Some speed bumps ahead

Business Times Reports: New rule may weigh on prices of luxury condos
By KALPANA RASHIWALA

The prices of luxury condos have continued to rise this year but a new rule may soon tie the hands of the developers. Till now, many have picked their time to launch developments when sentiments are good and decent prices can be charged. But under the rule changes which are expected to kick in early next year, they may lose this luxury.

If they bust the project completion period on sites bought from private sector sources, they stand to lose not just the 10 per cent bankers' guarantee for land cost, but could also end up making huge payments for time extension. All this could force them to launch earlier than they might like and affect prices, market watchers said. The median price of new luxury condo transactions stood at $3,265 per square foot in Q3 this year, an increase of 18.7 per cent year to date, according to CB Richard Ellis' analysis. However, the figure is still about 13 per cent shy of the peak achieved in Q4 2007.

A question mark now hangs over whether the previous peak median price of $3,750 psf can be scaled next year. CBRE's compilation shows about 1,500-odd luxury non-landed homes could be generated on projects that have received planning approval from Urban Redevelopment Authority and which have yet to be launched. These include five projects in the Ardmore Park area alone, the Westwood site at Orchard Boulevard, the former Parisian plot at Angullia Park and Ho Bee's and IOI's 302-unit condo on the Pinnacle Collection plot at Sentosa Cove.

CBRE executive director (residential) Joseph Tan says: 'Developers' strategy in the first instance, would be to hold off launching these projects as long as they can until sentiment improves further in this segment.' Agreeing, Wheelock Properties (Singapore) CEO David Lawrence says: 'Traditionally, developers know that for really high-end projects on very good sites like Ardmore Park, if you just keep them in your pockets, eventually prices will come up and they make money. But developers can't do that anymore.'

The catch is the amendment to the Residential Property Act that will apply to private residential projects undertaken by foreign housing developers with Qualifying Certificates (QCs), a category which effectively covers all listed developers. Such projects, built on residential sites bought from private-sector sources, will in future have to be completed within the stipulated project completion period (PCP). Otherwise, the developers may not only lose their bankers' guarantees as is the case currently but also have to pay the state for any time extension.

This is similar to the scheme for sites sold through the Government Land Sales Programme. Developers have to pay 8 per cent of the tendered land price for the first year of PCP extension. They must pay 16 per cent for the second year's extension and 24 per cent per annum for the third and subsequent years. CBRE's Mr Tan estimates that since it takes 30-36 months to complete a typical high-rise condo, and assuming developers need to attain Temporary Occupation Permit (TOP) by 2014-2015, construction would have to begin around 2011-2012.

That still leaves some room to avoid a bunching of project launches given that on average, developers have been able to sell an average of about 650 non-landed homes per year at above $2,000 psf over the past five years. One way that deep-pocketed developers may get out of the bind is to build their projects first - and meet PCP deadlines - but launch them for sale only when the sentiment is good.

For this reason, most property consultants don't expect developers to drop prices. 'But there's a good chance they may have to reduce their profit expectations if they wish to clear the units,' says Knight Frank managing director (residential services) Peter Ow. While he's betting there's a fair chance that the market could revisit the 2007-high in luxury condo prices next year, others are less sanguine.

As Mr Lawrence puts it: 'Prime property in the long term will still do very well in Singapore, but it's a difficult period at the moment. There's plenty of demand. I think prices won't come down much, but they won't go up to the level that developers are expecting; perhaps (they'll have to) make much finer profit margins.' There have been 'one-off' cases of high-priced transactions lately - such as a high-floor apartment at Boulevard Vue that Far East Organization sold last month for $4,800 psf reportedly to a foreign buyer. 'However, we'll need to see more foreign money flowing into Singapore. Right now, Singapore luxury condo prices are still below those in other major cities including London, where prime apartments are going for about £2,500-4,000 psf' (S$5,205-8,329) says CBRE's Mr Tan.

DTZ South-east Asia research head Chua Chor Hoon said: 'With the major economies still weak, foreign buyers have not come back to Singapore in a big way yet.' Knight Frank's Mr Ow is hopeful that 'property curbs in China and Hong Kong could divert some moneys to Singapore and boost our high-end market'.

Source: Business Times, TUE, NOV 30, 2010.

Singapore's Economy to Expand 4% to 6% in 2011

The economy will continue to expand next year; extending an expansion that has already prompted the central bank to allow the currency to rise to a record to damp inflationary pressures.

Won't rising exchange rates coupled with already rock-bottom interest rates accelerate asset price inflation?

A stronger Singapore Dollar might curb imported inflation but will also dampen exports & tourism. The Singapore Dollar has gained about 8 percent against the U.S. dollar this year, and closed at a record S$1.2835 on Nov. 4.

Property Market Update

October 2010 primary private sales market volume was up 16% month on month to 1,058 units compared to last month's 911 units - a rather strong recovery. Strong sales of 529 units of Executive Condominiums (EC) units contributed to the total primary market sales of 1,587 units in October. The strong sales were despite the Singapore government’s recent property cooling measures – suggesting HDB upgraders' demand could be stronger than expected. 

Sales are again weighted to the Outside Central Region (OCR), though sales in Core Central Region (CCR) picked up to 21% of all new sales - driven mainly by two projects: The Glyndebourne and Suites at Orchard. Aborted sales options returned fell to 29 units from 65 units compared to the previous month, signaling less uncertainty in the market outlook. Sentiment certainly has improved markedly since the new measures were announced.

New sales since the beginning of this year now stands at 13,860 compared to 14,688 in 2009.

Recently launched projects in November like KeppelLand's Lakefront Residences (mass market:; average selling price of $1,020 psf) and UOL's Spottiswoode Residences (mid-market; average selling price of $1,700 psf) are witnessing healthy demand. However, pricing appears to be flat to marginally positive for new
launches, and secondary market volumes are down by an anecdotal 25%.

Looking ahead, sales volumes could hold up but price growth is likely to remain muted. Also, it is likely that  the government will continue to push out more land supply to cater to this demand - which will cap rhe mass market residential price growth. More onerous demand-side measures might be on the cards if prices rise sharply. The high-end residential market, which has been rather muted this year, will start to show more signs of life going forward and into 2011.

GCB owners cashing in

Straits Times: Bought: $20m in June 2009, Sold: $37m in Oct 2009
By Esther Teo
Good-class bungalow owners are cashing in on rocketing property prices.
A CB Richard Ellis (CBRE) analysis of Urban Redevelopment Authority (URA) Realis caveats shows that good-class bungalows are netting bumper profits for owners who have seen average per sq ft (psf) prices rise almost 30 per cent over the past year.
Several have taken to buying and selling their good-class bungalows within a period of less than two years.
At least seven good-class bungalows bought since May last year have been sold within 18 months of purchase, with four sold within a year, with a profit of as much as 85 per cent over the purchase price.
This massive gain was seen by a 40,677 sq ft good-class bungalow property on Ridout Road near the Holland area, translating to a $17 million gain within a four-month span.
At least one home, on Nassim Road, has even been sold five times within the past six years - soaring from $9.8 million in 2005 to $43.5 million this year.
It sold at $1,800 psf in April this year - almost 4.5 times the $405 psf it was sold for in February 2005. The 24,186 sq ft property had changed hands at $620 psf in August 2006, $760 psf in December the same year, followed by $1,000 psf in June 2007.
Experts said that good-class bungalows have turned out to be one of this year's star investment propositions.
URA data shows that non-landed home prices inched up 1.6 per cent in the third quarter, while prices of detached homes rose 8.4 per cent over the same period.
CBRE said that while the 109 good-class bungalow sales last year had been transacted at $831 psf on average, the 86 transactions this year to September, which totalled $1.6 billion, were done at an average of $1,055 psf - a 27 per cent surge over the previous year.
This increase is one of the steepest over the last 15 years, said Cushman and Wakefield's senior manager of Asia-Pacific research, Mr Ong Kah Seng.
He noted that the keen buying interest in good-class bungalows was being driven by limited supply, making it the safest buy for a home buyer not limited by affordability.
'(Even with) developers' concerted efforts to brand condominiums with innovative concepts, the product is fairly homogeneous...On the other hand, buyers of good-class bungalows, in addition to being proud owners of the land, will be able to highly customise their homes to be materially different from another,' he said.
Mr Douglas Wong, CBRE director of luxury homes, said that the approximately 2,400 good-class bungalows, which can be found in 39 prime gazetted areas such as Nassim, Dalvey and Tanglin, are owned by only about 1,000 individuals.
These owners are usually ultra-high net worth Singaporeans, who are mostly professionals, businessmen or entrepreneurs, he said.
'Many of the buyers might have purchased their homes with the intention of long-term investment, but when the market moves, they might seize the opportunity to make some profits instead,' he added.
Mr Alexs Chua, managing director of property agency AC MacGyver, a specialist in landed homes, said that about 20 per cent of homes sold last year have been put on the market again, although many owners may just be testing the market.
He expects prices to rise another 10 per cent by March next year.
But CBRE's Mr Wong reports that demand had slowed in the third quarter, when 19 good-class bungalows were sold compared to 36 in the second quarter and 31 in the first quarter.
'This could be attributed partly to cautious sentiments and partly to the widening price gap between good-class bungalow owners' expectations and buyers' offers,' he said.
However, he expects the market to achieve about 100 to 120 transactions amounting to about $1.8 billion this year.
Typically, only Singapore citizens can own a good-class bungalow, but permanent residents may obtain permission to buy small bungalows with land areas of about 15,000 sq ft.

Rush to launch

BT: Developers eye project releases before holidays
By KALPANA RASHIWALA

As City Developments (CDL) announced yesterday that about 75 per cent of the 150 units at its freehold Glyndebourne condo have been sold since the preview began on Friday, some other developers are rushing to try to release projects before the year-end holiday season sets in.

UOL Group is expected to preview the freehold Spottiswoode Residences condo next week, and the price is expected to be about $2,000 per square feet (psf). About 90 per cent of the 351 units comprise one-bedroom, one-bedroom-plus-study and two-bedroom apartments.

The project, a 36-storey tower, is next to Spottiswoode Park, a green lung in the area, and close to Tanjong Pagar, which is slated to be transformed into a new bustling waterfront district after the container terminals in the vicinity eventually move out.

The Tanjong Pagar Railway Station site is also expected to be redeveloped after Keretapi Tanah Melayu vacates the site under a historic land-swap deal between Singapore and Malaysia announced in September.

Over at Robinson Road, agents are said to be gathering interest for the freehold Robinson Suites at prices ranging from $2,300 psf to $3,300 psf. The 42-storey project, to be developed on the VTB Building site, comprises 167 apartments and three ground-floor shop units. All the apartments are either one-bedroom-plus-study units or two-bedders. Unit sizes start at 484 sq ft.

The developer - a consortium whose shareholders include Cheong Sim Lam (whose family developed International Plaza), Fission Holdings, Tan Koo Chuan and Saw Pik Kee - is pitching the project as the 'first-ever freehold apartments along Robinson Road'.

CapitaLand, meanwhile, is getting ready to release the first phase of its 1,715-unit condo on the 99-year-leasehold Farrer Court site. The 36-storey Zaha Hadid-designed project will feature one to four-bedroom apartments, penthouses and six pairs of strata semi-detached houses.

In the mass-market segment, Sim Lian is said to be gunning to release Waterview, a 99-year-leasehold condo comprising 696 units at Tampines Ave 1/10 facing Bedok Reservoir, as soon as it gets all the necessary approvals from the authorities.

The project will comprise two, three and four-bedroom apartments and penthouses. The average price is expected to be in the $820-920 psf range.

Meanwhile, CDL said yesterday it sold 112 units at its 150-unit Glyndebourne condo on Dunearn Road between Friday and Sunday.

'All one-bedroom-plus-study, two-bedroom and three-bedroom-plus-study units have been snapped up. A wide spectrum of other unit types was also sold, including 10 out of the 23 penthouses,' CDL said in a statement yesterday.

Seventy per cent of the buyers are Singaporeans, with permanent residents and foreigners from Malaysia, the United States, Indonesia, China, India, Myanmar, Korea, Thailand, Taiwan and Brunei making up the remaining 30 per cent.

CDL began previewing the project on Oct 29 on behalf of its London-listed hotel unit Millennium & Copthorne Hotels, which owns the freehold site on which the condo will be developed.

The Copthorne Orchid Hotel Singapore on the site will be closed at the end of March 2011 to make way for the redevelopment of the site into Glyndebourne.

CDL said the 112 units sold were at prices ranging from $1,900 to $2,350 psf, or at an average price of about $2,100 psf.