NOVEMBER PROPERTY MARKET UPDATE !

Introduction

November 2009 will be remembered for central bank interventions in the real estate market throughout the world.

The US Federal Reserve has added one more provision onto the objectives of a central bank – which traditionally deals only with monetary policy including economic growth, inflation, and stability of currency – to include monitoring of property price movements.

Monetary Authority of Singapore (MAS) quickly followed the big brother’s foot step. The de-facto central bank has said that further action may be needed to cool the property market if the recent measure* to dampen property speculation prove insufficient.

* The Singapore Government had cancelled the use of interest absorption scheme (IAS) and interest-only loans (IOL) for property purchasers in September 2009. Except for some new home projects that have already received the green light, all purchases of new home units are subject to the normal progress payment scheme of old which requires the purchasers to pay according to the construction progress.

Will private property investors bear the brunt of yet another round of ‘anti-speculation’ curb measures? Are property prices really unsustainable? Can the two Integrated Resorts save us from the miseries? These are questions that need to be asked and answered before more potential buyers head back to the property showrooms again.


(A) OVERVIEW OF THE LARGER ECONOMY


[A.1] HOME PRICES IN ALL MARKETS MAY HAVE REACHED BUBBLE LEVEL

The recent half-a-year property rally in Singapore mirrored those in other countries, including the US and other major Asian cities such as Shanghai, Hong Kong, and South Korea. Policymakers in these countries are contemplating tightening lending standard to tame the spiking home prices.

IN THE UNITED STATES

In the US, home prices in certain areas, e.g. Minneapolis and San Francisco, have risen by double digits over the past four months. When considered on an annualised basis, the home prices appear to be in 'bubble territory'.

US home prices in August 2009 rose for the fourth straight month. The Standard & Poor's/Case-Shiller composite index of home prices in 20 metropolitan areas rose 1.2% in August from July 2009.

According to the same index, prices in the top 10 US metropolitan areas gained 1.3% in August 2009 after a 1.7% rise the previous month.

IN HONG KONG

In Hong Kong, home prices have climbed 26% so far this year. For example, a one-bedroom, 816 sq ft apartment in Kowloon district was sold for HK$24.5 million (S$4.3 million) in September 2009.

The rampant price hike had spurred the HK authorities to tighten down-payment requirements for luxury homes. The authorities have also reduced loan-to-value ratio of private homes costing more than HK$20 million from 70% to 60%.

The Hong Kong Mortgage Corp, a government-backed home-loan insurer now only insures owner-occupied homes.

IN SOUTH KOREA

South Korea's financial regulator said on Oct 8 2009 that it planned to tighten regulations on lending to households; and the authorities have cut loan-to-value ratios in mortgages to 50% from 60% in some Seoul areas.

IN SINGAPORE

The sharp rise in private home prices in the third quarter (Q3) of 2009 [see page 6 – 12 – Overall Performance of Private Home Segment] could have precipitated the increase of residential sites in the government land sale (GLS) programme for 2010. [Page 13 – 15 on Government Land Sale Programme]

While there has been no announcement of any similar tampering of the property market like the other countries, property speculators are still on tenterhooks waiting for the ‘unexpected’ to happen. The unusual involvement of the central bank in monitoring price swing of private homes – an add-on to the traditional role of a central bank – may have ruffled some feathers among the speculators.

IN PRC

Official statistics showed that from January to October 2009, real estate investments in China had gone up by 18.9%, compared with a mere 1% rise in the first two months of the year.

Large Chinese banks have been told by the central bank to increase write-offs against bad loans and maintain their capital adequacy.

The Chinese central bank has also recently called for immediate halt of the country’s real estate stimulus policies which include low down-payments, low mortgage rates and tax cuts or risk a housing bubble. Some Chinese officials share the concern that home prices in some areas may not be affordable to ordinary citizens.


[A.2] HAVE PRICES GONE TOO HIGH?

Is there genuine cause for concern over the price-run in the private home segment? Well, judging from the recent sub-sale activities so far, many speculators seem to have adopted the ‘safety-first’ approach this time round.

[A2.1] Sub-sale activities subdued compared with last bull run

In terms of sub-sale, the barometer for market speculation, 2009 has been a much quieter year so far with only 2,780 sub-sale deals from January 2009 to September 2009. In the same period in 2007, a total of 4,193 home units had been sub-sold by the end of Q3 2007.
The tables below show the comparison of sub-sale volume between the 2009 rally with the earlier property rallies in 1996 and 2007.

Table [1] – Comparison of 2009 sub-sale volume with the peak of the rally in 1996 and 2007
Period Sub-sale Sub-total of sub-sale at peak of Rally Total Sub-sales Total Sales Transaction
Q1 1996 1,238 2,888 2,888 31,921*
Q2 1996 1,650
Q1 2007 766 3,427 4,863 40,654
Q2 2007 1,892
Q3 2007 1,535
Q4 2007 670
Q1 2008 435 N.A 1,830 13,642
Q2 2008 562
Q3 2008 566
Q4 2008 267
Q1 2009 414 2,366 2,972 25,793
Q2 2009 1,309
Q3 2009 1,057
Source of data: URA website

*1996 figures include New Home Units sold by developers and sold in the secondary market which accounted for 19,699 units and caveated sales of 12,222 completed units. Both sets of figures have been culled from URA website.

All three periods, i.e. 1996, 2007 and 2009, were marked distinctly by extremely high sales volume in the new private home segment. However, the following compares the difference between the three rallies:

At the peak of 1996 bull-run, sub-sale deals transacted at the height of the rally amounted to 2,888 deals.
The height of the 2007 bull-run witnessed 3,427 sub-sale deals.
In 2009, the peak of the rally produced 2,366 sub-sale deals. This makes 2009’s rally a relatively quieter one.


IN PERCENTAGE TERM

In fact, the percentage of sub-sale deals in relation to overall sales had maintained at double digit level since Q2 2007, until Q3 2009.(See Table 1.1 below)

Table [1.1] – Percentage of sub-sale deals to overall sales volume
Period Percentage of sub-sale deals to overall sales volume
Q1 2007 7.5%
Q2 2007 12.8%
Q3 2007 15.0%
Q4 2007 12.4%
Q1 2008 12.8%
Q2 2008 12.9%
Q3 2008 13.3%
Q4 2008 16.3%
Q1 2009 10.0%
Q2 2009 12.9%
Q3 2009 9.0%
Source of data: URA website

As such, Q3 2009 was considered one of the quieter quarters in recent history with sub-sale deals accounting for only 9% of all home sales, compared to 12.9% in Q2 and 10% in Q1 2009.

MORE END-USERS BUYING

One of the reasons why sub-sale activities were much subdued in 2009 could be due to the fact that the vast majority of the original purchases of mass market homes were done by home owners who are HDB flat dwellers.

Savills Singapore’s analysis published on 23 November 2009 in Business Times showed that HDB dwellers accounted for 39% of the 1,300 private sub-sale deals in Q2 2009 and 36.6% in Q3 and 33.7% in October 2009 alone.

Comparatively in 2007, HDB residents' shares of sub-sale deals were much lower at 20.8% and 23.1 % share of sub-sale deals done amidst the property bull-run in Q2 and Q3 2007. It has been an established fact that the 2007 bull-run was characterised by high number of foreigners buying luxury homes.

PROJECTION OF SUB-SALES FOR 2010

The overall sub-sale level is likely to stay firm for the next 2 to 3 quarters if the following factors remain:

market value of HDB resale flats remain firm;

rents for HDB flats remain at current high level.

Other supporting factors include the gradual recovery of the global economy and the advent of foreign employees at the two upcoming Integrated Resorts (IRs) which are due for opening in 2010.

CHALLENGES AHEAD

However, there are valid concerns for speculators as the market awaits further moves by the central bank to further depress soaring property prices.

Coupled with the falling private home rents, speculators may fear the cost-cushion being pulled off from their feet as holding costs, as well as the risks of rental void are now correspondingly higher.


[A2.2] The Difference between the two bull-runs

Though both 2007 and 2009 were spurred by spectacular rallies in the new home segment, the combined value of the new home units sold in 2009 is estimated at $11.2 billion - which is a far cry from the $23 billion worth of new homes sold in the 2007 bull-run.

A recent market analysis published by CBRE showed that the median quantum per unit sold by developers in 2009 was $930,000, compared with $1.18 million for 2007. The median per-square-foot price of new home sold so far this year was $863, compared with $928 for 2007.

The highest price for new home unit transacted in 2009 was $13.89 million for a third-floor apartment at Seven Palms Sentosa Cove; while the top price in 2007 went to a 19th-floor unit at The Marq On Paterson Hill which sold for $31.40 million.

HOUSES BECOME SMALLER

The median size of units sold by developers also went down from 1,292 sq ft in 2007 to 1,206 sq ft this year. Because unit sizes have fallen, the total quantum of the home price is lower and the market value of transactions in 2009 actually remains at about the same level as last year which only sold slightly more than 4,000 new home units in a year.

POORER TAKING FOR IRAS

This can also be seen from the modest amount of stamp duty collected by the Inland Revenue Authority of Singapore (IRAS) so far this year.

According to the Department of Statistics (DOS), the IRAS took in $1.37 billion in stamp duty from January to September 2009, though almost 25,800 private homes were sold in the same period.

The Government received $3.8 billion in stamp duty in the whole of 2007; and $1.84 billion in 2008. (Note: 98% of stamp duty comes from real estate transactions)


FEWER FOREIGNERS

Likewise, the number of foreign buyers has also shrunk in the aftermath of the financial tsunami. So far, only 651 foreigner buyers were accounted for new home purchases in the first three quarters of the year. At the same period in 2007, a total of 1,736 foreign buyers were accounted for new home sales.

The drastic drop in private home rents may also have deterred many foreign buyers as more quality condo units are slated for completion eventually in the first six months of next year.


(B) OVERALL PERFORMANCE OF PRIVATE HOME SEGMENT

According to the recent URA report, private home prices increased by 15.8% in Q3 2009, compared with the 4.7% price fall in Q2 2009.

In Q3 2009, apartment prices went up by 16.2%, while condo prices shot up by 15.8%.


[B.1] NON-LANDED PRIVATE HOME PRICES BROKE 20 YEAR RECORD

In the Core Central Region (CCR) which comprises the prime districts such as Districts 9, 10, 11 and Sentosa Cove, non-landed home prices climbed by 15.2% in Q3 2009; while the same in the Rest of Central Region (RCR) and Outside Central Region (OCR) increased by 18.5% and 16.1% respectively

Landed home also became dearer by 14.9% in Q3 2009, compared with the 4.7% fall in prices in Q2 2009.

Prices of detached, semi-detached and terrace houses increased by 15.6%, 13.4% and 15.1% respectively in Q3 2009.

The comprehensive increase in home prices has not been seen for more than 20 years in Singapore, despite the fact that Singapore is now in one of the worst economic recessions since Independence.


[B.2] RALLY IN LANDED HOME SEGMENT RECEDED IN OCT/NOV PERIOD

Thanks to the sudden upsurge of home-buying activities, landed homes enjoyed a brief revival reminiscent of the vintage 2007 bull-run. For example, between June and August 2009, more than 450 landed homes were transacted. The transaction volume, especially detached houses, was quite close to April 2007 (see Table 2.1 below).

However, the sales volume seems to have receded after the IAS and IOL were scrapped in September 2009.


Table [2] – Overall sales volume of Landed homes between January and November 2009
2009 Detached Semi-D Terrace Total
Jan 13 35 49 97
Feb 8 22 57 87
Mar 20 50 138 208
Apr 40 87 134 261
May 55 97 171 323
Jun 106 158 246 510
Jul 71 116 350 537
Aug 70 109 271 450
Sept 94 100 191 385
Oct 55 100 179 334
Nov *12 *32 *66 *110
Dec - - -
Source of data: SISVRealink
*November sales figures are incomplete due to lag in caveat time.

In good years, such as 2007, the monthly sale volume of landed homes would stay above 200-unit level; and sometimes breaching the high-700-unit level, such as in May 2007. (See Table 2.1 below)

Table [2.1] – Overall sales volume of Landed homes in 2007
2007 Detached Semi-D Terrace Total
Jan 83 106 188 377
Feb 55 110 194 359
Mar 59 130 213 402
Apr 105 168 317 590
May 128 211 439 778
Jun 106 213 374 693
Jul 123 184 382 689
Aug 70 116 258 444
Sept 38 57 160 255
Oct 48 88 230 366
Nov 52 83 177 312
Dec 31 56 104 191
Source of data: SISVRealink

In normal times, such as 2008, the monthly sale volume of landed homes would stay below the 200-unit level. As such, 2009 can be considered a jolly good year with monthly sales figures going beyond the 200-unit level in most months.

Table [2.2] – Overall sales volume of Landed homes in 2008
2008 Detached Semi-D Terrace Total
Jan 34 47 116 197
Feb 20 38 101 159
Mar 18 37 119 174
Apr 21 39 107 167
May 31 56 108 195
Jun 17 39 114 170
Jul 21 41 115 177
Aug 9 33 91 119
Sept 15 40 88 143
Oct 12 28 60 100
Nov 12 17 55 84
Dec 8 17 47 72
Source of data: SISVRealink

In the final analysis, much of what will happen to the landed home segment would depend on the impact of the withdrawal of the Job Credit Scheme in July 2010. The massive stimulus cash-handout programme to employers has been credited as the main force behind the recent property rally. However, with employers facing the bleak prospect of a fragile economic recovery, more landed homes may be made available on the resale market; and that may be music to prospective landed home seekers but a bad news to those who are selling.


[B.3] PRIVATE HOME RENTS ON A LOSING STREAK

According to URA’s Q3 2009 rent figures, the 15.8% surge in private home prices was not matched by any increase in rental income for landlords.

In fact, private home rents have been in decline for the fifth consecutive quarter, losing a further 2.2% in Q3 2009. Private home rents had dropped a massive 5.2% in the previous quarter.

Rentals of non-landed private homes in CCR, RCR and OCR fell by 2.1%, 2.3% and 2.3% respectively in Q3 2009.

In all, private home rents have fallen over 15% since Q1 2009. This could mean that the current rally in the private home segment is not being supported by economic fundamentals and the soaring prices may be considered speculative. In other words, if there are no significant improvements in the larger economy, the down-side to private home prices will remain huge.


[B.4] NEW HOME SALES WENT BELOW 1,000 UNITS IN OCTOBER 2009

After 8 consecutive months of strong showing, the mass market home segment has begun to show signs of weariness, losing 55.17% over the previous month’s sales volume. The statistics below show the sluggish performance of the new home segment in October 2009.


Table [3] – Comparison of new home units sold in the past 10 months of 2009
2009 Total Number of Units in Project Cumulative Units Launched to-date Cumulative Units Sold to-date Cumulative Units Launched but Unsold Units Launched in the Month Units Sold in the Month
January 48,128 32,197 27,870 4,327 204 107
February 48,371 33,244 29,168 4,076 1,069 1,323
March 48,902 34,048 30,314 3,734 832 1,220
April 48,821 34,645 31,025 3,620 1,083 1,207
May 49,223 35,802 32,656 3,146 1,161 1,668
June 50,490 37,371 34,389 2,982 1,637 1,825
July 50,884 39,893 36,898 2,995 2,878 2,767
Aug 53,047 41,269 38,256 3,013 1,641 1,699
Sept 52,803 41,989 38,832 3,157 1,413 1,143
Oct 54,068 42,505 39,557 2,948 566 811
Total New Home Units Sold so far 13,770
Source of Data: URA website

Table [3.1] below shows that despite the two-fold increase in new home units sold in the Core Central Region (CCR) in October 2009, the overall percentage of transactions in prime districts still fell below the 25% mark, accounting for only 22.8% of all new home sales; while the mass market homes still dominated the proceedings with 42.9%.

Table [3.1] – Sale volume of the three regions i.e. CCR, OCR & RCR over the past 10 months
2009 JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT TOTAL %
CCR 13 102 133 322 617 526 514 449 152 311 3,139 22.80%
RCR 49 381 300 362 609 867 751 722 431 249 4,721 34.30%
OCR 45 840 787 523 442 432 1,502 528 560 251 5,910 42.9%
TOTAL 107 1,323 1,220 1,207 1,668 1,825 2,767 1,699 1,143 811 13,770 UNITS
Source of Data: URA website

[B.4.1] Sale of New home units in Core Central Region (CCR) jumped two-fold

Below are two tables showing the sales performance of new home units in the Core Central Region (CCR) in October 2009.

Table [3.2] – New home units sold in CCR in October 2009
Project Name Units launched so far but UNSOLD Units Sold in the Month Lowest Price ($psf) Highest Price ($psf) Median Price ($ psf)
1 Cyan 9 81 1,712 1,983 1,821
2 Trilight 22 58 1,639 1,836 1,684
3 Lincoln Suites 3 53 1,530 2,365 1,845
4 Vivace 0 28 1,445 2,111 1,906
5 Sophia Residence 35 10 1,141 1,605 1,452
6 Madison Residences 3 9 1,639 1,754 1,677
7 Estrivillas 31 8 494 862 616
8 Shelford Suites 11 8 1,158 1,457 1,431
9 Nassim Park Residences 2 5 2,774 3,480 3,89
10 VIVA 3 5 1,548 1,801 1,755
11 Alba 12 4 2,310 2,531 2,488
12 Icon 9 3 1,430 2,022 1,921
13 Luma 13 3 1,696 1,768 1,725
14 The Trizon 77 3 1,352 1,523 1,396
15 Villas @ Gilstead 6 3 658 906 763
16 8 Rodyk 13 2 1,416 1,503 1,460
17 D'Ixoras 19 2 1,150 1,175 1,163
18 Latitude 20 2 1,640 1,758 1,699
19 Lush on Holland Hill 8 2 1,465 1,465 1,465
20 Martin No 38 0 2 2,048 2,722 2,385
21 The Orange Grove 3 2 2,101 2,300 2,201
22 Volari 1 2 1,856 2,077 1,967
23 Boulevard Vue 1 1 4,150 4,150 4,150
24 Dukes Residence 4 1 1,531 1,531 1,531
25 Jia 13 1 1,366 1,366 1,366
26 Marina Collection 26 1 1,872 1,872 1,872
27 One Devonshire 1 1 1,912 1,912 1,912
28 Parc Mackenzie 13 1 1,146 1,146 1,146
29 Seven Palms Sentosa Cove 0 1 3,429 3,429 3,429
30 Signature At Lewis 10 1 1,307 1,307 1,307
31 Skyline 360° at St Thomas Walk 0 1 2,125 2,125 2,125
32 The Greenwood (Phase 5) 32 1 952 952 952
33 The Lincoln Residences 33 1 1,708 1,708 1,708
34 The Promont 2 1 2,096 2,096 2,096
35 The Wharf Residence 8 1 1,496 1,496 1,496
36 Ventura Heights 4 1 675 675 675
37 Vida 33 1 2,498 2,498 2,498
38 Watten Residences 0 1 780 780 780
311 (152 in September 2009)
Source of Data: URA website


With the increase in sales volume, the median price of new home units in CCR had also risen to $1,684 psf from $1,666 psf in September 2009.

The highest transacted price also rose to $4,150 psf from $3,353 psf in September 2009.



[B.4.2] Sale of New home units in Rest of Central Region (RCR) receded in October

New home sales in the Rest of Central Region (RCR) further receded from 431 units in September 2009 to only 249 units in October 2009.

Table [3.3] – New home units sold in RCR in October 2009
Project Name Cumulative Units Launched but Unsold Units Sold in the Month Lowest Price ($psf) Highest Price ($psf) Median Price ($psf)
1 Suites @ Guillemard 0 66 896 1,514 1,234
2 City Loft 0 40 880 1,280 1,181
3 Silversea 92 21 1,189 1,647 1,381
4 Clover By The Park 132 17 673 895 784
5 The Interlace 115 14 728 1,110 1,046
6 Trevista 73 13 905 1,083 1,013
7 Reflections at Keppel Bay 13 11 1,528 2,097 1,685
8 Bliss Loft 18 10 951 1,052 1,018
9 Concourse Skyline 40 8 1,553 2,063 1,781
10 Ascentia Sky 19 5 1,240 1,477 1,282
11 The Peak @ Balmeg 18 5 982 1,098 1,007
12 Vista Residences 3 5 1,158 1,257 1,174
13 Prestige Heights 8 4 1,250 1,400 1,322
14 The Serennia 14 4 681 1,006 836
15 Dakota Residences 8 3 943 982 977
16 Floridian 53 3 1,327 1,380 1,360
17 Ritz Regency 20 3 940 994 979
18 The Seafront On Meyer 34 3 1,253 1,281 1,261
19 Ventura View 1 3 772 823 809
20 Amber Residences 15 1 1,060 1,060 1,060
21 D'Fresco 4 1 825 825 825
22 Esterina 0 1 685 685 685
23 Evergreen View 1 1 596 596 596
24 Goodman Crest 1 1 776 776 776
25 Oasis Garden 1 1 870 870 870
26 Parc Aston 9 1 870 870 870
27 Parc Seabreeze 26 1 1,210 1,210 1,210
28 Stillz Residence 15 1 941 941 941
26 The Arte 5 1 943 943 943
30 The Verve 4 1 734 734 734
249 (431 in September 2009)
Source of Data: URA website


The median price of new home units in RCR had slide to $979 psf from $995 psf in September 2009.

The highest transacted price also fell from $2,482 psf to $2,097 psf in September 2009.



[B.4.3] Sale of New home units in Outside of Central Region (OCR) halved in October

Sales of new home units in OCR took a tumble in October losing more than 50% of the volume in the previous months.

The withdrawal of the Interest Absorption Scheme (IAS) and Interest-Only Loans (IOL) appeared to have impacted HDB upgraders harder than it did wealthier buyers of high-end homes – who in October 2009 came out in force to buy more new home units and along the way sent the highest psf price to cross the $4,000 psf mark in October 2009.


Table [3.4] – New home units sold in OCR in October 2009

Project Name Units launched so far but UNSOLD Units Sold in the Month Lowest Price ($psf) Highest Price ($psf) Median Price ($ psf)
1 Hundred Trees 24 52 799 1,029 799
2 Mi Casa 109 43 635 780 685
3 Livia 28 18 572 683 641
4 Prestige Loft 3 16 1,013 1,159 1,109
5 Elliot at the East Coast 14 14 731 1,074 810
6 Wembly Residences 19 14 675 997 801
7 Oasis @ Elias 17 13 599 730 648
8 Meadows @ Peirce 53 10 737 1,126 920
9 Double Bay Residences 17 8 686 746 717
10 Pavilion Park (Phase 2) 2 7 766 941 891
11 Waterfront Key 94 6 748 888 761
12 Waterfront Waves 21 6 696 931 727
13 Cubik 0 5 1,219 1,332 1,264
14 Rosewood Suites 4 5 493 586 572
15 Centro Residences 86 4 1,134 1,229 1,217
16 Envio 20 4 955 975 965
17 Breeze By The East 0 2 707 712 710
18 Chateau La Salle 0 2 621 632 627
19 D'Pavilion 28 2 876 921 899
20 Hillvista 70 2 1,079 1,085 1,082
21 St Patrick's Residences 7 2 905 1,031 968
22 The Gale 29 2 778 793 786
23 Verdana Villas 46 2 630 649 640
24 Coastal Breeze Residences 15 1 533 533 533
25 D'Almira 0 1 695 695 695
26 Dunsfold Residences 4 1 468 468 468
27 Fontaine Parry 7 1 910 910 910
28 Kovan Residences 31 1 887 887 887
29 Landed housing 6 1 814 814 814
30 Serangoon Garden View 4 1 657 657 657
31 Suncottages 1 1 800 800 800
32 The Amery 24 1 922 922 922
33 The Lattiz 9 1 812 812 812
34 The Lenox 15 1 1,163 1,163 1,163
35 The Parc Condominium 35 1 950 950 950
251 (560 in July 2009)
Source of Data: URA website


Though the sales volume in OCR had suffered, the median price of new home units in OCR had actually risen to $899 psf from the low of $741 psf in September 2009.

However, the highest transacted price fell from $1,550 psf in September 2009 to $1,332 psf in October 2009.



(C) PERFORMANCE OF NON-RESIDENTIAL SEGMENT

At the height of the bull-run in 2007, Grade A office space went at $18.80 psf/pm.

However, with the key occupiers of Grade A office space still nursing the bruises afflicted on them by the global economic crisis, the average Grade A office rent has slipped to $8.80 per square feet per month (psf/pm) in Q3 2009.

In general, office prices and rents had fell by 2.1% and 4.1% respectively in Q3 2009. Likewise, shop prices and rents also dropped by 1.2% and 0.9% respectively in Q3 2009.

With the substantial supply pipeline of about 7.7 million sq ft of offices slated for completion from Q4 this year to end-2012, office rents look set to head south for a few more quarters.


[C.1] LATEST PSF/PM PRIME OFFICE RENTS

The following shows the latest office rents in the central business district in the first 6 weeks of Q4 2009:

In the Shenton way area, prime office rents fell 0.8% to $5.99 per sq ft (psf) per month (pm) from $6.04 psf/pm in Q3 2009.

In the City Hall area, prime office rents dipped 0.4% to $6.77 psf/pm from $6.80 psf/pm in Q3 2009.

At the Orchard Road area, prime office rents are down a cent psf from $6.90 psf/pm in Q3 2009 to $6.89 psf/pm.

At Raffles Place area, Grade A rents fell 3.5% to $7.85 psf/pm, from $8.13 psf/pm in Q3 2009. Prime rents there also dropped 2.6% to $7.60 psf/pm, from $7.80 psf/pm in Q3 2009.


In the prime office arena in the CBD, there is no escaping the fact that the 2.2 million sq ft of new prime office space in 2010 must be absorbed first before any hope of a recovery in prime rents can be realised.


(D) GOVERNMENT LAND SALE (GLS) PROGRAMME

The Government announced in November 2009 that at least eight residential sites - and as many as 26 - will be offered to developers in 2010 under the government land sale (GLS) programme. In all, the 26 sites can yield a total of 10,500 private homes in the next two to three years.

All the 26 new residential sites to be released for tender are in the outside central region (OCR) and rest of central region (RCR) where common folks live.

[D.1] DEVELOPERS SNAPPING UP LAND PARCELS

A local developer, Treasure Well Investments, has placed the top bid of about $251.3 million or $533.34 per square foot per plot ratio (psf ppr) for a 99-year leasehold condo plot at Upper Thomson Road. The next highest bid was $438.83 psf ppr by Far East Organization.

The tender attracted just six bids in total - about half the 12 to 15 bids received for each of the other four GLS sites in the reserve list in the past few months.

The Upper Thomson Road site boasts a good location opposite the Singapore Island Country Club's Island Golf Course and Lower Peirce Reservoir. Freehold units at Meadows@Peirce nearby are being sold at about $900 psf

[D.1.1] Developers seeking to enrich own land-bank

Recently, the government land sale tenders had attracted a lot of interests from housing developers.


13 bidders were attracted to the tender of Chestnut Avenue in August 2009. The eventual successful bid price was $143.7 m or $280 psf ppr.

13 bidders vied for Dakota Crescent in September 2009 and UOL clinched the site with $329 m or $508 psf ppr.

In September 2009, Far East Organisation edged out 11 other bidders to win the site at Seletar/Yio Chu Kang Roads with the successful bid price of $119.1 m or $376 psf ppr.

In October, 15 developers competed for a site at Serangoon Ave 3 which is right above the Lorong Chuan MRT station. Eventually, a unit from Hong Leong Holding clinched the deal at $221.2 m or $529 psf ppr.


Rightly or wrongly, the keen competitions are clear signs that housing developers are optimistic of the near future and are afraid to lose out in their bids. However, the real test of the market hinges on how potential buyers and prospective tenants react to the generous supply of the thousands of ‘ready-built’ quality condominium units in 2010 and beyond.

[D.1.2] Landed housing sites on reserve list set for sale

An unidentified developer has triggered for public tender a government landed housing site with a minimum bid price of $15 million or $99 psf ppr for the 99-year leasehold parcel on Westwood Avenue, Jurong West. This site has an area of 14,098.9 sq m and is surrounded by other landed estates such as Westwood Park and The Floravale condominium.

About 60 terrace houses with a minimum plot size of 150 sq m can be built on the site and the eventual sale price of completed units should be around $1.1m to $1.2m.

A search with URA website reveals that terrace houses at the adjacent Westwood Park changed hands at $454-510 psf, or $850,000 to $1.13 million.

Due to low bid prices, the govt had rejected two earlier bids of $11.8 million and $10.33 million for the same site at Westwood Avenue.

(E) NEWS ON COLLECTIVE SALES

The first successful en bloc sale for 2009 was sealed sometime in late November 2009. Dragon Mansion at 18 Spottiswoode Park Road has been sold in a collective sale arrangement for $100.8 million or $863 per sq ft per plot ratio (inclusive of development charge).

On the other hand, the residents of Laguna Park have thrown in the towel in late November 2009 and withdrew from the collective sale market after yet another failed attempt to secure a good enough offer.


(F) CONCLUSION

It is still early day to gauge the impact of the withdrawal of the interest absorption scheme (IAS) and interest-only housing loans (IOL). There is also no point second-guessing the central bank’s intention in watching the price swing of private homes. Whatever follows next may well be a reaction to a global event beyond any player’s calculation or fancy.

However, at home the private home prices may have fallen due to ‘fatigue’ suffered by buyers after the 6-month rally. Traditionally, the house-hunting season has been overtaken by Christmas shopping; and the buyers deserve a good holiday breather.

For whatever reasons it is worth, the Minister for National Development, Mr Mah Bow Tan has come out saying that he is pleased with the weakening in private home prices. He explained that the government’s aims are to curb erratic price hikes arising from excessive speculation, inaccurate information or market manipulation, but ultimately prices have to be determined by market forces, based on genuine demand from home buyers and investors.