Re-zoning Geylang – Fewer residential properties

At first instance, this proposal may not sound promising, but it may actually bring good news for owners of existing condominiums in Geylang. The Urban Redevelopment Authority (URA) has recently announced a re-zoning of residential areas in Geylang for commercial use.

Rezi3TwoWhile this means that there may not be as many private residential properties in the area, the value of those which have already been built may appreciate as offices and businesses eventually move into the area. This proposal by the URA could be seen as mainly to facilitate the balancing of residential and commercial activities in the district. The over-building of residential properties in the red-light district could have a reverse effect and introducing more commercial properties and maintaining a suitable amount of residential properties in the area may in turn increase the rental yields and value of properties in its proximity.

With Geylang’s prime location putting it close to the city centre, Aljunied MRT station and the Singapore Sports Hub, rental yields here are already 1.5 per cent higher than those in other districts. With the area mostly made up of smaller land parcels, the likely tenants would be boutique developers and small businesses, with the possibilities of niche eateries and shops.

Some residents have however raised concerns over this re-zoning move as more commercial spaces here may mean an increase in the illegal and disruptive activities normally associated with this infamous district. What are the pros and cons of purchasing property in Geylang and does one outweigh the other?

New condominiums not spared from 2014’s lull

The stream of new homes entering the market has been continuous and more will be coming our way in 2015, with up to 2,500 units within the next two months. Larger new residential projects ready for occupation soon include the Sims Urban Oasis and Northpark residences.

Sims Urban OasisThis sudden increase in supply may not necessary affect sales prices, but the number of transactions may drop as buyers hold out in wait of what the rest of the year brings. In the last month of 2014, sales were lacklustre, with the best seller being Lakeville condominium with 16 units sold. This is followed by 13 units sold at Rivertree Residences and 12 at The Panorama. All are suburban mass-market private homes. Even the executive condominium market slacked a little with only 128 units sold at the 747-unit The Terrace in Punggol.

But the later half of 2015 may hold some promise as property prices may have corrected by more than 10 per cent and property cooling measures may then be lifted. Sellers may find themselves having to lower prices as competition heats up and buyers wait out as long as they can. It is just a matter of waiting for that sweet spot to hit the markets.

Rental market ended weaker in 2014

Compared to a year ago, the private residential rental market was on a slight downwards slope since last February, with the luxury property market taking the biggest hit with a drop of 1.2 per cent last month.

Parc Rosewood in Woodlands.

Parc Rosewood in Woodlands.

As most expatriates now have a reduced housing budget, properties which are asking for more than $10,000 in monthly rents may struggle to secure tenants quickly. And as the rental prices of properties in the city centre dips and closes in on the rental prices of city fringe homes, the latter may also be facing some fierce competition.

While suburban homes holding up better with their comparatively less expensive rents, the surge of 25,000 new homes entering the market by end 2015 may change the tune of things to come. Private residential condominiums which may be ripe for the rental pickings soon include Parc Rosewood in Woodlands and Eight Courtyards in Yishun.

When many units within the same property enter the market at the same time, property experts are expecting a price war which may benefit the tenants but not necessarily the landlords. As the private property market prepares itself for the upcoming increase in supply, one begins to wonder if the HDB market will benefit from this or will the rental prices there be similarly affected?

Private suburban properties faring better

 

For the resale private property market, condominiums in the suburbs seem to be faring better than those in the city fringe and city centre. While prices of city fringe and city centre apartments fell 1.2 and 1.1 per cent respectively last month, suburban resale properties rose 0.5 per cent. The sales volume also remained the same as November despite the expected lull due to the festive season.
Tre ResidencesBuyers are sharpening their skills at spotting good deals, and are going for units which will benefit them the most in terms of location and future value appreciation. Some buyers have even managed to secure purchases at $10,000 less than the market value of earlier transactions in the same development.

What are buyers looking for now? With the property cooling measures in place, the final selling price tag, including taxes and duties, makes or breaks the deal. Buyers are looking for lower price quantums, good locations and potential for future development in the district. Most HDB upgraders are also most likely to search for these suburban homes to stay close to their previous homes.

As 2015 moves along, and more homes become ready for occupation, will the interest for resale properties in the suburbs continue to burn brightly? Or will the spark wane and the market focus shift to other sectors?

Developers offer more direct discounts

If you’re looking for a good property deal, you could be hitting the market at the right time as developers are now preferring to offer direct discounts instead of indirect ones such as renovation and furniture vouchers and the likes. And the buyers seem to prefer that too.

In a bid to attract buyers back into the property market, developers have realised that with the prevailing property cooling measures, especially the tighter loan limits, it’s the final number that counts. Defraying the total costs through offers of furniture and renovation may no longer seem as attractive to buyers who are now keeping a keen eye on the total quantum prices.

HomeReno1Home buyers are more discerning and aware of how these indirect discounts affect the final sale price and more importantly, the total loan quantum they are able to receive from the banks. Though the rule which states that all discounts, even indirect ones such as renovation discounts and furniture vouchers, have to be declared when applying for a loan were in place since 2002, the banks have only recently been stricter about their checks. What this means for the buyer could be a lesser loan quantum as the amount give in indirect discounts are taken off from the final sale price of the unit, before consideration is given on how much the bank is able to loan.

Now, what developers are doing instead of offering renovation and furniture discounts, are to refurbish unsold units and selling them at a lower price than if the buyer were to purchase the furnishings themselves. Thus, the buyer gets a fully renovated unit at a slightly higher price than an unfurnished one, but at a lower price than if they were to renovate and furnish it themselves. This may be more cost-effective for buyers who are looking to rent out the unit as it saves them money and time.

City fringe homes find their footing

Filling in the gap between luxury and mass-market homes are the city fringe properties. But sitting in this position means being more exposed to market forces such as a lull in the luxury property market, which may be a good thing as buyers may be looking at cheaper options. But a wider and possibly cheaper pool of options pop up in the suburbs in the form of mass-market suburban homes, this might be the first sector to suffer a backlash.

Sky Habitat condominium in Bishan.

Sky Habitat condominium in Bishan.

There has been a recent drop in city fringe home prices as developers are offering discounts to help boost sales. As the supply of these home increase, about 2,411 new units were launched in 2014, so will the urgency to move units. City fringe homes registered a 5.3 per cent price drop, as compared to 4.3 per cent in the luxury homes market and 2.2 per cent in suburban private homes.

Projects where prices were lowered include The Panorama in Ang Mo Kio, Sky Habitat in Bishan and D’Leedon on Farrer road. Though luxury homes hogged the headlines last year with their decline in sales volume, property analysts are confident that the price decline will be minimal as most owners of city-centre homes will have the holding power to hang on to their properties.

Home prices expected to decline further in 2015

This year, the rate of decline for private home prices is expected to exceed that of 2014. Last year’s drop was estimated at 4 per cent whereas this year, industry analysts project an 8 per cent drop. This new estimate for the private property sector will put it on par with resale HDB flats. In 2014, the public housing market reflected a 6 per cent drop in prices.

Some market factors from last year are here to stay:
1) Tightened credit market
2) Stricter immigration policies
3) Weakening demand
4) Increasing supply of new homes
5) Higher stamp duties

The Luxurie - near Sengkang MRT/LRT Stations.

The Luxurie – near Sengkang MRT/LRT Stations.

And while interest rates were at a low at a point in time last year, they are expected to rise this year, which makes for an even less favourable environment for a thriving buy-and-sell of residential properties in particular.

This may put a fair bit of pressure on home sellers, who may find themselves having to lower prices in order to make a sale. With developers competing for the same buyers with offers of discounts, rebates and other enticing options, resale private properties might struggle to stand out.

Landlords may also find that it’s a tenants market as an onslaught of homes become ready for occupation this year. The most recent residential projects to come into the market this year include the 622-unit The Luxurie and 590-unit The Riversound Residences in Sengkang.

Coupled with a number of new launches planned for this year, and fewer foreign buyers taking the bite, the only properties which may remain popular are mass-market homes in locations close to MRT stations, schools and shopping malls.

Singapore home prices – The slow decline

Prices of residential properties, both private and public, may see a slow but continued decline in 2015. This year, the resale non-landed property market was ruled by an undulating price chart. After a recent rise in prices in October, prices once again fell in November. Property experts have found it impossible to predict future trends from such irregular movements and can only report the figures as they are.

Photo by ThinkStock.

Photo by ThinkStock.

In October for example, despite an increase in the number of mortgage sales and non-performing loans, prices of resale homes picked up nevertheless. Most of the information comes from URA’s quarterly statistics of private property transactions with caveats lodged. This however may not truly reflect home sales volume and prices, as they exclude factors such as developers’ discounts and rebates. But URA has mentioned disclosing prices of individual units in the near future. And perhaps a more frequent report would be helpful to the industry.

On the HDB resale front, the Minister for National Development, Mr. Khaw Boon Wan, has said that he hoped to see “single digit” fall in prices in 2015, indicating a gentle and gradual decline similar to that in 2014. The government is likely to tread lightly in this area as a drastic fall in home prices will bring about dissent from current home owners and will possibly affect their position in the next election. Buyers can expect a fall of about 8 per cent next year.