http://www.businesstimes.com.sg/prem...-tdsr-20130927

Published September 27, 2013

Residential sector hardest hit by TDSR

Drop in strata deals smaller for industrial and commercial properties in July

By Kalpana Rashiwala [email protected]


[SINGAPORE] Demand in all segments of the property market slumped in July following the introduction of the total debt servicing ratio (TDSR) framework in late June. Transactions of strata industrial and commercial units fell 20.9 per cent and 31 per cent respectively from June. But residential deals dropped even more, by 56.6 per cent.

These were findings made by property consultancy CBRE.

Transactions for commercial units were supported by a relatively more resilient resale market (which refers to secondary-market deals in completed projects).

Sales of private homes were dragged down by a 73.3 per cent slide in new sales (that is, by developers) to 482 in July from June's high base of 1,806. New sales had for some months strongly overshadowed the resale market, as investors find the progressive payments for new launches easier on their cashflow compared with picking up a home in the resale market, which would entail paying the full purchase price within a short time.

The sharp July fall is partly due to do with the volatility of developer launches. Knight Frank chairman Tan Tiong Cheng said: "Developers launched a lot less units in July after the TDSR was announced, and tested the market with more launches in August, despite the Hungry Ghosts Month."

The number of private homes that changed hands in the resale market in July fell 14.3 per cent to 539 based on caveats lodged. Subsale transactions - secondary market deals in uncompleted projects - eased 15.6 per cent to 76.

In the commercial segment (shops and offices), the number of strata units developers sold slipped 57.6 per cent to 42 from June's 99. Resales were steadier, with a fall of just two deals to 80 in July. Subsales remained unchanged at nine.

In the industrial segment (factories and warehouses), developers' strata sales fell 32.3 per cent to 44 units. Resales fell at a slower pace of 19.7 per cent to 118 units while subsales actually rose to 23 from 22 in June.

CBRE based its analysis on URA Realis caveats data downloaded as at Sept 20, except for new home sales, which were based on developers' monthly submissions to the Urban Redevelopment Authority (URA).

Market watchers say resale transactions for commercial units have been supported by strong demand from both end-users and investors. Commercial properties have been spared the seller's stamp duty to deter short-term trading that was imposed on industrial properties in January.

Giving his take on the strata office market, CBRE executive director (investment properties) Jeremy Lake said: "Despite the TDSR measures, we're still seeing steady interest from buyers for completed office units such as in Samsung Hub, Parkway Centre, Adelphi and Springleaf Tower.

"Buyers are mostly end-users who intend to occupy the premises when the existing tenancy expires. Seasoned investors are also still buying in anticipation of office rental growth over the next one or two years, which will offset any expected increase in interest rates and also fuel further capital appreciation."

However, things do not look so rosy for industrial property. Said Colliers International managing director Dennis Yeo: "On the front line, we've seen quite a significant drop in strata industrial deals even in the resale market. TDSR has affected demand from investors, as they may not get sufficient loan quantum."

Mr Yeo added that among strata industrial property buyers, the ratio of investors to owner-occupiers has gone up in the past two years - as investors switched from the residential sector, which was slapped with several rounds of cooling measures.

The switch was due partly to the fact that there is a larger pool of strata industrial properties than strata offices or shops.

Analysts also note that price quantums are lower for strata industrial properties than shops or offices. CBRE's caveat analysis of 2013 transactions shows that the average unit price for strata factories and warehouses is $498 per square foot and $595 psf respectively; and the average transaction quantum, $1.04 million and $1.4 million. These are lower than the average prices of strata retail and office deals, at $4,349 psf and $2,283 psf respectively, as well as average transaction quantums, at $1.6 million and $2.3 million respectively.

In August, sales of private homes climbed 8.9 per cent to 1,195 on the back of a 53.9 per cent pick-up in developers' sales to 742. Resale and subsale volumes, however, were down 24.1 per cent and 42.1 per cent. Total caveats lodged for commercial units fell 53.4 per cent to 61 in August. Caveats for industrial units declined 38.4 per cent to 114. However, August numbers are incomplete, with more caveats expected in coming weeks.

CBRE Research associate director Desmond Sim said that a longer study period would be required for a more conclusive picture of TDSR's impact.