(E) Foreign Interest in Singapore Real Estate

[E.1] Foreign funds and banks start looking at Singapore real estate

According to a Business Times report on 20 March 2009, SG Private Banking, which just set up a centre in Singapore to focus on real estate, hopes to invest another US$500 million in Asian property by end-2010.

Other firms here have similar plans. For example, Woori Investment & Securities (Woori I & S), part of Korea's Woori Financial Group, is looking at arranging and investing about US$300-500 million in Asian property over the next two years. And Singapore-based ARA Asia Dragon Fund aims to invest another US$1 billion in Asia over the next two to three years.

However, there are still some downside risks and the credit market still plays a vital role in the buying strategies.

(F) News on Government Land Sale (GLS) Programme

There have been no major developments in this area.

(G) Overall performance of the HDB resale market

[G.1] Resale flats going below valuation

Agents interviewed by the press said that it is now fairly easy for buyers to buy a flat without paying any COV or even find a flat that is priced below valuation. They said that there were more advertisements for resale flats going for absolutely no cash or below valuation.

A recent classified advertisement in The Straits Times offered a five-room flat near Ang Mo Kio Hub for $50,000 below its valuation of $640,000. Another one was offering five-room flats in Jurong for $10,000 to $15,000 below valuation.

Even flats in keenly sought-after estates, such as Tiong Bahru and Queenstown, are commanding less COV now because their values had appreciated tremendously during the market bull run in 2007.

For instance, the median COV for five-room flats in Bukit Merah, which reached $61,000 in the Q3 2007, has come down to a realistic level of $10,000 in Q4 2008.

Overall, the COV for five-room flats registered a 35% fall to $11,000 in Q4 2008, from $17,000 in Q3 2008. But for four-room flats, the fall in COV was smaller at 25%.

With the economy going downhill, there is no doubt that COV will continue to slide, with a bigger decline seen for bigger flats.

However, the COV for smaller flats may not come down so much because usually in a downturn, there will be higher demand for the smaller three- to four-room flats which may come from those downgrading from private properties.

[G.2] Resale transaction up in March 2009 after three-month decline

Transactions of smaller flats, including three- and four-room flats are in ascendancy. In fact, during the general gloom in the first two months of 2009, the 3-room resale transactions inched up, instead of falling.  While 4-room flat volume dipped slightly in February 2009, it rebounded with a vengeance in March 2009, hitting 1,013 – a height the market has not seen for at least the past 5 years.

However, the waning demand for larger flat types including 5-room flats and E-flats continue in March 2009. Although the resale volume of 5-room flats did perform better, it was some distance away from last year’s height of 699 transactions.

Transactions of Executive flat continue to be depressed. The 125 resale deals were lower than in February 2009 which was the worst month since February 2006. In short, while E-flats put in an indifferent showing in March 2009, smaller flats are truly the stars of the show.

Prepared by Sam Gian - Independent Real Estate Sales Trainer