought their properties in 2007. Another 36% had bought in 2006, while nearly 7% of 2009 sub-sale deals involved properties purchased this year.

The general mood in the sub-sale market may turn cautious now that the Interest Absorption Scheme (IAS) and Interest Only Loan (IOL) have been withdrawn. This may severely impact the bottom-line of many sub-sellers in the months to come when more quality condos receive their Temporary Occupation Permit (TOP).