Authorities not ready to ease property curbs

The property industry has been hoping for a respite from the several rounds of property cooling measures rolled out over this year and the last. But the Monetary Authority of Singapore (MAS) managing director, Ravi Menon, recently said that even though home prices has ease somewhat and has leveled the playing field slightly, there are still risk factors which prevents them to being able to release their hold on the reins.

Home prices have risen an astounding 60 per cent from 2009 and over the past year, it has only fallen 3.3 per cent. Though it is quite impossible for home prices to fall to the level before the 2009 boom, they are hoping nevertheless to keep the markets stable before easing the restrictions.

Singapore real estateThe measure which affected the market the most could be the mortgage loan curb. The TDSR (total debt servicing ratio) framework has put many buyers hoping for a home loan out of reach of their desired property. This has indirectly caused developers to shake a little on their footing and prices of new properties dropped slightly over the last 3 quarters. But property prices are still relatively high and the fear is that any relaxation of the current rulings might cause an upward spiral process which might be more detrimental in the long run.

Battling inflation has been one of the key issues for the country’s rulers and with housing becoming an increasingly crucial factor of nation development, the property market here would be largely linked to policy-making.

Smaller apartments gaining popularity once again

Just a couple of years ago, there were debates about whether homes were becoming too small for comfort as the 500 sq ft studio apartments or shoebox units took the market by storm. Some shunned small units, preferring instead to go for larger ones with a lower psf price.

But now as loan limits are truly showing their might, buyers are favoring smaller apartments once again due to their lower quantum prices and the ease of rental. Though not all are flocking to shoebox units, after all, young families do need a reasonable amount of space, the average home size has dropped to 947 sq ft from June last year. And for HDB upgraders, their chances to move onto the private property market might have become slimmer, especially if size is a major consideration. The average 4-room HDB flat is around 969 sq ft.

CIty GateOne- and two-bedders have increasingly become more popular with buyers as they are usually within their budget and investors find them easier to rent out. URA figures in fact also showed that new residential properties have also featured smaller units, with the average size being 753 sq ft. But this hardly comes as a surprise as home size has been shrinking since 2009.

The other popular property  type is the dual-key apartment which provides the atmosphere of having two separate living spaces within the same home. Some of these units share the same entrance but separate facilities such as kitchens and toilets, while others share the same facilities but have separate entrances, providing privacy for bigger families and offering more rental options.

As we progress into the second half of the year and the market evolves in reaction to buyers demand and supply of land, will developers be quick to re-strategize and cater to the majority?

Luxury apartments – Leased instead of Sold?

As the property market lull continues, developers of luxury properties are finding the going all the tougher. As the number of unsold units loom large in the horizon, some property developers have considered turning their private condominiums into serviced apartments instead.

iLiv@Grange

iLiv@Grange

The only other options are for those with deeper pockets to hold off their launches till the market turns around, or to offer steep discounts. Ardmore Residences is just one of the possible few luxury residential developments whose launch has been held off. Wealthy investors do not seem to be keen on hopping on the market for now, probably in lieu of the tightening measures placed around the housing and finance sectors. Since its completion last year, developers have chosen instead to lease out units at the Ardmore Residences for approximately $25, 000 per month. The Sculptura Ardmore condominium nearby has also not been launched.

Sculptura ArdmorePhoto credit: SC Global.

Although some marketing has been done for the iLiv @ Grange apartments in Grange road, it has not been officially launched as well. At its unveiling in 2010, developers were targeting selling prices of $3, 000 psf. But in the current market, that figure might be unrealistic. There has been talk of the developer, Heeton Holdings, possibly selling the units in bulk to a single buyer at $2, 200 to $2, 300 psf. Developers generally have a window of 2 years after completion of the project to sell off the units. Remaining units are not allowed to be rented out. Since Singapore may require more hotels and short-term accommodation, it may be a new venture should these luxury residential projects near the city centre to be converted into serviced apartments.

City fringe districts going strong

In the current softening property market, where private home sales and prices are on the downhill slide, it takes a good location to help a new launch stand its pricing ground.

The Thomson and Bishan area saw 3 such promising launches – Thomson Three, Three 11 and Sky Vue. Throw their proximity to current and future mrt stations, good schools, heartland shopping malls and other eateries into the mix, and it’s a recipe for success.

Thomson ThreeAll 65 units at Three 11 along Upper Thomson Road has been sold, whilst Thomson Three on Bright Hill Drive has already seen a 87 per cent take-up rate of its 445 units. Prices at the former were around $1,368 psf and $1, 308 psf at the latter.

Closer to Bishan, prices were even more positive, with units at the Sky Vue going at a median of $1, 465 psf. Prices have however dipped slightly. At its launch last September, prices were higher at $1, 500 psf. Closer to the Bishan MRT station, the massive 505-unit development, Sky Habitat, relaunched with encouraging sales figures last week. Prices were quite a bit lower than its launch price of $1, 700 psf. Discounts of 10 to 15 per cent were not rare, with units going at $1, 279 to $1, 590 psf. Perhaps these prices were more realistic and are sitting well with buyers still looking for a potential investment buy.

Sky Vue2In short, private home sales has been affected across the island, but there are still buyers out there looking for property worth their buck. And if the price is right, they might just bite.

New launches expected but at staggered timings

The market is somewhat dense with many units unable to leave the sales shelves. But the buying crowd is expecting new launches to whet their appetite. And perhaps this is the indirect way to help move existing properties as new properties provide grounds for comparison. A few more choices may just help the buyer make up his mind.

Though, developers are also equally wary about providing too many choices. This may tilt the market the way of the buyer and sellers may find themselves cannibalising on one another’s properties. Instead, the consumer can look forward to a steady flow of new property launches over the second quarter, but at staggered timings.

The Sorrento condominium

The Sorrento condominium

In Q1, only 7 new properties were launched. Q2 may see as many as 11 new launches. Starting the ball rolling is The Sorrento. Sales began over the weekend at $1, 380 to $1, 600 psf. It’s situated on West Coast road and has an offering of 131 units of one- to three-bedders.

And if you’re looking for something to do on 1 May, the labour day holidays. You can visit the showflats of Commonwealth Towers. This massive 845-unit project is developed by Hong Leong Holdings. Response at its preview last Sunday was indicative of its potential, drawing a crowd of 1, 500. Selling prices are expected to be around $1, 600 to $1, 800 psf.

Commonwealth TowersMost of the other projects expected to enter the market are in the city or at the city fringe districts. They include The Crest, Highline Residences, Amber Skye, Kallang Riverside, Pollen & Bleu, Marina One, Waterfront@Faber, Bijou and Coco Palms. Industry analysts are already expecting this second quarter to fare much better than the last, with 500 to 800 new private home sales.

Jurong private properties in demand

For those who are not used to living in the west, the lure may not be strong. Not yet perhaps. But as it changes from the industrial, remote ‘wild west’ into a well-greased regional commercial and education hub, many have seemed to change their minds.

LakevilleThe 695-unit Lakeville at Jurong West Street 41 has sold so well last weekend that the developers, MCL Land had to release 50 additional units to its original release of 150 units. Most buyers were Singaporeans, and they purchased mainly two- and three-bedders. A total of 180 units were sold thus far, at an average of $1, 300 psf. J Gateway, which was the last westside property launched since Lakeville, sold at an average of $1, 480 psf.

Despite constant reminders that the property market may be on a downturn, the response has buoyed the mood of the real estate market. This could however be due to the lack of private properties, especially new ones, in this neck of the woods. New amenities such as the Ng Teng Fong General Hospital and Jurong Community Hospital, and new commercial properties promises of more jobs, and better services, which could drive up rents of both HDB and private properties in the area.

Commonwealth TowersSlightly more inland, Commonwealth Towers, which will be linked to Queenstown MRT station, could be the next property to watch. This 99-year leasehold property will likely be launched in May, with mostly one- and two-bedders in its massive 895-unit development. If nearby condominium prices are anything to go by, buyers could be looking at prices of between $1, 300 to $1, 700 psf.

Investment money take overseas trips

Overseas properties are looking particularly attractive to investors from within Asia. Higher yields are one of the draw factors.

Areas which are pulling in crowds are the US and Europe. Commercial buildings such as offices, development sites as well as hotels are hot on the property investors’ lists. As Asia, the Americas and Europe go through different stages of the property cycle, higher returns are evident outside of Asia especially with the currency within Asia strengthening and low interest rates. The number of overseas investment opportunities are also on the increase, making the overseas market more competitive.

Oxley Royal Wharf

Photo credit: Oxley Holdings Limited.

In terms of residential developments, Oxley Holding‘s first London project is garnering a great deal of investor interest. Most of the studio apartments going at £235, 000 (S$495,000) have been sold at the 811-unit development, Royal WharfThe Royal Wharf project, situated near the Thames Barrier Park, will consist of 3, 385 homes, 10,000 residents who will be serviced by schools, shops, offices and leisure amenities. It is also near a future transport line, the Crossrail line, which will provide timely links to Heathrow airport and Bond Street.

Both the London and Singapore launches welcomed a big response. Mr Richard Oakes, the sales and marketing director of the project manager Ballymore says that despite Londoners’ usual lack of enthusiasm for property launches, a long line of 300 had queued for this particular project.

Authorities ease up on home refinancing rules

When the Monetary Authority of Singapore (MAS) implemented the Total Debt Servicing Ratio (TDSR) framework last June, it threw a rock in the home loan and mortgage system and made it difficult for many to get a home loan. For some who have already purchase properties prior to this new ruling, it made re-financing difficult and impossible.

The authorities have realised that the property market dynamics have been thrown rather out of whack ever since the new rules kicked in, and to prevent a rapid downward spiral of property prices, they have now eased up on the mortgage rules. More home owners are now exempted from the noose of the rules, but only those who have purchased prior to June 2013, and only for properties they are currently living in.

money imageThe main purpose behind this exception is to help households for whom refinancing may be the only way to keep the total debt ratio down. Instead of having to be forced to sell the roof over their heads, no matter how expensive the roof may be, they will now be able to find a little wriggle room. According to property analysts, this move will not affect new buyers, thus home prices and sales transactions may still be lower than before. Buying demand has been decreasing for a couple of quarters now.

Home prices are expected to dip 5 per cent this year, and with the looking oversupply starting in 2015, an even further drop of 5 to 15 per cent next year. In an industry that is all about timing, smart buyers will begin keeping a keen eye on what to buy and what not to  buy.