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Thread: Property players' outlook weakens in Q2

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    Default Property players' outlook weakens in Q2,00.html?

    Published July 29, 2011

    Property players' outlook weakens in Q2

    Economic slowdown, govt measures, higher land supply seen as factors


    (SINGAPORE) Real estate players' sentiment about the property market weakened in the second quarter and the moderation is especially clear for the suburban residential sector, according to the latest survey by the Real Estate Developers' Association of Singapore (Redas) and the National University of Singapore (NUS).

    Against this backdrop, developers are hoping for a respite from more government-imposed tightening measures - the private residential market should be given a chance to reach its equilibrium, said Redas president Wong Heang Fine.

    Mr Wong, who is also CEO of CapitaLand Residential Singapore, was speaking at a Redas seminar yesterday. Results from the Redas-NUS Real Estate Sentiment Index (RESI) survey, which polled developers, consultants and other Redas members, were shared at the event.

    The Current Sentiment Index, where respondents rate overall Singapore real estate market conditions now compared with six months ago, dipped to 4.6 in Q2 from 4.9 in Q1.

    The Future Sentiment Index saw a bigger drop, to 4.4 in Q2 from 5.1 in Q1. Here, respondents rate overall property market conditions over the next six months.

    The Composite Sentiment Index, derived from the two indices above, slipped to 4.5 in Q2 from 5 in Q1. 'Macro factors beyond the local property scene may have weighed more heavily on sentiment in Q2 2011,' said Redas CEO Steven Choo in a release. Survey respondents identified a slowdown in the global economy as the top potential risk, followed by an increased supply of new development land, and government intervention.

    While the general mood was subdued, there were marked differences in how industry players viewed different property sectors.

    Offices, hotels and service apartments were the favourites in Q2. The difference between the proportion of respondents who thought the office sector would fare better in the next six months, and the proportion who thought it would fare worse, was +42 per cent. This net balance was +52 per cent for the hotel and serviced apartment sector.

    The outlook for the residential sector was mixed in Q2. The net balance for the prime residential segment was +11 per cent, but for the suburban sector, it was -37 per cent.

    At the seminar, Mr Wong said that cooling measures have worked in stamping out speculation in the private residential market.

    Developers believe that property prices should move in tandem with economic growth to avoid negative spillover effects on other parts of the economy, but 'this must be examined against the fact that Singaporeans who own private properties make up only less than 15 per cent of the total residential market in Singapore,' he said.

    'Given this, the private residential market should be given the opportunity to independently adjust to achieve its demand and supply equilibrium.'

    Mr Wong then quoted a housing economist from the University of Pennsylvania, who said: 'If the government gets into a habit of intervening all the time, it will harm market development. Investors won't want to invest because they can't be sure what the government is going to do Monday versus Friday.'

    The threat of state intervention aside, the supply of residential units in the pipeline has also been on market watchers' minds. Mr Wong said at a separate interview that while the number seems large, there is still potential demand to consider and data should not be analysed on a static basis. 'At this stage, we still think that the market will stabilise,' he said.

    At recent state tenders of residential sites, caution seems to have crept in with top bids coming in below expectations. But Frasers Centrepoint group CEO Lim Ee Seng noted that lower bids do not necessarily lead to lower selling prices as developers also take the lead from market expectations. Furthermore, construction costs are expected to go up, he said.

    In the RESI survey, respondents cited the costs of building materials, land and labour as the top three concerns when it comes to development costs.

    The survey also showed that in Q2, 20 per cent of respondents believed unit prices in the primary residential market will be moderately higher, compared with 14 per cent in Q1. Some 63 per cent expected unit prices to be largely unchanged, slightly lower than Q1's 69 per cent.

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    Default Lower land prices offset by rising costs

    Jul 29, 2011

    Lower land prices offset by rising costs

    Construction costs expected to rise further, say developers

    By Esther Teo, Property Reporter

    BIDS by developers for suburban plots may be coming down somewhat but that does not mean that home prices at launches are certain to fall too, top executives of various property firms said yesterday.

    Rising development costs - such as an expected jump in labour and construction costs - are challenges that developers are grappling with, they warned.

    These cost factors might offset lower land prices, the developers added on the sidelines of a Real Estate Developers' Association of Singapore (Redas) seminar held at Orchard Hotel yesterday.

    Frasers Centrepoint group chief executive Lim Ee Seng said developers do not look at land price alone when pricing their launches. Market expectations are the most important factor.

    'If the market prices it at a certain level and you sell it way above, you cannot sell. But if you can sell it at a certain level, why would you deliberately want to underprice it?' he added.

    But the lower break-even cost brought about by lower land prices gives developers the advantage of more flexibility and a buffer in case the market turns, he added.

    However, Mr Lim emphasised that the fall in tender prices has not been significant yet.

    Construction costs are expected to rise with strong building demand from the Housing Board, which plans to launch 25,000 new flats this year, more infrastructure works and similarly robust demand from the private sector.

    Developers said that, coupled with the reduction in the number of foreign workers and higher material costs, overall costs are expected to spike further.

    On the residential property market as a whole, however, Mr Wong Heang Fine, president of Redas and chief executive of CapitaLand Residential Singapore, expects a period of stability without the runaway prices seen in the past couple of years.

    Still, while it is too early to call for a reversal of the various cooling measures introduced by the Government, it is clear that they have worked to remove the speculative froth from the market and stem the sharp rise in prices, he said.

    'All the cooling measures that are in place presently; the position that we take is to let the dust settle (and to) let nature take its course... Singaporeans who own private properties make up less than 15 per cent of the total residential market in Singapore.

    'Given this, the private residential market should be given the opportunity to independently adjust to achieve its demand and supply equilibrium.'

    Home hunters are taking longer to decide on a purchase, which shows that sentiment has been affected. However, basic demand is still present. In fact, if healthy economic growth, low interest rates and ample funds are present, they will continue to fuel purchases, he noted.

    City Developments group general manager Chia Ngiang Hong said that despite concerns of an impending oversupply, the government is able to tweak the six-monthly land sales programme according to market conditions.

    'We are hopeful that along the way, if the market situation does change, the government will take that into consideration and proportion the sites between the confirmed and reserve list,' he added.

    Confirmed list sites go on sale regardless of interest and are often an indication of the Government's strategic development plans. Land on the reserve list is put up for tender only if developers make an acceptable initial offer.

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