Residential Market News Extract - 28 August 2012

Residential DC rates poised to climb

Development charge (DC) rates are set to increase from Sept 1 for non-landed residential use, say property consultants. This is based on land sales in the past six months at prices above land values implied by prevailing DC rates.

Most also forecast higher DC - payable for enhancing the use of some sites or building a bigger development on them - for industrial use, again citing winning land bids at state tenders.

However, rates are predicted to remain either flat or increase only slightly for landed residential and commercial use.

Even if DC rates have limited impact, they are monitored as they are an indication of the government's reading of land values.

At the last DC rate revision on March 1, the average DC rate for non-landed residential use was trimmed 3 per cent, marking the first decline for this use group since September 2009. This round, most consultants expect a hike.

The increases are likely to be concentrated in geographical sectors such as 100 (which includes Punggol, Sengkang and Buangkok) and 99 (covering Pasir Ris and Loyang), where four 99-year leasehold state land parcels have been sold in the past half-year at 42-64 per cent above land value.

A rate hike is also expected in geographical sector 113, which covers Hillview, where a plot was sold at a state tender at 79 per cent above the DC-rate implied land value. Colliers notes that three other private housing plots - on Boon Lay Way, Bright Hill Drive and in Tanah Merah - fetched premiums of 52, 55 and 81 per cent above their respective DC-rate implied land values.

In the March revision, landed residential DC rates were left untouched. If anything, there could be marginal increases for geographical sectors that include Good Class Bungalow Areas.

For commercial use, the average DC rate appreciated 6 per cent in the March revision. However, come Sept 1, commercial DC rates are expected to be flat on average, despite falling office rents, as prices have held up with strong investor interest as a result of residential cooling measures.

Industrial DC rates were left untouched in the March revision, after being jacked up 30.9 per cent on Sept 1, 2011.

However, for the upcoming revision, expectations are running high for a rate hike - on the back of evidence of strong demand, leasing and sales markets, and unrelenting price appreciation.

For hotel use, a 5 per cent hike is predicted in the average DC rate from Sept 1. The increase in hotel occupancies has resulted in a positive outlook for the sector. The sole hotel plot sold in the past half- year, on Rangoon/Farrer Park Station Roads, was 157 per cent above the DC-rate implied land value.

Source: Business Times – 28 August 2012

 

Foreign buyers returning to S'pore property

Foreign interest in non-landed private residential properties is returning, following a slump in interest after the Additional Buyer's Stamp Duty (ABSD) was introduced in December last year.

Looking at the four largest groups of foreign purchasers by nationality, Malaysians made up the largest portion of foreign purchasers in Q2, at 6.3 per cent, followed by Indonesians at 4.7 per cent, Mainland Chinese at 4.4 per cent, and Indian nationals, at 3.0 per cent.

Indonesians accounted for the biggest jump in transactions, from 247 in Q1 to 391 in Q2, followed closely by Malaysians from 398 in Q1 to 521 transactions in Q2. Mainland Chinese transactions rose to 365 in Q2 from 311 the previous quarter while transactions done by Indian nationals rose from 173 in Q1 to 252 in Q2.

For the period from July to Aug 23, mainland Chinese demand perked up, accounting for 6.2 per cent of foreign purchases, just behind that of Malaysians at 7 per cent. This was followed by buyers from India and Indonesia, which constituted 4.2 and 3.7 per cent respectively.

Malaysians were involved in 120 transactions between July and Aug 23, followed by mainland Chinese (107), Indian nationals (72), and Indonesians (63).

The percentage of foreign buying in Q1 and Q2 was 22.96 per cent and 23.58 per cent respectively. Based on data from July to Aug 23, this figure rises to 27.06 per cent.

Chinese buyers, in particular, continue to show much potential for Singapore property.

Between January and August 2012, non-landed residential properties in districts 19 (Serangoon Gardens, Hougang, Punggol), 18 (Tampines, Pasir Ris), 12 (Balestier, Toa Payoh & Serangoon) and 23 (Hillview, Dairy Farm, Bukit Panjang & Choa Chu Kang) were popular with Chinese buyers.

The Chinese government's move to reduce interest rates twice since June has spurred buying especially among genuine home buyers. This has resulted in an increase in new home prices in 49 out of 70 cities in July 2012 (according to the National Bureau of Statistics. With the global economic outlook remaining cloudy and further upside to residential prices at home, Chinese investors will likely be turning their attention back to home ground (including Hong Kong).

Source: Business Times – 28 August 2012

 

Rents for private housing climb to new high

Private housing rents have kept climbing to hit a fresh high last month, as a growing number of small apartments drove up prices in per sq ft (psf) terms.

A report found median rents for non-landed homes were up 7 per cent to $3.60 psf a month while rents for landed homes rose 2 per cent to $2.81 psf a month.

Across the board, rents for last month came in at a record $3.52 psf a month. This is higher than the previous record of $3.46 psf a month in May.

Leasing volumes have also risen in both the landed and non-landed segments, with 4,717 contracts inked last month - 11 per cent more than in June.

In the first seven months of the year, contracts were up 5 per cent to 27,932, compared with the same period last year.

This led to total transactional value reaching $137 million - 8 per cent more than the $126 million recorded in the same period last year.

Although newly arrived expatriates appear to have more constrained rental budgets, rents as measured on a psf basis have increased as these tenants lean towards smaller homes.

The number of leases is expected to stay high, although overall rents are expected to fall. At the moment, we are not yet witnessing the completion of the bulk of small-format homes sold from 2010 onwards, and this has the effect of keeping the rental indices up.

However, once more get completed from 2013 and if the euro zone situation does not improve, rents may see an inflexion point.

Rents inched up 0.3 per cent in the second quarter compared with the first three months of the year, according to the Urban Redevelopment Authority (URA).

Terraced homes lodged the biggest increase of 1.6 per cent.

All other segments also enjoyed higher rents except for detached homes, which saw a 1 per cent dip, and non-landed homes in the city centre, whose rents fell 0.1 per cent, URA data showed.

Source: The Straits Times – 28 August 2012