Residential Market News Extract - 3 September 2012

Developers delay high-end launches

Developers seem to be delaying the launches and, in some cases, completions of their luxury residential projects as they await the anticipated uptick in the high-end segment.

As homes in suburban areas fly off the shelves at record high prices, it is a different picture in the luxury sector with anaemic volumes and prices languishing over the past year.

Prices of new non-landed luxury homes reportedly dipped 6 per cent to $2,230 per sq ft (psf) in the second quarter. This is on top of a 5 per cent fall in the first three months of the year.

But things might change for posh homes with volumes picking up again now as the price gap between high-end homes and suburban apartments narrows.

Experts say that developers have, in the meantime, held back their official launches as they wait for this turnaround.

One mode of sale considered for luxury projects is the private preview. Some developers are said to have chosen to tap their network of contacts too.

A fear is that if sales did not come in after a proper major launch, it would reflect badly on the project, said the consultant.

Some projects that have chosen the private route include Tomlinson Heights, Le Nouvel Ardmore and Bishopsgate Residences.

Units in these projects often cost more than $3,000 psf, with overall prices of at least $5 million.

Those selling through official launches are delaying the process until their projects are completed.

Some developers have also appealed for a waiver of extension charges.

These fees are incurred by foreign developers who do not dispose of all homes in a project within two years of its completion. Foreign developers refer to any firm with at least one non-Singaporean shareholder or director, and thus includes all the listed developers here.

Some may even choose to pay the additional buyer's stamp duty and transfer their unsold inventory to an investment company and lease out these units as investment assets while waiting for a price appreciation in the medium term.

Experts add developers could also choose to delay completions for some projects so they do not get caught by the two-year rule. This is especially so for projects that have not sold well.

Source: The Straits Times – 3 September 2012

 

COVs for resale flats rising again

Cash premiums for HDB resale flats are slowly inching upwards again after falling and stabilising for most of this year.

Fresh data from the larger property firms revealed that the overall median COVs, or amount paid above the valuation of a flat, was about $30,000 for the previous two months.

Analysts say the rebound is due in part to a stronger buyer sentiment, coming on the back of flagging premiums.

The overall median was about $26,000 in the first two quarters this year, down from about $34,000 in the fourth quarter last year, according to agency estimates.

ERA Realty key executive officer Eugene Lim said, however, that these are exceptions to the rule. "These buyers could be private property downgraders who are cash rich, and may have even funded the purchase without a loan."

"Traditionally, the areas with higher cash premiums tend to be mature towns where new flats are a scarcity," he added.

Such areas include Bishan, Marine Parade, Queenstown and Toa Payoh.

Overall, analysts expect cash premiums to stay at this level for the rest of the year, although resale flat prices will continue to inch upwards.

There is a resistance among buyers to pay any higher premiums in general, as there are many more options in the market, such as new flats if they are willing to wait, or even executive condominiums.

To stabilise and meet the demands of the red-hot housing market, the Government had promised about 25,000 new flats this year, and at least 20,000 next year.

Compared to resale flats, these units could mean a wait of more than three years for home buyers, depending on construction time.

The Housing Board plans to put about 6,700 flats on offer this month. These will range from new flats in Ang Mo Kio, Kallang/ Whampoa and Tampines, as well as balance flats that were unsold in previous sales exercises.

Source: The Straits Times – 1 September 2012

 

Nearby residential projects to benefit

Details of the new Thomson Line MRT stations have set the property market buzzing over just which project might benefit the most from Wednesday's announcement.

Experts say the clear winners are residential projects within a 500m radius of the new stations as they are expected to enjoy a healthy gain in home prices.

But some developments have the exceptional luck of being right on the doorstep of a station, guaranteeing even more robust price and rental increases, they add.

Projects like The Calrose, Far Horizon Gardens and Thomson Grove, for example, are right next to the future Lentor MRT station.

And The Gardens @ Bishan and Faber Garden Condominium are right smack beside the upcoming Sin Ming MRT station.

Some projects in the city will enjoy even greater connectivity.

The Equatorial, for instance, will be right next to the Stevens MRT station, while owners of The Trillium, The Cosmopolitan and Yong An Park will cheer now that the Great World MRT station will be right in front of their homes.

Experts add that while home owners are expected to gain from the rise in prices of these apartments, the interim construction period might also be a very painful one.

A safe bet for investors looking for a home close to an MRT station might be to look for developments that are in good condition.

If they are on a 99-year lease, then they should be less than 10 years old to ensure higher capital appreciation since the line will be fully running only in 2021.

In the much longer term, some older projects might even have collective sale potential as their plot ratios could be raised now that they are more accessible.

While the hype might result in owners raising their selling prices now, reality will sink in when construction starts and that's when prices will stagnate or even drop.

Tenants will also avoid these projects owing to inconveniences such as road diversions, noise and dust. Rental yields will suffer too.

The best time for investors keen on buying a unit next to an MRT station could be a year or two before the station opens instead, as this anticipates the larger price gains that typically happen only after the station is open.

Source: The Straits Times – 1 September 2012

 

Woodlands home prices may rise by 30 per cent

The upcoming Thomson MRT line could lift home prices in the Woodlands area by up to 30 per cent, according to one real estate expert.

The three stations along the new line - Woodlands, Woodlands North and Woodlands South - will cater for residents of more than 4,300 private homes as well as those living in HDB units, which dominate the area.

The Woodlands North station is near Republic Polytechnic and Woodlands South, close to Christ Church Secondary School.

Homes near the Woodlands station should get the biggest lift as it is sited adjacent to the existing station on the North-South line. Both will be linked eventually to become an interchange.

Surrounding HDB flats, such as five-room units along Woodlands Avenue 5 and Woodlands Drive 50, are already changing hands at more than $450,000. Some housing agents believe transactions crossing the half-million-dollar mark will not be too far away now that the station's location is known.

The Woodlands area is already attracting keen buyers. Condominium prices have been increasing by between 15 and 20 per cent over the past two years.

Resale units average $650 to $800 per sq ft, while new launches can be had for between $900 and $1,000 psf.

There has been healthy buyer interest in new launches like the 689-unit Parc Rosewood and 337-unit Woodhaven, both of which are still under construction.

Home price increases may not be as steep as in the past when there were fewer MRT lines in the country.

The new rail line could also hasten the development of Woodlands as a regional centre with more retail outlets and offices - changing the face of this typical HDB estate.

Unlike Tampines and Jurong East, Woodlands has seen little commercial and civic development.

Malls like Causeway Point could benefit as residents from other parts of Singapore capitalise on the improved transport links and visit the area.

Source: The Straits Times – 1 September 2012

 

Resilient housing rentals but for how long?

The private housing rental market may have achieved a record last month when the combined value of the 4,717 leasing contracts signed hit S$24.5 million, but early signs of “ghost towns” are emerging with the number of vacant apartments surging in the past 18 months.

The previous dollar value record of S$24.4 million was achieved exactly a year ago – in July 2011. However, in terms of the number of leasing contracts transacted, last year’s number was higher with 4,752 leasing deals closed for that month.

Stock-wise, the net increase in the number of completed private properties last year grew by 25 per cent from 2010. This year, the net increase in stock is projected to grow by at least another 10 per cent.

While there are areas where rentals have declined, there are many locations where rentals have continued to rise. An important factor contributing to the resilience of housing rentals is the growth in the number of renter households even as supply rises.

In the past, expatriate households have been the dominant force in determining the state of the leasing market.

If expats are not behind the increase in the number of renters, we can conclude that there are more local renters these days.

They could be beneficiaries of en bloc sales who choose to rent before buying a new place or have bought something under construction.

They could be speculators who have sold their existing units at record prices, and are parking their profits elsewhere while waiting for the market to correct. In the meantime, they rent.

They could be upgraders who see little point in buying new units because of the high prices. Instead, they do extensive renovations to their existing units and rent while this is happening.

Or there could have been a dramatic rise in single-person households – due to lifestyle changes – who are choosing to rent before buying.

Although the growth in the number of renter households have largely kept pace with the number of units completed in percentage terms, the absolute quantum of vacant homes is growing.

The vacancy rates for high-rise apartments alone have been hovering near 6 per cent for the past three quarters. However, the absolute number of vacant apartments has risen from 10,504 units at the start of last year to 13,838 units by end-June, a rise of 31.7 per cent over the period of one-and-a-half years.

Interest rates have remained very low and owners are able to hold their units vacant for a far longer period. With little pressure on the rate front, they have largely managed to present a unified front towards tenants with respect to rentals.

Still, looking at the number of vacant homes at the end of June and assuming that an average condominium development has 300 units, we can look at the issue in another way: We have at least 46 condo projects that are completely empty in Singapore today – signs of “ghost towns”?

Source: Today – 31 August 2012