Home buying momentum remains despite slower sales
Sales of new private homes in Singapore fell 16 percent to 322 units in January this year from the 384 units sold in December 2015, according to latest data from the Urban Redevelopment Authority (URA).
Including executive condominiums (ECs), developers sold 478 units in January, down from 508 units previously. Meanwhile, developer sales (excluding ECs) dropped 14 percent year-on-year from the 376 units sold in January 2015. Despite the drop in sales, analysts believe that there continues to be traction in the market.
“There is still a momentum that’s underpinned by genuine buyers looking to buy a home for owner-occupation. Buyers are steadily picking up previously launched projects — both private homes and ECs,” said CBRE’s Desmond Sim, Head of Research Singapore & Southeast Asia.
“Despite the fact that there have been no new EC launches for the past three months, the market registered EC sales of an average of 155 units. Developers have been drip-feeding the private home market with units of previously launched projects.”
Top-selling private residential projects in January include The Poiz Residences, Kingsford Hillview Peak, Sims Urban Oasis, Botanique at Bartley and The Panorama, revealed JLL, which attributed their better sales performance to their proximity to MRT stations and amenities. For ECs, the better performing projects were The Amore, CDL’s The Brownstone, and The Vales.
Looking ahead, Ong Teck Hui, National Director, Research & Consultancy at JLL, reckons that the biggest immediate threat to stability in the residential property sector is the volatility in the stock market.
“As the volatility continues, a soft landing for the private home market in 2016 appears less likely. Buyers would become more cautious and developers would be less confident in launching new projects.”
He noted that the correlation between the stock market and the residential market can be significant, as seen during the last global financial crisis (GFC), when the stock market plunged 62 percent between October 2007 and March 2009, and developer sales dropped 71 percent from 14,811 units in 2007 to 4,264 units in 2008.
“While current financial market conditions are considered less severe than the GFC, continued volatility in the stock market is still likely to have an adverse impact on the residential market,” added Ong.
5-room Pinnacle flat sold for nearly $1.07m
A 1,162 sq ft flat at Pinnacle @ Duxton (pictured) was sold in January 2016 for $1,068,888.
Data from the HDB, as cited by AsiaOne, revealed that the five-room unit is situated on one of the levels, from the 28th to the 30th storeys of Block 1B.
Located along Cantonment Road, Pinnacle @ Duxton is a public housing project comprising 1,848 units within seven tower blocks, linked by sky gardens on the 26th and 50th floors. The development is within walking distance to the Tanjong Pagar MRT station.
The transaction represents Singapore’s second most expensive sale of a five-room flat, according to The Edge Singapore. Data shows that another unit was sold for $1.02 million in January. Over the past year, five-room units at the development have been snapped up for between $868,000 and $1.088 million.
The five-room flats were priced from $345,100 to $439,400 during the project’s launch. Flat owners began selling their units at the end of 2014, after fulfilling the five-year minimum occupation period (MOP).
Balestier Point may go en bloc
Balestier Point (pictured), a mixed-use freehold development, may be put up for collective sale for approximately $250 million to $350 million, or around $1,337 to $1,872 per sq ft per plot ratio (psf ppr).
A report by The Straits Times said the property’s owners appointed an eight-member collective sale committee in October 2015, and ERA Realty as its marketing agent in January this year. However, they have yet to set the date for an extraordinary general meeting to obtain the owners’ approval.
Completed in 1986, the 62,315 sq ft property comprises an 18-storey residential block and a two-storey retail podium with a basement. The site is zoned commercial and residential under the 2014 Master Plan, with a building height limit of 30 to 36 storeys and a plot ratio of 3.0.
Owners may be motivated to sell, considering the above-market premium for the said property. Last month, a 1,119 sq ft apartment located on the ninth floor was sold for around $1 million ($900 psf). “It is within the Novena medical hub area and we are exploring the possibility of applying for change of use, subject to approval by the authorities,” said ERA Realty agent Stanley Koo.
Property consultancy CBRE noted that the most recent collective sale within the area was Skysuites 17 — formerly Diamond Tower — for around $49.6 million ($582 psf ppr) in April 2010.
“Due to the cutback on residential land offered through the Government Land Sales programme, developers may want to look at collective sales as an alternative source of land. At the end of the day, the most important thing is to bridge sellers’ and buyers’ expectations,” said Desmond Sim, Head, CBRE Research, Singapore and South East Asia.
Govt won’t let property market crash: Shanmugam
The government has a “rough idea” on when to revise the property cooling measures, “but that doesn’t mean that we announce it”, said Home Affairs and Law Minister K. Shanmugam.
Speaking to over 2,000 property agents at an ERA Realty conference on Wednesday (3 Feb), the minister said such a decision would be made by the National Development and Finance ministers when they assess the risks to be “less or manageable”. He was responding to questions on when the Additional Buyer’s Stamp Duty (ABSD) would be removed.
He explained that the measures were put in place by the government to protect Singaporeans, and they have managed to avert the disaster of an overheated property market, noting that while some people are worried that the property market could go the other way, the government will ensure this doesn’t happen. “We cannot have a healthy economy if the property market has crashed. So it’s not in anybody’s interest to see it crash.”
First introduced in December 2011, the ABSD was revised upwards in January 2013 to rein in Singapore’s escalating residential property prices. Singaporeans are required to pay an ABSD of seven percent for a second property, and 10 percent for a third and subsequent property. However, foreigners are required to pay an ABSD of 15 percent for their first and subsequent property purchases.
Eugene Lim, Key Executive Officer at ERA Realty, believes that the government is watching the market closely and will tweak the property measures in due time. “The question is when, and many analysts have tried to set a target of how much prices will come down before the government removes the measures, but I do not think that is the case. The government is concerned about Singaporeans over-leveraging themselves as there are many potential buyers waiting on the sidelines.
“Right now, we’re not sure how quickly prices will rebound if one of the measures is removed, and I think that is the litmus test for the government. They don’t want to remove something and cause prices to rebound, derailing the measures. They are looking at market stability rather than a target price.”
Property investment sales lowest since 2009
Property investment sales in Singapore plunged 15 percent year-on-year to $16 billion in 2015, the lowest sales volume in six years, according to a DTZ Research report.
Property sales by government agencies fell 13 percent to $5.8 billion, while private investment sales dropped eight percent to $10.3 billion.
The report stated that the decline in investment sales was largely due to the mismatch of price expectations between buyers and sellers, and the slowdown in launches of new sites from the Government Land Sales (GLS) programme. Sales were also affected by the uncertainty in global markets, as local investors sought to diversify their portfolio by growing their asset pool overseas.
Nevertheless, there was still much interest for Singaporean properties in 2015, given the country’s good governance and dynamic economic environment, said DTZ.
The biggest deal completed last year was the sale of a site in Paya Lebar for $1.67 billion to Abu Dhabi Investment Authority and Lend Lease. The developers plan to build a mixed development that will have 91,340 sq m gross floor area (GFA) of office space, 43,740 sqm of retail space and 429 apartments.
Meanwhile, the sale of a land parcel at Dundee Road in Queenstown was the most expensive residential site sold in 2015 via the GLS programme, fetching the highest price of $483 million. Awarded to Hao Yuan Investment, the site also saw the year’s highest residential price per square foot per plot ratio (psf ppr), at $871 psf ppr. The breakeven price for the proposed development is expected to be at least $1,240 psf, noted DTZ.
The consultancy added that investors are willing to bid for leasehold projects that are priced reasonably and have redevelopment potential. For instance, The Verge, which was sold for $317 million in Q4 2015, can be redeveloped into a mixed-use development.
Going forward, DTZ expects the real estate investment market in Singapore to present interesting opportunities for investors.
“2016 is expected to be a rocky year for the commodities and stock market, so real estate will become an attractive asset class for investors. Additionally, in a populous, land-scarce Singapore, the economic conditions are favourable for long-term property appreciation, so real estate with good specifications and location will still be in demand,” said Swee Shou Fern, DTZ’s Senior Director of Investment Advisory Services.
Expats now living in Phuket, working in Singapore
Expatriates in Southeast Asia are relocating their families to Phuket and commuting to work in major cities nearby such as Singapore, Hong Kong, Kuala Lumpur and Bangkok during the week, before returning to the tropical island on weekends via Phuket’s international airport.
Kevin Hodges, the North Branch and Investments Manager for Siam Real Estate, said that living standards, the cost of living, and infrastructure in Phuket are a major draw for families who would otherwise be living in much smaller and more expensive properties. This is especially true in cities like Singapore and Hong Kong.
According to the Phuket Gazette report, it is possible for a family to own or rent a four-plus-bedroom villa with a private pool and other amenities in Phuket at about the same price of a two-bedroom condo in Singapore. This is a major factor to consider for families who need additional space and amenities, as well as privacy.
Phuket has a number of international-standard medical facilities, improving infrastructure, beaches, numerous leisure activities, a low cost of living and a growing expat community that is making it more feasible for people to live there and work further afield, noted Hodges.
Another draw for families relocating to Phuket is the growing number of international schools found on the island. The newspaper reported that there are now 13 such schools on the island, with 10 established in the past decade. Demand for places in international schools from both expat and Thai families is greater than ever, and a number of these schools are expanding.
With the ASEAN Economic Community going into effect soon, more expats and possibly even Thais could choose Phuket as the place to move their families while working in Bangkok or other cities in Southeast Asia.
Singapore REIT yields hit 5-year high
Top Singapore-listed property trusts saw their dividend yields hit a five-year high, attracting global investors seeking refuge from the oil price slump and jitters over the weakest economic prospects of China, reported Reuters.
Using comparable month-end data available over the past five years, a Thomson Reuters analysis of 14 real estate investment trusts (REITs) showed that the median dividend yield as at end-January was 6.7 percent, the highest since April 2011.
Notably, the end-January spread between the aforementioned yield and Singapore’s 10-year government bond yield was also at its highest during the said period, at 4.4 percentage points. The yield trend provides a timely reminder of the allure of investments related to the brick-and-mortar type of REITs, which generally offer stable income streams.
“We believe current (REIT) valuations are attractive re-entry levels, and that large caps (large capitalisation trusts) are likely to benefit as investors turn yield-hungry in a tepid growth environment,” said DBS analysts Derek Tan and Mervin Song.
Meanwhile, the REIT horizon may be cloudy, with Singapore trusts facing a potential industrial and office space supply glut, the report said. Some prospective tenants, on the other hand, may hold off on new leases amid the same macro-economic concerns plaguing the financial segments.
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