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28th February 2015

Singapore Real Estate

Home vacancy rates 'may reach new highs'

Redas chief warns of falling prices with new properties set to hit market

Source: Straits Times / Top of The News

RESIDENTIAL vacancy rates here could surge to record highs, given the number of new properties set to hit the market, a real estate industry leader has warned.

The prediction came yesterday from Mr Augustine Tan, president of the Real Estate Developers' Association of Singapore (Redas), in some of the strongest comments made by developers recently.

"This will cause a further slip in home rentals and a downward spiralling of property prices," he warned in a speech at the Redas Spring Festival Lunch, where Ms Grace Fu, Minister in the Prime Minister's Office, was the guest of honour.

The vacancy rate at the end of last year was nearly 8 per cent, or 24,000 vacant units - 54 per cent more than the vacant stock levels in 1998, when the vacancy rate last peaked.

"As we have seen in the past, we can go into an oversupply situation very quickly. As we move on, and we have a larger base of private properties... the boom and the bust, if anything, is going to be more damaging," Mr Tan said.

More than 75,000 new private residential homes are expected to be completed from now to 2019.

Mr Tan's comments came after National Development Minister Khaw Boon Wan said last week that the residential market had achieved "a better balance between sellers and buyers".

Mr Tan acknowledged that the Government's cooling measures had achieved their intended goal of stabilising property prices.

Prices have fallen 5 per cent from the last peak in 2013, according to the Urban Redevelopment Authority's Property Price Index, but actual prices in the luxury homes segment have dropped by at least 20 per cent, he added.

"The imposition of the additional buyer's stamp duty on this segment runs counter to the Government's efforts to encourage foreign investment flows into the country," Mr Tan said.

He called for a "public-private-sector collaborative effort in understanding" and managing the real estate market. "The Government, working on its own, may not be able to manage precisely the rate of decline in prices in order to arrive at a level that is deemed to be desirable for a stable property market," he said.

"They may have in mind a certain target but the measures, if not moderated, could lead to an unintended downward spiralling of prices by much more. It is not in our national interests to see this happen."

On whether prices will fall sharply, Knight Frank Group managing director Danny Yeo agreed that prices are expected to weaken. But "at which point will the scale tilt and prices fall much faster? Six months, nine months, or a year? That's a question everyone is concerned about".

Tuan Sing group chief financial officer Chong Chou Yuen noted as well that luxury home prices have fallen by more than 20 per cent in Sentosa, but some analysts have said the luxury property market, while weak, is not representative of the entire market.

-By Rennie Whang

Redas warns of downward price spiral

Association chief says oversupply could push vacancy to new high; but not all developers share similar pessimism

Source: Business Times / Real Estate

COOLING measures by the government, if left unchecked, could lead to an unintended downward spiralling of property prices, warned Augustine Tan, president of the Real Estate Developers' Association of Singapore (Redas).

Already, private housing completions from the last few years of ramp-up in government land sales are presenting "a worrying oversupply scenario" that could bring vacancy rate to a new high, he said.

However, some developers BT spoke to feel the dire prognosis is restricted to a small luxury segment and the overall market is not at high risk of a downward price spiral.

Just three weeks into his newly appointed role at Redas, the executive director of property sales at Far East Organization painted a bleak picture of the Singapore property market at the Redas Spring Festival luncheon on Friday.

"Analysts estimate that over 75,000 new private residential units will be completed from 2015 to 2019. This looming supply is likely to bring home vacancy rate to a new record high," Mr Tan said. "This will cause a further slip in home rentals and downward spiralling of property prices. For homeowners, their investments will be severely impacted... Some may be forced to sell their properties."

The vacancy rate of private housing at end-2014 was close to 8 per cent, representing a vacant stock of 24,000 units - 54 per cent more than the vacant stock in 1998 when vacancy rate peaked at 9 per cent. But the total housing stock has grown 80 per cent since 1998 to almost 309,000 units.

"As we move on, and we have a larger base of private properties - residential units, office and industrial stock, the boom and the bust, if anything, is going to be more damaging, Mr Tan said.

He pointed out that the government, on its own, may not be able to manage precisely the rate of decline in prices to reach a level that is deemed desirable for a stable property market.

On that note, he hopes that the government's macro and prudential measures will be calibrated over time, through a public-private sector collaboration in understanding the situation.

A case in point, Mr Tan said, is how prices in the luxury homes segment dived at least 20 per cent from the 2013 peak but the URA Private Residential Price Index indicated only a 5 per cent drop in private residential prices from the 2013 peak.

"They look at a wider range of prices while when we say high-end, we refer to the above S$2,800 per square foot range," he clarified with BT, adding that Redas is looking to supplement such sub-market data to URA.

Though the high-end segment is not one that the government is looking to safeguard given that not many Singaporeans buy into this segment, the imposition of the additional buyer's stamp duty (ABSD) has alienated "some high net-worth foreign investors who create jobs for Singaporeans", Mr Tan pointed out.

Developers that BT spoke to noted that the 20 per cent drop in luxury home prices cited by Mr Tan refers to a specific market segment while the overall market has a lower risk of that downward price spiral. Lim Ee Seng, chief executive of Frasers Centrepoint Ltd, said that amid concerns of falling prices and dwindling demand, well-located projects such as those in integrated commercial and transport hubs should continue to do well. "Sales have almost ground to a halt in general. But the government has enough control in terms of TDSR (total debt servicing ratio) and the seller's stamp duty to control financial prudence and curb speculation, so if it can consider easing some of the buyers' stamp duty, that will help facilitate some purchasing activities from genuine buyers," Mr Lim said.

Tan Tee Khoon, executive director of residential services at Knight Frank, agreed that while overall private home prices have come down by 5 per cent, some segments and groups of people are harder hit. "There are those who cannot buy because prices in the districts they are interested in may still be resilient and they are just waiting. There are yet others who wish to buy a second property but could be hit by a 10 per cent ABSD. There are those whose properties' capital values are waning," he said.

"As far as we are concerned, the rice bowls of property salespersons are severely impacted," he said. "With a 51 per cent drop in new home sales last year, the prospect of higher vacancy rates and impending rise of interest rates, we can expect tougher days ahead."

Grace Fu, Minister in the Prime Minister's Office, graced the Redas lunch on Friday but cast the spotlight on other topics affecting developers - that of driving productivity in the construction sector, green buildings and public hygiene in commercial buildings. She disclosed that the Building and Construction Authority is exploring more incentives to help developers overcome the initial inertia and cost premium of adopting game-changing productive technologies. Details will be out when the second Construction Productivity Roadmap is launched later this year.

-By Lynette Khoo

Development charges for condo sites cut again

Largest drop for Tampines Road, Hougang, Punggol and Sengkang area

Source: Business Times / Money

IN A tough market, some modestly good news emerged for developers yesterday as development charges (DCs) for condo and other non-landed sites fell again.

Developers pay DCs to the Government for enhancing the use of a site or building a bigger project.

The Ministry of National Development said it has cut DC rates for non-landed residential use by an average of 3.2 per cent, the second straight cut - in line with property price moderation.

The new rates, which take effect tomorrow, were released yesterday. DCs are reviewed every six months and revised based on current market values.

They were trimmed for non-landed residential use by 1.6 per cent six months ago. Before that, they were cut in March 2012.

This time, 73 of 118 sectors registered falls in DC rates for non-landed residential use. The other 45 sectors stayed flat.

The largest drop of 12.5 per cent was for sector 100 - the Tampines Road, Hougang, Punggol and Sengkang area. Sim Lian Land's top bid for the Anchorvale Crescent executive condominium (EC) site earlier this month - $157.8 million, or about $280 per sq ft per plot ratio (psf ppr) - could have sped the decline, as it was the lowest tabled for an EC site since July 2011, said Ms Chia Siew Chuin, Colliers International director of research and advisory.

Hao Yuan Investment's successful bid later in the month for a Woodlands Avenue 12 EC site - which at $103.8 million, or about $278 psf ppr, was even lower - could also have led the DC rate for non-landed residential use in Woodlands to be cut by 5.1 per cent.

Apart from these two areas, DC rate declines were generally located in the central region, on the back of the weak home-buying sentiment and demand for high-end homes, said Ms Chia.

DC rates for sectors 37 and 38 in the prime residential districts of 9, 10 and 11 - covering Clemenceau Avenue, Scotts Road, Winstedt Road, Bukit Timah Road, Sarkies Road and Balmoral Road - fell 7.1 per cent while that for Orchard Road fell 5.9 per cent.

DC rates were unchanged for landed residential use, hotels and hospitals, industrial use, and places of worship and civic and community institutions.

But they were raised by an average of 2 per cent for commercial use, the third straight increase after going up by an average of 2.1 per cent half a year back. Ms Christine Li, Cushman & Wakefield director of research, said this was supported by the robust commercial investment market.

Among the sectors seeing the largest increase of 9.1 per cent were 8 and 10, including Maxwell Road, Telok Ayer Street, Hoe

Chiang Road and Keppel Road.

This may have been caused by sales of strata units on the 18th, 19th and 21st floors of Samsung Hub at $3,175 psf to $3,280 psf in the fourth quarter of last year, exceeding the $3,030 psf paid for the 14th floor in April, said Ms Li.

Half of the 11th floor at Prudential Tower was transacted at $2,750 psf, a rise from the $2,316 psf achieved in the building's collective sale in the second quarter.

Dr Chua Yang Liang, JLL head of research for South-east Asia, said most of the large rises were in sectors with some shophouses.

"This type of real estate has caught the attention of investors and prices have been on an upward trend of late. This is possibly one factor that has motivated the significant increase in commercial rates in these sectors."

The divergent trend between the residential and commercial markets is likely to continue, but should diminish as the large office supply comes in, he added.

-By Rennie Whang

DC rates for non-landed residential use trimmed 3 per cent

But development charge rates for commercial use have been raised 1.9%

Source: Business Times / Real Estate

New fees 'unlikely to turn S'poreans off Aussie homes' 
Investment firm says weaker A$ makes real estate highly attractive
Source: Straits Times / Money

NEW fees to be imposed on foreign buyers of Australian real estate are unlikely to deter Singaporeans from house hunting Down Under, property investment firm IP Global said.

Australia is still a highly attractive market for local investors, especially given the weaker Aussie dollar, the firm said in a report on Thursday.

Australian Prime Minister Tony Abbott on Wednesday said foreign buyers will be required to pay A$5,000 (S$5,300) or more for each residential property purchase.

Given that it will take time for these measures to be enforced, there might even be an increase in investment in the coming months, IP Global said.

It is also likely to spur investment in new and off-plan real estate, as these are the only investment properties for overseas investors that are approved by the Foreign Investment Review Board, it added.

While this rule is not new, Mr Abbott noted that it had not been enforced in recent years. He now plans to set up a register of foreign nationals buying real estate, and those who break the law would face a fine of up to a quarter of the value of the property and could be forced to sell it too.

IP Global senior investment manager Elizabeth Chu said: "Clearly, there are concerns about housing affordability for Australians and any illegal investment from foreign buyers needs to be addressed.

"Yet we expect industry bodies to put up a fight about the fees, especially given the big question mark over whether they will actually improve affordability."

There also needs to be more clarity about how these measures will be enforced, in particular, whether they will apply to future purchases or retrospectively, Ms Chu added.

The recent interest rate cut in Australia to a record low of 2.25 per cent and the depreciating Australian dollar are attracting more Singaporean investors who can benefit from lower mortgages and cheaper borrowing, IP Global noted.

Furthermore, sky-high prices and property cooling measures in Singapore continue to dampen the appeal of the local market.

There is strong evidence of increasing numbers of Singaporean investors in Australia's property market, IP Global added.

Singapore was the fourth-biggest source of foreign investment in Australian real estate in 2013, contributing US$2.01 billion (S$2.7 billion) worth of assets in total.

IP Global is especially upbeat on Brisbane and Melbourne as investment markets.

"While there have been concerns about oversupply in the Australian market - particularly in Melbourne - this is limited to central areas such as the Docklands and the Central Business District (CBD)," Ms Chu said.

"We suggest Singapore buyers look slightly further afield to areas between 5km and 10km from the centre."

In Brisbane, IP Global is focusing on Fortitude Valley and Newstead, where new developments provide resort-style living for young residents who want to live close to the CBD.

"We are now looking to the Inner East Side where recent zoning changes are set to allow new businesses to open and me-dium-density housing to be built, creating an exciting uplift in an already-popular area," she said.

-By Yasmine Yahya

Cool spots with hot real estate

The boom in ski holidays has led to growing interest in resort properties among investors
Source: Straits Times / Invest

Snow-capped peaks, crisp cold air and soft, powdery snow.

This has proved a winning formula for growing numbers of Singaporean travellers, especially those keen to ski or snowboard. These winter sports have caught on in recent years as travellers head to destinations such as Japan, South Korea and Europe.

Now, the allure of snow-capped peaks for travellers is shifting to property investors too - and often the motivation to buy starts with travel. The thirst for a cooler experience has also been fuelled by growing affluence and weaker currencies across the globe.

Ms Alicia Seah, director of marketing communications at Dynasty Travel, says there are also those travellers who were introduced to skiing as toddlers or teenagers by their parents. "Some actually take up the sport more seriously and also attend ski lessons during the holiday period," she notes.

For the past two years, she has noticed serious and experienced skiers who prefer a four-day ski festival in Gangwon-do, South Korea, or longer free-and-easy trips to regional ski resorts in Japan, especially Hokkaido or Nagano, for instance.

Some also choose to "explore ski destinations such as those in the Swiss Alps like St Moritz and Zermatt".

As recently as three years ago, Singaporeans tended to want to experience skiing for only one or two days and preferred group tours - but things have changed. Dynasty Travel says ski packages now make up about 40 per cent of its annual overall year-end business in November and December, compared with 25 per cent two years ago.

With more heading to the slopes, it is little wonder that developers are wooing the Asian investor with ski properties in places such as Europe and Japan.

There are three new projects nestled in the Austrian Alps for buyers with different budgets, marketed by Pure International, a British-based property sales and marketing firm.

Those seeking a luxurious holiday home may find themselves in Austria's exclusive ski resort village of Lech, for instance, connected to neighbouring ski villages including Zurs and St Christoph. They form the Arlberg region, frequented by royalty.

The Chalech project in Lech consists of four luxury chalets managed by the five-star Hotel Aurelio Lech, and prices start from 6.4 million euros (S$9.8 million) to eight million euros. You would be joining Lech aficionados such as the Dutch royal family. The late Princess Diana also enjoyed visiting the resort.

Chalech's developer, Mr Reinhard Wolf, says the area buzzes with tourists from the beginning of December until April, and your view will not be obstructed by high-rise buildings like those found in the French Alps' modern resorts, as the architecture of Lech remains quaint.

Mr Wolf is also developing the Arlberg Chalets in the quiet town of Wald am Arlberg, just one hour away from Innsbruck, and two hours from Zurich and Munich. One- to three-bedroom apartments start at 195,000 euros, and two- to three-bedroom chalets start from 417,500 euros. They hold a status where there's no rental obligation or usage restrictions.

The upcoming Arlberg 1800 Residences in St Christoph - one of the Alps' highest ski resorts - slated to be completed by the end of this year, offers the complete ski-in, ski-out experience.

The 84- to 260-sq-m serviced apartments, which are connected to the five-star Arlberg Hospiz Hotel, range from 10,000 euros to 15,000 euros per sq m, and could draw a rent of 75,000 euros a week during the peak ski season. Five apartments are still available.

Ski properties closer to home are also available in Niseko Village in Hokkaido. The Kasara Niseko Village Townhouse project by Malaysian conglomerate YTL has eight fully furnished, completed townhouses now, available since December last year.

The freehold townhouses, each with about 2,700 sq ft of built-up area over two floors, come with a leaseback option for home owners, and YTL Hotels can be appointed to manage and lease them.

Prices are about US$2.5 million (S$3.4 million), or about less than US$1,000 per sq ft.

Mr Joseph Yeoh, vice-president of YTL Land & Development, said: "Generally, the net yield in Niseko is between 2 and 3 per cent, depending on the type and quality of developments."

He has seen a good level of interest and although no firm sale has been made, "bookings for short-term stays by vacation-goers this winter season have been very good at over 70 per cent occupancy".

-By Rachael Boon