Further weakness seen in developer sentiment in Q3

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http://www.businesstimes.com.sg/arch...nt-q3-20131024

Published October 24, 2013

Further weakness seen in developer sentiment in Q3

Wilting of sentiment follows introduction of the TDSR framework in June

By andrea soh [email protected]


DEVELOPERS' sentiment appears to have weakened further in the third quarter, following the introduction of the Total Debt Servicing Ratio (TDSR) framework in June.

The Real Estate Sentiment Index, which reflects overall market sentiment through the Composite Sentiment Index, was 3.9 in the third quarter; this was down from 4.5 in the second quarter, which was itself lower than the 4.8 reading of the first quarter.

The Future Sentiment Index also fell to 3.9 from 4.4 in the second quarter.

In this index developed by the Real Estate Developers' Association of Singapore (Redas) and the National University of Singapore, a score under five is a flag for deteriorating market conditions.

The quarterly index is compiled from responses to a questionnaire sent to Redas members - developers, consultants, financial institutions and service providers.

The report accompanying the latest index said: "This weakened overall sentiment signals possible uncertainty in the market in the next six months."

This wilting of sentiment is a result of the government's introduction of the TDSR framework, designed to encourage financial prudence among borrowers. Under it, financial institutions must consider borrowers' outstanding debt obligations and ensure, for instance, that their monthly debt obligations stay within 60 per cent of their monthly income.

The composite index aside, the individual property sectors were also hit, with the residential sector taking it hardest.

Prime residential sector sentiment suffered with a net balance of -46 per cent; future net balance was -38 per cent. In Q2, the corresponding figures were -35 per cent and -32 per cent.

The net balance is the difference between the proportion of respondents who were optimistic and those who were pessimistic.

The suburban residential property segment went into negative territory, recording -30 per cent in current net balance (from +8 per cent in Q2) and -40 per cent in future net balance (-20 per cent in Q2).

The office and the hotel/serviced apartment sectors rode a wave of confidence. The office sector recorded a current net balance of +19 per cent and a future net balance of +31 per cent.

The hotel/serviced apartment sector had a current net balance of +10 per cent, and a future net balance of +20 per cent.

A survey respondent attributed this to the upbeat outlook for the hotel industry, given a vigorous tourism industry.

A total of 42 per cent of the respondents, down from 55 per cent in Q2, expect the number of residential property launches to hold steady, though 65 per cent, up from 21 per cent in Q2, expect moderately lower unit prices in the near term.

More than 55 per cent of the respondents believe that the TDSR framework will impose a drag on residential property sales and raise the number of unsold residential units.

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http://www.businesstimes.com.sg/arch...-data-20131026

Published October 26, 2013

Property players divided over URA's Q3 data

Some see weakness setting in, others say mass-market sentiment still strong

By Kalpana Rashiwala [email protected]


PROPERTY consultants have given mixed reactions to the latest third-quarter private housing data released by the Urban Redevelopment Authority (URA).

Pointing to indications of weakness setting in, some analysts highlighted that the 3,951 private homes (excluding executive condos) sold in primary and secondary markets in July-September 2013 was just 57 per cent of the volume in the preceding quarter, in addition to being the weakest showing since Q4 2008 during the global crisis, when 1,639 units were transacted.

Also, price indices for non-landed private homes in Core Central Region (CCR), where the choicest homes are located, and Rest of Central Region (RCR), which covers city fringe locations, slipped 0.3 per cent and 0.9 per cent, respectively, quarter on quarter.

"If these trends continue into the fourth quarter, the residential market may well be at its turning point," said Jones Lang LaSalle national director Ong Teck Hui.

However, others looked at the bright side of things. A 2.2 per cent quarter-on-quarter hike in the index for Outside Central Region, though small compared with the 3.8 per cent increase in Q2, reflected the still-strong sentiment for mass-market suburban condos.

Constrained by the total debt servicing ratio (TDSR) framework and earlier rounds of cooling measures, buyers are focusing on units priced between $800,000 and $1.3 million, which are more likely to be found in OCR, noted ERA Realty key executive officer Eugene Lim. Units in this price range are typically below 900 square feet. And small units typically have a higher per square foot (psf) pricing, which probably explains the rise in the OCR price index, he added.

Also supporting demand for private homes in OCR are newly minted permanent residents who are now required to wait three years before they can buy public housing flats in the resale market. "OCR prices will continue to rise - albeit at a slower pace - over the next six months," Mr Lim said.

He argued that it may also be possible for prices in RCR - which includes Tiong Bahru, Bishan and Toa Payoh - to rebound "depending on what gets launched".

URA's overall price index for private homes inched up 0.4 per cent in Q3 over the previous quarter, identical to the flash estimate released earlier this month. In Q2, the index rose one per cent.

URA's All Residential rental index climbed at a slower pace of 0.2 per cent quarter on quarter in Q3, a tad below the 0.3 per cent increase in Q2. The vacancy rate for non-landed private homes climbed from 6.3 per cent at end-Q2 to 7 per cent at end-Q3 - its highest level since Q3 2009.

These two indicators are seen as portending downward pressure on private housing rents, especially after factoring in the record level of private home completions forecast for Q4 and full-year 2013.

Developers received Temporary Occupation Permit (TOP) for 3,685 private homes in Q3, taking the total for the first nine months to 9,519 units. Based on developers' submissions to URA, another 6,305 private homes are slated for completion in the fourth quarter, taking the full-year figure to 15,824. This would surpass the record 14,582 units completed in 1997; the figure for last year was 10,329.

Alan Cheong, research head at Savills Singapore, points out that the total supply pipeline stood at 90,725 private homes at end-Q3. "The figure could stabilise at this level; it has fallen steadily from 96,230 units at end-Q4 2012. This could mean that the pressure from in-coming supply is being relieved."

Knight Frank also traced a steady decrease in total unsold inventory from 37,728 units at end-Q3 2012 to 32,232 units at end-Q3 2013. The latest figure was the lowest since Q2 2007 (30,673).

As for the 7 per cent vacancy rate at end-September, Mr Cheong was not too alarmed as it could be due to a few projects completed in Q3 that will require time for homeowners or tenants to move in. Projects that received TOP in Q3 include The Interlace in Depot Road (1,040 units), The Laurels, The Vermont (both in the Cairnhill area) and Cape Royale in Sentosa Cove.

New launches since the TDSR framework took effect in late June have been posting a patchy performance. The latest winner appears to be The Inflora condo in Upper Changi. A consortium led by Hong Leong Holdings that is developing the 396-unit project did roaring sales yesterday, with 250 options granted as at 6pm . "More options to purchase are in the process of being issued," it said in a release.

"Prices start from over $400,000 for a one-bedder apartment. Unit sizes range from 462 sq ft for a one-bedder to 1,302 sq ft for a four-bedder, and 1,463 sq ft for a dual-key apartment."

Word on the street is that all 128 one-bedders have been snapped up. The average price for the eight-storey, 99-year leasehold project is understood to be slightly below $900 psf.