Week in Review – 28 August 2014

Cooling market: bane or boon? Thomson-East Coast line to boost property prices: UOB Kay Hian, Concerns continue over Lease Buyback Scheme despite revisions, Cluster housing developments to enjoy more communal space and greenery
Cooling market: bane or boon?
In light of the cooling market, sentiment is rising among investors, while uncertainties plague sellers of older properties and developers. A recent survey by Manulife recorded an increase in the Manulife Investor Sentiment Index to 15 points, the highest since the launch of the survey in Q1 2013. Manulife reported that the “proportion of respondents who think it is a good time to invest in their own home rose to 40 per cent in the second quarter (from 31 per cent in the second quarter)”, citing “low interest rates, market stability and, importantly, the view that property prices have corrected to an attractive entry level for investment”. 
At the same time, the vacancy rate of private homes has risen from 6.6 per cent in Q1 2014 to 7.1 per cent in Q2 2014, bringing the total number of vacant private residential units to 21,268 island-wide. According to Savills the vacancy rate is rising “despite the strong leasing demand in Q2 2014”. The real estate services provider also notes that most of the projects that have added to the rising vacancies are “in the suburban areas, such as The Lakefront Residences on Lakeside Drive (629 units), Foresque Residences on Petir Road (496 units), Waterfront Gold on Bedok Reservoir Road (361 units) and The Greenwich on Seletar Road (319 units)”. 
Contributing to the negative sentiments among developers are sellers who have put their properties up for collective sales, or en-bloc. Real estate services firm Colliers International noted that “not a single attempt at a collective sale succeeded between January and July this year” and that this will not change unless “sellers lower their price expectations and stop aiming for huge windfalls”. However, the collective sales route is still considered to be “relevant and can still be meaningful for owners of older properties”. Colliers said, “Sellers must accept that making a sudden windfall from chance is a thing best filed in the annals of history… The way forward for collective sales should be that of a practical method of disposal for an ageing asset that is past its functional prime”.
Thomson-East Coast line to boost property prices: UOB Kay Hian
UOB Kay Hian said in a recent report that the upcoming Thomson-East Coast line (TEL) will “likely see 5-15 per cent capital gains” for residential developments in the East Coast area, increased shopper traffic for retail malls and tenant demand for offices and industrial properties. TEL station locations include Tanjong Rhu, Katong Park, Amber, Marine Parade, Marine Terrace, Siglap, Bayshore, Bedok South and Sungei Bedok and will be walking distance from an estimated 160,000 households. The report noted that “travel times will be reduced by 15-30 mins and almost by half for a resident travelling from East Coast to Orchard”. 
Concerns continue over Lease Buyback Scheme despite revisions 
An extension of the Lease Buyback Scheme (LBS) to include 4-room flat owners was announced last week by Prime Minister Lee Hsien Loong at the National Day Rally. The LBS is an additional monetisation option to help low-income elderly households to unlock part of their housing equity while they continue living in their homes, and receive a lifelong income stream to supplement their retirement income. Under the scheme, participants sell a part of their flat lease to the Housing & Development Board, retaining a 30-year lease. Their proceeds from selling part of the flat lease will be used to top up their CPF Retirement Accounts for annuity payouts. Concerns of outliving the 30-year lease and wanting to retain shorter leases are some reasons cited for the slow take up of the scheme. Speaker of Parliament Halimah Yacob, who chairs the Pioneer Generation Joint Committee, said that the committee will look into addressing these concerns. 
Cluster housing developments to enjoy more communal space and greenery
The Urban Redevelopment Authority (URA) has announced revised guidelines for strata landed housing developments, to reduce the likelihood of additional traffic and parking problems and a congested living environment – concerns raised by residents in landed housing estates regarding such developments. Key changes to the guidelines took place from 23 August 2014 and include:
– A new set of formulae to determine the maximum number of houses allowed in various types of strata landed housing developments generally resulting in fewer strata landed units compared to the previous formulae.
– A requirement for developers to set aside at least 45 per cent of the land area for communal open space, up from the current 30 per cent.
– A minimum of 25 per cent out of the communal area to be set aside for on-ground greenery.
– A maximum of 20 per cent to be used for communal facilities like swimming pools and playgrounds.
According to a Today report, property analysts believe that the impact of the new rules on pricing and buyer demand “should be limited, although interest from developers could wane”. In the interview with Today, Mr Alan Cheong, Senior Director for Research at Savills said “Under the new guidelines, developers may have to build at a loss of revenue because the social value of having more communal space cannot translate directly into monetary value. But prices are still largely dependent on market conditions…Considering these factors, cluster housing developments may become less appealing to developers. But I don’t see this causing any substantial change to the private property sector — the cluster housing segment is only a very small part of the more than 800,000 landed units in Singapore”.