Completed shoebox units lead price falls this year

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http://www.businesstimes.com.sg/real...alls-this-year

Completed shoebox units lead price falls this year

NUS's Nov flash estimate for price index for completed small units is down 4.4% from Dec; mounting completions expected to put stress on rents, prices

By Kalpana Rashiwala

[email protected]@KalpanaBT

30 Dec


SO far this year, prices of small units have fared the worst of the four segments of completed non-landed private homes covered by the National University of Singapore's Singapore Residential Price Index (SRPI) series.

Flash estimates for November released on Monday show that the SRPI for completed small units of up to 506 sq ft islandwide has contracted 4.4 per cent since December 2013. The biggest month-on-month drop for this small unit subindex so far this year of 1.9 per cent was in November itself. However, as this is a flash value, it is subject to final revision next month.

SRPI's current basket, which was revised in December last year, has a total of 78,877 completed non-landed private homes islandwide, of which 3,092 units (3.9 per cent) are small units, that is, up to 506 sq ft (47 sq m). The basket comprises 429 private residential projects in Singapore that were completed between October 2003 and September 2013.

The subindices for Central and Non-Central regions (both excluding small units) have decreased 4 per cent and 3.9 per cent year to date. Over the same period, the Overall SRPI has also slipped 4 per cent.

The weakness in prices of shoebox apartments is set to continue as more such units are completed, say property consultants.

According to information in a September 2012 Urban Redevelopment Authority circular, the stock of completed shoebox units (50 sq m or smaller) would increase from about 2,400 units as at end-2011 to around 11,000 units by the end of 2015. The latter figure was estimated based on the number of shoebox units in the pipeline that had been sold as at Q2 2012.

DTZ South-east Asia chief operating officer Ong Choon Fah said: "We understand that more owners of completed shoebox units may be under pressure to sell because many of them had bought for investment, due to the affordable lumpsum pricing; and now that the units are completed, the full extent of the mortgage payment kicks in. Many of these owners would be looking towards rental to help service the loan but it is difficult to lease out shoebox apartments and at the same time, the outgoings are there: the monthly mortgage instalment, maintenance charges, and from Jan 1, 2014, landlords can no longer claim vacancy refunds on property tax."

Those who do not see a turnaround in the near term may move to dispose of their units sooner rather than later as the situation could deteriorate further. "With more completions expected, competition for tenants will intensify. Shoebox rents and prices will continue to be under threat of distress," Mrs Ong added.

SLP International executive director Nicholas Mak forecasts that about 6,200 shoebox apartments (up to 506 sq ft) will receive Temporary Occupation Permit in 2015 and 2016 combined, and estimates that rentals for shoebox apartments will drop 5-9 per cent for the whole of 2015, outpacing a 4-7 per cent decline in overall private residential rentals. "Supply will outpace demand for the whole private housing market but for shoebox units in particular, things will be more critical as they face competition for tenants from bigger units such as two and three-bedroom apartments as well as from units in projects with better facilities. Some shoebox units are within developments that do not have condo facilities, so owners will have to make downward adjustments to attract or to keep tenants."

NUS's SRPI flash estimates for November released on Monday reflect month-on-month declines of 0.3 per cent for the Overall index and 0.5 per cent for the Central Region subindex. Central Region is defined as districts 1-4 (including the financial district and Sentosa Cove) and the traditional prime districts 9, 10 and 11 by the university's Institute of Real Estate Studies (IRES), which created the SRPI series tracking prices of completed private apartments and condos. The sub-index for Non-Central Region was flat last month.

IRES also published the revised index values for October, which show the Overall SRPI increasing 0.4 per cent month on month. The Central Region sub-index rose 0.5 per cent while that for the Non-Central Region edged up 0.4 per cent. The small unit index inched up 0.1 per cent.

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http://www.businesstimes.com.sg/real...alls-this-year

Completed shoebox units lead price falls this year

NUS's Nov flash estimate for price index for completed small units is down 4.4% from Dec; mounting completions expected to put stress on rents, prices

By Kalpana Rashiwala

[email protected]@KalpanaBT

30 Dec


SO far this year, prices of small units have fared the worst of the four segments of completed non-landed private homes covered by the National University of Singapore's Singapore Residential Price Index (SRPI) series.

Flash estimates for November released on Monday show that the SRPI for completed small units of up to 506 sq ft islandwide has contracted 4.4 per cent since December 2013. The biggest month-on-month drop for this small unit subindex so far this year of 1.9 per cent was in November itself. However, as this is a flash value, it is subject to final revision next month.

SRPI's current basket, which was revised in December last year, has a total of 78,877 completed non-landed private homes islandwide, of which 3,092 units (3.9 per cent) are small units, that is, up to 506 sq ft (47 sq m). The basket comprises 429 private residential projects in Singapore that were completed between October 2003 and September 2013.

The subindices for Central and Non-Central regions (both excluding small units) have decreased 4 per cent and 3.9 per cent year to date. Over the same period, the Overall SRPI has also slipped 4 per cent.

The weakness in prices of shoebox apartments is set to continue as more such units are completed, say property consultants.

According to information in a September 2012 Urban Redevelopment Authority circular, the stock of completed shoebox units (50 sq m or smaller) would increase from about 2,400 units as at end-2011 to around 11,000 units by the end of 2015. The latter figure was estimated based on the number of shoebox units in the pipeline that had been sold as at Q2 2012.

DTZ South-east Asia chief operating officer Ong Choon Fah said: "We understand that more owners of completed shoebox units may be under pressure to sell because many of them had bought for investment, due to the affordable lumpsum pricing; and now that the units are completed, the full extent of the mortgage payment kicks in. Many of these owners would be looking towards rental to help service the loan but it is difficult to lease out shoebox apartments and at the same time, the outgoings are there: the monthly mortgage instalment, maintenance charges, and from Jan 1, 2014, landlords can no longer claim vacancy refunds on property tax."

Those who do not see a turnaround in the near term may move to dispose of their units sooner rather than later as the situation could deteriorate further. "With more completions expected, competition for tenants will intensify. Shoebox rents and prices will continue to be under threat of distress," Mrs Ong added.

SLP International executive director Nicholas Mak forecasts that about 6,200 shoebox apartments (up to 506 sq ft) will receive Temporary Occupation Permit in 2015 and 2016 combined, and estimates that rentals for shoebox apartments will drop 5-9 per cent for the whole of 2015, outpacing a 4-7 per cent decline in overall private residential rentals. "Supply will outpace demand for the whole private housing market but for shoebox units in particular, things will be more critical as they face competition for tenants from bigger units such as two and three-bedroom apartments as well as from units in projects with better facilities. Some shoebox units are within developments that do not have condo facilities, so owners will have to make downward adjustments to attract or to keep tenants."

NUS's SRPI flash estimates for November released on Monday reflect month-on-month declines of 0.3 per cent for the Overall index and 0.5 per cent for the Central Region subindex. Central Region is defined as districts 1-4 (including the financial district and Sentosa Cove) and the traditional prime districts 9, 10 and 11 by the university's Institute of Real Estate Studies (IRES), which created the SRPI series tracking prices of completed private apartments and condos. The sub-index for Non-Central Region was flat last month.

IRES also published the revised index values for October, which show the Overall SRPI increasing 0.4 per cent month on month. The Central Region sub-index rose 0.5 per cent while that for the Non-Central Region edged up 0.4 per cent. The small unit index inched up 0.1 per cent.

There goes the mickey mouse!