Singapore Property News This Week #50

Residential

ABSD reimbursing may be a cause for concern

To prevent the ABSD from affecting sales, developers have been offering discounts, rebates and even reimbursing the ABSD. This may potentially distort property and loan values and obscure transparency in the market especially since these discounts are given only after the transaction, meaning that the prices may not be reflected in sale caveats. While the Ministry of National Development (MND) has yet to step in, it stated that it is watching the market closely and will intervene when needed. The Monetary Authority of Singapore (MAS) also stated that any rebates or discounts received from the seller or any other party in the transaction must be declared when apply for home loans.

NUS SRPI sub-index for small apartments grew the most in March

The NUS Singapore Residential Price Index (SRPI) sub-index for small apartments/condo units (up to 506 square feet) increased by 2.8%from February to March, compared to 0.8% and 0.7% respectively for the SRPI sub-indices for the Central Region and Non-Central Region which does not include small units.The overall SRPI for March 2012 was a 0.8% increase from February. Such shoebox units are said to be the reason behind high prices, the profile of buyers (mainly with HDB addresses) also suggests an investment demand. This, coupled with the anticipated increase in supply from 2,400 at end-2011 to 8,200 units by end-2015, has led to worry that there is no genuine demand for the units. While some feel that there may be cooling measures targeting these units, others feel that it may not happen as there is genuine demand for young singles and couples who want to own a private property. Since most of these units are not ready for occupation, whether the rents will continue to fetch high yields is a question. In Q1 2012, the average monthly rental of these units is $6.51 psf, compared with $3.80 psf for 501-1,500 sq ft units. As the supply of completed units increase, rents for these units are likely to fall.

Government may intervene in growth of shoebox units

National Development Minister Khaw Boon Wan clarified the perception that HDB flats are getting smaller and stated that there might be a potential governmental intervention if the proportion of “shoebox” units in Singapore rises too much at the annual Reach Contributors Forum.  He allayed concerns over the perceived shrinking of HDB unit sizes by stating that flat sizes in Singapore have not changed in the past 15 years but also stated that both smaller and larger units will be built to meet demand and needs. He also stated that the government may intervene if shoebox units grow to a worrying proportion, especially if there may not be much demand for these units. Latest figures showed that such units accounted for over 25% of private home sales in Q1 2012, compared to the 15% in Q4 2011. He also stated that the sharp increase in home prices was a temporary imbalance of supply and demand where the supply could not catch up to the increase in population and added that 100,000 new flats could be built in the following five years if deemed necessary.

FLO Residence at Punggol to be launched

FLO Residence located at Punggol Field Walk near Coral Edge LRT is to be launched at an average of $850 psf, with prices of two-bedroom units starting at $620,000, three-bedroom units at $750,000 and four-bedroom units at $990,000. Out of the 530 units, 106 are two-bedroom units between 764 sq ft to 861 sq ft, 317 three-bedroom units ranging from 926 sq ft to 1,044 sq ft, 92 four-bedroom units between 1,227 sq ft to 1,346 sq ft and 15 penthouse units between 1,500 sq ft to 2,500 sq ft. The project is likely to be attractive given that the adjacent site is reserved for an international school.

Woodlands EC site attracts $247m top bid

The 99-year leasehold EC site at Woodlands Avenue 5/Woodlands Drive 16 drew five bids, with the top bid at $247 million or $317.65 psf ppr within expectations of consultants. This bid reflects that confidence of the developer since there are no new EC projects in the area but the number of bids is rather low, possibly due to the recent tender for the more attractive Tampines Central 7 EC site. The developer plans to develop the site into a 700-unitresidential project comprising three and four-bedroom apartments with an expected launch date by this year. The expected breakeven cost is around $630-650 psf.

Commercial

StarHub Green sold at $210m

StarHub Green located at Ubi Avenue 1 near MacPherson MRT Station is sold to Blackstone Group for $210 million or $500-550 psf based on a 421,000 sq ft net lettable area, out of which over 90% has been let. Two towers (six and seven storeys) sit on the site zoned for Business 1 use with a 2.5 maximum plot ratio. The site has a remaining lease of about 45 years out of its 60-year lease.

Other recent deals include the sale of freehold nine-storey Three Rifles Building located at 50 MacPherson Road which was sold for $19.1 million or $650 psf based on its 30,000 sq ft NLA.

Other properties potentially up for sale include the Park Regis Singapore hotel at New Market Street-Merchant Road. The mixed hotel-and-office project consists of the 203-room hotel and a seven-storey office block with about 42,000 sq ft NLA which sits on a site with a remaining lease of about 95 years. Meanwhile, the99-year office development at 7&9 Tampines Grande is asking for $400 million and above or $1,400 psf on its 287,000 sq ft NLA, of which 95% has been let. The project includes two eight-storey towers with 147 basement carpark lots. The eight-storey office block at 99-year 700 Beach Road may also be sold at $115 million or $1,650 psf based on the fully let 70,000 sq ft NLA.  66 strata office units at Burlington Square (with 83 years’ lease remaining) located at Bencoolen Street is also on the market for $100 million.

Higher proportion of financial firms in Marina Bay than in Raffles Place

The proportion of financial and insurance companies in Marina Bay (75%) is higher than that in Raffles Place (55%). The absolute amount of office space occupied by such firms in Raffles Place, however, is much higher at four million sq ft than the 2.6 million sq ft in Marina Bay. This may change as more firms move into spaces in newly completed buildings in the region. The space occupied by such firms in Marina Bay will increase to more than 3.3 million sq ft in the next couple of quarters based on pre-commitments in Asia Square Tower 1 and Marina Bay Financial Centre (MBFC) Tower 3.

Average occupancy rate of office space in Marina Bay decreased by over 30 percentage points from 2011 to 68.1% in Q1 but increased to 86% when the one million sq ft pre-committed space is included, while the occupancy rate in Raffles Place fell 3.6 percentage points to 91.3% in the same period. The net increase in supply in 2012 is around 1.1 million sq ft, but rents may see a decline as a good 700,000 sq ft of space is expected to be returned to the market as shadow space or when lease expires and tenants shift to new spaces.

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