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Hiap Hoe seeks sole buyer for Balmoral condo units

Another developer is putting up unsold condo units for bulk sale, apparently to avoid having to pay hefty fees to extend the sales period.

Singapore-listed Hiap Hoe Group wants to sell all 48 units in its District 10 project, Treasure on Balmoral, at a guided price of $1,850 per square foot (psf) or $191.4 million.

This follows attempts by other developers to offload their unsold units in bulk sales – as did Great Newton Properties for its Newton Imperial condominium project and Heeton for iLiv@Grange.

With buying interest still dampened by tough lending rules, property consultants believe more bulk sales at reduced prices are in the offing, especially for high-end projects.

The government’s Qualifying Certificate rules, under which developers have to pay extension charges to extend the sales period two years after the project’s completion.

Hiap Hoe’s project received its temporary occupation permit (TOP) in November 2012, meaning that the developer will have to pay extension fees for unsold units from this November.

To extend the sales period, developers have to pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second, and 24 per cent for the third year onwards; the charges are pro-rated according to the proportion of unsold units in the project.

Hiap Hoe’s subsidiary paid $138 million for the Balmoral site by way of a collective sale tender in 2007. The guided price of $1,850 psf for Treasure on Balmoral is lower than the median prices achieved for units at two other projects on Balmoral Road: Goodwood Grand ($2,360 psf) and One Balmoral ($2,451 psf), going by caveats lodged.

In January, Great Newton Properties tried in vain to offload unsold units in the 36-unit Newton Imperial to a single buyer, after selling only nine units.

Heeton was also said to be seeking $2,200-$2,300 psf for the 30-unit iLiv@Grange, which TOP-ed last October. Not a single sale has been lodged there so far.

Source: Business Times – 10 July 2014

Government mulls changes to Land Acquisition Bill

SINGAPORE: The Government has tabled amendments to the Land Acquisition Bill, potentially paving the way for landowners to be better compensated when the authorities acquire part of their land for development.

It is proposing to remove the Betterment Levy, which is a levy placed on the compensation a landowner gets because of the perceived gain in the value of the remaining land after the acquired land has been developed.

For example, if the land in front of an owner’s home is acquired for the development of an MRT station, any increase in the value of the remaining land – because of the proximity of a train station in future – will be deducted from the compensation given for the acquired land. The imposition of the Betterment Levy has resulted in some landowners given only nominal compensation in the past.

The Law Ministry said affected landowners will stand to receive better statutory compensation once the removal of the levy is in effect.

Other proposed changes to the law include enabling Management Corporation Strata Title developments to act on behalf of individual unit owners in the acquisition of common property. Under current laws when, say, car park lots in a condominium are acquired, every unit owner must go through the entire acquisition process – from engaging a valuer to submitting claims – even if the units are not affected.

The Law Ministry said this results in inconvenience. The last major changes to the Land Acquisition Act were made in 2007.Lawyers say abolishing the betterment levy would create feelings of fairness for land owners whose properties are being acquired, because it means the Government recognises the property belongs to them.

“A lot of the land owners, when their properties are being compulsorily acquired, they will feel that: ‘Look, it’s not my fault that you want to compulsory acquire my land. I don’t have a choice in this, I don’t have a say in this.’ And as such, when you impose a betterment levy on me, it’s really something that’s not my fault. And you are imposing a levy on me,” explained Mr Steven Lam, Director of Templars Law.

He said it can give people the feeling that authorities have not taken into consideration issues such as how when public facilities are being built, “it’s going to create problems, it’s going to create a nuisance, it’s going to create things which affect me.” 

Property prices could dip further: Tharman

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam has raised the possibility of a further correction in property prices. He told a conference yesterday: “I think further correction would not be unexpected.”

He told a conference that Singapore had responded early enough to raging property prices with a set of cooling measures, but added that a crash in the property market was unlikely.

On the subject of keeping track of the market, he called for more emphasis on monitoring banks. “I don’t want to quarrel with the Basel recommendations. They are basically in the right direction; they are good for the long term.

“But far more focus needs to be placed on supervising banks and other financial institutions in the midst of the game, not just setting the rules of the game before it starts,” he said. “You need a good umpire, you need a good linesman.”

Last week, it was announced that Singapore would identify and regulate certain banks essentially deemed “too big to fail”. Such lenders, to be known as domestic systemically important banks, would have to meet Singapore’s prescribed liquidity coverage ratio, which seeks to ensure that these banks hold enough high-quality liquid assets to cover short-term market shocks. “The larger the bank is, and the more international it is, the more intrusive your supervision has to be,” said Mr Tharman.

As a result of greater banking regulation, which has meant higher capital requirements, growth may slow.

“It does mean that it weakens the ability of the banking systems to stimulate growth,” said Mr Tharman, adding that rules around crisis management of banks need to be outlined, too.

“Otherwise, I fear that we keep adding to regulatory requirements, some of which are already having negative impact, including in emerging economies.”

Mr Tharman invited laughter from the crowd, as he turned his attention to the subject of service expectations. “If you go into a top hotel in Stockholm, sit down and have breakfast, you don’t call someone for your coffee, because you’ve got a rather nice flask right in front of you – and you pour it yourself. Is it difficult?”

Here, a Singaporean is likely to look around for someone to serve the coffee. He said: “We must develop a new form of what comes naturally. Customers have to do things for themselves and not feel like they are getting less service as a result. It’s the quality of the coffee that counts.”

Source: Business Times – 5 July 2014

Private home prices fall in Q2, but pace slows

SINGAPORE – Private home prices in Singapore fell for a third consecutive quarter in the longest losing streak in five years as cooling measures and mortgage restrictions continued to slow the market, but the rate of decline moderated, suggesting the curbs are likely to stay in place, analysts said.

Overall prices of private residential properties declined by 1.1 per cent in the three months to June from the previous quarter, the Urban Redevelopment Authority’s (URA) flash estimate showed on Tuesday. The pace was slower than the 1.3 per cent drop registered in the first three months this year.

Analysts said the second-quarter fall was not surprising as some developers had cut launch prices in recent months to boost flagging sales.

“The residential market has started to consolidate since the affordability of home buyers, especially that of the upgraders, is hurt by the measures, and home prices will need to come down in tandem,” said Ms Christine Li, head of research and consultancy at real estate agency OrangeTee.

“However, due to the current low interest rate environment and a keen interest in property investment, the price decline has been rather subdued,” she added.

The Total Debt Servicing Ratio (TDSR), introduced in June last year, and the Additional Buyer’s Stamp Duty (ABSD), introduced in December 2011 and raised in January 2013, are frequently cited as the two most effective measures in curbing demand and causing prices to fall across the island.

The Core Central Region (CCR), or city centre, was the hardest hit in the second quarter, with prices falling for the fifth straight quarter, the URA data showed. The pace of decline accelerated to 1.5 per cent from the 1.1 per cent fall in the previous three months.

Home prices in the Outside Central Region (OCR), or suburbs, also suffered a quicker decline of 1.1 per cent, compared with the 0.1 per cent decrease seen previously. Meanwhile, prices in the Rest of Central Region (RCR), or city fringes, fell at a slower pace of 0.6 per cent after a 3.3 per cent slide in the first quarter.

Ms Chia Siew Chuin, Colliers International’s director of research and advisory, said: “Strong buying interest in the 845-unit Commonwealth Towers and 212-unit Kallang Riverside provided some level of support for prices (in the RCR). These projects benefited from pent-up demand, as there has been little launch activity in these two locations.”

Analysts said the 2.3 per cent drop in the URA residential price index in the first half of this year is not likely to lead to the Government reviewing the cooling measures.

“The Government has said it is not looking to ease off the measures yet, and looking at the overall price level, it is still considered high. Overall real estate sentiment is still reasonably healthy, which means if any measures are eased, that might trigger a surge in interest again, not necessarily from just Singapore,” said Mr Tan Kok Keong, chief executive of consultancy REMS Advisor.

“So it’s in my opinion that it’s still early for the Government to relax the measures … A quarterly decline of around 1 per cent is reasonable in the current market conditions. We’ll probably see this persist for the rest of the year.”

With the property curbs remaining intact, private home prices are expected to continue on a downtrend in the next six months, with analysts projecting the annual decline at the lower end of a 5 to 8 per cent forecast.

The recent price cuts by developers have given buyers hope that there will be further discounts, noted JLL’s national director of research and consultancy Ong Teck Hui.

“Price cuts raise buyers’ expectations of further discounts and this feeds into a downward price cycle as we are seeing,” he said.

Source: Today – 1 July 2014

Right time to review cooling measures: Kwek Leng Beng

Veteran property developer Kwek Leng Beng fears Singapore could lose its edge as an investment destination unless the Government reviews its property cooling measures.

Mr Kwek, executive chairman of Hong Leong Group Singapore and City Developments, said foreigners were choosing to plough their investment dollars into countries like Britain, Australia and the US over Singapore, while Singaporeans have been investing abroad.

“We are losing these investments to other countries even though these foreign properties have a higher risk profile,” Mr Kwek told The Straits Times yesterday. “It is unlikely these investment dollars will return to Singapore.”

He noted the unexpected decline in Singapore’s manufacturing activity in May, adding that it is crucial to ensure that the property sector is in good health as it is a crucial pillar of the economy.

“The overall picture seems to suggest that it may be timely now for the Government to take another look at the cooling measures introduced and make adjustments accordingly,” he said.

Mr Kwek’s comments came as the Total Debt Servicing Ratio (TDSR) loans framework, which aims to deter borrowers from accumulating too much debt, hit its one-year mark on Sunday.

The measure, together with the Additional Buyer’s Stamp Duty (ABSD), has hammered demand in the market.

New home sales in the first five months of this year plunged 52 per cent to 3,984 units from the same period a year ago, according to fresh estimates from the Urban Redevelopment Authority.

Industry players echoed Mr Kwek’s sentiments, pointing out that even if the ABSD is eased, it is unlikely to encourage more speculative buying.

Mr Kwek suggested in February that the Government consider lifting the hefty 15 per cent duty levied on foreigners buying homes after the property market and global economy showed signs of slowing. Prices have since fallen, confirming his concerns, he said yesterday.

However, Mr Kwek noted that the different segments have been affected to varying degrees, so there is no blanket solution.

“I have confidence the Government will take appropriate measures to deal with the challenges that Singapore faces,” he said.

Source: The Straits Times – 1 July 2014

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Sentosa condos feel the blues

ABOUT two in five Sentosa condominium units have resold at a loss in the past year, symptomatic of the plight of luxury homes here, as financing restrictions put off buyers, industry watchers say.

Since May last year, 31 units have changed hands at six Sentosa projects: Marina Collection, Seascape, The Azure, The Berth, The Coast and The Oceanfront, according to data compiled by STProperty.sg from URA Realis.

The profitability findings is in line with data gathered by HSR Research which shows resale prices at the plush Sentosa district falling 25 per cent to about $1,800 psf in the first five months of this year, compared to around $2,400 psf over the Jan-May 2013 period.

That said, the price movements tend to be volatile, given the single-digit number of transactions each month. There were just five transactions altogether this year, and none in the months of February, March and May.
Of the 31 transactions in the past year, profitability analysis could not be done for seven because caveats, which include information on purchase prices, were not lodged for the units. Profitability is calculated by subtracting purchase prices from selling prices. Of the remaining 24 transactions, 10 resold at a loss.
Among the loss-making transactions, four were units at The Berth, the debut project at the Cove which was launched in 2004 and completed in 2006. Three units made losses at The Oceanfront, two at the Coast, and one at the Azure.

Two in particular made seven-digit losses. A 2,982 sq ft unit at The Oceanfront sold for $5.65 million ($1,895 psf) in November last year, after it was purchased in April 2008 for $7.2 million ($2,415 psf) – a $1.55 million loss.

Another 2,820 sq ft unit at The Coast sold for $4.8 million ($1,702 psf) in January this year, two years after it was purchased at $6 million ($2,128 psf). This was a $1.2 million loss.
SLP International executive director Nicholas Mak suggests that this could be due to owners struggling to find tenants for their units amid the weak leasing market. Some may also not be able to secure high enough rental rates to service their loans. (Most Sentosa homes are bought not for own occupation, but as investment.) “So they may find it a better option to just liquidate,” he said, adding that the location is also not the most convenient for expats to commute to the mainland for work.

Another industry watcher added that buyers who bought units at $2,100 psf and above appear to have “overpaid”. Those who profited from their resale deals mostly bought in at lower psf prices; a handful even got their units at $800, $900-plus psf back in 2006.
Meanwhile, several Sentosa Cove units are also up for sale at auction houses here. A 2,777-sq-ft unit at Turquoise condo, put up for sale by a lender at a Colliers’ auction this week, yielded no bids, despite having reduced its opening price to $4 million from its previous $5 million.

Two Sentosa homes are up for auction by DTZ, both by lenders, one at Turquoise and another at Marina Collection. Another four are for sale by private treaty (akin to private negotiations) by JLL – two at Turquoise and two at Marina Collection.
Typically, banks repossess homes and put them up for auction as part of a repayment structure when delinquent mortgagors (borrowers) are unable to find buyers and dispose of their properties themselves.

JLL’s head of auction and sales, Mok Sze Sze, said: “The owners of the two Turquoise units bought them at $7 million each, which is quite difficult to match in the current market.
“Auctioning is a good method to garner all interested parties in a room to competitively bid. Potentially, the owner can also expect to get the optimum price because it’s a competitive method of sale.”
Meanwhile, some Sentosa condos such as Cape Royale and The Residences at W have made strategic decisions to lease out their unlaunched units instead, given current soft condo prices on the Cove.
Roaring sales in the waterfront enclave back in 2006-2008 were hit by the financial crisis and had hardly recovered when the private housing market succumbed to successive rounds of cooling measures from 2009. The way Mr Mak sees it: “For property prices anywhere, what goes up will also come down.”

Source: The Business Time – 28 June 2014

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Mortgagee sales touch quarterly high in Q2

The number of properties up for auction by mortgagees (or lenders) as well as their share of the number of properties going under the hammer has hit a quarterly high in Q2.

Auctioneers say this reflects the difficulty that financially stretched borrowers face in securing buyers for their properties since the implementation of the total debt servicing ratio (TDSR) framework a year ago. Because of this, financial institutions have had to repossess more properties and put them up for auction.

The trend is expected to gain momentum as the rising supply of non-landed private homes will make it harder for mortgagors (or borrowers) to find buyers and thus dispose of their properties themselves – resulting in more properties ending up as mortgagee sales.

Furthermore, the reduced inflow of expats into Singapore is shrinking the pool of potential tenants, hitting rental incomes and hurting owners’ ability to service their loans.

This quarter, 42 mortgagee sale properties have been put up for auction – almost double the 22 in Q1 this year. In Q2 2013, the figure was just six properties.

The latest figure is the highest since Q3 2009, when 63 mortgagee sale properties landed on the auction block. The first-half tally of 64 was double the 32 for the whole of last year – and also a big jump from 24 in 2012 and 39 in 2011.

In H1 this year, the number of properties put up for auction by owners was 192, down from 226 in the same year-ago period.

As a result, while the owner sales’ share of properties put up for auction has dropped from 93.4 per cent in full-year 2013 to 75 per cent in H1 2014, the mortgagee sales’ share has risen from 6.6 per cent to 25 per cent. On a quarterly basis, the mortagee sale share has doubled from 16.7 per cent in Q1 this year to 33.9 per cent in Q2 – the highest level since the 35.5 per cent share in Q1 2008 during the global crisis.

For January-May this year, 13 properties (both owner and mortgagee sales) were sold for a total of nearly $26.2 million at auction. Of this, the mortgagee sales accounted for nine properties which fetched $12.8 million.

For the whole of last year, 21 properties amounting to $99.6 million were sold at auction, of which 10 properties totalling $12.6 million involved mortgagee sales.

Typically, financial institutions provide some leeway to borrowers who are experiencing difficulty servicing their mortgages by giving them the first crack at finding a buyer as owner sales tend to fetch a higher price compared with a mortgagee sale which is often seen as distressed. However, the implementation of TDSR has made it difficult for potential buyers to obtain credit.

Nearly 63 per cent of the mortgagee sale properties that have been put up for auction in the first six months are residential properties, followed by a 17.2 per cent share each for industrial and retail properties.

The auction tomorrow will feature a mortgagee sale property at Turquoise condo in Sentosa Cove. The 2,777-sq-ft four-plus-one bedroom unit previously surfaced at an auction on April 30. It was withdrawn without bids at the opening price of $5 million.

Another mortgagee property to be featured at the same auction is a third-floor unit at the freehold Stevens Court. The 2,863-sq-ft unit has five bedrooms. Another auction on Thursday will feature mortgagee sale units at VisionCrest Residence, Residences@Killiney, The Floravale in Westwood Avenue and a shop unit at 116 Yio Chu Kang Road. At Knight Frank’s auction today, a mortagee sale of a two-bedder at Dover Parkview is expected to go under the hammer.

Source: Business Times – 24 June 2014