Week in Review – 3 April 2014

Office rents unaffected by slowdown, URA and HDB flash reports indicate weakening of home prices, developer marketing tactics to counter the slowdown, three 99-year leasehold sites released
In this week’s iProperty Week In Review:

Office rents unaffected by slowdown in property market

CapitaCommercial Trust is optimistic that the office rental market will continue to grow stronger. In a presentation for the J.P. Morgan Asia Pacific Property Conference 2014, the company identified five growth opportunities for itself, one of which is continued rising office rents. CapitaCommercial Trust also shared that office market rents for Grade A offices in 4Q 2013 increased by 2.1 per cent quarter on quarter.

Last week, Maybank Kim Eng reported that REITS have seen renewed investor interest after the Urban Redevelopment Authority’s Office Property Rental Index recorded a ~1 per cent year-on-year increase in rent for both the Central Area and Central Region in 3Q13 and in 4Q13. 

URA and HDB flash reports indicate weakening of home prices in both private and public sectors

Prices of non-landed private residential properties are seeing declines and HDB resale prices have fallen to 198.6, compared to a high of 206.6 on the Resale Price Index. Analysts believe cooling measures such as the Total Debt Servicing Ratio (TDSR) are effective in stabilising prices and a buyer’s market will persist as purchasers focus on affordability. 

Prices of non-landed private properties in the Core Central and Rest of Central Region have shown greater declines of 1.3 per cent and 2.8 per cent respectively, compared to those in the Outside Central Region (OCR). Prices of units located in the OCR have declined by only 0.3 per cent, showing greater appeal for mass market homes located there.

Developers are using a variety of marketing tactics to counter the slowdown in the market

In the wake of quiet show flats and slower transactions in the property market, developers are offering discounts, promotions and more to attract buyers. According to the URA, 2013 saw a drop of about 40% in the number of private residential units sold, compared to 2012. The weakening of the HDB resale market could also be leading to fewer HDB homeowners upgrading to private residential homes, if the owners are constrained by smaller profits from the sale of their flats.

In the meantime developers, such as City Developments Limited, Singapore Land and MCC Land have hired multiple marketing agencies to drive sales of selected projects. Involving agents from various agencies increases the number of prospective home buyers, according to MCC Land.

Government releases three 99-year leasehold sites

As part of the Government Land Sales (GLS) Programme, the government has put two executive condominium (EC) sites at Yishun Street 51 up for tender and a third residential site at Margaret Drive on the reserve list. The first half of the 2014 GLS Programme comprises eight sites on the confirmed list and 15 on the reserve list. There have been four sites released so far, the lastest being Prince Charles Crescent (Parcel B), announced in February this year.

The three recently released sites can yield a total of about 1,300 units, with 1,010 for the Yishun sites and 275 for the Margaret Drive site. While the government intends for the sites to meet demands for private housing, analysts warn of an oversupply of ECs, especially in the North region. Analysts also expect that the tender for the site in Margaret Drive will not be triggered soon. Buyers are restricted by the recent cooling measures such as the Total Debt Servicing Ratio (TDSR) and are gearing towards more affordable mass market homes. This would affect how developers price the project at Margaret Drive as land prices in the vicinity are currently seen to be high.