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27 June 2012

27th June, Wednesday




OCBC unit sees 10-20% fall in high-end home prices

Source: Business Times

Even as the gap between high-end and mass market residential prices hits a nine-year low, high-end prices are forecast to fall between 10 and 20 per cent in FY12.

According to the latest report by a brokerage, while the historic average price premium between the high-end and mass-market segment (over 1Q 2004 to 1Q 2012) is 98 per cent on a psf basis, the price premium has shrunk to 82 per cent in 1Q 2012.

That said, they forecast that prices would fall a further 10 and 20 per cent in FY12 following the ABSD measures - of which one key consideration was an additional 10 per cent stamp duty on property purchases made by foreigners and corporate entities - implemented in December.

Conversely, low interest rates and increased liquidity in the system is likely to sustain demand for shoebox and mass market units.

Coupled with the ample liquidity in the banking system, this would underpin sustained demand for shoebox and mass-market units, and unhinge prices from historical norms of affordability based on domestic wage levels and rental yields.

Shoebox units can also expect to continue enjoying a premium over non-shoebox units over FY2012 and FY2013. However, this premium could diminish or even reverse after 2015, particularly for shoebox units in the outside central region (OCR).

According to OIR estimates, the number of OCR shoebox units could grow by more than 450 per cent by 2015.

In the event of this supply glut, OCR shoebox rents could fall 10-20 per cent, assuming that rents would fall to the level of a "reasonable substitute" - a HDB flat in a similar location with around 50 per cent more space.


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Office capital values seen easing 5% this year

Source: Business Times

Office capital values could fall 5 per cent for the whole of 2012, according to a property consultancy’s latest quarterly research report.

The average capital values of Grade A office space in the Raffles Place/New Downtown micro-market softened by a marginal 0.5 per cent - from $2,459 psf in 1Q to $2,447 psf by end June - following pressure from the third consecutive quarter (since 4Q 2011) of easing office rents.

There was sustained interest, however, in the sales market, which was buoyed by low interest rates and continued availability of new strata supply.

On the rental front, rents of islandwide Grade A office space slipped by 1.2 per cent in 2Q compared with the 4.2 per cent fall in 1Q.

In the Raffles Place/New Downtown micro-market, the average monthly gross rents for Grade A office space fell 3 per cent quarter on quarter to $9.47 psf. This segment experienced a 5.3 per cent quarter-on-quarter drop in 1Q.

Similarly, rents in other micro-markets moved by between zero per cent and -2.4 per cent in 2Q, versus the -2.3 per cent to -8.8 per cent plunge seen in 1Q.

The report said: "The threat of an impending supply overhang remains. This stems from the substantial amount of space that could be returned to the market upon lease expiry, as existing tenants moved to newer premises. It is estimated that some 150,000 sq ft of space could be relinquished in 2H 2012."

The erosion of office rents in the Raffles Place/ New Downtown micro-market is expected to continue into the next six months, but the pace of decline could decelerate from the 8.1 per cent fall registered in the first half.

Rental decline is expected to keep within 15 per cent for the entire year.


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Investment Sales


Six floors in AA Centre for sale

Source: The Straits Times

The office space used by the Automobile Association of Singapore (AA Singapore) is up for sale.

The first six levels, or 55,774 sq ft, of the 14-storey AA Centre on River Valley Road is up for sale at an indicative price of $90 million to $100 million.

The first four levels are owned by AA Singapore. There is a reception area, a multi-purpose hall and a cafeteria on the first level, and offices and clubhouse space, including a jackpot room and swimming pool, on levels two to four.

On levels five and six are 32 serviced apartments, all vacant. It is unclear if AA Singapore owns these apartments.

The residential units on the remaining eight storeys are owned by individuals. There are 90 parking spaces in the basement level for common use.

The building, which is on a freehold site, was developed by AA Singapore in 1984. Nearby transport links include the Central Expressway, the Ayer Rajah Expressway and Somerset MRT station.

Offers close on 7 Aug.


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Former police station to be part of hotel development

Source: The Straits Times

The former Joo Chiat Police Station is set for a new lease of life as part of a hotel development, with developers needing to conserve the 1920s colonial building.

The Urban Redevelopment Authority (URA) described the East Coast Road station as 'historically and architecturally significant' as it released detailed sales conditions of the site Tuesday.

The site must be 'conserved and restored as part of the hotel development'.

The site is on URA's reserve list of the Government Land Sales (GLS) programme. Sites on the reserve list may not get triggered for sale, unlike confirmed list sites, which go on sale on a particular date. This means that the 8,239 sq m land parcel, on which the station sits, will be put up for tender only if a developer agrees to pay an acceptable minimum sum to the Government.

Any bidder will have to contend with competition from several hotels in the area.

The 99-year leasehold plot has a maximum permissible gross floor area of 24,716 sq m. It can be built up to a height of 20 storeys, a consultant has estimated. An earlier estimate had said that the site could yield some 600 rooms.


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