Week in Review – 5 June 2014

Overseas developers find opportunity in Singapore while Singapore developers look overseas for opportunities, HDB Housing Activity – HDB resale prices continuously fall; Lesser HDB flats being sold after Minimum Occupation Period; Another HUDB estate to be privatised, Continued tough times for property markets
Overseas developers find opportunity in Singapore while Singapore developers look overseas for opportunities
More overseas developers are launching sales offices and sales galleries in Singapore to reach out to Singaporeans with projects in locations like Australia and Iskandar among others. In the month of May, Crown International Holdings Group (Crown Group) from Australia launched a sales office while UMLand from Malaysia launched a property gallery at Anson House. The Crown Group sales office provides access to potential Singaporean buyers and local brokers. According to Iwan Sunito, CEO of Crown Group, the Singapore market shows high demand for Australian property and at the same time, the “Australian government is dedicated to engaging with overseas investors primarily in Asia”. Other sales galleries by overseas developers include China’s Country Garden showcasing its Danga Bay project and Malaysia’s Tropicana Corporation Bhd showcasing its projects in Penang, Klang Valley and Iskandar Malaysia. Iskandar Malaysia continues to be attractive for Singaporeans as more companies commit investments in the state. Ms Sarena Cheah, joint managing director of property developer Sunway Berhad’s property development division said in an interview with Today that, “As of the end of last year, Iskandar had committed investments of RM130 billion (S$50.7 billion) and…more than half of them have already been invested.”
Singapore based developers such as Frasers Centrepoint Limited (FCL) on the other hand, are looking to markets such as Australia and China where Mr Lim Ee Seng, the company’s chief executive officer, said macro-fundamentals support long-term housing demand. FCL has proposed a takeover bid of A$2.6 billion (S$3.03 billion) to Australian developer Australand Property for an acquisition that will see FCL taking control of Australand’s properties in the office and industrial sectors. This will add on to FCL’s Australian portfolio as the company is currently developing Central Park, a 2,000 unit apartment in central Sydney.
HDB Housing Activity – HDB resale prices continuously fall; Lesser HDB flats being sold after Minimum Occupation Period; Another HUDB estate to be privatised
The Singapore Real Estate Exchange (SRX) has reported yet another month of declining resale Housing and Development Board (HDB) flat prices. The SRX HDB Flash Report shows a decline of 1.2 percent for HDB resale prices from April to May, with prices of executive flats falling by 2.8 percent followed by prices of 3- and 4-room flats at 0.8 per cent. Sales volume for HDB resale flats also fell 11.1 per cent in May since April. Owners of HDB units in Queenstown, Clementi and Jurong East are however spared from the decline as the regions showed positive median Transaction Over X-Value (TOX) of S$6,500, S$1,000 and S$1,000, respectively. The median TOX is a measurement of the whether purchases are over or under the estimated market value according to SRX.
The falling resale prices are likely a reason for lesser HDB flats being sold after owners reach the Minimum Occupation Period (MOP). According to HDB, the number of flats sold in 2013 within a year of meeting the MOP was 470, less than half the number of flats sold the year before which was 1,006.
On top of last week’s news of the successful privatisation of Hougang Avenue 2 HUDC estate, Hougang Avenue 7 HUDC estate will be the next HUDC estate to be privatised. Residents of Hougang Avenue 7 HUDC estate received a letter on 28 May from the pro-tem committee overseeing the privatisation procedure, announcing that the privatisation is scheduled on June 13.
In other HDB news, HDB and Energy Market Authority (EMA) signed a Memorandum of Understanding (MOU) with Panasonic at the World Cities Summit for a study on the feasibility of establishing a Smart Home Energy Pilot, a study that can potentially help to lower electricity bills.
An online survey by National Development Ministry shows that Singaporeans are in favour of families living closer together. The respondents were keen on living in HDB flats in the same town as their parents, having more three-generation flats as well as supportive of the provision of higher housing grants to those who live close to or with their parents. For more information on the survey, visit http://www.mnd.gov.sg/homesweethome.
Continued tough times for property markets
Both DBS and Standard Chartered do not expect cooling measures will be relaxed anytime soon. DBS quotes the following as reasons for the need for continued measures – the continued rise of household debt-to-GDP ratio since it rose to 75 per cent in 2013; the historical high of mortgage loan-to-GDP ratio at 45 per cent; the continuously rising loan-to-deposit ratio (LDR) almost a year after the introduction of the Total Debt Servicing Ratio (TDSR). Standard Chartered on the other hand, referred to home prices that have yet to reach an equilibrium. Lim Cheng Teck, Standard Chartered Bank’s Chief Executive Officer, ASEAN stated in an interview with Bloomberg that measures would only be removed if “price growth reaches a certain level of equilibrium”.
The construction sector is likely feeling the domino effect of the cooling measures which has brought about lower sales for developers. The Singapore Commercial Credit Bureau (SCCB) recently reported delayed payments in the construction industry which could be linked to falling property transactions that brings about delays in payments from developers. The construction industry is also facing issues with limited manpower that brings about poorer workmanship especially in private residential homes. Today reported that “the construction boom in recent years has coincided with the Government’s tightening of foreign manpower”. Although structural safety of buildings are not compromised, some private residential owners provided feedback to Today that workmanship on their home interiors have been poor such as “hollow spots and scratches (on parquet flooring)” and “slanted sliding doors and chipped floors”.
In light of tough times for the property sector, bids for HDB’s recently released Executive Condominium (EC) site in Sembawang Avenue will most likely see conservative bids. The site is estimated to yield about 620 residential units and the tender will close at 12 noon on 10 July 2014.