Focus shift to Mixed-use commercial developments?

As the private residential property market takes a slight hit, it may be time to shift the focus onto other property types such as commercial properties and possibly mixed-use developments which have been quite the new kid on the block for these couple of years.

And perhaps buyers who have purchased a unit in the residential part of a mixed-use development could look into investing in a commercial unit in the connecting mall or office. The proximity makes it easier to keep an eye on the property and living near a shopping mall could also have its perks, including saving on time and transport costs. With most mixed-use developments situated near other public facilities such as bus interchanges, MRT stations, town centres and supermarkets,  accessibility and connectivity are prime calling cards.

Le RegalThere are some cons however. Some home owners may find their home surroundings a little less quiet and exclusive because of the connectivity to the malls, and the costs of these units are usually much higher than the next private condominium just down the road. However, tenants may prefer these units and be willing to pay higher rents.

Some of the more popular mixed-use developments in the market include Nine Residences which is above Junction 9, The Centris which is connected to Jurong Point, The Hillier, Watertown and even older ones such as Thomson Imperial Court, Sunshine Plaza and Burlington Square. There are a few newer ones in the works such as Le Regal in Geylang and NEWest at West Coast Drive.

Marina Bay home sales show positive signs

Private home sales in the suburbs have been showing sign of strain as the increasing number of new completed condominium units compete for the increasingly limited number of buyers, which could be further limited due to loan limits, a downtown project seemed to be bucking the trend and pulling in sales in the luxury apartment sector.

Marina One Residences in the Marina Bay precinct secured half of the total number of home sales in October alone. But that could also be due to the fact that it was the only new launch in the month. 334 units of the 1,042-unit condominium were sold at the average selling price of $2,228 psf. However, sales were still lagging behind its initial preview launch when earlybird discounts were given, and sale prices hovered between $1,960 and $3,100 psf.

Marina ONe iprop watermarkDevelopers are finding it harder to attract the buying crowd and have found they are now more sensitive to pricing as it became more difficult to secure bank loans. Though the price fight is not evident yet, as buyers are still willing to fork out a considerable amount for properties in good locations, it may only be a matter of time before the cracks show. Especially since 2015 and 2016 will see an even bigger influx of completed private homes in the market.

For now, developers are focusing their efforts on selling remaining units at previously launched projects such as DUO Residences, Coco Palms and Lakeville condominium, thus holding back on new launches. Will this drive consumers towards other property types such as executive condominiums (ECs) and resale HDB flats or will they continue to seek better deals with the existing private property market?

New private condos threaten Rental Market

As more new private condominiums in the suburbs attain their occupation-ready status, the number of apartments available for rental has increased significantly and fierce competition has brought rental prices down. Though concentrated mainly in the suburbs, where most of the new condominiums are situated, the decline has dragged the rental market down by 1.5 per cent.

FOresta Mount FaberAnd as most of these new condominiums are in close proximity to HDB flats, the HDB rental market has also been affected somewhat as tenants now realised they may be able to afford a private condo after all and instead choose this option over HDB flats. And as this pressure is exerted on the HDB market, some HDB flat owners may consider jumping over to the private property market and the HDB resale flat sector may see some shifting as a result of the spillover effect.

From January to September of this year, there were a total of 6,621 condominium units entering the market in the suburbs alone. This has pushed rental prices down 5.3 per cent and a 1.3 drop in the number of rental deals signed in September alone. However, a year-on-year comparison with 2013 showed an increase of 11.8 per cent in terms of the number of units leased. This could signify a shift of tenants leasing private properties as opposed to HDB flats as the price gap narrows.

Eight RiversuitesMoving forward, 2015 and 2016 may see a vacancy rate of 10 per cent and more if immigration policies remain the same and if rental prices become even more competitive with up to 20,000 new units reaching completion annually. Is this a sign that the cooling measures have worked? Or is it merely a sign that investing in residential property may have to take a different slant, to focus on long-term profits through property appreciation rather than on short-term rental profits? How does that then change the criteria for property selection?

Glimmer of hope for Private resale homes?

Although the total number of private resale homes sold were lower in October than September, prices have begun to rise slightly. According to latest data, non-landed private home prices rose 0.4 per cent in last month. In suburban districts often popular with buyers such as Bishan, Toa Payoh, Little India, Geylang and Queenstown, prices rose 0.6 per cent. Transactions and prices of prime district properties however remained quiet, falling in fact by 0.3 per cent.

Okio Residences in Balestier.

Okio Residences in Balestier.

Have overall property prices fallen sufficiently? And have they reached the lowest point of the property cycle? If so, how long will this low point last? Private property prices have been low for quite some time now, maintaining a steady level in terms of pricing and transaction volume for almost half a year. The government has said that they will not relax the cooling measures anytime soon, perhaps in fear of a huge and quick rebound which may bring prices up even higher than before the curbs were put in place. They could also be giving the measures a bit more time to sink in, to further bring down home prices and getting the industry and public used to these measures.

Property experts are expecting prices to decline even further in the short term. Would this be the best time to invest? And how would you go about investing? Is it best to move away from residential property into commercial property? Or are there certain property types with hidden long term value?

Almost all Lake Life EC units sold

At $799 to $930 psf with starting average prices of $685,000 for a 2-bedder to close to $1 million for a 3-bedder, units at the Lake Life EC in Jurong flew of the shelves over the weekend. Only 12 out of its 546 units  were available as of yesterday.

Lake Life ECThe palatable quantum prices of units at the executive condominium (EC) by Evia Real Estate could be the main draw. With a lower loan limit and other cooling measures in place, property buyers are now on the lookout for properties with a lower total selling price rather than focusing on per-square-foot prices. Evia Real Estate has done their homework well, and projected that the deepest pockets of buyers for the Lake Life, according to the demographics of the Jurong district, would be not more than $1.1 million. The pent-up demand for ECs may also have accounted for much of the rush for units in this quickly developing region. The Jurong and Jurong Lake district looks set to be one of the newest and busiest areas for development under the government’s island-wide growth plans.

URA Jurong Lake District

Photo credit:URA

In fact, some of the buyers were originally considering private properties in the area but decided instead to go for the EC options instead. Many saw it as a good investment even though they were purchasing units to live in for the moment. Executive condominiums are a hybrid between public and private property and can be sold after a 5-year minimum occupation period (MOP) in the open market. After 10 years, it will become a private property and may fetch even higher prices.

The other 2 ECs entering the market at the same time are Bellwoods and Bellewaters, developed by Qingjian Realty.

New properties lower overall rent

Though the government has reduced land sales in the second half of the year, a fresh new crop of properties reaching their point of maturity in the next year may have some effect on the rental prices of private properties across the board. In 2013 alone, 16,000 new non-landed properties entered the market and 25,000 more are expected to flood the market by 2016.

Shore Residences on Amber Road

Shore Residences on Amber Road

Tenants will have more rental options ranging from units in brand-new condominium to those at older private apartments as a large supply of condominiums enter the market next year. And as most tenants in a new development receive keys to their units at the same time, they may face competition from one another as they put up their units for rent at the same time. Older neighbouring properties as well as HDB flats may also face the same competition as tenants opt for newer choices. Rental prices may waver and some landlords may find themselves having to lower the rent to secure a suitable tenant.

Landlords may find themselves competing for the same and somewhat decreasing tenant pool, especially with concurrent restrictions placed on the foreign workforce. Diminishing expatriate housing allowances may also mean tenants may be looking out of the city centre for rental options. And though most of the new properties are situated out of the central region, the sheer supply may overshadow the demand.

Take the Katong, Joo Chiat and Amber road district for example. In that small area, there is The Shore Residences, Silversea, The Meyerise amongst other older properties. And in the up-and-coming Punggol and Sengkang regions, there is a good mix of ECs and private condominiums such as A Treasure Trove, The Luxurie and the latest launch of Bellewaters. It could very well be the battle between the new and newer in time to come as many new homes are erected in already-new clusters of private homes.

Price reduction at the Lake Life

Just launched not long ago, the latest kid on the block – Lake Life EC in the Jurong Lake district is already offering units at prices lower than its initial estimation. Prior to its launch, the price tag was expected to hover between $880 to $890 psf. But it seems the average is now around $857psf.
lakelife ECThis could be due largely to the loan limits and subsidy caps for executive condominium buyers. Before the cooling measures went into full force last year, prices were much higher as buyers could apply for larger loan amounts. In comparison to its neighbouring private condominium, Lakeville, prices at the EC are much lower. Lakeville units are selling at the medina of $1, 328 psf. Considering the fact that ECs will eventually become private condominiums, which may mean a wider profit margin in the long run. Executive condominiums (ECs) are a hybrid between public and private housing, and buyers can sell them in the market after 5 years, and after 10 years, the development will become a private residential property.

Reacting to the smaller loans which buyers can now receive, developers are adjusting their strategies to offer units prices at a lower quantum prices as compared to lower psf prices. At the Lake Life, 84 per cent of the units have been priced below $1.1 million. A few townships away in Woodlands, and over in the north of the island, the launch of Bellewoods and Bellewaters executive condominiums this weekend may fan the EC fire and buyers will have more fodder for comparison. Prices, expected to be set between $750 to $820 psf, will be competitive. What will buyers be looking out for?

Commercial properties – Promising future?

As the noose tightens around the residential property market, investors may consider shifting their focus onto commercial properties, in particular office spaces. Q3 figures have shown that selling prices and rental of office spaces have been growing at a record pace.

In land-scarce Singapore, the growing number of businesses means the demand for office space will continue to rise. And as space decreases, prices increase. In Q3 alone, office space rental prices rose by 1.6 per cent. Part of the reason could be that major buildings such as the NOL Building and Havelock II have been undergoing renovation and thus the office space crunch has led to businesses having to look for alternative spaces within a short time period.

Havelock 2 OfficeDespite luxury properties in the downtown and CBD areas faring poorly of late, Grade A office rents in these areas have been travelling the opposite direction – upwards. Office spaces in the central region have been more in demand than rentals in other regions despite the higher rental prices. Central districts office rentals have risen 2.8 per cent while those at the fringe of the city have risen 1.9 per cent.

Retail space however, is another creature altogether. As most retail space income comes also from the tenant’s sales and margins have been narrow due to higher operating and labour costs. And with the introduction of many more mixed-use developments come 2016, supply may overtake demand and reduce the rarity of these spaces. Especially as online shopping takes off in a big way locally, retail spaces, unless in high traffic areas or exclusive trendy enclaves, may find themselves fighting for the same audience.