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01 Aug 2013

Wave of newly-completed condominiums drives down rents

They are expected to drop further with a surge in supply of homes this year

Source: Straits Times
By Cheryl Ong

A wave of newly completed condominiums is bumping up the supply of rental homes in the market, forcing landlords to lower their asking rents to beat the stiff competition.

More cuts might be on the way as the number of private homes to be completed this year is projected to jump 62 per cent from last year, property consultants say.

At NV Residences in Pasir Ris, which obtained its temporary occupation permit (TOP) in January, landlords of three-bedroom units have lowered asking rents from $4,000 a month to less than $3,500 a month, said Mr Chris Koh, director of property consultancy Chris International.

Homemaker Angelin Loh, 46, who bought her 1,184 sq ft three-bedder there for $1.07 million in January last year, said she was unable to lease her unit for three months after collecting the keys in February.

She found a tenant only after slashing the monthly rent from $4,000 to $3,200.

Ms Loh noted that the rent was just enough to cover her monthly mortgage instalments.

Data from the Urban Redevelopment Authority (URA) last week showed that residential rents rose 0.3 per cent in the April to June period from the preceding three months, the smallest rise in five quarters.

One key reason is the surge in supply. Experts say 16,742 private homes are expected to be completed this year, up from 10,329 units last year.

Around five large-scale suburban projects have obtained TOP in the past six months, adding about 2,600 units to the supply, said ERA key executive officer Eugene Lim.

Even asking rents at older projects are being slashed, added Mr Koh.

Three-bedders at Dakota Residences at Old Airport Road, which received TOP in 2010, have been rented out for $4,700 to $5,000 a month, below landlords' expectations of $5,000 to $5,200, he said.

Next door, at Waterbank@Da-kota, which was completed last month, rents for similar units have also been advertised for $4,700 to $5,000.

Despite lower asking rents, data from CBRE Research shows that the number of new leases signed remained healthy in the second quarter, rising 16 per cent from the previous quarter.

This could be due to demand for interim housing from home owners waiting for construction of their new homes to be completed and from those whose homes have been sold through collective sales, CBRE Research said.

Experts said that given the jump in supply, investors should exercise caution if they wish to buy new units in the suburbs.

They warned that the demand for rental units outside the central region has yet to be tested.

"We might see more expatriates coming to the regional hubs when they are completed, but it will take time for newly completed projects in the suburbs to attract sufficient demand from expatriates," noted R'ST Research director Ong Kah Seng.

Recent URA data showed that suburban mass-market homes made up three quarters of new home sales last month.

SLP International executive director of research and consultancy Nicholas Mak also noted that home owners who have taken up floating interest rates for their mortgage loans might be stretched financially due to potentially higher mortgage rates in the pipeline.

Landlords faced with weak rental demand for their units will still be able to attract tenants if they are willing to price their units below the competition, said Mr Koh.

Mr Mak added that landlords can also consider throwing in incentives like a fresh coat of paint for the unit or furnishing for free.

"It's between deciding how much you want to spend to get that additional rent and simply lowering rents to get a tenant," he said.

19 singles chasing each 2-room BTO flat

But more demand for flats in Sengkang than Yishun

Source: Straits Times 
By Charissa Yong

THE first-ever launch of Housing Board flats for singles continued to draw a flood of applications yesterday, fuelled by high demand, attractive prices and new government grants.

By 5pm yesterday, HDB had received nearly 19 applications for every two-room flat available to single people in Sengkang and Yishun - more than triple the day before, when the Build-To-Order exercise opened.

Analysts said the rush showed the pent-up demand from lower-income singles, who can now afford to buy a small roof over their heads because of the attractive flat prices and government grants.

"Compared to larger-sized flats, the two-room flats are fairly low-cost for buyers with financial constraints," said Mr Ong Kah Seng, director at R'ST Research.

Up to 30 per cent of the 519 two-room flats on offer will be reserved for singles. They are priced between $76,000 and $133,000 and come in 35 sq m and 45 sq m sizes.

With newly-announced grants of up to $60,000, however, two singles who together earn $1,500 a month or less can buy a flat for as little as $16,000.

Singles earning $2,500 a month or less and who apply on their own can get an Additional CPF Housing Grant of up to $20,000, while those who take home $1,125 or less can get another Special CPF Housing Grant of up to $10,000.

OrangeTee's head of research and consultancy Christine Li said that over the past five years, many singles unable to afford shoebox units, more expensive resale flats and cash premiums have been waiting for this chance.

There were 27.2 applications for each Sengkang two-roomer and 12 for each Yishun unit.

"Sengkang is one of the most sought-after new towns among home buyers," said Ms Li. "On the other hand, Yishun is still perceived as a traditional non-mature estate."

Sengkang boasts recent infrastructure projects like the sports and recreation centre and floating wetland, while its flats are also near LRT stations and the waterway, she noted.

R'ST Research's Mr Ong said that singles who are applying are probably living with their parents near the flats on offer, and are jumping at the chance for a home in the vicinity.

However, Miss Jay Toh, 35, a quality assessor, said the flats were not ideal as she would prefer to live near her mother in Aljunied, a mature estate. Currently, singles can buy new flats only in non-mature estates.

"It's sad that singles are not able to buy a new flat near their parents' place," she said. "Getting a resale flat in my mother's area is hard at the moment. A two-room flat is very small. It would be better if the Government could open up three-room flats for singles."

Analysts expect more singles to apply for flats towards the Aug5 deadline for the BTO exercise.

Additional reporting by Debbie Lee

With newly-announced grants of up to $60,000, two singles can buy a new flat for as little as $16,000.

Batched tenders to go on despite price records

URA to continue testing system in coming months

Source: Straits Times | Money 
By Melissa Tan

THE Government looks set to stick with an experiment to try to moderate land bids by developers even though price records were smashed in its first test this week.

Under the plan, the Urban Redevelopment Authority (URA) batches tender closing dates together in the hope that this will take the pressure off prices.

But one of three batched tenders that closed on Tuesday ended up setting new price records.

An executive condominium (EC) site in Yuan Ching Road in Jurong drew a record 16 bids and a top bid of $418 per sq ft (psf) per plot ratio (ppr) on Tuesday - a new high for ECs.

The other two tenders that closed that day were Punggol EC sites and they also fetched higher prices than earlier Punggol ECs.

Analysts mostly said the batching seemed to have failed to lower bids, though some added that it may be too early to say.

However, The Straits Times understands the URA will continue with its experiment for the second half of the year. More tests of the batching system will come over the next few months.

The URA will launch two pairs of adjacent plots with the same tender closing dates in the second half of this year - one pair in September and another in December.

Batching is intended "to encourage more prudent bidding by developers", the Ministry of National Development said in June.

The September pair are two adjacent private residential plots in Upper Serangoon View. The December pair are two adjacent EC sites in Choa Chu Kang Grove.

A key difference between these and the batch of tenders on Tuesday is that the upcoming pairs are adjacent plots, whereas the three land parcels in the Tuesday batch were in different locations.

But EL Development managing director Lim Yew Soon said that the fact the plots were adjacent could result in even higher bids.

"One developer may try to get both sites together, or consortiums could band together and try to take up both land pieces at the same time. It's so that you won't have a competitor next door."

The Yuan Ching Road EC site was won by a consortium of Evia Real Estate, BBR Development, CNH Investment and OKP Land. EL Development was one of the 15 other contenders for the plot with a bid of $343 psf ppr.

Analysts said that developers may be encouraged to lodge high bids for the paired sites if buyers continue to snap up units at launches.

"If sales volumes for the next two to three months remain healthy, especially in suburban regions, that will give developers some impetus to continue to be fairly bullish for the subsequent batches of tenders," said Knight Frank research head Alice Tan.

She added that if the location is attractive, developers may bid even higher to win both adjacent plots, "but that is unlikely if there is already an existing supply of private homes in the vicinity".

Savills Singapore research head Alan Cheong said that for the popular EC segment, developers were likely to continue to bid more aggressively. "These could be the last dregs of EC supply so developers are taking more risk. If their balance sheets are still strong, they can compete," he said, noting developers would likely have to join forces only if a plot's total cost exceeded $500 million.

"Batching is only a stopgap measure and not a solution. You have to play game theory with the bidders," Mr Cheong added.



Drew record 16 bids, top bid a new high for ECs


Fetched higher price than earlier Punggol ECs


Also fetched higher price than earlier Punggol ECs



Two adjacent private residential plots



Two adjacent EC sites

Bank loan growth slowed slightly in June

Firms may be seeking alternative means of financing, says analyst

Source: Straits Times | Money 

THE overall value of bank loans here kept rising in June but at a slower pace than in May.

The slight deceleration came as businesses started to moderate expansion plans in expectation of weaker global economic growth.

Banks loaned $532.5 billion to businesses and consumers here in June, up 17.7 per cent from a year earlier, according to data released by the Monetary Authority of Singapore (MAS) yesterday. In May, bank loans had grown by 18.8 per cent year on year.

The June slowdown in loan growth is not necessarily a bad sign, economists said.

"The corporate debt market is starting to show signs of life again, and that may induce companies to tap capital markets rather than bank loans as a source of financing," said Barclays Capital economist Leong Wai Ho.

"I wouldn't be looking at decelerating of bank loans as a softening of activity. It could be due to firms seeking alternative means of financing."

Loans to all business sectors grew. They totalled $316 billion in June, a 20.4 per cent increase compared to June last year. This is a slowdown from the 22 per cent rise in May.

Mizuho Bank senior economist Vishnu Varathan said this shows that loans are "normalising towards the broader economic reality".

"Indicators from China, such as its slowing manufacturing sector, give little incentive to companies to build up their capacity at this point," he said.

"I suspect loans are mainly being taken out now to shore up working capital and to restructure to move up the value chain."

Consumer loans grew 13.8 per cent to hit $216 billion in June, compared to the same month last year. This was also a slowdown from May, when consumer loans rose 14.5 per cent.

Much of the deceleration was the result of a further decline in car loans, which fell 5.4 per cent to $11.9 billion, as measures introduced in February to restrict the amount and tenure of car loans continued to bite.

Housing and bridging loans rose 14.5 per cent to $159.9 billion, a slower clip than the 15.2 per cent rise recorded in May.

Mr Varathan said this is likely good news to the MAS, which has warned that there is a group of property loan holders in Singapore who are overstretching themselves.

"This deceleration tones down the intensity of the asset market risk that the MAS has been watching so it's good news," he said.

Barclays' Mr Leong, however, noted that housing loan growth may continue to stay strong for some time yet because many property buyers are rushing to lock in loans at low interest rates now, as they expect mortgage rates to rise soon.