August update

MONTHLY PROPERTY MARKET DIRECTION UPDATE

Introduction

Is there a real estate bubble; or is there not? This is also what we are asking ourselves now. This report will show readers that despite being in one of Singapore’s deepest recession, new home sales broke the national record of having the highest number of new units (i.e. 1,825 units in all) sold at all time. However, when prices are scrutinised another picture emerges. It appears that housing developers are in the hurry to offload their inventories by keeping prices at very affordable level. At this moment, the situation still intrigues most property analysts as to who will be the real winner at the end of the day.


(A) OVERVIEW OF THE LARGER ECONOMY

[A.1] MINISTER MAH CAUTIONED AGAINST EXCESSIVE SPECULATION

Where the taxman added more confusion and unnecessary trepidation by the untimely announcement of the Gain Tax, Minister Mah Bow Tan scored with his usually crisp comment that the Government will take 'whatever action necessary' to prevent excessive speculation in the property market.

However, as of now, Mr Mah does not believe “there is excessive speculation at the moment, but there is some element of speculation involved”. He pointed out that “some of the practices and habits that you saw in the last property boom are beginning to come back, so I think we'll have to be careful.”

He also warned about a property bubble forming.

Recently, the mass market segment has gone crazy with frequent sightings of long queues curling in front of new show rooms days before they were opened. For example, Optima, next to the Tanah Merah MRT and the 329-unit Centro Residences opposite Ang Mo Kio MRT station.

[A.2] SLIGHT IMPROVEMENT IN FOREIGN PURCHASERS’ SHARE AND SUB-SALE VOLUME

According to URA data, the number of sub-sale deals for private homes reached 1,041 in the second quarter (Q2) of 2009, and the median sub-sale price has likewise gone up to $959 psf or 18.1% over Q1 2009.

HDB upgraders' share of total caveats, which had been increasing for six consecutive quarters since Q4 2007, slipped in Q2 this year as purchases by those with private addresses rose at a faster pace. (see statistics of new home sales at Outside Central Region (OCR)B.1.3.

Q2 2009 also saw higher number of mid and mid-upper projects being launched and these are products that are typically beyond the reach of HDB dwellers. Coupled with the fact that there were fewer launches of mass-market projects in Q2 2009, the share of HDB dwellers of total purchases was therefore smaller this time round.

The number of caveats for private homes lodged by foreigners, including PRs, showed the same upward trend, reaching 1,418 in Q2 compared with 496 with Q1 2009. This is not surprising as the market has reached fever pitch.

[A.3] RETRENCHMENT CONTINUES IN SINGAPORE WHILE FEWER NEW JOBS WERE CREATED IN Q2 2009

According to a preliminary report from the Ministry of Manpower (MOM) published on 31 July 2009, a total of 5,500 workers lost their jobs in the second quarter (Q2) of 2009; and this is less than half the 12,760 redundancies in Q1 2009.

2,600 workers lost their jobs in the manufacturing sector in Q2 2009, compared with 9,250 in Q1 2009. 2,400 workers were laid off in the service sector in Q2 2009, compared with 3,170 in Q1 2009. The rest of the 500 workers who lost their jobs were from the construction industry.

Total employment was also reduced by 12,400 in Q2 2009, double the losses in Q1 2009.

[A.4] US JOBLESS RATE TO STAY HIGH – A REAL BAD NEWS

The US Federal Reserve expects the unemployment situation to worsen this year, probably topping 10%. The central bank previously predicted that job losses will be around 9.6%. The nation's unemployment rate climbed to a 26-year high in June 2009, hitting 9.5%.

The Fed also gives a range of all the forecasts including some officials’ expectation that the jobless rate would hit 10.5% this year, and 10.6% in 2010.

The post-World War II high was 10.8% at the end of 1982, when the country had suffered through a severe recession. The jobless rate averaged 5.8% last year.


(B) OVERALL PERFORMANCE OF PRIVATE RESIDENTIAL PROPERTY SEGMENT



[B.1] SOMETHING BIZARRE IS HAPPENING IN THE NEW HOME MARKET

Officially, Singapore is still in one of the worst recessions it ever had. But the country is in one of the best property bull runs as 1,825 new home units were sold in June 2009, knocking down the highest sales record of 1,723 new home units sold at the height of the 2007 bull-run before the market came to an abrupt halt.

And since February 2009, property analysts have been saying the rally would not last. Nothing can be more bizarre than this. The rally just defies logic.

By now, property developers have already sold more than 7,300 units in all. In theory if the situation remains more or less stable, the full year take-up may well exceed the record sale of 14,811 new home units.

But before any educated guesses are made, two things need to be ascertained: (1) the sale prices achieved so far this year; and (2) the market trend of home rents.

So far, it has been ascertained that prices of new home units did not improve much (please refer to last two reports in June and the findings in the July ‘Property Market Direction’ magazine). In subsequent chapter, we will look at the fall home rents and determine how long more before the ignorant buyers will wise up. First of all, let’s look at the details of the new home transactions.

[B.1.1] Good sales number at Core Central Region (CCR) but developers appear to be in a hurry

In June 2009, high-end homes in CCR sold 526 units from 34 projects, compared with 617 units from 32 projects in May 2009. This shows that developers are launching more projects but had sold fewer units in CCR. Likewise, median prices across the board appeared to be rather subdued.

Below are comparisons of sale prices between the whole of 2008 and June 2009 in some selected new condo/apartment projects in CCR. The June transacted prices are also compared with April prices to make sense of the actual market situation.


• 22 units at Zenith at Zion Road were sold in January 2008 at a median price of $1,682 psf, compared with two recent transactions in June 2009 at a median price of $1,300 psf (in April 2009 the median price was $1,199 psf).

• 13 units at Mulberry Tree at Moulmein Road were sold in September 2008 at a median price of $1,337 psf, compared with two May 2009 transactions at a median price of $1,198 psf (in April 2009 four transactions were done 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 with two transactions in June 2009 at a median price of $1,730 psf (in April 2009 the median price was $1,651 psf).

• Six units at Belle Vue Residences at Oxley Walk were sold in August 2008 at a median price of $2,044 psf, compared to 31 transactions in June 2009 at a median price of $1,786 psf (in April 2009 the median price was $1,503 psf).

• Two units at Martin Place Residences at Kim Yam Road were sold in April 2008 at a median price of $1,857 psf, compared with 61 units sold in June 2009 at a median price of $1,536 psf. (in May 2009, a total of 186 units were sold at a median price of $1,423 psf)

• A unit at Miro at Keng Lee Road was sold in October 2008 at a median price of $1,616 psf, compared with 30 transactions in June 2009 at $1,436 psf. There was a fall of 11.13% in median price.

• A unit at Orchard Scotts at Anthony Road were sold in October 2008 at $2,407 psf, compared with a June 2009 transaction at $1,750 psf. There was a fall of 27.29% in median price.


Finding: Despite the spike in transaction volume, sale prices in CCR continue to slide when compared with a year ago. However, in general the improved sentiments recently did edge up sale prices a notch. Let’s look at two typical examples.

(1) 61 units at Martin Place Residences units were sold in June 2009 at a median price of $1,536 which was 17.28% cheaper than the median price of $1,857 psf transacted in April 2008. However, when compared with the 186 units sold in May 2009, the June 2009 median price was about 8% stronger than the $1,423 psf in May 2009.

(2) 31 units at Belle Vue Residences were sold in June 2009 at a median price of $1,786 psf which was 12.6% cheaper than the $2,044 psf median price achieved a year ago. However, the June median price was a 18.8% improvement over the $1,503 psf median price achieved in April 2009.

Conclusion: Housing developers in general appear to be in a hurry to offload units before the flood of completed new home units hit the market in the final quarter of this year.

[B.1.2] Record sales volume at Rest of Central Region (CCR) but prices are falling

In June 2009, a total of 876 units were transacted from 46 projects, compared with 609 new home units sold at 38 projects. This was a 43.8% surge in sales performance over the previous month.

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


• 144 units at Dakota Residences at Dakota Crescent were sold in June 2008 at a median price of $978 psf, compared with 27 units sold in June 2009 at a median price of $870 psf. (10 units were sold in May 2009 at a median price of $883 psf)

• 100 units at Clover by the Park at were sold in July 2008 at a median price of $753 psf, compared with 33 sold in June 2009 at a median price of $729 psf. (16 units were sold in April 2009 at a median price of $730 psf.)

• 68 units at Concourse Skyline at Beach Road were sold in September 2008 at a median price of $1,592 psf, compared with 21 units sold in June 2009 at a median price of $1,329 psf. (20 units were sold in May 2009 at a median price of $1,314 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 13 transactions in June 2009 for a median price of $1,019 psf. (two transactions in April 2009 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 32 units sold in June 2009 at a median price of $777 psf. (four units were sold at a median price of $771 psf in April 2009).

• Four units at Woodsville 28 were sold in August 2008 at a median price of $919 psf, compared with 12 units sold in June 2009 at a median price of $770 psf. (34 units were sold in April 2009 at a median price of $751 psf).


Source of Data: URA website

Finding: The price trend in RCR is similar to CCR with June 2009 median price higher than April 2009 but much lower than last year’s. The same conclusion can be drawn for developers’ pricing strategy in RCR, i.e. they appear to be in a hurry to offload as many as they can.

Median price in June 2009 improved slightly over the previous month due to the support provided by the buying frenzy. However, when compared to the same time last year, median price in RCR still has much lost ground to claw back.

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

In all, a total of 432 new home units from 39 projects were sold in June 2009, compared with 442 new home units in 40 projects sold in OCR a month ago. However, when compared to the sales performance of 787 new home units sold from 40 projects in March 2009, the June 2009 figure was a drop of 44.5% in volume. It appears that the buying momentum caused by the droves of HDB upgraders is on the wane.

Below are comparisons of sale prices between the whole of 2008 and June 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 16 units sold in June 2009 at a median price of $838 psf. (Three units were sold at a median price of $740 psf in April 2009).

• Seven units at The Amery at Lorong K Telok Kurau were sold in July 2008 at a median price of $877 psf, compared with four units sold in June 2009 at a median price of $863 psf. (Three units were sold in April 2009 at prices between $727 psf and $863 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 four units sold in June 2009 at a median price of $830 psf. (Three units were sold in April 2009 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 two units sold in June 2009 at a median price of $950 psf. (Three units were sold in April 2009 at a median price of $949 psf).

Source of Data: URA website


[B.2] CONDO RENTS CONTINUE TO FALL – ALBEIT SLOWER THAN BEFORE

The number of condo projects that meet the URA criterion of at least 10 tenancy agreements signed in a quarter increased by 40 projects (or 20.7%) from 193 projects in Q1 2009 to 233 in Q2 2009. This may mean higher instances of ‘break lease’ cases – which mean that the tenants may have exercised the ‘diplomatic clause’ and terminated the tenancy agreements earlier, resulting in higher number of tenancy agreements being replaced within the respective projects – hence more entries into the data.

Another telltale sign is the comprehensive rent fall amidst higher number of rental transactions. When the increase in tenancy agreements was caused by higher demand, the rents amount would have gone up instead of coming down. As such, the higher number of tenancy agreements amidst falling rents could have been caused by tenants going through some ‘financial adjustments’ during this difficult time.

Some of the rent drops were severe, for example:

 At District 9, Cairnhill Crest the median rent dropped from $6.43 psf per month to $4.10 psf pm, which worked out to be 35.23% drop in rent.

 In other popular locations such as District 3 Queens at Stirling Road, the median rent dropped $1 psf per month from $4.52 psf pm to $3.52 psf pm or 22.12% slide.

 The median rent at Water Place at District 15 also dropped $1.73 psf pm or 37.7% from $4.59 psf pm to $2.86 psf pm.

The year-on-year comparison of private home rents of 100 quality condos between Q2 2008 and Q2 2009 across different districts. Both sets of statistics for Q4 2008 and Q1 2009 were culled from the URA’s rental price index where information on rents collected at condo/apartment projects with at least 10 tenancies is captured.

 [B.2.1] Median month rent below $2.00 psf

From the statistics available, it appears that in Q2 2009 there were a total of 46 projects (or 20% overall) having their median rent going below $2.00 psf per month. In Q1 2009, only 35 projects (or 18% overall) were renting at below $2.00 psf pm in median rent. These projects are either very old former HUDC flats or are located at outlaying areas including districts 17, 18, 19, and 23.

In Q2 2009, a total of 109 projects (or 47% overall) enjoyed median rent of below $3.00 psf per month. In Q1 2009, 126 projects (or 65% overall) were renting below $3.00 psf pm.

The other 78 projects (or 33% overall) shown in the URA statistics enjoyed rents of above $3.00 psf per month in Q2 2009. The majority of the projects are located near the central business districts including Districts 1,2,3,4,5,7,8,9,10,11, and 15. Only two units at two relatively newer projects in the outlaying districts, i.e. Gardenvista and Lakeshore managed to rent out for $3.32 psf pm and $3.48 psf pm respectively.

In Q1 2009, 39 projects (or 20% overall) featured in the URA record enjoyed rents of above $3.00 psf per month. However, despite the 2-fold increase in the number of projects enjoying above $3.00 psf rent per month, more high-end projects rather than fewer are suffering from sliding rents.

At the very top end of the home rent spectrum, only six projects had units renting out at $6.00 psf pm or higher. The rental prices of high-end condo units in District 9, 10 and 11 also succumbed to the general downward slide. In Q2 2009, only one unit at The Pier at Robertson managed to rent out at above $6.00 psf pm threshold. The unit was rented out at $6.08 psf pm.

New Launch!

Its been 8 yrs snice a new project is being launch in Ang Mo Kio the latest being Grandeur 8.

Finally we all been waiting for the launch of a new project which many have been eyeing on snice 2years ago.

Some info about project:
34 storey single block of 329units. 255carpark lots.

2/3/4/Penthouse

2 rooms approx. 775sqft-885sqft.est 124 units.
3 rooms approx. 914sqft-1025sqft.est 136 units.
3 rooms(excutive)approx. 1104sqft-1208sqft.est 36 units.
4 rooms approx. 1305sqft. est 28 units.
4 rooms Penthouse approx. 1740sqft-2704sqft.est 5 units.

Prices Est. $800k up for 2 rooms, Est. $950k up for 3 rooms.

Mins to Ang Mo Kio Mrt,Interchange and Ang Mo Kio Hub.
3 views available ie. City View, Yishun View and Ang Mo Kio Park View.

All you need is a cheque to gain access to the VIP Launches this coming 29th July and enjoy a discount of up to 12%. IAS and NPS available(price 3% different).

Expected TOP Dec 2014.

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.

Update for January 2009

Monthly Property Market Update for December 2008

Introduction

The global economic pie is shrinking rapidly, and when that happens, there will not be enough business to keep everyone happy. So far, all the economic numbers, data, and statistics that have been released by both the governments and private sector analysts the world over are pointing to a long and torturous year in 2009.

And as for now, nobody is any wiser about when the recovery will begin. As for the interim period, there will be no denying or escaping it – in order for the global economy, including Singapore’s to get better, there will be many bitter pills to swallow. In short, the global situation will get worse before it gets better.

Fortunately, not all the housing sectors in Singapore will be adversely affected by the on-going downturn – at least not the public flats that continue to provide more than 70% of the secondary market transactions for real estate agents. Demand for resale flats continue to stay on the healthy level; and as the crisis deepens, more prospective buyers may be forced to go for the safer option of public flats which are being heavily subsidised by the state.


The big picture of the larger economy

Global economy in serious trouble – IMF

The International Monetary Fund (IMF) reported that the unemployment rate in the 15-nation euro region will reach 8.3% in 2009.

A study by the Organisation for Economic Cooperation and Development (OECD), which includes the world's richest economies, said that the financial turmoil that started in the US has rapidly spread to the rest of the world. The study indicated that the number of unemployed people in its 30 member nations will rise to 42 million in 2010 from 34 million now.


Prospect bleaker for US economy

The year-old recession in the US began to intensify with the third quarter growth shrinking by 0.5%.


Consumer spending and corporate earnings down

According to revised figures from the US Commerce Department released on 23 December 2008, consumer spending along with corporate earnings fell the most in almost three decades and the contraction in GDP was the worst since 2001.


Residential investments down

Residential investments contracted 16% at an annual pace in Q3 2008. Besides, new-home sales plunged 2.9% to 407,000 in November 2008, the lowest level since January 1991.

The National Association of Realtors (NAR) reported on 23 December 2008 that sales of existing homes fell 8.6% to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October.


Job losses up in US

On 5 December 2008, the US Labour Department confirmed that some 2.7 million jobs have been lost since the US slipped into recession in December 207. It also revealed that the US economy lost another 533,000 jobs in November 2008 and the unemployment rate now stands tall at 6.7%. Many economists are expecting the unemployment rate to rise to 8% in 2009.

The government report also corrected the previous months’ job loss data as follows: October saw a loss of 403,000 jobs (up from an earlier estimate of 240,000) and September job losses were revised up to 320,000 from 284,000.

In the week ended 20 December 2008, the number of Americans on dole rose 140,000 to 4.506 million people – the highest since December 1982 which saw 4,509 people receiving unemployment benefits.

This means that the current economic recession is far worse than the last two recessions and may need much longer time to recover.


US subprime mortgage crisis spread to other domains

Rising unemployment in the US has intensified and widened delinquencies on mortgages across the nation.

More prime mortgages in trouble

The continual slide in property value are causing more prime mortgages to sour, and exacerbating foreclosures on prime mortgages.

The US government efforts to rescue the massive housing slump can at best be described as slow. In earlier December 2008, the Federal Reserve began its first move to buy up to US$100 billion of government-back mortgages. It was the first step in the right direction but the journey will be a long and painful one.

Home foreclosures in the US may rise to 8.1 million homes over the next four years, according to Credit Suisse.


US Commercial real estate asking for help

Even big commercial real estate players in the US are not spared the blushes. The US$6 trillion industry of hotels, office buildings and shopping malls, has recently asked the US government for help in providing some ‘credit market support’.

The commercial property industry is bracing itself for a record total debt of close to US$530 billion due for refinancing in the next few years. In 2009 alone, about US$160 billion of the huge pile will need to find fresh financing. However, with credit virtually in non-existence, thousands of those properties could go into foreclosure or bankruptcy if owners are unable to get new loans.
The trade associations are asking that their members be included in a US$200 billion lending facility that was created by the government for consumer debt such as car loans, student loans and credit cards.


The overall performance of Private Residential Property segment

Private homes prices continue down trend as export stalls

The final quarter of 2008 (Q4) saw the steepest drop in private home prices in a decade – shedding 5.7% quarter-on-quarter. This is on top of the 2.4% overall drop in home prices in the previous quarter (Q3) of 2008. (See Table [1] below for details)

The price fall in consecutive months brought the overall price growth to the negative region of minus-4.3% for the whole of 2008 year-on-year. This is a stark contrast to the 31.2% price hike in private home in 2007.

Since late 2007, potential buyers have played the ‘wait-and-see’ game; and their patience has been rewarded with cheaper home prices over the months.

In Q4 2008, prices for apartments in the Core Central Region (CCR) were down 6.3%; while those in the Rest of the Central Region (RCR) slipped 5.5% and Outside Central Region (OCR) dropped by 4.7%. This follows declines of 2.7%, 2.4% and 1.5% respectively in those areas in Q3 2008.


Price of non-landed private home dropped across all regions

Regions - Price growth of non-landed private homes Q-on-Q
Core Central Region (CCR) – 6.3% (previous quarter growth –2.7%)
Rest of Central Region (RCR) – 5.5% (previous quarter growth –2.4%)
Outside Central Region (OCR) – 4.7% (previous quarter growth –1.5%)
Overall private home prices – 5.7% (previous quarter growth –2.4%)
Whole year growth – 4.3% (previous quarter growth 31.2%)

Looking over the horizon, the private home prices are likely to stay down for at least the next six to nine months as the property market will have to digest the over-supply situation amid one of the worst global recession in decades.

Prospective buyers sitting on the fence certainly feel vindicated and are likely to persist in their strategy of ‘sitting out the crisis’.


Primary home sales did better in November 2008

Primary home sales did slightly better in November 2008 only because the sale figures were compared with the ‘flat performance’ of 112 sales transactions in the preceding month. The overall sales volume rose to 192 transactions – which could only be described as an ‘indifferent’ performance.

The unsold inventories of new home units continue to pile up with unsold units outweighing sold units by 6,033 to 4,208.


Performance of primary sales in Core Central Region (CCR)

Out of the 188 brand new condo projects on sale in the Core Central Region, only 6 projects had some sales. In all, the total new units sold in CCR in October 2008 were 63. See table below for details.


Performance of primary sales in Rest of Central Region (RCR)

Out of the 123 brand new condo projects on sale in the Rest of Central Region, only 13 projects had some sales. In all, the total new units sold in RCR in Nov 2008 were 28.


Performance of primary sales in Outside Central Region (OCR)

Out of the 140 brand new condo projects on sale in the Outside Central Region, only 19 projects had some sales. In all, the total new units sold in OCR in November 2008 were 101. See table below for details.


Secondary home market faces steep challenges in 2009

Secondary sales of Condo/Apt in Nov-Dec period halved

The revised November 2008 secondary sales figures fell way short of expectation, falling more than 50% of October’s transactions. The December 2008 interim figures fared even worse.

This is clear evidence that home owners and buyers alike are wary of the current market situation, preferring to be ‘safe than be sorry’. The current economic downturn, which has been exacerbated by the on-going corporate layoffs and insolvencies, is expected to continue to suppress buying activities for at least the next six months to a year. The near term prospect for secondary sales does not look good.

*Interim figures according to the latest search results on 10 January 2009. The final figures will be revised in the next update in February 2009.


Sales of Landed homes slide

The overall sales of landed homes in Q4 were clearly affected by the on-going stock market turmoil and in particular the 10 Oct stock market meltdown all over the world.


Property investment sales slow to a trickle

Investment sales – an effective gauge of developers' and investors' medium– to long–term confidence in the investment climate – are likewise in the doldrums in 2008, giving a faithful reflection of the currently weak market sentiment. The total investment sales of Singapore real estate achieved for 2008 (up to 9 December 2008) were just $17.8 billion, year–on–year. This is a far cry from the record $54 billion achieved for the whole of 2007 in investment sales.

In 2008, the residential sector brought in $6.25 billion worth of transactions and accounted for 35% of total investment sales. The breakdown of the various residential property transactions is as follows:

Collective Sales
A total of seven collective sales worth a total $371 million were transacted in 2008. In 2007, a total of 111 collective sales worth a total of $12.4 billion were transacted.

Good Class Bungalows
A total of 48 Good Class Bungalow (GCB) transactions worth $763.7 million were done in 2008, down from $1.2 billion from 90 deals in 2007.

Office investments
Office investment sales worth $5.4 billion were transacted in 2008, compared with $14.3 billion for full-year 2007.

Industrial property
The only growth came from the industrial property sector where a 66% growth was recorded. A total of $3.32 billion of investment sales deals were done in 2008, the best showing since 2002.

About 50% of the industrial investment sales for 2008 were accounted for by JTC Corporation's $1.7 billion divestment of its industrial portfolio to a joint venture involving Mapletree Investments, Arcapita and Mapletree Industrial Fund.

Auctioneers expect more mortgagee sales in 2009

Given that the loan default rate will rise due to the worsening economic situation and the rapid rise in unemployment, most auctioneers expect mortgagee sales to increase next year by leaps and bounds.

In fact, mortgages sales had already inched up in 2008 in the aftermath of the various major stock market clashes in the year. Out of the $69.1 million auction sales in 2008, about 36% were mortgagee sales, slightly higher than the 32% mortgagee sale share of the total $422.3 million auction sales in 2007.

Besides, there may be a significant jump in the number of speculators and investors, who bought their properties with the defunct Deferred Payment Scheme (DPS), dumping their properties onto the market before the completion dates draw nearer.

A veteran auctioneer reckoned that 'success rates at auctions may improve if a continued worsening in economic conditions forces some sellers to further lower reserve prices and satisfy the price expectations of some buyers who are bottom fishing'.

Home rents set to fall as more previously en bloc project come back for lease

More condominium and apartment projects that were sold collectively during the 2006/07 property bull-run have been put back by their new owners on the market for rental. Below are some recent examples:

All the 91 units at Lucky Tower at Grange Road, which was snapped up by city Developments Ltd (CDL) in May 2006, have been leased to one single tenant.

OUE, the developer who purchased The Grangeford at Leonie Hill has similar plan to lease out all the 192 units in the District 9 project.

Frasers Centrepoint has so far rent out about 60% of the 185 units at Flamingo Valley at Siglap, which it acquired in early 2007.

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

This means that the potential supplies of new apartment units will be fewer going forward. However, the flip side of the coin is that home rents are expected to ease due to the increase in supply of rental properties in prime locations.


The performance of Non-Residential Property segment

Prime office rents slide – vacancies Up

For the first time since Q4 2003, prime office rents in Raffles Place have come down.

In the final quarter (Q4) of 2008, these rents dropped a whopping 15.8% on a quarterly basis. The average prime office rent now stands at $16 psf per month.

Office rents in the Marina Centre micro market also fell by a big percentage of 12.9% on a quarterly basis to $13.50 psf pm.

Likewise, office vacancies edged up further in Q4 2008 as demand slowed in tandem with the global economic downturn.

In Raffles Place, the average office occupancy fell 1.3% compared with Q3 2008 to 95.6% in Q4 2008. Island-wide, office occupancies slid 0.8% to 95.6%. Only Tampines Finance Park bucked the trend with 96.8% occupancy.

Major developers have reacted to the situation by delaying the development of new office buildings, for example, City Developments (CDL) has delayed the South Beach project. Plans to extend office buildings by other developers were also shelved, for example, Tampines Mall and Funan DigitaLife Mall and the redevelopment of Marina House. As such, potential office supply from 2009 to 2013 would be at 11.3 million sq ft, instead of the earlier estimate of 12.1 million sq ft.

Occupancy rates and rents are expected to decline further in 2009.

Shop space rents getting cheaper

Prime Orchard Road shop rents have fallen 1.9% quarter-on-quarter to an average of $36.10 per sq ft per month (psf pm) in the final quarter of 2008 (Q4). This is the first time in five years these rents have fallen.

Measured year-on-year, prime retail rents in the Orchard Road area fell by 0.8%, reversing their 5.4 % growth in the same quarter in 2007.

Outside of Orchard Road, prime suburban rents also dropped, though by a moderate 1% quarter-on-quarter to an average of $29 psf pm in Q4 2008. This is the first time in nine years since these rents fall.

In the next few years, there will be ample supply of about six over million square feet of retail space with the completion of new malls, shops within the integrated resorts, and refurbished shopping centres. As such, prime Orchard Road rents could contract another five to 10% in the first half of 2009; while prime suburban malls another two to three per cent.


Industrial rents and capital value almost reached ‘tipping point’

The industrial property sector may have reached its tipping point in the final quarter of 2008 as manufacturing activity dips and relocations from offices slow to a crawl. Besides, sub-letting of excess space may start with more redundancies appearing in the manufacturing sector, thereby bringing down rents.

There are lots of glooms over the horizon beginning with the expected slowdown in GDP growth and the poor reading of the Purchasing Managers' Index (PMI) which fell to the record low of 44.3 in November 2008. The demand for industrial space is likely to moderate, to say the least.

According to the latest DTZ study, average rents of first-storey and upper-storey private industrial space could each drop by more than 2% in the fourth quarter of 2008 (Q4) from the previous quarter to $2.30 and $2.00 psf pm respectively. The average rent of high-tech and business park space could drop to $4.30 psf pm in Q4.

Likewise, JTC Corporation has been taking back more space as manufacturing and related companies consolidated their operations. JTC had reported that termination at its ready-built facilities surged 25.7% quarter-on-quarter and 45% year-on-year in the third quarter.

Economic uncertainty has already spurred the Trade and Industry Ministry to suspend sales of state-owned industrial land on the Confirmed List for the first half of 2009.


The performance of Collective Sales

En bloc sale news: Laguna Park condominium

The owners of Laguna Park condominium along Marine Parade Road have the second bite of the cherry after a majority of more than 80% of them voted in favour to try their luck for collective sale again.

The 667,000 sq ft project was first put up for collective sale in 2007, but in vain. That year, a total of 111 collective sale transactions worth $12.4 billion were sealed, but Laguna Park missed the boat due to a very high asking price of $3million per unit.

This time around, the 528 apartment owners are asking for $1.2 billion for the former HUDC project – or $1.8 million to $2.3 million per unit.

Laguna Park is one of the rare offerings for collective sale in 2008 where only seven collective sales worth a total of $371 million were successfully transacted.


Foreign Interest in Singapore Real Estate

Another ‘Runaway bride’ in property joint venture

US-based El-Ad Properties, owned by Israeli billionaire Yitzhak Tshuva, is seeking to find a buyer to buy out its stake in the high-profile South Beach development in Singapore.

The group clinched the 99-year leasehold South Beach site jointly with City Developments Ltd (CDL) and Dubai World unit Istithmar in September last year for $1.69 billion or $1,069 psf per plot ratio (psf ppr).

El-Ad Properties owns one-third stake in the South Beach project and also has half-share with CDL in the Futura condo site at Leonie Hill Road. The total worth of El-Ad’s stakes in both the project in Singapore is estimated to be around $707 million.

El-Ad has also had some problems with its investment in the US. It would delay the construction for a casino project in Las Vegas in the US to 2010, due to financing difficulties and high construction costs.


News on Government Land Sale (GLS) Programme

2009 Government Land Sales Programme will be halted

Ministry of Nation Development (MND) has decided not to add any new sites to the Government Land Sales (GLS) Programme for first half (H1) 2009, in view of the negative forecast for the economy.

The H1 2009 slate - comprising the entirely reserve list sites, will have a total of 38 sites, comprising 37 plots that are being carried over from the H2 2008 reserve list and the unsold executive condo site at Punggol Road/Punggol Field.

The potential total floor areas that can be developed from the H1 2009 GLS Programme will be 7,920 private homes, 512,000 sq metres gross floor area (GFA) of commercial space and 5,160 hotel rooms.

There will also be a reduced supply of commercial space and no new supply of private residential units from Government agencies. The H1 2009 supply from this source will comprise about 40,000 sq metres GFA of commercial space and 240 hotel rooms.


Kallang River and Stamford sites put off

The impending release of a hotel site in the Kallang River area has been postponed to next June by URA, yet another planned project delayed in view of the floundering market.

The 1.59ha hotel site at Kallang River - part of plans to transform the Kallang Riverside into a waterfront lifestyle precinct – will be relegated to the reserve list.

Likewise, a historic site in North Bridge Road - which contains Singapore's first cinema Capitol Theatre and two other heritage buildings - has been released on the reserve list sale system as planned.

This means that the site will be put up for tender only if developers indicate interest by committing to a minimum bid.


Overall performance of the HDB resale market

HDB resale price continue to climb despite recession

Price of resale HDB flats continue to rise despite the ongoing economic slowdown. The prices have climbed 1.5% in the final quarter (Q4) of 2008 – on top of the 4.2% rise in Q3 2008. The final figure of Q4 adds up to a total of 13.9% price growth for the whole of 2008, building on the 16.6% price increase in 2007.

This means HDB resale flat prices have reached a new peak since the 1996 high.


More HDB flat owners behind in instalments

There has been an increase in HDB home loan defaults since late 2003.

About 8,000 households or 8% of them are unable to pay back their monthly instalments for three consecutive months. This means that in Singapore one in 12 households has been unable to pay for their basic housing for more than three months.

HDB has revealed that at the end of 2003, 25,000 flat owners out of the 517,300 households with HDB loans were in arrears for three months or more; however, the figure went up recently with 33,000 delinquencies out of 420,000 HDB home loans.

The spike in delinquency could be due to higher HDB resale prices. The latest flash estimates published by the Urban Redevelopment Authority (URA) on 28 December 2008 showed that HDB flat prices rose 13.9%, despite the recession. The recent price increase was on top of the 17.4% gain a year earlier in 2007.

Another reason for the increase in the delinquency figures could be due to the fact that HDB seldom repossesses defaulters' flats, leaving their numbers to accumulate in the system. Some home owners in arrears can take up to a few years to pay off debts.

Members of Parliament (MPs) interviewed by the Straits Times confirmed that more HDB flat owners are seeking help for home loan problems at their Meet-the- People sessions.

The HDB will consider the following measures to help with the increasing delinquencies:

It may allow defaulters to pay reduced loan instalments on a temporary basis and work out a solution to their financial situation.

It may allow owners to sublet a room to generate income, or include working family members as joint owners to help pay for the flat.

Finally, the HDB may also consider providing an additional HDB loan to help owners downgrade to a smaller, more affordable unit.


Resale transaction in December 2008 down

Due to the long festive season in December 2008, the HDB resale transactions were down in that month, though it still stays above the 2,000-deal level and finishes the whole year on a strong note.

Case Study – 5-room resale prices kept at bay
After the spectacular rise in November 2008, the resale prices for 5-room flats in the 10 survey areas were held at bay in December 2008. Only four places had higher median resale prices. This shows that the drop in the resale transactions of 5-room flats was followed by the drop in the resale prices, due to the prevailing cautiousness.

Update for November 2008

Monthly Property Market Update for November 2008

Introduction

The October stock market turmoil continued right into November 2008, crushing whatever that was left of the consumers’ confidence about their own financial future.

Here in Singapore, exactly how the recent global stock market meltdown will affect the real estate market remains debatable. But one thing for sure, Singaporeans at large have started to adjust their spending behaviours in anticipation of more financial turbulences to hit town.

Here are the summaries of the important events affecting the property market in November 2008.


(A) The big picture of the larger economy

[A.1] US housing crisis deepens

Miseries continue to pile on homeowners in the United States. Higher unemployment rate of 6.3%, 10 straight months of falling payrolls, and more stringent mortgage standards are throwing more US homeowners onto the streets, sinking home prices further into the abyss.

Home values in the United States fell 9.7% in the third quarter (Q3) of 2008, extending its seventh consecutive decline to a median US$202,966. In the meantime, one in seven homeowners had negative equity, or owed more on their mortgages than their houses were worth.

30.2% of US homeowners who sold their property in the last 12 months through to September 2008 ended up taking huge losses; and 20% of all housing transactions were foreclosures.


[A.2] US Jobless rate hits 14-year high

The US unemployment rate bolted to a 14-year high of 6.5% in October, after hitting 6.1% a month ago and continuing a 10th straight month of payroll reductions. Another 533,000 jobs were cut in November and more layoffs are expected as more corporations are unable to find fresh capital to continue to operate – the three major car manufacturers, i.e. Ford, GM and Chrysler, are just some high-profile examples.

Altogether, around 2 million jobs have been lost so far this year. Out of which, 651,000 of them were lost in the third quarter alone. The unemployment rate looks certain to surpass the peak of 6.3% in the last recession in 2001. Many expect the jobless rate to climb to 8% or higher next year.


[A.3] The rich gets poorer

The world’s richest people have become a little poorer, at least on paper. American Bill Gates lost US$3.2 billion in the value of his Microsoft shares. He is now worth a total of US$55.5 billion from US$57 billion, according to Forbes' calculations.

Warren Buffett lost US$5.29 billion based on his 350,000 Berkshire shares; but managed to be slightly richer by US$8 billion, bringing his personal wealth to US$58 billion. Buffett’s new found wealth makes him the richest man in the US, unseating Bill Gates who had been the wealthiest for the past 15 years.

Hong Kong tycoon Li Ka Shing lost about US$12 billion, bringing his total wealth from about US$26 billion at end-September to US$14 billion now. In Singapore, wealthy property developer, Kwek Leng Beng of City Developments (CDL) may be poorer by S$780 million from his earlier estimated wealth of S$2.7 billion in early October 2008.

Veteran banker Wee Cho Yaw lost almost S$1 billion in October and may be worth about S$3.2 billion, down from more than S$4 billion.


[A.4] Multiple years of slow growth for Singapore

According to Prime Minister Lee Hsien Loong, Singapore is likely to face several years of slow growth after the current recession; and any hope of a speedy recovery will not depend on Singapore’s own measures but the health of the US economy.

Mr Lee explained that the current crisis differed from the 1985 recession and 1997 Asian financial crisis, as this time around, the crisis has brought the entire global financial system to its kneel and bankrupted many iconic financial institutions across the US and EU.

However, the Singapore government would maintain the current 7% rate of the Goods and Services Tax and use the revenue in a targeted way, such as by helping businesses affected by the crisis. Any cuts to the CPF scheme 'in the immediate term' were also ruled out by Mr Lee.

[A.4] Property News Update

§ [4.1] Master Plan 2008 becomes law

The Chief Planner has gazetted the Master Plan 2008 (MP 2008) on 5 December 2008. It means the latest MP 2008 has become law. Master Plan is a detailed statutory land use plan that guides the physical development of Singapore for the next 10 to 15 years.

As part of the public consultation process, the draft MP 2008 was put on public exhibition in May. More than 200,000 visitors visited the exhibition over the past six months; and about 300 feedback inputs were received from the exhibition and incorporated into the final MP 2008.

The four key thrusts of the MP 2008 are:

§ to enhance Singapore as a home of choice,
§ a magnet for business,
§ an exciting playground and
§ a home to cherish.

Three new commercial and mixed-use sub-regional hubs have been introduced at Jurong Lake District, Kallang Riverside and Paya Lebar Central. Marina Bay is the centrepiece of Singapore’s urban transformation into global distinctive city, with many exciting developments shaping up.


§ [4.2] URA re-introduces plot size control for Cluster Houses

The URA will re-introduce a cap to limit the number of allowable units in strata landed housing developments from 3 February 2009.

The total number of units allowed in a new cluster home project will be less than or equal the quotient obtained by dividing the total site area by the minimum plot size control for the relevant landed housing form.

The minimum plot size control for the relevant landed housing form includes 400sq m for Bungalows; 200 sq m for semi-detached houses; and 150sq m for terrace houses.


§ [4.3] IRAS ordered by the High Court to relook Property Tax rules

The Court of Appeal has ruled that monies in the sinking fund need not be included in the property tax calculation, if they were not used for capital improvements in the year of assessment. However, if they were utilized for maintenance and repairs which would add to capital enhancement on the property's value, then they should be included in the calculation.

The Court of Appeal also held that the onus on showing that the sinking funds were used for maintenance and repair should lie with the taxman; and it also ordered the IRAS to come up with clear guidelines on the exclusions.
Currently, contributions to the management fund are exempted from property tax calculation, as the fund is meant for general purposes not necessarily related to improvements.


(B) The overall performance of Private Residential Property segment


[B.1] Primary home sales heavily sedated in October

§ [1.1] Total primary sales figures

Official data from the URA showed that only 112 new home units were sold in October 2008, down from 376 units a month ago. In all, 159 new home units were launched in October 2008, much fewer than the 767 units launched in the previous month.


§ [1.2] Performance of primary sales in Core Central Region (CCR)

Out of the 183 brand new condo projects on sale in the Core Central Region, only 9 projects had some sales. In all, the total new units sold in CCR in October 2008 were 14. See table below for details.


§ [1.3] Performance of primary sales in Rest of Central Region (RCR)

Out of the 123 brand new condo projects on sale in the Rest of Central Region, only 12 projects had some sales. In all, the total new units sold in RCR in Oct 2008 were 27.

§ [1.4] Performance of primary sales in Outside Central Region (OCR)

Out of the 141 brand new condo projects on sale in the Outside Central Region, only 24 projects had some sales. In all, the total new units sold in OCR in October 2008 were 71.


[B.2] Secondary home market hit the slippery path in Q3

Likewise, secondary sale of private properties has hit a slippery path, with sales volume going down from the height of 1,728 deals in July 2008 to the sub-1,000-deal level recently. There were only 242 deals in the secondary sales market in November 2008, with no reprieve in sight.

The figures below show the lacklustre performance of the private secondary sale market similar to its primary market counterpart.


§ [2.1] More are letting their Option lapse

More purchasers of new home units have been elbowed out of their property deals in October 2008, probably due to the sudden stock market crashes worldwide. Buyer’s confidence is now trapped at the basement level of a skyscraper.

In October alone, about 50-odd new home buyers let their Option to Purchase (OTP) lapse by the expiry dates. This number is five times higher than the norm.


[B.3] Transaction volume in Q3 rose 9% but value crawled – indicating price dip

In Q3, a total of 4,287 caveats were lodged for private homes (including ECs), covering both primary and secondary markets. It was 9% higher than the 3,934 caveats lodged in Q2.

However, the total value of private homes transacted edged up only slightly to $5.68 billion in Q3 from $5.62 billion in Q2, indicating a price dip. Compared with the previous quarter, island-wide landed home private prices slipped 1.9% quarter-on-quarter.

Prices of apartments/condos in all geographic regions also declined. Below shows the details of price dip across the different segments:

§ Core Central Region – home prices declined by 2.7%
§ Rest of Central Region– home prices declined by 2.4%
§ Outside Central Region – home prices declined by 1.5%

The average price for high-end and super luxury residential homes stood at $2,065 psf and $3,240 psf respectively in Q3 2008. This was a decline of 14.3% and 12.0% respectively since the beginning of this year.


[B.5] Landed property segment – Sales volume by House Types

§ [5.1] Sale volume of Detached houses

Sales of detached houses in all districts continue their downward trend in Q3, falling from a total of 69 transactions (including new and resale units) in the previous quarter to 47 deals in Q3.

Apparently, the detached house market has reacted cautiously to the slew of bad news streaming in from the rich nations. Coupled with the worst performances ever from Singapore’s main economic engine – the manufacturing sector*, more prospective bungalows buyers will do their maths carefully before committing to any purchase.

* Note – the electronic shipments from Singapore, which has already fallen for seven consecutive quarters before October 2008, had plunged by 15% in the previous month. Singapore’s Non-Oil Domestic exports, which have fallen for six straight months before October, likewise fell 15.3% in October 2008.



§ [5.2] Sale volume of Semi-detached houses

Sales of semi–detached houses were likewise reduced in Q3, after rising marginally in the previous quarter. The factors affecting the semi–D segment are similar to the detached house segment as the prospective buyers are also from the high income groups that are more vulnerable than average wage earners to external economic shocks.



§ [5.2] Sale volume of Terrace houses

Sales of terrace houses were down in Q3 after the spectacular rise in Q2 2008. However, when compared with Q1 2008, the performance in Q3 was only slightly subdued.

This shows that the underlying demand for landed homes, especially at the price range of sub-one-million dollar and slightly over a million dollar, is still very strong. The cheaper terrace houses also attract many upgraders from nearby HDB heartland estates and the mid– to high–income groups in general.


[B.6] Price Trend of landed property segment – by House Types

Prices of landed homes held steady throughout the year and across all house types – probably due to limited supply of quality homes. Many landed home owners are still able to hold on to the mortgages at these early stages of the economic slowdown. However, with the ‘domino effects’ coming from the on-going layoffs and cost-cutting measures across the various industries, prices of landed homes might be affected in six to nine months’ time, if things do not look up sooner.


§ [6.1] Price trend of Detached houses

As of now, 2–storey bungalows in popular areas such as District 10, 15 and 19 held firmly, though they are expected to come down a shade lower in 2009, due to widespread layoffs in the wake of the worsening economy in Singapore.


§ [6.2] Price trend of Semi-detached houses

So far, despite the fewer transactions, prices of semi-detached houses have managed to stay firm, probably due to the limited supply of quality houses in the recent months.

However, the situation may be altered in the next few months when more layoffs occur in tandem with the worsening economy.


[B.6] Private home rents set to slide

Some experts are predicting that the rent drop could be as severe as over–20% in the next few months, as more corporate layoffs, cost-cutting and capital flights materialise.

Making matters worse is the impending completion of more condominiums in the prime districts. For example, another 681 units at the Sail @ Marina Bay, 172 units at St Regis Residences, and 110 units at Paterson Residence will be available for immediate occupancy from early next year onwards.


[B.7] More developers feeling the heat

Other worrying signs pointing to a slowing property market include news on delays or cancelations of high-profile building projects, and price reduction by developers etc. Here are some examples.

§ [7.1] Marina Bay IR may open in phases

Due to the trying times ahead, Las Vegas Sands has applied to the Singapore authority to open its casino in Marina Bay in phases from the end of 2009 instead of all at once. This is definitely a bad news for the ailing domestic economy where the unemployment rate is climbing; and thousands of people have been re-trained to take up the various positions promised at the casino.

Itself in serious financial peril, Las Vegas Sands had decided to halt projects in Macau and the United States to conserve cash. However, the gaming giant has vowed to go ahead with the planned Marina Bay Sands casino resort in Singapore, which is expected to cost nearly US$5 billion.


§ [7.2] CDL shelved South Beach project

City Developments (CDL) and its two joint-venture partners, Istithmar of the Dubai World Group, and El–Ad Group, have shelved the $2.5 billion high–profile South Beach project. The 3.5–ha site at the former Beach Road Camp was won by the CDL–led consortium for $1.69 billion.

The economic turmoil and the high construction cost were cited as reasons for the stoppage. CDL will delay the project until building costs fall to 'reasonable levels'.


§ [7.3] District 9 project re–launched at half price

A 75–unit freehold luxury condominium at River Valley Grove, Luma, has been re–launched at half its last year’s original launched price of $2,800 psf.

The transacted prices of Luma units were between $3,349 psf and $3,291 psf in August 2007; and between $2,837 psf and $2,586 psf in April 2008.

Luma sits an en–bloc site at St Thomas Walk which the Novelty Group bought in 2006 for $76.5 million, or about $810 psf of potential gross floor area.


(C) The performance of Non-Residential Property segment

[C.1] Prime office rents lower and trend to continue

The latest data released by the URA showed office rents lower by 0.8% in Q3 2008.

In October 2008, prime office rents slide by 5% from the previous month to reach $14.05 psf per month, as more corporations are down-sizing their operations here. But the fall in net effective prime office rents was even more pronounced, with landlords giving rent–free periods before the actual commencement of the leases.

Average office rents are now back to the 2007 level and may go down another 10% to 20% if the economic situation does not improve quickly.


[C.2] More office tenants expected to ‘break lease’

More tenants will ‘break lease’ in the next year as the full impact of the global financial tsunami hits the Singapore shore. It is estimated that about 3.5% of existing Grade A office space, amounting to about 450,000 sq ft, could be returned by tenants in the next 12 months as corporations in general consolidate their operations here.

As the way things go, the downward pressure has already sliced 1.2% off the average Grade A asking monthly rent in Singapore in Q3 2008, when compared with the previous quarter. The average rents fell to $14.92 psf in Q3, from the height of $15.10 psf in Q2 2008.

Bucking the downtrend, office space at Raffles Place, City Hall/Marina Bay, Beach Road/Middle Road, and Shenton Way actually became dearer by 2.2%. However, outside the prime Golden Shoe areas, average asking rents for offices fell by 3.3% in Tanjong Pagar; and by 0.91% in the Orchard area.

In the pipeline, there will be almost nine million sq ft of new office space supply in and around the Central Business District over the next four years; and at least 80% of them will be of Grade A standard.


[C.3] Fear for recession leads to more leases surrendering

Another telling sign of a weakening economy is showing up in the industrial sector. In Q3 2008, more Ready-built facilities (RBF) leased by JTC Corporation were returned. The rate of surrendering of JTC leases jumped 25.7% quarter-on-quarter and 45% year-on-year.
More leases surrendering occurred in manufacturing and related businesses as many tenants have started to consolidate their operations, following the drastic fall in demand from abroad.

In total, termination of leases of flatted factories, standard factories and business parks amounted to 30,300 sq m from lessees who were from the services and precision engineering sectors. They each accounted for 30% of the termination.

Another 18% of the terminations were from the electronic sector. And around 67% of termination in Q3 was the result of consolidation of operations, and about 12% was due to poor business.


(D) The performance of Collective Sales

There was no news in the collective sales segment in November 2008.


(E) Foreign Interest in Singapore Real Estate

[E.1] Australian fund pulled out from Singapore property deals

An Australian private property fund manager, Blaxland, has pulled out from industrial property deals worth some $200 million in Singapore.

Blaxland Funds Group is a joint venture between its executive staff and The Myer Family Company. It set up a representative office in Singapore earlier this year and had planned to build up an industrial property portfolio worth over $300 million, including eSys Technologies' building in Changi North and SH Cogent Logistics' warehouse building at Penjuru Close in Jurong.


[E.2] US buyer backed out of Ho Bee deal

American buyer of Ho Bee Group's Frontech Centre backed out of the deal in November 2008. The agreed sale price of the eight-storey high-tech industrial building was $30 million. Ho Bee had earlier planned to use the sale proceeds to pare down borrowing and increase working capital. The purchaser is understood to be a US-based property fund.


[E.3] Foreign Funds eying cheaper Asian properties

In November 2008, Merrill Lynch reportedly raised some US$2.65 billion for its Asian Real Estate Opportunity Fund, which is intended for direct acquisition of real estate assets and companies in Asia.

Likewise, it was also reported that an Australian fund, AMP Capital Investors, was in the process of raising up to S$2.9 billion for direct property investments in Asia, including malls in Japan, and offices in Singapore.

According to KPMG, pension funds, hedge funds and private equity funds are showing keenness in Asian real estate due to the structural shortage of commercial properties in the growing economies, including Australia, Singapore and China.

[E.4] Foreign home buyers made up 22% of home purchases in Q3

In Q3, a total of 903 private homes were sold to foreign buyers, based on the caveats lodged with the Singapore Land Authority (SLA).

Malaysians accounted for 22% of the total transactions by foreigners. Among the other nationals, Indonesians accounted for 19% of the total caveats lodged, while PRC Chinese took up 13%, Indian 12%, and UK citizens 6%.

Among the most popular projects that attracted the highest numbers of foreign buyers in Q3 2008 were Clover by the Park (40 units), Livia (30 units) and Kovan Residences (20).
In terms of the total private home transactions, foreign buyers (including PRs) made up 22% of total private home transactions in Q3 – down 3% from the previous quarter of 25% of total sales.

Among the foreigner buyers, PRs contributed the lion shares of 53% or 476 of the total 903 private homes bought by foreigners in Q3. Non-PR foreigners accounted for the remaining 47%.


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

[F.1] Government Land Sale (GLS) programme suspended

The Singapore government has suspended sale of state sites from the Confirmed List for the first half of next year. The remaining sites on the Confirmed List will be transferred to the Reserve List.

In good measures, the government has also lifted an earlier ban on converting office space in the central area to other uses, such as serviced apartments.

Any developers that need land will still be able to acquire it through the Reserve List where the government will release a site for sale if an interested party submits an application and guarantees to pay a minimum price acceptable to the state.

[F.2] No show at tender of Punggol EC site

The fourth executive condominium (EC) site launched for sale by the Housing & Development Board (HDB) received no bid at the close of the tender in November. The 242,159 sq ft and 99-year leasehold site is near Punggol MRT Station and the future Punggol Town Centre.

The no-show by developers may be due to the uncertain prospect of the property market amidst one of the worst economic crises the world has witnessed for decades.

There might be a valid concern among buyers that some resale 99-year leasehold condo units might cost the same or less than EC units as the current economic crisis takes fuller shape later.

[F.3] URA tries its luck with Dakota and Seletar sites

Despite the no-show at the last tender of an executive condo site in Punggol, the URA has released sales details for two Reserve List sites - at Dakota Crescent and Seletar Road.

The 1.7 ha site at Dakota Crescent is for a residential project with a gross floor area of 647,599 sq ft. It is near the future Singapore Sports Hub and upcoming Dakota MRT station.

The 2.1 ha site at Seletar Road is meant for a mixed commercial and residential development with a gross floor area of 226,042 sq ft. It is in a residential area at Seletar Hills near the future Seletar Aerospace Park.


(G) Overall performance of the HDB resale market

[G.1] Punggol BTO flats more than three times subscribed

2,344 Singaporeans are vying for 750 new flats at Punggol Arcadia, the latest Build-To-Order (BTO) HDB flats in Punggol. The BTO project is located at the junction of Punggol Place and Punggol Field and was launched in mid-November 2008.

Buyers could choose from 120 three-room, 465 four-room, and 165 five-room flats. The flats cost between $181,000 and $211,000 for a three-room unit, between $268,000 and $327,000 for a four-room unit, and between $356,000 and $416,000 for a five-room unit.

The overwhelming response to the BTO project means that the underlying demand for new flats is still strong, amidst the general cautiousness. The current economic worries may have prompted more home buyers to go for the safer option of public flats.

[G.2] Pricey condo-like HDB flats drew few buyers

Natura Loft at Bishan, the latest HDB’s Design, Build and Sell Scheme (DBSS) flats, has drawn about 600 applications for its 480 units, a far cry from the previous overwhelming responses seen at Premiere @ Tampinese, City View @ Boon Keng, and Park Central at Ang Mo Kio.

Besides the apparent economic woes, another reason for the lukewarm response might be the high asking price. For example, typical four-room 95-sq m units are asking from $465,000 to $586,000; while the five-room 120-sq m flats cost $600,000 to $739,000. On the average, the unit price works out to about $450 to $570 per sq ft (psf).

Comparatively, a new 99-year leasehold condo, Rosewood Suites in Woodlands, is being attractively priced at between $590 to $600 psf.

[G.3] HDB sub-letting rents to fall in tandem with private rents

As rents for private condos and apartments are softening and expected to continue sliding due to the deteriorating economy and increasing supply of new condos next year, HDB sub-letting rents are expected to follow suit.

In fact, the downward pressure is already being felt. First of all, the sub-letting rents for HDB flats have shown smaller increases in the third quarter (Q3) of 2008.

For example, HDB sub-letting rents for 4-room and 5-room flats in popular areas such as the Central areas, Bukit Merah, Queenstown, and Marine Parade are facing downward pressure.

Secondly, the number of HDB flats which received the green lights from HDB for ‘whole flat sub-letting’ increased in Q3 to 21,400 units from the 20,200 approved units in Q2 2008. However, ‘whole flat sub-letting’ deals fell 4% to 3,960 cases in Q3. If the trend continues, the sub-letting rents will fall further.
Note: HDB flat owners are allowed to rent out their whole flat after having fulfilled the minimum occupation period (MOP) of three years, if the flats have been purchased from the open market without any housing subsidies from the government. The MOP is five years if the flat owners have taken the government subsidy, such as the CPF Housing Grant.

[G.4] Resale transaction in November 2008 increased by 43 cases

The total HDB resale volume in November 2008 was the third highest this year. After hitting the highest volume in September 2008, the resale activities dipped slightly in October with 2,389 resale transactions. However, with more bad news of corporate layoffs and the heightened fears for the economic uncertainties, more home buyers opted for the safety of subsidised flats; and the buying trend is likely to continue into 2009.


[G.5] Larger flats in demand – with volume of 5-room flats hitting year’s highest

The deteriorating economy may have compelled many aspiring private home buyers to switch to larger public flats (and probably also to take advantage of the subsidised home financing).

The demand for bigger flats, such as 5-room and executive flats, has increased steadily since January 2008, as the global financial crisis deepened. The resale volume of 5-room flats reached its highest level this year, hitting 699 deals in November – 64 deals more than in October 2008 and 102 deals more than in January 2008.

The resale volume for executive flats crossed the 200-deal threshold for the second time in the year, reaching 204 deals in November – 22 deals more than the previous months.


[G.6] Case Study – 5-room resale flats more expensive in November 2008

The highest resale volume of 5-room resale flats was accomplished with generally higher resale prices. Samples of resale prices of 5-room flats in the 10 largest HDB heartland estates were used in the latest case study to ascertain the price trend of 5-room resale flat across the island.

It was discovered that the 5-Room resale flats in seven out of the 10 largest HDB heartland estates experienced higher median resale prices.


Likewise, a similar study was done on the smallest heartland estates. It was ascertained that, as the resale prices in the smallest estates are already very high, the general upswing in resale prices for larger flats elsewhere did not occur to the larger units in the smaller estates, except for Marine Parade which is still the choicest location.


Findings: Only one (01) out of the three (03) smallest HDB heartland estates experienced higher median resale prices for the 5-Room resale flats.

[G.7] Higher resale prices supported by high demand for resale flats

Checks on the 5-Room flat resale volume in the 10 largest heartland estates revealed that there were 21 more resale 5-room flat transactions in November 2008. Likewise, at the smallest HDB estates, where resale prices tend to be much higher than elsewhere due to limited supplies, there were 12 more resale 5-room flat transactions


This means that the rise in median resale prices was supported by higher demand from the buyers, many of whom are probably making the necessary financial adjustments in these tumultuous times. It also means that the underlying strengths in the HDB resale market are strong, while the country goes into an unchartered economic territory next year 2009.