Home Sales Hit New Highs On Silent Buying Frenzy

Source : The Business Times, July 16, 2009

Developers sold more units in June than in 2007 peak but the momentum may not last

The buying frenzy in Singapore's property market has now eclipsed even the dizzy heights of the last property boom. Developer sales of new private homes in June hit 1,825 units - topping the previous peak of 1,723 units homes sold in August 2007 at the property market peak.

But analysts are unsure if the buying momentum can continue for much longer.
















June marks the fifth straight month where the number of transactions has exceeded 1,000. To capitalise on the bullish sentiment, developers increased supply by 41 per cent month-on-month to launch 1,637 units in June.

In the first half of 2009, developers sold more than 7,300 units in all. If this momentum is sustained, new home take-up for the full year will exceed 14,000 units.

That figure could be met, some analysts said. In 2007, a record 14,811 units were sold, in what one analyst said was 'the climax of the bull run in terms of sales volume'. CB Richard Ellis (CBRE), for example, said that it is likely that the whole year's new home take-up will be around 12,000-14,000 units.

But others are more doubtful. DBS Vickers analyst Adrian Chua expects developers to sell just 9,000 new homes in 2009. That figure is itself an upgrade from his previous assumption of 6,000 units.

Colliers International's director for research and advisory Tay Huey Ying noted that June's record number of primary home sales is driven by pent-up demand from both owner- occupiers and investors, and was also helped by the fact that home prices remained largely at a discount from their peaks despite recent signs of strengthening. Official data shows that private home prices fell 14.1 per cent in Q1 2009 and another 5.9 per cent in Q2.

'As the primary market is perceived to have bottomed, people have rushed in to buy ahead of sharp price increases and the Hungry Ghosts Month,' Ms Tay said. 'Nevertheless, buyer sentiment and buying momentum remain susceptible to downside risks as well as runaway home prices as buyers remain price-sensitive, given the lack of economic and income growth.'

But analysts are encouraged by two factors: firstly, the fact that the high-end market seems to be picking up. Colliers' analysis showed that some 11 units were transacted at more than $2,500 per square foot (psf) in June, up from just three units in May. By contrast, no new homes were sold for more than $2,500 psf in the first four months of the year.

In addition, the $3,000 psf mark was breached as well. UOL managed to sell one unit at Nassim Park Residences at $3,813 psf, which is the high watermark price for the year so far. A unit in the Ritz-Carlton Residences was sold at $3,404 psf while another in The Orchard Residences was sold for $3,299 psf. In fact, seven units at The Orchard Residences were sold in the price range of $2,700-$3,299 psf.

The trend, at least, looks set to continue in July. Analysts said that several other luxury units have also changed hands so far this month.

And, secondly, some are optimistic as this rally is a bottom-led recovery, which analysts said should be more sustainable than the previous boom. The 2006-07 run-up was led by investment interest in the high-end segment.

'This time, mass market projects (supported by the relative stability of the HDB resale market, which is still seeing limited supply) are driving the market bottom- up,' said DBS Vickers' Mr Chua. 'Also, smaller units continue to be snapped up first, in contrast to the penthouses and larger units in the 2006-07 run-up. We believe the current run-up is still largely premised on affordability (with investment interest skewed towards rental yields) whereas the 2006-07 run-up was based on an investment interest premised on capital appreciation and the luxury scarcity factor.'

And there still appears to be support at the bottom. According to an analysis by Jones Lang LaSalle (JLL), the price gap between non-prime residential projects and HDB resale flats has come off from the peak of 67 per cent in 2007 to a low of 54 per cent in 2009. 'In our opinion, the narrower price gap is a major factor behind the bullish sentiment, especially among HDB upgraders. As long as this gap remains tight, this stream of HDB upgraders into the private residential market is likely to continue,' says Chua Yang Liang, JLL's head of research for South-east Asia and Singapore.

Rich Russians Are Back In US Property Market

Source : The Business Times, July 16, 2009

They are lured by distressed sales and the rouble's rise against the US dollar

(MOSCOW) Russian millionaires are returning to the US property market, lured by distressed sales and the rouble's rise against the US dollar, lawyer Edward Mermelstein said.

Tumbling: Closings for apartments priced over US$10m in Manhattan fell by 82% in the last year, helping bring the average co-op price down 29% from Q2 of 2008

'The way many look at the US right now is that it's a bargain,' said Mr Mermelstein, who has arranged about 300 real estate deals for buyers from the former Soviet Union since 2007.

Mr Mermelstein, 41, closed two purchases and bid for 20 more residential and commercial properties in New York and Miami for Russian and central Asia clients in the past three months, he said. That compares with no deals or offers in January, he said.

Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc and Bear Stearns Cos caught up to property owners in the nation's most expensive urban market.

The rouble rallied about 13 per cent against the US dollar from this year's low on Feb 17 and 4 per cent against the pound sterling from a Feb 6 low.

US sellers are cutting prices 30 per cent to 40 per cent from their peak in 2007, Mr Mermelstein said in an interview here, where his firm has an office.

'All of a sudden in the last three months activity's picked up,' he said.

More than half of the 15 or so Russians he's helping find US property are new clients, he said.

'Now that oil has settled at about US$70 a barrel, there's a little bit of a comfort level,' he said.

Oil has averaged US$60.14 a barrel in New York trading since April, rising as high as US$72.68 on June 11.

Last year's plunging commodity and equity markets wiped out US$380 billion in the value of Russia's so-called Golden Hundred, according to Forbes.

Closings for apartments priced over US$10 million in Manhattan fell by 82 per cent in the last year, helping bring the average co-operative price down 29 per cent from Q2 of 2008, according to Brown Harris Stevens Co.

About 32 per cent of Q2 listings included discounts from the original asking price, according to StreetEasy.com, a property listing service.

Mr Mermelstein said he closed deals for US$1 million and US$3.8 million properties last month in New York and has bids for commercial real estate for US$25 million to US$50 million in the city and New Jersey. He declined to name the clients.

'In the next six months to a year we'll definitely see some high-profile transactions in terms of number and in terms of trophy assets,' Mr Mermelstein said.

A Thomas Cooley Law School graduate, Mr Mermelstein founded his firm in 1995 and worked as a real estate broker in college.

His first Russian client led to a joint venture on New York and Moscow commercial real estate.

His company now focuses on Eastern European clients seeking to invest in the US.

The increase in Russian interest in US property mirrors what's happening in other countries.

In London, luxury-home prices advanced in June for the first time in more than a year as Russian and Italian buyers took advantage of the pound's weakness, London-based broker Knight Frank LLP said on June 27. Many Russians considering buying are influenced by celebrities and financiers including Chelsea football club owner billionaire Roman Abramovich and telecommunications billionaire Mikhail Friedman, Mr Mermelstein said.

'It's a great marketing tool,' he said. 'Russians are very much of a pack- mentality.' Not everybody is ready to jump in.

Metals and banking magnate Mikhail Prokhorov, 43, named by Forbes as Russia's richest man with US$9.5 billion, isn't interested.

'Why do I need a house an eight-hour difference away?' Mr Prokhorov said in an interview here.

'I spend 90 per cent of my time here and it makes no sense to have a private home so far away.' - Bloomberg

More Mortgagee Sale Properties In H2 Unlikely: DTZ

Source : The Business Times, July 16, 2009

The firm says it could be due to banks being less anxious to foreclose

BARGAIN hunters waiting for more distressed properties to show up at auctions could be in for a disappointment.

Real estate consultancy firm DTZ believes that the number of mortgagee sale properties will not rise in the second half of the year as the open market has improved.

'The recent buying interest in the property market and stabilisation of prices across all sectors in Q2 2009 would have enabled cash-strapped owners to dispose of their properties,' says DTZ in a report released yesterday.

Fresh data from the Urban Redevelopment Authority (URA) illustrates the renewed enthusiasm among home buyers.

Developers sold 1,825 new units in June, breaking the previous record of 1,723 units set in August 2007.

In fact, after a spike in February, the number of mortgagee sale properties put up for auction has tapered off.

'The less than expected mortgagee sales in the current economic downturn could be due to banks being less anxious to foreclose now,' DTZ says.

It explains that the government has been urging banks to give debtors more leeway to service their loans.

Banks are also not rushing to foreclose on properties if they have to accept lower prices and risk ending up with too much stock.

DTZ's views on the number of mortgagee sale properties to surface differ slightly from another industry watcher's.

Colliers International deputy managing director and auctioneer Grace Ng expects to see a 'marginal increase' in such cases at auctions.

Colliers' report late last month notes that it can take six months or longer for a bank to repossess properties and put them up for auction, after owners default on their loans.

Banks may also give owners some time to sell the properties on their own.

As a result, more mortgagee sales may only enter the market in the second half of the year.

DTZ and Colliers share similar views on most other trends in the auction market.

For instance, the value of properties sold through auction has certainly picked up tremendously since last year.

According to DTZ, major auction houses in Singapore posted $72.5 million in transaction value in the first half of this year.

This already surpasses the transaction value in the whole of 2008, which was $65.5 million. In particular, buying interest soared in March and remained buoyant up till June.

June was the most active month, accounting for 34 per cent of the total number of properties sold in the first half of the year.

The proportion of properties successfully sold through auctions also rose between March and June.

The success rate in that period was 26 per cent, compared with just 5 per cent between January and February.

In A Class Of Their Own

Source : The Business Times, July 16, 2009

LANDED HOMES

Some 1,000 Singaporeans are said to own the majority of Good Class Bungalows here

VERY few people live in landed homes in Singapore and even fewer live in Good Class Bungalows (GCBs), which probably explains why they are so desirable. There are about one million or so homes here. These comprise terrace houses, semi-detached houses, bungalows and of course high-rise homes - condominiums, apartments and public housing flats.

Exclusive: While it is not inconceivable that there could be more GCB areas added in the future, given the need to intensify land use in Singapore, the likelihood is slim

But GCBs stand quite far apart from all of these in that they not only have to sit on land that is of a certain size - not less than 1,400 square metres - but also have to be located in areas that have been specially designated for them. Indeed, there are estimated to be less than 2,500 GCBs in Singapore.

GCB areas were officially gazetted in 1980 with 39 areas formally safeguarded. A spokesman for the Urban Redevelopment Authority (URA) explained that the purpose of the gazette was to 'protect the high environmental quality of these established large bungalow areas from the intrusion of more intensive forms of housing such as semi-detached or terrace houses'.

Walk or drive around these GCB areas and often you will notice not only stately houses but stately trees as well with many protected for posterity. There are two zones in Singapore under the National Parks Board's Tree Conservation Areas with the main zone covering central Singapore where most of the GCBs are located.

To control development in these areas, URA set certain guidelines for planning purposes. For instance, the minimum plot size for any newly created bungalow within the 39 GCB areas must be at least 1,400 sq m. For this reason, a GCB plot cannot be developed to accommodate more intensive forms of housing. And unless it is at least 2,800 sq m in size, it cannot be sub-divided into two GCB plots either.

Of the GCB areas, the best known are the Nassim, Cluny, Bishopsgate and White House Park estates. While it is not inconceivable that there could be more GCB areas added in the future, given the need to intensify land use in Singapore, the likelihood is slim.

URA's spokesman said: 'In drawing up our land use plans for Singapore, we aim to provide a variety of housing options for Singaporeans, from waterfront housing to garden living to city living. This includes low-density and landed housing, such as those found within existing GCB areas. The detailed housing form for future landed housing areas will be determined when the area is ready to be developed.'

URA said that there are currently no plans to release new sites or designate new areas as GCB areas. 'Nevertheless, there is scope for the number of GCB plots within existing GCB areas to increase, for example through sub-division of larger GCB plots into several GCB plots, so long as each bungalow plot meets the minimum land size of 1,400 sq m,' URA added.

Big GCB plots do not come by often. In 1994, a plum site in the Tanglin GCB area came up for sale by public tender. The 194,000 sq ft parcel was the official residence of the Australian high commissioner at White House Park/Dalvey Road. Property valuers had estimated that the site could fetch as much as $70 million, or around $400 per square foot (psf). The site eventually sold for $98 million or $505 psf.

In 1997, developer Wharf Group sold five units of the 11-unit development of GCBs at an average of $14.1 million each. Ten years later, in 2007, a house in this development sold for $28.8 million. There have been other public tenders of large sites.

In 2000, Hongkong and Shanghai Banking Corporation (HSBC) sold a 201,782 sq ft freehold bungalow site it owned since the 1960s in Jervois Road for $60 million, or slightly over $330 psf. Then in 2003, HSBC sold a 276,112 sq ft site at Bishopsgate for $69.8 million. Together, all three sites would have yielded less than 40 new GCBs.

Occasionally, individual GCB sites will come up for auction. In 2008, the Singapore Land Authority auctioned a site at Ridout Road which saw 34 bids lodged by three prospective buyers. The winning bid came in at $8.96 million or $579.55 psf. This was 22.6 per cent above the opening bid of $7.31 million or $473 psf. Being fresh government land sale sites, however, it came with a 99-year lease.

SLA also said that recently, three parcels of land have been sold under the Sale of Infill Sites programme on 99-year leases. 'The owners have to comply with URA's GCB guidelines as the land parcels are within GCB areas,' it added.

Because the environment is an important factor in GCB areas, there are guidelines that control how big the house can be. For instance, the house cannot cover more than 35 per cent of the site. This is to ensure that there are adequate green buffers between each house.

There are also more prosaic restraints - childcare centres are not allowed in GCB areas for instance. But perhaps the most important constraint on GCB ownership to note is that foreigners are not allowed to own these, thus reducing the buying pool of GCBs.

Some 1,000 Singaporeans are said to own the majority of GCBs here and are mostly intent on holding on to them as long-term investments. If you have bought one through the open market, you can count yourself lucky indeed.

Property Transactions For Districts 1 To 16 With Contract Dates Between June 24th - 30th, 2009