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14 Oct

Tackling the housing imbalance issue

The government has emphasized its role in helping to correct the housing imbalance, especially with regards to rising housing prices, by ramping up availability of new HDB flats. Is this sufficient or what other measures could be put in place? Is this housing imbalance temporary or could it swing wildly to either extremes?

The government is taking active measures to address the ‘temporary imbalance’ in the supply and demand of housing, National Development Minister Khaw Boon Wan reiterated yesterday. A sudden rise in housing prices following a sharp economic recovery, amidst global liquidity, has worried many Singaporeans, Mr Khaw noted in an addendum to President Tony Tan Keng Yam’s address in Parliament on Monday. ‘We are building more HDB flats and speeding up their completion. We have adjusted the income ceilings, so that higher income couples and singles can also qualify for public housing‘,’ Mr Khaw said.

Has the new HDB flats made housing more affordable for you?

At the same time, the government will also release more land for private homes and will ‘calibrate’ its measures to ensure that prices move sustainably with the economy, he said. Among other measures, the Housing & Development Board (HDB) recently upped the monthly income ceiling for purchasing new executive condominium (EC) flats from $10,000 to $12,000.

Besides schemes for singles and the elderly, HDB also has a Special Housing Grant for low-income families

As at end-September 2011, HDB has received around 140 EC bookings from flat-buyers within this income group, it said. The CPF Housing Grant disbursed to this group so far is about $130,000. Mr Khaw also reiterated that HDB is building more subsidised rental flats to help ‘vulnerable’ families that are unable to afford their own homes. He also said that as HDB moves into the next phase of public housing, it will strive for even better-designed and sustainable towns that have ample public spaces and community facilities so that residents can enjoy ‘cleaner, greener and better’ living. HDB will tap on private sector expertise and public feedback to develop such sustainable towns.

What will your town receive in the HDB Neighbourhood Renewal Programme? Image courtesy of HDB.

‘For the mature estates, we will upgrade and rejuvenate them. As we complete the lift upgrading programme, we are accelerating the home improvement programme and neighbourhood renewal programme,’ Mr Khaw said. ‘We will also identify suitable sites for more intensified redevelopment so as to inject more housing in mature towns.’ Where possible, some of the new HDB flats will be built in mature estates to ‘widen choices and meet aspirations’, he said.

Has your HDB toilet been upgraded under the HDB home improvement programme?

The government also intends to bring jobs closer to homes as new growth areas such as Jurong Lake District, Paya Lebar and Kallang take off. Housing will also be gradually intensified, especially around MRT stations and in mature towns such as Queenstown and Bishan to take full advantage of their amenities, Mr Khaw said.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
With positive steps taken to provide more HDB flats in mature estates and rejuvenating older HDB towns, what will this mean for prices of HDB flats in these areas? Will resale flat prices drop because of these changes or will it go the other way?

13 Oct

Four Singaporean developments win International Real Estate Awards

This year, the International Real Estate Federation (FIABCI) awarded four Singaporean projects with prestigious awards – one of which is the Pinnacle @ Duxton housing project by the HDB.

Four Singapore developments – including the Housing Board’s The Pinnacle @ Duxton – won prestigious awards from the International Real Estate Federation (FIABCI) this year.

The International Real Estate Federation (FIABCI)

A green office project, 7 and 9 Tampines Grande, was the winner of the Sustainable Development Category in the World Prix d’Excellence 2011. City Square Mall at Kitchener Road was second in the Retail Category. The Quincy Hotel at Orchard and The Pinnacle @ Duxton nabbed runner-up awards in the Hotel and Residential (High Rise) categories respectively.

The winners were named earlier this year, and the Singapore chapter of the FIABCI organisation hosted a dinner last night at the Fullerton Hotel to celebrate these achievements. FIABCI represents the world’s real estate professions through its Special Consultative status with the Economic and Social Council (ECOSOC) of the United Nations Organisation. The Prix d’Excellence recognises projects from more than 60 member countries that show excellence in areas related to sustainability and preserving the heritage of a building. Prizes are also given to outstanding residential or commercial projects.

Marina Bay Residences took a spot in the 13 developments which were awarded the Singapore Property Awards by the Singapore charter of FIABCI in June this year. They will be entered in the International Prix d'Execellence Awards next year.

A panel of judges from the federation considers criterion such as the architecture and design of the project, its development and construction, and the benefits to the community or environment. ‘These competitions show clearly that a winning design and development is unfolded when the best come together to share and contribute their expertise and experiences,’ said Dr Lim Lan Yuan, president of the Singapore chapter in a speech at the dinner.

FIABCI Singapore introduced its own inaugural Singapore Property Awards in June to recognise local projects or properties. A total of 13 projects were announced as winners of the inaugural Fiabci Singapore Property Awards last night. Only the 13 winners, which include Marina Bay Residences and Mapletree Business City, will be allowed to enter next year’s international Prix d’Excellence awards. Dr Lim said this was to encourage more Singapore designers and developers to submit their projects for competition, and also to pick the best entries.

Belle Vue Residences.

In the residential category, Duchess Residences (by UOL Group) and Belle Vue Residences (by Wing Tai Land) won awards for residential (low rise); Hillvista (by Far East Organisation), Marina Bay Residences (by Raffles Quay Asset Management) and St Thomas Suites (by Frasiers Centrepoint) were recognised under the residential (high rise) category.

Hillvista condominium.

In the office category, Raffles Quay Asset Management’s Marina Bay Financial Centre (Phase 1) clinched the award.  11 Tampines Concourse by (City Developments Limited), Treelodge@Punggol (by Housing & Development Board) and Mapletree Business City by Mapletree Investments shone in the sustainable development category.

HDB’s Clementi Town Mixed Development came in tops under the master plan category. Under the industrial category, Citi Campus and Plaza 8 (by HSBC Institutional Trust Services) and ICON @IBP (by Ascendas Tuas) rounded up the list of 13 winners.

Pinnacle @ Duxton HDB Flats - One of the Singaporean developments which won the prestigious international awards.

HDB chief executive Cheong Koon Hean said the Pinnacle’s win was proof that good planning and innovation could make public housing projects special and give value for money. ‘It shows that with clever planning, design and innovation, HDB as a master developer has provided a holistic, pleasant and well-designed living environment to benefit our residents and Singaporeans,’ she said.

Mr Raphael Saw, chief operating officer of Far East Hospitality, the hotel arm of property developer Far East Organization, said Quincy Hotel was designed to stand out from its competition. ‘In creating Quincy, we wanted to combine the best of influences from around the world, with lots of character. Hence, the architecture of Quincy departs from the norm with its distinctive monolithic facade,’ he said.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
The Crème la de crème of real estate developments are attracting architectural experts, interior designers and rising a good deal more from our midst. How will this benefit developers and home buyers?

14 Sep

No Housing Oversupply by 2014

Correspondingly, they are also not expecting the residential properties here to dip in prices simply because of the sheer volume of new projects and launches this year and next. So if you’re waiting for an opportunity to nick a cheaper home three to five years down the road, is it wise to wait it out?

The residential market here will not see a correction in 2014 and 2015 even though a sizeable amount of new homes is due to be completed over those two years, argued Jones Lang LaSalle (JLL) in a new white paper.

‘Demand for housing is likely to remain fairly stable and support the injection of new stock over the next few years,’ said JLL’s South-east Asia research head Chua Yang Liang, who presented the paper yesterday.

Clover by the park private condo in Bishan, with views overlooking Bishan Park.

JLL’s view differs from most analysts’ prediction that Singapore is set to face a housing glut from 2013 to 2015. According to JLL, an average of about 50,000 HDB flats and private homes will be ready each year in 2014 and 2015. This is equivalent to 2.5 times the average yearly stock completed since  2001.

Dr Chua said the residential market will not contract as a result o f new stock. Over the past decade, the Singapore residential market has seen hardly any corrections based on stock levels alone, he said. For example, despite the large supply that came in 1998, island-wide property prices were fairly stable.

Dr Chua also noted that the growth in population over the past few years has outpaced the increase in physical housing stock. This suggests that the demand backlog is likely to help keep prices steady.

Yishun Natura new BTO HDB flats launched in July 2011. HDB's latest September launch is now out. Image courtesy of HDB.

On top of this, immigration is unlikely to stop, JLL said. The property firm used two different rates of immigration and population growth to map out the expected state of Singapore’s residential housing market in 2014 and 2015. Under the first scenario, JLL assumes that Singapore’s population grows to just 5.2 million by 2015. In this case, the cumulative housing stock (the total number of homes available for owner-occupation and rent) will still not be able to meet total demand in 2014. But in 2015, supply will be greater than demand, Dr Chua said. Under this scenario, he expects the official property price index to grow by an average of 1.8 per cent per year until 2015.

And in JLL’s more bullish second scenario, Singapore could be home to some 5.5 million people by 2015. In this case, new housing stock may be insufficient in both 2014 and 2015 to meet annual housing demand. As a result, property prices could grow by an average of 7.5 per cent a year from 2011 to 2015, JLL said.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Is it a full circle once more with immigration and housing policies intimately interlinked? What about the existing property cooling measures, should they stay, be reviewed to include stricter rules or loosened to allow the market forces to correct themselves?

9 Sep

Paya Lebar gets a facelift

Paya Lebar, one of Singapore’s eastern districts, has seen better days and now, this beloved town will get a major faelift as part of the Urban Redevelopment Authority’s 2008 Masterplan. Will properties in this area get a price facelift likewise?

They have long been seen as a bit sleepy, seedy and rundown, but Paya Lebar and Geylang are undergoing radical changes to make them a commercial hub – with positive spin-offs for home owners.

Centra Loft, one of the new properties in the Geylang district.

Hotels, shops, parks and other facilities are on the drawing board for the area, as part of the Urban Redevelopment Authority’s 2008 Masterplan. There is about 12ha of land available for development and a potential commercial floor space of more than 5 million sq ft.

The new Paya Lebar Central is poised to be a bustling commercial centre near the MRT station, with a mix of office, retail and hotel developments, and attractive public spaces. Mr Alan Cheong, Savills’ associate director of research and consultancy, said: ‘The Kallang district is perceived to be more genteel; it will have to attract users who may be (more similar in profile) to those of traditional Central Business District commercial space users.’

A key driver of the makeover will come when the Ministry of Manpower opens a Continuing Education and Training campus in Paya Lebar Central in 2013. The eight-storey campus will focus on tourism, hospitality, food and beverage, retail, security and aerospace. ‘By taking the lead, the Government is sending a signal that it is committed to its plan for the area,’ said Ms Chia Siew Chuin, Colliers International’s director of research and advisory.

The East Campus of the Continuing Education and Training Campus set up by the Ministry of Manpower. Image courtesy of the Ministry of Manpower.

Industry players have also been eager to stake a claim in the area. In April, there was a 10-way tussle between some of Singapore’s biggest property players for a 1.5ha commercial site next to Paya Lebar MRT. The tender was clinched by a consortium of property group Low Keng Huat, Guthrie and Sun Venture, which bid $586 million, or $872 per square foot per plot ratio (psf ppr), well above the $550 psf ppr or so predicted by analysts. A 2ha plot at the corner of Sims Avenue and Tanjong Katong Road was recently released for sale as part of the Government Land Sales Programme. It is zoned for office, hotel and commercial use.

Another big field of developers could line up for this site, say market watchers, with an expected top bid of as much as $960 psf ppr. The tender closes on Oct 18. Several existing buildings in the precinct are primed for redevelopment as well. The old Singapura Theatre at the junction of Jalan Turi and Changi Road, once the go-to spot for Hindi and Malay movie fans, is likely be turned into a mixed-use project with apartments and shops. A partnership between Roxy-Pacific Holdings and Macly Capital secured the site last November for $44.9 million.

In Geylang Road, the old Lion City Hotel site and the former Hollywood Theatre next door will become a learning and enrichment hub, with a residential component. The UOL group emerged tops in a six-cornered fight earlier this year, with its bid of $313 million for the site.

Geylang Serai will also be receiving a facelift, to better reflect its distinct cultural identity. The Malay Village will be redeveloped and a new civic centre called Wisma Geylang Serai added. While the focus is on the district’s commercial potential, the redevelopment effects are rubbing off on the area’s residential sector as well.

euHabitat is situated near Paya Lebar. Image by Far East Organization.

Savills said the average price of non-landed property in district 14 has risen to $1,035 psf, 35 per cent up on the $766 psf average in 2008. Far East Organization’s latest project, euHabitat, is close to Paya Lebar, and like other developers, it is counting on the district’s rejuvenation to draw new residents.

‘Eastern districts are traditionally popular with home buyers…Paya Lebar is already an established precinct with good transport links, services and amenities,’ said Mr Chia Boon Kuah, Far East’s chief operating officer for property sales. While the neighbourhood may seem to have a lot going for it, some analysts caution against being over-enthusiastic about the redevelopment plans.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Although it will be some time before the entire area boasts a new look, it may be wise to think of investing in the property you want early as home prices may be different when everything is up and running. Let’s also hope not too much of the nostalgic features which give the area its character will go missing. 

6 Jul

DBSS land sales on hold pending review

The most recent issue regarding housing is without doubt the exorbitant prices of DBSS flats. Now, the entire scheme has been put on hold while the government reviews. Will this be the end of the Design Build and Sell Scheme?

The sale of land for Design, Build and Sell Scheme (DBSS) projects has been put on hold while the Government carries out a review, said National Development Minister Khaw Boon Wan.

 

The latest DBSS offering - Central 8 at Tampines. Image by Sim Lian Group Limited.

But developers which clinched sites last year will launch their projects as scheduled in the next few months, he added, noting that ‘these are old tenders beyond my control’.

Mr Khaw made these points on his official Facebook page over the weekend, in response to a member of the public who called for the scheme to be scrapped in the wake of high asking prices at a Tampines project called Centrale 8.

The developer, Sim Lian Group, initially estimated prices at $880,000 for five-room units, later revising them to $778,000 after a public uproar.

Yesterday, the Ministry of National Development (MND) said that pending the results of the review, the Housing Board would not proceed with the sale of a DBSS site in Bendemeer slated for later this month.

Latest DBSS land sales in Sengkang.

However, the sale of a site in Sengkang – expected to yield 790 units – will still proceed, with a July 20 deadline.

DBSS was rolled out six years ago to give private developers a chance to participate in the public housing market and to introduce more building and design innovations in such housing.

Since then, 13 sites have been awarded and 5,500 flats have been built and sold. DBSS flats make up less than 1 per cent of the total HDB stock.

Analysts say the current review is timely, given the changing housing landscape. Recent flash estimates from HDB revealed that resale flat prices jumped 2.9 per cent from the first quarter of this year, while data from major real-estate firms put the median cash premium paid above a flat’s valuation at about $30,000, an almost 50 per cent increase.

PropNex chief executive Mohamed Ismail noted that when DBSS kicked off in 2005, the market was in the doldrums and there was a surplus of public housing.

‘The scenario now has changed with soaring prices,’ he said, adding that DBSS flats are in demand because most are in mature estates or central locations.

Mr Colin Tan, Chesterton Suntec International’s research and consultancy director, said that if the objectives are to inject variety and engage the private sector and smaller contractors, ‘then perhaps the sites should be in newer towns which are less in demand’.

 

The first DBSS in Yishun - Adora Green. Photo by Guthrie SK Land.

Dennis Wee Group director Dennis Wee said that if a revision of the monthly household income cap is being studied for public housing, then it makes sense to put DBSS on hold.

‘Moreover, eligible flat buyers for these units are a smaller group compared with the main supply,’ he said. Currently, the income ceiling for build-to-order (BTO) flats is up to $8,000, while that for DBSS and executive condominiums is up to $10,000.

Meanwhile, DBSS developers with projects in the pipeline say it is business as usual for them.

The launch of the 488-unit Belvia in Bedok is still on track to take place this year, said a spokesman for CEL Development. ‘We’ve already submitted the necessary documents; the prices have yet to be confirmed and will depend on prevailing market prices then,’ she said.

Mr Lim Yew Soon, managing director of EL Development, which clinched a DBSS plot in Clementi in March, said it would be to its advantage to ‘sell flats as soon as possible to ease cashflow’.

Although he expects the top price to cross $800,000, it would not hit the peaks that sparked the Centrale 8 furore.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Existing DBSS projects will still carry on, but will this put a damper on the sales?

4 Jul

Which HDB policies should be axed?

Which of Singapore’s Housing Board public housing policies should have long been on the chopping board? Is it time to cease the tweaking and get rid of these policies once and for all?

Since National Development Minister Khaw Boon Wan took office in May, a raft of changes to housing policy has been announced. Although not fully implemented yet, these ideas mean the slaughtering of some ‘sacred cows’ that have been the hallmarks of Singapore’s public housing market for the past decade. Straits Times’ Esther Teo, Cheryl Lim and Jessica Cheam examine the changes.

1: From ‘build to order’ to ‘just build’:
Arguably, the most ‘sacred of the cows’ in public housing being slain is the idea that the flats should no longer be ‘built to order’. This is a key shift from the current system where a construction tender for new HDB flats is called only after there are buyers for at least 70 per cent of the units launched.

Now, the HDB will call for a tender as soon as architectural drawings and tender documents are ready, meaning that the HDB will go ahead and build new flats regardless of the response.

Rivervale Arc BTO Flats in Sengkang. Image courtesy of HDB.

National Development Minister Khaw Boon Wan wrote in one of his famous blog posts: ‘I told (HDB) to proceed to build, knowing that the orders will definitely come.’

That statement rolled back one of the most rigid principles the Ministry of National Development (MND) has adhered to for more than a decade.

That principle, of course, resulted from the trauma of dealing with an oversupply of new flats in the 1990s.

Fernvale Foliage BTO flats in Sengkang - part of HDB's latest sales launch. Image courtesy of HDB.

Under the former registration for flats system (RFS), HDB built flats according to the number of applicants on its waiting list. But the agency was caught out when flat demand vanished overnight when the Asian financial crisis struck in 1997.

But viewed as a breathtaking move from the historical context , market watchers say that the change was not surprising given the current political climate.

Recent build-to-order (BTO) launches have all been oversubscribed and the HDB is racing to push out a record 25,000 homes this year. Mr Khaw has also made clear that building ahead-of-order would only be only a temporary measure to clear the demand backlog, and that the HDB will go back to the BTO approach once the situation has stabilize.

ERA Realty key executive Eugene Lim said, however, that if application rates fall, HDB should be able to react quickly enough to rein in the programme, preventing a supply glut.

2: Income ceiling to be raised:
As the property market boomed in recent years and prices rocketed upwards, young couples in the middle-income group felt increasingly squeezed.

Some busted the income ceiling soon after joining the workforce, becoming barred from buying flats from the HDB. Pricier resale flats or private property were also out of their reach.

Have prices of resale HDB flats in popular estates such as Bishan gone up?

It might have taken 17 years and a watershed election to get things moving but the Housing Board’s (HDB) income ceiling will finally be raised in a key policy shift that some experts say, while not unexpected, was long overdue.

In a surprising turnaround, the Government committed to review the ceiling for first-timers during the run-up to the May elections – possibly raising it from $8,000 to $10,000 – despite defending it as relevant as recently as March this year.

A couple’s combined income now has to be below $8,000 a month for them to qualify to buy a new build-to-order (BTO) flat directly from the HDB, which is typically 20 to 30 per cent cheaper than a resale flat.

Industry players say that the review is welcome in the light of the property bull run – with home prices jumping 17.6 per cent last year – but cautioned that the demand for new flats will surge further, worsening the demand backlog that has built up.

This is because the move will likely siphon some demand away from executive condos (ECs) and design, build and sell scheme (DBSS) flats and also from private mass market homes.

This, in turn, means that the Government must continue pushing out new flats at a steady pace to avoid volatility and to ensure that the problem is not aggravated, he added.

OrangeTee’s Mr Tan added: ‘HDB should take a longer-term perspective in its review and consider – what exactly is the role of HDB and public housing. Is it still to cater to the mid-to lower-income and provide basic housing needs?

3: Never-seen-before HDB data released
Mr Khaw’s blog is only about a month old but it is keenly watched by a large audience including home buyers, sellers and industry analysts. Since he started ‘Housing Matters’, as the blog is named, Mr Khaw has made the unprecedented move of releasing HDB data that never used to be so readily available before.

So far, he has released detailed breakdowns of the profile of applicants for new HDB flats and buyers in the HDB resale market.

Mr Khaw has also taken to posting observations about supply numbers and housing policies, and has even given fatherly advice on what factors home buyers should take into account.

Profile of applicants for new HDB flats. Table courtesy of the Ministry of National Development.

This new open style is a radical departure from the past.

Property agency PropNex’s chief executive Mohamed Ismail said that this will give consumers ‘a more accurate picture of the current demand’.

International Property Advisor chief executive Ku Swee Yong noted that with such ‘better quality data’, buyers can make decisions with greater clarity.

But even though the revelations can bring more transparency, they can also cause ‘murkiness’ in the short term because they throw up more questions, warned Mr Ku.

Chesterton’s Mr Tan said that the underlying reason for this new form of communication – also a reflection of Mr Khaw’s consultative approach – is that HDB can now illicit more direct feedback from the public from the minister’s remarks and figures, which the Board can then use to plan its next move.

4: Flats to be built in mature estates:
With their more established infrastructure and well-connected transport links, mature HDB estates have always been hot locations in the property market.

In the past, the HDB has always maintained that building new flats in mature estates would be the exception rather than the norm.

The Straits Times understands that these flats often attract large numbers of applicants, including those who do not need a home urgently. Therefore, the high subscription rates might not accurately reflect the true demand and could alarm the market into thinking there is insufficient supply.

 

Newer estates like Sembawang need time to grow.

There is also a lack of land on which to build new flats – unless older flats are torn down and their residents resettled. More importantly, there is a need to ensure that new estates take off.

 

Industry analysts said the market needs to be aware about the land limitations in these mature estates. Many of them also point out that new towns would eventually grow into mature housing estates.

Mr Ku said: ‘Perhaps all these newer towns need is time to build up reputable schools and better establish their infrastructure and maybe more people might want to move there.’

But Mr Khaw has given the market renewed optimism with his recent announcement that because such flats are popular, HDB will look at building more new flats in mature estates next year.

International Property Advisor chief executive Ku Swee Yong said this could result in home buyers taking more of a wait-and-see approach.

5: DBSS could see big change or even be axed:
The inception of the Design, Build and Sell Scheme (DBSS) in 2005 was labelled by the Government as a ‘bold experiment’ and a signal of a major shift in Singapore’s public housing programme.

Centrale 8 at Tampines. Photo by Sim Lian Group Limited.

The scheme allows private developers to tender for state land, then design, build and sell Housing Board flats. Previously, HDB projects were developed solely by HDB.

DBSS homes have bridged the gap between build-to-order flats, the most basic form of public housing, and the more premium executive condominiums, offering buyers a wider choice of flats and better value for money.

A total of Eight sites have been developed under the DBSS so far, with the latest project being Centrale 8 in Tampines.

After a public outcry over the record $880,000 price tag of five-room flats at the Centrale 8 project. The public is concerned about how private developers are given free reign over the pricing of HDB flats.

The Ministry of National Development is now reviewing the scheme as part of a broader review of housing policy. Property analysts say the review could see drastic changes to the scheme, with some saying it might be better to scrap the scheme altogether.

Others have suggested the HDB establish firmer control over the development of DBSS projects, relegating private developers to the role of contractors instead.

PropNex chief executive Mohamed Ismail said the Centrale 8 debacle exposed the scheme’s key weakness. ‘The scheme is primarily still dealing with public housing but housing that is awarded to private developers. These developers might be listed and might have to answer to shareholders so they are very much profit-oriented,’ he said.

The ministry has said that DBSS units make up a small proportion of public housing with 5,500 DBSS units built and sold to date. Ideally these units should ideally be priced higher than BTO flats but lower than ECs, said analysts, otherwise they could risk destablising the public housing eco-system, despite their small numbers.

 

Will the oversubscription of Centrale 8 in Tampines by 2 times have private developers upping the price of DBSS flats in future? Image by Sim Lian Group Limited.

‘If one developer can launch at that price and still be oversubscribed by two times, other developers could try to go the same route,’ said Mr Nicholas Mak, head of research at SLP International. ‘If enough of them succeed, this new elevated price could become the new benchmark.’

Editor’s Commentary:
Are all five of the aspects mentioned above equal in their impact on the real estate situation? Or should any one take priority?

3 Jul

How much do developers profit from DBSS?

Following the hot debate about the DBSS flats recently, there was information out there that mentioned the high profit margins private developers are raking in from these projects. Is it true? How much do they actually profit?

Three property firms have issued clarifications on a media report claiming that Design, Build and Sell Scheme (DBSS) projects yield ‘high’ gross profit margins for the developer.

The article, which appeared in the Business Times on Thursday, claimed that DBSS developers stand to reap gross profit margins of up to 76 per cent. Five out of a sample of seven DBSS projects yielded a gross profit margin of at least 28 per cent.

The Business Times had compiled these figures by analysing the revenue, land price, maximum gross floor area and estimated construction cost for each project.

However, Sim Lian had bought the land for its Centrale 8 project for $178.1 million, and not $82.2 million as reported. The maximum gross floor area was 682,384.9 sq ft instead of 721,188 sq ft. Based on these figures, the gross return would be 26.5 per cent instead of 75.8 per cent as reported, Sim Lian told the Singapore Exchange on Thursday.

 

The DBSS project, Centrale 8 at Tampines, which has been the centre of recent debates about Singapore's housing & property market. Image by Sim Lian Group Limited.

A Ministry of National Development statement late last night said that even the reduced estimate was wrong as the article had failed to take into account key cost components such as financing, marketing and administrative costs.

‘These are significant costs and when included, would have further lowered the profit margin for all the DBSS projects listed in the article.’

MND added: ‘It is unacceptable that BT had not exercised due diligence and professional journalism, which resulted in an erroneous and highly misleading report.’

Developers Hoi Hup Group and Sunway Group yesterday said that by focusing only on gross profit margins, the report did not paint an accurate picture of the profitability of DBSS projects developed by the Hoi Hup Sunway consortium.

The two firms have collaborated on two DBSS projects, City View @ Boon Keng and The Peak @ Toa Payoh.

DBSS City View@Boon Keng. Image by Hoi Hup Realty.

The BT article estimated that Hoi Hup Sunway could have earned a gross profit margin of 57.4 per cent from The Peak, and 33.3 per cent from City View.

‘Gross profit margins do not take into account essential costs incurred by us. They include differential premium, financing costs, stamp duty, GST and marketing expenses,’ the developers said.

‘Such essential costs for DBSS projects form a very significant chunk of total costs as compared with that for private mass market condominium projects, and therefore exert a large negative impact on profitability.’

The profitability of their projects should thus be measured by their net profit margins, the firms added, which range from 15 per cent to 18 per cent.

‘As a developer, we are also exposed to a whole host of business risks over a fairly long period of about four years. During this period, property prices do not always go up and bank interest rates do not always stay down.’

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
The prices set for the DBSS flats are initial, but the demands and response from the public hasn’t waned because of the high price tag. Would this mean even higher prices for upcoming DBSS projects?

2 Jul

Resale HDB flat prices continue to rise

It seems like the announcements by HDB that more new HDB flats will be built, coupled with the high prices of private homes, has affected resale HDB flat supply. More HDB owners are  unable to sell their HDB flats as private property are now further from their grasp or new buyers are holding out in hope of buying a new flat.

Resale flat prices have risen partly because of a falling supply, experts told The Straits Times yesterday.

The prices jumped by 2.9 per cent over the past three months – compared with an increase of only 1.6 per cent in the quarter before, Housing Board figures showed.

Analysts put this down to a significant drop in the number of resale flats on the market.

Are resale flats in areas such as Marine Parade harder to come by?

They gave several reasons for the supply crunch. First, some HDB flat owners are hanging on to their units because rising private property prices mean it is too expensive for them to upgrade.

ERA Realty’s key executive officer Eugene Lim said: ‘Many HDB upgraders have found private property prices, especially those of mass market condos, out of reach, so they postpone upgrading plans.’

Another possible factor behind the supply crunch is the rule issued in August last year that requires those buying HDB units to sell their private property within six months.

Mr Lim said the rule could deter those who have upgraded to a private apartment from putting their HDB flat on the market.

This is because they would be unable to buy another HDB flat without getting rid of their private apartment. ‘Were upgraders to want to buy a flat again, they would have to sell off their private property,’ he said.

Are prices at private condos such as Lagoon View in Marine Parade beyond reach of HDB upgraders?

Those in this situation who decide to sell their private apartment to get an HDB flat will subsequently have to wait five years before they are eligible to buy another private property because of the increase in the minimum occupancy period (MOP) for HDB flats in August last year.

‘HDB dwellers who are able to upgrade after the MOP is up might choose to sublet their whole units instead and collect rent to defray other costs,’ said Mr Lim.

SLP International’s head of research Nicholas Mak said those with existing home loans could be being put off upgrading because of a change in the law in January which means they cannot borrow more than 60 per cent of the value of the property they want to buy.

‘Most flat owners with existing mortgages are unable to cough up the 40 per cent cash, even more than that when legal fees and stamp duties are included,’ he said. ‘This means they would have to sell before getting another loan and have nowhere to stay in between.’

PropNex chief executive Mohamed Ismail said high demand could be another factor behind the rising flat prices.

Buyers who held back to assess the impact of cooling measures brought in earlier this year could now be coming back into the resale market. ‘However, there are still many HDB owners who are reluctant to sell, resulting in a supply crunch,’ he said.

Mr Mak added that he is seeing fewer HDB upgraders based on his data gathered from government figures.

How do resale HDB flats, new BTO flats and older private property prices compare to those of new mass market condos? 38 i Suites in Ipoh Lane.

Mr Lim said because of the limited supply, many transactions are being negotiated not on the flat’s actual price, but on its cash-over-valuation (COV) – the amount the buyer is willing to pay over and above the official value.

Fresh data from ERA Realty puts the median COV at $37,000 for last month, while PropNex’s median COV last quarter stands at $32,000, up from $22,000 in the previous quarter.

According to an earlier report sourced from real estate firms, median COVs rose by almost 50 per cent to about $30,000 between April and last month.

Calling the current trend of COVs unsustainable, Mr Ismail said the figure will likely hit $35,000 for this quarter, before settling to $32,000 by the year end. It will also dip further should the Government continue to provide new public housing at the current brisk clip.

Mr Ismail also estimates the HDB resale price index to increase by up to 9 per cent  for the full year.

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Has the property market reached a stalemate with sellers and buyers both holding out? How will the situation change when the new BTO flats are ready or will the tables turn long before that?

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