Singapore Property News This Week #167

Residential

Private home price continues to fall

According to the National University of Singapore, the Singapore Residential Price Index (SRPI) has decreased by one per cent month-on-month in June. Nonetheless, the price index which reflects changes in the market for private condos is still 36.1 per cent higher than in January 2008. Data from URA showed that out of the 1,412 completed private homes that were not sold by the end of June, 63.3 per cent were located in the Core Central Region. From May to June, sale of private homes in the Central Region fell 1.5 per cent while those in non-central regions fell by 0.4 per cent. Ong Kah Seng from R’ST Research believes that restrictions on the Total Debt Servicing Ratio have impacted buyers’ ability to make large loans, hence, limiting their ability to purchase new homes. Nicholas Mak from SLP International adds that he thinks an increase in supply of homes in the Outside Central Region will push rental prices downwards first before impacting resale prices. Thus given that the supply of private homes is expected to increase and that the rental market is weakening, private home prices are expected to dip further.

(Source: Business Times)

Analysts optimistic about property market despite falling prices

According to Real Estate Developers’ Association of Singapore (Redas), the outlook for the property market will remain positive despite an expected 10 to 15 per cent fall in residential prices in the coming two years. Song Seng Wun from CIMB Research said that market liquidity is high as buyers are anticipating a drop in residential property prices. Thus, Song believes that there is no rush to lift cooling measures. Chua Yang Liang, head of research for South-east Asia and Singapore at JLL expects home sales volume to continue moderating with the implementation of the total debt servicing ratio framework. While the framework was introduced in 2013, it only started taking effect three quarters after it was implemented. On the other hand, Toby Dodd from Cushman & Wakefield predicts that office rents and occupancy rates will increase in the next year as the supply of prime grade office space remains limited. He expects the net demand for prime grade office space to exceed 1.5 million square feet by the end of 2016. As such, despite the expected fall in property prices, the longer-term outlook for the property market remains positive.

(Source: Business Times)

Commercial

Rising vacancy in industrial spaces

Colliers International said that there is an oversupply of industrial space in relation to its demand. This is likely to worsen the level of vacancies. According to Chia Siew Chuin from Colliers International, there is a need for the government to improve current policies on industrial space usage in order to boost occupancy rates. Under the current rules by the URA, 60 per cent of the total floor area has to be dedicated to core industrial activities while the remaining 40 per cent may be used for secondary uses. Yet, Chia said that industrialists are moving away from traditional manufacturing activities, as more companies have begun to focus on after-sales services, product consultation and conceptualisation. The current rules fail to capture this shift in the market, as more industrialists are focusing on activities that are not considered core industrial activities. Not only so, JTC will be restricting occupiers from subletting their building space beyond 30 per cent. According to Chia, this new rule will also affect the uptake of industrial land. Besides that, from 2014 to 2018, about 76 million square feet of industrial land space will be supplied. Given the surge in land supply, Chia forecasts that there will be a 3 per cent drop in rents for multi-user factories.

(Source: Business Times)

Two new Tuas site for sale

Under the H2 2014 Industrial Government Land Sales programme, JTC has launched two sites at Tuas Bay Close and Tuas South Street 7. The Tuas Bay Close site will cease its tender on September 23, while the other site will close on September 9. The Tuas Bay Close site is 2.7 hectares and can be strata-subdivided. The 30-year tenure site is zoned for B2 development which is for heavier industrial use. It has a maximum gross floor area of 4.6 hectares and market experts predict that it will draw up to five bids. They expect the winning bid to be around $65-80 per square foot per plot ratio. On the other hand, the Tuas South Street 7 site measures only 0.5 hectares. It is on reserve list for the government land sales. Bidding starts at $3.527 million for the site at Tuas South. The site is also zoned for B2 development but its tenure duration is 20 years and 10 months. Its maximum gross plot ratio is only 1.0. Experts predict that the Tuas South site will attract contractor-developers and average-sized industrialists. It is expected to draw up to 10 bids and is expected to be sold for $68-100 per square foot per plot ratio.

(Source: Business Times)

Fall in Q2 commercial property real estate investor sentiments

A survey done by the Royal Institution of Chartered Surveyors (RICS) showed that real estate investor and occupier sentiments in the commercial property market are down from the previous quarter. The index measures occupier demand, level of inducements and rent expectations. According to the index, the number of respondents that expect a positive outlook fell to 11 per cent in Q2. Due to shrinking demand for industrial and retail land space, occupier demand has also fallen. However, office space rental prices are expected to increase as the office land supply decreases. While the Investment Sentiment Index showed a drop of 14 per cent from Q1, it is still in the positive range as 4 per cent of the respondents are optimistic in the property market. From the survey results, RICS expects the property transaction volumes to moderate in the next quarter.

(Source: Business Times)