Week in Review – 22 January 2015

Sales down in December; down for all of 2014, Developers tread a cautious path, Tenants market? HDB net deficit to remain high says Minister Khaw, URA proposes rezoning of Geylang area, Singapore Business Federation announces fair tenancy framework
Sales down in December; down for all of 2014
URA data showed that new home sales dropped to a five year low in December 2014, with buyers and developers holding back purchases and launches. The number of units sold fell by 46 per cent, from 423 in November to 230 last month. Total 2014 new home sales amounted to 7,557 units, half the 15,291 sold in 2013. 
December’s lacklustre sales can be attributed to a lack of new projects and a drought in home-buying. Colliers International stated that “In the absence of new launches to spur buying interest, home-buying activity in December 2014 also slowed down across all three market segments.” In December, primary market sales volume in the Core Central Region fell by 56.3 per cent month-on-month to 35 units. Likewise, sales volume in the Rest of Central Region and Outside Central Region dropped by 60.1 per cent and 29.5 per cent month-on-month, to 61 units and 134 units respectively.
While overall property sales slowed, buying interest for executive condominiums (EC) held firm in December, according to DBS. DBS reported that The Terrace, a 747-unit EC launched in Punggol Drive, was the most popular project last month, followed by Bellewaters, Waterwoods and Skypark Residences. DBS listed non-landed properties, such as Lakeville, The Panorama and [email protected] as the top selling projects.
Developers tread a cautious path
Developers were cautious about an EC land site at Anchorvale Crescent, registering just three bids at the close of the tender on 20 January. Sim Lian Land submitted the highest bid of S$157.8 million for the 17,450.10 square metre, 99-year leasehold site, which can potentially be developed into an estimated 525 units, according to the HDB.
Mr Nicholas Mak, Executive Director for Research & Consultancy at SLP International Property Consultants, told Channel News Asia that “the top bid translates to a price of S$280 per square foot per plot ratio – the lowest land price for an EC site since July 2011.” 
Tenants market?
Analysts interviewed by Bloomberg said that it has turned into a tenant’s market. URA data shows that vacancy rates for private residential homes increased from 4.6 per cent in March 2010 to 7.1 per cent in Q3 2014, while Colliers auction data indicated a year-on-year rise in the number of auctioned apartments and houses, from 32 units to 159 units. Mr Alan Cheong, Singapore-based Director at Savills plc, told Bloomberg that apartment vacancies may hit ten per cent by end-2015, significant considering vacancies rate peaked at 9.7 per cent during the 1998 Asian crisis. With vacancy rates rising, tenants are having the upper hand when negotiating with landlords. Mr Sam King, a 29-year-old sales director at an aviation services company, has been renting a two-bedroom penthouse in Singapore for six years. His rental was reduced by ten per cent for the first time in late 2014. He told Bloomberg that “It has turned into a tenant’s market”. 
HDB net deficit to remain high says Minister Khaw
Mr Khaw Boon Wan, Minister for National Development, announced that the HDB will continue to incur high net deficits over the next few years; the net deficit surged to S$1.97 billion in FY2013/14. Mr Khaw explained that the surge was attributed to the subsidy given to buyers of new flats under the Home Ownership Programme and the disbursement of CPF Housing Grants allocated to eligible buyers of resale flats. He added that the future deficit will be dependent on several factors including housing demand, HDB’s building and upgrading programmes, development costs and policy changes. In addition, Mr Khaw mentioned that the HDB will grant a third loan for buyers only under exceptional circumstances in an effort to discourage ‘churning’ of resale flats.
URA proposes rezoning of Geylang area
The URA has proposed rezoning the area bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang, to change from ‘Residential/Institution’ use to ‘Commercial/Institution’. Analysts are speculating this move could benefit existing owners in the area, due to lowered residential supply. Analysts from OSK-DMG told the Singapore Business Review that the rise in capital value of condos in Geylang is largely dependent on whether the area can shed its “red light” reputation.
Singapore Business Federation announces fair tenancy framework
The Singapore Business Federation (SBF) released a Fair Tenancy Framework to prevent unfair leasing practices. According to SBF, the guidelines under the framework, which will be published in a guidebook, will allow small and medium enterprises to have a better understanding of tenancy terms and conditions, so as to establish fairer negotiation ground between both landlord and tenant. Business owners can also refer to rental data, categorised in terms of street, size, floor level and price range when negotiating leases, according to Ms Cynthia Phua, Chairman of the Rental Practices Working Group under the SBF-led Small and Medium Enterprises Committee (SMEC). Information will be on the JTC Corporation and URA websites and updated every quarter.
Mr Teo Ser Luck, Minister of State for Trade and Industry, noted however that the framework is intended to be voluntary, while legislation would require study on its implications. According to Channel NewsAsia, major landlords such as CapitaMall Trust and Ascendas support the framework.