Property News & Market Trends

Property News in a nutshell - June

Even the Office property sector is cooling off...
Office rental prices have been flat. The average office occupancy rate in the second quarter dipped to 96.9%. Many tenants have relocated to cheaper venue. Companies are now more cautious about expansion and unconditional renewal. However, outer areas like the Novena and HarbourFront have gone up to 99%. CBRE reported Prime office rents edged up 10 cents - just 0.6% - in the second quarter to $16.10psf a month on average. Where DTZ stated office rentals went up by 1.1% - with Raffles Place going for an average of S$19psf. Whichever way you look at, increases are slowing to almost a halt.

Businesses have been looking to alternative locations like business parks, and temporary office locations to tide them over until new office locations open up in 2010. At the moment, business park rentals cost about half, or a third of what can be found in the CBD. Will demand within CBD picks up after 2010? If the IR is a success and Singapore economy springs back to life, why not? Then again, we have to look west to get a hint of what is to come.

HDB launches 2 new BTO Housing projects - Punggol & Sengkang & a DBSS in Toa Payoh
HDB launched two new housing projects, Punggol Breeze in Punggol and Fernvale Residence in Sengkang, under the Build-To-Order (BTO) scheme comprising of 1,587 premium flats - 55 three-room, 1,222 four-room and 310 five-room flats. With these two new projects, HDB has launched a total of 4,524 units in 7 BTO projects in towns like Punggol, Sengkang, Yishun and Woodlands in the first half of 2008. Punggol Breeze will have 778 units of four-room and 186 units of five-room flats. Fernvale Residence offers 55 units of three-room, 444 units of four-room and 124 units of five- room premium flats.

A new site for tender under the Design, Build and Sell Scheme (DBSS) was open on June 27. The site, located at Lorong 1A Toa Payoh, will be the sixth site to be offered under the scheme. The plot has an area of 27,480sqm and an allowable gross floor area of 115,416sqm, just minutes away from the Toa Payoh Town Centre.

SLA launches 8 "infill" sites
‘Infill’ sites are pockets of State land located in the midst of an established landed housing estate that have either been left untouched by nearby development, or are formerly used for public purposes that have since been phased out.

They will be offered through a public auction on 21/08/08 with fresh 99-year leases. In November last year, six infill sites were sold for over $30m. A site within the Good Class Bungalow area with a land area of about 1,400 sq m in Ridout Road, District 10 is also being offered. Possible developments for the other sites include detached, semi-detached and terrace houses. Some of the other sites are located within prime residential areas such as Holland Road and Carmichael Road. There is also a site at Upper East Coast Road, within walking distance of the popular Siglap and East Coast food haunts.

Valuation vs Valuer - Who & what decides?
In reference to Mr Patrick Tan’s letter, ‘Valuation the culprit in artificially inflating HDB flat prices’ (ST,June 17), Janet Han (Ms) Secretariat, Singapore Institute of Surveyors and Valuers replies: "The market value of a property is the estimated amount for which it should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where both parties acted knowledgably, prudently and without compulsion. The market is the final arbiter of what is an appropriate valuation.

Valuers have to examine the micro and macro factors of the particular segment of the real estate market, together with the economy sentiment. Such factors will include demand and supply of the various micro residential markets, and legislation and policies pertaining to the particular real estate segment. Factors affecting the private and the HDB residential market may be slightly different, and thus the property market cycle of each real estate segment is never identical. This also accounts for the difference in values of a property in different timeframes and different values for similar properties in different locations."

What is interesting is - Valuers based their "findings" of HDB past transactions at least 6-9weeks after a transaction is done! By then, prices could have moved. And it's incredible for them to "know" if the transaction is fair & favourable to both buyer & seller. So, how do they decide when a high transaction does not constitute a willing buyer/seller scenario or a low value transaction is not due to distressed sellout? Basically, valuation is a human factor - based on the valuer's perception of the marketplace, not the market price. That's the value of valuation.

17 units of The Sovereign for sale
Thakral Land is selling 17 units at The Sovereign, a FH condo for $75m to $99m. It is open to selling the units individually or to a single party. It has net yield of around 2.5%. Buyer of all 17 units may also hold the key to a potential collective which represent 19% of share value. Current Masterplan plot ratio - ratio of maximum potential gross floor area to land area - is 2.8, which is higher than the 1.8 plot ratio tapped by the existing property.

Property Investment deals drop but...
Investment sales of Singapore real estate dipped to $3.7 billion in Q2, or 58% lower than the Q1 2008 figure of $8.9b, according to CB Richard Ellis. The Q2 showing is the lowest quarterly number in three years, and brings the total so far in the first-half to around $12.6b. Full-year figure could come close to around $20b - or less than half the record $54.4b of investment sales deals. 

Nevertheless, there’s still plenty of institutional money ready to invest but pricing sought by institutional investors, including property funds, is lower than that being asked by most sellers. Public-sector land sales accounted for 34% or $4.3b of total investment sales so far this year. The office sector contributed about $5.2b or 41% of year-to-date investment sales. The more active investors in the short- to-medium term would be the core and core-plus investors which underwrite acquisitions with lower debt levels, given the current climate of tighter bank lending and moderate increases in office rentals going ahead.

In contrast, the residential sector has seen a much bigger slowdown. The $4.2b of deals in H1 2008 (up to June 20) is just 13% of the $33.3b achieved for full-year 2007. Residential investment sales done this year include around $2.1b of sites sold either through the Government Land Sales programme or at Sentosa Cove; around $141 million of collective sales sites (compared with some $14 billion for the full-year 2007); $817 million of landed home sales (including Good Class Bungalows); and around $1.1 billion of apartment/ condo sales (units costing at least $5 million each). Market watchers note that developers’ appetite for residential sites has weakened considerably in the first-half of this year against the backdrop of weak home sales.

The industrial property market chalked up $943 million of investment sales deals between Jan 1 and June 20 this year. Ascendas Reit, Mapletree Logistics Trust and Cambridge Industrial Trust were among the major buyers. With tighter bank financing these days, smaller office blocks and industrial or business park buildings costing $20-200 million each are in greater demand among funds. Industrial property is also more in favour now because it offers higher yields than offices and is a better match for these funds’ lower risk appetite in the current climate.

Dakota Residences received good responses
Ho Bee Investment and NTUC Choice Homes have sold more than 80 units of the 99-year leasehold Dakota Residences since Saturday morning. The developers released 122 units in the 348-unit project at an average price of $970psf - under the $1,100 or so they wanted a year ago.

Buyers are still keen if the price is right. Suites 123 at Rangoon Road was sold out. Oxley Ventures, offloaded 50 units of Parc Sophia, is also behind Zenith in Zion Road and Tyrwhitt 139 in Tyrwhitt Road, offers an interest absorption scheme. It lets buyers postpone the bulk of their payments on new purchases. Listed developer Sim Lian also started sales at the The Amery, a 74-unit development in Telok Kurau at the weekend. It sold 16 out of 39 launched units at an average of $860 psf, or between $1.16 million and almost $2 million.

More launches are expected in the next couple of weeks, including mass-market projects such as the 724-unit Livia in Pasir Ris and the 616-unit Clover by the Park in Bishan. Meanwhile, the Strata Titles Board gave the go-ahead yesterday for the collective sale of the 342-unit Minton Rise. Kheng Leong, which bought the site early last year, plans to build 1,300 flats for launch next year.

Government reduces number of sites
Only eight sites for outright sale; move follows poor sales in first half of year. Government is cutting back on the number of development sites being released for outright sale over the next six months. The move follows poor sales of the 37 sites that have been available since the start of the year.

Only five sites on the confirmed list have been sold while four other plots have yet to be sold or launched. None of the 26 sites on the reserve list has been put up for tender. These sites go on sale only if a developer makes a minimum bid. The Government decided not to award one residential site as the bids were too low, and it withdrew an unsold hotel plot in Race Course Road after it failed to attract an offer.

The iconic Capitol Theatre, Singapore’s first cinema, and nearby century-old Stamford House finally have a chance for a new lease of life. The Government yesterday announced that it will sell the huge 1.45ha prime site housing these historic buildings in December. Any development must include a hotel.

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