Week in Review – 17 April 2014

In this week’s iProperty Week In Review:

Lower home prices may soon be a norm

Many have assessed that it is now a buyer’s market, and this is slowly proving to be true with both upcoming and recent launches, as well as old launches being priced lower than in 2013. The Sorrento by Allgreen Properties, located at West Coast Road, will launch this weekend at around $1,380 and $1,600 per square foot (psf), which is approximately 5 to 15% lower than similar projects launched in the same district in 2013.  The recently launched Lakeville by MCL Land was priced between $1,250 and $1,350 psf at the time of launch. The property, which is located at Jurong Lake District, can be compared to J Gateway, another project by MCL Land. When launched in July 2013, J Gateway commanded a higher price of $1,480 psf.

Developers like CapitaLand are pricing previously launched projects lower. Originally launched in 2012, Sky Habitat, which is located at Bishan, will be re-launched this weekend starting at $1,370 psf. As a point of comparison, prices in 2012 were between $1,435 to $1,893 psf. 

Analysts from Knight Frank Singapore and Barclays Capital expect interest and sales to pick up for projects that are priced below $1,600 psf. In the same vein, CIMB forecasted that sales for units priced above $1,600 psf will be subdued.

Recent reports have also demonstrated conservative bids for new sites put up for tender by URA. The 268,713 sq ft Prince Charles Crescent site received bids of $463.1 million by UOL Venture Investments and Kheng Leong Company, which translates to S$820.65 per sq ft per plot ratio (psf ppr). Bids in 2012 for land sales in the vicinity were much higher, at above $900 psf ppr. In a report by Today, Mr Ku Swee Yong, CEO of real estate agency Century 21, estimates the launch price will be between $1,300 and $1,400 psf, which is lower than current rates in the area.

Continued bleak outlook for private home market

The Urban Redevelopment Authority of Singapore (URA) released data on Tuesday that reflected a bleak outlook for the private home market in March. Only a total of 1,784 units have been sold to date this year. The number of transactions in March fell 82.8 per cent year on year. Barclays reported that the poor sales were in part due to a lack of new launches, with only The Santorini by MCC Land at Tampines being launched. Colliers International does however foresee that primary market sales volume will improve in the months to come, following the launch of Lakeville.

The bleak outlook looks set to continue as CIMB predicts that property prices to drop further from 2014 to 2016. This is attributable to the number of projects due to be completed compared to historical supply and take up. Analysts at CIMB believe that this will result in higher vacancy rates and push rental and property prices down further.

TDSR continues to reign in buyers

Amidst the falling sales of private homes are talks of how the Total Debt Servicing Ratio (TDSR) has affected buyers as more loans are assumed to have been rejected. Barclays Capital reported that 38 units were returned from Skysuites@Anson that was launched in March, and 19 units from Rivertrees and Riverbank which were considered the two best-selling launches in February. This was assumed to have been due to potential bank loan rejections due to the TDSR.

Analysts also cited TDSR as a factor for developers to stagger their property launches as buyers are struggling to get the required loan quantum. To this effect, in a CNBC report David Kuo of Motley Fool has highlighted that developers need to moderate prices as the TDSR has affected buyers who are seeking loans.

The mortgage loan growth in February was 8.4 percent, the slowest pace since July 2007, according to data compiled by Bloomberg extrapolated from MAS figures.

Commercial property transactions set to pick up

According to recent figures by Jones Lang LaSalle (JLL) on Asia Pacific’s commercial real estate market, transaction volumes have slowed to $28.8 billion (US$23.1 billion) in Q1 2014. In Singapore, commercial property transaction volumes have declined 42 percent to reach $1.5 billion (US$1.2 billion). JLL attributes the current slowdown to government cooling measures and various seasonal factors. However, this is expected to taper off, with a large number of en-bloc assets coming to market, improved investor sentiment and a healthier rental market. Consequentially, transaction volumes are set to pick up during the rest of the year.

Woodlands Regional Centre may be the next popular precinct in Singapore

In a report released on 9th April, OrangeTee has identified Woodlands Regional Centre as becoming a key growth area in North Singapore, hailing it as a “vibrant live-work-play precinct over the next 10 to 15 years”. This follows a report by the URA last week which stated that a commercial site at Woodlands Regional Centre released for tender by URA received strong interest from developers. 

The property consultancy firm sees the 700,000 m2 commercial space, more than 100 ha of development land and upcoming cross-border rail link as great potential for the “Northern Gateway” of Singapore. In the last ear, the URA has announced Woodlands Regional Centre as part of its Draft Master Plan, and plans to prioritise development of the land around the Woodlands MRT interchange station to capitalise on the enhanced connectivity. 

OrangeTee also sees high potential for rental yields in the precinct as the supply of completed private homes are limited. The firm quoted rental yields in Woodlands, Yishun and Sembawang as ranging between 4 per cent and 4.2 per cent which exceeds the island wide average of 3.8 per cent.