http://www.straitstimes.com/archive/...sales-20131012

Figures point to grim Q3 for new home sales

Office sector fared better with small pick-up in rents, say consultants

Published on Oct 12, 2013

By Melissa Tan


THE third quarter is likely to be one of the worst for the residential property market since 2009, consultants say.

All the numbers are not finalised yet but what is in looks grim.

There were likely 2,200 to 2,400 new homes sold for the three months to Sept 30, said a Knight Frank report earlier this week. CBRE put the figure at 2,300 units.

Whatever the final number, it will be the lowest quarterly transaction volume for new sales since the last three months of 2009 when only 1,860 new units were sold.

Consultants said all segments of the residential market were weighed down by a cap on debt-to-income ratios under a total debt servicing ratio framework imposed in June.

New sales in the city centre fell to fewer than 100 units per month on average in July and August, down sharply from the monthly average of around 190 units in the first six months of this year.

In the city fringe area, monthly new sales fell from an average of 460 units in the first half of the year to fewer than 150 in July and August.

The drop was nearly as drastic in suburban regions, where new sales tumbled from a monthly average of 1,050 units in the first half to less than 600 units per month in July and August.

Knight Frank's executive director of residential services Tan Tee Khoon said there would be "limited improvement" in sales volumes in coming months due to an increasing number of unsold units in recently launched projects.

But he said that "no major market correction is expected for now" due to low interest rates, adding that foreign investors could return to the market.

The office market fared better than the residential sector in the third quarter, with a small pick-up in rents despite a rise in the vacancy rate, according to consultants.

Average monthly gross rents for premium office space in the Raffles Place and downtown Marina Bay area climbed 3.3 per cent to $9.92 per sq ft (psf) in July through September from the preceding quarter, Colliers International said in a report on Thursday.

This was a faster pace than the 2 per cent quarter-on-quarter rise in April through June for that area.

The next biggest rise in average gross office rents was for Grade A offices in the Shenton Way and Tanjong Pagar area, which grew 3.2 per cent to $8.08 psf per month in the third quarter, Colliers said.

The recovery in office rents came despite an increase in vacancies caused by a spike in supply.

CBRE noted earlier this week that the overall islandwide office vacancy rate edged slightly upwards from 4.3 per cent in the second quarter to 5.1 per cent in the third quarter.

However, this remains lower than the 10-year average vacancy rate of 7.2 per cent.

CBRE said the rise in office vacancies was greater in the core central business district, largely due to an increase in supply from the completion of Asia Square Tower 2, which added 782,284 sq ft of office space.

The vacancy rate in that area was 6.5 per cent in the third quarter, up 1.6 percentage points from the second quarter.

Other office developments that went on the market in the third quarter were Metropolis Tower 1 along North Buona Vista Drive and the office component of Nexus@one-north.

Consultants said the office leasing market was expected to improve in this quarter due to brighter global and domestic economic prospects.

[email protected]