Property cooling measures ineffective?

Not exactly… said Philip Loh in his letter published in the Forum page of our de facto English newspaper today.

Below is the full transcript:

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THE Singapore Real Estate Exchange (SRX) reported that resale suburban condominium prices rose by 5.1% last month (“Resale suburban condo prices rise”; March 9).

This gave the impression that suburban property prices had gone up by 5.1% when, in actual fact, prices may have softened a bit from January.

The SRX reports average per square foot (psf) figures, which depend a lot on the mix of properties transacted.

As the sales volume plunged for the general resale market (older private properties), the sub-sales of private properties that were still under construction, about to get their temporary occupation permit (TOP), or just received their TOP (new properties) will pull the average psf price up.

Also, the sizes of these sub-sales units are usually smaller, which will generally fetch higher psf prices.

The mix of private properties transacted is simply getting newer and smaller. Even if real actual prices were to remain the same, the SRX would still have reported higher average psf prices as long as the mix of transacted units was skewed towards the “newer” and “smaller” trend.

The more balanced Urban Redevelopment Authority (URA) private property index reported a price gain of 2.8% last year, down from the 5.9% gain the year before (“Prices of suburban condo units climb 3.4% on strong demand”; Jan 3).

The difference is that the URA index adjusts for the size and age of private properties transacted, whereas the SRX does not.

As the Housing Board does not build shoebox flats, and new flats can be sold on the resale market only after the five-year minimum occupation period, the SRX actually reported a drop in last month’s HDB resale prices.

Sales volume was reported to have dropped sharply last month and developers’ share prices plummeted as a result of the poor outlook.

All these, I believe, are more indicative of the true state of the Singapore property market now.
The SRX’s reported average psf price is a misleading indicator of the health and price trend of the Singapore property market. As a result, many Singaporeans may feel that the Government’s property cooling measures are ineffective when, in actual fact, they could be working very well.
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The wife and I appreciate the insight given by Mr Loh on the difference between the SRX and URA indices. And on the subject of price, we feel that as long as liquidity amongst potential home buyers remains high, private home prices will continue to rise, albeit at a slower pace given the latest set of cooling measures.

Property cooling measures #8: If not capital gains tax then…

Comments made by our National Development Minister’s last Friday, whereby he wants to lower the prices of new HDB flats, have sent jitters in the property market that the Government may bring in a fresh round of market cooling measures. This has sent property stocks tumbling over the past few trading sessions.

Property developers are concerned that lowering of HDB prices could affect the private market eventually as buyers switch to the HDB market. And some observers has interpreted the recent comments as a sign of the Government’s willingness to further intervene in still buoyant private market, with increased sentiment and expectations of Round 8 of new cooling measures.

As you may recall, the seventh and toughest round of market cooling measures was unveiled in January of this year.

Rumors have been circulating in the market since last week that the Government may soon slash the mortgage servicing rate for private homes. This is the proportion of monthly income a borrower spends to service his monthly mortgage installments.

If you have been following our blog, we did put forward the possibility of reinstating the property gains tax by the Government in an earlier post. This has generated quite a lively discussion amongst our readers.

The wife and I decided to take another chance on our somewhat murky crystal ball and it has this to say: the mortgage servicing ratio for loans granted by banks on private home purchase may be capped as low as 30% of a borrower’s gross monthly income. The current ratio can vary from anything between 30 to 60%.

The 30% mortgage servicing ratio was already implemented for bank loans on HDB flat purchase as part of the last set of cooling measures in January. 

To illustrate the impact of such a reduction in mortgage service ratio (illustration taken from a previous news article report): Let’s take a buyer who takes up a 30-year loan for a $700,000 “shoebox” apartment. And let’s assume that the loan to be 80% of the apartment’s value, with interest rate pegged at 1.5%. Based on a 40% mortgage servicing ratio in the past, he would need to have a gross monthly income of $4,830. But for the same property at a 30% ratio, he would need to make $6,440 a month.

Will this cause a further dent in private property prices? The wife and I certainly think so.

When is this likely to happen? Sooner than you may think.

Click on the link below to read our previous post on property cooling measures round #8:
http://sgproptalk.blogspot.sg/2013/01/property-cooling-measure-round-8.html

Resale prices up 2.7% in Feb 2013

Resale prices of private non-landed homes increased 2.7% in February when compared with January 2013, according to flash estimates put out by the Singapore Real Estate Exchange (SRX).

SRX compiles data from 11 top property agencies in Singapore.

Leading the rise were properties in the suburbs. Resale prices of non-landed private homes in those areas rose surged 5.1% on-month to an average of $1,046psf in February, exceeding $1,000psf for the first time.

In the city fringes, resale prices rose 3.5% on-month to $1,272psf.

In contrast, resale private homes in the city or the core central region saw a decline of 4.7% month-on-month to reach an average per square foot of $1,788.

Despite price gains, only 325 resale transactions were recorded in February – a drop of more than 50% compared to January 2013. This was attributed to the Lunar New Year holidays in February.

Meanwhile, rental prices for non-landed private homes in February dropped by 1.3% compared with January. Rentals softened across all three regions, with units in city fringes recording the sharpest drop of 1.9%. The mass market segment saw rentals fall 1.6%, while the core central region reported a 0.4% dip.

SRX said small private apartments, commonly known as shoebox units in Singapore, bucked the trend of softening rentals for the entire non-landed residential market.

Rentals of shoebox units rose 1.8% in February. Units in the suburbs enjoyed a 101% rental price premium in per square foot terms over larger homes in the same areas.

Meanwhile, shoebox units in the city recorded a 63.0% rental price premium while those in the city fringes were rented at a premium of 66.8%, compared to larger homes in the same areas.

Source: Channel News Asia

Resale price up 0.6% in January 2013

Resale prices of non-landed private residential units inched up 0.6% in January, compared to December 2012, according to flash estimates released by the Singapore Real Estate Exchange (SRX).

SRX compiles data from 11 top property agencies in Singapore.

It said resale prices of non-landed private homes in the city fringes rose 2.5% to an average of $1,256psf in January, compared to December 2012.

Resale prices in mass market segment rose 1.1% to $997psf.

In contrast, resale prices of private homes in the core central region saw a drop of 2.9% month-on-month to $1,878psf.

SRX noted that January 2013 saw a 16.7% month-on-month increase in the volume of transactions for non-landed private residential homes.

Compared to the same period last year, the monthly resale volume of 920 units in January was almost triple the 309 units sold in January 2012. SRX said this was mainly due to the Lunar New Year holidays falling in January 2012.

Meanwhile, rental prices for non-landed private homes in January rose 1.2%, compared with December 2012.

This was led by a 3.8% increase in the city fringes, followed by a 0.9% appreciation in the core central region. The mass market segment saw rentals decline by 0.6%.

Source: Channel News Asia

We were Yahoo-ed!

THE wife and I were told that our recent blog entry entitled “A home buyer’s lament: Here’s some relief?” was featured in Yahoo! Singapore News today. While we are strong advocate of information sharing and have no qualms about agreeing to requests from other blogger/blog site to repost our entries, today’s feature did catch us totally by surprise.

THE wife and I decided to take a peek at the Yahoo! Singapore News article and besides having quite a few chuckles over the various comments made on the article, we have these thoughts:

1. Yes, we do not have all the answers but then again, we never profess that we do.

2. We have always maintained that whatever we have written are strictly our opinons, so anyone taking what we said as facts is either a huge fan (one can always hope!) or he/she truely believes that we make (some) sense. But nobody is pointing a gun at anybody to take what we said as the gospel truth.

3. Even if we are wrong (which certainly will happen from time to time and if so, we really don’t mind being corrected), we hope our entries will at least invoke responses from people who may have the correct answers. This will provide opportunities for those who don’t know to learn from those who do.

4. We appreciate someone educating us on the difference between “unusable” and “unhabitable” space. But if AC ledge is indeed classified as “unhabitable space”, then we are really surprised when the same someone claimed that “most projects do not have unhabitable space to begin with” – THE wife and I probably need to get our heads checked because if our memories served us right, most of the new projects (including “shoeboxes”) that we had seen over the past 3 years have rather large AC ledge/space.

5. We are also grateful to be taught the difference between “covering over” and “enclosures”. Having said that, nobody ever said anything about “covering up of roof terraces”. Despite our limited English abilities, we believe that “having covered structures built on top of open roof terraces” is quite different from “covering up of roof terraces”. And if anyone still insists that the former is prohibited in older estates, he/she has obviously not been to Lakeview Estate!

6. And before this becomes the subject of another Yahoo! News Singapore article (or the National Conversation, for that matter), THE wife and I wanna go on record to say that there is just THE one and only wife… and we shall leave it at that.

 

 

Developers getting creative?

Property analysts said developers will probably have to get more creative in order to move sales after the introduction of new cooling measures recently.

One developer told Channel News Asia that it is planning to complete its condominium project a year ahead of schedule to entice buyers.

To date, 380 of the 500 units launched at La Fiesta at Sengkang have been sold. There are 810 units at La Fiesta in total.

Most of the deals were done before the cooling measures kicked in on January 12.

Since then, sales have cooled and just eight units were sold over the weekend.

Its developer, EL Development, has offered discounts of up to 24% off the selling price.

On average, a unit at La Fiesta cost about $1,125psf after discount.

It hopes to deliver the new units a year ahead of schedule by June 2016.

The committed date for delivery of the units was originally set at June 2017.

It will start work earlier and adopt more efficient construction techniques.

Lim Yew Soon, managing director at EL Development, said: “Initially, we are thinking of starting in April, May. We will speed up our construction progress, we intend to commence construction in March, early March. By completing our project earlier, we believe we will be able to draw buyers who are looking for self-occupation.”

Mr Lim said this could raise construction cost by two to five per cent, which it will absorb fully.

The developer will also roll out its new marketing campaign for the project this week.

Going forward, EL Development will also devote more resources to explore opportunities in overseas markets like the Iskandar region in Malaysia, Myanmar and China.

Meanwhile, analysts said many developers have offered extra discounts to cushion the impact of the increase in Additional Buyer’s Stamp Duty (ABSD).

Colin Tan, director of research and consultancy at Chesterton Suntec International, said: “If you are in the midst of a launch, the developer can’t have sales stagnating. The best thing they could do is to absorb the ABSD. That is why the discounts that they are giving is around five to seven per cent.”

Singaporeans buying their first home will not be affected by the latest round of cooling measures and some analysts said developers can look at packaging their products to target this group of buyers.

Beyond current projects, analysts expect developers to work at right sizing units and maximising space usage or explore other property segments.

Chia Siew Chuin, director of research and advisory at Colliers International, said: “The way to go is still catering to families with room types catering to them but because of the affordability issue, developers may be prompted to look at smaller sizes of apartments. This is of course not to the extent of Mickey Mouse apartment.”

Nicholas Mak, executive director at SLP International Property Consultants, said: “Another way is that the developers may start to look at developing outside the residential market. For example, they may be looking at the commercial property market or industrial property market locally.

“If the developers were to venture into the industrial development market, they have to be aware that they should build industrial units that are suitable for end-users and not retail investors.”

Creativity aside, analysts said developers must be careful that their marketing activities do not contradict the intention of the cooling measures.

 

Source: Channel News Asia

 

 

 

A home buyer’s lament: Here’s some relief?

The wife and I came across an article in the Forum page of our de facto English newspaper (“So many questions, so few answers”) from a certain Mr Tan who happens to be an enthusiastic first-time home buyer. He claimed that the numerous doubts and anomalies he had after viewing several new and completed projects could not be explained clearly even by experienced real estate agents. He went on to list the questions that he is stilling seeking answers to.

While maintaining that we are no real estate experts (and thus not dispensing professional advice here), we like to have a crack at Mr Tan’s questions:

1. What constitutes part of total floor area and what does not?
Technically speaking, everything that is shown on the floor plan of an apartment/house will form a part of the total floor area. The obvious ones are open roof terraces and private enclosed spaces. But areas labeled as “RC ledge”, “A/C ledge”, “void”, “void over staircases”, “flat roof of houses (no access except for maintenance)” etc are generally included as part of the total floor area as well. The wife and I have previously came across a new project in the Holland area (recently TOPed) where a planter box located on the outer wall of the master bathroom toilet was included as part of the total area, despite the fact that one has no access whatsoever to this planter box!

The areas that generally do not constitute as part of the total area are what we termed as “common areas”, e.g. the walkway outside your apartment, the lift landings (unless your apartment has a private lift, in which case the lift landing is also part of your total area) etc.

2. Is it true that unusable space constitutes 20 – 35% of a unit’s total floor area (jumbo penthouses excluded)?
Although this differs between projects, but 10 – 20% of unusable space is a realistic ballpark.   

3. Why are secondary market units valued at a hefty discount to primary market ones?
The can be due to various factors: age and condition of the older development, pedigree of older development versus new, and in some cases, the perception of owners in the older development as to how much they can move prices of their units up vis-a-vis the price of neighboring new development. But the primary reason is due to the obscene bids that developers have made for land parcels over the last 2 – 3 years, coupled with increase in construction costs. As such, their break-even price is much higher now resulting in higher selling prices for new projects.

4. Can small office, home office (SOHO) units with commercial titles like those at Southbank and The Central be purchased for residential use? Is office-cum-residential use allowed?
This is best explained by URA on their website, which has this to say:

Increasingly, we are seeing more developments marketed as “SOHO” in the property market. “SOHO” is essentially a marketing term used by property developments to refer to Small Office, Home Office.  Many would-be buyers are unsure whether “SOHO” units are approved for office or home use, or both.

URA does not recognize “SOHO” as a planning term and does not specifically approve a development for “SOHO” use. Rather, developments being marketed as SOHOtoday are approved either as Office or Residential but not for both uses.

We have noticed that some office developments are being marketed as residential apartments by calling themselves “SOHO”.  This is misleading and inappropriate as the office development may not fully meet the guidelines and various technical agencies’ requirements for Residential use (eg. provision of sufficient parking facilities).  Similarly, home buyers should not be misled by the term ‘SOHO’ to think that they can convert the residential unit to a pure office.

Residential homeowners or tenants who want to conduct selected small-scale businesses from homes can make use of the existing Home Office Scheme. This is not to be confused with “SOHO” as these units under the Home Office Scheme are still approved and used primarily for Residential purposes. To ensure that the home office uses do not disturb the neighbors, applicants under the Home Office Scheme must meet the stipulated conditions and performance criteria.  For example, there is a limit on the number of employees and type of business uses that can be conducted within the homes. More details on the Home Office Scheme can be found at http://edanet.ura.gov.sg/dcd/homeoffice/HOMainPage/HOindex.jsp.

Would-be property buyers should be cautious and are advised to check the approved use of the property before committing to any purchases.

5. Some formerly freehold estates that went en bloc are now being sold as new 99-year leasehold condos. Are there any implications to buyers – legal or otherwise?
We are talking about the likes of The Shore Residences in Katong (formerly Rose Garden), which is sold on 103-year lease but resides on a freehold site.

Realistically speaking, this is no difference to buying a leasehold property. The only major implication to buyers (that the wife and I can think of) is that, at the end of the 103-year lease, the land owner can rightfully “take back” the land and do whatever with it as they please, with the buyers/owners having little/no recourse. This is the same right the government has over owners of units in 99-year leasehold developments when the lease is up.

6. Why are new developments prohibited from enclosing balconies and having covered structures built on top of open roof terraces whereas old estates aren’t?
This has to do with not changing the facade of the estate. Imagine what a brand new development will look like if every owner decides to have their own ways with their balconies and roof terraces? So a rule is generally put in place at new developments prohibiting any additions/alterations that will alter the facade of the estate. But these rules will generally be relaxed as the estate gets older, although we are unsure if there is a stipulated number of years before this happens.

7. What is the difference between unit size, gross floor area and strata floor area?
This is one that we are not exactly sure (so we stand corrected) but we believe the terms are used interchangeably these days to mean one and the same thing. However, Gross Floor Area is typically referred to in formal and legal documents while Strata Floor Area is used when determining share-values of the unit concerned.

8. Why is photography disallowed in showflats?
This question is best left to the developers, but we reckon they do not want people to just go to their showflats to “steal ideas” without the slightest intention of buying.

There you have it! So if Mr Tan happens to read our blog, hope the above helped in some small ways towards explaining your numerous doubts and anomalies …

Have a good weekend, everyone!

Proposed new MRT lines: Huat Ah…?

According to property analysts, home prices near the proposed new MRT lines are unlikely to increase in near future.

Market watchers say the announcement of a new MRT line could generally prop up prices of homes in the area by 3 to 5%. But the response to the announcement of the expanded rail network on Thursday may be more muted.

News of the new MRT lines would have generated more excitement among developers, buyers and sellers alike in normal circumstances, say analysts. But they are probably still thinking about the impact of the cooling measures introduced recently.

Without further details on the exact locations of the train stations, analysts added that it will not be easy to justify any significant increase in home prices.

Chia Siew Chuin, director of research and advisory at Colliers International said: “When the stations are announced, probably you will see another increase in prices for those located near MRT stations, probably to the tune of 10 to 15%. Nearing completion of the stations, then we will see probably a 20 to 30% increase in prices.”

The expanded rail network and new lines and are expected to be ready in 2025 and 2030.

According to analysts, the flip side is that future construction work could undermine the value of homes in the area.

“Typically, no one will want to buy a property to live next to a construction site, that is why buyers will only be willing to pay a premium when they are able to enjoy the benefits, when the lines are completed,” said Eugene Lim, key executive officer at ERA.

Market watchers also do not expect the announcement of the new train lines to reduce the impact of cooling measures to keep rising home prices in Singapore in check.

Source: Channel News Asia

At least 12 more years before the expanded network is ready – that’s a pretty long time especially for the wife and I, since we have never stayed put at the same place for more than 3 years thus far…

And as far as the inconvenience due to construction work of the new MRT Lines is concerned, just ask those who have to commute along Bukit Timah/Dunearn Road during rush hours these days!

Q4 resale prices jumped 13%!

Resale prices of private non-landed homes jumped 13.4% on-year in the fourth quarter last year, according to flash estimates put out by the Singapore Real Estate Exchange (SRX).

SRX compiles data from 11 top property agencies in Singapore.

It said non-landed private resale home prices continued its uptrend to hit $1,233psf in the fourth quarter (Q4), compared to $1,157psf in the third quarter (Q3) in 2012.

Resale units in the mass market segment led the gain with a 4.8% increase over Q3, while those in the city fringes saw prices climb 3.6%.

But it was the core central region which saw a higher-than-expected growth of 4.6% in Q4.

SRX said this was due to the city area’s strong performance in December.

Average private resale home prices in the city area surged 8.8% to $1,899psf in December, over November’s average of $1,746.

SRX said the strong growth is partly attributed to a possible record breaking price paid by Hong Kong’s Swire Properties for all 12 units in the en bloc sale of Hampton Court located at the corner of Draycott Park and Draycott Drive

Meanwhile, resale transaction volume of non-landed private homes showed a seasonal drop of 5.5% in Q4 compared with Q3.

But transaction volumes in the city area bucked the trend by reporting a 7.3% increase. Volumes in city fringes and mass market segments fell by 11% and 4.6% respectively.

For the full year, 12,500 units were transacted in the private resale non-landed market – a 7% drop compared to 2011.

SRX said this can be attributed mainly to the weak performance in the first half of the year, which saw a 27.3% plunge in transaction volumes after the additional buyer’s stamp duty was introduced.

But the trend was reversed in the second half of the year with a 20.1% jump in the number of units transacted compared to a year ago.

Source: Channel News Asia

No more "free spaces" for developers …?

National Development Minister Khaw Boon Wan has asked the Urban Redevelopment Authority (URA) to review and fix the policy allowing developers to sell off free spaces to make additional profit for themselves.

He said this in a blog post, “Who Gets Short-Changed?”, on Monday, on the heels of recent launches of executive condominium (EC) projects.

Mr Khaw noted that in these projects, super-sized units were offered and snapped up by buyers who did not appear to be from the “sandwiched” households.

He said understandably, there was public indignation that there were “deviations” from the government’s intention of meeting the needs of such households through ECs.

Mr Khaw said the developers explained that such super EC units were a minority, and that they were snapped up by buyers who could actually afford private properties as they had priced them low.

One such developer, he noted, priced its super penthouse at $470psf, while selling the other smaller typical EC units at $770 psf.

Mr Khaw was referring to CityLife@Tampines, which made the news for a penthouse unit with a record price tag of $2.05 million. The unit was over 4,000sqft – roughly four times as big as a five-room HDB flat. The unit was snapped up within two hours of its launch.

This sparked a public outcry on whether ECs have deviated from its original intent to provide subsidised housing for the sandwiched class – those who cannot afford private property but with an income exceeding the limit that qualifies them for a HDB flat.

Mr Khaw said communal sky terraces have been effective in promoting greenery and providing useful common amenities for residents.

But the creation and sale of super-sized private roof terraces is becoming more prevalent.

This is also happening on the ground floor, where it’s referred to as “private enclosed space” for the buyer.

Mr Khaw said under URA rules, it’s “not improper” for developers to sell off free spaces to make additional profit.

But he’s concerned that as more developers do so with larger private roof terraces and private enclosed space, communal space in the development that benefits all residents will shrink.

Chesterton Suntec’s research head Colin Tan said: “This is a closed market in the sense that there is a ceiling cap. And so the developers may think that the majority will not be prepared to pay for such space, and so they decided to concentrate most of this space in just a few units. They feel that at least there will be some buyers who will be prepared to pay for this.”

In an emailed response to Channel NewsAsia, URA said: “We are reviewing the guidelines on private enclosed space and private roof terraces, and will announce the details once the review is completed.”

Property analysts said the issue has much to do with equity.

CEO of International Property Advisor Ku Swee Yong said: “A sandwiched class family with a household income of $12,000 – are they able to afford a property that is more than $1.5 million? If the family, together with support from parents and relatives can afford (a unit costing) more than $1.5 million then perhaps they are not really in the sandwiched class anymore. They should be better off buying a private property rather than buying a subsidised property which is subsidised with taxpayers’ money.”

Source: Channel News Asia

Mr Ku seems to have hit the nail right on its head there…