Singapore's Office Occupancies, Rentals Sharply Lower In Q1

Source : Channel NewsAsia, 01 April 2009

Office occupancies and rentals in Singapore fell sharply in the first quarter of 2009, according to latest figures from property consultancy DTZ.

DTZ said the data showed that companies continued to consolidate space and put expansion plans on hold in the wake of the global financial crisis.

According to DTZ, office rents slid 18 per cent on average island-wide. This was the steepest decline since the third quarter of 1998, when rents fell by 12 per cent during the Asian Financial Crisis.

DTZ said monthly rental for prime office space in the Central Business District dropped 25 per cent to an average of S$12 per square foot (psf).

The report also indicated that average office rents fell most sharply at the Tampines Finance Park, dropping by 32 per cent to S$5 psf, as new supply of space becomes available.

Office occupancy also registered the largest quarterly decline since the third quarter of 1997, with a 2.1 percentage point fall to 93.6 per cent.

DTZ said the office market faces an impending supply glut, with some 2 million square feet of office space due to be completed later this year. This will further put pressure on rentals and landlords are expected to step up efforts to fill these new developments.

The industrial property market also saw further weakening in the first quarter, with a seven per cent drop in average rent as a result of shrinking demand. This compared with the three per cent fall in rentals in the last three months of 2008.

DTZ said the outlook for the industrial market seems bleak, with the economy showing no signs of bottoming out.

In addition, industrial REITs players are also staying away from acquisitions, as they focus on sustaining and improving occupancy levels in their current portfolio. - CNA/yt

Property Prices Down In Q1

Source : Channel NewsAsia, 01 April 2009

Prices for private property and public housing fell steeply in the first three months of the year.

In the Housing and Development Board (HDB) resale market, the first drop since 2006 was seen.

HDB's flash estimate, based on its Resale Price Index, showed a decline of 0.6 per cent in the first quarter compared to the fourth quarter of last year, which had registered a 1.4 per cent increase.

Still, some property agents believe the resale flat market will remain resilient.

They said the first quarter decline in prices is largely due more flats being sold below their valuation.

The biggest drop on record though is 4.8 per cent in the second quarter of 2005, after the HDB imposed curbs on cash-back practices, a scam where buyers inflated home loans to get extra cash.

As for private residential property, flash estimates from the Urban Redevelopment Authority (URA) showed prices were down 13.8 per cent in the three months to March.

That was more than twice as steep as the 6.1 per cent decline in the fourth quarter of last year. It also the second consecutive quarter on quarter decline in prices.

"The drivers would really be the slowing to a trickle of new sales we saw in the fourth quarter of 2008, which spilled into January 2009. I think all this happened amid a deteriorating macroeconomic conditions, tighter credit market and worsening job market," said Tay Huey Ying, director of Research & Advisory at Colliers International.

Nicholas Mak, director of Consultancy & Research with Knight Frank agreed: "One of the driving factors for this steep fall in prices is the lack of buying demand. Also, because there are some sellers who are much more realistic, pricing units ahead of the curve to sell their units in the current market."

Based on geographical regions, prices in the "rest of central region" fell the steepest, at more than 17 per cent compared to 6.2 per cent in the fourth quarter.

Prices of non-landed private residential properties decreased by 15.2 per cent in the "core central region", much higher than the 6.5 per cent fall seen in late 2008.

Prices "outside the central region" fell 7.5 per cent, compared to the 5.9 per cent drop seen in the previous quarter.

But analysts note that this is as bad as it gets, as developers have already cut prices significantly.

Although prices will continue to drop, the pace will taper off or moderate in the coming quarters, likely to be in the region of 8 per cent for 2Q 2009, maybe even tapering off to about 3-5 per cent per quarter for the subsequent quarters," said Tay.

Furthermore, the mass market segment is still well supported by HDB upgraders.

Going forward, analysts expect developers to use competitive pricing, or marketing strategies such as rental or price guarantees to move sales.

The flash estimates are compiled based on transaction prices given in caveats lodged during the first ten weeks of the quarter, supplemented by information on the number of new units sold. - CNA/yt/sf/ls

S'pore Bank Lending Slides Further

Source : The Business Times, April 1, 2009

Property lending growth slows to near zero in Feb

Bank lending fell for a fourth straight month in February as loans to businesses shrank further and lending to the property sector slowed to a crawl, though the overall pace of decline eased slightly.

Total Singapore-dollar bank loans at end-February stood at $270.5 billion, down 0.2 per cent from a month earlier, the latest estimates from the Monetary Authority of Singapore show. In each of the preceding two months, overall bank lending slid 0.4 per cent, according to revised figures from MAS.

Loans to businesses dipped 0.6 per cent in February to $155.8 billion, compared with a 0.7 per cent drop in January and a 1.1 per cent decline in December.

Economists point out that credit supply and demand have slowed as the property sector cools, banks implement stricter lending standards and more businesses put expansion plans on hold amid the uncertainty over when the economy will recover.

In the first two months of this year, 22 companies have been forcibly wound up and petitions have been filed to liquidate another 26, separate data from the Insolvency and Public Trustee's Office shows. For the same period last year, 23 firms were dissolved and 19 petitions were filed.

Property-related lending, which makes up almost half of bank lending here, rose just 0.1 per cent to $130.5 billion in February - the weakest monthly growth since lending to the sector last contracted in December 2006.

The figure includes business loans to the building and construction sector and consumer home loans, but excludes loans to property trusts, which are counted separately under the category of loans to non-bank financial institutions.

'All we need is for lending to the broad property sector to slow down to pull down overall lending,' said Song Seng Wun, senior economist and head of research at CIMB.

Building and construction loans dipped 0.2 per cent to $50.1 billion in February, while consumer housing and bridging loans rose 0.4 per cent to $80.4 billion - the smallest percentage monthly increase since March last year.

Over the year to end-February, total bank lending rose 11.9 per cent - little more than half the 21.9 per cent yearly rate to end-February last year and the slowest pace of growth since August 2007.

Loans to most other important business sectors apart from building and construction - manufacturing, general commerce, and transport, storage and communication - also declined in February.

An exception was lending to non-bank financial institutions, which includes property trusts and business trusts. That rose 1.2 per cent during the month to $33 billion, reversing a 2.7 per cent decline in January.

Excluding home loans, consumer lending fell 0.2 per cent in February to $34.3 billion, as car loans, credit-card borrowing and share financing declined. Total credit-card billings fell to $1.78 billion, down 10.3 per cent from January and 5.6 per cent lower than a year earlier.

Overall, total consumer loans rose 0.2 per cent to $114.7 billion. Compared with a year earlier, total lending to consumers was up 7.6 per cent.

In the coming months, 'much really depends on how high unemployment will go', said Mr Song.

So far, there have been clear signs of a 'softening, but not a collapse' in consumer spending, mainly because unemployment among Singapore residents hasn't risen very much, he added. 'People are still spending.'

But he warned that a further round of retrenchments by firms here would likely hit local residents hard, in turn reducing their appetite to spend.

Q1 Home Price Respite Fails To Impress

Source : The Business Times, April 1, 2009

In rental market, luxury monthly condo rents slide 18.8%

The prices of resale private apartments and condos fell at a slower clip in the first quarter compared with the decline in Q4 last year, according to latest figures from DTZ.

However, the property consulting group is predicting price drops for the whole of this year to be just as sharp, if not sharper, than last year's declines as the recession bites and more new homes are completed.

Meanwhile, property consultants estimate that developers sold between 2,000 and 2,400 private homes in Q1 2009, the best showing since Q3 2007, when the US sub-prime crisis struck.

CB Richard Ellis (CBRE) said the top-selling projects in the primary market in Q1 were Caspian (550 units), Alexis (293 units), Double Bay Residences (250 units) and The Quartz (178 units).

It predicts developers will sell some 5,000 to 6,000 units for the whole of 2009, while DTZ puts the figure a tad higher, at between 5,500 and 6,500 units. Either way, it would be an improvement from last year's dismal showing of 4,264 units.

CBRE reckons that its predicted 10 to 15 per cent slide in private home prices across the board this year may encourage developer sales in the primary market.

DTZ said yesterday that the average price for luxury freehold condos and apartments in prime districts 9, 10 and 11 slipped 3.6 per cent quarter-on-quarter to $1,880 psf in Q1 2009, much milder than the 22 per cent q-on-q decrease in Q4 2008.

DTZ's senior director (research) Chua Chor Hoon is predicting a 25 to 35 per cent full-year drop, similar to last year's price fall of 30.4 per cent.

In the mass-market segment, the average price for 99-year leasehold condos/ apartments outside the prime districts eased 2.6 per cent to $555 psf in Q1, roughly half the 5.8 per cent depreciation in Q4 2008.

Ms Chua projects a full- year slide of 10 to 15 per cent, steeper than the 7.3 per cent decline last year.

Landed home prices were more resilient, with average price drops of 1.5 to 2.2 per cent in Q1, compared with declines of 3.8 to 5.8 per cent in Q4 2008.

'The leasing market bore the brunt of corporate downsizing and increased supply from new completions. 2008 saw the completion of 10,122 private residential units, 17 per cent more than the past 10-year average of 8,671 units.

' Some investors have resorted to renting out their units for the time being, hoping to sell when the market recovers,' DTZ said.

Average monthly rents for luxury condos and apartments in prime districts fell 18.8 per cent quarter-on- quarter to $5.20 psf in Q1 2009, a level last seen in Q3 2006.

Ms Chua is predicting full-year 2009 decline will come in at about 25 to 30 per cent, steeper than last year's 15.8 per cent fall.

Based on DTZ's figures, which are based on resale prices, the average freehold luxury condo and apartment price of $1,880 psf in Q1 this year represents a drop of about one- third from the peak of $2,800 psf in late 2007/early 2008.

In contrast, the average price of 99-year leasehold non-landed properties outside prime districts, at $555 psf in Q1 2009, has barely slipped 10 per cent in that period.

That's not surprising since luxury home prices rose much faster than mass-market homes during the run-up. As DTZ's Ms Chua points out, in 2007 alone, luxury home prices increased by 66 per cent, while mass-market home prices rose a more moderate 27 per cent.

DTZ says that falling construction costs will provide some leeway for developers to re-price their projects.

Says the firm's executive director (residential) Margaret Thean: 'Mass market and mid-tier launches will continue to dominate the primary market in 2009.'

Knight Frank managing director Tan Tiong Cheng observes that with the bigger slide in luxury home prices compared with other segments, the price gap has narrowed between high- end and mid-tier properties.

'Eventually, this will provide some support to the high-end-market. Once developers start launching luxury projects and somebody sets a price benchmark at attractive prices, buying should return to this segment,' Mr Tan says.

While foreigners and speculators who fuelled the run-up in luxury home prices have vanished, those who sold their homes in en bloc sales and who are still sitting on cash may be in a position to buy, he added.

DTZ's Ms Thean cautioned that despite the recent pick-up in developer sales, weak economic fundamentals will weigh down hopes of a sustained recovery in activity.

Those agreeing with this view say that the HDB resale market - which feeds the entry-level private residential market - is expected to slow down as unemployment worsens.

ERA Asia-Pacific associate director Eugene Lim predicts that the HDB Resale Price Index will probably rise just 3 to 5 per cent for the whole of this year, after a 14.5 per cent gain last year.

Still, most observers reckon that any eventual recovery in the private housing market will be bottom- up - emanating from the mass-market segment and fuelled by income-driven buyers - rather than a top-down effect from a surge in high-end prices generated by wealth-driven buyers as seen during the 2006-2008 bull run.

'The signal must come from the economy because we're still the tail and the dog is the economy, because that's where the incomes are derived, and property is always the tail end of the value chain,' as a major developer puts it.