Week in Review – 19 February 2015

Increase in sales of private residences expected with upcoming launches, Luxury homes in Singapore still attractive to world’s UHNWIs, Prices of EC set to moderate, Growing rent potential for homes in RCR, Sale and renting of HDB flats discussed during Parliament
Increase in sales of private residences expected with upcoming launches
The Urban Redevelopment Authority (URA) released data on 16 February showing that sales for private houses increased in January 2015, but remained lower as compared to January 2014. The number of private housing units sold by developers went up by 62 per cent, from 230 units in December 2014, to 372 units last month. This is due to developers launching 415 units in January 2015, a huge increase compared to the 53 units launched in the previous month. Sales of new private homes declined by 35 per cent year-on-year in January 2015.
Ms Christine Li, Director and Head of Research at Cushman and Wakefield, said, “With the expected completion of 21,359 private residential units, excluding executive condominiums, in 2015, as well as the impending interest rate hike by the second half of the year, headwinds are strong for the residential market as supply outstrips demand in the near to medium term.”
Sales volume may pick up after the Chinese New Year period as buyers start to source for homes after the festivities. In a recent report, OrangeTee stated that “many developers have held back new launches and instead preferred to strategise for a launch after February.” Upcoming new launches such as Sims Urban Oasis, Kingsford Waterbay, Botanique At Bartley and North Park Residences.
Luxury homes in Singapore still attractive to world’s UHNWIs
Prices of high-end residential homes in Singapore fell by six per cent in 2014, the largest drop in Asia Pacific. Jones Lang Lasalle (JLL) reported that the fall is due to market adjustment, a result of government policies. Prices in Hong Kong and Manila increased by two per cent and 9.7 per cent respectively.
In a Knight Frank wealth report for 2014, luxury home prices in Singapore were noted to be one of the highest in the region. During an interview with Bloomberg, Mr Alan Cheong, Director at Savills Plc said, “Luxury homes will face challenges to lure the overseas buyers back as they are loathe to pay the additional taxes.” Foreigners have to fork out a levy of as much as 18 per cent to the costs of the homes with the current taxes imposed by the city state.
Wealth-X and Sotheby’s “Global Luxury Residential Real Estate Report 2015” showed that the Republic continues to be a popular spot to purchase overseas properties by the world’s ultra-high net worth individuals (UHNWIs) at seventh place. A UHNWI buyer is on average 59 years old and has a median net worth of $143 million (US$105 million). Mr Philip White, President and Chief Executive Officer of Sotheby’s International Realty stated, “Singapore is a very attractive luxury real estate market with a thriving economy and international marketplace.”
Prices of EC set to moderate
CBRE released a report that stated the number of unsold Executive Condominiums (EC) has increased by eleven per cent month-on-month to 2,251 units in January. Mr Desmond Sim, Head of Research at CBRE, told the Singapore Business Review that the market is changing as buyers are increasingly opting for homes from existing launches, so as to obtain them within a shorter timeframe.
The Housing and Development Board (HDB) recently announced that despite the seven bids received for the EC land parcel at Woodland Avenue 12, the top bid submitted was the lowest on record in three-and-a-half years. Hao Yuan Investment submitted S$103.79 million or about $278 per sq ft per plot ratio (psf ppr) as the top bid for the 99-year leasehold EC site. In January, another EC site at Anchorvale Crescent attracted only three bids with the tender awarded to Sim Lian Group at a bid of $280 psf ppr.
Mr Ong Teck Hui, National Director for Research & Consultancy at JLL told Singapore Business Review that the 17 to 30 per cent take-up rate for the previous EC launches in November and December 2014 explains why developers are submitting significantly lower tender bids for EC sites. He added that, “This…reflects an expectation of EC prices correcting.”
Growing rent potential for homes in RCR
Following last week’s news on increasing rentals in the rest of the central region (RCR) and outside central region (OCR), Savills released a report on the changing state of rents across the different regions in Singapore. Savills reported that the rental prices of private homes in core central region (CCR) will continue declining, amid falling housing allowances of expats and the current gloomy market sentiments. According to Savills, the RCR has been the most resilient to the current island-wide decline in rents, mainly due to its proximity to the city and its relatively affordable housing. Savills noted that the average monthly rent of high-end condominiums also persisted in its decline, falling 1.9 per cent quarter-on-quarter and 5.8 per cent year-on-year to S$4.57 per sq ft in Q4 2014. 
Sale and renting of HDB flats discussed during Parliament
HDB plans to release two batches of about 5,000 units of balance flats this year. Minister of State for National Development Maliki Osman said that by conducting the sale bi-annually, applicants would have more flats to choose from and a better success rate for each exercise. Of the 10,000 balance flats, 3,000 units will be located in mature estates. An estimated 4,000 units will be three-room and smaller.
According to Minister of State (National Development) Desmond Lee, nine per cent of the applicants (estimated 10,000 applicants) failed to complete the purchase of their Build-to-Order (BTO) flats, out of the 113,000 new HDB flat bookings since 2010.  There were also 460 appeals made between 2010 and 2014 to delay the key collections, specifically 30 appeals in 2010 followed by 50, 90, 90 and 200 in the subsequent years. 
Mr Lee also stated that 51 flat buyers failed to complete the possession of their new flats, after the second round of credit assessment, between the period of 2013 and 2014. He warned against buyers from completing the purchase if they cannot manage to serve their housing loan, saying “It would merely be creating a potential loan defaulter with many other new problems for the family.”
Dr Maliki also shared that there are 87,900 households in Singapore that have rented out their flats as of 31 January. Of these numbers, 92 per cent are Singaporean households, while the rest are permanent residents. Since January 2013, permanent residents can only sublet part of their flats, but not their entire flats according to the Housing Development Board (HDB). Dr Maliki advised flat owners to be aware of the regulations to avoid breaching them.