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03 August 2013

Two-bedder private units back in demand
They are viewed as 'insurance' against weak rental market

Source: Straits Times | Money 
By Melissa Tan

TWO-BEDDER private homes are back in fashion as investor demand for one-bedroom units declines on the back of property cooling measures.

One-bedders have always been regarded as a better bet in the rental market but buyers are turning cautious and want ...bigger flats in case they need to live in them.

Their relatively lower price also makes them more attractive, given new curbs on borrowing.

Developers have responded to the change, with two-bedders making up a higher proportion of recently launched projects, according to data compiled by real estate consultancy OrangeTee for The Straits Times.

OrangeTee looked at the unit mix and take-up rate within the first two months of launch, for sizeable projects launched in March and April. These were Bartley Ridge (which has 868 units), D'Nest (912), Urban Vista (582), Sennett Residence (332), The Trilinq (755) and Novena Regency (55).

All the projects were launched in March except Novena Regency, which went on the market in April. There was insufficient data for projects launched in May and June.

Two-bedders outnumbered one-bedders in all the projects, comprising up to 43 per cent of the total number of units in each development.

Boutique developer EL Development managing director Lim Yew Soon said the unit mix depends on the location. "For suburban projects, there are more two- and three-bedders, some with more four- or five-bedders. Developers have reduced the number of one-bedroom units," he noted.

But in prime locations or areas where launch prices are expected to be $1,500 per sq ft (psf) or more on average, "we'll still have a fair bit of one-bedders because of the affordability", Mr Lim added.

The take-up rate for two-bedders within the first two months of launch was also higher than that for one-bedroom units at Urban Vista, D'Nest, The Trilinq and Novena Regency.

OrangeTee research head Christine Li said more people have been buying private homes for owner- occupation rather than for investment in recent months.

This was partly because the additional buyer's stamp duty was raised for an owner's second and subsequent properties in January - part of the seventh round of cooling measures.

Home loan restrictions imposed in late June have made it even harder for property investors to keep leveraging to buy units, as the new rules cap a borrower's total debt repayments relative to gross monthly income.

"On the pricing front, two- bedders typically have slightly lower prices psf and the quantum is still quite affordable. These are the main reasons why they are gaining popularity in today's market," Ms Li said.

She added that two-bedders were viewed as "insurance" against a weak rental market, compared with one-bedders which are more susceptible to rental market downswings.

Some projects launched recently with a large proportion of one- bedders have had lacklustre sales due to a softening rental market.

The 56-unit freehold Cosmo- Loft in Balestier, made up mostly of shoebox units, was launched in April and moved only four units as of June 30, according to Urban Redevelopment Authority data.

The popularity of two-bedders reverses the situation prior to the January measures when "investment demand was very strong and shoebox units even outside the central region were selling like hot cakes", Ms Li said.

In 2011, one out of every seven units sold was a shoebox flat - defined as a home of up to 500 sq ft in size - The Straits Times reported last year. Buyers, who were mostly investors, snapped up a record 2,037 new shoebox units that year, at projects such as Spottiswoode 18 near Outram MRT station, Skysuites@Anson and The Interweave in Kim Keat Road.

That was more than seven times the number of shoebox units sold in 2008 and 20 per cent more than in 2010.

rjscully@sph.com.sg



Record home prices should set alarm bells ringing

Prices could invert if a few factors kick in at same time

Source: Straits Times | Money By Fiona Chan Senior Economics Correspondent

THIS week, the president of the Real Estate Developers' Association of Singapore declared that the housing market is nearing an "inflection point".

Cooling measures have slowed price rises, and the market faces hea...dwinds such as a looming rise in interest rates, a large supply of new homes, and a slowdown in China's economic growth, said Mr Chia Boon Kuah.

But just a few hours after he spoke, the property market pulled off another record-breaking feat.

A site in Jurong for an executive condominium (EC) - a hybrid of private/public housing sold with Housing Board restrictions but turning private after 10 years - drew a record offer of $418 per sq ft (psf) of gross floor area.

The 16 developers that threw their hats into the ring were undeterred by the two other EC sites up for grabs on the same day, EC buyers' income ceilings, and concerns that some borrowers here are becoming overstretched.

Instead, they focused on the recent sell-out of Jurong condo J Gateway at prices of up to $1,778 psf, a new record for suburban homes - never mind that J Gateway is next to Jurong East MRT station and the new Jem mall, while the EC site is surrounded by empty plots for new developments and nowhere within walking distance of an MRT station.

The top bidders for the EC site, a consortium of smaller developers, clearly have their sights set on breaking records as well.

The units they build will have to sell for close to $900 psf, consultants said. No EC project's average selling price has ever topped $800 psf, noted OrangeTee's head of research Christine Li.

At $900 psf, many units in the new development will likely top $1 million in price. As ECs are limited to buyers with household incomes of no more than $12,000 a month, the units are likely to cost about seven times their buyers' annual income, if not more.

That compares with an average of five times for HDB resale flat buyers and about six times for lower-income buyers of three-room HDB resale flats, according to recent calculations by Standard Chartered economist Edward Lee.

Some may argue Jurong is a special case. The Government has earmarked the Jurong Lake District for a new self-contained regional centre, which should support the area's property values, they say.

And yet the situation in Jurong has been played out in other regions across the island as well.

In April, a site in Tiong Bahru sold for $1,163 psf of gross floor area, the highest ever for a residential government land plot. New units are expected to sell for $2,000 psf, a record for 99-year leasehold city fringe homes.

As long as developers are still buying land at high costs, they are less likely to reduce unit prices extensively, said a report last week by property firm Colliers.

Other factors are also supportive of prices. Recent economic data reflects a fragile United States recovery that is likely to keep short-term rates low to 2015.

New home supply may also not be as forbidding as it looks. Based on units now being built, about 16,000 private homes will be completed on average every year from now until 2016 - 70 per cent more than the 10-year historical average, says Credit Suisse. But going by government data, almost 80 per cent of the private homes and ECs under construction as at end-June this year have already been sold.

Meanwhile, China's slowdown notwithstanding, Singapore's job market stability - perhaps the biggest factor in supporting home demand - seems assured. The economy is near full employment and likely to stay there for a while.

Housing dynamics are also still strong. Speculative buying fell to 4.2 per cent of total sales in the second quarter of this year, the lowest since 2006, while vacancy rates for private homes remain below the historical average.

But if prices are not expected to fall soon, how does this square with Mr Chia's prediction?

Mr Chia didn't elaborate on his comment, but one way of looking at it could be that his forecast of a turning point marks not a change in prices, but in fundamentals.

Not so long ago, buyers baulked at paying above $1,000 psf for suburban condos; if ECs are now nearing that price, alarm bells should ring. Rather than a sign that demand is still buoyant, the Jurong EC site may be a symptom that prices are running too far from basics.

Other signs are emerging that the property cycle is maturing. Prices of detached and semi-detached houses fell in the second quarter for the first time in about a year, while median cash premiums for HDB resale flats have dropped to their lowest in a year.

Rental yields are also dipping as landlords lower their asking rents due to a surge of new homes coming on the market.

So while the actual turning point in prices may not come so soon, entering the market at this juncture - especially at a record price - may be dangerous.

Since 2009, housing prices have risen much faster than economic output, incomes and rentals. The only thing that has kept pace is debt levels, which is funding the growth in home prices.

Suburban homes are likely to be a flashpoint, as investors buying such units have shallower pockets to withstand a softening of the rental market.

Even owner-occupiers - such as those buying ECs - could be caught in a negative equity trap if prices start falling as rates rise.

All it takes for prices to invert is for a few factors to kick in at the same time: a record number of home completions, a hike in interest rates, and a shock to the economy that costs some jobs.

So while prices look to be still in the ascendant, would-be buyers of suburban homes at record prices would do well to heed Mr Chia's prediction of an inflection point. The crunch has yet to come, but that doesn't mean it never will.

fiochan@sph.com.sg


Escape the frenzy - head north by north-west

Checking out the page views on the STProperty website gives an instant snapshot of what projects buyers are keen on. This week, we look at the developments in Districts 23 and 25 that have drawn the most attention.

Source: Straits Times | Money 
By Rachel Scully
IF YOU want to get some relief from the the hustle and bustle of the city, heading north-w...est makes a lot of sense.

District 23, which covers the Hillview, Dairy Farm, Bukit Panjang and Choa Chu Kang areas, is one such haven and is easily accessible via the Pan-Island Expressway.

The Bukit Panjang Plaza, Junction 10 and Lot One malls keep shoppers occupied while nature lovers can exercise and relax along the Pang Sua Park Connector or Choa Chu Kang Park.

Buses are a popular mode of public transport in the area on top of the LRT service which runs between Choa Chu Kang and Bukit Panjang.

In a few years they will also have the Downtown MRT line, which will run from Bukit Panjang and down Bukit Timah Road to Bugis.

The 762-unit Northvale topped the list of page views for private homes on STProperty from July 22 to 28. Its average asking price of $882 per sq ft (psf) for its one-, two-, three- and more bedder units was the lowest among the district's top five.

Eco Sanctuary at $1,185 psf topped the rankings for asking price in the week under review.

However, the neighbouring Foresque Residences recorded the highest average transacted price at $1,345 psf between January and June, Urban Redevelopment Authority data shows.

Buyers looking to put even more distance between themselves and the city scene can go farther north to District 25, which spans Kranji, Woodgrove, Woodlands and Admiralty.

It includes the Kranji Industrial Park and the Singapore Turf Club.

Shoppers have plenty of choice, including the popular Causeway Point beside Woodlands MRT station on the North-South Line.

Four of the top five projects by page views on STProperty from July 22 to 28 were executive condominiums.

The recently launched Forestville with 653 units topped the list with an average asking price of $737 psf for its two-, three- and more bedder units.

The smallest project, 200-unit Rosewood Suites, had the highest average asking price on STProperty at $863 psf for its one- and three- and more bedders.

La Casa, Northoaks and Twin Fountains rounded out the top five list by page views.

rjscully@sph.com.sg