Sources : The Business Times, Thu, Jul 23, 2007
He reiterates that the 40% increase was not to cool the property market
(SINGAPORE) National Development Minister Mah Bow Tan yesterday pointed out that not all en bloc sales will be affected by the development charge (DC) hike announced last week and reiterated that the main aim of the hike was not to cool the property market.
The government raised DC rates by 40 per cent last Wednesday, to 70 per cent from 50 per cent of the appreciation in land value arising from enhancing the use of a site.
Mr Mah told Channel NewsAsia: 'When you look at the different en bloc sales, you'll realise that some en bloc sales actually do not incur development charge at all, partly because they are actually able already to develop up to a higher intensity. So, the government doesn't have to go in and change the planning parameters.'
The minister added that the impact on en bloc sales would be minimal and reiterated that the DC hike was to 'take some of that increase in value to go and improve the infrastructure'. 'Because you know when you increase the plot ratio - build more flats, build to a higher level - you need to provide the infrastructure. So that's what the development charge is. You could say it's a tax on the increase in the value as a result of government action.'
The government had earlier explained that the DC increase was to enable more equitable sharing of gains between land owners and the state.
Mr Mah noted that the recession in 1985 had led the government to reduce the DC, but with the property market recovery, the government has decided 'it's timely for us to go back to the original'.
The minister also said that the government would continue to monitor the property market and release more land via the government's land sales programme if required.
Meanwhile, he expects an amply supply of properties in all categories to be available over the next two or three years to ease the current shortage.
Monday, July 23, 2007
S'pore Property Market is 'World's Hottest'
Sources : The Straits Times, Thu, Jul 19, 2007
SINGAPORE'S property market is the hottest in the world for major real estate investments, according to a new study by Jones Lang LaSalle (JLL).
Astounding rental growth and rising values were cited as reasons for the strong showing for the first half of this year.
Capital values of prime property here have soared 50 per cent in the past six months alone, said JLL's report, which tracks properties that sell for more than US$5 million (S$7.6 million) worldwide. Most of these are commercial buildings.
The full report will only be out next month, but the firm released a brief summary of some of its findings yesterday.
It showed that property investments around the world rose for the 16th quarter in a row, reaching a record US$382 billion in the first half of this year. This is up 17 per cent from a year ago.
The bulk of these deals were made in the United States, where investments jumped 32 per cent to US$171 billion. In Europe, they rose 4 per cent to US$157 billion.
As for the Asia-Pacific, property investments climbed 12 per cent to US$55 billion.
SINGAPORE'S property market is the hottest in the world for major real estate investments, according to a new study by Jones Lang LaSalle (JLL).
Astounding rental growth and rising values were cited as reasons for the strong showing for the first half of this year.
Capital values of prime property here have soared 50 per cent in the past six months alone, said JLL's report, which tracks properties that sell for more than US$5 million (S$7.6 million) worldwide. Most of these are commercial buildings.
The full report will only be out next month, but the firm released a brief summary of some of its findings yesterday.
It showed that property investments around the world rose for the 16th quarter in a row, reaching a record US$382 billion in the first half of this year. This is up 17 per cent from a year ago.
The bulk of these deals were made in the United States, where investments jumped 32 per cent to US$171 billion. In Europe, they rose 4 per cent to US$157 billion.
As for the Asia-Pacific, property investments climbed 12 per cent to US$55 billion.
Stay Unscathed In Property Scrum
Sources : TODAY • Monday • July 23, 2007
Hunters should not be “spooked” by current property prices or rising rental rates, said Minister for National Development Mah Bow Tan, responding to recent reports on soaring property and rent prices.
“It’s important we keep pushing out information so people don’t get spooked or panic (over) one particular headline or report in the newspapers about record prices or record rental (prices),” he said at a Tampines event yesterday.
Recent reports indicated rentals for Housing and Development Board (HDB)flats have hit a 10-year high, with monthly rates soaring past $2,000. According to a Straits Times report on Saturday, the rent for a four-room HDB flat in Lavender is $2,800, while that of a fourroom flat in Jurong East is $2,500.
The reports followed HDB’s release of average resale prices and cash-overvaluation data on its website last week.
Experts TODAY spoke to said the examples highlighted in the media were “sensational” and reflected record sales, which might not give an accurate picture of the situation.
According to Cushman & Wakefield’s Donald Han, sale and rent prices of properties in areas such as Woodlands, Serangoon and Yishun are still below premium levels.
Those hit by high prices are the ones who “rush” to join the property scrum, said Mr Mah. “There is actually a lot of supply available. Stand back and let the others rush. If you want to follow the crowd, you must be prepared to take higher risks.
“Why should 10 people rush for a flat when there are others around?”
The Government is monitoring the situation, he added, and — within the next two to three years — there will be “ample supplies” across the various categories. Home owners and those looking to rent must arm themselves with the right information and differentiate between fact and speculation, said Mr Mah.
Commenting on Wednesday’s announcement to raise the development charge — a tax on the appreciation of land value — from 50 per cent to 70 per cent, the minister said this was not a knee-jerk reaction to cool the current en bloc frenzy.
The fee, which was lowered from 70 per cent to 50 per cent in 1985 due to an economic slump, was raised in response to the buoyant economy.
“The primary intention is to go back to fair sharing — sharing of wealth and of enhancement value,” he said. “The reaction so far is, it will not have a major impact on the market.”
Hunters should not be “spooked” by current property prices or rising rental rates, said Minister for National Development Mah Bow Tan, responding to recent reports on soaring property and rent prices.
“It’s important we keep pushing out information so people don’t get spooked or panic (over) one particular headline or report in the newspapers about record prices or record rental (prices),” he said at a Tampines event yesterday.
Recent reports indicated rentals for Housing and Development Board (HDB)flats have hit a 10-year high, with monthly rates soaring past $2,000. According to a Straits Times report on Saturday, the rent for a four-room HDB flat in Lavender is $2,800, while that of a fourroom flat in Jurong East is $2,500.
The reports followed HDB’s release of average resale prices and cash-overvaluation data on its website last week.
Experts TODAY spoke to said the examples highlighted in the media were “sensational” and reflected record sales, which might not give an accurate picture of the situation.
According to Cushman & Wakefield’s Donald Han, sale and rent prices of properties in areas such as Woodlands, Serangoon and Yishun are still below premium levels.
Those hit by high prices are the ones who “rush” to join the property scrum, said Mr Mah. “There is actually a lot of supply available. Stand back and let the others rush. If you want to follow the crowd, you must be prepared to take higher risks.
“Why should 10 people rush for a flat when there are others around?”
The Government is monitoring the situation, he added, and — within the next two to three years — there will be “ample supplies” across the various categories. Home owners and those looking to rent must arm themselves with the right information and differentiate between fact and speculation, said Mr Mah.
Commenting on Wednesday’s announcement to raise the development charge — a tax on the appreciation of land value — from 50 per cent to 70 per cent, the minister said this was not a knee-jerk reaction to cool the current en bloc frenzy.
The fee, which was lowered from 70 per cent to 50 per cent in 1985 due to an economic slump, was raised in response to the buoyant economy.
“The primary intention is to go back to fair sharing — sharing of wealth and of enhancement value,” he said. “The reaction so far is, it will not have a major impact on the market.”
DC Rate Hiked, But 'It's Not A Cooling Measure'
Sources : The Business Times, Thu, Jul 19, 2007
(SINGAPORE) Catching the market off-guard, the government yesterday changed the formula for computing the development charges (DC) that must be paid for enhancing a site's use, effectively raising DC rates by 40 per cent.
With immediate effect, the new DC rates will cream off 70 per cent of the appreciation in land value that arises from changing the use of a site or more intensive construction on it. Till now, this rate was 50 per cent.
'The change is not to cool the property market,' a spokeswoman for the Urban Redevelopment Authority said. Instead, it seeks to achieve a 'more equitable sharing of gains between land owners and the state', she added.
Industry insiders said that the state was probably laying claim to a larger share of the property boom since many of its initiatives had directly spurred the current, buoyant market conditions.
It can be argued, for instance, that the strong demand driving the local residential and office markets owes much to the government's decision to go ahead with two integrated resorts and its promotion of the Business & Financial Centre and the Republic as a banking hub. The efforts to transform Singapore into a global city have played their part, too.
In fact, until 1985, the DC creamed off 70 per cent of the enhancement in land value arising from higher use or plot ratio, and yesterday's move merely turns the clock back to pre-1985 days.
Market watchers are expecting 'a second whammy' on Sept 1 when government is expected to announce higher DC rates under its regular six-monthly review of the rates based on market values.
Yesterday's DC formula change - which is independent of the regular review - is likely to boost the development charges flowing into the government's kitty. For the financial year ended March 31, 2006, the state collected $264 million of DC and $130 million in differential premium (DP) which applies to sites where there are title restrictions on use and intensity. Since 2000, DC and DP charges have been aligned to the same percentage level.
Analysts, meanwhile, pointed out that the higher rates charged by the government could cool the property market, especially the fervour for collective sales.
'Maybe they want to send a signal that they are watching the property market closely. I wouldn't be surprised if more policies are introduced in the coming months, especially if property prices and rents continue to rise in a way that undermines Singapore's competitiveness,' said Chua Yang Liang, head of research (South-east Asia) at Jones Lang LaSalle.
Speculation has been rife of late that the government could curb the deferred payment schemes extended by residential developers, which have been blamed for fuelling speculation.
Some argue that yesterday's change in the DC formula would help generate even more income for the government if plot ratios go up under Master Plan 2008, even if very selectively.
Typically, developers rush to lock in prevailing DC rates by obtaining provisional permission before the next revision date - either March 1 or Sept 1. Hence, yesterday's announcement took them by surprise.
A mid-sized developer who recently bought a site in the eastern part of Singapore where the DC quantum was $4 million will now end up paying $5.6 million. He paid the owners of the en bloc site $15 million. 'My land cost has just gone up by 8 per cent. In terms of unit land cost, the additional $1.6 million DC works out to $25 psf of potential gross floor area, which is not a small amount for a project in a suburban location,' he said. 'It's unfair to those who have paid the deposit for a site and who are suddenly slapped with a 40 per cent increase in DC cost.'
Credo Real Estate managing director Karamjit Singh said that the impact of yesterday's announcement will be felt most by developers that have bought sites in the last month or so and have not obtained provisional permission. On-going negotiations of en bloc sales with big DC components could be affected, he added.
Knight Frank managing director Tan Tiong Cheng said that in the majority of collective sales these days, the DC component makes up just 5-10 per cent of total land value.
But for some sites, the DC component could touch 15-30 per cent of total land value and such sites would be clearly hit by the hike. Among them are many 99-year leasehold sites such as privatised HUDC sites, currently a hotbed for en bloc sales.
The extra charge will have to be paid either by the buyers, sellers or developers - and this might depend on how highly sought after the site was.
'For prime sites, developers may just take the higher DC cost in their stride as it may be justified by the still positive outlook,' Mr Singh said.
However, market watchers reckon that for less sought-after sites, owners may have to take the biggest hit by settling on a lower price.
The Singapore Properties Equities Index fell 43 points or 2.7 per cent yesterday.
(SINGAPORE) Catching the market off-guard, the government yesterday changed the formula for computing the development charges (DC) that must be paid for enhancing a site's use, effectively raising DC rates by 40 per cent.
With immediate effect, the new DC rates will cream off 70 per cent of the appreciation in land value that arises from changing the use of a site or more intensive construction on it. Till now, this rate was 50 per cent.
'The change is not to cool the property market,' a spokeswoman for the Urban Redevelopment Authority said. Instead, it seeks to achieve a 'more equitable sharing of gains between land owners and the state', she added.
Industry insiders said that the state was probably laying claim to a larger share of the property boom since many of its initiatives had directly spurred the current, buoyant market conditions.
It can be argued, for instance, that the strong demand driving the local residential and office markets owes much to the government's decision to go ahead with two integrated resorts and its promotion of the Business & Financial Centre and the Republic as a banking hub. The efforts to transform Singapore into a global city have played their part, too.
In fact, until 1985, the DC creamed off 70 per cent of the enhancement in land value arising from higher use or plot ratio, and yesterday's move merely turns the clock back to pre-1985 days.
Market watchers are expecting 'a second whammy' on Sept 1 when government is expected to announce higher DC rates under its regular six-monthly review of the rates based on market values.
Yesterday's DC formula change - which is independent of the regular review - is likely to boost the development charges flowing into the government's kitty. For the financial year ended March 31, 2006, the state collected $264 million of DC and $130 million in differential premium (DP) which applies to sites where there are title restrictions on use and intensity. Since 2000, DC and DP charges have been aligned to the same percentage level.
Analysts, meanwhile, pointed out that the higher rates charged by the government could cool the property market, especially the fervour for collective sales.
'Maybe they want to send a signal that they are watching the property market closely. I wouldn't be surprised if more policies are introduced in the coming months, especially if property prices and rents continue to rise in a way that undermines Singapore's competitiveness,' said Chua Yang Liang, head of research (South-east Asia) at Jones Lang LaSalle.
Speculation has been rife of late that the government could curb the deferred payment schemes extended by residential developers, which have been blamed for fuelling speculation.
Some argue that yesterday's change in the DC formula would help generate even more income for the government if plot ratios go up under Master Plan 2008, even if very selectively.
Typically, developers rush to lock in prevailing DC rates by obtaining provisional permission before the next revision date - either March 1 or Sept 1. Hence, yesterday's announcement took them by surprise.
A mid-sized developer who recently bought a site in the eastern part of Singapore where the DC quantum was $4 million will now end up paying $5.6 million. He paid the owners of the en bloc site $15 million. 'My land cost has just gone up by 8 per cent. In terms of unit land cost, the additional $1.6 million DC works out to $25 psf of potential gross floor area, which is not a small amount for a project in a suburban location,' he said. 'It's unfair to those who have paid the deposit for a site and who are suddenly slapped with a 40 per cent increase in DC cost.'
Credo Real Estate managing director Karamjit Singh said that the impact of yesterday's announcement will be felt most by developers that have bought sites in the last month or so and have not obtained provisional permission. On-going negotiations of en bloc sales with big DC components could be affected, he added.
Knight Frank managing director Tan Tiong Cheng said that in the majority of collective sales these days, the DC component makes up just 5-10 per cent of total land value.
But for some sites, the DC component could touch 15-30 per cent of total land value and such sites would be clearly hit by the hike. Among them are many 99-year leasehold sites such as privatised HUDC sites, currently a hotbed for en bloc sales.
The extra charge will have to be paid either by the buyers, sellers or developers - and this might depend on how highly sought after the site was.
'For prime sites, developers may just take the higher DC cost in their stride as it may be justified by the still positive outlook,' Mr Singh said.
However, market watchers reckon that for less sought-after sites, owners may have to take the biggest hit by settling on a lower price.
The Singapore Properties Equities Index fell 43 points or 2.7 per cent yesterday.
Split Over DC Impact On Property Stocks
Sources : The Business Times, Fri, Jul 20, 2007
(SINGAPORE) Property stocks have taken a beating over the past two days since the government announced an increase in the development charge (DC) for increasing the intensity of land use, with investors still mulling over its impact on the property market here. But the effect is still unclear, with analysts split in their opinions on this matter.
The surprise announcement on Wednesday by the Urban Redevelopment Authority (URA) that the charge was going up to 70 per cent of the appreciation in land value that arises from changing the use of a site or more intensive construction on it. The DC had previously been set at 50 per cent. This measure was largely seen as preventing overheating in the residential property market, although the URA said this was not the intention.
Analysts with a bearish view believe the rise in the DC will erode margins in some property projects where developers may be unable to pass the additional cost to the end buyers.
'DCs on future development projects where the land use is changed or if the plot ratio has been increased will rise, eroding developer margins. While it has limited impact on current projects and therefore current RNAV (revised net asset value) estimates, this is likely to lower profitability and thus the justification for developer stocks to trade at a substantial premium to RNAV,' JPMorgan said in a note.
The brokerage said the DC increase is likely to affect development sites that have been acquired in the past six months through collective sales where there is an increase in the plot ratio of the site, with the impact heaviest on those with more exposure to the Singapore housing market and trading at a premium to their RNAVs.
JPMorgan has an 'underweight' call on Allgreen, City Developments, Wheelock Properties and Wing Tai - these having between 47 per cent and 66 per cent of exposure to Singapore housing in proportion of their total RNAVs.
Analysts said the reaction affecting shares in property companies was due in part to an anticipation of further dampening measures from the government, with the intention of stopping speculative activity in the housing sector.
Prompted by the latest measure, DBS Vickers cut its rating on the property sector to 'neutral' from 'overweight' as it believes the DC increase could affect the way developers accumulate their land banks, reducing these developers' ability to outperform the broader market.
Among the developers, CapitaLand is seen to be most affected by the DC hike as it has built up an extensive land bank. JPMorgan estimates the DC for Farrer Court could rise from $500 million to $700 million and that for Gillman Heights from $90 million to $126 million.
Responding to these concerns, a CapitaLand spokesperson told BT yesterday that these two properties are large and branded residential developments for which the group had factored in a conservative estimate for the DC. 'For these two properties, we expect the impact of the new DC rate to be between one per cent and 3 per cent increase in total development costs,' the spokesperson said.
Yesterday, CapitaLand shares continued their slide, falling five cents to $7.50. Among other property stocks still heading south were City Developments, which closed down 20 cents at $15.70, Wing Tai Holdings, off 12 cents at $3.58, and Allgreen shedding eight cents to $1.88.
Besides CapitaLand, UOB KayHian noted that Guocoland, Wing Tai, SC Global, United Overseas Land and CityDev - which have made en bloc purchases in the last three months - may need to pay a higher DC for their purchases as the provisional permission for those sites may have yet to be obtained.
But Guocoland spokeswoman yesterday told BT that its DC for existing projects has been locked up, so it is not affected by the increase.
Some analysts remain bullish about the sector, viewing the DC hike as a short-term negative impact, with Citigroup calling the recent sell-down an 'overreaction', which provides a 'buying opportunity'. It is sticking to its 'buy' call on Allgreen, Wing Tai and CityDev but has a 'sell' rating on CapitaLand due to its rich valuation.
Goldman Sachs said it believes that any further move to address the supply side of the property market will result in more manageable price increases over time. 'We think sentiment could in the near term be negative on property stocks but believe the story of Singapore developers riding on the positive Singapore physical market story remains unchanged,' it said, keeping a 'neutral' call on CapitaLand, CityDev and Keppel Land, and a 'buy' call on Guocoland.
Yesterday, Guocoland rose 10 cents to $5.20, unfazed since the announcement of the hike.
(SINGAPORE) Property stocks have taken a beating over the past two days since the government announced an increase in the development charge (DC) for increasing the intensity of land use, with investors still mulling over its impact on the property market here. But the effect is still unclear, with analysts split in their opinions on this matter.
The surprise announcement on Wednesday by the Urban Redevelopment Authority (URA) that the charge was going up to 70 per cent of the appreciation in land value that arises from changing the use of a site or more intensive construction on it. The DC had previously been set at 50 per cent. This measure was largely seen as preventing overheating in the residential property market, although the URA said this was not the intention.
Analysts with a bearish view believe the rise in the DC will erode margins in some property projects where developers may be unable to pass the additional cost to the end buyers.
'DCs on future development projects where the land use is changed or if the plot ratio has been increased will rise, eroding developer margins. While it has limited impact on current projects and therefore current RNAV (revised net asset value) estimates, this is likely to lower profitability and thus the justification for developer stocks to trade at a substantial premium to RNAV,' JPMorgan said in a note.
The brokerage said the DC increase is likely to affect development sites that have been acquired in the past six months through collective sales where there is an increase in the plot ratio of the site, with the impact heaviest on those with more exposure to the Singapore housing market and trading at a premium to their RNAVs.
JPMorgan has an 'underweight' call on Allgreen, City Developments, Wheelock Properties and Wing Tai - these having between 47 per cent and 66 per cent of exposure to Singapore housing in proportion of their total RNAVs.
Analysts said the reaction affecting shares in property companies was due in part to an anticipation of further dampening measures from the government, with the intention of stopping speculative activity in the housing sector.
Prompted by the latest measure, DBS Vickers cut its rating on the property sector to 'neutral' from 'overweight' as it believes the DC increase could affect the way developers accumulate their land banks, reducing these developers' ability to outperform the broader market.
Among the developers, CapitaLand is seen to be most affected by the DC hike as it has built up an extensive land bank. JPMorgan estimates the DC for Farrer Court could rise from $500 million to $700 million and that for Gillman Heights from $90 million to $126 million.
Responding to these concerns, a CapitaLand spokesperson told BT yesterday that these two properties are large and branded residential developments for which the group had factored in a conservative estimate for the DC. 'For these two properties, we expect the impact of the new DC rate to be between one per cent and 3 per cent increase in total development costs,' the spokesperson said.
Yesterday, CapitaLand shares continued their slide, falling five cents to $7.50. Among other property stocks still heading south were City Developments, which closed down 20 cents at $15.70, Wing Tai Holdings, off 12 cents at $3.58, and Allgreen shedding eight cents to $1.88.
Besides CapitaLand, UOB KayHian noted that Guocoland, Wing Tai, SC Global, United Overseas Land and CityDev - which have made en bloc purchases in the last three months - may need to pay a higher DC for their purchases as the provisional permission for those sites may have yet to be obtained.
But Guocoland spokeswoman yesterday told BT that its DC for existing projects has been locked up, so it is not affected by the increase.
Some analysts remain bullish about the sector, viewing the DC hike as a short-term negative impact, with Citigroup calling the recent sell-down an 'overreaction', which provides a 'buying opportunity'. It is sticking to its 'buy' call on Allgreen, Wing Tai and CityDev but has a 'sell' rating on CapitaLand due to its rich valuation.
Goldman Sachs said it believes that any further move to address the supply side of the property market will result in more manageable price increases over time. 'We think sentiment could in the near term be negative on property stocks but believe the story of Singapore developers riding on the positive Singapore physical market story remains unchanged,' it said, keeping a 'neutral' call on CapitaLand, CityDev and Keppel Land, and a 'buy' call on Guocoland.
Yesterday, Guocoland rose 10 cents to $5.20, unfazed since the announcement of the hike.
DC Hike Changes Market Dynamics, Mood
Sources : The Business Times, Fri, Jul 20, 2007
(SINGAPORE) A day after the government effectively raised development charge (DC) rates across-the-board by 40 per cent, there seemed to be a shift in the mood and dynamics of the Singapore property market.
Some worried that Wednesday's surprise move could presage more measures from the government that might impact the market while others were stirred into action as greed gave way to a dose of realism.
Property consultants told BT that owners in estates planning collective sales were busy calling one another yesterday, saying they should stop sitting on the fence and speed up the signing of the collective sale agreement (CSA) before any further measures were announced - instead of waiting for higher and higher prices.
'There's caution, more realism in the air today,' Knight Frank's managing director Tan Tiong Cheng confirmed.
The hike also made some developments more attractive and others less so - depending on how high their DC component was.
DTZ Debenham Tie Leung director Shaun Poh reckons that developers who wish to continue landbanking may focus on sites with little or no DC component.
Some of these sites are in prime areas - such as Rivershire, The Claymore and Watten Estate Condo - and already have high development baselines.
In contrast, developers are likely to adopt a wait-and-see attitude for sites with significant DC components - say 15 per cent or more of total land value. Wednesday's hike is likely to add 6 per cent or more to the land cost of these sites. Those affected are likely to include 99-year leasehold properties such as privatised HUDC estates.
One influential developer told BT that while the measure was unlikely to cool the market, it could add to the cost of doing business. For example, if en bloc sellers in prime locations refused to budge, the move could fuel further hikes in the price of luxury homes on such redeveloped sites. The other question hanging in the air was: What next?
'Basically the question is: Is there going to be another jab from the government?' said Knight Frank's Mr Tan.
The announcement could also make the players more realistic in their expectations.
DTZ's Mr Poh said: 'Hopefully, this announcement will bring some balance to the property market. Owners can't just keep pushing up reserve prices higher and higher all the time.'
Agreeing, a seasoned industry player added that developers, too, may become cautious about buying en bloc sales sites and increasingly turn to the Government Land Sales programme. 'They'll see how buyers respond to new launches in coming weeks,' he added.
The Real Estate Developers Association of Singapore has so far not given any reaction to Wednesday's change.
A City Developments spokesman said: 'Our preliminary finding is that there will be insignificant impact on our existing projects. However, we will take this increase into consideration for future acquisitions.'
And with the 'second whammy' on the way on Sept1, when the government is expected to raise DC rates for specific locations and use groups based on market values, it makes more sense for developers to wait for another six weeks for a clearer picture to emerge before making any decisions on such sites.
DTZ's Mr Poh reckons that in cases where owners controlling the minimum 80 per cent of share values have signed CSAs or where signing is at advanced stages, 'there'll be no rolling back' in terms of lowering prices. Most CSAs give sales committees the power to raise reserve prices, but not to lower them, he explains.
'But for cases where signing of CSAs has not begun, agents will be discussing price strategies with sales committees, especially if the DC component is big and urge owners to be more realistic as developers' potential profit margins will be eroded,' he added.
(SINGAPORE) A day after the government effectively raised development charge (DC) rates across-the-board by 40 per cent, there seemed to be a shift in the mood and dynamics of the Singapore property market.
Some worried that Wednesday's surprise move could presage more measures from the government that might impact the market while others were stirred into action as greed gave way to a dose of realism.
Property consultants told BT that owners in estates planning collective sales were busy calling one another yesterday, saying they should stop sitting on the fence and speed up the signing of the collective sale agreement (CSA) before any further measures were announced - instead of waiting for higher and higher prices.
'There's caution, more realism in the air today,' Knight Frank's managing director Tan Tiong Cheng confirmed.
The hike also made some developments more attractive and others less so - depending on how high their DC component was.
DTZ Debenham Tie Leung director Shaun Poh reckons that developers who wish to continue landbanking may focus on sites with little or no DC component.
Some of these sites are in prime areas - such as Rivershire, The Claymore and Watten Estate Condo - and already have high development baselines.
In contrast, developers are likely to adopt a wait-and-see attitude for sites with significant DC components - say 15 per cent or more of total land value. Wednesday's hike is likely to add 6 per cent or more to the land cost of these sites. Those affected are likely to include 99-year leasehold properties such as privatised HUDC estates.
One influential developer told BT that while the measure was unlikely to cool the market, it could add to the cost of doing business. For example, if en bloc sellers in prime locations refused to budge, the move could fuel further hikes in the price of luxury homes on such redeveloped sites. The other question hanging in the air was: What next?
'Basically the question is: Is there going to be another jab from the government?' said Knight Frank's Mr Tan.
The announcement could also make the players more realistic in their expectations.
DTZ's Mr Poh said: 'Hopefully, this announcement will bring some balance to the property market. Owners can't just keep pushing up reserve prices higher and higher all the time.'
Agreeing, a seasoned industry player added that developers, too, may become cautious about buying en bloc sales sites and increasingly turn to the Government Land Sales programme. 'They'll see how buyers respond to new launches in coming weeks,' he added.
The Real Estate Developers Association of Singapore has so far not given any reaction to Wednesday's change.
A City Developments spokesman said: 'Our preliminary finding is that there will be insignificant impact on our existing projects. However, we will take this increase into consideration for future acquisitions.'
And with the 'second whammy' on the way on Sept1, when the government is expected to raise DC rates for specific locations and use groups based on market values, it makes more sense for developers to wait for another six weeks for a clearer picture to emerge before making any decisions on such sites.
DTZ's Mr Poh reckons that in cases where owners controlling the minimum 80 per cent of share values have signed CSAs or where signing is at advanced stages, 'there'll be no rolling back' in terms of lowering prices. Most CSAs give sales committees the power to raise reserve prices, but not to lower them, he explains.
'But for cases where signing of CSAs has not begun, agents will be discussing price strategies with sales committees, especially if the DC component is big and urge owners to be more realistic as developers' potential profit margins will be eroded,' he added.
En Bloc Sales Drive Demand And Supply
Sources : The Business Times, Mon, Jul 23, 2007
(SINGAPORE) Collective sales of residential developments are becoming a major driver of the property market boom, creating demand as well as potential supply of up to 40 per cent of the projected new homes in the next few years.
The trend is likely to continue despite last week's hike in development charges. Each en bloc sale temporarily sucks some supply off the market as the sites are redeveloped. But an analysis by CB Richard Ellis shows that the collective sales will yield more homes than they take away.
The 154 collective sales that have been reported since the start of 2006 will translate into a demolition of 10,249 units. But these, in turn, will be replaced by new supply of up to 21,719 homes through fresh construction on these sites.
This will account for almost 40 per cent of the 54,746 new uncompleted units that the Urban Redevelopment Authority has projected by 2011 or so.
The collective sales will automatically create new buyers. CBRE executive director (residential) Joseph Tan said: 'The search for replacement apartments will generate new demand for residential units in the near to medium term.'
In a typical collective sale deal, there is a time frame of about nine to 14 months before an existing development is taken off the market.
Adding a proviso to the figures, Mr Tan said: 'Depending on demand, developers may change their mind and delay some of the launches. In addition, developers, especially the major ones, still have an existing landbank to fall back on. Therefore, it is hard to tell how long the supply of 21,719 units will last. It may well be spread over more than five years.'
But current demand is very high. CBRE believes total take-up of new homes in 2007 is likely to exceed 14,000 units. If demand remains at this level over the next three years, there could be a shortfall in supply. Some 22,000 of the units projected by URA have already been sold.
A spokesman for URA said: 'Based on historical take-up rate, the 32,700 units that were still unsold as of 1Q 2007 should be able to meet demand for the next four to five years. Even if we refer to the take-up of 10,360 units in 2006 which was the highest recorded, the 32,700 units can meet demand for the next three years.'
The URA also said there are 1,900 additional units from recent Government Land Sale (GLS) sites, and more than 8,000 potential units from sites in the second half of the 2007 GLS programme. Whether any shortfall is taken up by future collective sale sites or future GLS sites will affect both supply and demand.
The URA said: 'As a new GLS programme is decided every six months, the government is able to ensure that there will be sufficient supply to match any surge in demand.'
A total of about 42,200 new private residential units from projects in the pipeline are expected to be completed from the second half of 2007 to 2010. Of these, about 16,400 units will be in Core Central Region, 12,700 units in Rest of Central Region, and 13,100 units in Outside Central Region.
CBRE's analysis has broken down its projected supply of new units from collective sale sites into districts. Not surprisingly, District 10 has the highest number of potential new units at 4,800. The second highest area is the combined districts of 2, 4, 5, 8 and 12, which can be collectively known as the West Coast, with 4,068 units. District 9 came third with 4,055 units followed by the combined districts of 15 and 16 (East Coast) with 3,772 units.
Mr Tan said: 'The new supply in the past two years has been mostly concentrated on prime projects, and will continue to be so as developers still hold a number of sites in the prime districts.
'New supply in fringe and suburban locations has been limited because developers have very few of such projects to cater to upgraders and middle-income group. Therefore, it is natural for them to be looking for these sites for future development from now on, in anticipation of demand coming from this segment of the market.'
Mr Tan noted that recent suburban launches like Casa Merah, Seafront On Meyer, Parc Mondrian, Northwood and The Riverine have been selling well. 'This shows that the residential market is seeing a broad base recovery compared to a year ago, when recovery was only seen in the high-end segment.'
(SINGAPORE) Collective sales of residential developments are becoming a major driver of the property market boom, creating demand as well as potential supply of up to 40 per cent of the projected new homes in the next few years.
The trend is likely to continue despite last week's hike in development charges. Each en bloc sale temporarily sucks some supply off the market as the sites are redeveloped. But an analysis by CB Richard Ellis shows that the collective sales will yield more homes than they take away.The 154 collective sales that have been reported since the start of 2006 will translate into a demolition of 10,249 units. But these, in turn, will be replaced by new supply of up to 21,719 homes through fresh construction on these sites.
This will account for almost 40 per cent of the 54,746 new uncompleted units that the Urban Redevelopment Authority has projected by 2011 or so.
The collective sales will automatically create new buyers. CBRE executive director (residential) Joseph Tan said: 'The search for replacement apartments will generate new demand for residential units in the near to medium term.'
In a typical collective sale deal, there is a time frame of about nine to 14 months before an existing development is taken off the market.
Adding a proviso to the figures, Mr Tan said: 'Depending on demand, developers may change their mind and delay some of the launches. In addition, developers, especially the major ones, still have an existing landbank to fall back on. Therefore, it is hard to tell how long the supply of 21,719 units will last. It may well be spread over more than five years.'
But current demand is very high. CBRE believes total take-up of new homes in 2007 is likely to exceed 14,000 units. If demand remains at this level over the next three years, there could be a shortfall in supply. Some 22,000 of the units projected by URA have already been sold.
A spokesman for URA said: 'Based on historical take-up rate, the 32,700 units that were still unsold as of 1Q 2007 should be able to meet demand for the next four to five years. Even if we refer to the take-up of 10,360 units in 2006 which was the highest recorded, the 32,700 units can meet demand for the next three years.'
The URA also said there are 1,900 additional units from recent Government Land Sale (GLS) sites, and more than 8,000 potential units from sites in the second half of the 2007 GLS programme. Whether any shortfall is taken up by future collective sale sites or future GLS sites will affect both supply and demand.
The URA said: 'As a new GLS programme is decided every six months, the government is able to ensure that there will be sufficient supply to match any surge in demand.'
A total of about 42,200 new private residential units from projects in the pipeline are expected to be completed from the second half of 2007 to 2010. Of these, about 16,400 units will be in Core Central Region, 12,700 units in Rest of Central Region, and 13,100 units in Outside Central Region.
CBRE's analysis has broken down its projected supply of new units from collective sale sites into districts. Not surprisingly, District 10 has the highest number of potential new units at 4,800. The second highest area is the combined districts of 2, 4, 5, 8 and 12, which can be collectively known as the West Coast, with 4,068 units. District 9 came third with 4,055 units followed by the combined districts of 15 and 16 (East Coast) with 3,772 units.
Mr Tan said: 'The new supply in the past two years has been mostly concentrated on prime projects, and will continue to be so as developers still hold a number of sites in the prime districts.
'New supply in fringe and suburban locations has been limited because developers have very few of such projects to cater to upgraders and middle-income group. Therefore, it is natural for them to be looking for these sites for future development from now on, in anticipation of demand coming from this segment of the market.'
Mr Tan noted that recent suburban launches like Casa Merah, Seafront On Meyer, Parc Mondrian, Northwood and The Riverine have been selling well. 'This shows that the residential market is seeing a broad base recovery compared to a year ago, when recovery was only seen in the high-end segment.'