Residential Market News Extract - 29 August 2012

Singles twist puts boot in shoebox units

Shoebox homes will likely see a drop in demand if the government allows singles to directly purchase new flats from the housing board, say property consultants that BT spoke to.

The extent of the drop will depend on the strength of the restrictions that these experts believe will likely be placed on singles purchasing built-to-order (BTO) flats.

Private apartments in the shoebox category (which singles below 35 used to have to buy because they cannot purchase HDB flats) might see demand wane.

Such homes are 50 square metres (538.2 square feet) and below in size, and have been quite well-received by affluent singles in the market.

But how large a dent this will create in the shoebox apartment market will hinge on whether limits, such as income ceiling restrictions, will be imposed on singles who buy BTO flats.

Discerning singles with more sophisticated living requirements may find that HDB flats have a fairly mixed profile of residents. But in a private apartment development, buyers are generally more educated and matching in backgrounds.

The impact on the HDB resale market will depend on how restrictive the regulations concerning the purchase of BTO flats by singles would be. The government has not released the details of such regulations and conditions yet.

HDB is already running at almost full capacity to produce as many new HDB flats as possible to meet demand from eligible buyers. It will put additional stress on the system and the environment if the HDB now has to to produce even more flats to satisfy demand from singles.

Another factor that will impact singles' demand for BTO flats is the type of homes that the HDB will allow them to buy, and the supply of such new flats. If the supply is low, then the impact on both the new and resale markets will be minimal.

Source: Business Times – 29 August 2012

Far East tops bid for Farrer Rd site, beating 14 others

Property giant Far East Organization yesterday muscled out 14 other bidders to emerge as the top bidder for a smallish 99-year leasehold plot at Farrer Road (next to Lutheran Towers). The plot can potentially generate up to 54 apartments.

Far East was the only major residential player that took part in the state tender.

Its unit, Far East Soho, bid $45.777 million, or $1,107.80 per square foot per plot ratio (psf ppr), for the 29,509 sq ft plot. Its bid was 3.3 per cent higher than the second-highest bid of around $44.3 million or $1,072.73 psf ppr - from industrial property developer Soon Hock group's unit, Soon Hock Tuas Development.

The latest plot tendered yesterday, within walking distance of Botanic Gardens MRT Station, can be developed up to five storeys and can have no more than 54 units, based on a formula which assumes an average home size of 70 square metres (753.47 sq ft) gross floor area under development control guidelines issued last November on the maximum number of units for flat and condo developments within residential estates with 1.4 plot ratio.

The proposed scheme will comprise a mix of one and two-bedroom apartments with high ceilings, "with the majority of units being two-bedders to cater to young families who appreciate trendy and flexible spaces in an urban setting", he added.

The site enjoys a central location near the shopping, dining and recreational amenities in the Botanic Gardens and Orchard Road, Far East said.

Far East's estimated break-even cost at $1,500-1,600 psf and expects the selling price for the new project to be around $1,800-1,900 psf.

Source: Business Times – 29 August 2012

Suburban condos resist price pressure

Completed private apartments and condos (excluding small units) in the suburbs have been the best price performers year to date, according to National University of Singapore's Singapore Residential Price Index (SRPI) series.

The subindex for Non-Central Region (excluding small units) rose 1.3 per cent between December last year and July this year, based on the flash estimates for July released yesterday.

Over the same period, the subindex measuring prices of small units (up to 506 sq ft) islandwide dipped 0.1 per cent, while the subindex for Central Region (excluding small units) posted a 3.9 per cent loss, making it the worst performer.

The overall SRPI has declined 1.1 per cent in the year-to-date, based on the July 2012 flash estimate issued by NUS' Institute of Real Estate Studies. SRPI tracks prices of completed private apartments and condos (excluding executive condos).

For July itself, the overall index declined 1.1 per cent month-on-month, after inching up 0.1 per cent m-on-m in June.

The subindex for small units (up to 506 sq ft) islandwide rose 1.1 per cent m-on-m in July after slipping 0.9 per cent m-on-m for June.

The subindex for Central Region (excluding small units) dipped 1 per cent m-on-m in July, identical to its June performance.

The Central Region is defined as Districts 1-4 (which include the financial district and Sentosa Cove) and the traditional prime residential districts of 9, 10 and 11.

Many high-end homes were launched in 2007 and purchased on Deferred Payment Scheme. Hence property financing would have commenced upon project completion and various investors may feel the financing pressure as leasing has moderated with companies tightening expat allowances. Buyers who made profits from such homes may relent slightly to cash out.

The subindex for Non-Central Region (excluding small units) fell 1.3 per cent in July, reversing June's 1 per cent gain.

According to analysts, the number of shoebox apartments (less than 500 sq ft) transacted fell 10 per cent from 828 units in the first quarter of this year to 748 units in Q2. These figures are based on URA Realis caveats data and cover both completed and uncompleted units.

A caveats analysis showed that the number of shoebox units sold in Outside Central Region (where suburban projects are located) declined by 34 per cent quarter on quarter while elsewhere on the island, shoebox transactions rose 36 per cent quarter on quarter. As a result, the OCR's share of islandwide shoebox transactions fell from a record high of 65 per cent in Q1 to 47 per cent in Q2.

In tandem with this trend, islandwide, the proportion of shoebox units picked up by those with HDB addresses declined to 11 per cent in Q2 from a record high of 17 per cent in Q1.

Source: Business Times – 29 August 2012

'Balance' flats: Priority for couples with young kids?

Public flats that are close to completion could be earmarked by the authorities for couples with young children, property analysts predicted.

These units, left unsold in previous launches, could figure in changes to housing policy as the Government seeks to raise fertility rates, they added.

In his National Day Rally speech on Sunday, Prime Minister Lee Hsien Loong said the Government was looking at a range of measures to help stem declining birth rates. One was to afford "some consideration to giving couples with young kids priority when they book HDB flats".

Giving them priority in "balance" flats, in particular, would be useful as they would have to wait a substantially shorter time before they get their keys.

Balance flats are those not taken up at previous launches for reasons such as there not being any takers, or the buyer rejected the unit. These flats are either close to completion or have been built.

On the other hand, those who opt for Build-to-Order (BTO) flats may have to wait more than three years from the time they book the flat to moving in.

This year, so far, the Housing Board has put up for sale about 17,000 BTO flats and about 4,000 balance flats.

Giving couples with young children first dibs on such flats will not only ease the concerns for such couples but it could also encourage them to have more children earlier.

Currently, up to 95 per cent of the supply of new flats in well- developed towns are reserved for first-timers, or those who have yet to get a housing subsidy. In less-developed towns, up to 85 per cent of flats are reserved for this group.

In addition, first-timers have twice the chance at the ballot box than second-timers. And they have more chances under the Married Child Priority Scheme - at least four tries - if they live near or with their parents.

Source: The Straits Times – 29 August 2012

Singles don't expect same chance as couples

Prime Minister Lee Hsien Loong may have hinted at the National Day Rally that singles will soon be allowed to buy new flats from the Housing Board (HDB) - but singles are not holding their breath.

While they welcomed the prospect of having access to brand new, subsidised flats and not just being confined to the resale market, they do not expect to be put on a level playing field with married couples.

In fact, observers predict that given the HDB's longstanding goal of using public housing to encourage marriage and child-bearing, the policy change for singles will come with many caveats.

There is a precedent: Before 2001, the HDB allowed singles to buy resale flats of only three- room or smaller size, and only in towns outside the central area.

The minimum age for a single to buy any HDB flat has always been 35. Singles above that age are allowed to buy any resale flat, and those earning $5,000 or less a month are eligible for a cash grant of $15,000 and an HDB loan.

Singles bought 3,972 HDB resale flats last year, 16.1 per cent of the total.

Analyst speculate that it is possible that the HDB will sell new flats to singles at a marked-up price to what couples pay.

When a couple buys a Build- to-Order (BTO) flat, the discounted price enjoyed is the HDB's subsidy for two Singaporeans. So if a single can buy at the same price, he or she is enjoying a double subsidy.

He said new HDB flats are still a scarce commodity, with new projects in mature towns still oversubscribed. This may give rise to public backlash over allowing singles access to BTO flats.

It remains to be seen if the supply of new flats promised by the HDB - 25,000 this year, with 20,000 promised for next year - will be sufficient to accommodate a buyer base that will include singles, said observers.

That is because it is not clear yet which singles are allowed to join the BTO queue, and what criteria they will be subject to.

Despite uncertainty over what the final policy change will be, singles were happy with PM Lee's acknowledgement that with high resale prices, they have few options for a home of their own.

Source: The Straits Times – 29 August 2012