Issue 116

Copyright 2011-2013 www.Propwise.sg. All Rights Reserved.

CONTENTS
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When a Property Billionaire Turns Bearish
Singapore Property News This Week Resale Property Transactions (July 24 July 26)

FROM THE

EDITOR

Welcome to the 116th edition of the Singapore Property Weekly.

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Mr. Propwise

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SINGAPORE PROPERTY WEEKLY Issue 116

When a Property Billionaire Turns Bearish

By Mr. Propwise It is a rare occasion when a billionaire property developer talks the market down. Kwek Leng Beng, Chairman of City Developments Limited (CDL), a leading real estate developer in Singapore, did just that recently when he called buying land in Singapore at todays prices suicidal and predicated an up to 5 percent fall in property prices.

Buying land in Singapore at current prices suicidal

Not one to mince words, he called buying land from Government Land Sales suicidal, especially given the requirement that the
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SINGAPORE PROPERTY WEEKLY Issue 116 units must be sold within two years of completion. His point was that it didnt make sense to buy land at todays high prices, and then give up the flexibility of being able to time the sale of the units, especially if the deadline to sell coincides with a downturn in the market. Developers, would in effect have to buy high and sell low, and potentially face reduced margins or even losses. Kwek: Up to 5 percent fall in prices over the next year And just to be clear, Kwekis looking for a correction in the private residential property market of up to 5 percent over the next year, assuming the governments property cooling measures remain. He sees a combination of a fragile and unpredictable global economy and the combined impact of the multiple rounds of property cooling measures creating stronger headwinds for the market (and for property developers). Personally, I think it is quite strange for Kwek to be talking down the market when CDL is still actively marketing units of its projects. But a more cynical reading would be that he is talking down the market in a bid to depress land prices so that CDL can buy landbank at more reasonable prices.
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Land prices have shot up in recent months as developers continue to bid them up despite the seven rounds of cooling measures and the recent Monetary Authority of Singapore (MAS) guidelines on the Total Debt Servicing Ratio. Based on CBREs analysis of government land sites that have been recently sold, the majority of suburban projects are expected to launch units for sale at above $1,200 psf.

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SINGAPORE PROPERTY WEEKLY Issue 116 After all, CDLs projects such as the 616-unit Jewel@Buangkok, 912-unit DNest and 868unit Bartley Ridge are mostly sold already. Signs that property price growth is already moderating Despite the acceleration in the quarter-onquarter growth of the URA Property Price Index in second quarter 2013 to one percent versus the 0.6 percent increase in the previous quarter, more timely (albeit unreliable) indicators suggest that price growth is already moderating as we enter the second half of 2013. 0.8 percent rise in June. Analysts blamed the MAS Total Debt Servicing Ratio framework for the slowdown (which limits borrowers to a maximum 60 percent total monthly debt repayment versus their gross monthly income), which might well be the case, but sentiment in general has already been hurt since the uncertainty created by Fed Chairman Bernankes talk about tapering, which have markets pricing in a rise in interest rates from as soon as 2014. On the public housing front, weve also seen the Cash Over Valuation (COV) of resale HDB flats fall to a more than two year low to a median of $20,000, based on figures from the SRX. A weakening public housing market will become an overhang for the private property market.

According to the Singapore Real Estate Exchanges (SRX) figures, island wide private non-landed resale property prices were up just 0.1 percent in July, a slowdown from the

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SINGAPORE PROPERTY WEEKLY Issue 116 Overleveraged buyers meet a supply avalanche and weakening rental market Orange Tee expects a total of 33,555 units to hit the market in 2016, versus the 15,503 units available this year. This number includes both units from newly launched projects and those that have exited the fouryear Seller Stamp Duty (SSD) period. The raised Seller Stamp Duty imposed rates of 16% for properties sold within the first year of purchase from January 14 2011, which would then gradually fade to 4% in Year Four. The first batch of these properties that can be sold without SSD will be hitting the market from 2015. The SSD has led to a reduction in saleable units in the market since 2011 as buyers have held back from making their units available for sale in the market to avoid incurring SSD, and thus has likely had the potential unintended consequence of keeping property prices high as buyers faced a reduced supply in the resale market, and turned to the primary market to buy up higher-priced new units instead. Furthermore, we are likely entering a period of weakening rental demand. Over the past few years, in the backdrop of a strong economy and growing foreign workforce, rental demand averaged around 42,000 units. Going forward, given that Singapore is looking at a slowing rate of GDP and foreign workforce growth, the growth in rental demand is likely to be lower than the growth of rental supply (from the large increase in completed units), leading to lower rental yields and high vacancy rates.

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SINGAPORE PROPERTY WEEKLY Issue 116 Finally, the MAS has recently expressed concern that Singaporean households are overleveraged on property loans, having been tempted by low interest rates and extended loan tenures. Given most mortgage loans in Singapore are floating rate packages, the MAS has estimated that a 3 percent rise in mortgage rates would put 10 to 15 percent of borrowers at risk. So going into 2014 and beyond, we have a combination of a significant segment of overleveraged buyers facing rising mortgage rates and an avalanche of supply in a weakening rental market. Sounds like a recipe for a more than 5 percent correction in the market, if you ask me.

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SINGAPORE PROPERTY WEEKLY Issue 116

Singapore Property This Week

Residential
Allgreen Properties Ltd to launch River Valley Condo Allgreen Properties Ltd is launching River Valley Residences, the 999-year project with 248 units in District 10 at River Valley Road, at the end of August. The project includes one-bedroom to four-bedroom units and penthouses, with prices likely to be between $2,100 psf and $2,300 psf. Marketing agent DTZ said 85 percent of the available units will be compact units below 850 sq ft. Onebedroom units start from 419 sq ft; while two, three and four-bedroom units are between 678 sq ft and 1,270 sq ft. Penthouses are
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between 796 sq ft and 1,539 sq ft. The variety of apartment types and a comprehensive set of facilities provides RV Residences with the versatility to reach out to a broad market, from singles looking for a compact living space, to nuclear and extended families. (Source: Business Times) GCB at Chancery Lane on sale for $39m A one-storey freehold Good Class Bungalow (GCB) at Chancery Lane is on the market for around $39 million, or about $1,630 psf based on its land area of 23,932 square feet, subject to offers. This shows a sign of more interest in the area with significant sales in recent

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SINGAPORE PROPERTY WEEKLY Issue 116 months. The house, which is located within the Bukit Tunggal GCB enclave near Novena and Newton MRT stations, is an old house built in the 1980s and hence is expected to be redeveloped. The site is also within a short distance of Mt Pleasant MRT station which is part of the Thomson Line, due in 2021. The vicinitys schools include Anglo-Chinese Primary School, St Joseph's Institution, and Singapore Chinese Girls' School. (Source: Business Times) Sharp drop in approvals for PRs to buy landed homes in Singapore The number of approvals granted to permanent residents to buy landed homes on mainland Singapore has dropped greatly, following the authorities tighter eligibility criteria in 2011 to ensure scarce properties remain the primary preserve of Singapore citizens. According to the Singapore Land Authority, the number of such approvals decreased from 145 in 2010 to 117 in 2011 to just 31 last year (the first full year after the tightening). In the first half of 2013, only six applications were accepted. About two-thirds of approved applicants are married PR couples with children who are also PRs. Where these couples have sons of National Service-eligibility age, the sons are serving or have served NS. In October 2011, Law Minister K Shanmugam had indicated that the number of approvals given to PRs to buy landed homes would fall by more than half to no more than 50 per year. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 116 Home prices could fall with oversupply expected According to Kwek Leng Beng, executive chairman of City Developments, the Singapore residential sector could expect some oversupply from next year unless the global and domestic economies rebound strongly and curbs on foreign buyers for private residential property are reviewed. It was reported that private home prices could drop 5 per cent from now till next year if all the cooling measures remain intact. Mr Kwek said he did not believe that the market would collapse, but it could go down. He also said the government may possibly remove some of the cooling measures by 2015, because 90.2 percent of Singaporeans own property and it is not their intention to crash the market. (Source: Business Times) Academic paper supports housing curbs for PRs, foreigners

An academic paper of authors from the Singapore Management University (SMU) and Savills Singapore supports the curbs on housing ownership and investments by permanent residents (PRs) and foreigners to manage demand in the property market. The paper also includes suggestions on how some of these policy tools might be expanded for better tamping down demand and runaway property prices. For example, making it mandatory for foreigners to seek permission to purchase housing and the tweaking of existing property tax structures could be effective in discouraging foreign and multiple-unit residential ownership.
(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 116

Non-Landed Residential Resale Property Transactions for the Week of Jul 24 Jul 26
Postal District 2 3 4 5 5 8 9 9 10 10 12 14 15 15 15 15 17 18 19 23 25 Project Name ICON THE METROPOLITAN CONDOMINIUM THE COAST AT SENTOSA COVE PARC IMPERIAL THE INFINITI KERRISDALE THE TRILLIUM 8 @ MOUNT SOPHIA 8 NAPIER ORANGE GROVE RESIDENCES OPAL SUITES CRYSTAL LODGE ONE AMBER COSTA RHU SANCTUARY GREEN KATONG VILLE FERRARIA PARK CONDOMINIUM LIVIA THE QUARTZ REGENT HEIGHTS ROSEWOOD Area Transacted Price Tenure (sqft) Price ($) ($ psf) 581 1,180,000 2,030 99 1,066 1,700,000 1,595 99 3,100 4,500,000 1,452 99 420 720,000 1,715 FH 1,066 1,161,940 1,090 FH 1,270 1,285,000 1,012 99 2,217 4,657,800 2,101 FH 1,539 2,380,000 1,546 103 4,112 12,368,888 3,008 FH 2,002 3,780,000 1,888 FH 452 592,000 1,309 FH 1,141 950,000 833 FH 570 1,020,000 1,788 FH 1,647 2,060,000 1,251 99 1,399 1,610,000 1,151 99 1,184 1,215,000 1,026 FH 1,711 1,260,000 736 FH 1,539 1,400,000 910 99 1,076 1,150,000 1,068 99 1,023 890,000 870 99 1,012 880,000 870 99

NOTE: This data only covers non-landed residential resale property transactions with caveats lodged with the Singapore Land Authority. Typically, caveats are lodged at least 2-3 weeks after a purchaser signs an OTP, hence the lagged nature of the data. Page | 10

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