PDA

View Full Version : The Business Times Property 2015, October 22



reporter2
26-10-15, 16:09
http://www.businesstimes.com.sg/hub/property-2015/rising-interest-in-luxury-condos

Rising interest in luxury condos

With these properties currently trading at significant discounts to historical peaks, a long-term strategy of investing now will reap rewards later.

By WONG XIAN YANG

Oct 22, 2015


THE Singapore luxury condo market has seen better days, with prices and volumes remaining well below the peaks last seen in the pre-Global Financial Crisis (GFC) property boom. Developers are still left with a substantial amount of unsold inventories and cooling measures have put a lid on demand. Hence, prices and volumes have remained soft. However, the luxury condo market is showing signs of thawing, with transaction volumes slowly creeping up, amid depressed prices, since the second half of 2014. In this article, we define luxury condos as non-landed private residential units located in the Core Central Region (CCR) that have transacted at prices above S$4 million.

Interest in the Singapore luxury condo market seems to be gaining momentum as evidenced by the pick-up in the number of transactions. After transaction volumes hit a low of 108 units in the first half of 2014, volumes have been moving up, and 165 units were transacted in H1 2015. The slow and steady rise in volumes amid dim market sentiments and cooling measures, suggests that both Singaporean and foreign buyers have largely acclimatised to the current property landscape and prices have fallen enough to justify investing in the segment, despite paying the additional buyer's stamp duty (ABSD). Word on the ground is that there has been a rise in the number of enquiries in the high-end market. The anecdotal evidence suggests that many investors are keeping a keen eye out for good bargains especially with current price levels being significantly discounted compared to their pre-GFC peaks.

In H1 2015, Singapore and Chinese buyers formed the two major sources of demand for the luxury condo market, having bought 57 and 31 units respectively, which together accounted for 53 per cent of luxury condo transactions during the period. Chinese demand has been on the rise, on the back of the appreciating yuan relative to the Singapore dollar. Many would also be investing for diversification purposes. Recent deals reflect Chinese interest in the Singapore luxury market and their willingness to pay top dollar for rare, good quality properties. For example, the sole penthouse unit at Le Nouvel Ardmore was snapped up by Chinese billionaire Sun Tongyu, co-founder of e-commerce site Alibaba. The 13,875 sq ft penthouse was bought at S$51 million, which is a historical record for the condo market here in terms of transaction value.

On the flipside, interest by Indonesian buyers, who were a traditional source of demand for luxury condos in Singapore, has declined as their purchasing power has been diminished by the continued depreciation of the Indonesian rupiah against the Singapore dollar. The unfavourable exchange rate coupled with the high ABSD has raised the cost of Singapore properties significantly for Indonesian buyers. Until exchange rates stabilise to previous levels or the ABSD is adjusted, Indonesian demand is not expected to come back anytime soon. Barring a hard landing in China's economy, the luxury condo market is expected to be supported by local and Chinese demand over the short to medium term.

Savvy investors are increasingly looking at the resale market in search of deals that are now selling at deep discounts compared to their previous selling prices. The table above shows secondary market transactions this year (as at Sept 30) at prices significantly below their previous transaction price, based on caveats data.

The largest discount was for a unit at Seascape, which was sold for S$5.8 million in May 2015, S$5.2 million lower than the previous transaction, representing a 47 per cent fall in value. Other transactions highlighted in the table saw buyers picking up units at around 26 per cent to 37 per cent below their respective previous transacted prices. With some units selling at prices significantly lower than their pre-GFC historical peaks, the upside potential is significant, assuming prices will return to their previous levels.

Value can also be found in the primary market, where some developers are facing hefty extension charges due to Qualifying Certificate (QC) conditions. QC regulations apply to foreign developers - defined as one that has even a single shareholder or director who is not a Singapore citizen - that have acquired their land from private sources such as collective sales. These developers have a two-year period to sell off all their units within the project after it obtains Temporary Occupation Permit (TOP). Failure to do so would make them liable to pay hefty extension charges to the state which are pro-rated based on the proportion of unsold units left in the project. Many completed luxury condo projects have a substantial number of unsold units, and developers that are facing or are already paying hefty extension charges, may be more willing to lower prices to attractive levels in order to move sales.

However, investors who are expecting developers to lower prices to cut-throat levels may be disappointed. Developers have other options. Some may choose to privatise and delist their company. Once all the shareholders and directors of the company are Singapore citizens, the developer may apply to the authorities for a clearance certificate, upon issue of which it may then apply to cancel the QC for the project. For instance, SC Global, which privatised in 2013, has saved millions in potential QC charges. Others may choose to dispose of unsold units in a project through internal sales. For instance, Hiap Hoe Group sold all 48 units in its Treasure on Balmoral project to its unlisted holding company.

In the primary market, one of the best-selling luxury condo projects this year (based on URA Realis caveats data as at Sept 30, 2015) has been the Urban Resort Condominium by CapitaLand. The project is located in Cairnhill Road and 17 units were sold in the first nine months of 2015 at a median price of S$2,270 psf. In comparison, 39 units were sold in the preceding period (before 2015), at a median price of S$2,760 psf. The project achieved TOP in 2013, and would be liable for QC extension charges in 2015. Other best-selling luxury condo projects in the first nine months of this year include Goodwood Residence and Leedon Residence.

Demand for luxury condos is expected to grow over the long term, driven by rising wealth in the Asia Pacific region. According to the World Wealth Report 2015 by Capgemini, Singapore is host to one of the biggest High Networth Individual (HNWI) populations in the world. Furthermore, the HNWI population in the Asia Pacific is expected to grow and is poised to be a major driver of global HNWI wealth over the next few years. A part of this wealth would find its home in Singapore, driving demand for Singapore luxury properties. With its attractive tax rates, high standards of living and transparent housing regulations, Singapore will continue to appeal to the HNWI population.

Demand for luxury condos would pick up if global economic conditions improve and prices would be underpinned by limited future supply. Overall future supply in the market remains limited with only 15 per cent of incoming completions to be located in the CCR over the next few years. The bulk of land supply from the Government Land Sales Programme is for mass-market homes. On the other hand, collective sales - the main source of land for luxury condo projects - remain muted due to ABSD and QC conditions. As the unsold inventory of luxury condos dwindles on the island, demand should eventually catch up with supply, setting the stage for a recovery in prices.

Over the short term, a broad recovery in luxury property prices is not expected, given the headwinds facing this segment. These include a dim economic outlook, the property cooling measures in place, rising interest rates and a substantial stock of unsold units in the market. Yet, with limited future supply, together with an expected increase in demand due to growing wealth in the Asia-Pacific region, the long-term fundamentals of Singapore's luxury condo market remain intact and the upside potential is likely to be significant, given the discount at current price levels compared to historical peaks. There is already growing interest in the luxury condo market, as reflected by the slow rise in volumes. Pockets of opportunity would appear in times of market uncertainty and discerning investors are standing ready to pounce when a good deal comes on to the market. With this in mind, it is wise to understand that investing in a luxury condo project is a long-term strategy that should reap rewards when the market recovers.

The writer is senior manager, research & consultancy, OrangeTee

reporter2
26-10-15, 16:11
http://www.businesstimes.com.sg/hub/property-2015/the-appeal-of-buying-completed-homes

The appeal of buying completed homes

First-time buyers, upgraders benefit as they can move in quickly upon purchase, cutting out waiting time and possibly saving on rents.

By TAN TEE KHOON


THE Business Times on May 20, 2015 cited a report that at the end of Q1 2015, developers had paid about S$119 million in extension charges for unsold units of non-landed private residential developments completed from 2010 onwards. Condominiums completed prior to 2010 were mostly fully sold. It was further estimated that developers would incur up to a staggering total of S$328 million in extension charges for unsold units in their condominium projects for this year and the next, if Singapore's real estate market does not improve and they fail to sell any units by end 2016.

There are two reasons for these significant numbers. Firstly, the extension charges under the Qualifying Certificate (QC) requirements are calculated at per annum rates of 8 per cent of the land purchase price for the first year, 16 per cent for the second, and 24 per cent for the third and subsequent years of extension. The amount is pro-rated according to the number of unsold units. Secondly, more projects were completed in 2014 as compared to 2013. Since the developers are required to sell their units within two years of completion, more would be incurring these charges in 2016 as compared to 2015.

There is thus the urgency for these developers to sell within the stipulated timeframe. This presents a golden opportunity for buyers to pick up their choice properties.

Where are these unsold completed units located? Why do they remain unsold? What are the benefits of buying completed unsold units? This article attempts to answer these questions.

The total unsold inventory of completed and uncompleted units in the non-landed private residential market has been declining steadily over the past nine quarters as the market gradually absorbed the outstanding supply while the government tapered its land sales programme. By Q2 2014, the available stock then were 28,436 units, down 16.2 per cent year-on-year (y-o-y) and by Q2 2015, this further reduced to 26,905 units, down 5.4 per cent y-o-y (see Exhibit 1).

However, as the rate of absorption for new launches also slowed over the past two years, there has been a corresponding build-up of completed units left unsold. Hence, the number of units which are completed but remain unsold has been increasing. In Q2 2014, there were 1,412 such units, up 113.9 per cent y-o-y and by Q2 2015, 2,470 units up 74.9 per cent y-o-y.

A significant proportion of the unsold stock lies in the Core Central Region (CCR). In fact, in Q2 2014, 63.3 per cent of the completed but unsold 1,412 units were in the CCR. By Q2 2015, 77.6 per cent of the 2,470 completed but unsold units are in the CCR.

The unsold stock situation in the CCR is in line with the overall weakness of the market in view of the hefty Additional Buyer's Stamp Duty (ABSD) imposed on foreign buyers, who typically formed a higher proportion of buyers in this market segment. As market pundits had been predicting that the government is likely to review ABSD after the 2015 general elections, foreign buyers have taken this as a signal to wait.

Meanwhile, local demand continues to be saddled by the Total Debt Servicing Ratio (TDSR). Although prices in CCR have fallen, the median price for new non-landed homes in the CCR is still significantly higher than those located elsewhere. Based on the Urban Redevelopment Authority's (URA) data from January to August 2015, the median transacted price in absolute quantum for new non-landed homes in the CCR was S$1.8 million as compared to S$1.1 million in the Rest of Central Region (RCR) and S$904,000 in the Outside Central Region (OCR).

Unit sizes in the CCR also tend to be bigger than those in RCR and OCR, which further impacted their affordability. Based on URA data from January to August 2015, the median unit size for new non-landed homes in the CCR was 81 square metres, as compared to 65 sq m for RCR and 68 sq m in the OCR.

Meanwhile, there has been an increasing buyer interest in completed units as seen in the rise of sales transactions though this remains a small proportion relative to the total new sales market. In Q2 2014, there were 33 completed new unit sales and in Q2 2015, there were 117 such units sold. Noteworthy of mention is the sales volume in the CCR market in Q2 2014 when 22 completed units were transacted and this tripled to 67 units in Q2 2015. There appears to have been a rebound of sales in completed units in the CCR.

The Rest of Central Region (RCR) also witnessed a spike in sales of completed units from 10 in Q2 2014 to 37 units in Q2 2015.

A LOOK AT PRICES

In the CCR, the new sale prices of uncompleted and completed units are on a downward trend (see Exhibit 2). This presents investors with more options. In fact, completed units are attractive because they could be immediately available for owner occupation, or can be leased to obtain immediate rental income.

In the RCR market, the gap between the average new sale prices of uncompleted and completed units is narrowing (see Exhibit 3). However, the resale market in RCR could also be interesting to look at, as the average resale prices of completed units have fallen below that of new sale prices, partly due to the rising competition from developers as more new projects are launched in RCR.

What about the Outside Central Region (OCR)?

It is observed that new sale prices of units completed fewer than three years ago have fallen significantly in H1 2015 from both H1 2014 and H2 2014 (see Exhibit 4). This could be due to some projects approaching the end of the maximum completion time allowed by the authorities, and a higher proportion of bigger units changing hands at lower per square foot prices. However, the market continues to see low transaction volumes of newly completed units in the OCR because recent launches have been extremely attractive. Some of these projects in good locations are being launched at very reasonable prices with developers keen to achieve better market absorption to move units.

In addition, these developers who had obtained their sites one to two years ago would be aware of the market softening. Besides the usual ramping up of marketing activities to bring in more human traffic to their showflats, many had gone further to ensure the attractiveness of the project, creating more efficient space allocation within a unit, and a generous suite of attractive facilities.

THE PURCHASE BENEFITS

The tangible benefit of buying a completed unit is that one can see the finished product. Usually, developments obtaining Temporary Occupation Permit (TOP) would witness another surge of sales as prospective buyers can finally appreciate the building design, quality finishes and other thoughtful details in the development itself and within the units.

Immediate rental returns are cited earlier as a good reason for buying completed units in CCR. This also holds true for buyers who are not owner-occupiers of completed units in other locations.

Investing in Singapore's real estate could also provide foreigners from some countries a hedge against currency devaluation. This is especially so for Malaysian and Indonesian buyers, who together account for the majority of foreign buyers (including Singapore Permanent Residents) of private homes in Singapore, The Sing dollar is tipped to stay resilient against their currencies because weaknesses in commodity exports are expected to persist following the devaluation of the Chinese yuan.

Finally, prices for these completed units are competitive or even lower than uncompleted units, presenting a value proposition to different buyer groups in a tepid market. For example, institutional buyers such as funds may structure an attractive bulk purchase deal with a developer for its unsold, completed units through the assistance of a real estate agency active in the CCR. Individual buyers can also assemble themselves to make offers to developers to purchase multiple unsold completed units through syndicated buying at a bulk discount rate. They can reap their immediate rental yields by leasing these units to suitable tenants through the networks of real estate agencies. First-time buyers and upgraders benefit too when buying for owner-occupation as they can move in quickly upon purchase, cutting out waiting time and possibly save on rents which would have been incurred in leasing while waiting for the completion of newly launched units.

The writer is managing director of KF Property Network

reporter2
26-10-15, 16:12
http://www.businesstimes.com.sg/hub/property-2015/private-residential-leasing-filling-the-pigeonholes

Private residential leasing - filling the pigeonholes

With shrinking rental budgets, landlords may take to finding tenants for individual rooms in an apartment.

By ALAN CHEONG

Oct 22, 2015


WHILE the debate on whether residential prices have come off significantly rages, at the sidelines, another no less important topic - leasing - has somehow been left out.

The performance of the latter has been befuddling to say the least because on the ground, what market specialists have observed is that despite rising vacancies coupled with stepped down rents, prices of completed properties have only budged a little.

Using the high-end market as an illustration, while Savills' average luxury non-landed residential price has fallen by 11.3 per cent from the peak in Q4 2007 or 8.8 per cent from the last crest in Q1 2013, our average rental value for the same segment has fallen much more, by 27.3 per cent from the peak in Q1 2008 and 19 per cent from the rebound high in Q2 2011.

If one factors in the higher vacancies, the effective loss in rental revenue by a typical landlord is even greater.

Savills does not have baskets for the non-landed mid-tier and mass-market segments but Urban Redevelopment Authority's rental indices for non-landed properties in Rest of Central Region and Outside Central Region are at an early stage of decline with the former falling by 3.1 per cent from Q1 2014 to Q2 2015 and the latter registering a 6.7 per cent decline from Q2 2013 to Q2 2015.

In the meantime, we are receiving statistics that the volume of leasing transactions has been on an uptrend, breaking records quarter after quarter. The does not square with the fact that rents have declined noticeably.

Most market watchers expect that if the leasing market fares well, the sales market should also perform well.

However, what we are experiencing today is that while leasing demand and rents are soft, prices at new launches are holding up generally.

Why the disconnect? It is about the breakdown in the fundamental relationship between yields and prices - where yields and occupancies are falling but new sale prices are holding up. We believe that this can be explained in terms of the high level of household liquidity.

The liquid assets held by households have risen to such heady levels that even if rental yields are coming off in the face of rising interest rates, the appetite for buying residential properties for investments remains unsatisfied.

The healthy sales of North Park Residences in Yishun and Commonwealth Towers are a giveaway that the liquidity building up in our households, frozen after the implementation of the Total Debt Servicing Ratio (TDSR) framework as buyers waited out for prices to fall, is starting to thaw.

What could result from the interaction between this liquidity, the cooling measures, the TDSR, and planning regulations on the average minimum unit size, for projects away from the Central Area, of 70 square metres?

One is that buyers can overcome the high equity downpayment hurdles if the absolute purchase price quantum is manageable.

Smaller one and two-bedroom apartments have therefore been popular among investors (these buyers are not likely to be HDB upgraders because public flats are often much larger than the private homes they purchase from developers).

The question now is, when they are completed, are these units going to meet the needs of the new breed of overseas nationals arriving in Singapore?

On the rental front, we are observing the increasing trend of overseas nationals being employed on local terms, meaning they do not have rental allowances. For those who have such housing perks, they have been trimmed.

This is due to the increasingly challenging business environment that companies here face - both domestically and in the region. With the Chinese economy entering into a significant slowdown on top of the clampdowns on government officials' ostentation, the conditions for non-Chinese companies doing business there and in Asia become tougher.

The fallout of this will be greater cost control, trickling down to rental budgets of their overseas staff.

Already, we are observing that a greater number of new overseas nationals arriving in Singapore are prepared to be co-tenants in a single housing unit, something quite unheard of just a decade ago. The chart "More Flatmates" shows that the number of Employment Pass (EP) holders per unit of leased out private property has jumped to 3.37 in 2014. Vacancies on the other hand have been increasing.

The question that arises then is: Why are there more EPs staying in a rented home but at the same time, vacancy levels are rising? If each unit leased out is getting more densely populated, shouldn't vacancies fall instead?

What this implies, and ties in with our observation from the ground is, that with greater budget constraints, more overseas nationals now cannot afford to rent an entire housing unit (for example, an apartment). This has implications on the leasing market and also how a landlord can position his unit for lease.

Before we attempt to look for a strategy, we may want to take a cursory look at what is known as the pigeonhole principle. In layman's terms, the pigeonhole principle puts it that if we have say 12 pigeons but there are 10 holes to accommodate them, at least one hole will house more than one pigeon.

The chart does point to the pigeonhole effect because the number of EP holders mapping into each private residential unit is surprisingly high, meaning there are more tenants out there than there are housing units (not rooms) available for the right rent.

Market observers have thus far tried to explain the soft rental market using traditional demand versus supply arguments. The more astute would drill down the demand and supply numbers to analyse in greater levels of granularity.

However, they are still stopping short on a solution for landlords pertaining to leasing or why policy makers may have to rethink on cooling measures in their current form if it is beginning to create an unviable leasing market.

For landlords, anecdotally since we have an increasing number of multiple tenancies per apartment let out, it signals that there are more tenants in a certain budget range than there are apartments available to fill that budget. (There could be more apartments in the market but they are just not made available to a singular tenant with a much lower budget because the landlord is not willing to accept that level of rental or the landlord is not prepared to have multiple lettings for his/her unit.)

To ensure that his/her unit falls within the set of tenanted properties, the landlord therefore has only two options. One is to lower the rent and let out to a single tenant; the other is to accept multiple tenancies for his/her apartment.

Unless they do not mind gapping down the rents to the same or a replacement tenant upon lease renewal, landlords may find their units vacated.

TOUGHER CONDITIONS

Serious consideration should therefore be made on the option of renting out to multiple tenants. For some locations, particularly the non-central areas, the total rental collection from leasing out each room in an apartment to a different tenant, may be higher than from leasing out the entire apartment to a single tenant.

Landlords must continue to be alert to the strong possibility that moving forward, business conditions are expected to be even tougher and companies may attempt to rein in hiring overseas nationals and in turn train locals to take on expanded roles. This is the time to be realistic. Multiple lettings can reduce the risk as there is a diversification of the tenant base.

On the supply side, the issue is more complicated. With lower rental budgets, in terms of unit sizes, the minimum lot size for habitation is a bed space per person. We do not believe that for EP holders, it will come to that and the lower bound is that of a room. This is where investors have to be wary of what has lettable value and what may experience sharper rental declines in future.

Presently, studios, one-bedders and shoebox apartments are still finding traction with tenants. Being small in size, these housing types are a one-to-one mapping from a tenant to a housing unit. Unfortunately, if payroll cost cuts continue, will the one-to-one move down a level, to that of rooms?

If so, it will be a multiple tenants-to-one housing unit mapping, that is, larger apartments with multiple rooms that will be in demand.

Should that be the outcome, and very likely to be the case, then rents of shoebox apartments will adjust towards single-room rates. In other words, shoeboxes can fall prey to sharp falls in rents.

Using district 14 as an illustration, the rent for a room within a private apartment there is about S$1,700 per month. Shoebox apartments in the same district are going for about S$2,000-2,300 per month.

As more rooms become available for lease, their rents should fall and with it those of shoebox apartments too as the gap between the two narrows (but not coalesces).

In an environment where businesses are economising expenditures to the limit, a greater demand for rooms rather than singular housing units like studios and shoeboxes may be the outcome.

Owing to lower rents payable, units with more rooms will improve their probability of finding tenant(s) for at least one of their rooms than for the entire unit. It is unfortunate that the TDSR and cooling measures have made larger units less affordable.

This policy in action is observed in many of the new launches where one and two-bedders are sold at a more rapid pace than bigger units.

Cognisant of this affordability issue, developers have also been limiting the supply of larger units by keeping to the lower bound 70 sq m average size unit rule.

The effect of this will be that if corporates continue to pare their staff payroll and ancillary expenditures, the multitude of studios, one-bedders and shoebox apartments sold may reap sub-par rental returns upon completion.

All this may seem commonsensical and one may wonder why this roundabout way of explaining the recent leasing market behaviour. It is when one adopts a prismatic view that vested parties, involving landlords, developers and policy makers, begin to approach the issue of matching tenants to housing units from a new angle.

This angle sheds light on how landlords can still get their vacant units filled and command a firm rent. Policy makers may have to think hard about recalibrating the measures to lower the bar for more to purchase larger units (with more rooms).

There is still an increasing number of overseas nationals coming on one-year stay and taking up residence in serviced apartments and some even in budget hotels. The number of single-room tenants in the market has not yet been fully tapped by private residential landlords.

In conclusion, landlords need to stay nimble and realistic to maintain cash flow.

Tenancy diversification is a good way to reduce the probability of having the whole unit lying vacant. As the rental market is becoming increasingly competitive, active lease management - with multiple tenants for a housing unit - may be the way forward.

The writer is research head, Savills Singapore

reporter2
26-10-15, 16:15
http://www.businesstimes.com.sg/hub/property-2015/cooling-measures-driving-developers-overseas

Cooling measures driving developers overseas

Overseas investments by Singapore-based developers from 2013 to mid-2015 were S$6.84 billion, almost double that for 2010-2012.

By KARAMJIT SINGH / NUTCHAYUDA TEPHABUTR

Oct 22, 2015


AFTER the global financial crisis, the Singapore residential property market recovered strongly on the back of pent-up demand, undersupply and low interest rates. Urban Redevelopment Authority's Private Home Price Index surged 38 per cent, from the low seen in Q2 2009 to Q2 2010 in an over-heated market which led to concerns that an asset bubble was in the making. This prompted the government to introduce as many as seven rounds of cooling measures between 2010 and 2013, culminating in the Total Debt Servicing Ratio (TDSR) framework and resulting in a drastic decline in transaction volume and eventual softening in prices.

Developers began to feel the squeeze on revenue as projects under marketing encountered poor sales progress. New development opportunities became increasingly hard to come by due to the difficulties in buying collective sale sites as well as residential sites under the Government Land Sales programme. The programme had been cut back with fewer sites on offer, making it more competitive for bidders. Faced with these challenges, many developers began to explore overseas investment opportunities following in the footsteps of others who had already established an overseas presence in previous regionalisation efforts since the 1990s.

China - the focus of previous overseas investments

Recognising the limited size of the Singapore real estate market and the growth opportunities available in new markets, Singapore-based developers had begun investing overseas in countries such as China, India, Vietnam and others since the 1990s. They ventured into China in order to capitalise on its robust economic growth that was driving demand for real estate and provided significant investment opportunities.

After the global financial crisis, cross-border investments by Singapore-based developers picked up. Between 2010 and 2012, overseas investment value totalled S$3.46 billion with the bulk invested in China, especially in residential and commercial projects. These were led by large establishments and government-linked companies. Notable investments during that period included Mapletree's purchases of Beijing Gateway Plaza for S$593.9 million in 2010 and Silver Court in Shanghai for S$449.6 million in 2011. Chengdu was another popular investment destination, attracting S$518.4 million from Singapore-based developers.

More recent forays

Although the cooling measures were imposed gradually from 2010, their effects were felt mostly from 2013 onwards which also marked a new wave of Singapore-based developers venturing to overseas markets.

While some investments between 2013 and 2015 were made by seasoned regional players like Keppel Land, Mapletree and Ascendas, a number of local developers, who were more focused on the residential market in Singapore, became more active overseas.

These included Far East Organization, City Developments Ltd (CDL), Oxley Holdings, Sim Lian Group, Lian Beng Group, Roxy-Pacific Holdings, Ho Bee Land, Hiap Hoe, Fragrance Group and Aspial Corporation, although some of them had invested overseas previously.

Overseas investments by Singapore-based developers between 2013 and mid-2015 amounted to S$6.84 billion, almost double that for the 2010 to 2012 period.

Australia was the top investment destination accounting for 32 per cent of total investments while significant investments were also made in the UK (19 per cent), followed by US, Hong Kong, and China, at approximately 13 per cent of the investments volume each.

As most of the reported deals do not have development costs factored in, actual investment commitments from Singapore-based developers are much higher than illustrated in the graph. Almost all of these markets are mature and transparent, having established legal and regulatory frameworks - conditions that Singapore-based developers are used to at home and appreciate having in new markets - so as to minimise risks and operational uncertainties.

Investment in overseas markets also allowed Singapore-based developers to diversify their business based on different market cycles, which could smooth their revenue flow and improve earnings.

AUSTRALIA

From 2013 to Q2 2015, Singapore-based developers invested in Australia more than any other country. Most of the investments were in commercial and mixed-use properties in the key markets of Melbourne, Sydney, Brisbane and Perth. As a large number of these are redevelopment sites where development costs form a large component of the total investment commitment, actual investment values by Singapore-based developers into Australia are even higher than those captured in these numbers.

Some high-profile deals include Far East Organization's acquisition of Harbour Town Shopping Centre in Perth for S$230.8 million and Ausgrid Building in Sydney for S$177.2 million. In May 2015, Far East Organization and its Hong Kong-based sister company Sino Land jointly acquired The Westin Sydney and its adjoining Heritage Retail podium. Aspial Corporation also made its mark via its property arm, World Class Land, by building the tallest residential tower in Australia, Australia 108 in Melbourne, as well as investing into large-scale development sites in Brisbane and Cairns.

Singapore-based developers have been attracted to the Australian property market because of its transparency, the availability of quality assets, higher yields with net returns of 6 to 10 per cent, foreign demand for prime residential assets and investment-friendly environment, and of late, the weakened Australian dollar. The time difference of one to three hours and travel time of four to seven hours from Singapore is favourable and a major consideration.

United Kingdom

The UK market also attracted attention from Singapore-based developers who invested S$1.27 billion between 2013 and Q2 2015. Some significant investments include that of Oxley Holdings in the Royal Wharf Township development at a sum of S$418.2 million (excluding development costs), where more than 3,000 homes would be built alongside commercial, retail, leisure and educational facilities, and Ho Bee's purchase of 1 St Martin's Le Grand in London for S$358.5 million. Far East Orchard has also has acquired a portfolio of student accommodation properties in the UK for S$86.6 million.

These properties are in the northern city of Newcastle and are located close to local leading educational institutions. As a leading global city and a financial centre, London attracts global banks and financial institutions, which support the demand for office space. Triple net leases - wherein the tenant is responsible for property tax, insurance, and maintenance - coupled with longer lease terms could also provide landlords with favourable returns - these are additional factors that attracted foreign investments in office properties. The UK property market allows investors to generate net returns of 4 to 6 per cent.

London's tradition and position as a hub for culture, arts, entertainment and education is also a strong draw for foreign investors in the hospitality, residential and student accommodation sectors. These are supported by a general housing shortage in the UK market, bolstered by immigration.

In addition to market transparency and an established rule of law on property investment and ownership, favourable exchange rates also contributed to increased investments by Singapore-based developers. The Singapore dollar strengthened by 27 to 40 per cent against the British pound in the past two years compared to the period before the global financial crisis. The recovering UK economy is also seen in a positive light and is likely to continue attracting foreign investments.

United States

Although the US saw fewer investments from Singapore-based developers, some of the deals were significant. S$456.5 million was paid by OUE for US Bank Tower in Los Angeles while in Manhattan, Pontiac Land acquired a freehold luxury residential property for S$253.3 million. Both the investments were made in 2013 and since then, the investments would have gained 10 to 15 per cent on exchange rate. The US market has not drawn Singapore-based developers traditionally but its high degree of transparency, improving fundamentals, economic recovery and prospects of good returns have made it an increasingly popular option for foreign investors. The time difference and travel distance are a deterrent.

Japan

The attraction of Tokyo is that it is a leading city in Asia and an established financial centre with a mature and large real estate market. The improvements made under the Abe administration have also bolstered confidence among businesses and foreign investors while a weaker Japanese yen against the Singapore dollar has enticed investors from Singapore. For example, in 2014 CDL purchased a prime residential site in the capital for S$356 million. At that time, the Japanese yen had weakened 46 per cent against the Singapore dollar compared to 2011 when the yen was at its strongest. In recent years, Tokyo residential property prices have been rising and this has attracted further foreign investments into this market. However, prior to the pick-up, the Japanese property market experienced a prolonged period of deflation which led to muted property investments among locals, thereby encouraging a renting culture. Concerns over a shrinking and ageing population remain.

EMERGING STRONGER

Every market is cyclical. Seasoned residential developers in Singapore would have gone through at least one major stormy downcycle, which typically lasts one to two years, coinciding with external factors such as economic recessions. During this period, most local developers keep their heads down and stock up while waiting for opportunities, as domestic markets have historically recovered relatively quickly. While some developers during such cycles have chosen to diversify to spread market risks, most find it sufficiently acceptable to remain totally rooted in the domestic market.

This current downcycle in the Singapore residential market differs from previous ones, primarily owing to the unnatural cause (government policy-induced). The fact that the government implemented several strong and incremental steps to wrestle the market does suggest it would not loosen its grip too quickly. Developers interpreted this forecast early, which accounted for the increasing trend of developers investing abroad, and hiring permanent employees there. Moreover, most Singapore residential developers have greatly benefitted from the strong local market post-GFC, and hence are riding high on confidence and equity to be regarded as a formidable force overseas, despite being new. As they dig deep and learn more of the respective market nuances, this forced change in mindset is likely to result in a community of developers that is more nimble and diversified.

The writers are international director and research analyst respectively at JLL

reporter2
26-10-15, 16:16
http://www.businesstimes.com.sg/hub/property-2015/suburban-share-of-private-home-launches-set-to-fall

Suburban share of private home launches set to fall

Oct 22, 2015


WEIGHED down by the cooling measures, the private residential real estate market has suffered a drop in prices and transactions in the past two years. Although the high-end market segment was the first to experience price decline in 2013, the contagion steadily spread to the mid-tier and mass-market segments within months.

This article will examine the market trends in the private mid-tier and mass-market housing segments. These two market segments occupy a very significant part of the private residential property market in Singapore. Based on the total sales transactions in the past five years, the number of transactions in these two market segments made up 84 per cent of the total market volume.

The private housing market in Singapore can be broadly divided into three segments, namely the mass-market, mid-tier and high-end segments. For the purpose of this report, the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR) will represent the high-end, mid-tier and mass-market segments respectively.

After reaching a peak in mid-2013, the RCR and OCR residential property price indices have been declining gradually. The turning point was triggered by the introduction of the Total Debt Servicing Ratio (TDSR) framework in late-June 2013.

Based on the third quarter 2015 flash estimates by the Urban Redevelopment Authority, its price index for non-landed homes in RCR has dropped 9.3 per cent from the peak in Q2 2013. The OCR price index peaked slightly later, in Q3 2013, and has decreased 6.7 per cent since then.

Although the decline in the price indices over the past two years does not appear to be very high, it is not an accurate barometer of the market sentiments. The spectre of further price drops due to the cooling measures weighs heavily on the real estate market and has created a sense of gloom which has resulted in a further drop in prices and transactions.

LION'S SHARE

In the past five years, Government Land Sales (GLS) were the main source of development sites acquired by developers. As a large majority of the GLS sites were located in the OCR, it is not surprising that the mass-market occupied the lion's share of the primary market among the three market segments. This was especially so in April and July this year when three prominent projects - Botanique at Bartley, North Park Residences and High Park Residences - all in the OCR, were launched with healthy sales momentum.

The median take-up rates for OCR and RCR launches, as measured by the median of sales-to-launch ratio for January to August 2015, were 104.12 per cent and 115.70 per cent respectively. A take-up rate of more than 100 per cent would result in a reduction of developers' inventory of unsold units. The median take-up rate for RCR is higher than that for the OCR while the total number of unsold units in OCR constitutes the majority of total unsold units among the three market segments, implying faster clearance of unsold stock in RCR.

LESS SUPPLY IN THE MASS-MARKET SEGMENT

In the past five years, from 2010 to 2014, the respective shares of OCR, RCR and CCR of the total number of private homes launched were 59.6 per cent, 26.0 per cent and 14.4 per cent.

During this period, OCR launch and sales volume dominated the private residential primary market so much that it is hard to imagine a time when the OCR did not hog the limelight. The situation was quite different before 2009, when the number of private homes launched in the OCR made up less than 40 per cent of the total launch volume.

The market share of OCR in terms of the number of uncompleted private homes launched for sale increased steadily from 19.5 per cent in 2005 to 70.4 per cent in 2012. The most dramatic increase was in 2011 and 2012, when the primary market launch and sales volume in the OCR grew sharply at the expense of the market shares of CCR and RCR. It was also during these two years that the average prices of mass-market homes in the OCR climbed significantly. The OCR price index increased 14.6 per cent in the two-year period of 2011 and 2012. During the same period, the price indices for CCR and RCR rose only 4.8 per cent and 6.2 per cent respectively.

The relatively high increase in OCR prices corresponded with the sharp rise in the primary market activities in this market segment. However this upward trajectory in prices was possible in the absence of the TDSR framework and high Additional Buyer's Stamp Duty (ABSD).

In the next 18 to 24 months, the proportion of private homes in the OCR to be launched for sale is projected to fall below 50 per cent for the first time since 2010. Based on the analysis of the private housing projects that could be launched in the next two years, only 42.9 per cent of the total number of units in these projects is located in the OCR. As a result, there could be less downward pressure on the OCR property prices.

OUTLOOK AND ADVICE

As the supply of new OCR launches offered to homebuyers in the next two years is projected to gradually decrease, some of the buyers could turn to the resale market or to buy executive condos (EC), especially as there is a large upcoming supply of new EC launches. On the other hand, the buyers of new launches in the RCR could expect to enjoy a steady supply. However, based on the prices paid by developers at recent GLS tenders, homebuyers should not expect prices of new launches in these two segments to fall significantly.

As the private housing market faces growing headwinds posed by a slowing economy and the prospect of rising interest rates, the average prices in all the three market segments are expected to remain weak in the coming year. The silver lining is that the government may ease some of the cooling measures if the real estate market were to be dramatically affected by an economic contraction. Such relaxation of the curbs would be necessary to address certain market imbalances in the near future.

The article is written by SLP research & consultancy department

reporter2
26-10-15, 16:18
http://www.businesstimes.com.sg/hub/property-2015/a-second-wave-of-supply-that-will-transform-the-cbd

A Second Wave of supply that will transform the CBD

New opportuinities for tenants as Grade A office space increases by 4m sq ft in 2016.

By TOBY DODD

Oct 22, 2015


THE Singapore office leasing market is approaching its "Second Wave", another fundamental shift as the Central Business District (CBD) enters the next phase of its transformation with the supply of nearly four million square feet of prime Grade A office space in 2016.

This follows the First Wave, which took place between 2010 and 2012 when the new premium Grade A office towers dramatically transformed the Marina Bay district.

This Second Wave will provide tenants the opportunity to capitalise on the new supply and upgrade their offices to drive their company's talent, brand and profit initiatives.

The First Wave saw the Singapore office market expanding at an exponential pace between 2010 and 2012 when approximately six million sq ft of new office space was delivered to the CBD. The strategic move by occupiers to consolidate and upgrade their offices provided strong leasing commitment for these landmark projects such as Marina Bay Financial Centre, Ocean Financial Centre and Asia Square, driving up the average annual net absorption to 1.9 million sq ft between 2010 and 2012, nearly double the 10-year average annual absorption of 1.1 million sq ft.

Major occupiers in the financial, legal, resource and technology sectors leveraged on the market cycle to strategically grow their businesses.

In more recent years, however, companies were constrained by a lack of choices in the CBD but now the market will provide options and become favourable for tenants to consolidate and relocate. With new high-quality supply and rents reaching the bottom of the cycle, there is a short window of opportunity for tenants to secure flexible terms over the next six to12 months.

As the pre-commitment rates for major CBD projects steadily increase, Marina Bay rents are likely to stabilise at around S$9.50 per square foot per month through 2016, and see a healthy rebound of between 17 and 20 per cent by 2018/2019, assuming a moderate growth in the global economy.

It is highly unlikely for Singapore to see another opportunity like this in the medium to long term following this Second Wave. We forecast the Second Wave of demand next year will centre around tenants who did not move in the last cycle and would have the opportunity to capitalise on market conditions.

Based on Cushman & Wakefield data, more than 50 large tenants each occupying over 25,000 sq ft of space have not moved in nearly a decade, totalling over 4.2 million sq ft. The Second Wave could present the best opportunity for these companies in the next decade.

Tenants seeking a "flight to quality" strategy could well consider new mixed-use developments including Marina One, Guoco Tower and DUO, which provide efficient and modern space options for tenants in different districts.

EFFICIENCY, PRODUCTIVITY AND SUSTAINABILITY

For large office users requiring more than 50,000 sq ft, sourcing for contiguous space is critical to efficiency productivity - but this can be challenging at times. With an increasing corporate focus on the need for space efficiency and productivity around their building design, occupiers may need to move to new developments with good designs such as large column- free floor plates of about 30,000 sq ft - providing tenants with great flexibility to configure work spaces.

Sustainability has also become a must for tenants, and developers are meeting these needs through features such as the Biodiversity Garden at Marina One and the sculptural funnel at CapitaGreen. Green building features are increasingly becoming a standard in the new developments.

New office projects are also increasingly centred around integrated mixed-use developments comprising offices, residences, retail podium and even hotels, which cater to the lifestyle focus of employees.

A strong corporate focus on talent, brand and profit has become more important than ever in this new technology-enabled environment. When implemented and supported in the right way, as part of a wider strategy, the office environment will have the ability to attract, harness and motivate the best talent. The development should represent the tenant's brand values, align with the corporate image and drive the sustainability agenda.

SINGAPORE'S CORE APPEAL

Singapore maintains its attractiveness as a core market, and it will continue to be the preferred destination for regional headquarters.

For the first quarter of 2015, Singapore attracted 87 foreign direct investment projects, making it one of the most popular destination cities in the Asia-Pacific region, according to fDi Markets.

Besides its business-friendly environment, Singapore is often complimented for its high network readiness, sound investment potential and ability to attract, develop and retain its talent pool.

The resounding victory at the recent General Election (GE) 2015 with the People's Action Party winning 70 per cent of the vote share nationwide sends a positive signal to both international investors and domestic businesses. With China's slowdown impacting Asia generally, business sentiment has been weighed down by economic concerns. The stronger-than- expected mandate should inject confidence and maintain Singapore's edge as one of the leading markets to do business in as the outcome of the GE provides political stability and policy continuity.

Total Grade A net absorption in the CBD for the first half of 2015 was relatively strong at 407,000 sq ft. While macroeconomic uncertainties and the supply overhang pose challenges to the office leasing market in the short term, opportunities abound for both landlords and tenants.

Landlords are better able to retain existing occupiers as cost-conscious tenants are finding it more favourable to renew their leases and save on fit-out costs.

For tenants with the budget to relocate, the record four million square feet of Grade A CBD space entering the market in 2016 is a one-off opportunity for them to secure space in one of the upcoming premium developments which will help to drive their business forward for the second half of the decade.

In summary, we believe that Singapore is backed by sound fundamentals as a core investment market. Grade A capital values suggest net yields for investors are between 3.5 and 4 per cent, which could inch upwards once the US Federal Reserve commits to raising interest rates.

We believe capital values in the office segment are hovering near the peak for the current cycle and will track rental growth going forward. While owners might want to take a more cautious stance by cashing out at the current price level, institutional investors, on the other hand, may view Singapore as a safe haven and stay invested in its trophy assets given their long-term investment outlook.

The writer is the managing director of Cushman & Wakefield Singapore

reporter2
26-10-15, 16:19
http://www.businesstimes.com.sg/hub/property-2015/big-luxury-condos-a-rare-species

Big luxury condos: A rare species

Despite falling supply, prices have slipped but their market fundamentals remain sound.

By LEE NAI JIA

Mar 19, 2015


IN land-constrained Singapore, big units of over 2,000 sq ft are attractive to investors due to their scarcity. The stock for such units is limited, and new supply is expected to diminish over time. Condominium developments with apartments exceeding 2,000 sq ft are mostly located in prime districts 9, 10 and 11. Besides Ardmore Park condo that comprises more than 300 large units, most of these are found in developments with fewer than 100 units each.

Such large apartments can also be penthouses within developments with smaller units. For the suburban districts, there are only a handful of penthouse units with such expansive floor areas.

Similarly, the stock of landed properties forms less than a quarter of the total private housing stock. As at the fourth quarter of 2014, there were about 71,540 units of landed properties.

New supply of such large units has diminished significantly recently due to a confluence of government policies with market forces. With more competing land uses, the government encourages land use optimisation in land scarce Singapore.

This implies that new supply of big units will be limited and previously low-density developments will be assigned higher plot ratios. The move would encourage developers to buy less dense developments via collective sales to build high-density projects.

SMALLER AFFORDABLE UNITS

At the same time, the weakened market conditions increased the developers' incentive to build smaller affordable units instead of large units to move sales.

Hence, new stock for landed properties has hardly increased - by more than 1 per cent year on year - since Q1 2008. Similarly, only a smattering of penthouses with areas bigger than 2,000 sq ft were built since 2012.

Despite facing a diminishing supply of such large units, prices for luxury condominiums, which comprise large units over 2,000 sq ft in prime districts, have experienced a 9.7 per cent year-on-year fall in Q4 2014 to S$2,300 psf.

The fall in prices registered by luxury condos is even higher than that for freehold suburban apartments, which registered an 8.5 per cent year-on-year decline in Q4 2014.

Incidentally, this has also been the case in 2008 when the US subprime crisis spilled over to the Singapore property market. Prices for luxury condos plunged by 33 per cent year on year in Q1 2009, compared to the 15 per cent year-on-year fall in prices for three-bedroom freehold condominiums in non-prime districts.

However, the luxury condo segment registered the largest rebound when the market picked up in Q4 2009. Prices for luxury condos rose by 23 per cent year on year in Q4 2009. In comparison, prices for non-prime three-bedroom condo units increased by a modest 4 per cent year on year over the same period.

The amplified price volatility in the luxury condominium segment can be attributed to foreign investors and a heavier reliance on the rental market. Foreigners form a large proportion of buyers of luxury condos as they are attracted by their long-term returns. The ease in subletting these apartments to expatriates working in the Central Business District increases the allure of these properties.

However, these foreign investors who rely heavily on the rental stream to offset their borrowing costs, tend to be affected most by global economic shocks as observed in 2008 and cooling measures implemented from 2009 to 2014.

In contrast, landed properties, which are also limited in supply, appear to be most resilient across different private housing types.

Median prices for landed properties in prime districts slid 2.4 per cent year on year to S$2,062 per sq ft in Q4 2014, compared to the 10 per cent year-on-year fall registered by the luxury condo segment.

Median prices for landed properties in non-prime districts also experienced a moderate 6 per cent year-on-year decline to S$1,149 per sq ft in Q4 2014.

Similarly, the average price for landed properties island-wide only fell by 7 per cent year on year in Q1 2009 during the subprime crisis, a sharp contrast to the double-digit fall experienced in other segments.

Buyers usually purchase landed properties for owner-occupation and have a long term investment horizon. Hence, they are more resistant to shocks to the global economy and rental demand.

The recent change in the URA guidelines for landed housing, which give developers and architects more design flexibility, will further ameliorate any adverse impact that the economic environment and macro-prudential policies have on landed properties. With more MRT lines and better bus services, there is also more upside potential for the value of landed properties.

OUTLOOK AND POTENTIAL VALUE

Looking forward, we anticipate the sales volume for these large units to remain slow in H1 2015. The slowing sales are largely down to the price gap between buyers and sellers, which is amplified by the uncertainty surrounding the lifting of the Additional Buyer's Stamp Duty (ABSD).

Despite the reported price falls, owners of luxury condo units, who are backed by sound market fundamentals, remain bullish about the future.

In addition, such units possess the valuable option to be redeveloped via a collective sale. With the stamp duties capitalised into the prices of some developments, we anticipate that volume will pick up towards the second half of the year. As discussed above, we also anticipate the luxury condo segment to make a fast recovery when the market picks up.

With the growing network of MRT lines and better bus services connecting key nodes, accessibility will no longer be a key feature for potential value buys in 2015. Rather, we anticipate these potential value buys to exhibit features that are long-lasting and high value-added.

First, these developments will feature facilities and amenities that create an inclusive living environment for all ages and adapt to the family needs as the family grows. Second, iconic developments designed by world esteemed architects with high CONQUAS (Construction Quality Assessment System) scores will also be value for money in the long run. In this case, buyers are actually purchasing an art piece that will increase in value over time.

The writer is DTZ's associate director of research.

reporter2
26-10-15, 16:21
http://www.businesstimes.com.sg/hub/property-2015/luxe-condos-may-be-near-a-turning-up-point

Luxe condos may be near a 'turning up' point

With institutions and sophisticated investors buying stacks of condo units, it may indicate that the risk return payoff may favour a re-entry into the high end market.

By ALAN CHEONG

Mar 19, 2015


AMONG the various segments of the condominium market, the luxury end has been the most affected by the slate of cooling measures.

Using the Core Central Region (CCR) to represent the luxury segment of the condominium market, we see that prices have fallen 6.6 per cent from the peak recorded in Q1 2013 till Q4 2014.

In comparison, prices for condominiums in the Rest of the Central Region (RCR) and Outside the Central Region (OCR) fell 5.8 per cent and 3.1 per cent from their respective peaks.

What looks worse is the number of transactions. For the primary market, this fell to just 755 units in 2014, down 62 per cent from 2013's 1,967 units.

The situation is not much better in the sub-sale and resale market with the number of units transacted in 2014 standing at 962, down 34 per cent from the 1,466 units recorded in 2013.

With transaction numbers likely to stay low in 2015, it may bring about greater price volatility.

This may present to potential buyers the opportunity of taking a position in this segment of the condominium market because the larger price movements increase the chances of striking a buyer's offer price.

Recent deals in the market hint strongly that Ultra High Net Worth (UHNW) individuals, and corporate institutions are now beginning to see value in the high end condominium segment.

When we look at the number of transactions for the CCR on an annual basis, it shows that 2014 was a slow year.

However, on a month-to-month level, we detect that for the month of November, activity spiked to 300 units.

To ascertain if this was a seasonal effect, a contrast with November 2013 numbers showed that it isn't, because the year before, the number of transactions was only 197.

There were also no en bloc transactions in November 2014. For the month of December, barring new launches, transaction volumes have been low due to the school holidays and festive season.

The uptick in transactions for November melds with feedback from agents who observed that buyers are starting to return to the luxury end of the market.

Concerns over interest rates affecting the general property market have been over-emphasised, with undue weight given to this one factor and ignoring reality.

No doubt an increase in interest rates will also increase monthly mortgage payments. However, the point to note is that the quantum of increase for a mortgage payment is actually quite manageable. For instance, for a S$1 million loan to be repaid over a 20-year period, even if rates go up by 1.5 per cent, the extra monthly payment is just S$721.

So far, despite all the hoopla about the sharp spike in the Singapore interbank offered rate (Sibor), it amounts to less than 0.3 per cent or an extra S$143 per month in mortgage payments.

Today, although interest rates have increased, the environment is deflationary or disinflationary, so the extra mortgage payments are partially offset by lower utility costs, among other things.

What is suppressing luxury condominium prices more than other segments of the residential market is a mix of factors.

One is the imposition in January 2013 of a second and higher stamp duty rate of 15 per cent in the form of an Additional Buyer's Stamp Duty (ABSD) on overseas buyers.

The other retarding factor for the high-end residential market is that since 2012, the granting of permanent residency (PR) status has been tightened, with the annulment of the scheme that used to allow individuals who hold at least S$10 million in assets in Singapore for five years to apply for permanent residence on a "fast track". This can be achieved by buying a property, which would confer high net worth individuals a PR status. A source of demand for residential properties, particularly for the high-end segment, was therefore removed.

Both of these have affected the sub-sale and resale market with the number of transactions falling 34 per cent year on year.

For the new sale market, the same pattern would have been mirrored if it had not been for the re-launch of D'Leedon in late 2012. With more attractive pricing, this project experienced primary strong sales momentum in 2013 with 680 caveats lodged. If one were to eliminate this project from the new sales numbers for the CCR, then transactions in this category would also have fallen significantly in 2013.

All said and done, what then holds for the luxury end of the condominium market now?

Well, while we have consistently been fed with news of units going for discounted prices, the danger is that those waiting on the sidelines get fixated with the lower prices and forget that besides the seller releasing his property at a lower price, there needs also to be a buyer who believes it is an attractive price.

It takes two hands to clap. Standing on the sidelines would relegate one's position to being a spectator rather than a participant.

With institutions and other sophisticated investors buying stacks of condominium units, this could act as an indicator that the risk return payoff may favour a re-entry into the high end condominium market once more.

After all, whatever goes up must come down, and now that it has, the cyclical nature of things would mean we are closer to the "turning up" point than a year ago.

The writer is senior director at Savills Research.

reporter2
26-10-15, 16:23
http://www.businesstimes.com.sg/hub/property-2015/deciding-between-strata-and-non-strata-landed-homes

Deciding between strata and non-strata landed homes

By Nicholas Mak / Kim Huynh

Mar 19, 2015


OWNING a landed house is a dream for many Singaporeans. To most landed home owners, their landed residential properties are likely one of the most expensive assets that they own.

Hence, most buyers would generally exercise a great deal of care in their selection of the property. A common question that often arises is whether a strata landed house or an individual land title house (also called a non-strata landed house) would be a better investment.

Here, we examine which types of landed housing have provided the strongest price appreciation in recent property market booms.

We analyse the price performance of strata landed homes vis-à-vis individual land title housing in the past 10 years, spanning two market boom periods.

Individual land title houses refer to the usual private landed homes where each property has an individual land title.

According to the Urban Redevelopment Authority, strata landed housing is defined as low-rise or low density residential developments with strata-titled arrangements.

These developments offer buyers the option to combine a landed housing lifestyle with communal facilities and greenery similar to those found in condominiums. Such developments are also commonly known as cluster housing.

Both individual land title houses and cluster houses can be divided into three types: detached houses (or bungalows), semi-detached houses, and terraced houses.

We further divide the sales transactions of strata landed and individual land title houses into two smaller groups based on their land tenures: freehold and 99-year leasehold.

In our research, we take freehold to include leasehold tenures longer than 200 years. The sample of reported landed housing transactions from 2004 to 2014 is hence divided into four categories:

a) 99-year leasehold strata landed housing;

b) 99-year leasehold individual land title housing;

c) Freehold strata landed housing;

d) Freehold individual land title housing.

Based on these four categories, a time series of the transacted prices of each group is computed based on the median unit price per square foot (psf) on a half-yearly basis.

Thereafter, the time series is converted into price indices using H1 2004 as the base period. The frequency of the time series is six months.

We also selected two property market boom periods: from H1 2004 to H1 2008, and from H1 2009 to H2 2013.

In the first market boom from 2004 to 2008, the median price of freehold cluster houses increased at an annualised rate of 15.4 per cent per year or 77.3 per cent over the four-year period, which is the fastest among the four landed housing groups.

An example is Casa Fidelio, a freehold cluster-housing development in Siglap.

A terraced house in this project was reportedly transacted in 2004 at S$760,000 and was subsequently re-sold for S$1.18 million in 2008, netting a 55 per cent gross profit.

The slowest price growth in the four-year period was that of 99-year leasehold non-strata landed houses at 7.7 per cent per annum. The slow rate of price increase is partly due to the relatively high median price of S$435 psf at the start of the market boom in H1 2004.

In the second market boom from H1 2009 to H2 2013, the median prices of 99-year leasehold cluster housing surged by an impressive 20.1 per cent per annum from S$357 psf to S$813 psf, ranking it the landed housing group with the fastest capital appreciation.

For example, for the 99-year leasehold cluster housing project called Springhill, the median transacted price in H1 2009 was S$324 psf. In H2 2013, the median transacted price increased by 83 per cent to S$593 psf.

The second and third fastest rate of growth was seen in the median prices of freehold and 99-year leasehold individual land title housing respectively.

The median price of freehold cluster housing grew the slowest during the period at 10.2 per cent per annum.

CONCLUSION

Based on our findings, among the four groups of landed housing, freehold individual land title housing is the most popular and commonly transacted group with the highest number of recorded transactions, numbering more than 24,000 from 2004 to 2014.

This group was ranked second in terms of price appreciation in both market boom periods, indicating that it has been fairly superior in performance among landed properties.

The results of the analysis of the price performance of freehold cluster housing are mixed. The median price of this group increased the most in the first market boom period from 2004 to 2008.

However, it turned in the slowest price appreciation in the second market boom.

For 99-year leasehold landed properties, the results show that the price growth of cluster housing has outperformed that of individual land title housing in both periods of market boom.

Conversely, the analysis also shows that 99-year leasehold houses with individual land titles has under-performed other types of landed homes during these two periods.

The writers are head of research & consultancy, and analyst at SLP International.

reporter2
26-10-15, 16:24
http://www.businesstimes.com.sg/hub/property-2015/light-at-the-end-of-the-tunnel-for-prime-homes

Light at the end of the tunnel for prime homes

With lower prices and unsold inventory of luxury homes slowly shrinking, the search for value in this asset class is set to gather pace.

By TAN TEE KHOON / ALICE TAN

Mar 19, 2015


IT has been almost two years of being in the doldrums for Singapore's private residential market, in particular for the luxury homes segment since 2012 - a contrasting picture from the two initial buoyant years of 2009-2011 when record-low interest rates and increased foreign investment propelled luxury property demand.

Sales performance of high-end private homes in the Core Central Region (CCR) has been much battered by the slew of property cooling measures, in particular the 15 per cent Additional Buyer's Stamp Duty (on top of the 3 per cent stamp duty) imposed on foreign home buyers who made up around 30 per cent of buyers in the luxury home market before the imposition of the ABSD.

This led the transaction volume in the CCR to fall by almost half from 3,702 units in 2013 to 1,955 units in 2014, and affected prices.

The URA Non-Landed Private Residential Price Index for CCR has posted seven consecutive quarters of price declines and an overall decline of 6.6 per cent from the first quarter 2013 to Q4 2014.

While regular news of falling prices may not be music to the ears of property sellers and investors, buyers who have been planning to acquire luxury properties can now explore a window of opportunity as prices are now lower.

Despite the prevailing context of weak sentiment besetting the private residential market, there still exists an inherent pool of prospective buyers who are currently waiting at the sidelines for the best available opportunity to invest in luxury homes.

As both prospective buyers and sellers mull over their options to buy, sell or hold their properties, a key question that is increasingly being floated in the marketplace at the start of 2015 is: Is it the right time to look at the high-end residential market once again?

An identification of some key market trends combined with an in-depth price analysis of private home transactions in prime districts would offer further insights into the potential value proposition of the high-end private home segment.

Emerging value in prime districts:

The value of a luxury home emerges as prices fall and the exclusivity of the location remains.

Focusing on prime residential areas in the CCR, that is, districts 1, 2, 9, 10 and 11, Knight Frank analysed the transacted prices of non-landed residential properties according to the completion status and the age of the completed properties.

Generally, most micro-segments posted annual price declines for Q4 2014, with uncompleted properties in District 2 posting the steepest fall of 25.6 per cent year on year to an average price of S$2,167 psf.

Completed resale properties of between four and seven years old in District 9 registered a decline of 22.4 per cent to reach S$1,983 psf for the same quarter.

Resale properties in District 1 similarly saw downward price pressures, with properties of four to seven years old transacted at an average S$2,026 psf in Q4 2014, almost 20 per cent lower compared to a year ago.

While prices of resale properties generally trend lower as the age of the properties increases, the scarcity of certain prized homes in more sought-after locations - such as the Ardmore, Nassim and Tomlinson areas - provides reasonable support to prices despite the weak private residential demand.

We also found that resale properties (of about eight to 14 years old) in District 10 show higher price resilience, with a year-on-year (y-o-y) price growth of 5.4 per cent in Q4 2014 compared to the lower price increases for newer properties in the same district.

While uncompleted high-end homes in Districts 1, 9 and 10 continued to command high prices, emerging value is increasingly evident for older resale properties in District 11 with average prices hovering between S$1,500 and S$1,600 psf in Q4 2014.

Attractive price, gradual reduction in unsold inventory and future stock:

Plagued by continued price falls and prolonged weak sales, some developers have offered their properties at more attractive prices since early 2014 as the seven-year grace period under the Qualifying Certificate regulations nears expiry for an increasing number of luxury residential properties. Buyers propped up sales in the CCR by 91 per cent in July 2014 after developers moderated prices by as much as 20 per cent.

For example, The Vermont on Cairnhill sold its remaining 37 units after adjusting prices by around 12 per cent from S$2,400 psf to S$2,113 psf. Hallmark Residences, off Bukit Timah Road, sold 63 per cent of its 75 units after lowering its selling prices by 14-20 per cent from its initial launch price of S$2,200 psf.

Despite the overall price declines across all regions, unsold stock in the high-end market segment fell by 5.2 per cent quarter on quarter in Q4 2014, marking its third consecutive quarter of decline.

On a y-o-y basis, unsold stock decreased by 11 per cent in Q4 2014. This is a notable reduction, compared to the 3.7 per cent y-o-y decline for unsold stock of city-fringe homes in the Rest of Central Region, and the 13.9 per cent y-o-y decrease in unsold inventory of mass market homes in the Outside Central Region.

The faster reduction in the unsold inventory of high-end homes for the past few quarters in 2014 suggests a recovery in buying interest for this segment.

While this year's impending supply of 3,292 private residential units in the CCR will continue to put downward pressure on prices at least for the first half of 2015 amid prevailing property cooling measures, the gradual decline in the upcoming supply of high-end homes would ease the supply glut and vacancy levels beyond 2016.

Furthermore, the cutbacks in available supply of private homes under the Government Land Sales programme will reduce the availability of high-end residential property within the next three years, leading to a limited supply situation and supporting the attractiveness of high-end homes in the medium term.

Conducive fundamentals support appeal for luxury homes:

The lower property prices have now presented greater value for high-end residential properties, which offer reasonably stable rental income in the short term as high-income tenants keep their preference for prime residential properties.

Invariably, luxury properties in the CCR remain a good asset class for investors because of their location and accompanying prestige, offering added capital downside protection as well as capital gain potential in the long term.

Notwithstanding the existing muted sentiment among property investors, Singapore still holds considerable appeal as a favoured market in Asia for real estate investment, thanks to strong accolades such as a healthy economy, conducive business environment, low unemployment rate, progressive city planning and a high standard of living.

Anticipating the future trends of limited supply, investors could return to the high-end homes market as early as the second half of 2015, a period where overall private home prices could have declined by about 5-6 per cent to "acceptable levels" and any potential adjustments to property cooling measures could be on the cards in a bid to restore demand for Singapore residential property.

The writers are executive director of residential services, and director and head, consultancy & research at Knight Frank.

reporter2
26-10-15, 16:26
http://www.businesstimes.com.sg/hub/property-2015/suburban-condos-may-still-be-good-buys

Suburban condos may still be good buys

OCR homes are becoming more attractive due to the lower price quantum.

By MOHAMED ISMAIL GAFOOR

Mar 19, 2015


THE implementation of the Total Debt Servicing Ratio (TDSR) in June 2013 marked a turning point for the exuberance in the primary sales market seen in recent years. Against a backdrop of reduced affordability levels and high land acquisition costs, there was a sharp reduction in developers' launches and sales volume. The 2014 primary sales volume was 7,437 units - a 50 per cent decline from the 15,162 recorded in 2013. Developers also launched 52 per cent fewer units for sale within the same period. Private home prices fell 4.1 per cent in 2014.

While the impact of the TDSR on sales volume was immediately felt in the months after its implementation, the effect on prices only became apparent in the fourth quarter of 2013.

In 2014, even though prices generally slipped in all segments, prices for property in the Outside Central Region (OCR) remained the most resilient of the lot - registering only a 2.2 per cent decline compared to a 4.3 per cent and 5.5 per cent drop in the Core Central Region (CCR) and Rest of Central Region (RCR) respectively.

And in recent years, despite numerous rounds of cooling measures, OCR prices outshone all segments with a 6.4 per cent growth in both 2012 and 2013, when others only showed marginal gains or even fell.

We believe that the OCR segment is well supported by first-time homebuyers as well as upgraders. However, the market conditions for the private property market this year remain challenging. 2015 is expected to be another lacklustre year for the property market. Primary market performance will continue to depend on developers finding the right pricing strategy which accurately portrays current sentiments. Buyers will still remain very price and quantum sensitive and would only go in if they perceive a property to be a good value proposition.

BUYERS' MARKET IN 2015

While selected projects which are reasonably priced and well located will continue to attract homebuyers, prices are expected to come under pressure as the potential pool of buyers shrinks and developers face stronger competition for consumer dollars. This could be exacerbated by the sizeable residential supply that is expected to come onstream, which will turn the market further in favour of home buyers. It will be a subdued market in the private property sector this year with most launches centred on the mass market segment as they are more affordable.

The OCR is considered the suburbs of Singapore. This includes densely populated estates such as Punggol, Sengkang, Yishun, Woodlands, Jurong, Tampines and Bedok - where a wide variety of mass market condominiums are located.

Due to the cumulative effects of the cooling measures and TDSR which restricts liquidity, buyers have become increasingly quantum sensitive, which in turn, has benefited projects in outlying regions - where the overall quantum is more affordable compared to the central region.

We think that OCR homes are becoming more attractive due to the lower price quantum. With the continued enforcement of loan curbs, buyers continue to be limited by the amount of debt they can take on, and as such, properties priced between S$800,000 and S$1.2 million will be more sought after, followed by homes in the up to S$1.5 million range.

For foreigners, the Additional Buyer's Stamp Duty (ABSD) will continue to be a stumbling block in their consideration for a purchase. As such, they will also look to more "budget friendly" alternatives in the OCR.

Apart from the lower price quantum, mass market properties are also increasingly becoming more appealing due to the government's decentralisation strategy to sustain Singapore's growth by developing regional centres at various parts of the island including the West and North regions.

Various industry analysts had predicted that it will be a turbulent year for the local property market, citing the government's cooling measures as the main reason in lieu of achieving its overarching aim of curbing property speculation and encouraging financial prudence.

As the impact of the measures trims buyers' purchasing power, affordability and the right pricing will become critical factors in the success of a project launch.

Be that as it may, home buyers still swarmed the show flats of the following mass market launches that were priced attractively and/or are in good locations:

The Inflora was sold out 30 days after its launch, at a median price of S$952 psf (October 2013);
Rivertrees Residences sold 218 units at a median price of S$1,111 psf (February 2014);
Riverbank@Fernvale sold 211 units at a median price of S$1,033 psf (February 2014);
Lakeville sold 210 units at a median price of S$1,318 psf (April 2014);
Coco Palms sold 590 units at a median price of S$1,018 psf (May 2014).

In view of the continued enforcement of various government policies and loan curbs as well as purchasers' cautious stance, developers are expected to price their projects competitively to maintain sales momentum.

For new projects, developers will be able to draw buyers through attractive price points. This trend will be fuelled by the continued availability of credit in a low interest rate environment, along with developers' cautious pricing strategies. This may put a fair bit of pressure on home sellers in the resale market, who may have to lower prices in order to make a sale.

With developers competing for the same buyers with offers of discounts and other enticing options, prices of resale private properties in the secondary market may face pressure and are expected to correct marginally, in tandem with the new launches.

Coupled with a number of new launches planned for this year, and fewer foreign buyers taking the bite, the only properties which will remain popular are mass-market homes in locations close to MRT stations, schools and shopping malls, such as the upcoming integrated project in Yishun North Park Residences, which we expect to achieve a strong take-up rate.

Why should buyers consider buying a condominium unit in 2015? Long-term stability, for one. Notwithstanding the slowdown, the longer term prospects for the residential market remain intact in the light of the various initiatives announced by the government. These include the unveiling of the 2013 Draft Master Plan which details key elements from the Population White Paper as well as the Land Use Plan for housing a larger population in quality living environments for the next 10 to 15 years.

They include the construction of new homes in Holland Village, Kampong Bugis and Marina South, as well as new redevelopment areas in Paya Lebar, Greater Southern Waterfront and Pasir Panjang and Tanjong Pagar in addition to the plans for new homes in Bidadari, Tampines North, Tengah New Town and Punggol Matilda.

There are also plans for new growth areas for accommodating industrial and business activity and supporting infrastructure. These new plans and developments are expected to introduce a wider variety of housing options and new living environments - signalling another step towards exciting times for Singapore's urban housing landscape.

The initiatives signal the government's resolve to protect the value of homes while ensuring a stable and sustainable residential property market. This bodes well for the Republic's long-term growth despite some near-term fragility in the residential property market - with mass market properties in the OCR enjoying the lion's share of all property transactions in 2015.

The writer is PropNex CEO.

reporter2
26-10-15, 16:27
http://www.businesstimes.com.sg/hub/property-2015/how-will-higher-rates-affect-property-buyers

How will higher rates affect property buyers?

The recent increase in Sibor has sparked more enquiries on fixed rate packages.

By TOK GEOK PENG

Mar 19, 2015


THE Singapore Interbank Offered Rate (Sibor), which commonly reflects how much it would cost for banks to borrow from one another, has attracted much attention of late.

This is because many home owners, especially private property owners, have their housing loan rates pegged to the Sibor. After staying low and relatively flat since late 2010, the Sibor began inching up in early 2015, with the three-month Sibor increasing by at least 0.25 percentage points since December 2014. This recent upward trend was possibly caused by a combination of several factors:

With the Sibor being highly correlated to US interest rates, the rise might have been the result of growing expectations of a hike in the US Fed Funds rate, against the backdrop of a stronger US economy and dollar.
The rise could also be attributed to recent central bank moves to slow the appreciation of the Singapore dollar. A weaker Singapore dollar is expected to lead to capital outflow and tighter liquidity conditions, causing interest rates to rise.
The introduction of the Basel III global banking rules, which require Singapore banks to set aside more funds as buffer, might have induced competition for funds, and in turn driven up the Sibor.

The wider concern now is how much more the Sibor might rise. If we look at the past seven-year historical records, the three-month Sibor might even rise above 3 per cent. It is therefore time for property buyers or investors to start thinking about how higher interest rates might affect their finances.

Whether you are a property owner, an investor or a prospective buyer, many of us already actively track the property market. This is a good time to start tracking the interest rate outlook as well. The correlation is clear: the higher the interest rate, the higher the housing loan payment.

If you are looking to purchase property:

If you plan to buy property this year, it is also likely that you are about to enter into a housing loan. This will probably be one of the largest long-term financial commitments you will ever undertake.

Before you buy a property, do approach your bank and work out what you can afford. There are now several measurements such as the Mortgage Servicing Ratio and Total Debt Servicing Ratio to help you determine what you can afford and the amount of cash or CPF you will need. From there, you will be able to determine the types of properties that are within your means.

Housing loan packages generally fall into two categories: the floating rate package and the fixed rate package.

For a floating rate package, the interest rate is set at a mark-up from the prevailing reference rate.

The Sibor is a commonly used reference rate. The rates are published publicly, thus giving you greater transparency. Some banks use their board rate as reference rate, but this means that any adjustments to the rate are at the bank's discretion.

As its name suggests, the interest rate of a floating rate package varies. When the interest rate is low, you pay a lower housing loan rate. However, in a rising rate environment, expect your housing loan rate to move upwards as well. For example, for a loan of S$1 million over a 25-year tenor, every 0.1 per cent increase in the interest rate will lead to a S$45 increase in your monthly mortgage payment.

The fixed rate package in comparison offers greater stability as your housing loan rate is set for a period of time, usually over two to five years. If you have opted for a fixed rate package, the recent Sibor increase will not affect you and your monthly mortgage payment will remain unchanged. The trade off is that the fixed interest rate will be higher than the floating rate package's rates.

If you are a property investor:

A property investor typically looks at property price outlook and rentals.

In a rising rate environment, some investors may consider selling their property as monthly housing loan payments get too burdensome. The question here is how much can the property be sold for and how quickly.

Against the slew of cooling measures, we have seen prices decline across all segments of the private residential property market. According to a URA report, private residential property prices decreased by 4.0 per cent in 2014, compared to an increase of 1.1 per cent in 2013.

The report also indicates that a large supply of private residential units and executive condo units is in the pipeline for 2015 and 2016.

Rentals of private residential properties have also weakened, falling by 3.0 per cent in 2014, compared to a 0.9 per cent increase in 2013.

It remains unclear if higher interest rates could add further downward pressure on property prices. A recent report by Fitch Ratings expects Singapore property prices to fall by around 3 per cent in 2015 and 2016.

For property investors who use rental income to fund monthly housing loan payments, a weaker rental market coupled with rising rates could result in investors having to supplement higher monthly instalments with cash.

Good practices for anyone with a housing loan:

Once you have obtained a housing loan, review it once every few years to see if there is the possibility of saving money. This is especially useful if the interest rate gets higher.

If you have funds to spare, check with your bank to see if you can make a lump sum repayment or increase your monthly repayment. This reduces the amount borrowed and interest cost, and also allows you to pay off your loan more quickly. But also check if there are any penalty charges or if there is a need to provide advance notice.

As interest rate rises, you should see higher rates in the new housing loan packages. Hence if you believe that the interest rate will continue to increase and have concerns about escalating monthly housing loan payments, it is time to speak with your bank. Most banks have mortgage specialists who can help you to better understand your options and make the right decisions.

With the recent increase in Sibor, we are now seeing more enquiries on fixed rate packages. Some home owners have also asked for alternatives to Sibor-pegged floating rate packages.

Regardless of interest rate trends, we strongly advise anyone with a housing loan to set aside funds as a buffer against interest rate hikes or any unforeseen circumstances. Ideally, you should set aside some savings in cash or liquid assets that can be used to pay for your monthly instalments for the next two years.

This gives you sufficient time to restructure your loan or even sell the property should you run into any financial issues. Finally, see the bank as your financial partner. Approach your bank early on if you have difficulties keeping up with monthly payments and they may be able to help you restructure your loan.

The writer is executive director of secured lending at DBS Bank.

reporter2
26-10-15, 16:29
http://www.businesstimes.com.sg/hub/property-2015/what-happens-when-you-cant-fulfil-your-option-to-buy

What happens when you can't fulfil your option to buy?

More buyers are failing to complete private home purchases. What legal consequences do they face?

By Lee Liat Yeang

Mar 19, 2015


THE purchase of a private residential property involves legal documentation which includes the signing of a contract. Once the deposit is made and the contract is signed, the buyer is legally bound to make the balance payment of the purchase price and complete the legal documentation by the completion date stipulated in the contract.

But some buyers might not be able to pay the full balance payment to complete the purchase. This article explores the legal consequences that such buyers could face, whether they are buying from developers or from sellers in the resale market.

PURCHASE OF A RESALE PROPERTY

Aside from the sale of uncompleted residential properties by developers, there is no prescribed contract for the sale and purchase of a private residential property. The most common contract is by way of an option to purchase where the seller grants an option to the buyer for a stipulated period in consideration for an option fee. Upon the exercise of the option by the buyer, a sale and purchase contract is formed. Parties then have to complete the process by the scheduled completion date in accordance with the terms of the option.

Most option formats do not have specific clauses dealing with the failure to complete. However, most if not all option formats, incorporate the Law Society of Singapore's Conditions of Sale 2012. One should note two pertinent conditions here, namely condition 9 that deals with Late Completion Interest, and condition 15 that deals with a Notice to Complete. These conditions will apply unless they are specifically amended by the terms of the contract.

If the buyer fails to complete the purchase on the scheduled completion date, the seller can choose to extend the completion date, and also charge the buyer (as provided for in condition 9) for late completion interest (as liquidated damages), from the day following the scheduled completion date up to the actual completion day, at 8 per cent per annum on the balance of the purchase price.

In cases where the buyer fails to complete despite the extension given, the seller can apply to court for an order to compel the buyer to specifically perform his side of the contract. This remedy might not be given by the court, particularly when the buyer lacks the financial or legal capability to complete the purchase.

Most sellers might prefer to rescind the contract so that they can proceed to resell instead of spending time and money to go to court. In such a case, the seller must consider condition 15 where it is stated, among other things, that upon service of a notice to complete, parties must complete the transaction within 21 days after the day of service of notice and time will be of the essence of the contract.

If the buyer fails to comply with the terms of any effective notice to complete given by the seller, the seller may, among other things, forfeit and keep any deposit paid by the buyer and resell the property.

If upon any resale contracted within one year after the scheduled completion date the seller suffers a loss, the buyer must pay to the seller, as liquidated damages, the amount of such loss. The liquidated damages will include all costs and expenses reasonably incurred in the resale or attempted resale but the seller must give credit for any deposit and any money paid on account of the purchase price.

PURCHASE OF PROPERTY FROM A DEVELOPER

The sale and purchase of private residential properties from the developer is governed by the Housing Developers Rules. There is a prescribed form of the Sale and Purchase Agreement (SPA) that can be used by the housing developer, subject to such modifications pre-approved by the controller of housing. For the purpose of this article, we will refer to the relevant clauses in this prescribed form of SPA.

The buyer's primary obligation is to pay the purchase price by progressive instalments in the manner set out in the SPA. If the buyer fails to pay any or any part of any instalment of the purchase price, the buyer is liable to pay interest on the unpaid amount to the vendor, calculated on a daily basis at 2 per cent per annum above the base rate (defined as average of the prevailing prime lending rates of DBS, OCBC and UOB, per annum rounded down to the nearest one-eighth of 1 per cent) as provided under clause 6 of the SPA. The prevailing interest rate chargeable is 6.75 per cent.

While the developer can sue a delinquent buyer for the unpaid instalment(s) of the purchase price, it is likely to choose to terminate the SPA and look for another buyer. In such an instance, the developer relies on clause 7 of the SPA which gives it the right to treat the SPA as repudiated by the buyer if any or any part of any instalment of the purchase price and interests remain unpaid for more than 14 days after the expiry of the relevant due date for payment.

In order to exercise this right, the developer has to give to the buyer a written notice, of not less than 21 days, of the developer's intention to treat the SPA as repudiated. The SPA shall be annulled after the notice has expired unless the unpaid instalments and interest are paid within the notice period.

Upon annulment of the SPA, the developer has the right, among others, to resell the unit as if the SPA had not been entered into. The developer can recover from the instalments previously paid by the buyer all interest, property tax, maintenance charges and other amounts owing and unpaid under the SPA, as well as all costs incurred (if any) by the developer to recover possession as at the date of the annulment, and also forfeit 20 per cent of the purchase price from instalments (excluding interest) previously paid.

The terms of the SPA are also clear that the developer cannot claim for or forfeit more than the sum of 20 per cent of the purchase price and other moneys owing, even if the developer suffers a loss exceeding 20 per cent of the purchase price upon resale of that unit.

PURCHASE OF ECs FROM DEVELOPERS

The contractual position is substantially similar for the purchase of executive condominiums from developers.

However, pursuant to an announcement made by the Ministry of National Development on Dec 9, 2013, the relevant clause 7 (as well as clause 19 relating to non compliance with EC rules) was amended such that the amount that can be forfeited by the developer is 20 per cent (where the leasehold estate commences before Jan 1, 2014), and 5 per cent (where the leasehold estate commences on or after Jan 1, 2014).

Although the apparent reason for this change is to relieve significant financial hardship of young couples who cannot fulfil the eligibility requirement of marriage for ECs, the lowered cap (of 5 per cent) in the forfeiture amount applies to all situations including those cases where the default by the buyer is due to failure to pay any part of the purchase price (covered by clause 7).

Buyers are advised to plan ahead their financial arrangements, including setting aside enough to pay for any part of the purchase price that cannot be covered by a housing loan or CPF moneys. This should be done before the signing of a binding contract so as to avoid unnecessary financial loss.

The writer is a partner of Real Estate Practice Group of Rodyk & Davidson LLP. This article is for general information purpose only and should not be relied upon as a substitute for specific legal advice for any particular case or matter.

reporter2
26-10-15, 16:30
http://www.businesstimes.com.sg/hub/property-2015/is-spore-still-attractive-to-property-investors

Is S'pore still attractive to property investors?

Investment sales fell in 2014, but there is in fact feverish activity in the background.

By ALAN CHEONG

Mar 19, 2015


MANY economic and social activities move in cycles. There is a time for investing and a time for harvesting the fruits of one's investments. For the real estate market, it is no different. In 2014, investment sales transacted totalled S$17.8 billion, a sharp 40.3 per cent drop from 2013's figure of S$29.7 billion.

To those outside the field of real estate, the sharp drop may indicate waning sentiments among investors, but in fact, it belies feverish activity in the background, as works in progress carried over into 2015.

For the private sector, what this means is that although the number of investors who put pen to paper fell, they were nonetheless active in the background pursuing deals. Either the transactions did not materialise or they have rolled over the consummation of the deals into 2015.

Over the years, as capital values have risen substantially, the quantum of investments needed to participate in a commercial or residential en bloc transaction have also grown to a point where institutions and corporate players now have to spend more time running their financial models and gleaning market research data to present a case.

Declining yields in the face of a potential sharp increase in interest rates has often been cited as the reason for waning buying interest in Singapore's income-yielding real estate. This may be true for some buyers, but others would beg to differ. The recent sale of AXA Tower for S$1.17 billion shows that Asian liquidity may well dominate the investment scene here, as funds from the traditional developed countries shy away for one reason or another.

This shows that one cannot be overly fixated with a constant argument that either promotes or demotes investing in Singapore real estate. As existing arguments evolve and new ones appear, a fallback on hackneyed ideas could well mean missed opportunities.

One reason we believe that Singapore has always been able to rise to the occasion even when things appear negative and insurmountable is the openness to free flow of capital here.

By striving to maintain or do better in staying as an open economy, Singapore will be a conduit for capital flow from anywhere in the world. Real estate is just one of the channels of fund flows.

Let's look at the thematic outlook for the three major property sectors: office, residential and retail.

OFFICE

This year, investments in the office sector should continue at least at the same pace as 2014, because the relatively limited supply of new office building space should lift rents significantly, staunching yield compression and perhaps even reversing the decline.

The plump offering of the Government Land Sales (GLS) site at Paya Lebar for a mixed use development is also expected to rake in a billion dollar land deal from the successful bidder.

As office values have been rising at the strata-titled level, the transaction quantum involved will also increase. Therefore, if one considers only deals above S$10 million as investments, the figure will rise as those which were slightly below the hurdle amount now get included with the boost in their per square foot prices, in tandem with the rise in values.

En bloc transactions may well be concentrated in the central business district among buildings built in the 1980s to 1990s era.

RETAIL

For retail, other than for GLS sites that allow retail use, the lack of product offerings in this sector may mean a relatively dry year for pure-retail property transactions.

There is investment demand for malls but the ownership of many of the completed ones is in the hands of reluctant sellers who can only be induced to sell if the pricing gap between buyers' and sellers' expectations narrows. But because the domain of retail mall buyers are mostly made up of institutions and sovereign wealth funds, they will find it difficult to justify the returns at the sellers' asking prices.

Deals are thus likely to come from GLS sites which are mostly for mixed use developments.

RESIDENTIAL

On the residential front, the high end may continue to register transactions if sellers are willing to accept buyers' discounted offers. Such discounted offers are often derived from selling stacks of units.

The drag on transaction volumes is the relatively high Additional Buyer's Stamp Duty (ABSD) of 15 per cent levied on overseas buyers and companies. For the latter, the 20 per cent loan-to-value cap would mean that offer prices need to be even more suppressed in order to make the financial returns worthwhile.

While corporate buyers can still sidestep some of these issues, deal sizes are getting larger because what is currently left over is mainly from projects which have not sold any unit. This clean structure makes it easier to attract bloc buyers.

On the residential en bloc side, owners still have high expectations of prices. This adds friction to pushing through transactions, so we may continue to see a period of impasse for such deals.

In conclusion, because real estate values on the whole are holding up well and the smaller pickings have been taken up in the last few years, the remaining deals on the table are getting larger in value terms. Given the greater quantum in investment needed, buyers would tend to be a new breed with different sources of funds and objectives.

Previously, investors entering the market merely had to take a market view. However, for 2015, in addition to that, they have to add value to the project, such as building on a new site or investing in the unutilised plot ratios.

Beyond 2015, unless market prices are low enough to allow for a trade or if one is willing to hold out for over a decade, hoping for enhanced land-use changes for the site, it will be difficult to justify passive investing. Some form of value-add by taking on development risks, full or partial, may be the way forward.

The writer is senior director at Savills Research.

reporter2
26-10-15, 16:32
http://www.businesstimes.com.sg/hub/property-2015/hdb-resale-volume-may-rebound-as-prices-dip

HDB resale volume may rebound as prices dip

By Eugene Lim

Mar 19, 2015


THE total number of resale HDB transactions for 2014 was just 17,318 units - a further decrease of 4.3 per cent from the already low 18,100 units transacted in 2013 and less than half the 37,205 units transacted when the resale volume peaked in 2009.

Historically, this was the lowest number of resale HDB flats transacted since the Asian Financial Crisis in 1997.

During 2014, the resale HDB market experienced the full brunt of the government's supply and demand-side measures that were progressively introduced since 2011 to stabilise public housing prices that had increased too fast and for too long.

From the third quarter 2005 to Q2 2013, resale HDB prices increased by a total of 104 per cent over the 73/4 years, averaging 13.4 per cent per year over the period.

A combination of the following measures has led to the significant decline in the number of resale HDB transactions. They are:


The lowering of the Mortgage Servicing Ratio (MSR) cap to 30 per cent from 35 per cent and the maximum loan term for HDB mortgage loans to 25 years from 30 years.


These measures essentially reduce the loan quantum that a would-be HDB flat buyer is able to obtain and hence, his ability to buy higher priced flats or larger flats that come with a larger price quantum.

As it is more difficult for some buyers to obtain financing, they may have put off their plans to buy another flat and therefore their relocation plans.


The large number of new Build-To-Order (BTO) flats and flats sold by HDB via the Sale of Balance Flats (SBF) programme has offered a good number and variety of choices for first and second time buyers.



Over four years from 2011 to 2014, the HDB launched some 99,700 BTO flats. This has reduced demand significantly for resale HDB flats especially in estates where the new flats are offered.


The imposition of a three-year wait-out period before new Singapore Permanent Residents (SPRs) are allowed to buy resale HDB flats has also reduced demand.

SPRs purchasing their first residential property (including HDB resale flats) are required to pay the Additional Buyer's Stamp Duty (ABSD) of 5 per cent.

SPRs owning HDB flats are not allowed to sublet their whole flat. Those who own a HDB flat must sell their flat after purchasing a private residential property in Singapore.

Allowing singles to buy two-room Build-To-Order (BTO) flats in non-mature estates.



It was recently reported in Parliament that 77 per cent of the two-room BTO flats launched were allocated to singles between 2013 and last year, even though only a third of these flats were set aside for them.

Of the 16,900 BTO flats that will be launched this year, about 5,000 will be two-room flats. As a result, resale demand from this group is further reduced, especially for three- and four-room flats, which were the flat-type of choice had they bought from the resale market.

Resale HDB transaction volume may rebound in 2015

Although the total resale transaction volume in 2014 was a historical low, the quarterly resale transactions seem to be on a steady increase.

Should the momentum carry through, we are likely to see a rebound in resale volume this year due to the following reasons:

Flat buyers gaining confidence

The revised resale procedure in March 2014 to rid buyers and sellers of the need to negotiate for cash-over-valuation (COV) has helped to stabilise resale HDB prices.

Around that period, resale HDB prices started to fall and more resale transactions were being closed at below market valuation due to tighter loan curbs and reduced resale demand. So the HDB took the opportunity to overhaul the resale procedure.

Previously, sellers of resale HDB flats would first obtain the valuation report to use as a base to price in a premium. Much of the negotiation between sellers and buyers centred on the COV, which resulted in an irrational upward spiral of prices over time.

Under the new resale process, sellers and buyers will now negotiate the resale price using market data that the HDB updates on a daily basis.

The sellers have to grant the Option-to-Purchase (OTP) to the buyer before the buyer can apply for the official valuation to facilitate his loan application.

With almost a year into this change, we can see sellers and buyers getting used to negotiating on prices instead of COVs. With resale prices stabilising, more buyers who were previously put off by the high COV prices are now more confident that they would not have to pay high cash premiums when purchasing from the resale market.

HDB is scaling down the new flat supply in 2015

With first-timer demand being satisfied, the HDB is scaling down its BTO programme in 2015.

It has announced that it will be launching 16,900 new flats over four quarterly launches compared with the 22,400 over six launches in 2014.

This would mean less competition in the resale market.

Coupled with stabilising resale flat prices, we may see increasingly more buyers that have immediate housing needs purchasing from the resale market rather than waiting the three to four years for a BTO flat to be completed.

New flat buyers have to obtain a HDB loan eligibility letter before they can book a BTO flat

Since Jan 1, 2007, all potential new flat buyers who wish to take up a HDB concessionary loan must first obtain a HDB loan eligibility (HLE) letter, to be produced when they sign the agreement for lease, four months after booking a flat.

The HLE letter provides information on the loan quantum that flat buyers are eligible for, as well as the monthly instalments for the loan, and helps to ensure that flat buyers are able to pay for their homes without overstretching their finances.

From the BTO sales exercise starting from February, flat applicants who intend to take out a HDB housing loan will need to produce a valid HLE letter at the point of booking a flat, instead of during the signing of the agreement for lease.

This move to bring forward the HLE requirement seeks to help flat buyers better plan their finances. It will minimise any disappointment should they be unable to obtain sufficient loans to proceed with the flat purchase subsequently, resulting in a cancellation of their flat application and forfeiture of the option fee paid.

While this revised procedure is mainly intended to assist new flat buyers, it can also benefit the resale market.

For example, after obtaining the HLE letter, some flat buyers may come to realise that they qualify for a larger loan amount than they had previously thought.

With this, and coupled with stabilising resale prices, more may want to consider resale HDB flats instead of enduring the wait for new flats.

Prices to continue softening in 2015

Resale HDB prices continued to soften in Q4 2014, due to a combination of cooling measures and a steady supply of new flats.

HDB's fourth quarter Resale Price Index (RPI) continued to decrease to 137, down 1.5 per cent from 139.1 in the previous quarter. This is smaller than the 1.7 per cent fall in Q3 2014 and it is the sixth consecutive drop in resale HDB prices over one and a half years.

For the whole of 2014, resale HDB prices have fallen a moderate 6 per cent.

Though HDB has scaled down its supply-side measures with the decrease in new flat supply from 2015 onwards, the demand-side measures, particularly the MSR cap of 30 per cent and the maximum loan tenure of 25 years, remain unchanged.

As the government has reiterated that these are prudence measures to prevent over-stretching of finances among home buyers, they are likely to stay for now.

With loan curbs still in place, resale prices may decline some more in 2015 before levelling off.

The mood in the resale HDB market for 2015 remains conservative. Though we may see a rebound in resale volume, prices are expected to continue to decline at a moderate pace, bringing stability to the market.

All-in-all, we may see prices slide a further 5-8 per cent in 2015, while resale volume may rebound to 18,000-20,000 units for the whole year.

The writer is key executive officer of ERA Realty Network.

reporter2
26-10-15, 16:45
http://www.businesstimes.com.sg/sites/default/files/styles/large_popup/public/image/2015/03/19/BT_20150319_AWMAP3_1565060.jpg?itok=nEloQAlq

reporter2
26-10-15, 16:50
http://www.businesstimes.com.sg/hub/property-2015/residential-leasing-options-on-the-rise

Residential leasing options on the rise

As housing allowances tighten, tenants get to choose new and more affordable locations.

By JULIANN TEO / TAYLOR WAH

Mar 19, 2015


RESIDENTIAL leasing in Singapore has been largely driven by foreigners. While expatriates holding employment passes have accounted for most of the residential leasing demand, this volume has stagnated in recent years.

According to statistical data provided by the Ministry of Manpower, the number of expatriates with employment passes has generally been stable if not increasing at a much slower pace given the tighter employment rules for foreigners.

Between December 2013 and June 2014, the number of employment passes only increased at a meagre 0.6 per cent, from 175,100 to 176,100.

By the end of 2014, there were 308,814 available private residential units, including both landed and non-landed properties, compared to 289,370 units in the previous year.

Although the leasing transactions increased 10.5 per cent year on year in 2014, from 55,610 contracts inked in 2013 to 61,447 in 2014, it wasn't enough to keep vacancy at bay. The number of vacant private homes island-wide increased from 18,003 in 2013 to 24,062 by December 2014, translating into a rise in vacancy rate from 6.2 per cent in 2013 to 7.8 per cent in 2014.

Due to the mismatch in supply and demand growth, rentals have witnessed some softening. According to URA statistics, island-wide rents softened for five consecutive quarters since Q4 2013.

Many sub-markets recorded moderate rent declines in 2014 compared to the previous year, with average rents falling 3.0 per cent year on year. As vacancy rates rise, rents tend to fall in tandem due to higher supply in the market.

PRIME SPOTS

Traditionally, prime locations such as districts 9, 10 and 11 are popular with expatriates due to their easy access to the Central Business District (CBD) and the Orchard Road shopping belt.

Over the past five years, the most popular leasing locations (based on the number of leasing transactions registered) include the traditional Bayshore, River Valley, Tanjong Rhu and Marina Boulevard.

Due to the significant number of residential units expected to be completed in the next few years, tenants will have a wider choice of accommodation to consider. In the prime districts 9, 10 and 11, the amount of new supply is also substantial and likely to result in a further easing of rents. There are 3,586 units in 36 non-landed projects in the prime districts due for completion.

With the increase in completed units and decline in rents, several new locations have also appeared to be more affordable, offering a greater variety of choices to the leasing community.

NEW TRENDS

These supported some of the new emerging trends in recent times. A few factors underscore this trend:

1) the tighter housing allowance given by companies, and

2) the type of expatriate has expanded to include non C-class, such as directors, managers and executives, who do not mind bohemian and colourful neighbourhoods. Some of the current popular leasing locations include:

District 27 (Yishun, Sembawang): Rental transactions in this district have witnessed a considerable increase in recent years, growing by 48.06 per cent in 2013 to 2014. At the same time, median rents also rose by 5.84 per cent over the same period. Yishun and Sembawang have become popular among expatriates as these areas are away from the hustle and bustle of city life, yet they remain convenient as they are served by the Central Expressway, with travel time of around 20 to 25 minutes to the city. Other amenities that attract expatriate tenants are nearby shopping centres, Orchid Country Club and Seletar Golf Course.
District 28 (Seletar): This district is where expatriates can get large areas for their houses and gardens for their money. The area consists of part of Upper Thomson and includes the Lower Seletar Reservoir.

It is popular among foreigners due to its close proximity to the Singapore American School, as well as the Seletar Airport, which now offers chartered flights and flying lessons.

Median rents in this district grew by 9.14 per cent over the last two years. Leasing transactions have increased by 97.21 per cent since 2012, the highest increase among all districts in Singapore.

In addition to the above districts that have seen significant increase in rental activity among expatriates over the last two years, there are other upcoming areas in Singapore that are starting to gain interest from foreigners, such as:

District 03 (Alexandra Road, Tiong Bahru, Queenstown): This district has become more popular among the expatriate community as it provides the convenience of living at the city fringe, which is only marginally further from the CBD, but has the advantage of lower rents which enable them to reduce their accommodation costs. This means they may not need to fully utilise their fixed accommodation allowance, a common housing package offered by many companies today.

The housing estates in this district are among the oldest and most mature, and distinguish themselves from the newer, but pervasive, high-rise and high density estates with their signature old-world charm.

Sentosa Cove: The Southern Islands have matured over the years and more expatriate tenants have come to discover the unique lifestyle they offer.

Sentosa Island provides some of the most exclusive homes in Singapore, some of which have direct access to the waterways. Residents of Sentosa Cove enjoy access to a golf course, many restaurants and a variety of recreational activity, which are appealing to expatriates.

District 16/17/18 (Bedok, Changi, Pasir Ris, Simei, Tampines): Leasing activity in these districts has increased due to the emergence of business parks in the area, which has resulted in the relocation of some large corporations and as a result, an increase in the number of expatriates.

In addition, these East Coast neighbourhoods are popular among expatriates for their spacious and reasonably priced housing. Within the vicinity, East Coast Park also offers sandy, palm-fringed recreational facilities and seafood restaurants.

The writers are head of residential leasing, and a research analyst at JLL.

reporter2
26-10-15, 16:52
http://www.businesstimes.com.sg/hub/property-2015/quiet-but-stable-on-the-strata-front

Quiet but stable on the strata front

TDSR has hurt transaction volumes of strata offices, shops and industrial properties, but prices appear resilient

By Leonard Tay / Doreen Goh / Carissa Chin

Mar 19, 2015


THE Total Debt Servicing Ratio (TDSR) which came into effect in June 2013 has affected the affordability of buyers of strata-titled properties in Singapore, due to the new limits on borrowings.

But to what extent does the impact of TDSR have on transaction activity and the average prices of strata-titled office, retail and industrial properties?

We look at these sub-sectors' sales volumes and average price trends in the six quarters (Q1 2012 to Q2 2013) before the TDSR was implemented, and the six quarters after (Q3 2013 to Q4 2014) to find out.

The strata-titled office market

Data from the Urban Redevelopment Authority showed that about 711 caveats were lodged for strata-titled office units in both the primary and secondary markets in the 18 months from July 2013 to December 2014, after the advent of TDSR. This was 57.8 per cent lower when compared to the 1,684 strata-titled office transactions between January 2012 and June 2013, and illustrates the immediate effects of the TDSR.

Some 416 strata-titled offices were resold in the 18-month period after TDSR - about 45.4 per cent lower than the 762 resale deals from Q1 2012 to Q2 2013.

Comparatively, sales of strata-titled office units from new launches dropped more drastically by 69.8 per cent - from 904 caveats in the Q1-2012-to-Q2-2013 period to a mere 273 units in the 18-month period after the TDSR was put in force.

Besides weaker buying demand, developers also held back or postponed their launches after the TDSR kicked in. From Q1 2012 to Q2 2013, 500-plus units were launched; however, from Q3 2013 to Q4 2014, developers launched about 440 strata-titled office units.

Despite the drop in launches and transactions, prices have been holding fairly firm.

The average price range for strata-titled offices in the six quarters before TDSR was S$1,889 to S$2,360 per sq ft (psf) per quarter. After TDSR, the price range narrowed, ranging from S$2,163 psf to S$2,314 psf per quarter from July 2013 to December 2014.

The average price of strata-titled office space fell 8.4 per cent from S$2,360 psf in Q2 2013 to S$2,163 psf by Q4 2013. Thereafter, in Q1 2014, prices rebounded 4.9 per cent before falling by 2 per cent in Q2 2014, and then again climbing by 4 per cent in Q3 2014. In Q4 2014, the average price of strata-titled office space moderated by 3.1 per cent.

Despite the price fluctuations, prices are broadly observed to have stabilised between S$2,200 and S$2,300 per sq ft, which was generally comparable to the average price seen in the six months before TDSR.

We believe the sustained recovery of Singapore's office rents, coupled with the limited available supply of prime office space for sale, has supported prices of strata-titled office space, despite the TDSR.

The strata-titled retail market

In the retail sector, 945 caveats were lodged for strata-titled retail units in both the primary and secondary markets between Q3 2013 and Q4 2014. This is a 55.8 per cent decline from 2,136 caveats lodged in the 18 months between Q1 2012 and Q2 2013, before TDSR.

Most of the sales during these two periods were new sales.

Some 1,205 strata-titled retail units, accounting for 56.4 per cent of sales between Q1 2012 and Q2 2013, were sold in the primary market, which saw new launches such as Bugis Cube, Millage, Oxley Tower and The Promenade @ Pelikat.

However, while developers' sales continued to constitute the majority or 58.2 per cent of the total sales in the six quarters after TDSR, retail units sold in the primary market fell substantially to only 550 units - largely due to subdued investor interest and fewer new project launches post-TDSR.

About 750 units of new strata-titled shops were launched between Q3 2013 and Q4 2014, about half of the 1,500 units launched between Q1 2012 and Q2 2013.

Some new launches with smaller units and thus lower quantum price continued to draw healthy interest from investors. About 124 of the total 146 strata-titled retail units at Junction Nine in Yishun found buyers on the first day of its launch in Oct 2013.

The total number of resale transactions in the 18-month period after TDSR, too, declined by 57 per cent to a measly 355 units, from 825 resale deals between Q1 2012 and Q2 2013. Similar to strata offices, prices of strata-titled shops have not fallen significantly after TDSR, in spite of the lower transaction volume.

Their average price peaked at S$4,746 psf in Q2 2013, having risen by 77.1 per cent from S$2,680 psf in Q1 2012. After TDSR, the average price moderated by 13.1 per cent quarter on quarter to S$4,123 psf in Q3 2013 before rebounding by 4 per cent to S$4,288 by Q4 2013. Thereafter, average prices eased by another 12.9 per cent year on year to S$3,734 psf in Q4 2014.

Prices of strata-titled retail units islandwide have still kept to a comparable range. In the 18 months before TDSR, this ranged from S$2,680 to S$4,746 psf. This price range narrowed to between S$3,504 and S$4,288 psf in the six quarters from July 2013 to December 2014.

The strata-titled industrial market

Mirroring the trends in the office and retail property markets, demand for strata-titled industrial properties with 30-year, 60-year and freehold/999-year leasehold land tenures also slowed down after TDSR.

Although the government imposed a Sellers' Stamp Duty (SSD) on the resale of strata industrial properties within three years of purchase with effect from Jan 2013 to weed out speculators, this caused only a knee-jerk market reaction.

To illustrate, URA's data showed that caveats lodged for strata industrial properties fell 46 per cent quarter on quarter in Q1 2013 after the SSD kicked in, followed by a 26.2 per cent rebound in Q2 2013.

In contrast, caveats lodged for strata-titled industrial properties had fallen steadily since the TDSR requirement took effect.

Overall, about 2,120 caveats were lodgedpost-TDSR from Q3 2013 to Q4 2014 - a significant 60.1 per cent decline from the 5,312 caveats recorded pre-TDSR, from Q1 2012 to Q2 2013.

By land tenure, 60-year leasehold and freehold/999-year leasehold strata-titled industrial properties saw respective steep declines of 66.3 per cent and 69.6 per cent in caveats lodged post-TDSR, compared to pre-TDSR. Caveats lodged for 30-year leasehold industrial properties fell by a smaller 23.1 per cent.

This might be due to the greater willingness of sellers of 30-year leasehold properties to lower their price expectations to move sales. The ramped-up Industrial Government Land Sales (IGLS) programme in recent years has resulted in stiffer competition among 30-year leasehold industrial properties, especially after buying demand slowed.

Average prices of 30-year leasehold strata-titled industrial properties, which ranged from S$322-361 psf pre-TDSR from Q1 2012 to Q2 2013, fell to S$286-329 psf in the six quarters after TDSR.

In contrast, the average prices of 60-year leasehold industrial properties which ranged from S$419-459 psf from Q1 2012 to Q2 2013, rose to S$444-472 psf from Q3 2013 to Q4 2014. For freehold/999-year leasehold properties, the price band narrowed from S$615-813 psf, to S$709-780 psf over the same period.

The more resilient prices of strata-titled industrial properties with longer tenure, compared to those with 30-year leasehold, can be attributed to the limited availability of such properties following the government's move to reduce the tenure of its IGLS sites from 60 years to 30 years.

Hence, the TDSR requirement is not the sole factor that led to the slowdown in demand for strata-titled industrial properties. Other factors such as the selective release of new units for sale by developers, the ample pipeline supply of 30-year leasehold industrial properties and the price standoff between buyers and sellers, with the former expecting a future price correction, also contributed to the depressed sales.

Outlook for 2015

Looking ahead, while sales volume has moderated, strata-titled office properties are expected to continue to attract interest from end-users such as overseas corporate buyers and family businesses looking for suitable business and investment premises.

However, the TDSR and impending interest rate hikes might weigh on purchasers' decision-making, thereby limiting growth in capital values of office space to 5 per cent in 2015, assuming economic conditions remain benign.

Likewise, the sales volume of strata-titled shops is likely to remain thin for the same reasons. That said, the sales volume of prime units may hold up better, as owners are likely to maintain their price expectations since these units remain rentable. As such, average capital values of prime strata-titled retail space are expected to stay flat in 2015.

For strata-titled industrial properties, transaction activity will remain subdued in 2015, unless the gap in price expectations between buyers and sellers can be bridged. However, demand for specialised and niche developments such as food factories, which are limited in supply, may stay healthy. Overall industrial property prices could ease by up to 3 per cent in 2015.

Generally, industrial properties with longer land tenures are limited in supply, and so their prices will hold up better than their shorter-leasehold counterparts.

Mr Tay and Ms Goh are associate directors at Colliers, while Ms Chin is assistant manager of research & advisory.