Week in Review – 30 October 2014

Private residential prices and transactions fall, again, HDB resale prices decline for fifth consecutive quarter, Thomson East Coast Line (TEL) to boost property prices, Rise in foreign investment interest, URA launches second land parcel in Paya Lebar Central

The Urban Redevelopment Authority (URA) revealed that the private residential price index declined by 0.7 per cent in Q3 2014, following a one per cent decrease in Q2. Analysts told TODAY that the moderate decline in property prices suggests a stabilising market, but the correction is not complete, cautioning that prices might soften in the following few months. URA noted declines across all private home segments: non-landed properties in the Core Central Region (CCR) fell by 0.8 per cent; non-landed properties in the Rest of Central Region (RCR) and Outside Central Region (OCR) fell by 0.4 per cent and 0.3 per cent respectively. Landed properties saw a more significant decline of 1.8 per cent, following a 1.7 per cent decline in Q2. Property analysts also noted that the subtle decline in the price index was supported by ‘higher priced’ new launches, for instance Highline Residences at Kim Tian Road, City Gate at Beach Road and Bijou at Jalan Mat Jambol, where units sold for  more than S$1,800 per square foot.

There was also a decrease in developer’s sales, by approximately 40 per cent, to 1,531 condominium units in Q3, from 2,665 units in Q2. Resale transactions fell as well, from 1,389 in Q2 to 1,288 in Q3. Although buyers are willing to purchase properties, home owners and developers seem unwilling to cut prices further. Mr Eugene Lim, Key Executive Office of ERA told TODAY, “Sellers are under no pressure to cut prices significantly, the (market) continues to see a mismatch of expectations and deals take longer to close.” Moreover, property consultants predict rental values and property prices will decline for another year due to oversupply of new private homes. As of the end of Q3 2014, there were 74,496 uncompleted private homes in the pipeline, of which 28,120 remain unsold.

The Housing Development Board’s (HDB) resale price index fell for the fifth consecutive quarter, by 1.7 per cent in Q3 2014. Analysts attributed the decline to loan curbs and a surplus of new flats. The decline in prices has however sparked growth in resale transactions, up 2.8 per cent, from 4,389 units in Q2 to 4,513 units in Q3. The rental market has seen more activity, with a 5.5 per cent increase in sublet transactions in Q3 and a 1.5 per cent increase in HDB flats being approved for subletting. Mohamed Ismail, Chief Executive Officer at PropNex Realty, noted in TODAY that he expects HDB resale prices to soften by six to seven per cent in 2014, as a result of an influx in supply of new homes and the property cooling measures – resale volumes are expected to be between 16,500 to 17,000 units. In addition, an increase in second-time home buyers purchasing Build-to-Order flats will continue to impact resale prices as buyers must sell their existing flats within six months of key collection. “Home buyers are more restrained if their MSR is over 30 per cent, or TDSR is near 60 per cent. Loan curbs and softer prices will ultimately mean that HDB upgraders will find it more prohibitive to upgrade to a private property,” Mohamed Ismail explained to TODAY.

Singapore’s sixth rail line – Thomson East Coast Line (TEL) – is anticipated to be fully operational by 2024. According to the latest Real Estate Sentiment Index (RESI) report, the upcoming TEL is predicted to give a boost to property prices in areas along the rail line route, with 78.5 per cent of respondents identifying Marine Parade seeing the most benefit. More than 60 per cent of respondents also cited Katong/Amber Road, Siglap/Bayshore, Upper Thomson and Tanjung Rhu. Overall, the report revealed that respondent’s sentiments towards the property market was bearish. The report revealed that market sentiments towards the prime and suburban residential sectors were the bleakest. The current net sentiment balance for the prime residential sector was negative 76 per cent, while the net sentiment for suburban sector had a net balance of negative 63 per cent.

Despite the higher cost of foreign home ownership as a result of the Additional Buyers’ Stamp Duty (ABSD), foreigners are starting to adapt. A report by Knight Frank identified District 23 (Hillview, Dairy Farm, Bukit Panjang, Choa Chu Kang), as the residential hotspot for foreign buyers in Q3 2014, with the highest number of homes bought by both Permanent Resident (PR) and Non-permanent resident (NPR) buyers, from 5.5 per cent in Q2 to 8.8 per cent in Q3. An additional 17.3 per cent of foreign buyer transactions were in districts 9, 10 and 11, marking a 14.0 per cent quarterly improvement.

Moreover, a report by Maybank Kim Eng revealed that the identity of foreign buyers in Singapore has shifted slightly. People’s Republic of China (PRC) Chinese now constitute the highest number of purchasers, at 28.2 per cent in September 2014. Malaysians and Indonesians continue to represent a sizable percentage of foreign buying in Singapore, such that economic crises in these countries might impact the Singapore market.

The Urban Redevelopment Authority (URA) launched a public tender for a land parcel at the junction of Payar Lebar and Sims Avenue – a mixed-use site consisting of office, retail and residential uses. In conjunction with URA’s decentralisation strategy, the development of commercial clusters outside the central region will create employment opportunities closer to homes, thus reducing congestion and transportation time for businesses located outside the Central Business District (CBD). Paya Lebar Central is anticipated to be a ‘vibrant commercial centre’ with approximately 165,000 sqm of gross floor area (GFA), of which 90,000 sqm will be allocated as office space and the remaining space would be available for other uses – “additional office, retail, entertainment, food & beverage (F&B) and residential uses”.

The land parcel consists of a 99-year lease period and is situated near the Paya Lebar Interchange and MRT station, as well as other upcoming developments in Paya Lebar – Paya Lebar Square, shopping mall One KM and the Workforce Development Agency’s new Lifelong Learning Institute. The accessibility to the MRT station and proximity to the CBD has attracted a significant level of developer interest. Desmond Sim, Research Head in CBRE Southeast Asia, commented to Channel NewsAsia, “It is a highly anticipated plot as it is yet another step in the government’s plan to provide a viable alternative to the CBD commercial market, helping occupiers manage costs and bring jobs closer to homes.” The tender period will be approximately 22 weeks, and will close on 31 March 2015.