Week in Review – 24 July 2014

3,841 units released in latest BTO exercise, Temporary extension of stay for resale flat owners, Expect cooling measures to remain for the long-run, City Gate successfully launched, Developers venture abroad in light of weak local market
3,841 units released in latest BTO exercise
HDB has released 3,841 new flats under this month’s Build-To-Order (BTO) exercise, consisting of Studio Apartments, 2- to 5-room flats and 3Gen flats in Punggol, Sembawang, Woodlands, Yishun, and Toa Payoh. Launches for Woodland’s Kampung Admiralty and Toa Payoh’s Apex attracted much attention. Commenting on Kampung Admiralty’s popular Studio Apartment launch, Mr Mohamed Ismail, CEO at Propnex, told CNA “such studio apartments do allow Singaporeans who are older to be able to dispose of their existing flat and yet live so comfortably near all other amenities that are provided, and cash out from the capital appreciation of the past”. Meanwhile the 4-room flats in Toa Payoh’s Apex were oversubscribed, with 1.3 times more applicants than units available.
85 per cent of 4- and 5-room and 70 per cent of 2- and 3-room public flats were set aside for first-time applicants. Multi-generation families are given public flat options in Matilda Court, Waterway Sunray, Park Grove @ Yishun, Sun Natura and Toa Payoh Apex under the Multi-Generation Priority Scheme. Married couples can apply for 3Gen flats in Park Grove @ Yishun.  In September HDB expects to launch 4,510 BTO flats in Bukit Batok, Hougang, Jurong and Kallang/Whampoa, as well as 3,000 Sales of Balance (SBF) flats in November. Mr Mohamed added that most of the backlog for first-time applicants has been cleared in this release and that for the coming years, first-timer’s subscription rates could be below two or even less than 1.5. 
Temporary extension of stay for resale flat owners
HDB has announced that flat sellers can now come to an agreement with their buyers to allow the former to continue staying in their homes for up to three months after completion of the sale. According to a blog post by Minister of National Development, Mr Khaw Boon Wan, this is intended to give sellers “sufficient time” to buy their next home, as “some do not have their homes to move into as they may not yet be ready (as) renovation is in progress, (and) others may first need funds from the sale of their current flat before they can complete the purchase of their next home”. With the new policy, about 2,700 households (representing 15 per cent of all resale transactions) could benefit from the extended stay. Mr Eugene Lim, Key Executive Officer at ERA, told TODAY “it is something the market has been pushing for some time, and it is certainly a relief that we now have an official policy to allow for this temporary extension of stay for the seller after the completion of the sale”.
Expect cooling measures to remain for the long-run
Following URA’s release of data showing continued decline in private home prices in 2Q 2014, Keppel Land CEO Ang Wee Gee said that “home prices are expected to continue to moderate” therefore “Singapore is unlikely to relax property-cooling measures in the short term.” Mr Nicholas Mak, Executive Director at SLP International, told The Edge Singapore that “developers that have deep pockets may not be under tremendous pressure to cut prices”. He agreed with Keppel Land’s view, adding that he “(doesn’t) see the government relaxing the curbs for a year”.
MAS confirmed this during the release of its annual report for the 2013/14 financial year, with Managing Director Mr Ravi Menon saying that it is “too early” to ease the cooling measures currently in place. According to Mr Ravi, “property prices have risen 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters.” He added that easing cooling measures during a period of low interest rates may start a spiral of price increases, and Singaporean households still need more time to reduce their debt levels.
City Gate successfully launched
Amidst a weakening property market, World Class Land and Fragrance Group’s joint venture – Bayfront Ventures – successfully launched the mixed development project City Gate at Beach Road over the weekend. 78 residential units and 62 commercial units were sold at $1,800 psf and $2,900 to $6,200 psf respectively, with the help of aggressive marketing efforts by six real estate agencies. According to RHB Bank, the take-up rate by buyers is encouraging considering the current sluggish outlook.
Developers venture abroad in light of weak local market
As the government’s cooling measures take a toll on the property market, local developers are venturing abroad for better opportunities, according to a report by UOB Kay Hian. The report states that many big Singaporean developers such as OUE’s joint venture with Caesars Entertainment, City Developments Limited and Ho Bee Land have expanded their operations overseas. 
“Developers are deep in value but lack near-term catalysts. An analysis of the peak/trough P/B multiples in past cycles suggests that developers offer an attractive upside potential of 152% vs a downside risk of 39%. However, near-term news flow from the residential segment is likely to be negative. The slowing residential demand and elevated land prices in Singapore are prompting developers to explore overseas land acquisition opportunities,” says UOB Kay Hian in the report. This also explains the mild participation rate for the latest government land tenders, ranging from four to twelve bids per tender. The report anticipates however that “business park and high-tech space will benefit in the medium term as rising occupancies and rentals for office space will lend support to a recovery in the segment”.