Residential
Residential supply is expected to remain high in H2 2012
An estimated upcoming supply of 28 to 30 new residential sites from both the confirmed and reserve list yielding 14,000 residential units is predicted, given the high housing prises and strong demand for both housing units and land. On the Confirmed list could be some sites from the current Reserve list with one or two new sites that had never been released. Some predicted that 6,000-6,500 units could be released under both the Confirmed and Reserve Lists, 10% less than H1’s release since the units launched from previous GLS sites were more than the expected number of units given the smaller unit sizes. Others suggest that if the number of units released remains the same, there might be restrictions o the number of units per plot to prevent developers from building too many shoebox units.
Meanwhile, some predict the release of one or two residential plots in the Central Region and Kallang Riverside, especially since the area was planned as a work-live precinct and a growth area under the Master Plan 2008. Sites in the latter could also come with ground floor retail/commercial components. MND is also expected to release more hotel sites given the demand for such sites in good central locations and near MRT stations. New commercial sites are unlikely to be released given the current slow office market and pipeline supply, though the Paya Lebar commercial site which was withdrawn late last year may be rereleased.
Things to look out for at Mount Sophia
Mount Sophia in District 9 near Dhoby Ghaut MRT is heating up with a project launch and a property on collective sale.
Freehold residential project 1919 will be launched in early June at an attractive price range of $2,000 psf to $2,200 psf with the prices of ground floor PES units starting from $1,600 psf. There are 39 one-bedroom units with study (560-775 sq ft), 31 two-bedroom units (646-1001 sq ft, with or without study), and five three-bedroom units (1001 or 1302 sq ft). It is expected to draw singles and DINK (double income, no kids) couples given its location in the Mount Sophia neighbourhood and its proximity to the many attractions. The development is expected to be completed in 2015.
Meanwhile, freehold Sophia Mansions, a residential development located at Adis Road is asking for $42.5-$45 million or $1,160-1,228 psf ppr based on a 2.1 gross plot ratio on the 17,545 sq ft land area, inclusive of development charge. The potential gross floor area of about 36,840 sq ft means that it could possibly be redeveloped into a 6-storey high boutique development with 35 1,000-sq ft apartments. Zoned “residential”, the site can have a maximum height of 36 m above sea level. Developments on the site may prove popular with the working class, small families and investors given its proximity to the Singapore Management University and the School of the Arts. The tender for Sophia Mansions will close on June 27.
March launch of HDB flats benefits both first- and second-timers
The March launch of a combined BTO (Build-To-Order) and SBF (Sale of Balance Flats) offering with 8,000 new flats meant that the revised balloting rules could be tested out and it proved successful, with more success in second-timer’s applications and a reasonable success rate for first-timers. Both overall first-timer application rate and the application rate in non-mature estates fell, with the former falling from 2.2 to 1.6 and the latter 1.9 to 1.3. If the application rate for first-timers remained below 2, second-timers would have a higher chance t getting new flats. The overall application rate of 2.5 (11,410 applications for 4,600 new flats) was also encouraging. Toh Yi Studio Apartments, which was earlier criticised for its location on a slope, making it less elderly-friendly, also saw 220 applications for its 132 units. The Ageing-in-Place Priority Scheme was also a success as all Toh Yi residents who applied for the flat got to select a unit.
99-year Pasir Ris Drive 3 residential site draws five bids
The 99-year leasehold 240,222 sq ft residential site located at Pasir Ris Drive 3 drew a total of five bids, with the top bid of $211 million, or $418.3 psf ppr from Capital Development. Though the top bid was within expectations, the competition from the more attractive Elias Road site sold in April and Sea Esta at Loyang Besar explains the relatively low number of bids. Pasir Ris Park, PA Pasir Ris Holiday Complex and Pasir Ris Beach is within walking distance while Pasir Ris MRT station and White Sands shopping mall are a short drive away. Elias Mall and West Plaza also provide the amenities. Its expected breakeven cost is around $800 psf.
Record sales of 2,200 homes by Far East from January to May
Far East Org Organization will be offering up to 3% discounts to mark the record sales of 2,200 homes in the first five months of the year. The sales from Far East’s projects have been driving the recovery in the private housing market, with Watertown’s sales accounting for over half the 1,872 units sold in January and Hillsta’s sales the driving force behind April’s record home sales. Developers are likely to continue building in the suburban area to meet local demand, since suburban home prices are more affordable for locals. The government may introduce more cooling measures given the recent increase in home sales. However, home sales in May have fallen when compared to April’s sales, possibly as a result of the negative economic outlook from the Europe’s financial crisis.
Wing Tai chairman predicts oversupply in the housing market
As buyers fear future price increases, they may choose to buy a property now instead of waiting. This may result in an overestimated projected demand in the next few years, which may be problematic given the oversupply and if the economic conditions are bad. Past rounds of cooling measures failed to keep a lid on rising prices, even with the increase in supply, suggesting that there is pent-up demand from the earlier undersupply, the growing population and the current strong liquidity and low interest rate.
Smaller price gap between suburban and CBD homes
The price gap between condo units in the suburban areas and units in the CBD and prime districts have been narrowing, as a result of the improved MRT network, increased amenities and the slower luxury housing market. However, the price is unlikely to narrow further since there is still a perceived prestige in owning properties in prime locations.
The average launch price of suburban condo units is around $1,000 psf. To cool the mass market segment, the government can consider releasing more sites further away from MRT stations since such property and land values for these sites are lower than those nearer train stations.
Villa Des Flores up for sale in the collective market
Freehold Villa Des Flores located in the prime District 11 is up for sale with a $160-165 million or $1,533-1,581price tag. Zoned for landed housing development, the 104,370 sq ft site located near Orchard Road shopping belt and top schools consist of 28 four-storey walk-up apartments (1,378-2,088 sq ft) and 13 town houses (2,034-2,702 sq ft) and can be redeveloped into a project with two-storey mixed landed housing with detached, semi-detached, terrace houses or a combination of them, based on either conventional housing types or as a cluster housing development. If redeveloped as a cluster landed project, 24 strata bungalows, 48 strata semi-detached or 64 strata terrace houses could potentially be built.
Private resale home transaction volumes trending upwards
The number of private home resale deals hit 2,551 by May 31, compared to 2,117 in Q1. This came as a surprise since the spike in March to 1,142 resale transactions was not expected to happen again. This is especially since only 332 such transactions were completed by April 24. Furthermore, the uncertain global economic conditions had worsened in the months since March. This suggests that the increase in transactions was due to occupier demand. Meanwhile, the figure for Q2 2012 is expected to hit 3,300 to 3,500 units as buyers, encouraged by the primary market and the high prices in new launches, re-enters the resale market.
HDB resale prices also reflected an upward trend, having increased by 2.05% in April and May to $438,800 from $430,000 in Q1 with the highest price increases from Bukit Panjang (by 7.6% to $460,000), Bukit Merah (by 7.55% to $591,500), and Marine Parade (by 7.37% to $502,500). However, the prices are unlikely to increase further since buyers may not be willing to pay the high cash over valuations.
Meanwhile, rental volumes for private non-landed units decreased by 33.2% from 7,504 in Q1 to 5,014 in April-May while rental yield decreased by 25 basis points to 4%. Rental yield in the Core Central region (CCR) fell from 3.42% to 3.19%, while the yield in the Rest of Central region (RCR) fell by 12 basis points to 4%. Rental yield in the Outside Central Region (OCR) also fell by 20 basis points to 4%. Some believe that the downward trend for rental yield is not a cause for concern since the low interest rate meant lower refinancing. The lower volume rental, however, may be a cause for concern.
Commercial
Units at freehold Paya Lebar industrial project selling at record prices above $1,000 psf
The strata-titled freehold industrial project, AZ@ Payar Lebar, located along Paya Lebar road has been selling at record high prices above $1,000 psf. This is attributed to the project’s proximity to the MacPherson MRT station and the small unit sizes (mainly below 1,400 sq ft) as well as its freehold status. Ground floor units were sold at $1,700-2,100 psf and above, while other units were sold at $1,110 psf onwards. Though high, prices are still within expectations. The overall average launch price for the units (979-2,497 sq ft) is between $1,000-1,100 psf. 103 of the 201 units had been sold. The units could prove attractive to businesses and SMEs given its proximity to the MRT and the direct car park access in its design.
Demand and high prices for industrial properties a cause for concern
The sudden increase in speculative demand for industrial property and the high prices are cause for concern as many investors are new to the market.
These investors may not achieve the high rental yield they expected, especially with the huge upcoming supply of factory and warehouse space (3,696,000 sq m and 1,192,000 sq m respectively by 2015), which may lead to a tenant shortage and lower rental rates. Furthermore, with the prices of industrial property rising faster than rents (up 26% in Q1 2012 from Q1 2011 compared to the 10.6% for rents), the rental yields have begun falling. While some marketing agents have been asking for more than twice the market rates ($4-6 psf), they are likely trying to attract quasi office users, especially since some buildings resemble office buildings. Rents for light industrial space are usually in the range of $1.80 to $2 psf. However, owners who are seeking high rental yields from this may face enforcement action from the URA. Furthermore, the negative global economic outlook as a result of Europe’s financial crisis may lead to tenants of such spaces pre-terminating their contracts and owners of strata title industrial units dumping the property.
While the government have been introducing measures to discourage speculative demand, such as the new strata sub-division conditions for sites near MRT stations and the minimum unit size of 1,615 sq ft or 150 sq m, the effects of these measures will only be felt much later. Meanwhile, the number of shoebox units has been on the rise, with 50% of the transactions in the first five months of 2012 being such units, compared to 37% in the whole of 2011. Prices also remained high, with freehold AZ@Paya Lebar having a record high average launch price of $1,000-1,100 psf and freehold Arcsphere@Aljunied at $950-980 psf.