Residential Market News Extract - 7 June 2012

Housing oversupply on the horizon, says Wing Tai boss

Just as pent-up demand saw housing prices shoot up over the past few years, a reverse situation could be at play now, says Wing Tai chairman Cheng Wai Keung.

People are bringing forward their decision to buy property as they fear prices may rise. As a result, demand in subsequent years may be lower than what is projected based on current demand. This could worsen an oversupply situation. "On top of that if the economy is not so good at that time, it will compound the problem," says Mr Cheng in an interview.

He attributes this to a cocktail of past undersupply, Singapore's population growth and liquidity.

"In 2003, 2004, 2005, when the economy was not so good, only people who really needed property would go out and buy.”

"Now, it's the reverse. Because of liquidity, people feel more secure, and even though the government continues to say that the economy is not doing well, apparently Singaporeans are still confident in general. Now some people may be bringing forward their buying (decision), thinking: 'I'd better buy now because prices are going up'.

"But my argument is that there is a danger of people bringing forward their demand, so subsequent years' demand may be lower than what they call average demand every year (based on current demand statistics).

"This will create an even bigger supply and demand inequilibrium; it will create an oversupply more than we think."

Analysts have also attributed strong property demand since 2009 to investors' distrust of financial instruments following Lehman's collapse. Strong liquidity and low interest rates and the onset of inflation have made property investment all the more alluring.

In addition, developers have also taken to minting small apartments to keep lumpsum investment size affordable, to draw a wider buying catchment.

Mr Cheng says that he understood the government's measures to cool the property market but has a suggestion. "Government policies, especially tactical policies, must have a sunset clause because they are enacted to deal with certain dislocation of market forces.

Source: Business Times – 7 June 2012

Suburban-urban price gap narrows because of MRT, amenities

Singapore's MRT network, along with a lethargic high-end market, has led to a narrowing price gap between suburban condos near MRT stations and those in the CBD/prime districts.

One way for the authorities to cool the mass segment of the private housing market would be to release more sites further away from MRT stations, reckons Wing Tai chairman Cheng Wai Keung.

He also notes that the network of MRT stations around the island has also reduced price differentiation between various suburban locations.

"The MRT transport network is so good that what is important now is not how far a property is from the centre or CBD; it (the price) is now more defined by how close you are to the MRT station.

In short, shopping malls and other amenities that were in the past offered only in urban locations are now duplicated in suburban areas.

Average launch prices for new suburban condos near MRT stations, excluding small units, are around $1,000 per square foot (psf).

Mr Cheng, however, does not believe that the price gap will continue to narrow between suburban and prime locations as "High-end locations still have a certain brand value."

One solution for the government to tackle the rise in property prices in the suburbs would be to release more land that is not next to MRT stations.

Land and property values for such sites are lower than those next to MRT stations.

While Mr Cheng acknowledges the motivation for government to tender out plots closer to MRT stations, to intensify land use near major transport nodes, he highlights some of the benefits of selling more land further away from MRT stations.

"You bring down the price which will reduce the anxiety of people . . . and help to moderate the urge to quickly want to buy (a property) before price goes up."

Secondly, by selling land that is further from an MRT station, "you allow people a choice to have cheaper housing".

From the state's perspective too, it makes economic sense to release not-so-conveniently located sites in a hot market rather than in a dull market.

In the current market, there will still be some takers for such plots.

Source: Business Times – 7 June 2012

Shoebox glut will distort planning, hit infrastructure

Cheng Wai Keung thinks building too many shoebox apartments will distort planning and put a strain on surrounding roads and other infrastructure.

He also urges buyers to beware this housing format, since it is still not widely tested.

"If you build too many shoebox units, you create a distortion in the market, because now all of a sudden you have a lot more people living in a place than the (planning) forecast . . ." the chairman of Wing Tai Holdings said in a recent interview with BT.

He suggests that the government, when it sells residential sites, could stipulate a minimum unit size for the development.

Alternatively, the maximum number of units could be stated. Leaving too much flexibility to the market may not be a desirable outcome for the planning process as it could throw the whole forecast off track.

Secondly, while rental returns for completed shoebox apartments seem to make sense now amid the current buoyant property market, things may change in a downmarket.

Urban Redevelopment Authority data released in April shows that the stock of completed small apartments (below 50 sq metres) on the island is set to increase from about 2,400 at end-2011 to 8,200 units by end-2015.

These estimates are based on the pipeline supply of such units that have been sold by developers as at end-2011; so the actual shoebox stock in future years could be larger since URA's estimates do not include shoebox units that had yet to be sold as at end-2011.

Source: Business Times – 7 June 2012

 

Experts see ECs as a good buy

Home hunters worried that executive condominiums (ECs) lack the prestige of private condos should think again, according to property consultants.

For those who are eligible, ECs - a public-private housing hybrid - offer a condo-like environment with government subsidies thrown in, they said.

'ECs have most, if not all, of the facilities of private mass-market condominiums and are generally comparable in design and facilities.

Some home owners who bought ECs a decade or so ago have benefited from their homes' rising value.

For instance, Nuovo, in Ang Mo Kio, went for an average price of $789 per sq ft (psf) in the first five months of this year. It was sold for $399 psf in 2001, when it was launched. Units range in size from 1,119 to 2,626 sq ft.

The EC option helped to reduce the long queue of sandwich-class home buyers who wanted executive flats, which were larger HDB flats then.

But the property boom drove up home prices and led to a greater appreciation of ECs.

Cost-wise, home buyers are likely to find a new EC in a far-flung place to have prices comparable to a resale HDB flat in more established areas.

But not all recently launched ECs have done well.

Source: The Straits Times – 7 June 2012

 

Whitley Road condo up for collective sale

A site in prime district 11 currently home to a freehold condominium is being put up for collective sale today.

Villa Des Flores, a 41-unit condominium, sits on a 104,370 sq ft site at Whitley Road.

The project comprises 13 townhouses and 28 apartments and is more than 20 years old.

The indicative price range is $160 million to $165 million which translates to $1,533 per sq ft (psf) to $1,581 psf.

The plot is zoned for landed housing development.

According to the 2008 Master Plan, the site can host two-storey mixed landed housing.

The successful developer can build detached, semi-detached, or terraced houses, or a combination of these.

As a cluster landed project, the site can hold about 24 strata bungalows, 48 strata semi-detached or 64 strata terraced houses.

Source: The Straits Times – 7 June 2012