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29 November 2012

29th November, Thursday




No correction in home prices after measures

Source: Business Times

No appreciable correction in overall house prices was seen in October, despite the latest round of cooling measures.

Prices of completed private apartments and condominiums (excluding executive condos) rose one per cent in October, fuelled by price increases in the suburban market.

Excluding small units, prices of suburban apartments rose one per cent while homes in the Central Region rose 0.9 per cent. Prices of small units (up to 506 sq ft) islandwide rose 0.6 per cent in October.

This is despite measures rolled out in October, which include a 35-year cap implemented on loan tenures alongside tighter loan-to- value (LTV) ratios.

Liquidity and herd mentality is driving the market said an analyst: "There is herd mentality in the purchase market. When sales volume is higher, buyers become braver. Sellers also ask for more."

The findings, which are based on October flash estimates of the Singapore Residential Price Index (SRPI) series, suggest that the macro-prudential levers implemented thus far have had limited effectiveness in mitigating house price inflation, said Lum Sau Kim of the National University of Singapore's Institute of Real Estate Studies (IRES) . "Where the policy measures have worked is to attenuate house price volatility. The amplitude of monthly house price swings has reduced over time," she said.

While prices of small units have been more volatile than those of the overall market, they too contracted after a policy targeting shoebox units was announced in September this year. "We believe the control will continue to moderate small unit prices and volume going forward as it takes effect from Nov 4," said Prof Lum.

Lee Sze Teck, senior manager, training, research and consultancy at DWG, pointed out that given the SRPI tracks completed units, the sub-index for small units might register higher increases in the future, as more shoebox units are expected to be completed next year and in 2014.

The data also suggests that owner-occupiers were active on the resale market in October, said Mr Lee. "If I'm looking for my own unit, I don't mind paying a bit more because I don't care about rental yields, whereas investors don't want to pay too much because it will affect the returns they get on their investment," he noted.

Another analyst added that one of the reasons why the measures appear to have limited impact on suburban pricing is domestic liquidity. "The measures seem to work in the core central region because they happen to coincide with the economic crisis in high net worth exporting continents. Suburban areas on the other hand have been driven mainly by domestic liquidity chasing returns," he said.


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Home buyers borrowing less with tougher rules

Source: The Straits Times

Home buyers are borrowing less as tougher lending guidelines contained in property cooling measures start to bite.

Mortgages with a loan-to-value (LTV) ratio of more than 80 per cent comprised 4.7 per cent of all loans in the third quarter, down from 4.9 per cent in the same period last year.

This is the lowest since 2004 and is a sharp drop from the peak of 17 per cent in the third quarter of 2009, said the Monetary Authority of Singapore Wednesday.

The MAS' Financial Stability Review noted that housing loan quality remains robust with the proportion of mortgages with negative equity - where the loan exceeds the property's value - remaining negligible.

More than 70 per cent of mortgages are for owner-occupied homes, which tend to have a lower risk profile while non-performing loan (NPL) ratios for property-related lending have stayed low.

However, these trends warrant close monitoring as NPLs are a key indicator of economic conditions and how borrowers are handling their repayment obligations, the MAS noted.


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Grade A office rents continue to fall in Q4

Source: Business Times

Grade A office rents have continued to fall this quarter, rental data from major property consultancies shows.

One consultancy’s estimates show that the average monthly rental value for Grade A office space has fallen 3 per cent to $9.51 per sq ft this quarter, from $9.80 psf in 3Q. This takes the full-year drop to 13.5 per cent, against an 11.1 per cent rise in 2011.

Another consultancy too, show that the average rent in its Grade A basket - comprising best-quality buildings in Raffles Place, Marina Bay, Shenton Way, Tanjong Pagar and Marina Centre - has dipped 2.2 per cent quarter-on-quarter to $8.90 psf. This places the full-year decline at 8.7 per cent.

Based on another consultancy’s figures, the average Grade A Raffles Place/New Downtown rent for 4Q 2012 is $9.07 psf, down 2 per cent from $9.26 psf in 3Q.

All three firms are predicting pretty flat Grade A rents next year.

Describing current leasing strategies of occupiers, a consultancy said: "The banking sector remains ultra-cautious and is likely to remain focused on delivering ever greater efficiency in use of space. In more austere times, there will be greater acceptance of lower-cost locations, particularly for support functions. We may well see large companies pursue split operations where the costs of maintaining CBD space cannot be justified."

While most occupiers are focused on cost savings for now, there is still some expansion in the market, albeit limited, said another consultancy. The legal, technology and business services sectors are likely to continue to be the most active going into 2013.


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