New private home sales plunge 42 per cent
According to data from the Urban Redevelopment Authority (URA), new private home sales plunged 42 per cent from May to June. 375 housing units were transacted last month, dropping below the 643 units in May. The number of units launched also decreased, to 219 units compared to 500 units in May. Sales of executive condominiums (ECs) fell as well, from 210 units in May to 110 units in June. Mr Ismail Gafoor, Chief Executive Officer of PropNex Realty told TODAY that the drop in sales was likely due to a lack of launches, combined with the June school holidays and ongoing property curbs.
Botanique at Bartley in Upper Paya Lebar Road fared best with 59 units sold at a median price of S$1,301 per square foot (psf). Lakeville at Jurong Lake Link and The Panorama in Ang Mo Kio trailed closely behind, with 25 units sold at each project, at a median price of S$1,320 psf and S$1,231 psf.
This brings the total units sold to 497 and 450 for Lakeville and The Panorama respectively. All three projects are in the outside central region (OCR).
REDAS: More empty private homes
A soaring number of vacant private homes looks inevitable as supply increases and tougher mortgage curbs lessen demand. At a seminar held by the Real Estate Developers’ Association of Singapore (REDAS) on 14 July, REDAS’ president Mr Augustine Tan noted the upcoming supply of over 89,000 private homes between 2015 and 2019. He said, “This looming supply is likely to bring home vacancy rate to a new record high, causing a further slip in home rentals and a downward spiralling of property prices”. According to official figures, Singapore’s private residential prices have declined in six continuous quarters and flash estimates predict another fall in the upcoming seventh quarter. Fewer units have also been put up for sale by developers, with just 7,316 units launched in 2014 compared to 14,948 units in 2013.
According to CIMB, current market conditions, including property cooling measures, residential oversupply and lower development margins brought about by costly land have affected Singapore’s property developers more than the Global Financial Crisis in 2008.
“After the implementation of a series of macro-prudential measures by the government, including higher transaction costs and more prudent debt servicing measures, demand for residential property has weakened. This, coupled with a slow rental market and rising incoming supply, has led to higher vacancies and deteriorating private home prices,” said Analyst Ms Lock Mun Yee in a CIMB report.
“With revenue growth decelerating and the bottomline being affected by narrower margins, developers are increasingly looking to overseas markets such as Australia, the UK, China and other SEA countries. The bright spot is that developers’ balance sheets are healthy with low leverage, enabling them to seek reinvestment opportunities,” she noted.
Positive response for Brownstone EC
Despite the sluggish executive condominium (EC) market and predictions that upcoming launches will add to the supply glut, the newly launched Brownstone received 300 e-applications and over 2,000 visitors at the sales gallery on its opening weekend on 11 July. The luxurious 638-unit EC is situated at Canberra Drive, next to the future Canberra MRT Station on the North-South Line in Sembawang, which Mr Eugene Lim, Key Executive Officer at ERA Realty Network, the marketing agency for Brownstone, believes helps the EC stand out.
The EC includes 42 two-bedroom units, 428 three-bedroom units, 162 four-bedroom units and six five-bedroom penthouse with prices ranging from $599,000 to $680,000 for a two-room unit, and $869,000 to $990,000 for a four-room unit. According to data by the Urban Redevelopment Authority, 4,176 EC units remained vacant as of May, while in the previous year, it was 2,738 units. This means that vacancy rates increased to 15.1 per cent in the first four months of this year compared to six per cent last year.
Commenting on the positive response, director of property firm Chris International, Mr Chris Koh, said in an interview with TODAY, “Considering the number of ECs on the market, buyers are spoilt for choice, so a 50 per cent (application rate) on the development’s first weekend is not bad”. Government policies such as the Mortgage Servicing Ratio’s cap of 30 per cent and resale levy implemented on second-time buyers have put a lid on demand.
Shoebox unit owners are defaulting on mortgages
Once a favourite for being an apparently fail-proof and wise property investment choice, shoebox units are now losing their shine, with 27 units put up in auctions in the second quarter this year. This was an increase of 28.6 per cent quarter-on-quarter (QoQ) in the number of shoebox units offered for auction. With policies curbing the property market, declining rents and rising vacancy rates, investors are failing to pay their mortgages.
In an interview with Singapore Business Review, Director & Head of Auctions at Knight Frank Singapore, Ms Sharon Lee said, “Amid the sluggish leasing market, with a high vacancy of 8.3% for non-landed residential properties island-wide, investors of small-sized units face increased difficulties in obtaining rental income to service their mortgage loans. The subsequent mortgage defaults have resulted in lenders putting up these units for auction in a bid to secure recovery of their loan portfolios”.
Three out of four shoebox units put up for auction were under mortgagee sale. Ms Lee said that the increase in shoebox units put under mortgage sale signals a weakening outlook for shoebox units as a property investment choice, against a rising surplus of private homes and a slow leasing market.
40 parties, including government-linked companies (GLCs), top Malaysian developers, world-class property brands, as well as foreign state investment corporations have responded to Bandar Malaysia’s call for an expression of interest (EOI), which ended on 10 July. The project’s transaction advisor, CH Williams Talhar and Wong (WTW), said in a statement that they have received interest from Malaysia, Singapore, China, Japan, Korea and Australia investors.
Bandar Malaysia, a 486-acre mixed-urban development based in Sungai Besi, is 1Malaysia Development Berhad’s (1MDB) key project to the transformation of Greater Kuala Lumpur. The project’s master developer, 1MDB Real Estate Sdn Bhd (1MDBRE), is currently searching for development partners. “1MDBRE is looking for development partner(s) that can contribute to the project, bringing in strong brand names, relevant expertise, strong track record and the capacity to raise necessary funding,” said WTW in a statement on Monday.
The Bandar Malaysia project is located seven kilometres from Kuala Lumpur City Centre and will be key to the transformation of Kuala Lumpur’s central transport hub. It will be home to the high speed rail-line to Singapore, and mass rail transit Line 2 and 3, KTM Komuter, express rail link and upcoming connections to important highway networks within the city.
Savills: Ho Chi Minh City residential market reports strong performance in Q2
According to Savills’, recent policy changes on foreign ownership, competitive mortgage rates and rental yields have caused a spike in the supply and demand of residential property in Ho Chi Minh City, Vietnam. Notably, apartment and villa/townhouse sectors performed well in the second quarter of 2015.
In the second quarter, 9,700 new apartments were launched – marking a 47 per cent quarterly increase and topping the largest amount of newly launched supply in five years. There was an increase of three per cent quarter-on-quarter (QoQ) for the villa and townhouse market, with 470 units launched. With high demand for homes equipped with facilities and better infrastructure, sale transactions remained high for both markets, with apartments leading. 5,000 units were sold in the second quarter, a 17 per cent increase from the previous quarter and the highest volume since Q4 2010. Sales of villas and townhouses saw a 12 per cent quarterly increase.
With more supply to enter the market, this bodes well for foreign investors. The new laws on foreign ownership now allow international investors with valid visas and foreign businesses operating in Vietnam to own property in the country. A maximum of 30 per cent of units in an apartment building, or 250 houses per ward, can be owned by a foreigner.
59,200 new apartment units and 52,500 new dwellings are slated to be launched from H2 2015 to 2017. Apartments like the Empire City in Ho Chi Minh City’s District 2 are expected to interest foreign buyers.