Week in Review – 18 December 2014

Home prices to continue stabilising in 2015
The Housing and Development Board (HDB) resale market in Singapore is predicted to remain modest in 2015. The HDB reported that resale flat prices saw 7.3 per cent growth in fiscal 2012/13, which slowed to 3.4 per cent in FY2013/14. With the supply of resale flats rising, property analysts expect further moderation in prices. The Ministry of National Development estimated that 47,505 residential units, including private and executive condominiums, will be completed in 2014, followed by 50,592 and 60,623 units in 2015 and 2016 respectively. By 2017, 200,034 residential units will be built and finished.
Mr Chris Koh, Director of Chris International told Channel NewsAsia, “Historically, during the year-end period you get fewer transactions and of course, that has an effect on prices. You have the school holidays, the festivities. Then 2015, the beginning of the year will again be a slow quarter.”
The Total Debt Servicing Ratio (TDSR), implemented in June last year, has brought about a continuous fall in private home prices, beginning in Q4 2013. Market analysts expect the downward trend to continue in 2015 as demand weakens while the supply of private residential homes rises.
Mr Mohamed Ismail, CEO of PropNex Realty believes that the Government will not relax cooling measures at this stage. He said in an interview with Channel NewsAsia, “If you look at any form of a barometer to measure, from the mind of the authorities, they are saying that yes, we understand volume has dropped 30, 40, 50 per cent on different segments but prices have not dipped even close to ten per cent.”
Other property watchers Channel NewsAsia spoke with commented that the Government may be looking at additional indicators such as economic growth, interest and employment rates.
Ms Chia Siew Chuin, Director for Research and Advisory at Colliers International, said, “With all these factors still prevailing, it would then mean that if the government were to remove the measures at this point in time, it would be too premature. Whatever efforts that have been put in place earlier to contain or to curb buyers from over-extending themselves, that would have been in vain.”
Transactions for executive condominiums remain bullish in Singapore
The executive condominium (EC) market witnessed a sharp rise in sales last month, though analysts predict that sales in December will slow down. Statistics from the URA indicated that developers sold almost ten times the number of ECs in November (855 units) as compared to October (90 units). There were a total of three ECs up for sale last month; namely Lake Life, Bellewaters and Bellewoods, with Lake Life top in terms of sales.
When interviewed by Channel NewsAsia, Mr Alan Cheong, Senior Director of Research and Consultancy at Savills Singapore, said, “The number of EC units sold last month is higher than the total number of EC units sold in the first ten months of this year. This is the result of pent-up demand meeting pent-up supply as there was an absence of new ECs”.
The Amore, an EC at Punggol Central that opened for applications from last Saturday is the only remaining EC to come without a resale levy. Prices for the 395-unit project are S$780 to S$800 per square foot.
In contrast, URA statistics showed that sales of private homes decreased by 49.5 per cent in November. Analysts attributed the falling sales to the year-end seasonal slowdown and the increased focus on cheaper ECs to cater to existing credit constraints. TRE Residences, the best performing private project last month, sold a mere 52 out of 250 units at a median of S$1,588 per square foot (psf), whereas Lake Life witnessed sales of 533 out of 546 units at a median price of S$869 psf. Property experts interviewed by Channel News Asia predict that 2014 will see less than 8,000 private property units sold, which is about half the sales figure (14,948) of 2013.
Analysts expect that developers are unlikely to provide discounts on projects due to the high land cost. Mr Lim Yong Hock, Key Executive Officer of PropNex Realty, suggested to Channel NewsAsia that developers may utilise different methods, such as reducing property sizes, to allow the quantum to be more affordable.
HDB releases its annual report
The HDB released its annual report, stating that its deficit has more than doubled from the previous financial year, to almost S$2 billion. The overall deficit has increased from S$143 million in FY2010/2011, to S$443 million in FY2011/2012, followed by S$797 million in FY2012/2013 and finally to S$1.97 billion in FY2013/2014.
When questioned by TODAY, HDB responded that the annual deficits were incurred due to HDB’s focus of providing homes for Singaporeans. It explained that its home ownership programmes were the reason for the majority of the deficit in FY2013/14, about S$1.93 billion. The government covered the overall deficit with its grant, estimated to be S$2.12 billion and double the amount given to HDB in the previous financial year.
Sing Tien Foo, Associate Professor at National University of Singapore said to TODAY that the rise in the income ceiling for the Special CPF Housing Grant (SHG) and its extension to middle-income families were causes of the surge in HDB’s deficit. He added that other factors include increased construction and land costs for new BTO flats.
Market analysts commented that after the previous few years of increasing supply of flats to cater to first-time buyers, the Government will reduce its supply in 2015. They were also confident that the Government has the financial capability to handle the deficits.
When interviewed by TODAY, Albert Lu, Key Executive Officer of C&H Properties said that the deficit in FY2013/2014 will “likely to be one-off” and Mr Chris Koh, Director of Chris International added that the Government, which is financially strong, should have no issues in financing the deficit.
HDB also reported positive news as its annual report showed that the construction of new flats and its sale have increased in FY2013/2014. Statistics indicate an 18.6 per cent rise in construction of flats, which amounts to 86,298 flats in FY2013/2014, from 72,737 in FY2012/2013. The number of flats sold was 13,300 units in FY2013/2014, a growth of 2,780 units. The report also summarized its performance in laying out the statistics of its newly launched single schemes and the new Three-Generation (3Gen) flats, together with the six BTO exercises in FY2013/2014.
Selected sites in Bugis and Tuas up for sale
Peace Centre and Peace Mansion, situated on a 76,617-square-foot site on Sophia Road, were launched for sale on 15 December. Colliers International confirmed that the site has an indicative price of approximately S$680 million and that it “has a 99-year leasehold tenure that commenced on Jun 2, 1970, and is zoned for commercial use, with a gross plot ratio of 4.2 according to the Master Plan 2014.” The tender would be closed on 11 February 2015 at 2.30pm.
JTC Corporation (JTC) announced on 16 December that it has put up two Tuas sites for sale. The first site, which is on JTC’s confirmed list, is situated on a 0.8-hectare sized land at Tuas South Street 11 and has a 20-year five-month tenure. When interviewed by TODAY, Mr Nicholas Mak, Executive Director of SLP International Property Consultants predicted that the selling price will be between S$6.4 million and S$7.2 million. The other site, which is on the Reserve list, is a 0.5-hectare industrial site at Tuas South Street 7. An anonymous buyer put up a bidding price of minimum S$4.2 million for the second site, which has a 20-year, four-month tenure. The first and second sites, which are both zoned for Business-2 development, close their tender on 10 February 2015 and six week after end-December respectively.