Collapse or short term blip for SG RE?

Collapse or short term blip for SG RE?


by Sonia Kolesnikov-Jessop


After two years of exuberance, activity in the private housing market in Singapore has slowed to a near standstill. The number of new property sales, measured on a monthly basis, contracted 64.9 percent in April, as buyers became more cautious and took a wait-and-see attitude. As a result, several well-publicized launches have been put on the backburner for an indefinite period and some developers have started to drop asking prices, for example at The Lakeshore in Jurong West and Blu Coral in Telok Kurau.



An air of doom and gloom has settled over Singapore’s residential property market and vultures are circling, proclaiming the Singapore residential property market is about to collapse by 30-40 percent, but are they interpreting the facts correctly? Not all experts agree, with some calling the current market downturn more of a short-term blip rather than the beginning of a market collapse.


“The slowing of the property market is a natural development after prices skyrocketed on the back of very strong demand,” says Sherman Chan, an economist at Moody’s, “but a 30-40 percent collapse is highly unlikely. The construction sector is an important growth driver for Singapore and I don’t think the government would let it collapse as there would be wider ramifications. Let’s not forget that the government imposed some measures last year to cool down the market and these measures could very well be lifted if need be.”


In recent weeks, several bearish reports have forecast a dramatic plunge in home values over the next two years. Barclays Capital believes private home prices could slide 28-30 percent by 2010, while Credit Suisse predicted a price decline of 30 percent in 2008-2009.


The bears are pointing to several factors suggesting the writing is on the wall. The stock of unsold condominiums (as measured by projects that have been issued a sales license) rose to 10,861 units in the first quarter of this year, 34 percent higher than the quarterly average in 2007 and back up to levels not seen since June 2005. Net CPF withdrawals for private property have turned negative for the first time, reflecting the decline in transaction as well as profit taking by local buyers who own more than one property. “This has never happened before, not even during the 1998 Asian Financial Crisis,” notes Barclay Capital economist Waiho Leong. And vacancy rates in non-landed property developments have also risen in recent months toward 6.3 percent, compared with 5.6 percent in the last quarter of 2007. Credit Suisse, in its recent report, argues that this will rise further to 9.8-19 percent, on a base and worst case scenario. This could in turn trigger a sharp fall in rentals further weakening the market. “The last time vacancies shot up from 5.8 percent to 9.7 percent, rentals fell by 41percent,” Credit Suisse Tricia Song wrote referring to the year 1996.


Casting long shadows on the markets are the estimated 66,000 home units expected to be completed between 2009-2012, as well as the possible unwinding of speculative purchases. Unless many of the developments that are currently in the pipeline are postponed, a cumulative surplus could provide a glut that will be felt most acutely in 2010, Leong warned.


The bears also argue that given the current thin sales environment, the small price growth recorded by the URA indices do not reflect sentiment and can easily be biased by a few high-end sales. A better gauge of sentiment is land prices and developers’ waning appetite for recent URA auctions, they say. In May, a 99-year residential leasehold site in Choa Chu Kang Drive attracted a top bid of only $203 per square foot per plot ratio, well below the $230-$270 psf ppr range the market had expected.


But not everybody agrees. “I think bad interpretation of data is causing the string of bad news,” says Ku Swee Yong, Director, Savills Residential Private Limited.


Ku points out that the supply figures touted by some analysts bundle together planned, under construction and complete unit numbers. “The reality is that any apartments expected to complete in 2010 but still not under construction today, is unlikely to be completed on time given that the average construction period for a 20 storey apartment block takes 24 months from foundation works till handover” Ku remarks.


“The construction sector is tight on resources today and unless there are policy changes given to encourage faster pace of construction, the ‘oversupply scenario’ is not a realistic one,” he adds.


Tay Huey Ying, Director for Research and Consultancy at Colliers, agrees, pointing out that although the supply pipeline appears a “bit on the high side,” once delays and abandonment of project developments are taken into account, “the new supply will be much lower than expected.”


Leonard Tay, director, CBRE Research also points out that many of the units will be taken out by either en-bloc sellers who need to relocate, or new expatriates moving here. “There is a lack of activity in the market, but property prices have been holding. I believe there are still a lot of buyers in the market with ready cash; they’re just waiting for what’s next,” Tay says, forecasting that the luxury end of the market may “dip just a bit” this year, but prices should hold for now.


As for the units bought under the deferred payment scheme that some say will be “dumped” in the market as the construction is completed, Ku says their number is probably limited to around 2,900, 10 percent of the 29,000 units that URA has given approval for sale under Deferment Payment Scheme. “Not that much to worry about,” he says.


Many property consultants are pointing to the long-term prospects for the Singapore property market supported by the positive vibe stemming from the Integrated Resorts and events such as the F1 race and the 2010 Youth Olympics.


“I think the Singapore property market is still pretty strong. We could see a mild correction, but I don’t see that as a concern because the government is still trying to attract expatriates to work here and they will contribute to demand for properties,” Chan says.


Tay also points out that given the anticipated continuing influx of foreigners, the 15-year historical average number of 7,000 new units needed a year is likely to increase to 8,000 to even 10,000 units.


“So I don’t foresee an oversupply situation as yet. I don’t think the sky is about to fall in,” she says.


Source: Asia Property Report

More instability expected in REIT market before it picks up

More instability expected in REIT market before it picks up


SINGAPORE: UBS said more instability is expected in the relatively cool real estate investment trust (REIT) market before it picks up, and this turnaround could happen as early as the last quarter this year.


Although REITs have been under pressure in the current volatile market, some other market-watchers said they expect to see new REITs being launched within the next six to 12 months.


Retail and healthcare REITs, along with the lowly geared and plain vanilla ones, will be among the first to pick up, before the others do.


Mark Ebbinghaus, MD, Head of Real Estate, Lodging & Leisure, UBS, said: “The market will look increasingly for strong sponsorship. Independents will find it tougher whereas a large, well-sponsored vehicle with a sound management will probably come out first.”


UBS thinks it will take at least another six months before things get better.


“In terms of the broader global market where we’re a little of two-thirds of the way down, there’s still some instability to come through. It may take another six months. It’s still very uncertain that we would be gearing up for more significant activity in 2009, but that could be brought back a quarter to the last quarter of this year,” he said.


Other market-watchers noted that the general easing of liquidity once the sub-prime issue works its way through the system will also give REITs a boost.


Justin Chiu, Executive Director of Cheung Kong Holdings, said: “Right now, because of higher liquidity problems, REIT operators do have problems with borrowing. REIT unit prices have dropped quite a bit so expected yield is higher for investors. But as market consolidates, yield will compress once more, making it easier to make further acquisitions. I expect new REITs will come into the Singapore market in the next six to 12 months.”


REITs have enjoyed a honeymoon period in Asia since the first one was launched in 2001. But they have sold off more than 15 percent in value since last year.


Still, most market-watchers are positive that fundamentals continue to be relatively good for most real estate companies around the world.


Source: Channel NewsAsia

Mapletree and Arcapita form joint venture to hold JTC industrial portfolio

Mapletree and Arcapita form joint venture to hold JTC industrial portfolio


SINGAPORE: Mapletree Investments has formed a joint venture with Arcapita Bank of Bahrain to hold a portfolio of industrial properties bought from JTC Corp.


The assets are worth a combined 1.7 billion Singapore dollars.


Arcapita will hold a 56.5 per cent stake in the joint venture called Mapletree Industrial Trust (MIT).


Mapletree will own 25.1 per cent, while the rest will be held by Mapletree Industrial Fund, a pan-Asian private real estate industrial fund sponsored by Mapletree.


In a statement, Mapletree said the acquisition of JTC’s industrial property portfolio, which was announced in April, has been completed.


The properties include 39 blocks of flatted factories, 12 amenity centres, three multi-tenanted business park buildings and one warehouse building.


The assets have been officially transferred to MIT on July 1.


Mapletree Industrial Fund Management will manage the properties. – CNA/vm


Source: Channel NewsAsia

SPRING Singapore building put up for sale

SPRING Singapore building put up for sale


SINGAPORE: The SPRING Singapore building at No. 2, Bukit Merah Central has been put up for sale by expression of interest.


The property comprises a 22-storey tower block and a six-storey podium block.


SPRING Singapore sits on an area of 88,295 square feet and the building has a total gross floor area of 355,153 square feet.


The property has a lettable area of 198,744 square feet and is almost fully occupied.


The Urban Redevelopment Authority has given permission for the property to be used for commercial purposes until its lease expires in 2083.


When the deal is completed, SPRING Singapore would lease back about 50 per cent of the building.


Property consultants Colliers International is marketing the commercial development. – CNA/ir


Source: Channel NewsAsia

Singapore expected to hold up despite gloomy global outlook

Singapore expected to hold up despite gloomy global outlook


SINGAPORE: According to economists, the Singapore economy is seen meeting the government’s growth targets for the full year, despite a gloomy global outlook.


But they have warned that higher oil prices will drag down growth for the next two quarters.


Oil prices have been on the upsurge and are now holding above US$140 a barrel. The uptick is expected to continue, with crude futures pushing past the US$150 threshold within the next few months.


David Cohen, Director of Asian Economic Forecasting, Action Economics, said: “Singapore’s economic growth should manage something a little over 5 per cent which would be slightly above the mid-point of the government’s official projection from 4 to 6 per cent. That would be respectable by any standards even if it’s slowing from last year’s 7.7 per cent growth.”


A recent survey by the Monetary Authority of Singapore (MAS) shows that private sector economists are expecting full-year GDP to come in at 5.5 per cent as oil-related sectors continue to boom.


Moreover, domestic demand is expected to provide some support to the service industry including retail, hotels, restaurants and construction services. Some are also hopeful of a rebound in the biomedical sector.


Robert Prior-Wandesforde, Senior Asian Economist at HSBC, said: “Pharmaceuticals which was growing for a month or two at a hundred per cent is now contracting by 50 per cent. That’s really swinging this economy around and I think that is why the second quarter could see a negative.


“(But) I would expect that to bounce back and I think that would be the key reason why the third quarter would be positive. I think Singapore will do okay… I’m still looking for quite an ambitious and quite a positive 6 per cent growth number for 2008.”


But the outlook for the manufacturing sector, specifically electronics, is uncertain as inflation is at its highest in 26 years.


“I think inflation will start to come down in the second half of this year in Singapore but perhaps not as quickly as the central bank would like. Therefore, I expect the Monetary Authority of Singapore to keep the exchange rate strong here, towards the top of the band as a means of keeping downward pressure on inflation,” Mr Prior-Wandesforde added.


Inflation is now at 7.5 per cent, but that is expected to ease in the second half of the year. Nonetheless, to rein in rising costs, economists expect the MAS to keep to its strong Sing dollar policy.


Source: Channel NewsAsia

MTI to release 8 industrial sites in the second half this year

MTI to release 8 industrial sites in the second half this year


The Trade and Industry Ministry will release eight industrial sites with a total area of some 13 hectares for the second half this year.


Of these, only one is in the confirmed list, while the rest are released under the reserve list.


The site confirmed for sale is located at Tampines Industrial Avenue 4.


MTI said that for this site, JTC will be introducing specific technical conditions on minimum floor plate size per unit and the product type.


The objective of such conditions is to address demand for industrial space for single-users which need larger floor plates.


Further details on these conditions will be announced by JTC when the site is ready for launch.


Other sites released under the reserve list include those at Yishun, Kallang Pudding Road and Serangoon North.


Under the reserve list, the Government will only release a site for sale if an interested party submits an application for the site to be put up for tender.


The tender offer must be of a minimum purchase price that is acceptable to the Government.


The figures of the site releases are identical to government industrial land sales programme for the first six months of the year.


Source: 938Live

Exciting vision for mega site

Exciting vision for mega site


URA seeks to bring ‘24/7’ life to cluster near Bugis


AN EXCITING cluster of shops, homes, entertainment centres, hotel and office space — all set within an attractive garden-like environment in the heart of Singapore’s city centre.


This is the Urban Redevelopment Authority’s (URA) vision for the 2.7-hectare green field development site, :bordering Ophir and Rochor roads, it is putting out for tender.


With analysts forecasting a possible land sales price of over $1 billion, this could be the second most expensive plot of government land sold this year, after the $1.2 billion paid by Parkway for a rare hospital site near Novena.


“Every major developer in town will be looking at it,” said Mr Nicholas Mak, director of consultancy and research at Knight Frank.


“But while they may be paying attention, they may not all bid, because in today’s market, getting the necessary financing is difficult. As this is a big one, some might bid in consortiums instead.”


The URA wants to bring some “exciting 24/7” life to the area.


The site, located behind Parkview Square, is seen as a natural extension from the established convention, office and hotel hub at Marina Centre.


“New developments in the Beach Road/Ophir-Rochor Corridor will inject vibrancy and activities to this part of the city and form a new office cluster for financial and business institutions that will complement the existing financial district at Raffles Place and Marina Bay,” said the URA’s statement.


The site can potentially accommodate at least 570,000 sq ft of mixed-use space.


At least 40 per cent of the area is zoned for office use and at least 15 per cent must be for hotel and hotel-related uses.


Mr Li Hiaw Ho, executive director of CB Richard Ellis Research, said: “If awarded, the office development is likely to be ready in 2013 and could offer city-fringe office occupiers an option to upgrade or expand into a higher grade quality building without moving into the central business district.


“There would also be the added benefit of proximity to the Circle Line, which would have been completed a few years earlier, as well as the Downtown Rail Transit System (RTS) line that will be completed around the same time,” said Mr Li.


“Thus, an office development on this site should be attractive to occupiers.”


The site is flanked by the historical district of Kampong Glam. Bras Basah and Bugis are also nearby.


In fact, the future development will have direct basement-level connections to the new Bugis Interchange MRT station, with immediate access to the existing East-West RTS line and the recently-announced Downtown RTS line.


The new development can tower up 40 storeys high, providing panoramic views across the city to Marina Bay and the new Sports Hub at Kallang.


Source: Today Newspaper

New Project Launch by Developer: L’viv

New Project Launch by Developer: L’viv


Developer: WingTai


Address: 23 Newton Road (Dist 11)


Tenure: Freehold


Type of Development: Single 32 Storey Tower Block


Total Unit: 100


Site area: 3,984.20 sqm (42,886 sqft)


Unit Mix: 2 bedrooms (980sqft), 3 bedrooms (1475sqft), Penthouses


Expected TOP: 4th Qtr 2011


Special Features: Soaring through the night sky in a dazzling beacon of light, L’VIV is set to take chic city living to new heights. Located in the prime residential enclave of Newton, this exclusive boutique development boasts prime views of the city from each tastefully appointed apartment. It also features 4 distinct lifestyles suites on the 24th storey, perfect for entertaining and relaxing. L’Vista lets you host your own fabulous private pool party, whilst the L’Viva lets you unwind and chill out with your friends anytime, any day. Wellness enthusiasts can immerse themselves in holistic goodness at L’Vanda, after which they can enjoy a soothing massage at L’Verdure. With easy access to MRT stations, prestigious schools, shopping malls and the premier Orchard Road shopping belt, L’VIV is the ultimate lifestyle residential development for well-heeled and style-savvy individuals.



Please contact me if you need further details on the above-mentioned projects or any other projects’ details. I would be more than happy to be of assistance.

Flash estimate of HDB resale flats prices up 4.4% in Q2

Flash estimate of HDB resale flats prices up 4.4% in Q2


SINGAPORE: The flash estimate for prices of HDB resale flats rose 4.4 per cent in the three months to June, over the previous quarter.


This is slightly higher than the 3.7 per cent increase in the first quarter.


In the first half of the year, HDB has launched a total of 4,524 new flats.


Subject to demand, HDB plans to offer about 3,900 new flats under the Build-To-Order system over the next 6 months in various towns.


The total planned BTO supply of 8,400 new flats this year will surpass the BTO supply in 2007.


This will be in addition to flats offered under the Balloting Exercise for surplus replacement SERS flats, and the other exercises for sale of balance flats from previous offers.


Source: Channel NewsAsia

Flash estimates of private residential property prices up 0.4% in Q2

Flash estimates of private residential property prices up 0.4% in Q2


SINGAPORE: Private residential property prices rose 0.4 per cent in the second quarter of this year, according to flash estimates released by the Urban Redevelopment Authority.


This compares to the 3.7 per cent increase in the first quarter.


Prices of non-landed private residential properties increased by 0.2 per cent in Core Central Region, 0.7 per cent in Rest of Central Region and 1.3 per cent in Outside Central Region in the second quarter of the year.


In comparison, for the first quarter of 2008, prices of non-landed private residential properties increased by 3.8 per cent in Core Central Region, 3.3 per cent in Rest of Central Region and 3.8 per cent in Outside Central Region.


Analysts note the softening prices contributed to a pick up in sales toward the end of the second quarter in some attractively located and reasonably-priced projects launched.


On the supply side, as at first Quarter of 2008, there were about 67,700 private residential units in the pipeline, of which about 56,500 new private housing units are expected to be completed between 2008 and 2011.


About 42,700 units of the supply in the pipeline (or 63 per cent) had not been sold by developers yet.


Said Ms Margaret Thean, DTZ’s Executive Director for Residential: “This is clearly indicated by the sell-out status of projects such as Suites 123 while Nassim Park, Parc Sophia, Dakota Residences and Clover by the Park received encouraging response.”


DTZ also foresees further price corrections in private residential properties going forward as high inflation compounds the expected economic slowdown globally.


Source: Channel NewsAsia