En bloc sales still the way to go

Collective sales remain a relevant option for property owners to exit from their ageing assets and for developers to replenish their development pipeline, despite the current standstill in the en bloc market.

But an expectation gap is continuing to impede en bloc deals.

Sellers who are still hoping to strike rich overnight through an en bloc do not seem to have awoken to the new market reality. Developers, on the other hand, are looking for a higher risk discount now to mitigate the headwinds in property development given the softening market.

It is inconceivable that buyers (developers and landlords) are going to pay anywhere close to outrageous sums for development land, unless it makes economic sense.

Developers were more willing to pump in “what seemed like astronomical sums” in the past due to the intensification of development potential and change in land use zoning for many sites. This is no longer the case now.

Year-to-date, there is no en bloc deal that has successfully taken place, the consultancy observed. Many rounds of government cooling measures to curtail speculative activities have not only taken the froth out of the property market but also taken the steam out of collective sale activities.

The success rate of a collective sale attempt has fallen to 33 per cent last year, compared to 41 per cent in 2012. This means that only three in every 10 en bloc sale attempts last year were successful.

The freehold Tanglin Shopping Centre in Orchard district is back on the en bloc market since late last year. Millennium & Copthorne Hotels plc, which owns 34 per cent of the shopping-cum-office complex, put the property back on the market in the fourth quarter of last year when it signed the collective sales agreement with other selling unit-holders.

The reserve price for Tanglin is said to have come down to S$1 billion or S$3,190 per square foot per plot ratio. Media reports last year had cited a reserve price of S$1.25 billion for the freehold site of about 68,512 sq ft, which some analysts considered steep.

BT understands that owners of Tanglin Shopping Centre are in the midst of gathering the requisite consent level to launch a collective sale.

As new shopping malls and grade-A office buildings spring up, owners in a strata-titled single-use or mixed-use development can consider the en bloc route to dispose of older assets and upgrade to a better business environment.

Strata-titled retail malls, which are often characterised by a lack of tenant-mix control, are also potential candidates for en bloc, such as Serangoon Plaza, which houses a branch of well-known retail giant Mustafa and was sold en bloc last November for S$400 million.

Similarly, owners of ageing residential assets are still likely to achieve better prices through en bloc and tuck in tidy profits compared to selling their units piecemeal.

Spring Grove condominium in the prime Grange Road area was launched last month for sale by tender with an asking price of more than S$1.39 billion – a level that many consultants regard as “ambitious” vis-a-vis Farrer Court’s record S$1.34 billion en bloc sale in 2007.

Source: Business Times – 21 August 2014

Jurong Lake area to be new draw for developers

Developers are expected to take a keener interest in future state land tenders in Jurong Lake District – whether for residential, commercial or hotel projects.

The buzz created from efforts for greenery attractions in the area is expected to give a fillip to home values there.

Attention will be heightened further if a decision is made to house the future Kuala Lumpur-Singapore high-speed rail terminus in Jurong Gateway, said property consultants yesterday. They were giving their views on plans announced on Sunday night by Prime Minister Lee Hsien Loong to liven up Jurong Lake District.

Existing property owners can look forward to one of the most liveable housing estates in Singapore outside the central and fringe areas.

The changes will “remove the stigma of an industrial township that Jurong was originally planned for”.

National Development Minister Khaw Boon Wan blogged yesterday: “Since 2008, Jurong has made steady progress to be our largest regional centre, outside of the city.”

Jurong Lake Gardens, spanning over 70 hectares, will integrate the revitalised Jurong Lake Park (to be completed by 2017), as well as the Chinese and Japanese Gardens which are set to be spruced up, and not forgetting the new Science Centre, which will emerge next to the Chinese Garden MRT Station around 2020.

Even though the overall conditions in the residential property market remain tepid, the buzz created could provide a minor boost to existing projects and help support prices and transaction volumes in the area.

In the longer term, the development of Jurong Lake Gardens will enhance the living environment for residents, similar to the Bishan-Ang Mo Kio Park, and increase interest in the area.

The plans are expected to fuel developers’ interest in a 99-year private housing site just above Jurong Lake – between The Lakeshore and Lakeville condos – that will be launched in December through the confirmed list of the Government Land Sales Programme. While the number of bids is expected to be high..bid prices are expected to be dampened by current market sentiment and confidence.

Development sites for residential, commercial as well as integrated uses (eg office, retail and residential elements) are expected to whet developers’ appetite – if they are released over the next year or two.

Source: Business Times – 19 August 2014

HDB rents ‘to stay depressed for rest of 2014′

Lean times are here to stay for Housing Board landlords, with rentals likely to stay depressed for the rest of the year.

Sluggish demand, arising from foreign labour curbs that have shrunk the pool of tenants, combined with a rising supply of HDB flats, will weigh on rental rates, said property analysts.

Already, Singapore Real Estate Exchange data shows the HDB rental index has fallen 2.3 per cent since the start of the year, hitting a three-year low last month. The median rent was $2,300.

This is only the beginning of a continued slowdown, said property analysts.

ERA Realty key executive officer Eugene Lim expects a further 5 per cent to 6 per cent drop by the year end.

Property agents said the problem is simply a lack of demand due to a shortage of tenants.

“Landlords are realistic as the market is not doing very well,” said ERA Realty agent Noel Lu.

Many have been adjusting their rentals downwards, said agents.

The worst-affected areas are those without easy access to amenities such as public transport.

However, demand in mature estates and those near MRT lines is continuing to hold up, said ERA agent Zola Tan.

Tenants for units in such areas can be found within a month, as opposed to two to three months for less popular areas, he added.

But although tenants can be found, rents have been falling. An executive apartment used to go for $2,700 or $2,800 a month; now, the rate is $2,500.

The one bright spot is that falling rents have boosted activity in the market so far this year.

There have been more rental deals in general, with 8,485 in the January to March period and 8,455 in the March to June period.

This is up from an average of 7,580 a quarter last year and 6,780 a quarter in 2012.

Woodlands, Jurong West and Tampines have seen the most rental transactions in the past month, based on an STProperty “heat map” using HDB data.

One reason for the flurry of activity is that low rents have attracted more tenants.

Landlords have had to offer low rents to compete for tenants, whose numbers have been affected by foreign labour curbs. The surfeit of flats for rent also means tenants can pick and choose.

“Nowadays, tenants can be fussy,” said a 32-year-old safety officer who wanted to be known only as Mr Chandran. He has been trying to rent out his four-room flat near Ang Mo Kio MRT station, but has received just one call in the past fortnight.

With more suburban condominiums due to be completed next year, competition will only rise.

Current upgraders) have to quickly secure a tenant for their flat in case there are more flats put up for subletting.

Falling rents in the private market are also putting pressure on HDB rents. Last month, non-landed private residential rents hit a 38-month low.

“Suburban condos both new and old are competing for tenants, with budgets of around $3,000,” said ERA’s Mr Lim.

Source: The Straits Times – 19 August 2014

Developers hard-pressed to price projects modestly

Latest official statistics showed that developers’ housing sales continued to languish last month, but the focus now is on the likely launches for the rest of the year and how much room developers have to price them attractively to get potential buyers into making a commitment.

Many developers paid high prices for 99-year private housing sites at state tenders in the past couple of years as they sought to replenish land following strong home sales at the time.

“Those with a high breakeven cost but who need to launch a project are likely to adopt a “Star Buy” strategy for inferior stacks of units in the development to draw out initial take-up to drive confidence in the launch,” a seasoned developer told BT yesterday.

Even amid the weak July developers sales stats released yesterday by the Urban Redevelopment Authority (URA), evidence is surfacing of developers successfully drawing out buying demand through attractive prices.

For instance, Wheelock released The Panorama in Ang Mo Kio in January this year, posting a median price of S$1,343 psf for sales in that month. But since it reduced prices in May to the S$1,200-plus psf level (median price), this project has been among the top sellers every month.

URA’s July data also revealed that the remaining 37 units at The Vermont on Cairnhill, which was completed last year, were sold at S$2,113 psf median price in July. This is 8.6 per cent below the S$2,313 psf median price, based on caveats data, for all previous sales in the project by its developer.

Vermont’s brisk sales show many high-end buyers are on the sidelines waiting to enter the market once prices become attractive.

Last month, developers sold 484 private homes excluding executive condos (ECs), just two more than the 482 units they moved in June. In July last year, the figure was also 482 units.

Developers also offloaded 51 EC units last month, compared with 49 in June and 112 in July 2013. The weak home sales mirrored their strategy of holding back on major launches.

There were only four new launches last month – of which three were in the city fringe.

The top seller was City Gate on Beach Road, with 89 units transacted at a median price of S$1,809 psf. Near Kitchener Road, the developer of The Citron Residences found buyers for 23 units at S$1,585 psf median price. In the West Coast, 11 units were sold at Bijou at S$1,969 psf.

In the first seven months, developers sold 4,893 private homes and 354 EC units. For the whole of last year, the figures were 14,948 private homes and 3,588 ECs.

For the rest of the year EC sales will gather momentum and probably overshadow sale of mass-market private condos. There has not been a single new EC project launch in nearly a year, which means pent-up demand can be expected to manifest for five expected EC launches by year-end.

Some market observers expect genuine buyers to increasingly head for the resale market to pick up a completed property, including units in newly completed projects.

Source: Business Times – 16 August 2014

Time to review cooling steps, say property players

Even though the government has reiterated that it is not yet time to lift the property cooling measures, some real estate consultants are calling for a review of the earlier taxes imposed to rein in speculators, which they claim have an inflationary effect.

Consultants felt that with the implementation of total debt servicing ratio (TDSR) to cap total borrowings at 60 per cent of gross monthly income, the additional buyer’s stamp duty (ABSD) and the seller’s stamp duty (SSD) have become less relevant.

Speaking at the National Real Estate Congress yesterday, ERA Realty key executive officer Eugene Lim, , felt that it was “safe to remove SSD now” given that sub-sales, which serve as an indication of speculative activity, are low across all property types. Currently, the SSD kicks in if a residential property is sold within four years of acquisition.

“Perhaps, it is an opportune time to review the measures that were implemented to tackle speculative buying and selling and whether the holding period under SSD is necessary at this point now,” he added.

While acknowledging that economists have flagged ample Asian liquidity waiting to enter the market, Mr Lim felt that the ABSD, while imposing a higher tax on foreigners, still penalises Singaporeans who wish to own a property for owner-occupation and another for investment.

Sing Tien Foo, deputy head of the department of real estate at the National University of Singapore, also touched on the government’s supply-side policy. He noted that the impact of the ramp-up in residential supply – be it on prices or buyers’ behaviour – is “yet to be fully understood at this moment”.

Given that it has become more costly to buy properties in Singapore, consultants said that there is greater interest than before in overseas properties among Singaporeans.

Consumers Association of Singapore (Case) executive director Seah Seng Choon said that he had once come across an advertisement on the Internet touting returns of 100 per cent for an overseas property. He urged real estate agents not to “over-sell” or confuse buyers where overseas properties are concerned.

Source: Business Times – 13 August 2014


HDB resale flat prices dip for 6th straight month: SRX

As expected, HDB resale flat prices fell again for the sixth straight month to hit a low not seen since February 2012, going by figures from the Singapore Real Estate Exchange (SRX).

Prices slipped 0.9 per cent last month, after a 0.8 per cent dip in June – proof that June’s fall in prices was not due solely to the school holidays and the World Cup distracting buyers from making home purchases, analysts said. They believe larger factors were at play, chiefly the loan curbs in the form of the mortgage servicing ratio (MSR), the total debt servicing ratio (TDSR), and loan tenures being capped at 25 years.

Since the beginning of this year, prices have declined 4 per cent. Consultants expect resale prices to fall up to 8 per cent for the whole of 2014, with the government continuing to emphasise that it is still premature to pull back cooling measures.

The HDB resale market is expected to take a hit also because a huge supply of new build-to-order flats, as well as balance flats, executive condo units and flats under the design, build and sell scheme (DBSS) are coming onstream.

Resale volume improved by a slight 2 per cent to 1,341 flats sold in July’s resale market, after the numbers contracted in May and June. Resale volumes are expected to shrink in August, during the “hungry ghost month”, when fewer people would do house-hunting.

Rental volume rose 1.7 per cent to about 1,600 flats rented in July, possibly because some flat owners are waiting out the price weakness by renting their flats out in the meantime.

ERA Realty’s key executive officer Eugene Lim said flats are enjoying “fairly attractive returns” of 6 to 8 per cent, compared to the 2 to 4 per cent yields of private properties.

Rental prices were, however, 1.5 per cent lower than in June, marking a three-year low.

Source: Business Times – 8 August 2014

Fernvale tenders reflect drop in market confidence

The latest state land tender for a pair of adjacent private housing sites in Fernvale Road in Sengkang showed a thinning in tender participation rates as well as land prices – compared with two sites in the area sold last year before the total debt servicing ratio kicked in.

This reflects less confidence among developers given current weaker market conditions, said industry players.

At yesterday’s tender for the 99-year plots, Parcel A along Fernvale Road drew just four bids, and the next-door Parcel B, three bids – down sharply from the eight and nine bids respectively for the two sites tendered in April and June last year respectively.

While the earlier sites, which are now being developed into Riverbank@Fernvale and Rivertrees Residences condos, are slightly superior as they boast water-frontage, the latest pair of sites along Fernvale Road are closer to the Jalan Kayu amenities such as food and beverage outlets.

The top bids for Parcels A and B in Fernvale Road – S$438.17 per square foot per plot ratio (psf ppr) and S$448.35 psf ppr respectively – are also significantly lower than last year’s winning bids of S$489 psf ppr and S$533 psf ppr for the Riverbank@Fernvale and Rivertrees Residences sites respectively. Against the land price of Rivertrees Residences – the highest bids for Parcels A and B on Fernvale Road are lower by 17.8 per cent and 15.9 per cent respectively.

A tie-up involving Chip Eng Seng, Kim Seng Heng Realty and Heeton Homes placed the highest bids for both parcels in the latest tender. Analysts attribute the slightly higher bid for Parcel B to it being closer to Thanggam LRT Station. The introduction of the TDSR (total debt servicing ratio) framework in late-June 2013 has reduced property transactions.

Analysts polled by BT when the sites were launched by the Urban Redevelopment Authority (URA) in June this year had forecast top bids of $420-480 psf ppr for the two sites, with around five bids for each plot.

When contacted last night, Raymond Chia, group CEO of Chip Eng Seng, which is leading the consortium that placed top bids for both Fernvale Road plots, said: “Clinching both sites is more of a strategic move to better manage construction costs and overall planning for the development. We’re exploring whether to do separate projects for the two sites or a single development, but we should have nearly 1,400 units in all, encompassing a range of unit sizes.”

Chip Eng Seng is taking the majority 60 per cent stake in the consortium, while a joint venture between Kim Seng Heng Realty and Heeton Homes will hold the balance. “With both Chip Eng Seng and Kim Seng Heng involved in the construction business, we should be able to contain our costs better,” said Mr Chia.

The breakeven costs for the two sites are estimated at around $850-890 psf. And the consortium is hoping to launch the initial phase in first-half next year at around $1,000 psf on average.

Also bidding for Parcel A yesterday were a City Developments-TID partnership (bidding around S$400 psf ppr), Sim Lian Land (S$361 psf ppr) and Koh Brothers (S$321 psf ppr). Vieing for Parcel B were Flair Development, controlled by Wee Ee Chao (S$418 psf ppr) and Sim Lian Land (S$392 psf ppr).

Source: Business Times – 8 August 2014