Suburban condos may still be good buys - AsiaOne

The implementation of the Total Debt Servicing Ratio (TDSR) in June 2013 marked a turning point for the exuberance in the primary sales market seen in recent years.

Against a backdrop of reduced affordability levels and high land acquisition costs, there was a sharp reduction in developers' launches and sales volume.

The 2014 primary sales volume was 7,437 units - a 50 per cent decline from the 15,162 recorded in 2013.

Developers also launched 52 per cent fewer units for sale within the same period. Private home prices fell 4.1 per cent in 2014.

While the impact of the TDSR on sales volume was immediately felt in the months after its implementation, the effect on prices only became apparent in the fourth quarter of 2013.

In 2014, even though prices generally slipped in all segments, prices for property in the Outside Central Region (OCR) remained the most resilient of the lot - registering only a 2.2 per cent decline compared to a 4.3 per cent and 5.5 per cent drop in the Core Central Region (CCR) and Rest of Central Region (RCR) respectively.

And in recent years, despite numerous rounds of cooling measures, OCR prices outshone all segments with a 6.4 per cent growth in both 2012 and 2013, when others only showed marginal gains or even fell.

We believe that the OCR segment is well supported by first-time homebuyers as well as upgraders.

However, the market conditions for the private property market this year remain challenging. 2015 is expected to be another lacklustre year for the property market.

Primary market performance will continue to depend on developers finding the right pricing strategy which accurately portrays current sentiments.

Buyers will still remain very price and quantum sensitive and would only go in if they perceive a property to be a good value proposition.

BUYERS' MARKET IN 2015

While selected projects which are reasonably priced and well located will continue to attract homebuyers, prices are expected to come under pressure as the potential pool of buyers shrinks and developers face stronger competition for consumer dollars.

This could be exacerbated by the sizeable residential supply that is expected to come onstream, which will turn the market further in favour of home buyers.

It will be a subdued market in the private property sector this year with most launches centred on the mass market segment as they are more affordable.

The OCR is considered the suburbs of Singapore. This includes densely populated estates such as Punggol, Sengkang, Yishun, Woodlands, Jurong, Tampines and Bedok - where a wide variety of mass market condominiums are located.

Due to the cumulative effects of the cooling measures and TDSR which restricts liquidity, buyers have become increasingly quantum sensitive, which in turn, has benefited projects in outlying regions - where the overall quantum is more affordable compared to the central region.

We think that OCR homes are becoming more attractive due to the lower price quantum.

With the continued enforcement of loan curbs, buyers continue to be limited by the amount of debt they can take on, and as such, properties priced between S$800,000 and S$1.2 million will be more sought after, followed by homes in the up to S$1.5 million range.

For foreigners, the Additional Buyer's Stamp Duty (ABSD) will continue to be a stumbling block in their consideration for a purchase. As such, they will also look to more "budget friendly" alternatives in the OCR.

Apart from the lower price quantum, mass market properties are also increasingly becoming more appealing due to the government's decentralisation strategy to sustain Singapore's growth by developing regional centres at various parts of the island including the West and North regions.

Various industry analysts had predicted that it will be a turbulent year for the local property market, citing the government's cooling measures as the main reason in lieu of achieving its overarching aim of curbing property speculation and encouraging financial prudence.

As the impact of the measures trims buyers' purchasing power, affordability and the right pricing will become critical factors in the success of a project launch.

Be that as it may, home buyers still swarmed the show flats of the following mass market launches that were priced attractively and/or are in good locations:

The Inflora was sold out 30 days after its launch, at a median price of S$952 psf (October 2013);

Rivertrees Residences sold 218 units at a median price of S$1,111 psf (February 2014);

Riverbank@Fernvale sold 211 units at a median price of S$1,033 psf (February 2014);

Lakeville sold 210 units at a median price of S$1,318 psf (April 2014);

Coco Palms sold 590 units at a median price of S$1,018 psf (May 2014).

In view of the continued enforcement of various government policies and loan curbs as well as purchasers' cautious stance, developers are expected to price their projects competitively to maintain sales momentum.

For new projects, developers will be able to draw buyers through attractive price points.

This trend will be fuelled by the continued availability of credit in a low interest rate environment, along with developers' cautious pricing strategies.

This may put a fair bit of pressure on home sellers in the resale market, who may have to lower prices in order to make a sale.

With developers competing for the same buyers with offers of discounts and other enticing options, prices of resale private properties in the secondary market may face pressure and are expected to correct marginally, in tandem with the new launches.

Coupled with a number of new launches planned for this year, and fewer foreign buyers taking the bite, the only properties which will remain popular are mass-market homes in locations close to MRT stations, schools and shopping malls, such as the upcoming integrated project in Yishun North Park Residences, which we expect to achieve a strong take-up rate.

Why should buyers consider buying a condominium unit in 2015? Long-term stability, for one.

Notwithstanding the slowdown, the longer term prospects for the residential market remain intact in the light of the various initiatives announced by the government.

These include the unveiling of the 2013 Draft Master Plan which details key elements from the Population White Paper as well as the Land Use Plan for housing a larger population in quality living environments for the next 10 to 15 years.

They include the construction of new homes in Holland Village, Kampong Bugis and Marina South, as well as new redevelopment areas in Paya Lebar, Greater Southern Waterfront and Pasir Panjang and Tanjong Pagar in addition to the plans for new homes in Bidadari, Tampines North, Tengah New Town and Punggol Matilda.

There are also plans for new growth areas for accommodating industrial and business activity and supporting infrastructure.

These new plans and developments are expected to introduce a wider variety of housing options and new living environments - signalling another step towards exciting times for Singapore's urban housing landscape.

The initiatives signal the government's resolve to protect the value of homes while ensuring a stable and sustainable residential property market.

This bodes well for the Republic's long-term growth despite some near-term fragility in the residential property market - with mass market properties in the OCR enjoying the lion's share of all property transactions in 2015.

The writer is PropNex CEO.

Thursday, Mar 19, 2015

Mohamed Ismail Gafoor

The Business Times

Source: Asiaone

Headline: Rents continued to slip, volume declined in February 2015 - SRX

Headline: Rents continued to slip, volume declined in February 2015

posted on 11 Mar 2015 SHARE 

  

SRX Property

Headline: Rents continued to slip, volume declined in February 2015.

A. Non-Landed Private Residential Rental Market

1. Private rents continued to fall. According to the SRX Property Price Index for Non-landed Private Residential Rentals, rents posted a drop of 0.8% in February 2015 compared to January 2015. Non-landed Private Residential units in CCR and RCR saw decreases in rents of 1.2% and 1.5% respectively. The rents in OCR stayed unchanged from January.

According to the SRX Property Price Index for Non-landed Private Rentals:

· Rents have not been increasing since Feb 2014.
· Year-on-year, rents in February 2015 are down 6.2% from February 2014.
· Rents in February are 10.5% down compared with its peak in January 2013.
· Rents change in January has been revised from a 0.2% increase to unchanged.

2. Rental volume declined. According to the SRX Property, an estimated 2,586 Non-landed Private Residential units were rented in February 2015, a 25.8% decrease from 3,487 units rented in January 2015.

· Year-on-year, rental volume in February 2015 is 5.9% lower compared to 2,748 units rented in February 2014.

B. HDB Rental Market

1. HDB rents continued to fall. According to the SRX Property Price Index for HDB Rentals, rents posted a decline of 0.3% in February compared to January. HDB 3 and 4-Room flats posted declines in rents of 0.8% and 0.6% respectively. 5 Room and Executive flats on the other hand saw a pick-up in rents by 0.7% and 0.5% respectively.

According to the SRX Property Price Index for HDB Rentals:

· Year-on-year, rents in February 2015 are down 3.0% from February 2014.
· Rents in February are 5.5% down compared with its peak in August 2013.
· Rents change in January has been revised from a 0.5% decrease to a 0.6% decrease.

According to the SRX Property Price Sub-Indices for HDB Rentals in Mature and Non-mature Estates:
· Rents dropped in both Mature and Non-mature Estates in February 2015.
· Year-on-year, rents of Non-mature Estates in February 2015 have dropped 3.8% from February 2014.
· Year-on-year, rents of Mature Estates in February 2015 have dropped 2.3% from February 2014.

2. HDB rental volume declined. According to the SRX Property, an estimated 1,371 HDB flats were rented in February 2015, a 25.7% decrease from 1,846 units rented in January 2015.

· Year-on-year, rental volume in February 2015 is 6.5% lower compared to 1,467 units rented in February 2014.

Source: SRX (11 Mar 2015)

Perfect Storm: When Cooling Measures Collide with Urban Planning - SRX

Residents in Northeast see $ 396 million Decline in Market Value

According to the Economic Development Board (EDB), Singapore’s aerospace industry has expanded at an average rate of over 10% per year since 1990, and the latest figures show employment of around 19,000 workers.

The development of an aerospace hub in Seletar (District 28) has spurred development of new housing projects and amenities like the Seletar Shopping Mall.

One of the rules that property investors follow is the SRX Urban Planning Rule.  This rule states that by reviewing public documents (e.g., URA Master Plan), investors and their advisors can identify areas that are up-and-coming and worthy of consideration for investment in Singapore residential property.

The government promotes its major development projects to the public.   For example, during the National Day Rally Speech, Prime Minister Lee Hsien Loong spoke of various developments in the Jurong Lake District, including the expansion of the gardens and a possible terminal for a high-speed train.

This publicity generates demand for properties in the areas that are being developed.  Investors bet that developments, like that of the aerospace hub, will increase the value of property in the surrounding areas.

Under normal circumstances, this bet is often a good one.  But there are two risks.  

First, savvy buyers and investors know the SRX Urban Planning Rule.  So, if they have the capital, they move very quickly, bidding up prices for latecomers.  If you are late to the party, you can overpay and face difficulty in getting a proper return on your investment.

The second risk is timing.  A downturn in the economy, war, government policies, and other external shocks can negatively impact an otherwise sensible investment.

For example, from a statistical standpoint, the Cooling Measures have hit Northeast Singapore particularly hard.  

Sengkang and Punggol have the highest percentage of resale flats in the red of all HDB estates.  If residents in these estates were to sell at today’s X-Value, about 47-50% would sell at a loss.

Close to 44% of the owners of private flats in District 28 would sell at a loss.

The total loss would be $ 396 million.

This is a cautionary tale for investors.

While an area in the URA Master Plan may seem attractive, no area is immune from a perfect storm.

Homeowners bought with the goal of benefiting from the government’s development of the Seletar aerospace hub.  As demand increased, prices increased. 

The Cooling Measures then hit before the market could normalize prices.  As a result, many people were caught holding overvalued homes as the market turned downward.  As prices have come down, an unusually high number of owners have entered into a paper loss.

While this storm shall someday pass, it’s critical to have a financial cushion so you aren’t forced to sell before the market can return to normal.

Source: SRX (05 Mar 2015)

HDB resale prices dipped on declining volume - SRX

Observations:

1. HDB resale prices dipped in February. HDB resale prices dropped by 0.6% in February 2015 compared to January 2015.  The price drop was driven by HDB 3 Room, 4 Room and Executive Flats whose resale prices decreased by 1.2%, 0.6%, and 0.4%, respectively. The resale prices for HDB 5 Room remained unchanged from Jan 2015.

According to the SRX Property Price Index for HDB Resale:

• Year-on-year, prices have dropped 5.7% from February 2014;
• Prices have declined 10.2% since the peak in April 2013;
• Price change in Jan 2015 has been revised from a 0.6% increase to a 0.2% increase;

According to the SRX Property Price Sub-Indices for HDB Resale:

• The HDB Resale prices decreased in both mature and non-mature estates;
• In Feb 2015, HDB resale prices decreased 0.6% and 0.7% in mature estates and non-mature estates respectively.
• Year-on-year, prices in mature estates have declined 3.2% from Feb 2014;
• Year-on-year, prices in non-mature estates have declined 7.6% from Feb 2014;

2. Resale volume up year-on-year. According to HDB resale data compiled by SRX Property, 1,148 HDB resale flats were sold in February 2015, an 8.5% decrease from 1,255 transacted units in January 2015.

• Year-on-year, resale volume increased by 20.7% compared with 951 units resold in February 2014;
• Resale volume is down 68.5% compared to its peak of 3,649 units in May 2010.

3. Overall median Transaction Over X-Value (T-O-X) remained negative. According to SRX Property, HDB prices continue to face downward pressure and negative market sentiment in February 2015.  The median T-O-X for HDB measures whether people are overpaying or underpaying the SRX Property X-Value estimated market value.

• Overall Median T-O-X was NEGATIVE $4,000 in February 2015, a $3,000 drop from NEGATIVE $1,000 in January 2015;
• Median T-O-X for HDB 3, 4, and 5 Room flats were negative while Executive flats saw a positive median T-O-X.

4. Bukit Merah posted the highest median T-O-X. For HDB towns having more than 10 resale transactions with T-O-X in February 2015, Bukit Merah reported the highest median TOX of $13,000, followed by $5,200 in Punggol and $3,000 in Hougang.

This means that majority of the buyers in these towns has purchased units above the computer-generated market value.

5. Among relatively active towns, Jurong West and Sembawang posted the most Negative median T-O-X. Among HDB towns having more than 10 resale transactions with T-O-X in February 2015, the lowest median T-O-X were in Jurong West, Sembawang, and Jurong East at NEGATIVE $ 8,000, NEGATIVE $8,000, and NEGATIVE $7,500, respectively. 

This means that majority of the buyers in these towns has purchased units below the computer generated market value.

Source: SRX (05 Mar 2015)

HDB resale market 2015: Anticipation for an upswing? - PropertyGuru

2014 has raised a few concerns with regards to the HDB resale market. After experiencing consecutive months of decline in prices and transactions, many have accepted the downward trend to be the ‘new normal’, with modest dips likely to occur in the next months.

Indeed, looking at current market conditions, there is a high probability that activity will stay muted. Prices too will remain impacted by a looming flood of new Build to Order (BTO) units and the unwavering influence property measures, such as a lower mortgage servicing ratio, shorter loan tenure and a minimum three-year waiting period for PRs wanting to buy HDB resale flats, has on access to capital.

Not all estates are equal

While the prices of resale flats have taken a tumble across the board, each HDB districts were affected differently with some experiencing a greater degree of decline as compared to the rest. Resale flat sellers in two districts in North-Eastern Singapore felt the most pain as a result of prices going south in both the 4 and 5 room unit category. Resale prices for 4 room flats in Sengkang have one of the highest rates of price depreciation at 9.2 percent, with a median valuation of $446,000 between Q1 – Q3 2014. 5-room unit prices performed marginally better, seeing an 8.3 percent fall from a median price of $535,167 to $491,000.

Similarly, prices for 4 room resale properties in Punggol followed a similar pattern with a 9 percent decline to arrive at a median price of $457,000 while 5 room units were down to a median of $555,333 from $562,500.

The fall in prices within these new estates can be attributed to the abundance of sellers within a certain demographic. Most homeowners within Sengkang and Punggol are young couples who could be looking to move elsewhere to upgrade in order to suit their families’ evolving needs, as such, creates a situation where supply of houses entering the resale market will exceed the demand into these areas.

Also, numerous launches of Build-To-Order (BTO) flats in Sengkang and Punggol could also play a key role in placing pressure on existing homeowners into selling their flats at a lower price than expected. This is likely as sellers will be inclined to choose to sell now, rather than run the risk of selling their flats at an even lower prices when new flats have been completed in the future.

Other areas that had seen a significant fall in price include mature estates such as Toa Payoh in addition to districts located in the North Western part of the island- Choa Chu Kang, Sembawang and the outskirts of Bukit Panjang.

Conversely, there are certain areas which have maintained strong demand by virtue of their favourable location, hence do not seem to suffer from significant price drops over time. “In the central areas of Queenstown such as Strathmore Avenue, Mei Ling Street and Stirling Road, the highest recorded prices for HDB units there would be in the $800,000 range. Today, one can purchase a resale unit for between $720,000 to $770,000, a smaller estimated dip of about 5 percent as compared to those in Sengkang and Punggol,” explained Evan Chung, Vice-President, DTZ Property Network.

A buyer’s market at the expense of sellers and upgraders

The situation from a seller’s perspective

It is without a doubt the tepid demand for resale flats has put pressure on sellers. Referring to those who have already got, or will soon get, their keys to newly completed BTO flats or ECs, it is mandatory for them to sell their existing HDB flats within six months of getting their new homes.

However, the situation compounded by the lack of buyers in the market. As a result, some have chosen to postpone collecting their keys to a later date or requested for an extension of the deadline to sell their flats in order to buy time to search for a suitable buyer for their unit.

Admittedly though, one reason why sellers are unable to find buyers, and why resale volumes remain low, is due to the mismatch of price expectations between sellers and buyers.  On one hand, sellers are reluctant to cut prices, thinking that they can get a better price for their unit or simply because they find that prices offered are too low for their consideration. On the other, buyers have different price expectation, leveraging on the weakening market and increasing pool of supply to bargain for the best price.

“Sellers who need to dispose of their current HDBs may find that it will take longer than the six months they are given to find suitable buyers. Because of this, they have to make adjustments to their selling price. Some have done so, and this has significantly contributed to the dip in overall price in the resale market,” mentioned Chung.

Implications for upgraders

The austere outlook is also a bitter pill to swallow for upgraders – referring to those who currently own a place of residence and looking to purchase a bigger HDB flat or private property in the near future – especially so given the high probability prices will further soften in 2015.

Simply put, upgraders cannot get the price they need to upgrade in today’s market. It is common practice for upgraders to use a portion of profit from the sale of their existing HDB units to pay for the down payments needed to upgrade to a larger resale unit or private condo. However, with a shrinking pool of buyers and prices set to wane in the year ahead, it is indeed going to be a tough time for most to fulfil their aspirations.

This has in turn also affected sales for private property. “As a result of the reduction in the HDB resale volume, we find that the number of those intending to sell their HDB flats to upgrade to a private condos have fallen. This has diminished sales for private property as well, given that upgraders form 30 to 40 percent of condo buyers,” said Eugene Lim, Key Executive Office of ERA Realty.

Outlook for 2015: Resurgence of buying activity in the market

Property buyers are keeping a close watch on developments in the market so as to find an opportune time to re-enter the Singapore market. More buyers will likely come into the market when there is a perception that prices have fallen to a level low enough to meet their expectations.

Analysts believe that a rebound in the number of resale transactions may happen in 2015, given that prices are already showing signs of stabilising in recent months. Prices though are predicted to continue sliding at a slower pace.

“For the first half of 2015, there will still be the decline in prices. At this juncture, prices will have sufficiently reached a certain level where buyers are comfortable to relook at purchasing HDB resale units, thereby creating conditions for an upswing in the total number of transactions in overall,” Chung commented.

Echoing his sentiments, Lim mentioned, “Overall volume for HDB resale will probably see an increase in the region of 18,000 – 20,000 units with the return of more buyers into the market. On the other hand, continued correction of resale HDB prices will still occur. It will not be surprising to find that a further 5 to 6 percent fall will happen.”

To read more about the property outlook for 2015, download the PropertyGuru Property Outlook Report 2015 eBookhere 

Adam Rahman, Senior Content Marketing Executive at PropertyGuru, edited this story. To contact him about this or other stories, email adam@propertyguru.com.sg

Source: PropertyGuru