Savills: Less high-end residential transactions, but more non-PR purchase
In a study by Savills Singapore, there have been fewer transactions in the market for high-end homes, but the proportion of non-permanent residents foreigners who bought such properties have increased. From January to November this year, there were1,285 caveats lodged for apartments and condos priced at $2,000 psfand above in high-end districts,a 33% decrease from the caveats lodged in the same period last year.
On the other hand, the proportion of non-PR purchase of non-landed homes priced at more than $1,951 psf in these districts has increased from 28.4% to 37.8% in the same period. The increase is likely due to the restrictions on China’s property buying, resulting in mainland Chinese turning to the Singapore property market. The negative outlook in the Western economies may also push investors to turn to the Asian economies for investment. While Indonesians traditionally dominate the purchase of high-end apartments in Singapore, the proportion of Chinese and Indian buyers have increased.
Chinese buyers, in particular, have increased their share of total buying from 5.8% to 11.8%. Nonetheless, the high-end residential market is not likely to be very active in the next few quarters given the current global economy even as Singapore continues to draw interest from foreigners looking to invest their monies in safer economies.
34 units at the Scotts Tower sold at an average price of $3,100 psf
34 units of the initial batch of 56 one and two-bedroom apartments released for the preview for the 231-unit The Scotts Tower, the first development under the Far EastSOHO brand, was sold at an average price of $3,100 psf. Prices start from $1.94 million for a 624 sqft one-bedroom small office, home office (SoHo) apartment. The 103-year leasehold 31-storey development comprises of one to three-bedroom apartments and four-bedroom penthouses with access to recreational facilities such as landscaped gardens and sky terraces.
Top bid for 99-year Alexandra residential parcel at $396 mil
The top bid of $396 million, or $750 psfppr from a consortium comprising City Developments’ unit Sunmaster Holdings, Hong Leong Group’s Intrepid Investments and Hong Realty’s Garden Estates was higher than the predicted $600 to $650 psfppr. This is due to the site’s attractiveness, being located near the city and amenities such as Redhill MRT station. The strong sales for recent new project launches are likely to have contributed to the higher confidence in the site. Given the land cost, breakeven is estimated to be at about $1,300 psf. The site, which has a maximum gross floor area of about 524,900 sqft, attracted seven bids. This should not be viewed as a loss of market interest since the value of the site is much higher than that of other suburban site making it less affordable for some developers. The consortium planned to develop the site into a 40-storey or greater residential project.
Stamp duty for foreigners to cool private home prices for Singaporeans
Foreigners and corporate entities now have to pay an additional 10% for an additional buyer’s stamp duty when purchasing private homes in Singapore. Permanent residents (PRs) buying their second or subsequent homes in Singapore and Singaporeans buying their third Singapore residential property or more will also have to pay 3%.
This is to make the private homes affordable for Singaporeans again but many developers feel that the measures are coming at a wrong time. Despite the strong sales in recent months, which were driven by the increase in new launches and attractiveness of particular projects, the market is not going to become speculative, claimed the Real Estate Developers Association of Singapore (Redas).
On the other hand, Deputy Prime Minister and Finance Minister TharmanShanmugaratnam stated that the large investment flows into the property market islikely to continue as long as interest rates remain low. He added that the duty can help to cool investor demand and avoid a potential major destabilising correction in the future.
DTZ’s Southeast Asia chief operating officer Ong ChoonFahalso stated that the ABSD is trying to strike a balance between keeping the economy open and looking after the interest of Singaporeans, given that it distinguishesbetween foreigners and PRs and also considers the purpose of buying homes – investment or occupation. Prices are likely to fall but developers will most likely absorb the stamp duty or give furnishing vouchers before lowering their prices.
Fewer residential sites to be released in H1 2012
The Ministry of National Development (MND) would release new land for about 14,100 private homes in the first half of 2012. This is after taking into account the new cooling policies and the large supply of 81,600 private residential unitsthat are already available in the pipeline as at Q3 2011. Nonetheless, there will be more land for building EC units available given the higher expected demand for ECs after the raising of the income ceiling for new EC purchase. Analysts considered the upcoming supply of land excessive especially with the new cooling measures. More than 50% of the supply is from the north-east of Singapore, a risk for home owners in those locations. Whether the supply will be absorbed by the market will depend largely on the rate of migration in the longer term.
Luxury developers worst hit by cooling measures
The additional buyer’s stamp duty (ABSD) over and above the current stamp duty announced by the government is likely to hit developers of luxury property the worst even though the whole market is likely to be affected. The ABSD is targeting foreign buyers of local residential properties, with the stamp duty of 10% imposed on foreigners and corporate entities. This may be a measure to counter the increase in foreign buyers of local homes. The impact of ABSD is likely to be felt most strongly in the prime and mid-prime markets though less so on the suburban mass market. Analysts believe that the impact should be immediate with the second month after the implementation showing whether the market can sustain the stamp duty.
However, there are also analysts who believe that the luxury housing sector may not be so severely affected. There had been an increase in rich foreigners who have deep pockets and therefore will not be affected by the ABSD.
Collective sales affected by ABSD
Developers buying residential land have to develop any residential sites (including Government Land Sales (GLS) plots and private-sector sites such as en bloc sales)they buy from Dec 8 and sell all the units in the new project within five years if they do not want to pay the new 10% additional buyer’s stamp duty (ABSD). This means that developers will find it less viable to land bank. According to the Inland Revenue Authority of Singapore e-tax guide on the ABSD,developers can apply for upfront remission if they develop and sell all units in the new development within five years of the date of contract or agreement to buy the site. If the developer fails to do so, the ABSD (with interest) will have to be paid immediatelyon the expiry of five years.
Thus, developers have to be sure that they can complete and sell all the units before they buy the land. This is more risky for collective sales since the date of contract or agreement refers to the date when the site is awarded by the Sales Committee. Even then, the sale may not be legally complete and completion can take six to 12 months or even longer ifthere is a delay in court approval. This time spent waiting for the legal completion of the purchase would result in lesser time for the developer to build and sell the units. This would be detrimental to the sale of larger en bloc sites, where there is higher difficulty in selling all units within five years. Foreigners from countries which signed free trade agreements will not be affected, however.
ABSD to affect Sentosa Cove Market
Sentosa Cove, the only place in Singapore where foreigners don’t need to be permanent residents (PRs) to buy landed homes, is likely to be badly affected by the new cooling measures. Given the high property prices in the area of more than of $15 million, the ABSD would result in a stamp duty of around $2 million, a price that buyers may be unwilling to pay. This also means that buyers who had earlier bought properties in Sentosa Cove for resale purpose would find it harder to find buyers. However, the limited number of homes available in Sentosa may mean that this is not a big problem. Furthermore, developers and investors of properties in Sentosa Cove are likely to be those with deep pockets and therefore need not worry about having to sell their properties immediately.
Buyers holding back on purchase as response to cooling measures
As a result of the new cooling measures on the property market, buyers have adopted a wait-and-see approach when purchasing properties resulting in a slower market.
Nonetheless, the recent closing of the tender for a 99-year 138,783.3 sqft residential site at Chestnut Avenue / Almond Avenue attracted a total of 22 bids, with the highest at $510.38 psfppr. The strong interest in the site is beyond expectations and this may be because many see the ABSD as a measure that does not affect the landed market.The estimated breakeven price and selling price are $2.3 million to $2.4 million per unit and $2.7 million and $2.8 million per unit respectively, assuming that the site is developed into a strata-landed development of 64 units with a build-up area of 4,600 sqft per unit.
Some developers like City Developments (CDL) do not think that the new measures will have much effect on their companies, while others like CapitaLand Residential and Rodyk& Davidson both thought that the latest measures was unexpected. Some, like ECG Property, felt that the measures will only be effective in the short term but no longer so when people start to accept it.
Singapore tops property investment survey again
In a survey jointly published by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC), Singapore triumphs other countries in the Asia-Pacific region for its commercial real estate investment and development prospects in 2012. This is because Singapore is being viewed as a good place for both investment and development of properties, unlike Hong Kong. Nonetheless, investors are still cautious in their investments, with a tendency towards core investments with low capital appreciation but guaranteed cash flows.