Property News & Market Trends

Property News in a nutshell - July

URA & HDB both announced Price Index up by 0.2% & 4.5% for Q2
Amidst the subprime and inflation woes, the Urban Redevelopment Authority’s price index showed increases as follows:
- Private residential at 0.2%
- Offices at 0.7%
- Shop at 0.7%
- Industrial at 4.1%

Prices for condominium and apartments in districts 9, 10, 11 increased by a miserable 0.1% where downtown district and Sentosa fell 0.1%. Properties in areas outside the region went up between 0.7% and 0.9%. As for landed property, prices rose 0.6%. There are 43,473 new units still unsold from a total supply of 67,569 uncompleted units. This includes more than 12,000 which developers held back from launch and another 28,282 units pending approval.

Rentals increased as follows:
- Private residential at 2.5%
- Office at 6.3%
- Shop at 5.2%
- Industrial at 2.3%

Singapore currently has 71 million square feet of office space, and is expected to add about 10 million by 2012. Citigroup estimates that rents could fall 30% to 35% by 2011 as a host of new office buildings are expected to be ready for occupancy. “The strong Singapore dollar, the high rental rates, the slowing economy and the uncertainties surrounding the financial industries are likely to put a lid on new demand for office space.”

Housing & Development Board’s resale flat price index increased 4.5% in Q2 2008 over the previous quarter, higher than the 3.7% gain in Q1 2008. Resale transactions increased by about 22%, from about 6,360 cases in Q1 2008 to about 7,760 cases in Q2 2008. The median cash-over-valuation (COV) amount of all resale transactions in Q2 2008 was $20,000, a slight dip compared with the COV of $21,000 in Q1 2008.

Meanwhile, subletting transactions in HDB flats increased by about 15 per cent to about 4,120 cases in the second quarter from about 3,580 cases in the first quarter.

Agency starts firing non active agents
PropNex Realty said that it was firing more than one-third of its agents. About 2,800 agents who have been with the firm for over a year but have yet to record a single transaction will be terminated, PropNex said. Era has a policy of terminating non-active agents every 6 months. HSR has yet to embark on house cleaning as they confirmed a new & bigger premise to house their agents. Overall, an estimated 300 new agents joined the industry every month as compared to more than a monthly average of 800 last year.

2 small office blocks sold for $40m
Both buildings are 999yr leasehold, one in High Street and another at Middle Road were sold at an estimated $1,300psf of existing net lettable area.  A Hong Kong investor is believed to have bought the 7storey Wisma Sugnomal at 75 High Street for $23.5 million or $1,349 psf based on existing NLA of 17,414 sq ft. Fragrance group bought the property at 33 Middle Road for $16.8 million or $1,324 psf of existing NLA in the 5storey building.

Enbloc prices slashed by 40% to attract buyers
Asking for $58 million to $60 million for Robin Court, a walk-up block of 15 flats, and No. 1 Robin Drive, a detached house that hosts a preschool. The new price tag for the 40,518 sq ft parcel works out to $964 to $996psf(compared to $1,500 to $1,600 psf previously)  of the total potential floor area of about 62,400 sq ft.

Meanwhile, two blocks of 38 tenanted apartments at Gallop Gables off Farrer Road are also looking for buyers. The properties are owned by Straits Trading. The indicative price is $1,500 psf, which works out to about $4.5 million for each apartment, or $171 million in total.

Park Central @ AMK attracts thousands, as expected
Some 1,200 buyers visited Park Central @ AMK(TOP 2011) on the first day of its launch on Wednesday. 130 applied for the flats. The project is Singapore’s third condominium-style public housing, and a queue to view the showflats started forming at 5am. All 578 units at Park Central@AMK come with fittings like built-in wardrobes, air-conditioners and parquet flooring. The four 30-storey blocks will house four- and four-room units priced between S$433,000 and S$689,000 or about S$500 per square foot. These are about S$400,000 for a four-room flat and up to S$550,000 for a five-room unit.

Slowdown in Hotel investment in Asia
Asia is likely to register a sharp slowdown in hotel investments across the region this year, according to Jones Lang LaSalle Hotels. The hotel investment advisory company said hotel sales in Asia may drop by as much as 75 per cent, compared to last year. Some US$11 billion worth of deals were transacted across Asia in the hotel investment market last year. But Jones Lang LaSalle has forecast that hotel transactions in the region are likely to drop to as low as US$3 billion this year.

Despite this, Jones Lang LaSalle Hotels is optimistic that activity will pick up in 2009. It has forecast that the number of hotel rooms in Asia will surge by 25.8 per cent, with 140,000 new rooms to be added around the region over the next three years. It added that the increases will be most pronounced in India, but growth has been hampered by rising land prices.

1 Philip St sold for $99m
Auric Pacific has sold One Phillip Street in the Raffles Place area to UK-based New Star International Property Fund for $99.02 million or $2,736 per square foot of the 999-year leasehold building’s net lettable area (NLA). Auric’s selling price is about 2.6 times the $37.6 million it paid for the 16-storey building about two years ago when it bought the property from Kewalram Group. Interestingly, Kewalram had bought One Phillip Street from Lippo in early 1996 for $76.8 million.

The asset is New Star’s second major acquisition in Singapore. In May last year, it bought Parakou Building, at the time a newly completed freehold office block, at the corner of Robinson Road and McCallum Street for $128 million or $2,013 psf of NLA. This is the 17th asset the fund has bought since its launch in June last year. Its properties are located in Japan, Australia, Germany and the Netherlands, in addition to Singapore. The open-ended fund has raised £pounds;650 million (S$1.8 billion) so far, of which about £pounds;270 million have been invested so far.

Enbloc rulings rules
The selling price could have been higher if the sales committee or its agent had tried harder to secure a better deal. In the case of Horizon Towers, a potential buyer was even standing by with a higher price than the one that was eventually chosen. But that cannot be reason enough to disallow an en bloc sale, according to Justice Choo Han Teck as he brought a protracted saga to an end. In a landmark decision, the judge set out the role of the Strata Titles Board as well as which of its findings can be challenged, and which ones cannot. When it comes to price, as long as the STB finds that a purchase price is fair, which would make it a “finding of fact” in legal parlance, it would have fulfilled its duty and is entitled to approve an en bloc sale. Minority residents at Horizon Towers who argued that the $500-million sale to Horizon Partners Private Limited (HPPL) was done in bad faith - as evidenced by Vineyard Holdings’ higher offer of $510 million :- had failed to prove their case.

Capitaland's new Farrer Condo to be launch next year
CapitaLand is developing the 99-year leasehold plot with three partners. Hotel Properties and a Morgan Stanley Real Estate fund will each hold 22.5 per cent, while Wachovia Development will take 20 per cent. These parties, which borrowed a whopping $1.996 billion for the ambitious project, yesterday held a signing ceremony for the loan with their bankers at the Four Seasons Hotel. It is the largest syndicated residential property development loan ever arranged in Singapore and comes amid a slow housing scene and tight credit markets. CapitaLand said the deal comprises a $1.362 billion term loan, $500 million of revolving credit and $133.9 million in bank guarantees. The collective sale deal for the former Farrer Court condo site was inked in June last year at $1.338 billion, or up to $783 per sq ft (psf) of potential gross floor area. Ms Patricia Chia, chief executive of CapitaLand Residential Singapore, said the project’s break- even cost is around $1,350 psf to $1,450 psf. The condo will be launched in the first half of next year.

Fannie Mae & Freddy Mac in trouble
On 11 July, Fannie and Freddie saw their share prices halve in the course of a few hours. Elsewhere in the financial sector, trading this week has seen troubled banking giant Citigroup’s share price tumble to 10-year lows, and insurance giant AIG’s fell to levels not seen since 1995.

How is US public debt doing? It's about US$14.5 trillion. But try to think about it this way: Would you be worried if your friendly next-door neighbour had bank borrowings equivalent to one year’s income? Well, that US public debt number is only slightly larger than the US economy’s annual GDP.

SLA properties & new sites offer
The Singapore Land Authority (SLA) has awarded the first two sites for transitional office space this year. The former Home Affairs Ministry complex at Phoenix Park parcel was awarded to LHN Facilities Management, which will pay S$368,888 in rent per month. The second site is the former Monk’s Hill Secondary School at No. 10, Winsteadt Road in the Newton area. It was awarded to Allbest Equipments for a rental of S$211,328 per month. The SLA also is preparing to lease out two more sites for office use. 11 bids were received for the Phoenix Park site, 10 of which were above the guide rent of S$165,000 per month. The second site is the former Monk’s Hill Secondary School at No. 10, Winsteadt Road in the Newton area. It was awarded to Allbest Equipments for a rental of S$211,328 per month. The plot received seven bids in total, all above the guide rent of S$147,300 per month. The SLA is preparing to lease out two more sites for office use. The first is a former police post at No. 1, Kelantan Road. It has a gross floor area of 177 square metres and is suitable for small start-ups. The second site is the former Pacific Can Building at Cecil Street, which has a gross floor area of 1,810 square metres. Leases for the two properties will end in June 2011.

UK property suffers
Britain’s economic slowdown heralds a wave of forced commercial property sales that could yet tip a downturn in real estate markets into a 1990s-style property crash. Some new buildings could be left empty, while others could be taken over by creditors, causing the all too familiar drag effect that haunted the industry for more than a decade last time around. It took almost 13 years for UK commercial property values to regain their 1989 highs, according to Investment Property Databank. Far fewer new offices are going up in London than was the case almost 20 years ago, and creditor banks have learned that foreclosure can make a bad property situation worse, but property derivative traders sense trouble ahead as occupier demand begins to wilt.

‘Many borrowers are reliant on income from tenants to meet interest commitments to their debt providers,’ said Jon Gershinson, who heads the insolvency team at property services firm Allsop. ‘As the economy continues to weaken, this carries the inherent risk of tenant default and therefore those borrowers having difficulty meeting interest payments.’ The speed of the correction in property prices since the market peaked a year ago has been far faster than the last property crash nearly 20 years ago, with commercial real estate values down by a fifth and house prices almost 10 per cent down.

How the IRs will affect the housing market
The two integrated resorts (IRs) are expected to employ some 75,000 people, demand for housing will go up. Both IRs are expected to employ foreigners. As such, homes for the masses will become Singapore’s residential most lucrative market.

If 50%(35,000 jobs) are taken by foreigners, this would generate a substantial demand for the rental market. If we estimate that around 25,000 resort workers will reside in the lower tier of the housing market, the main demand would enter both the HDB, as they are more affordable. The spillover would be group sharing of condos & landed properties. The worrying subject would be the huge supply of high end properties coming TOP in 2009-2011. These supplies will be greatly affected if demand in this sector does not pick up.

Although the Urban Redevelopment Authority’s first quarter figures show that there were 14,862 vacant private residential units available in the market, Savills Singapore believe that they could include units from condominiums that had been sold en bloc and old apartments in unliveable conditions. Hence, the current available private units could be as few as 7,500 units. Moreover, the mass segment will see a moderate supply of only 8,400 units to be completed between 2008 and 2010. This modest supply, coupled with the strong demand in the rental market, is likely to boost homebuyers’ as well as investors’ confidence in the residential mass-market.

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