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Thread: BT Property 2010 - 23/09/10

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    Default BT Property 2010 - 23/09/10


    Published September 23, 2010

    [B][SIZE="5"]The next wave[/SIZE][/B]


    WHAT is next for Singapore's property market? No one - neither developers, analysts nor homebuyers - can answer the question with any certainty right now.

    After subdued sales through all of 2008, the residential market here took off in February last year. And the buying volume and price growth continued into 2010 - despite a slew of government measures announced over the past 12 months to dampen demand for both private homes and HDB flats, and boost supply.

    But the latest round of cooling measures, announced by National Development Minister Mah Bow Tan on Aug 30, are considered to be harsher than the previous policy changes and could have a greater impact.

    Developers trust that the measures - which include the decision to disallow concurrent ownership of HDB flats and private residential properties within the specified minimum occupation period - are not likely to keep away genuine buyers. They are also hoping that the flux in the market will settle in a few months and that buying interest will continue apace.

    Over the next few pages, we examine the key aspects of Singapore's property market, taking an in-depth look at the residential market and the commercial sector as well as key overseas markets.

    We ask experts for their views on the impact of the latest round of government measures and look at where the next wave of activity will come from after the market, investors and homebuyers digest the latest news.

    There is no denying the importance of Singapore's property sector. How the market fares will impact not only developers, investors and 'regular Joe' homeowners, but also related sectors. These include banks which have been enjoying brisk business dishing out housing loans over the last two years.

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    Published September 23, 2010

    [B][SIZE="5"]Too hot to handle?[/SIZE][/B]

    [B]WENDY TANG and PNG POH SOON examine the impact of cooling measures on HDB, mass, mid- and high-end residential properties[/B]

    MUCH has been said about the government's recent cooling measures and their likely impact on the residential property market. While some think the latest measures have enough bite to cool the entire market, others expect that only the mass market and public housing (HDB flats) segments will be affected.

    In the aftermath of the financial crisis, China, Hong Kong, Singapore, and Australia have seen their property markets performing strongly in tandem with the recovering economies. Prices had risen so rapidly that there were worries about a property bubble. China has tried to cool its property market as has Singapore, with three rounds of cooling measures.

    The property market generally turns cautious when the government changes the demand and supply levers. The market is still digesting the new measures and market watchers are anxiously monitoring response to new project launches.

    How will the new measures affect the HDB, mass, mid- and high-end residential properties? Prior to the new measures, HDB buyers typically comprised locals, PRs, upgraders, downgraders or even private property owners.

    The wide range of buyers was due to the relaxation of rules by the Housing and Development Board in the late 1980s. This allowed permanent residents (PRs) to buy HDB flats and HDB owners to invest in private property, with certain conditions. Later on, private property owners were allowed to buy HDB flats from the resale market as these units were deemed not to be subsidised. Collectively, this group forms the base of HDB buyers.

    Over the past 10 years, Singapore's population (residents and non-residents) grew by 26 per cent. The number of Singapore residents (citizens and PRs) rose by 15.6 per cent, and non-residents (foreigners) by a hefty 72 per cent. The number of new completed HDB flats, however, has dropped significantly since 2006 while the overall population has increased. HDB resale prices escalated in response and have risen by some 45 per cent since 2000.

    The new measures are likely to affect the HDB segment most since demand will be crimped as those owning private property here and overseas will no longer be allowed to buy HDB flats unless they sell the private property within six months of getting the HDB flat.

    Existing HDB owners upgrading or downgrading to another HDB flat are also affected. To qualify for 80 per cent financing, they have to show proof of sale of their existing unit within two weeks of the first sales appointment. Hence, arrangements with the buyer of their existing flat and the seller of the flat have to be well planned. Otherwise, buyers are limited to borrowing no more than 70 per cent of the purchase price of their new flat. In addition, the cash downpayment will be doubled to at least 10 per cent.

    The seller's stamp duty, which used to apply to properties sold within a year, has now been extended to those sold within three years. But this should not affect the HDB segment as buyers have to occupy the new flat for at least five years before they can sell it.

    On the supply side, 16,000 new flats will be offered in 2010 which is more than 3.5 times the average number of new HDB flats completed between 2006 and 2008. Going forward, the HDB is prepared to launch up to 22,000 new flats in 2011 should demand continue to be strong. The new supply will eventually ease demand pressure on existing stock.

    The introduction of the new measures is in line with the government's view that HDB flats are homes to live in rather than investments. The restrictive measures which crimp demand, in addition to the looming supply, will dampen any capital appreciation of HDB flats. This will happen even when the private property market recovers in the future.

    In fact, in the HDB resale market, anecdotal evidence points to early signs of price moderation, in particular the cash over valuation (COV) component, as buyers' and sellers' expectations change. However, any decline in HDB prices should not be drastic in the near term due to the limited completed stock. In the medium term, prices will remain stable with limited price appreciation.

    The private mass market segment will also be significantly affected as those with HDB addresses typically form the bulk of such buyers. This group of buyers are usually price-sensitive and have been motivated by the current low interest rates.

    A lower loan to value quantum raises the hurdle for HDB owners looking to make their first private property investment. Assuming a purchase price of $1 million, a total of $300,000 is payable, of which $100,000 must be in cash. The latter is double what was required in the past. Buyers without the additional funds will have to wait longer before they can enter the market.

    Previously, buyers whose monthly household income ranged from $8,000 to $10,000 a month were not able to buy new HDB flats. Some opted to buy smaller private residential units in order to keep the absolute price affordable. This was a more appealing option than paying high COV for older HDB resale flats.

    The new measures now allow these buyers to purchase new flats under the Design, Build, and Sell Scheme (DBSS). If the response to DBSS flats is good, more of them may be released. As such, some demand for private homes may be diverted to public housing.

    Buyers now have more housing options, including executive condominiums (EC) which were introduced in 1995 for buyers whose household income was too high to qualify for a new HDB flat but who might not have found private property affordable. ECs are sold with eligibility and ownership restrictions similar to public housing, but are fully converted to private housing after 10 years. Going forward, the government will be launching three EC sites in Pasir Ris, Bukit Panjang, and Tampines that are expected to yield 1,415 units.

    Developers seem more cautious of late judging from recent results of government land sales (GLS) tenders. The highest tender price of $340 per sq ft per plot ratio at Hougang Avenue 7 was 25 per cent lower than that of another site sold at Hougang Avenue 2 in May. The premium between the top and second bidder narrowed to 2.5 per cent.

    In the second half of 2010, land that can potentially yield about 13,900 new private homes will be up for tender. It is the highest in the history of the GLS programme. Of the upcoming supply, about 8,100 units are confirmed for sale without the need for prior developer interest. If demand remains strong, the government is prepared to increase supply in the first half of 2011.

    In light of this, prices of mass market properties may ease by 10 per cent in a year's time. This is not to say all mass market prices will follow suit as developments in better locations, near MRT stations or which offer good value should hold up.

    Mid- to high-end properties are less likely to be adversely affected by the cooling measures as buyers are not as price-sensitive as those in the mass market. As such, the lower loan to value ratio for an investment property is unlikely to affect them as much as buyers of mass market and HDB properties. Sellers' stamp duties will also not affect investors so long as they do not sell within three years. In any case, the amount is not significant in relation to the overall value of the property.

    Interest in prime property remains strong. However, buyers are cautious as the global economy is still fragile. Buying activity remains selective. Assuming there isn't another crisis, mid- to high-end properties are likely to remain fairly stable with prices down by 5-10 per cent over the next 12 months.

    To sum up, the property market is unlikely to crash as the government monitors the market closely. In the past, measures have been taken to revive the property market if prices are depressed and vice versa. While the new policies benefit some people, they adversely affect many others. Time will tell whether this round of measures is well-calibrated or excessive. The authorities are equally anxious to monitor the impact and may well ease up should it hurt more deeply than intended.

    No one benefits if the residential market is badly destabilised, particularly in a country where property is viewed as a valuable investment. Hopefully, the latest round of cooling measures will bring Singapore closer to a stable and sustainable property market.

    [I]Wendy Tang is director, residential services, Knight Frank and Png Poh Soon is senior manager, consultancy & research, Knight Frank [/I]

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    Published September 23, 2010

    [B][SIZE="5"]Strata-landed market gaining ground[/SIZE][/B]

    [B]Strata-landed homes have changed hands so far this year at prices averaging $646 per sq ft, report DOREEN GOH and ELIZA LEE[/B]

    STRICTER development guidelines on the density of strata-landed housing developments, which were implemented on Feb 3, 2009, had effectively reduced the potential supply of new strata- landed homes. Notwithstanding, there are plenty of options available in the secondary market for those keen on owning a strata-landed property. Where should buyers begin their search? What kind of price range can they expect? And for those who still prefer new developments, what are some of the upcoming projects they can look out for?

    Strata-landed housing are landed houses with strata-titles and common facilities. Most are found in cluster housing developments that are allowed within Designated Landed Housing Areas, and may comprise of solely bungalows, semi-detached or terrace houses, or a combination of these housing types. To a lesser extent, they are also known as townhouses within mixed landed/non- landed developments. Based on caveat records from the Urban Redevelopment Authority's Real Estate Information System (URA Realis), on Aug 26, 2010, 337 strata- lnded homes have changed hands so far this year at prices averaging $646 per sq ft, up 13.7 per cent from 2009's level and surpassing the previous peak of $621 per sq ft in 2007 by 4.1 per cent.

    Strata terrace houses which traditionally dominated transaction activity has to date accounted for about two-thirds of this year's strata-landed transactions, with prices averaging $637 per sq ft. Another 22 per cent of the transactions involved semi-detached houses at an average price of $681 per sq ft, while the remaining 11 per cent were bungalows at prices averaging $632 per sq ft.

    Unlike the past five years where most deals were sealed in the primary market, the majority (64.7 per cent or 218 units) of the strata-landed transactions so far this year occurred in the secondary market, with the potential to exceed the 237 secondary market transactions in 2009.

    The heightened level of activity in the secondary market is unsurprising since the revised guidelines for strata-landed developments stipulating a minimum plot size per unit type will effectively reduce the potential supply in the market.

    The number of new strata-landed units launched had declined from a high of 108 units in Q3 2009 to 42 units in Q2 2010, as the effect of the revised guidelines kicked in. As such, prospective buyers would need to warm up to the idea of house hunting within the secondary market.

    [B]What's available in the secondary market[/B]

    The secondary strata-landed housing market offers prospective buyers many options in terms of location, price, housing concept/type, and strata area to suit varying budgets and lifestyle.

    To date, there are some 120 developments supplying over 3,000 strata- landed houses in Singapore. The highest concentration of units can be found in Bukit Timah (684 units), Bedok (653 units), and Serangoon (527 units), while established residential areas like Ang Mo Kio, Yishun, and Novena house smaller pockets of strata-landed units.

    While most are small-scale or boutique developments of less than 50 units, with limited facilities such as swimming pools, security, and Jacuzzis, there are about 10 large- scale strata-landed projects with over 100 units each, supplying around half of the estimated available supply of strata-landed houses in the secondary market.

    These developments also offer more facilities such as swimming pools, gymnasiums, tennis courts, children's playgrounds, security, club houses, Jacuzzis, barbecue pits, spas, mini golf ranges, etc. Examples include The Shaughnessy (254 units) in Yishun, D'Manor (174 units) in Bedok, Hillcrest Villa (163 units) and The Teneriffe (148 units) in Bukit Timah, Horizon Gardens (157 units) in Ang Mo Kio, and Springhill (115 units) in Sembawang.

    In terms of pricing, projects located in the Outside Central Region (OCR) are the most affordable. Using transactions in 2010 (as of Aug 26, 2010) as a guide, prospective buyers with a maximum housing budget of $1.5 million could consider terrace houses with strata area of less than 5,000 sq ft in the OCR, whereas those with a more generous budget of up to $2.5 million can consider semi- detached and detached houses in developments such as Aston Green in Hougang, Dalla Vale in Yishun, Sungrove in West Coast, Water Villas in Kovan, and Northshore Bungalows in Punggol.

    As for those with a budget of above $2.5 million, they could extend their options to a wide range of terraces, semi-detached, and detached houses in high-end/luxury projects in the Core Central Region (CCR) with varying strata areas. Popular examples include Barker Terraces, Barker Ville, Estrivillas, Hillcrest Villas, Shamrock Villas, The Teneriffe, [email protected], and Watten Residences in the Bukit Timah and Novena localities.

    [B]What's available from developers[/B]

    If one is set on a first-hand property, he/she could still turn to new launches by developers. However, the numbers could be limited in years to come, as developers with the option of developing either non-landed and/ or strata-landed housing forms are likely to have a preference for the former which allows them to maximise the potential gross floor area of a site.

    For those who do not wish to wait for future project launches, there are still unsold units for selection in some of the launched projects such as Five Chancery on Chancery Road, Mosella on Muswell Hill, Mt Sinai Residences on Mount Sinai Lane, Residences at Emerald Hill on Emerald Hill Road, Seven Crescent on Crescent Road, Sommerville Residences and Water Villas in Kovan.

    As for those who prefer new projects, there are still some 600-plus units planned or in the pipeline. Major projects include Cabana (Phase 4) with 78 units; Watercove Ville (80 units); Nim Park, a proposed 121-unit cluster housing development by MCL Land; and a proposed 193-unit cluster housing development on Mount Rosie.


    Strata-landed housing, in particular cluster housing projects, is expected to remain an appealing housing option to home buyers seeking the best of both worlds, ie a landed property with condominium-style facilities.

    The expected healthy demand, coupled with the limited new supply in the pipeline, could translate into some potential upside in prices, as well as generate more activity in the secondary strata-landed housing market, where a wide selection of developments are available to suit varying needs.

    [I]Doreen Goh is a senior manager and Eliza Lee is a research analyst, research & advisory. Both are with Colliers International [/I]

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    Published September 23, 2010

    [B][SIZE="5"]The evolution of the luxury home market[/SIZE][/B]

    [B]Despite the ever-evolving definition of luxury residences, two characteristics continue to stand out: location and space, says HAN HUAN MEI[/B]

    WHAT constitutes luxury homes today, especially when the entire price structure of residential homes has changed so drastically in the past five years?

    Prior to 2003, one could safely define prime residential areas as postal districts 9, 10, and 11 which comprise the Cairnhill, Orchard, Grange, Tanglin, Holland, Bukit Timah, Dunearn, Newton, and Novena areas. The districts immediately surrounding these three would comprise the next price range of housing.

    Anywhere beyond, going into the HDB estates and new towns would be homes of the lower price range, catering to the masses. In dollar terms, prime residential had a price tag of $1,500 per square foot (psf) and above at that time. The mid-tier price range was $900-$1,400 psf and mass market homes were priced below $900 psf.

    The prime residential market saw a watershed year in 2007 because there was a clear split between prime and luxury homes when the latter attained headline prices way above $3,000 psf. When some new projects hit $4,000 psf and above, they formed a new class called 'super-luxury' homes.

    Unfortunately, a misnomer was created when small-format homes began to sprout in the prime districts to counter the high quantum. These units fetched prices ranging from $2,500 psf to $3,500 psf but their product attributes could not offer a luxurious lifestyle.

    Luxury living in Singapore has evolved over time, from quality finishes to designer fittings to branded residences with butler services and lifestyle features like carpark lofts and private berths for waterfront homes.

    The rich and well-heeled are attracted to them because owning a trophy residence beats owning a standard home any time. Two characteristics of luxury residences continue to stand out: location and space.

    They are located at exclusive addresses and come with generous living areas for the enjoyment of space. URA has demarcated the Core Central Region (CCR) as the location where high-end homes are found.

    This comprises the traditional prime districts 9, 10, and 11 as well as the waterfront locations of Marina Bay, Sentosa Cove, and Keppel Bay.

    In recognition of the various types of residences and in consideration of the current higher price levels, the general consensus is that prime properties fall within the $2.5 million to $5 million price band, luxury homes within the $5 million to $8 million band, and super-luxury homes are those priced $8 million and above.

    As a guide, luxury and super- luxury homes are taken to be 2,500 sq ft and above, befitting a lavish lifestyle.

    In 2007, sales volume was at a record high and home prices peaked.

    URA data for the selected districts where luxury homes are found showed that 230 homes in the primary market (Table 1) were sold at prices $5 million and above from Jan to Aug 2010. Within this basket, 144 new homes (Table 2) were of sizes 2,500 sq ft and above.

    At the peak of the market in 2007, 701 new homes were sold at $5 million and above (Table 1) and of these, 402 were 2,500 sq ft and above. On the whole, luxury prices in 2010 are still lower than those in 2007.

    In the secondary market, the first eight months of 2010 saw the sale of 182 luxury homes above $5 million sold in 2007, of which 166 were over 2,500 sq ft. This compared with 489 homes in the same price range sold in 2007 but a higher number of 532 homes were over 2,500 sq ft. The higher number of large units sold could be attributed to the more affordable price levels of older properties.

    Back in 2007, the focus of the market was on new projects setting new benchmarks, causing the rift between luxury prices in the secondary and primary markets to widen.

    It is foreseeable that the luxury transaction volume in 2010 will not measure up to that in 2007. Price-wise, the prices of secondary luxury homes have more or less caught up with the levels in 2007 but those in the primary market are still lagging behind by 10 per cent on the average.

    The implication is that there is a potential for current prices of new luxury homes to rise as the economy strengthens and sentiment improves. Some 1,000 units in luxury projects like Ardmore II, 8 Napier, and Paterson Suites were completed this year, with another 1,400 units due for completion between September 2010 and December 2011.

    Among them, around 900 units remain unsold. It was reported that property funds have been involved in the bulk deals of high-end apartments.

    One of these was Arch Capital, who bought all 34 units of Royal Oak - a refurbished project in Anderson Road - at around $200 million or $2,337 psf. The likely route that developers will take is to source for such bulk purchasers. Alternatively, they may keep them for rental income until higher prices are achieved later.

    [I]The writer is associate director, CBRE Research, Singapore [/I]

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    Published September 23, 2010

    [B][SIZE="5"]HDB market set to normalise[/SIZE][/B]

    [B]Measures to cool the property market appear to have made some impact already, says EUGENE LIM[/B]

    A MASSIVE building programme was undertaken by the Housing and Development Board (HDB) in the 1970s due to a shortage of housing for the masses. Back then, there was no resale HDB market. From the 1980s to the mid-1990s, as the housing shortage eased, the public housing programme shifted from building to satisfy a shortage, to deregulation and the creation of a resale market.

    In 1989, the government made major policy changes by removing the income ceiling for buying resale HDB flats; allowing HDB owners to invest in private residential properties; as well as allowing private property owners and Singapore permanent residents (PRs) to buy resale HDB flats for owner occupation.

    Since then, resale HDB prices have seen their ups and downs. But in the second quarter of this year, HDB numbers showed that resale HDB prices hit their highest point since 1990. Resale HDB prices were 18 per cent higher than the first peak in Q4 1996; and five times more than flat prices in 1990, when the resale market started.

    Despite higher valuations, 96 per cent of resale transactions in Q2 were done at higher and higher cash-over-valuation (COV). Prices continued to climb in July and August. Resale HDB transactions handled by ERA agents showed that the median COV increased to $35,000, up 17 per cent from Q2's $30,000.

    But it was 11 times more than the market low of $3,000 just 14 months ago. On the ground, many deals were closed by negotiating on the COV rather than the resale price of the flat.

    For five straight quarters starting in Q2 2009, resale transactions shot past 8,000 units; with three-room transactions accounting for 30 per cent; four-room 36 per cent; five-room 25 per cent; and executive 9 per cent.

    This exuberance in the resale market was happening despite the HDB's launch of some 66,500 new flats since 2006 - including the estimated 16,700 units this year.

    Many first-time buyers, priced out of the resale HDB market, put the blame on, among other things, the artificial demand coming from those buying HDB flats for investment or short-term speculation.

    These were people who did not need a roof over their heads but were riding the buoyant resale HDB market for personal profit, and in the process driving up prices.

    While there were no official statistics as proof, these claims have some validity. A three-room resale flat bought at $300,000 that rents for $2,000 a month gives a yield of 8 per cent per annum; well above the average private property yield of 3-4 per cent.

    A resale flat bought in 2008 and sold in 2010 could net the seller a gain of at least 30 per cent. A PR can buy a resale flat, rent it out for an income stream, and after a few years sell it for a good profit. The profit could be channelled to buy a better house back home and other luxuries.

    An astute investor with spare cash could be tempted to take a punt in the resale HDB market, despite flouting public housing rules.

    [B]Impact of new measures[/B]

    On Aug 30, the government announced measures designed to help first-time buyers, as well as to keep the resale HDB market in check. These measures were:

    # Minimum occupation period for resale HDB flats extended to five years.

    # Private property owners who buy resale flats have to sell their private home within six months of buying the flat. Private homes include overseas properties.

    # Those with existing mortgages can only take a maximum loan of 70 per cent; and need to fork out a mandatory cash deposit of 10 per cent.

    # First-timer households with monthly income of between $8,000 and $10,000 can buy new flats under the Design, Build, and Sell Scheme (DBSS).

    # HDB speeds up completion of flats from three years to two-and-a-half years.

    While these measures may help to rein in runaway prices, they have also made buying and selling property more complicated.

    Those who buy a resale flat from Aug 30 onwards can no longer buy private property within the first five years of the resale flat purchase.

    Should they buy private property after five years, they will have to put up a higher cash downpayment of 10 per cent of the purchase price if their current loan is not fully paid up. In addition, they can only take a maximum loan quantum of 70 per cent.

    After buying the private property, it may not make sense for them to sell their resale flat to buy another one, unless they are prepared to sell the private property within six months. This means they can no longer bequeath their private property to their children or rent it out for income.

    Meanwhile, should PRs buy a resale HDB flat, they will have to part with any property they own in their homeland within six months of the flat purchase. With non-genuine demand taken out of the equation, PRs are placed in a dilemma.

    First-time buyers will have a large supply and variety of flats to choose from: Build-To- Order (BTO) flats (16,700 units in 2010 and up to 22,000 units in 2011), DBSS flats (up to 7,000 units in 2010 and 2011), and executive condominiums (up to 8,000 units in 2010 and 2011). As such, we estimate that demand for resale HDB flats may drop by some 30 per cent.

    If that happens, total resale volume this year could dip below 30,000 units and median COVs fall to $20,000 or lower by year's end. With lower transacted prices, valuations will also be lower and this may again impact future resale prices. A price correction in the resale HDB market is in the offing.

    Measures to cool the property market appear to have made some impact already. The recent launch of the Yishun Riverwalk BTO project attracted only 3,225 applications for 1,408 flats - well below the ratio seen in past BTO launches when up to six times the number of bids were seen for each unit.

    This may indicate that first-timers may be intending to return to the HDB resale market in anticipation of falling prices. These buyers had been priced out of the resale market during the property boom and flocked to join the queue for new HDB flats. They may now be waiting to see if resale prices will drop.

    Those who have an immediate need for homes will probably go to the resale market instead of queuing for a new flat which may take three years to build.

    The five-year minimum occupation period (MOP) only affects resale applications received by HDB from Aug 30. For those who bought their flats before that, the previous MOP of three years, 2.5 years or one year still applies, depending on when they acquired their flats and the type of loans they took.

    These HDB owners can sublet their HDB flats after occupying it for three years. They can also invest in a private property during their MOP; unlike buyers after Aug 30.

    [B]Days of high COV transactions may be over[/B]

    With the new measures taking effect, the froth in the resale HDB market has been removed. Coupled with new housing options for first-time buyers and the sandwiched class, the key driver for the resale HDB market going forward will be those with immediate housing needs - whether they are Singapore citizens or PR households.

    The resale HDB market should now reflect the real demand for housing. As such, the days of high COV transactions may be over.

    [I]The writer is associate director, ERA Asia-Pacific [/I]

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    Published September 23, 2010

    [B][SIZE="5"]Sentosa Cove still a coveted address[/SIZE][/B]

    [B]The luxury enclave saw the return of buying interest on the back of an improving global economy, report STEVEN MING and ZENG ZHEN[/B]

    SENTOSA Cove, Singapore's first gated waterfront residential enclave located on the eastern shores of Sentosa island, is taking shape with the completion of some 920 upscale condominium units and 200 waterfront and hillside bungalows since its inception in 2004. In tandem with the buoyant home sales on the mainland and coupled with the opening of the integrated resorts (IRs), the luxury enclave of Sentosa Cove saw the return of buying interest on the back of an improving global economy.

    There are now nine condominium and seven landed housing developments for sale. The most recent launches include City Developments' 228-unit The Residences at W Singapore Sentosa Cove, and Ho Bee & IOI's 151-unit Seascape, both of which saw good take-up.


    Amid favourable market conditions, sales remain strong for non-landed residential homes in Sentosa Cove. There were 104 sales transactions registered from January to July 2010.

    Despite falling short of the 130 sales transactions recorded for 2009, the sales value for the first seven months of 2010 has outperformed that of last year, with $541 million recorded thus far compared with $497.9 million in 2009.

    With the release of new projects, the primary market enjoyed a 430 per cent increase in volume, albeit from a relatively low base in the previous year. In the secondary market, because only The [email protected] Cove received Temporary Occupation Permit (TOP) in March this year, the sub-sale activity has turned relatively quiet with only 21 caveats, down from 101 in 2009, whilst resale activity has firmed up by 57.9 per cent from 19 in 2009 to 30 transactions.

    The first seven months of this year have seen rising prices across the board. Fuelled by higher prices of new launches in the vicinity, the prices of projects that were launched before 2010 have shown an increase ranging from 2.2 per cent to 30.8 per cent, with some surpassing their previous peaks in 2007.

    As a result, the average price of non-landed residential in Sentosa Cove has soared from $1,691 per sq ft in 2009 to $2,344 per sq ft in 2010, representing a 38.6 per cent increase.

    Appreciation in capital values of non-landed homes has lent support to the investment activities in Sentosa Cove, especially the sub-sale transactions in those projects approaching TOP dates.

    Caveat matches of 19 sub-sales from January to July show that 94.7 per cent, or 18 sub-sales, yielded a profit between $179,400 and $3.06 million, significantly higher than the 71.7 per cent for the whole of 2009.

    In addition, the average gain per unit almost doubled from $600,025 in 2009 to $1.16 million in the first seven months of 2010. This was a result of increased percentage of sub-sales that yielded gains exceeding $1 million.

    So far this year, the sub-sales of nine units in The [email protected] Cove have earned profits from $1,005,970 to $3,056,700, accounting for 47.4 per cent of the total profitable sub-sales.

    On the other hand, there were only seven out of the 67 profitable sub-sales that reaped a profit of more than $1 million in the preceding year.


    Unlike Good Class Bungalows (GCBs) on the mainland, the landed housing segment in Sentosa Cove is unique as it offers an exclusive waterfront.

    More importantly, the landed houses in Sentosa Cove appeal to a wider market as foreigners who do not have permanent residence status are allowed to purchase them.

    According to the caveats lodged between January and July 2010, 39 landed houses in Sentosa Cove have been sold, only one less than the total recorded for the whole of 2009. The transaction value has surged by 20.5 per cent from $507.3 million in 2009 to $611.3 million in the first seven months of 2010, attributed to the 19 houses costing more than $15 million each that were transacted during this period. In stark contrast, there were only nine transactions above $15 million in the preceding years from 2005 to 2009.

    Of these 39 sales, foreign buyers chalked up 19 transactions or 48.7 per cent, with Chinese investors being the most dominant, inking 12 transactions, or 63.2 per cent, of all foreign purchases in the reviewed period. The Chinese buyers have ranked top among the foreigners since 2009; overtaking the Indonesians.

    The average unit price based on land area climbed from $1,568 per sq ft in 2009 to $1,892 per sq ft in 2010, up by 20.7 per cent. In terms of unit price, the most expensive home sold this year was a terrace house in The [email protected] Cove which was transacted at $8 million or $2,929 per sq ft in May.

    Interestingly, this house was first bought in June 2007 from the developer for $4.6 million or $1,682 per sq ft, yielding the vendor a profit of $3.4 million.


    On the economic front, Singapore has probably not seen better days. The government has revised the GDP growth forecast for 2010 up to 15 per cent from its previous forecast of 7 to 9 per cent.

    Despite this, the market is not absolutely immune from external downside factors. Market sentiment has been affected by the rising concerns over the uncertainty of US economic recovery and the eurozone debt crisis. Meanwhile, the government's latest tightening measures, coupled with the ample supply from the government land sales programme, has cast a cloud over the property market.

    Nevertheless, we expect that these cooling measures would have limited impact on the luxury developments in Sentosa Cove. The government's measures are designed to curb speculation, especially in the mass-market and public housing re-sale segments.

    Still, the sales activity in Sentosa Cove may soften in the near term as buyers adopt a wait-and-see approach to the new measures.

    However, the broader fundamentals for the private residential market are still good, and driven by the low interest environment, and abundant liquidity from Asia's booming wealth, Sentosa Cove would continue to attract both local and foreign buyers who take a mid to longer term view of the market.

    [I]Steven Ming is executive director, Savills Singapore and Zeng Zhen, senior manager, Savills Research & Consultancy[/I]

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    Published September 23, 2010

    [B][SIZE="5"]Market may be in state of denial[/SIZE][/B]

    [B]KELVIN TAY looks at how the new measures introduced by the government will affect residential property prices here[/B]

    THE 1980s witnessed one of the most spectacular property bubbles in modern history. It was brought on by a combination of a buoyant Japanese economy, the forced appreciation of the Japanese yen by virtue of the 1985 Plaza Accord, and low interest rates. The mixture was so potent that, at its height in 1989, prime properties in Tokyo's Ginza district were being sold for $125,000 per square foot (psf).

    In 1991, the Japanese property market bubble burst spectacularly and almost 20 years later, the market remains moribund. More recently, the collapse of the US housing market brought capitalism to its knees in October 2008, with the resulting de-leveraging ramifications still being felt in the global economy almost 24 months later.

    Although some market observers are still debating whether there is a bubble in the Singapore property market and therefore a need for price stabilisation measures, the fact that there is such debate is already proof of a pie in the making. As of the second quarter of this year, the HDB resale price index was 18 per cent above its previous peak in 1996. Prices in the mass market segment of the private residential market are as much as 23 per cent above its previous peak in 1996 as well.

    In fact, the HDB resale and mass market segments may currently be in a state of denial - that prices will keep rising forever, a fundamental myth of asset bubbles. During a bubble, people generally believe prices would not fall. Although this has been proven wrong so many times in the past, many have not learnt from the past. And very often, homeowners are often the biggest victims of any property bubble.

    It is with these thoughts in mind that we view the latest round of government policies to stabilise property prices in Singapore with relief. This is especially so as the recent run-up in property prices in Singapore has been concentrated largely in the HDB resale and mass market segments of the private residential market, where the majority of Singaporeans reside.

    Most of the policies that were introduced three weeks ago are targeted at the HDB resale market, which in turn underpins prices in the mass market segment of the private residential market. Any decline in HDB resale prices will in turn affect the private mass market segment and vice-versa. The measures are broad-based, targeting both market demand and supply, with the 'demand' focused measures largely aimed at reducing speculative demand.

    For example, buyers with a second mortgage now require a higher down payment of 30 per cent (previously 20 per cent), while the minimum cash payment has been increased to 10 per cent (previously 5 per cent). In our view, these two measures are likely to seriously dampen the HDB dweller's enthusiasm to upgrade to private property at current prices, as it reduces affordability.

    A typical HDB upgrader would be looking at purchasing a 1,200 sq ft apartment at $850 psf, or around $1 million. Assuming that the couple still has an existing mortgage for the HDB flat they are upgrading from, they would need to cough up at least $100,000 in cash to meet the 10 per cent cash requirement and fund the remaining $200,000 from their CPF accounts. If we include the usual renovation expenses of about $30,000, then the cash requirement becomes a rather prohibitive $130,000, or close to 11 months of the couple's monthly net median income of $12,000.

    Over time, the increase in supply of Design, Build, and Sell Scheme (DBSS), Build-to-order (BTO), and executive condominiums (ECs) in the market will also affect prices of the HDB resale market as buyers have a greater choice of homes available.

    Some of the latest measures also reversed a long-standing policy that sparked the previous upturn in the HDB resale market in the 1990s. Back in 1991, the Ministry of National Development allowed HDB flat owners who have passed the minimum occupation period (MOP) of five years to invest in a private property.

    Subsequently in 1993, the HDB relaxed mortgage valuations from 1984 values to current values and also permitted funds in the CPF ordinary account to be used for mortgage payments. Arguably, these two landmark policy changes at that point in time started the strong upturn in the HDB resale market in the 1990s, with the market hitting a peak in Q2 1996 before turning down sharply as a consequence of the Asian financial crisis.

    Part of the package of measures announced at the end of August now disallow home owners from concurrently owning a private and public property within the MOP.

    We expect this tightening to have a meaningful impact on the HDB resale market, as this is likely to reduce volumes and moderate price appreciation, if any. The subsequent impact is a decline in the average cash-over-valuation (COV) of the HDB resale market, which currently hovers at an average of $30,000.

    With all these measures targeting the HDB resale market, it is difficult not to envisage the mass market segment of the private residential market being impacted as the former acts as a firm price support and catalyst for the latter. The last year or so has seen the emergence of 'shoebox' apartments ranging from 350 to 650 sq ft in size.

    These smaller apartments are usually the targets of speculators as the absolute financial outlay and commitment is smaller and not surprisingly, we believe these apartments are also likely to be among the first to decline as the HDB resale and private mass market segment takes a breather.

    Ironically, the most effective 'policy' of the government in stabilising the property prices might be interest rates. The Singapore property market has never been an interest rate sensitive market until 2007 and our sense is that the average home buyer may not be sanguine about how interest rates would impact his mortgage payments.

    Prior to 2007, most housing loan rates in Singapore were pegged to the banks' and finance companies' prime lending rates (plus a premium of one per cent), which not only tended to be much higher than the Singapore Interbank Offered Rate (Sibor) or Swap Offer Rate (SOR) but also usually stayed consistently high, regardless of how low the base rates were.

    However since 2007, the bulk of home loans are now pegged to Sibor or SOR (plus a premium of 1.25 per cent). With Sibor at historically low levels (0.51 per cent as of Sept 16, 2010), mortgages are currently artificially low, making homes that were once out of reach based on the old lending rates very affordable. However, the current low Sibor rates will normalise at some point. It is just a question of when and how fast.

    Have there been instances where Sibor behaved erratically? The Asian financial crisis was one such example. Sibor spiked to a high of 7.75 per cent before finally sliding to 1.9 per cent in December 1998. The average rate of Sibor during that 18-month period hovered at 4.9 per cent.

    As Asia was fortunately not at the epicentre of the credit crisis in 2008, Sibor did not behave erratically but averaged around 1.3 per cent, almost three times the current rate of 0.51 per cent.

    So what is the likelihood of the above scenario panning out? At this point in time, with the global economic recovery still wobbly, a high interest rate environment looks rather unlikely. The good news is that history has shown that there are usually several warning signs before a financial crisis engulfs an economy.

    We are also hopeful that history would have taught the average Singaporean buyer not to overextend his debt like his Japanese and American counterparts, buying property that cost more than they could rationally afford because they assumed that values would only rise and interest rates would always remain at such levels. The bad news is that humans seldom learn from history.

    [I]The writer is chief investment strategist Singapore, UBS Wealth Management [/I]

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    Published September 23, 2010

    [B][SIZE="5"]HDB rental market surging ahead[/SIZE][/B]


    THE rental scene in the HDB market is buzzing, with strong demand for flats that is likely to continue as Singapore's economy powers ahead.

    The number of flats approved for sub-letting by the Housing and Development Board (HDB) exceeded 14,000 in the first half of this year.

    This is almost 94 per cent of the total for 2009. This year's quarterly average of 7,000 transactions is almost double last year's average of 3,750 units.

    In particular, the number of rental transactions for three-room HDB flats has already exceeded last year's total by 235 units or 4 per cent.

    Though Q3 numbers from the HDB are not yet available, it is likely that rental transactions for all the other flat types would have surpassed last year's total.

    The surge in rental demand is not surprising, considering the country's double-digit GDP growth and full employment.

    As companies increase hiring and the two integrated resorts continue to create buzz, the HDB rental market should remain strong.

    Tenants for HDB flats are typically Asian professionals, service industry staff, foreign students, and permanent residents (PRs).

    Currently, three-room flats account for about 39 per cent of rental transactions; four-room - 31 per cent; five-room - 22 per cent; and executive flats - 7 per cent.

    ERA's transactions show that median rents across all flat types have increased by an average of 5 per cent in Q3.

    Going forward, rental demand will continue to surge as Singapore's economy powers ahead.

    Also, PRs affected by HDB's new policy of having to sell their properties in their home country when they buy a HDB flat could decide to rent for now. This will add to the rental demand for HDB flats.

    We may soon see quarterly transactions come close to 8,000 units and this is likely to push rentals up again - possibly by 8-10 per cent over the next year.

    [I]The writer is associate director, ERA Asia-Pacific [/I]

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