New home sales in Singapore surged last month despite global macroeconomic uncertainties and stock market volatility, driven by strong demand in mass market condominiums from HDB upgraders.
Urban Redevelopment Authority (URA) data released yesterday showed developers sold 1,631 private homes last month, up 20.7 per cent from the 1,351 units in August. A total of 1,321 units were sold in the outlying areas, 260 in the city fringes and only 50 in the prime districts.
Including Executive Condominiums (ECs), September sales hit 2,064 units. This is the highest monthly volume this year and a strong 26 per cent jump from August's 1,638 units.
September's results were remarkable and largely contributed by the sale of A Treasure Trove closing 683 units, making up 42 per cent of the total transactions. These homebuyers are mainly HDB upgraders and the purchase rationale was the attractive pricing, with median price of S$915psf in this development, and its proximity to the Punggol MRT.
The number of private homes, excluding ECs, launched last month rose 39.1 per cent from the previous month to 1,919 units - and 1,504 of these, or 78.4 per cent, were in the OCR.
A total of 433 EC units were sold last month, up from 290 in August, it was likely that the latest Government move to raise the household income ceiling for EC buyers from S$10,000 to S$12,000 per month had given a boost to sales.
For the rest of the year, developers would be monitoring the impact of the euro zone crisis on the Singapore economy to time their project launches.
Looking at launch-ready projects in Q4 and with prices remaining stable, it is unlikely that there will be the same level of take-up as in Q2 and Q3. Total new home sales volume in 2011 is expected to exceed the 14,688 units sold in 2009, but it remains to be seen whether it can outdo the record 16,292 units sold in 2010.
Land for 1,900 more homes to go on sale.
To meet persistent housing demand, the Urban Redevelopment Authority (URA) and the Housing and Development Board (HDB) will be selling four sites this month that can yield about 1,900 homes, adding to the 13,825 units that have been launched under the Government Land Sales (GLS) Programme this year.
The first of the four sites, in Alexandra Road near the Redhill MRT, was launched yesterday under the Confirmed List of the GLS.
Based on a plot ratio of 4.9, the roughly one-hectare site can produce a maximum gross floor area of 48,768 sq m, or 540 to 580 housing units.
The Alexandra Road site is one of the more attractive sites on the current GLS programme. The tender could attract about 15 to 20 bids, with the top bids likely to be submitted by major developers with deep pockets and holding power because if the winning developer plans to sell the units in this project at prices above $1,350 psf in the near future, it could need more than a year to sell all the units.
Based on analysis, this site can be expected to fetch a winning bid of about S$305 million to S$341 million, or S$581 to S$650 psf per plot ratio.
The other three sites will be released on Oct 27 and can potentially yield another 1,345 housing units.
Source: TODAY – 18 October 2011
Showing posts with label singapore property market. Show all posts
Showing posts with label singapore property market. Show all posts
Tuesday, October 18, 2011
Sunday, October 31, 2010
It all boils down to demand and supply
We need good data and solid reference points to navigate towards investment decisions. A good source of raw data, with solid data integrity and consistency of reporting, layered with reasonable assumptions, deep experience and objectively interpreted and analysed will mean the difference between a mediocre investment versus a wildly profitable one.
With several rounds of policy changes imposed on the residential sector within the last 12 months, more investors are asking "What new policies next?", "Should we divest now?" and "Should we wait a year or two before investing?"
The market is directionless, with indicators pointing in opposing directions: Low holding costs versus low rental yields against a backdrop of prices for mass market residential setting records in Yio Chu Kang, Ang Mo Kio, Pasir Panjang, Pasir Ris, Serangoon, etc, where demand remains strong.
So, what numbers can guide us to a decision?
IPA's work and discussions involve high-net-worth investors (who may be buyers or sellers at any one time), mortgage lenders, developers, construction firms, institutional funds, private equity players, funds who lend for project financing, equities analysts, etc. Our basis of discussions for the residential market relies heavily on data provided by several sources.
In Singapore, the bulk of raw data comes from official sources. Databases we rely on are: URA Realis, SISV-Realink (whose main data source is caveats filed with SLA), HDB's announcements and SingStat for population growth, household formation and income.
In the private residential sector, market watchers are very focused on a few key data points:
1. Number of units sold by developers monthly and quarterly, by project
2. Monthly lowest, highest and median prices of each project sold by developers
3. Number of units sold in the primary, sub-sales and resale markets
4. Number of units launched and sold, number of units launched but unsold
Perhaps this is because the equities analysts require these data sets to gauge the financial health of the listed developers whose stocks they cover - and these analysts are the voices most often heard by financial investors.
The larger listed developers have "investor relations" personnel to liaise with analysts and fund managers. Healthy share-price performances are important for the market's short term confidence in the developers' financial strength and perhaps also allow the developers access to more favourable credit terms.
In fact, the same mentality applies to data for public housing: Analysts are focused on selling prices, COVs, BTOs, DBSSs, launch prices, how many units launched and sold, over-subscribed or not, etc. Few enquire about the net new supply of HDB flats, which is the new supply minus the demolitions due to the Selective En Bloc Redevelopment Scheme (Sers) and other upgrading programmes.
So, which are the data sets that would form a solid basis and reference for a direct real estate investor's decision making?
None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand - physical demand from home users, as opposed to demand based on buy-sell transactions.
Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the "under construction" condominiums can be completed within 36 months.
LESSONS FROM THE RECENT PAST
When vacancies are dropping and rentals are climbing fast, we can safely predict that property prices will move up. This was the case in 2006-2008, when tenants were at the mercy of landlords when it was time to renew their leases.
With hindsight, we see that the population increase over the two years of 2005-2006 was about 235,000 (see table).
Assuming the new population growth is based on households of four, we would require about 59,000 residential units. The net new supply in 2005 and 2006 was 17,000 residential units. Therefore, we can safely assume that a portion of the new population moved in to take up the vacant units (which at that time was about 7-8 per cent) while others moved in with friends and relatives or sought accommodation in hostels and serviced apartments.
The story continued through 2007 into 2008, when the physical demand for residential units skyrocketed due to the inflow of 438,000 into our population in 2007 and 2008. That period also saw many en bloc sales and HDB SERS projects, followed by demolitions such that the net new supply of residential units was only about 13,000 units.
Now, squeezing 438,000 newcomers into 13,000 new private residential and HDB units is not simple. Vacancies have dropped to around 5 per cent (there is a structural persistent vacancy of around 1 per cent which are apartments or houses which are not in usable condition or are intended for demolition).
Therefore, lesson here is: We need to keep a close tab on physical supply completions.
by Ku Swee Yong
The writer is the founder of real estate agency International Property Advisor, which provides services to high-net-worth individuals.
With several rounds of policy changes imposed on the residential sector within the last 12 months, more investors are asking "What new policies next?", "Should we divest now?" and "Should we wait a year or two before investing?"
The market is directionless, with indicators pointing in opposing directions: Low holding costs versus low rental yields against a backdrop of prices for mass market residential setting records in Yio Chu Kang, Ang Mo Kio, Pasir Panjang, Pasir Ris, Serangoon, etc, where demand remains strong.
So, what numbers can guide us to a decision?
IPA's work and discussions involve high-net-worth investors (who may be buyers or sellers at any one time), mortgage lenders, developers, construction firms, institutional funds, private equity players, funds who lend for project financing, equities analysts, etc. Our basis of discussions for the residential market relies heavily on data provided by several sources.
In Singapore, the bulk of raw data comes from official sources. Databases we rely on are: URA Realis, SISV-Realink (whose main data source is caveats filed with SLA), HDB's announcements and SingStat for population growth, household formation and income.
In the private residential sector, market watchers are very focused on a few key data points:
1. Number of units sold by developers monthly and quarterly, by project
2. Monthly lowest, highest and median prices of each project sold by developers
3. Number of units sold in the primary, sub-sales and resale markets
4. Number of units launched and sold, number of units launched but unsold
Perhaps this is because the equities analysts require these data sets to gauge the financial health of the listed developers whose stocks they cover - and these analysts are the voices most often heard by financial investors.
The larger listed developers have "investor relations" personnel to liaise with analysts and fund managers. Healthy share-price performances are important for the market's short term confidence in the developers' financial strength and perhaps also allow the developers access to more favourable credit terms.
In fact, the same mentality applies to data for public housing: Analysts are focused on selling prices, COVs, BTOs, DBSSs, launch prices, how many units launched and sold, over-subscribed or not, etc. Few enquire about the net new supply of HDB flats, which is the new supply minus the demolitions due to the Selective En Bloc Redevelopment Scheme (Sers) and other upgrading programmes.
So, which are the data sets that would form a solid basis and reference for a direct real estate investor's decision making?
None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand - physical demand from home users, as opposed to demand based on buy-sell transactions.
Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the "under construction" condominiums can be completed within 36 months.
LESSONS FROM THE RECENT PAST
When vacancies are dropping and rentals are climbing fast, we can safely predict that property prices will move up. This was the case in 2006-2008, when tenants were at the mercy of landlords when it was time to renew their leases.
With hindsight, we see that the population increase over the two years of 2005-2006 was about 235,000 (see table).
Assuming the new population growth is based on households of four, we would require about 59,000 residential units. The net new supply in 2005 and 2006 was 17,000 residential units. Therefore, we can safely assume that a portion of the new population moved in to take up the vacant units (which at that time was about 7-8 per cent) while others moved in with friends and relatives or sought accommodation in hostels and serviced apartments.
The story continued through 2007 into 2008, when the physical demand for residential units skyrocketed due to the inflow of 438,000 into our population in 2007 and 2008. That period also saw many en bloc sales and HDB SERS projects, followed by demolitions such that the net new supply of residential units was only about 13,000 units.
Now, squeezing 438,000 newcomers into 13,000 new private residential and HDB units is not simple. Vacancies have dropped to around 5 per cent (there is a structural persistent vacancy of around 1 per cent which are apartments or houses which are not in usable condition or are intended for demolition).
Therefore, lesson here is: We need to keep a close tab on physical supply completions.
by Ku Swee Yong
The writer is the founder of real estate agency International Property Advisor, which provides services to high-net-worth individuals.
Friday, August 6, 2010
Buy from developers or in resale market?
Source : Today 6 Aug 2010
With the interest rate on savings near zero and not able to beat even Singapore’s benign inflation, forecast at 2.5 to 3.5 per cent by the Monetary Authority of Singapore, many are looking to work their savings harder by buying an investment property.
Having decided that, the next question is whether to invest in a new property bought from the developer or a unit from the resale market. There are arguments for both.
Buying from Developers
Brand new property. Being the first owner, the investor does not have to worry about the history of the unit, its previous owners or occupants.
Progressive payments. The investor may be better able to manage his finances. The loan drawdown is staged and the instalments start low, allowing one to build up the nest-egg during construction. If one’s investment time horizon is short, say two years, one can sell into a rising market and make a profit even before the substantial drawdown on bank loan when the Temporary Occupation Permit is issued. Developers may also tie up with banks to offer attractive financing packages for home buyers.
Defects liability period. The developer guarantees against defects for the first 12 months from TOP.
Early bird discounts. These can often be enjoyed at developers’ previews. Some developers may offer special prices for investors who are willing to commit even before the showflats are ready. Developers always step up prices, or reduce discount levels, when the pace of sales is strong, so early buyers stand to make paper gains quickly.
Choice units. If you get ahead of the queue, all the units that are released are available for your selection.
Configurable. In a limited way, many developers allow room for making minor adjustments. The most common features are selection of materials, tiles, finishes, etc. But it could be more substantial, such as an open versus closed kitchen, or say, the removal of a plunge pool at the rooftop terrace. At the extreme, Far East Organization’s bespoke condominium called Boulevard Vue offers a white plan for individual customisation and “the luxury of creating interior spaces that mirror your personal preferences and taste” (quoted from developer’s website). Such customisation was previously only available if we built our own landed home.
Investing In Tenanted Apartments
Low upfront commitment as simplified by the catchphrase “1+4, not 5+15!”. Buying a new unit from a developer requires a 5 per cent option fee and 15 per cent more eight weeks after exercising the option to purchase. This is in line with practices allowed by the Controller of Housing at the Urban Redevelopment Authority. In the case of a resale transaction, the buyer normally pays a 1 per cent option fee and 4 per cent more to exercise.
Immediate income stream. Despite the relatively low yields of Singapore residential properties, most tenanted homes yield positive cash flow for the landlords, thanks to cheap mortgages.
Significant discounts. Older resale properties often trade at significant discounts to new launches on the same street. There are many examples to support this point, say, around Raffles Place and Shenton Way, along Grange Road, Nassim Road, in Serangoon, East Coast, West Coast, Pasir Panjang, and River Valley, etc. The price gaps between new launches and properties more than five years old in the same street, or even sharing the same perimeter wall, can range from 5 per cent to 50 per cent, or from $100 to $1,500 psf. For 99-year leasehold properties, one might further discount based on the age of the lease, but examples abound for freehold properties too. Given that construction costs range from $300 to $500 psf for luxury properties, if the cost of an older property is lower than its recently launched neighbours by a gap of $500 psf, then one could take a view that the older property was purchased at land cost, and the buildup area was given free.
Developers’ sales prices are peakish. Anecdotal evidence from URA data (see graph) indicates that a majority of investors who have bought from developers’ launches this year have yet to make paper gains despite the more than 10 per cent rise in the URA Private Property Index over the same period. The PPI increase was most likely due to the price gains from resales and landed properties.
En bloc potential. With the rebound in sentiment and collective sales coming back into favour, the en bloc potential must not be ignored. But the investor must do his homework and ask for evidence that the project is indeed a likely, economically feasible, candidate.
As is, where is. What you see is what you get. The investor is buying a completed apartment, flaws and gems all included. There is no guesswork as to the quality of the workmanship and the finishes that will be delivered, unlike with new apartments.
The overall trend in the Singapore home market may be up but confidence is still lacking in some quarters. Global economic uncertainties loom and Singapore is not immune.
For now though, I would recommend properties that are under-valued relative to their neighbours, minimising downside risks and collecting steady rental income.
By Ku Swee Yong, founder of real estate agency International Property Advisor (IPA)
With the interest rate on savings near zero and not able to beat even Singapore’s benign inflation, forecast at 2.5 to 3.5 per cent by the Monetary Authority of Singapore, many are looking to work their savings harder by buying an investment property.
Having decided that, the next question is whether to invest in a new property bought from the developer or a unit from the resale market. There are arguments for both.
Buying from Developers
Brand new property. Being the first owner, the investor does not have to worry about the history of the unit, its previous owners or occupants.
Progressive payments. The investor may be better able to manage his finances. The loan drawdown is staged and the instalments start low, allowing one to build up the nest-egg during construction. If one’s investment time horizon is short, say two years, one can sell into a rising market and make a profit even before the substantial drawdown on bank loan when the Temporary Occupation Permit is issued. Developers may also tie up with banks to offer attractive financing packages for home buyers.
Defects liability period. The developer guarantees against defects for the first 12 months from TOP.
Early bird discounts. These can often be enjoyed at developers’ previews. Some developers may offer special prices for investors who are willing to commit even before the showflats are ready. Developers always step up prices, or reduce discount levels, when the pace of sales is strong, so early buyers stand to make paper gains quickly.
Choice units. If you get ahead of the queue, all the units that are released are available for your selection.
Configurable. In a limited way, many developers allow room for making minor adjustments. The most common features are selection of materials, tiles, finishes, etc. But it could be more substantial, such as an open versus closed kitchen, or say, the removal of a plunge pool at the rooftop terrace. At the extreme, Far East Organization’s bespoke condominium called Boulevard Vue offers a white plan for individual customisation and “the luxury of creating interior spaces that mirror your personal preferences and taste” (quoted from developer’s website). Such customisation was previously only available if we built our own landed home.
Investing In Tenanted Apartments
Low upfront commitment as simplified by the catchphrase “1+4, not 5+15!”. Buying a new unit from a developer requires a 5 per cent option fee and 15 per cent more eight weeks after exercising the option to purchase. This is in line with practices allowed by the Controller of Housing at the Urban Redevelopment Authority. In the case of a resale transaction, the buyer normally pays a 1 per cent option fee and 4 per cent more to exercise.
Immediate income stream. Despite the relatively low yields of Singapore residential properties, most tenanted homes yield positive cash flow for the landlords, thanks to cheap mortgages.
Significant discounts. Older resale properties often trade at significant discounts to new launches on the same street. There are many examples to support this point, say, around Raffles Place and Shenton Way, along Grange Road, Nassim Road, in Serangoon, East Coast, West Coast, Pasir Panjang, and River Valley, etc. The price gaps between new launches and properties more than five years old in the same street, or even sharing the same perimeter wall, can range from 5 per cent to 50 per cent, or from $100 to $1,500 psf. For 99-year leasehold properties, one might further discount based on the age of the lease, but examples abound for freehold properties too. Given that construction costs range from $300 to $500 psf for luxury properties, if the cost of an older property is lower than its recently launched neighbours by a gap of $500 psf, then one could take a view that the older property was purchased at land cost, and the buildup area was given free.
Developers’ sales prices are peakish. Anecdotal evidence from URA data (see graph) indicates that a majority of investors who have bought from developers’ launches this year have yet to make paper gains despite the more than 10 per cent rise in the URA Private Property Index over the same period. The PPI increase was most likely due to the price gains from resales and landed properties.
En bloc potential. With the rebound in sentiment and collective sales coming back into favour, the en bloc potential must not be ignored. But the investor must do his homework and ask for evidence that the project is indeed a likely, economically feasible, candidate.
As is, where is. What you see is what you get. The investor is buying a completed apartment, flaws and gems all included. There is no guesswork as to the quality of the workmanship and the finishes that will be delivered, unlike with new apartments.
The overall trend in the Singapore home market may be up but confidence is still lacking in some quarters. Global economic uncertainties loom and Singapore is not immune.
For now though, I would recommend properties that are under-valued relative to their neighbours, minimising downside risks and collecting steady rental income.
By Ku Swee Yong, founder of real estate agency International Property Advisor (IPA)
Friday, July 30, 2010
More making the move to suburbia
Source : Today – 30 Jul 2010
Property investors with a lower budget but with a longer term perspective towards property purchases may look at the choices available in suburban areas instead of prime locations.
Analysts reckon that prices in upcoming suburban areas are still within reach and units there have upside potential as well, making them good investment opportunities.
Among the new coming areas that potential buyers can consider include Serangoon, Jurong Lake District and Punggol Waterfront Town, market experts said.
Mr Colin Tan, Chesterton Suntec International research and consultancy director, said: “Investors should identify areas with future potential and enter early to secure a pricing more reasonable than some of the developed areas. In the long term, say about five years, the price may rise 20 to 30 per cent.”
Mr Tan noted that since the opening of the Integrated Resorts, property prices in suburban areas have also increased sharply from between $400 and $450 per square foot to about $800 psf.
Experts said some developments within the suburban areas have become popular mainly because of their proximity to the new and less heavily-used Circle Line.
In addition, they observed that more expatriates are settling away from the prime areas as well, creating more rental opportunities for unit owners. “Expatriates are increasingly moving into suburban areas to save on the housing allowances. Meanwhile, a greater proportion of foreign and permanent resident Chinese and Indian buyers are also doing so because of their preference,” said Ms Chua Chor Hoon, senior director of research at property consultancy DTZ.
Among the new upcoming areas that are expected to see a vibrant community when fully developed are Kallang Riverside and Jurong Lakeside District.
When completed, Kallang Riverside will see a new Sports Hub, an additional 400,000 square metres of commercial space, 3,000 hotel rooms and more.
Meanwhile, the Jurong Lakeside district will be developed into a major regional centre, featuring a commercial hub and leisure destinations for locals and tourists.
“The overall development in these areas can give an uplift to prices in the region, ” Ms Chua added.
But industry experts noted that to keep the selling price palatable, developers may build smaller units.
In addition, Mr Tan cautioned: “Because these new sites need at least three to four years to develop fully, investors should be careful about timing the market and be prepared to hold the units.”
Meanwhile, for those with deeper pockets, industry watchers still recommend the prime area properties.
“For investment, it is good to buy into prime areas with good resale and rental value. In these areas, prices have not climbed to its peak and there is more upside, therefore, there is less price resistance,” said Ms Chua.
Real Estate Sentiment Index shows property market likely to worsen
Source : Straits Times – 30 Jul 2010
A NEW index tracking the property market shows that developers and other industry players remain positive but believe conditions will cool down from the bullish levels seen in recent months.
More developers also believe the slowing global economy and an increased supply of new development land may hit market sentiment over the next six months.
The Real Estate Sentiment Index, which was launched at a seminar yesterday, also points to rising interest rates and an excessive supply of new property launches as market risks. The index has been jointly developed by the Real Estate Developers Association of Singapore (Redas) and the department of real estate at the National University of Singapore (NUS). It is based on data collected in a quarterly survey of Redas members to get a snapshot of market sentiment. The poll started in the first quarter.
The reading for the second quarter stood at 5.9, down from 6.8 in the first quarter. This shows that while industry players are still positive, they expect market conditions to worsen.
With empirical data, it is always about the past, said Dr Yu Shi Ming, head of NUS’ department of real estate.
‘With the index, we hope that as soon as a policy is announced, we can get a sense of how the industry feels,’ he said.
Redas chief executive Steven Choo said that apart from its members, policymakers, banks and other firms may find it useful.
There have been about 70 respondents for the survey each quarter – about 60 per cent are developers and the rest consultants and other industry figures.
About 51 per cent of developers polled for the second quarter expect prices of new launches to rise, compared with 85 per cent in the first quarter. About 68 per cent expect more new units to be launched over the next six months, compared with 83 per cent in the first quarter.
About half of the developers polled feel the level of interest for public and private development land will remain unchanged in the near term. Developers are most concerned with rising land prices, followed by the cost of building materials and labour.
At Redas’ seminar yesterday, Rider Levett Bucknall’s managing partner, Mr Winston Hauw, said: ‘It’s good to tender this year as there’s more uncertainty next year. We think prices will go up slightly next year.’
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