Residential Market news Extract - 15 October 2012

New green rule could boost building's value

A new valuation guideline on green buildings could potentially boost the values of these properties, as valuers take into consideration the structure's income and cost implications.

The income method, for instance, will take into account the enhancements a building may achieve, whether in the form of increased rental or a reduction in operating expenses, as a result of the incorporation or installation of green features and design.

The direct comparison method requires green buildings to be appraised by comparing them to similar green buildings which have been sold, making relevant adjustments for differences.

Studies carried out in various parts of the world on the impact of green buildings on values corroborate this. Specifically, a recent study conducted in the United States found that rents commanded by Energy Star-labelled and LEED-certified properties enjoy a premium of 7-17 per cent and occupancies improved by 10-18 per cent. Selling premium is estimated at $30 and $130 per square foot for Energy Star-labelled and LEED-certified properties respectively.

These figures were cited by Professor Lim Lan Yuan, president of Valuation & General Practice, Singapore Institute of Surveyors and Valuers (SISV), in his speech at the Breakfast Talk for CEOs, which was jointly organised by the Building and Construction Authority (BCA) and SISV, wherein the valuation guideline was introduced.

This is the first time the SISV is publishing a valuation guideline on green buildings, which will be incorporated in their newly revised edition of "Valuation Standards and Practice Guidelines", expected to be launched next month.

While the guideline will assist professionals by providing a framework to investigate and appreciate the tangible and intangible benefits of green features thus translating them into economic values, challenges remain.

Source: Business Times – 13 October 2012

 

Where are home prices headed?

Home prices are likely to hold their ground despite being pummelled by six rounds of cooling measures, according to most property analysts.

They pointed to low interest rates and a stable employment outlook as factors supporting prices.

They predicted the measures - including last week's new restrictions on loan terms - would take a toll on sales volumes. However, another factor helping to keep prices steady is the strong holding power of developers.

Some contrarian analysts said prices might fall by up to 10 per cent in the next 12 months.

But most agreed that private home prices are likely to continue flatlining instead. They have risen by less than 1 per cent in the first nine months of the year.

The measures announced by the Monetary Authority of Singapore last Friday included caps on loan terms to prevent buyers from over-extending themselves, and lower loan-to-value (LTV) ratios for certain purchases.

They were also meant to curb rising home prices driven by low interest rates and easy credit coming from a fresh round of cash stimulus in the US and Europe.

The experts held varying views over how the high-end segment might be affected. Some said the higher cash upfront required for these pricey homes could further slow the segment. However, others pointed out that these home buyers are typically cash-rich and do not take out large loans.

Source: The Straits Times – 13 October 2012

 

City-fringe home sales chalk up highest price gains

City-fringe homes tend to be overshadowed by those in prime and mass-market areas but property experts call the segment a "quiet achiever".

The segment - also known as the Rest of Central Region (RCR) - outperformed homes in the city and suburbs with the highest gains for new and resale units since the trough in the second quarter of 2009.

Property consultants said that city-fringe homes are sought after partly for their proximity to the city, exclusivity and accessibility. Generally, there are MRT links and lifestyle amenities.

Investors find it easy to get tenants, especially as expats with smaller housing budgets scale down.

For instance, One Dusun Residences in Balestier is selling for about $1,500 psf compared with Suites @ Newton where flats go for about $2,100 psf.

Areas like Balestier and Geylang have done particularly well.

Four sites have been sold under the Government Land Sales programme this year but experts feel more land could be released given the demand.

Last week, the Singapore Real Estate Exchange (SRX) said the RCR segment recorded resale price gains of 7.1 per cent in the third quarter. Prices in the three months to Sept 30 hit $1,199 per sq ft (psf) - the highest since the SRX starting collecting information in 2006 - up from $1,120 psf in the previous quarter.

Source: The Straits Times – 13 October 2012

 

Face of Redhill to change with more condo projects

Think Redhill and a plethora of car showrooms as well as blocks of public housing probably spring to mind.

But a dramatic increase in private housing in this city-fringe neighbourhood is set to modify the area's image.

Until recently, interest focused mainly on the 1,000 or so completed condominium units at four projects there.

But three upcoming projects will more than double that figure by adding more than 1,500 units.

Of the three, only one - the 373-unit Ascentia Sky - has been launched. As of August, it was more than 98 per cent sold, at a median price of $1,398 per sq ft. The other two projects will be built in Alexandra Road and Prince Charles Crescent, on sites sold earlier this year.

Another two sites in the area, which can yield more than 1,000 units, are on the reserve list of the Government Land Sales programme. This means they will be put up for sale only if a developer makes an acceptable minimum bid.

Most condos are close to Redhill MRT station, just a couple of stops from the city centre. Amenities in the area include Crescent Girls' School, a swimming complex and several places of worship.

But there are no major malls. The nearest ones are Tiong Bahru Plaza and Great World City.

Since 2009, when property prices were at a low, prices have jumped at least 37 per cent.

For instance, median resale prices at the 14-year-old Tanglin Regency stood at $1,216 per sq ft in the third quarter, up from $826 psf in the second quarter of 2009.

Next door, prices at the 11-year-old Tanglin View have surged 54 per cent to $1,285 psf in the same period.

Across the road, at The Metropolitan condominium, completed three years ago, median prices are also up more than 50 per cent to $1,317 psf.

And at the nine-year-old freehold Alessandrea, prices have risen by 37 per cent in that period.

In 2010, 134 sales were recorded at the five condos in the area including Ascentia Sky. In the first nine months of this year, there were only 59 sales.

Still, compared to nearby estates like Tiong Bahru and Queenstown, Redhill boasts the lowest median resale prices so far this year, at $1,350 psf.

At Tiong Bahru, with its many amenities, the figure is $1,378 psf while at Queenstown, it is $1,450 psf because of the limited private homes available.

In the second quarter, rents at Tanglin View were $4.46 psf a month - a rise of 8.9 per cent - and $4.39 psf a month at Tanglin Regency, a rise of 20.1 per cent.

Source: The Straits Times – 13 October 2012

 

Bye to big profit from property buys

Some friends recently commented that "invest in property, sure make money". That, unfortunately, is not as true as it once was. It now depends on what you mean when you say "make money".

Potential gains are certainly not on the scale of those achieved for homes bought in the late 1960s and 1970s. At that time, a house could be had for anything from $10,000 to $100,000. Now these terrace homes and bungalows are priced in the millions and even the tens of millions of dollars.

Even as recently as 20 years ago in the early 1990s, condos could be purchased for a few hundred thousand dollars and there were still landed homes available for less than $1 million.

Back then, it didn't take much to have a Midas touch as home owners rode the transformation of Singapore from developing to developed economy and the accompanying jump in home values.

Many people who say that property makes them money are, I believe, referring to this period. These are the older generation of home owners for whom property has, without a doubt, outshone every other investment.

But the case for property being a winning proposition has since become less clear-cut.

For example, there are some property buyers who bought houses close to the previous peak in 1996 and it has taken years before prices returned to those levels.

Oleander Towers in Toa Payoh, for example, was transacting at around $800 psf (per square foot) in 1996, but during the global financial crisis, units could be had for less than $700 psf. This year, there are several units that have changed hands at more than $900 psf.

There are also those who invested in luxury apartments during the latest peak of 2006 and 2007. Many of them could well be sitting on paper losses.

For example, Bukit Sembawang sold 14 units at its Paterson Suites condo earlier this year at around $2,500 psf, about 15 per cent off the peak in 2007.

What has cushioned the impact is that the developers, as well as many of these investors, are cash-rich and have holding power. Developers would have covered their costs from selling sufficient units, even if the project did not sell out. Many investors who have a large property portfolio are able to wait out their paper losses, while renting out their properties in the meantime.

Winners and losers

Equally, just as there are now cases of investors nursing paper losses, there are many who have made a pretty profit.

The most recent upswing came when the global economic crisis hit after 2008, when the property market was in the doldrums. But a flood of cash from the first round of quantitative easing helped prop up the stock market, and before you knew it, property prices were on the rise again.

Investors brave enough to venture into the market then are now the ones laughing all the way to the bank. Take the project at City Square Residences near Little India. In 2009 when the project was still uncompleted, psf prices were around $1,000. Now, nearly three years later, small units are transacting at around $1,600 psf.

But even if there are investors who have made profitable bets, examples of investors making capital gains on such a scale will be thin on the ground from now on.

The reason property investors are no longer going to enjoy a 100 per cent or 200 per cent upside is partly due to the series of cooling measures.

The Government aims to have a stable property market. The days of flipping properties in 2006 or so - where for a downpayment of a few hundred thousand dollars, you could make almost that same sum a few months later by selling your option - are over.

Supply is going to increase substantially on all fronts, from the HDB market, to the executive condominium market, to the condo market. That will keep price rises in check.

The major structural change in the property market - a large jump in the population - which led to a surge in demand for housing has already occurred. Further rises in population numbers will be at a more placid pace.

It may be easy enough for prices to rise by 50 per cent from $1,000 psf to $1,500 psf, but it will take much longer to hit $2,250 psf from the higher base of $1,500 psf.

At the same time, potential buyers who stand ready to pounce once prices plunge should refrain from wishful thinking.

That's because Singapore's fundamentals remain strong. There are people who want to upgrade, to move, and to rent. Singapore is seen as a safe haven and therefore will continue to attract investors - both local and foreign - who think property investments will remain a store of value.

As prices are unlikely to fall much, what should be clear for investors who have missed the boat and are hoping to get into the property market is that handsome gains are probably going to be far and few between.

There is, however, the slow boat, as I would call it - a respectable yearly yield from decent rental rates.

This means that investors aiming to buy property have to focus on what brings them yield. This means buying smaller properties - such as two-bedders because these will be easier to rent out.

Properties should also be close to transport links and amenities to cater to tenants who do not drive.

While property investment may not make big money, if carefully handled, it is not a losing proposition either.

Source: The Straits Times – 13 October 2012