Standard Chartered: Mass market prices could fall by 30% over next 3 years!

Private home prices in the mass market could fall by up to 30% over the next three years as supply ramps up amid falling demand, according to a new report.

Standard Chartered analysts see demand being hit by the stuttering economy and slower population growth in the wake of tighter immigration rules.

Population growth will shrink to between 1.5 and 2% for the next three to five years, they noted, while economic expansion is set to slow 3 to 4%, from an average of 6.1% over the past five years.

But housing supply will go the opposite way with the number of mass market units expected to rise by 3.1% next year and 5.4% in 2013.

“We expect lower population growth and high completions to induce a 20 to 30% decline in home prices from 2012 to 2014,” the report said.

Source: The Straits Times

Is it just us or have market sentiments gone from cautiously optimistic to increasingly pessimistic in recent days? Reports from two separate sources within a span of one week certainly seems to suggest so….

http://sgproptalk.blogspot.com/2011/11/pure-pessimism.html

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New holiday job for students: "Queuer" at project launch

Units at a new property launch go on sale on Wednesday and already some 500 people are in the queue.

And about 100 of them are students.
Most of the students said they are helping family or friends queue for a spot in Bedok Residences, a development coming up at Bedok New Town.

Interested buyers must get a queue number, and the students said they are being paid about $10 an hour to do the job.

Residents in the area said some of them have been there since 10:00 pm on Sunday.

Bedok Residences will have 583 units and is part of a 15-storey integrated development consisting of residential units, a shopping mall and a transportation hub.

The development is by CapitaLand Residential Singapore and CapitaMalls Asia.

Source: Channel News Asia

So it looks like there is little doubt that Bedok Residences will be a sell-out. The question is just… at how much per sqft.

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The Marq sets another record high!

$6,850psf… The wife and I cannot even begin to phantom the notion of paying that kind of money for an apartment (not that we have that kind of money in the first place), even if the development comes with club library/lounge where they serve drinks, concierge service and furnishings by Hermes.

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North-South divide, Singapore style?

Property prices and rents of some Novena and Thomson properties along the construction route of the North-South Expressway (NSE) could be hurt by the project, but only during construction, say analysts.

On Tuesday, the Government announced that 21 private properties will have part of their land acquired to develop the 21.5km expressway. Aside from this, dozens more homes will be hit by noise, dust pollution and traffic diversions that typically plague large-scale projects.

These may deter prospective buyers and could lead to a 3% to 5% drop in property values, said some analysts. The impact would depend on the property’s location and whether the nearby portion of the expressway is above or below ground.

The construction could also derail an attempt by owners at Novena Ville to mount a collective sale.

Credo Real Estate, marketing agent for the sale, said less than 1% of the development’s land area is being acquired by the authorities and that this will not lessen the plot’s redevelopment potential.

However, industry watchers point out that developers are wary of buying this type of site as they do not like to launch a new project in the thick of construction chaos or at lower prices.

Newer projects will not be spared either. City Developments’ (CDL) Cube 8 project will have 89.6sqm shaved from its total land area while another 239.1sqm will be taken from its 368 Thomson project.

Responding to queries from The Straits Times, a CDL spokesman said it is too early to determine exactly how owners will be compensated for the loss of the common space, but more details will be released soon.

He added that the group does not anticipate any significant impact on the projects’ construction process. Both are slated to receive their temporary occupancy permit (TOP) in 2014, a year before major construction of the expressway begins.

While well-built homes can command higher prices after they have received their TOP, the expressway’s construction means that owners wishing to sell will have to adjust their pricing expectations, said Dennis Wee Group director Chris Koh.

Profits can still be made, but the inconvenience from the building works needs to be factored into the selling price, he said.

Resale properties may also be affected. Mr Ku Swee Yong, chief executive of International Property Advisor, believes properties along the construction route in Novena and Thomson area could under-perform the overall private housing market by perhaps 10%.

Rents will be hit as well, with potential tenants expected to shy away from homes located close to construction sites.

“In the case of Farrer Road, when road work was being done for the Circle Line, the entrances of development like Spanish Village and Gallop Gables were a mess. It creates a bad impression of the place even before the potential tenant has seen the room or the unit,” said Mr Ku.

More clarity will be needed before any firm forecasts on prices or rents can be made, said some market observers, with others already predicting that prices of properties along the expressway could jump after its completion as owners market it as an attractive feature of their properties.

Source: The Straits Times

So moral of the story is: People want the convenience of (and the possible capital appreciation of their estates that is associated with) an expressway being near their homes only if it miraculously appear out of thin air, i.e. do not inconvenient us with the construction phase please!

And for the folks who bought units at Cube 8 and 368 Thomson, there is good reason to feel aggravated by the “enforced shrinkage” of their estates even before the developments are completed. However, they probably shouldn’t complain too much about the anticipated noise and dust pollution arising from the NSE construction…

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Expected dip in October home sales

Data for private homes sales are out next week but analysts are already expecting to see a drop in sales.

They say private home sales could cool by 15 to 20% on-month to between 1,200 units and 1,600 units in October.

Buyers’ sentiment was strong in September with 1631 units sold, defying market expectations and perhaps even logic as Singapore was facing a technical recession and a spiralling eurozone debt crisis.

Experts now attribute the buoyant sales to the launch of large condominium development during the month.

A slight slowdown is expected for October as investors sober up to the realities of the global economic turmoil.

More importantly, they say developers are likely to have held back launches to reassess buyers’ price thresholds.

Cushman & Wakefield vice chairman Donald Han said: “My prediction for the rest of the year, which includes the month of November, is for the prices to remain flat. If we are looking into the high end luxury market, average pricing would be $3,300psf.

“If you are going into the mid-end component, the prices will range about $1,800psf. The mass market would be about $850 to about a $1,000psf and then the executive condominium will range about $750psf.”

The official property price index shows that price increases slowed to 1.3% in the third quarter. Some expect this to slow further in the fourth quarter to about one per cent.

But home sales could still pick up if the price is right.

International Property Advisor CEO Ku Swee Yong said: “Developers may have skipped the month of October to push out a significant big launch but I think there will be a rebound coming in November.”

Overall, the buying sentiment of private homes should remain steady and healthy this year.

Experts are even predicting that the total number of new home sales could even exceed last year’s figure of 16,292 units.

Analysts opine sales for December may dip due to the lull year-end holiday period which typically sees fewer project launches.

Source: Channel News Asia

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Did you read about the woman who sue a developer… not for defects but for falling?

A prospective home buyer who fell and hurt her face after viewing a show flat is suing the developer.

Madam Tan Ah Lai, 59, claims she slipped as she was walking down a staircase, which was unlit and had sand on it.

Developer Keppel Land (Mayfair), however, denies negligence, saying she could have chosen to use a sloping walkway with handrails.

This is believed to be the first case of its kind to reach the courts, and the outcome could have implications on the way developers are expected to look after people who visit their show flats.

The lawsuit comes at a time when property buyers continue to throng showrooms in ever greater numbers. These are usually located at the project sites, all of which are subject to building control regulations.

The accident happened when Madam Tan and her family members visited the show flat at the Lakefront Residences condominium project next to lakeside MRT station on Nov 10 last year.

Madam Tan claimed the only access and exit from the show flat was via a common staircase. She said that this was not lit and there was sand on the steps.

The self-employed businesswoman filed court documents claiming she stepped on the sand as she came down the stairs, causing her to fall on her face.

Madam Tan sustained multiple bruises to her face and left leg. She also damaged her teeth and suffered depression.

Her injuries made her look unsightly and curbed her daily activities, such as exercising, and affected her self-confidence. She attached medical reports and bills to support her claims.

Her lawyer, Mr Madan Assomull, alleged in court papers that the developers had failed to protect her from injury, pointing out the staircase should have handrails or guides.

He claimed Keppel Land had breached its duties listed under the building laws, and asked the court to assess damages for Madam Tan.

But Keppel countered that Madam Tan had the choice of using the alternative sloping walkway with handrails if she had deemed it too dangerous to use the stairs.

It filed defence papers last week denying that there was sand on the steps and saying that it hired full-time cleaners to maintain the premises. The steps had also been paved with anti-slip tiles, it added.

Keppel’s lawyer K. Anparasan said the area was properly lit. He claimed Madam Tan failed to exercise proper care when she used the steps. There was also no need to place any warning boards as the staircase did not constitute an “unusual danger”.

Madam Tan, who still bears a scar on her lip from the fall a year ago, told The Straits Times last week she had intended to buy two units for her family but changed her mind after the fall.

“I fell down and it is not a good sign for me to buy there,” she said.

A court pre-trial conference is due next month.

Source: The Straits Times

The wife and I reckon that this will eventually be settled out of court. And speaking of which, we probably should look into putting up a “warning sign” (with flashing hazard light) for the step-down between our dining room and open-concept kitchen, since a few of our friends have already tripped over the step. This is before anyone decides to sue us for injury sustained…
 
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2012 Supply Glut: Here’s what Mr Ku Swee Yong said (exactly)

Supplies, supplies, supplies!
by Ku Swee Yong

The evidence for a price drop in Singapore’s residential property market is stacking up even as investors here continue to buy up small units in the outskirts, setting new highs for average per sq ft prices.

The Urban Redevelopment Authority (URA) released last Friday the full set of third-quarter property data – sending a clear signal about the avalanche of supply of homes.

About 80 pages of the URA report were on the private residential market. Two things stuck out: The expected supply of homes getting the Temporary Occupation Permit (TOP) for this year and next year increased yet again, surpassing previous forecasts; and the vacancy total of non-landed properties at 12,975 units is just shy of that during the Lehman Brothers crisis peak in 3Q2009 at 13,084 units.

In a previous commentary in Today (Feb 11), we had cautioned that “we need to be wary about the supply in 2011 and 2012 because the global economic recovery remains elusive.” At that time, the complete set of URA data for 4Q2010 was just published and the expected TOP supply for this year was 8,430 units and for next year was 8,116 units. In that same article, IPA’s projections for the total completions this year and next year were 11,500 units each year.

Just nine months later, the official forecast for this year has risen 29% to 10,889, with 9,196 completed in the first three quarters and another 1,693 due for completion in 4Q2011. The number for next year rose to 48% to 12,043. If investors had made their decisions to invest this February thinking that the supply in this year and next year will be moderate at 8,000 over units, they may be stuck, especially because of the hefty seller’s stamp duty.

The huge supply hitting the market will arrive earlier than official forecasts. In the interests of operational efficiency, including collecting progress payments, developers and construction companies are generally ahead of planned schedules, especially for projects that are by and large fully sold. We believe that, over the next few quarters, expected TOP numbers will continue to grow for 2012 and 2013 stock. We have revised our estimates for completions in 2012 to 2015 (See table – as soon as we get our hands on a copy of the TODAY paper).

The second point of note in the URA data is the number of vacant private homes. During the quarter, 4,565 units were granted TOP and that resulted in an increase of 2,173 vacant units. The overall vacancy rate rose from 5.1% in 2Q2011 to 5.8% in the last quarter. We are approaching and will soon breach the peak vacancy of 6.2% in 3Q2009, about a year after the collapse of Lehman.

Vacancy rates will increase over the next few quarters if the take-up from tenants does not outpace the TOP supply. Looking at the pipeline of completions, we see for example, Alexis, Optima, Reflections, Parvis, etc., coming onstream. These are projects that attracted a significant proportion of investors rather than owner-occupiers. There will be strong competition among landlords for tenants.

On the surface, the market may look healthy to some as many of the recent launches were significantly sold out within the first two months of launch, including the HDB’s record supply of Build-To-Order flats.

But, as emphasised in my book Real Estate Riches, we need to look beyond the take up at launches and match physical supply to real demand from families. When the completions of HDB and mass market condominiums swamp us in 2012 to 2015, we may end up paying for today’s excesses, unless the doors to foreigners open wide again like in 2006 to 2008.

Around the world, many banks are retrenching or slowing down hiring, the electronics sector is downsizing and the current wave of corporate profits have been derived not from significant expansion of business but mainly from cost reduction. Inflation remains stubbornly high and economic growth stays low.

In Singapore, low interest rates support holding power and cash-rich investors seeking to beat inflation are still looking at real estate investments.

I believe the prices for landed properties will continue to rise, perhaps a little more slowly than the 2.4% and the 3.6% increase in the last two quarters, respectively.

Since holding power is steady and there is a strong deterrent in the form of the seller’s stamp duty, the sub-sale and resale categories should not see significant discounting unless the residents’ unemployment rate rises significantly. However, there is room in the new sales category for prices to dip. Recent transacted prices for new sales in the mass market show that developers have enough profit headroom to accept lower prices and still generate normal profits.

On balance, in the immediate term, we expect a 5 to 10% reduction in private residential prices, i.e. a drop of the URA PPI from 205.7 points to around 190 within the next 12 months, mainly due to new sales from mass markets where the supply wave is strongest. 

Where prices go beyond next year would depend on recovery of the global economy and how Singapore might benefit. For those who need to invest because their cash reserves are earning too little interest income, our advice is: Do not buy into an imaginary future rental income, invest in apartments that come with tenancy. Even in a seemingly high market like today’s, good value can be found in districts 9 and 10, where 10-year-old condominiums might be gotten for around $1,200 to $1,400 psf, similar to the price levels of some of the new properties in the Outside Central Region.

Ku Swee Yong is founder of real estate agency International Property Advisor, specialising in property services for high-net-worth clients. He is the author of Real Estate Riches: Understanding Singapore’s Property Market in a Volatile Economy.

Source: TODAY Online

Don’t know about you but the figures that are laid out above is sufficient to make the wife and I somewhat edgy. And if the scenerios do play out exactly, we reckon the negative 5 – 10% impact on private non-landed home prices will be highly optimistic….

More new private homes than expected by 2012?

An anticipated surge of new private homes may come sooner than officially forecast, according to a report by property consultancy International Property Advisor (IPA).

In its November estimates, it said 14,000 new homes might be completed next year, significantly more than the 12,043 new home completions predicted by the Urban Redevelopment Authority (URA) in its third-quarter property forecast.

The predictions for 2013 follow a similar trend, with IPA’s estimate of 17,000 homes far ahead of the 12,882 new homes anticipated by the URA.

IPA chief executive Ku Swee Yong said his forecasts are based on the fact that developers often complete projects within three years, shorter than the estimated legal completion period of up to five years developers are bound by. A faster completion date translates to speedier payments from buyers.

“Buyers make progress payments at each stage of completion so the quicker the job gets done, the sooner the developers can get paid,” said Mr Ku.

While the shorter wait for homes will be good news for buyers who intend to occupy the new units, Mr Ku cautioned that it could turn out to be a double-edged sword for investors.

“ As an investor, yes, you get the apartment earlier, but you might have bought it anticipating a stronger rental demand because fewer homes were expected to be completed within the same year.”

“It could mean you are entering a market that is very congested with new apartments, which may severely affect the rental demand for your investment property.”

Fears of a weakening global economy could lead to a slowdown in the rental market, weaker demand for more new homes and developers reducing prices to maintain a consistent pace of sales for new homes, said Mr Ku.

“Last quarter, a project may have launched for $900psf with a 90% sell-out rate in two months. But developers might be led to lower their prices in order to achieve the same sales pace next year.”

Mr Ku said the market might experience a 5% to 10% dip in the prices of new and resale private residential property within the next year.

Source: The Straits Times

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Private housing prices continue to moderate

Prices of private residential properties increased by 1.3% in the third quarter of 2011, lower than the 2% rise in the previous quarter.

This was the eighth consecutive quarter in which the rate of increase in overall private housing prices had moderated, according to real estate statistics released on Friday by the Urban Redevelopment Authority (URA).

Prices of non-landed properties in Core Central Region (CCR) – which includes postal districts 9, 10 and 11 –  increased at a slower pace of 0.7% in the third quarter, compared to the 1.6% rise in the previous quarter.

Meanwhile, prices for Rest of Central Region (RCR) and Outside Central Region (OCR) increased by 1.2% and 2.1% respectively in the third quarter.

This is slightly higher than the 1.1% and 1.7% increase in the previous quarter.

Rentals of private residential properties rose by 0.8% in the third quarter, less than the 1.3% increase in the previous quarter.

URA said there was a total supply of 76,255 uncompleted private residential units from projects in the pipeline, as at the end of the third quarter this year.

This supply is higher than the 71,111 units in the previous quarter, and also the highest ever recorded since
such data was first available in 1999.

Meanwhile, the total stock of completed Executive Condominium (EC) units remained unchanged at 10,430 units as at the end of the third quarter.

In addition,there were 5,332 EC units in the pipeline.

URA added that another 1,115 EC units could come from the EC sites that have been released for sale via the 2nd Half 2011 government land sales (GLS) Programme.

Source: Channel News Asia

The wife and I are rather amazed by how the slower pace of price rise in the prime districts of 9, 10 & 11 more than offset the higher price increase for the rest of Singapore. This is dispite the fact that the bulk of the sales continue to be mass-market homes in the suburban areas. It just goes to show the huge price disparity between private properties in the prime districts versus the rest.

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Private home market on the up again..?

Private home market gaining momentum
by Colin Tan  (Colin Tan is head of research and consultancy at Chesterton Suntec International)

For the past couple of weeks, you get the sense that momentum is building up in the private housing market.

In an ironic twist, a private residential site tender at Flora Drive in Upper Changi broke new ground on Wednesday, the same day National Development Minister Khaw Boon Wan said it was not time yet to remove the property market cooling measures.

It was the first site sale to reverse the tide of cautious bids for the past few land tenders. The tender attracted eight bids, with the top offer coming at $163 million or $361 psf ppr. This is 11% higher than the $325 psf winning bid for an adjacent site sold in June which attracted only four bids.

You could say that this day was some time in the making. Even as the past few state land sales attracted lower – and fewer – bids, the point is that they still got sold. The past few years have been golden years for developers, with many achieving strong profits. Many are facing the “good” problem of how best to re-invest these profits.

But more important than profits for developers is that housing sales are continuing, albeit at stable price levels.

The latest developer sales numbers for last month showed housing units sold jumping by 20.7% from the previous month, or by 25.8%, including the sale of Executive Condominiums.

Can the buying momentum continue and surpass the record 16,292 private homes achieved last year? It is a tall order but why not, if – as many have predicted – developers are rushing over themselves to push out their units.

And if sales continue to be robust, can we expect prices to remain unchanged for long since rising prices and sales often always go hand-in-hand?

Adding to the momentum is the ongoing collective sales – but with a big difference this time. The en bloc sale scene has clearly entered a new phase where the majority of owners for some projects are “determined” to sell.

This week alone saw five developments being put up for collective sale – Faber Garden, Dragon Mansion, Newton Lodge, Dunearn Gardens and Jasmine Court.

For the majority of owners in Dragon Mansion and Dunearn Gardens, they are openly lowering their price expectations. If owners are determined to sell, I strongly suspect they will get it sold eventually.

What will be the impact of this continuous stream of collective sales? For one, they will remove some of the housing stock and possibly some rental units – which will lend some support to the rental market.

Some owners will choose to rent while others will downgrade for the time being. This will again impact both the rental market and raise housing sales for existing developments. Others will seize their opportunity to make big money, enough to possibly retire comfortably.

For these owners and other investors, the path is clear. There is price stability in the private housing market – which means no more cooling measures for the time being. They may even derive some comfort from Mr Khaw’s announcement on Wednesday that his top priority for the next two years will be to tend to the housing needs of two groups: Newlyweds and vulnerable families.

As the saying goes, when the cat’s away, the mice will play.

Source: TODAY Online

It seems like the current sentiments about our private housing market is much like the stock market these days – one week up, the next week down. Let’s see what the experts will have to say in the next couple of weeks…

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