Oversupply in office spaces, falling retail rents and corrections in the residential market are taking a hit on Singapore’s real estate investment prospects.
Singapore slips in ranks of real estate investment favourites
Singapore fell 10 places for city investment prospects, dropping to 21 from the 11th spot a year ago, a report by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC), revealed.
As recently as 2012, Singapore had topped the ranks of real estate investment favourites.
“Singapore’s low ranking in this year’s report has been attributed to various factors including overcapacity in office space, falling retail sales and a residential market correction” said Dr Seek Ngee Huat, Chairman of ULI Asia Pacific and Chairman, Global Logistic Properties.
Amidst a market slowed by cooling measures and a weaker economic outlook, the Urban Redevelopment Authority’s (URA) price index for Singapore’s private residential market slid 1.5 percent to 137.9 in in the third quarter of this year, its 12th consecutive quarter of decline. Meanwhile, retail sales fell 1.9 percent year-on-year (YOY) in September over 2015’s numbers.
“However, the report findings indicate that investors still believe in the long term fundamentals of Singapore and are on the lookout for investment opportunities,” Dr Seek continued.
“Focusing on the positive, we could be close to the bottom of the cycle and we are seeing opportunities to invest. I hope, given the uncertainties in local and global economy, there will be an increase in transactions across asset classes over the next twelve months,” said Yeo Chee Keong, Real Estate and Hospitality leader for PwC Singapore.
While a weaker core market in Singapore has made assets in the city state more attractive, the report suggests that prices have yet to fall enough to attract serious buyers. However, Chinese investors are rumoured to be looking in Singapore, and may be early buyers as they are relatively less price sensitive.
Topping the list of investment prospects this year are Bangalore, Mumbai, Manila, Ho Chi Minh City and Shenzhen. The rise of these cities in emerging markets is part of a trend where investors, both institutional and private, are finding it hard to source for core, high value assets, even as yields and returns continue to decline.
The report Emerging Trends in in Real Estate Asia Pacific 2017 is authored annually by ULI and PwC, and solicits the opinions of 604 real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
UOL to launch new projects in Clementi, Potong Pasir
Property developer UOL Group is planning to launch two new residential projects in Clementi and Potong Pasir over the next two years, reported Singapore Business Review, citing a report from OCBC Investment Research.
The Clement Canopy, a 505-unit condominium in Clementi in which UOL owns a 50 percent stake, is expected to launch in the first quarter of 2017.
Raintree Gardens in Potong Pasir, which was acquired by the group via an en bloc sale with UIC Ltd, will be redeveloped into a 750-unit project that will hit the market in 2018.
UOL has seen healthy sales at its previously launched Singapore projects. The 797-unit Botanique at Bartley recorded a take-up rate of 96 percent, while Principal Garden and Riverbank @ Fernvale are 43 percent and 78 percent sold, respectively.
The three projects obtained their Temporary Occupation Permit (TOP) in September 2015 and May 2016, respectively.
With this, the group’s revenue for the quarter climbed 11 percent year-on-year to $393 million, on the back of higher topline contributions across its hotel, property development and property investment segments.
Property development revenue, for instance, jumped 19 percent year-on-year to $207 million due to higher progressive recognition from Botanique at Bartley, Riverbank @ Fernvale and Principal Garden, said OCBC.
HDB launches 10,118 flats in November sales exercise
The Housing and Development Board (HDB) launched 10,118 flats for sale on 22 November in its largest sales exercise in 2016.
Build-To-Order (BTO) flats accounted for more than half of the units launched for sale, with 5,110 units spread across nine projects. Of these, three projects are located in the non-mature estate of Punggol, while the other six are within the mature estates of Bedok, Bidadari and Kallang Whampoa.
Excluding grants, prices for the flats range from $80,000 for a 2-room Flexi flat in Punggol to $503,000 for a 5-roomer in Bedok.
Meanwhile, the remaining 5,008 balance flats are spread across 11 non-mature and 14 mature estates.
“They comprise 635 units of 2-room Flexi, 1,266 units of 3-room, 2,233 units of 4-room, 837 units of 5-room, 23 units of 3Gen, 13 units of executive flats, and one unit of Multi-Generation flat,” said the HDB.
Prices start from $75,000, excluding grants, for a 2-room Flexi unit in a non-mature town to $525,000 for an executive flat in a mature town.
The Housing Board noted that the launch brings the total BTO and balance flats supply this year to 17,891 and 10,178 units, respectively. This works out to a total flat supply of 28,069 units.
Lim Yong Hock, Key Executive Officer at PropNex Realty, expects flats in mature estates to receive a higher subscription rate of between four to eight times, while those non-mature estates will see a subscription rate of one to three times.
“HDB BTO overall subscription rates for this year have dropped from 4.7 in February to 3.7 in May and 2.3 in August,” he noted.
“We predict that this last BTO launch for the year will see an average rate of three to five times due to more matured estates released this time round.”
The latest exercise will close on 28 November. Furthermore, the next BTO launch will be held in February 2017, with about 4,100 flats offered in Clementi, Punggol, Tampines and Woodlands.
Integrated development to rise next to Buangkok MRT station
The government plans to transform the open field next to the Buangkok MRT station into an integrated development, revealed the Ministry of National Development (MND) on 7 November.
In a written reply to a parliamentary query from MP Gan Thiam Poh as to the progress of the proposed development, the MND said a residential property will be integrated with a bus interchange and the MRT station.
“There are also plans to include community facilities and commercial amenities,” it added.
The Ministry noted that the Urban Redevelopment Authority (URA) is working closely with other agencies to ensure that the various uses are properly planned and integrated in the future development.
More details on the future development will be released once the plans are finalised, said the MND.
HK billionaire buys Asia’s priciest apartments
Hong Kong billionaire Edwin Leong Siu-hung has acquired the most expensive apartments in Asia for a total of HK$912 million (S$167 million), reported the South China Morning Post.
The 64-year old property investor bought two adjoining luxury apartments—which have a combined area of 8,702 sq ft—on 8 November at Wheelock Properties’ Mount Nicholson development at The Peak for an average price of HK$104,803 psf (S$19,224 psf), breaking the record price for Asian homes on a psf basis.
With a net worth of US$3.9 billion (S$5.5 billion), the founder and chairman of property developer Tai Hung Fai Enterprise was ranked the 17th richest person in Hong Kong by Forbes this year.
The purchase was made just three days after the Hong Kong government increased the country’s residential property stamp duty to 15 percent for those buying their second and subsequent houses, but Leong told local newspaper Oriental Daily that he does not have any other properties under his name.
Retail rents continue to weaken amid decline in demand
Demand for retail space in Singapore has continued to soften, weighing down on retail rents in the third quarter of 2016, revealed a Knight Frank report.
This comes as retailers continue to consolidate outlets to streamline costs on the back of persistently weak retail spending, intensified completion for the spending dollar, as well as the softer global and local economic conditions.
In Q3 2016, average Orchard Road prime rents fell 0.5 percent to $35.10 psf per month, while suburban prime rents improved marginally by 0.1 percent to $29.50 psf per month.
Prime rents held steady within the Marina Centre-City Hall-Bugis and city fringe areas, standing at $31.40 psf per month and $24.70 psf per month, respectively.
On an annual basis, prime rents across all locations declined.
“This was largely weighed down by the weaker retail spending amid the softened global and local economic performance, which resulted in more tenants working towards downsizing and consolidation of their businesses,” said Knight Frank.
Given the challenging retail environment, Knight Frank expects rents to moderate further in the fourth quarter of 2016.
Average rents in the central region, for instance, are forecasted to fall by six to eight percent year-on-year by Q4 2016, while the more resilient prime rents are expected to drop by up to three percent year-on-year over the same period.
Knight Frank noted that the predicted fall in rents takes into account “not only the projected weakened demand from retailers, but also the likelihood of landlords re-adjusting the rental structures to help their tenants tide over down cycles of the market in order to maintain healthy occupancy status”.
About 1.072 million sq ft of net lettable major retail space is set for completion for the whole of 2016. Of this, 38.2 percent (409,000 sq ft) was completed during the first half of 2016, while the remaining 663,000 sq ft is set to be completed in the second half of 2016.
And with retailers taking a cautious stance towards business expansion, Knight Frank expects island-wide occupancy to fall from 92.8 percent in Q4 2015 to between 90 percent and 92 percent in Q4 2016.
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