Residential

Freehold Asia Gardens back on the en bloc market, with a lower price

Freehold Asia Gardens at Everton Road is back on the market, asking for a lower $273.2 – 300.3 million or $1,354 to $1,488 psf ppr, compared with the earlier $302.6 – 307.7 million. The 84-unit development zoned for residential use has an allowable GFA of 201,765 sq ft based on its 2.8 plot ratio. There is no development charge payable for the site, which is located near the Outram Park MRT interchange. The tender closes at 3pm on July 31.

Cooling measures helped in stabilising the property market and making it sustainable

According to National Development Minister Khaw Boon Wan, the ABSD, among other cooling measures, has helped the property market stabilise and made it more sustainable. He said that the ABSD and the increase in supply for both private and public housing has helped to reduce the proportion of foreign purchase of private properties from 20% in 2011 to 7% in H1 2012, stabilise prices of private housing to a 0.3% increase in H1 2012 compared to a 6% increase in the whole of 2011 and reduce short-term property speculation. Buyers from the middle and low-end of the housing market has also benefitted from the moderation to a0.4% increase in Q2 compared to the 1.1% in Q1 2012. The increase in supply of BTO flats also meant that most first-timers who apply will be successful.

New policies for PR owning HDB flats

To deter PRs from buying flats for investment or rental yields, the approval to sublet HDB flats is reduced to one year, compared to the earlier three years. Unlike the earlier policy, which allows owners to renew the approval at expiry without limit, extension will be granted only if there are extenuating reasons and the total period of subletting during the flat owner’s entire duration of ownership cannot exceed five years. According to HDB, PRs can sublet their flats on a temporary basis and should sell the flats if they no longer need the flats for their own occupation instead of subletting them. Since the number of flats owned by PRs (5,000) accounts for only 5% of the HDB sublet market, the overall impact of the new policy will be small even if there may be a small increase in HDB rental rates in the short term.

New homes between $500,000 to $1 million the most popular

46.3% of all new home deals or 3,361 transacted by Singaporeans in H1 2012 were in the $500,000 to $1 million price range, compared to 26.0% in H1 2010 and 40.1% in H1 2011. The demand for such homes is strong, especially from HDB upgraders gaining from the higher COVs recently. Demand for new units under $500,000 and new units in the $1 million to $2 million range also increased, with the former seeing a three-time increase from 2011 to 384 at the end of H1 2012 and the latter increasing from 1,760 units in H1 2011 to 1,910 or 26.3% in H1 2012. Meanwhile, new home deals in the $2 million to $3 million, $3 million to $5 million and beyond $5 million range fell by 21.2%, 21.3 % and 50.0% from H1 2011 to 215, 59 and 12 units In H1 2012, respectively. This trend towards new home purchases in the under $1 million range is likely to continue as there is a large upcoming supply of suburban developments and developments with small units.

99-year leasehold 486-unit Parc Olympia launched at an average price $820 psf

The 99-year leasehold 486-unit Parc Olympia at Flora Drive in Pasir Ris has been launched at an average price of $820 psf, with the cheapest unit at an affordable $440,000. The mass market residential development consists of eight residential blocks comprising one-bedroom units  (495 sq ft to 646 sq ft), two-bedroom units (646 sq ft to 1,292 sq ft), three-bedroom units (969 sq ft to 2,164 sq ft) and four-bedroom units (1,324 sq ft to 2,702 sq ft) sitting on a 322,368 sq ft site with facilities such as a 600 metre synthetic jogging track, a 50 metre lap pool, an air-conditioned badminton court and a putting green for golfers. The project also offers a feeder bus service to and from nearby MRT stations and the Singapore Changi Airport. It is located next to The Japanese School and a drive away from Tampines Mall, Tampines One and Downtown East. It will be launched in total of four phases, with the first offering 118 units.

99-year leasehold Potong Pasir site expected to be very popular

The 88,267 sq ft plot located at Tai Thong Crescent and five minutes away from Potong Pasir MRT Station was released after a successful application to release the site from the reserve list. It is expected to draw 7-15 bids with the top bid of $580-750 psf ppr since it is zoned for residential use with commercial space on the first storey and well located, being near near schools such as St Andrew’s Junior and Secondary and Cedar Girls’ Secondary School, and near the MRT station. However, some believe that it may have some disadvantages when compared to nearby sites since it is near a major road junction and a fly-over and has a partial two-storey height limit. The maximum GFA of 308,945 sq ft can potentially yield around 267 homes. The expected selling price of the apartments and first-storey commercial space are $1,250-1,450 psf and $4,000-4,500 psf, respectively.

Most expect more cooling measures

47% of some 300 hundred respondents to a Credit Suisse survey believe that home prices will rise next year since they believe that there is genuine demand, with 30% predicting a 10% rise, while another 35% expect prices to fall. 60% believes that there will be more cooling measures, with 40% expecting it to happen within a year. 60% also stated that they may consider buying a residential property within three years, though only 31% of these intend to buy them for investment; others are buying for occupation, upgrading, or buying for family. However, only 21% said that they will consider buying a home within the year, suggesting cautiousness in the market. 60% of the respondents also said that they will not purchase shoebox apartments.

Commercial

Upward revision of Singapore’s office market needed

Demand in the office market has been stronger than expected, with the positive net office absorption of 473,200 sq ft in Q2 bringing H1 2012’s total to 1.06 million sq ft. This means that the earlier prediction of having no change in net office demand has to be revised to one of having a positive net demand.  Meanwhile, vacancy rates in all submarkets and building grades have fallen from Q1 to Q2 2012 (with the overall vacancy rate falling from 7.3% in Q1 to 6.4% in Q2, and Grade A vacancy rate falling from 12.9% in Q1 to 12.2% in Q2), though the vacancy rates in the CBD are expected to rise as more space are released back into the market as leases expires and tenants move out.

Grade A rents have fallen more than Grade B rents, 4.9% from Q1 to $10.10 psf in Q2 compared to 0.6% to $7.21 psf for the latter, hence narrowing the gap between the two. This is Rents for Grade A office space could fall even further to $9.30/9.40 psf by the end of 2012, a 15% fall from 2011. This may change as Grade B rents may fall more as supply from vacating tenants (1.2 million sq ft) and shadow space are expected to increase in the next one-and-a half years while rents for Grade A fall at a slower rate. Grade A’s rental decline is due to the large amount of new space from recently completed projects whereas Grade B rental’s relative lack of change is due to the higher occupancy level it enjoys. However, since Grade A rental rates have fallen much from its recent peak, there is room for growth, unlike Grade B rental rates which have likely reach the peak, hence widening the rental gap again. A total of 1.37 million sq ft of office space will be completed by 2012, with another 2.8 million sq ft in 2013 and 1.7 million sq ft in 2014.

Secondhand spaces filling up

Almost 90% or 114,000 sq ft of the 129,000 sq ft left behind by Citi when its lease at Centennial Tower expired has been taken up, with existing tenants of the building such as Sumitomo Mitsui Banking Corporation (SMBC) and McKinsey taking a total of 36,000 sq ft, and other new tenants such as Maxwell Chambers and PetroChina taking up the rest. Citi will also vacate 143,000 sq ft of space at Millenia Tower when its lease expires, but two tenants taking up two floors of this space has been confirmed. Rents in both Centennial Tower and Millenia Tower are in the $9-11.50 psf a month range. Meanwhile, other companies such as Allianz and JP Morgan that are facing lease expiry are said to be deciding either to renew their leases or move out to other spaces.

Creative ways to tackle office supply glut

As supply of office space increase, developers found a new way to deal with the competition by redeveloping existing office buildings for other uses and downsizing units to make them more affordable. A total of 1.4 million sq ft of net lettable area in the CBD are to be redeveloped into residential and commercial type projects. However, despite this, the amount of space slated for redevelopment is unlikely to make much of a impact, especially with low pre-lease figures and higher vacancy rates.

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