Property Market Warning

Source : The Straits Times, June 13, 2009

Analysts point to over-supply and weak rental demand

THE optimism in Singapore's property market is unsustainable, given an impending over-supply of new flats, weak rental demand and the fact that the country remains in a recession.

While there has been strong resale demand, the call for new homes is patchy and rental demand remains weak. -- ST PHOTO: LAU FOOK HONG

That is the pessimistic view of two research houses, which concluded that the price recovery is highly fragile.

Citigroup said the market is not at the start of a cyclical upswing and that the spike in home prices cannot last. 'We caution against over-optimism, because fundamentally the market is not ready for a sustained price recovery,' analyst Wendy Koh wrote in a report on Thursday.

In the same report, she downgraded Allgreen to 'sell', putting the developer in the same 'sell' basket as City Developments, CapitaLand and Keppel Land. Citi also downgraded Wing Tai to 'hold'.

While there has been strong resale demand, the call for new homes is patchy and rental demand remains weak, Ms Koh said.

Resale prices of some projects have risen and some developers are reducing discounts for new projects but Nomura Singapore believes these seemingly positive factors are misleading.

It maintained that the demand for new homes was boosted by price discounting and the interest absorption scheme.

'A rapid deterioration in rents amid higher supply and weaker demand has undermined yield expectations,' it said.

Nomura also pointed to the damaging effect of rising unsold inventory and forced sales by defaulting or distressed buyers who bought on deferred payment.

These properties form a source of 'hidden' inventory that will place further pressure on asking prices.

Read the full story in Saturday's edition of The Straits Times

A Merry May For Home Sales

Source : The Straits Times, June 16, 2009

Figure at near record level, with prime areas doing particularly well.

SALES of new private homes rocketed to an 'outstanding level' last month thanks to price cuts and the share market rally boosting buyer confidence.

Last month, developers launched 1,161 new homes, up from 1,085 in April, according to data released by the Urban Redevelopment Authority on Monday. -- ST PHOTO: STEPHANIE YEOW

Recession-defying numbers out on Monday showed there were 1,668 units sold in May, just a tad below the all-time high of 1,731 set in the boomtime month of August 2007.

Last month's figure was also well ahead of the already-strong developer sales of 1,214 units in April and 1,220 in March.

PropNex chief executive Mohamed Ismail cited recent rallying of the stock markets and launches by developers at attractive prices as reasons for what he described as outstanding sales last month.

Many speculators who had been sitting on the fence were spurred into action, hoping to take advantage of the low prices in the market across all levels, he said.













Other experts cited pent-up demand and buyers' fear of missing the boat as explanations for the sales spike.

Developers stepped up a gear last month as well, launching 1,161 new homes, up from 1,085 in April, according to Urban Redevelopment Authority data.

The total sales of 2,882 units recorded in April and last month exceeded first-quarter sales by 11 per cent and they were generally done at prices higher than the first quarter's, said CBRE Research.

One striking aspect of last month's bumper numbers is that sales of homes in the core central or prime region nearly doubled from April to 617 units. This comprised 37 per cent of total sales.

Despite being in the midst of an economic downturn, this region's May sales have outshone the August 2007 performance by 6 per cent, said Jones Lang LaSalle's associate director of research, Mr Desmond Sim.

The high-end segment, while still mired in the doldrums, recorded 15 transactions, up from three in April, noted PropNex. Two units at The Orchard Residences atop the Orchard MRT station, for instance, were sold at $2,787 per sq ft (psf) and $3,299 psf - prices that have not been seen for a while.

Sales were also well up in city-fringe areas. There, 609 units transacted at median prices of $735 psf to $1,200 psf over April's 362 units.

But sales of suburban homes reflecting a median price range of $580 psf to $760 psf fell 16 per cent to 442 units.

The best-selling project last month was the 302-unit Martin Place Residences in Kim Yam Road, which had sales of 186 units at a median price of $1,423 psf.

Buyers flocked there after Frasers Centrepoint cut prices to a seemingly attractive level - initial units at the condo had gone for $1,700 to $2,000 psf last year.

Other popular projects included The Wharf Residence in Tong Watt Road and The Arte in Jalan Datoh. Buyers picked up 140 units at The Wharf Residence at a median price of $1,186 psf and units of The Arte at $933 psf.

Experts said the unexpectedly strong May showing was rather exceptional.

Mr Ismail said the number of transactions this month could well exceed 1,000 units while CBRE Research expects second-quarter sales to exceed 3,500 units.

If the present strong sentiment persists, this year's new home sales will exceed 10,000 units, which is way above the 4,264 units sold last year and close to the 11,147 units sold in 2006, it said.

Property Auctions Shedding Bad Image

Source : The Sunday Times, June 14, 2009

Home owners become more receptive to mortgagee sales as a way to secure a better price

Property market watchers will likely be keeping an eye on the 'forced-sale' auction on June 23 of two units at Jasmine Court condominium along Upper Thomson Road.

The two units, owned by one person, will be offered as MCST (management corporation strata title) sales at the Knight Frank auction.

The last time Knight Frank offered such a sale was in April last year. A condo's management can initiate an MCST sale if a unit owner is in arrears on monthly maintenance and service payments.

Given the current downturn, there has also been talk that the number of mortgagee sales - when owners are unable to refinance their home loans - may increase.

Mr Shaun Poh, DTZ's senior director for investment advisory services and auction, said, however, that in the short term 'maybe (in the) next three to six months, I will not expect any increase in the number of mortgagee sales'.

He said banks this time round are quite prepared.

'That's why I think there is no panic repossession or foreclosure. The banks are not pulling the plug and are more prepared to talk to borrowers about restructuring their loans,' he explained.

Colliers International's figures show that the number of mortgagee sales across all auction houses has not seen a large jump in the first five months of the year.

The highest number of mortgagee-sale auctions was 21 - in February - while the lowest was 15 - last month.

Ms Grace Ng, Colliers' deputy managing director and auctioneer, said: 'I think the banks prefer to give the owners time to manage the property on their own.'

She said, however, that the number of mortgagee sales might rise in the third or fourth quarter of the year.

'Normally, there is a lag time between when the bank repossesses the property and when it puts it on the market.'

Colliers' data also showed that some $18.5 million worth of properties were sold across all auctions - forced sales or otherwise - last month.

'Owners are now quite receptive to putting properties up for auction. They have more or less accepted it as an acceptable mode of sale, compared to maybe a decade ago, when mortgagee sales had a bad image,' said Ms Ng.

Ms Mok Sze Sze, the head of auction and sales at Jones Lang LaSalle, said some good deals were transacted during her firm's last auction last month.

An example, she said, was a semi-detached house in Namly Garden. It was withdrawn in an auction in January at the highest bid of $2.8 million. Last month, it was sold for $3.7 million.

'With the recent improved market sentiment, we are seeing more owners' sales coming on board, with some owners looking at auctions as a way to attain the desired optimum price within a definite timeframe,' she said.

Perhaps another sign of the improved times is the confidence the owner of a colonial bungalow, in the choice Belmont Road area, has in getting an optimum price.

He will put his property, with a whopping land area of 32,627 sq ft and an indicative price range of $850 to $1,000 per sq ft, up for bidding at Knight Frank's auction next Tuesday.

Ms Mary Sai, the executive director of Knight Frank, said: 'Bungalows are hardly put up for auction. It's basically very rare property.'

'Optimism In Property Market Won't Last'

Source : The Straits Times, June 13, 2009

Analysts point to over-supply and weak rental demand

THE optimism in Singapore's property market is unsustainable, given an impending over-supply of new flats, weak rental demand and the fact that the country remains in a recession.

That is the pessimistic view of two research houses, which concluded that the price recovery is highly fragile.









Citigroup said the market is not at the start of a cyclical upswing and that the spike in home prices cannot last. 'We caution against over-optimism, because fundamentally the market is not ready for a sustained price recovery,' analyst Wendy Koh wrote in a report on Thursday.

In the same report, she downgraded Allgreen to 'sell', putting the developer in the same 'sell' basket as City Developments, CapitaLand and Keppel Land. Citi also downgraded Wing Tai to 'hold'.

While there has been strong resale demand, the call for new homes is patchy and rental demand remains weak, Ms Koh said.

Resale prices of some projects have risen and some developers are reducing discounts for new projects but Nomura Singapore believes these seemingly positive factors are misleading.

It maintained that the demand for new homes was boosted by price discounting and the interest absorption scheme.

'A rapid deterioration in rents amid higher supply and weaker demand has undermined yield expectations,' it said.

Nomura also pointed to the damaging effect of rising unsold inventory and forced sales by defaulting or distressed buyers who bought on deferred payment.

These properties form a source of 'hidden' inventory that will place further pressure on asking prices.

Also, as competition among new launches increases, there will be further risks of price declines.

The Citigroup report said a short-term price spike is possible, even in the luxury segment, given strong liquidity and the widening gap between Singapore and Hong Kong property prices.

But it cited the same over-supply risk highlighted by Nomura in its June 10 report, pointing out that supply scheduled for completion will reach a five-year high of 10,300 units this year and exceed 10,000 units a year through to 2011.

Knight Frank consultancy and research director Nicholas Mak is equally sceptical: 'The stock market fuelled much of the recent exuberance in the property market. People tend to think the recovery of one market is the recovery of another.'

If there was a time lag of six to 12 months, the property price rise would have been more sustainable, he added.

The private housing market has seen unexpectedly strong new home sales, at a rate of over 1,000 units a month.

'While this is good as it helps clear the backlog of over-supply, I am very concerned as rentals are still falling - by my estimate - at 3 per cent every month for some time now,' said Chesterton Suntec International's head of research and consultancy, Mr Colin Tan.

There is a clear disconnect if prices are improving while rents are falling, he said.

What is worrying is that most purchases now are made by investors, not owner-occupiers. These buyers will need to find tenants for their investment homes.

Around two-thirds of the completed supply coming through this year and next is in the central region, said Citigroup.

Couple this with the absence of a strong inflow of expatriates with large housing budgets, and rents in the upper-middle and luxury segments are likely to fall by another 20 to 30 per cent in the next two years. This would make a price spike unsustainable, said Citigroup.

It is more upbeat on the mass market sector as supply is limited, but rents there are also sliding, so any price rise is likely to be capped at 5 to 10 per cent.

The upside for the Housing Board resale market is limited as there is no wage rise in sight.

Nomura expects a shallow decline in mass market prices from now.

It tips the likelihood of a W-shaped recovery in asset prices, rather than the previously expected U-shaped recovery.

Dempsey: White Hot Or Too Hot?

Source : The Straits Times, June 13, 2009

Yet another F&B cluster is to open on hilltop area come September

TANGLIN Village, already home to the hip, hungry and thirsty, is getting a third lifestyle cluster.

Five furniture shops now occupying the seven blocks slated for this new cluster along Dempsey Road will move out by the end of this month.
























In their place come September: A $2 million lifestyle complex called 6ix and 7even @ Dempsey, comprising restaurants, bars and retailers taking up 11 units.

The master tenant for this part of Tanglin Village is Forward Alliance, a logistics and warehousing company making its first foray into the food and beverage (F&B) industry. It is now sourcing for tenants to rival the two other nearby clusters of restaurants and bars in Dempsey Hill and Dempsey Hill Green.

Forward Alliance has a few tricks up its sleeve. It plans to bring in restaurants that will serve food that is new in the neighbourhood such as fusion cuisine; 'live' music joints are also on the cards.

It is planning to have a bicycle boutique housed in a 300 sq m space as well - a one-stop store for bicycle enthusiasts with a cafe, bicycle racks and services like showers and limousine transport home for tired cyclists and their wheels.

Another novel idea: A caravan park-turned-restaurant. Forward Alliance plans to import about five caravans of between 30 sq m and 50 sq m in size, and then kit them out as private dining rooms for up to 12 people.

The debut of 6ix and 7even @ Dempsey will mark the latest chapter in the area's transformation from sleepy furniture town to hip dining and drinking destination.

Nearly half of the 72 businesses there now are restaurants or bars, each paying rents of between $8 and $15 per sq ft.

Tanglin Village started out in the 1860s as army barracks. In the 1990s, it became known for its furniture shops. Then in 2004, the Singapore Land Authority (SLA) stepped up its search for tenants who would put the pre-war blocks to other uses.

In came upmarket restaurants and wine bars such as Oosh and PS Cafe. Schools, shops, art galleries and offices also moved in.

In 2007, when Country City Investment (CCI) opened the Dempsey Hill and Dempsey Hill Green F&B clusters, the buzz in the area went up several notches.

CCI is now taking over several more Dempsey Road blocks to expand these two clusters. Several furniture shop tenants in this area moved out in February, complaining of rocketing rents.

So the entrance of yet another F&B cluster poses the question: Is the hot spot getting too hot for its own good?

After all, there are signs that the Government is getting wary of overkill. The Straits Times understands that for the upcoming Dempsey Hill expansion, the SLA has capped the amount of space occupied by F&B outlets to 20 per cent of the area.

The SLA has also stipulated that some space should be used by furniture shops, in an apparent bid to preserve the original feel of the place.

But real estate experts - and Dempsey F&B owners themselves - say the area still has room to grow. They also say its unique charm, thanks to the greenery and old buildings, will continue to attract diners.

Mr Michel Lu, who owns the Hacienda bar, said: 'The nice thing is that the buildings are quite spread out. It is very green, not compact, and does not feel like Singapore.' He is so upbeat about the growth prospects of the place that he is building a cafe extension to Hacienda. It will open in a month.

Mr Danny Yeo, managing director of property consultancy Knight Frank, said the success of the place depends on its variety of offerings. So as long as the new operator creates new concepts, then it should still do well, he said.

Mr Eric Cheng, executive director of property consultancy HSR, said master tenants will also need to choose their sub-tenants carefully to protect the area's upmarket atmosphere.

'Look at Pasir Panjang Village. It used to have that 'niche restaurant' feel. But now, it is just not really there,' he said.

Foodie Michelle Quah, who has been to Tanglin Village only thrice since its redevelopment, said the offerings will have to be more than just 'pleasant but predictable' to draw her back there.

Referring to the upcoming outlets, the 29-year-old legal counsel said: 'The food, decor and experience must set them apart from any of your usual yuppie haunts.'