Week in Review – 5 March 2015

Falling prices for resale private homes and luxury apartments, Lower development charges for non-landed residential projects, Tussle between sellers and buyers continues, REDAS to government: Loosen reign on high-end properties, Steady growth in overseas investments by Singaporean developers, Singaporean investors set their sights on London and Malaysia
Falling prices for resale private homes and luxury apartments
Overall resale prices of private residences fell in January, brought about by central regional price declines. According to Singapore Residential Price Index (SRPI) estimates, overall prices recorded a 1.6 per cent month-on-month decrease – a larger fall as compared to the one per cent decrease in December 2014. Resale prices of homes in the central region and the non-central region, excluding small units, fell by 1.9 per cent and 1.4 per cent respectively. Resale prices of small units decreased by 0.6 per cent.
In a biannual report released by CBRE, prices of luxury apartments have continued to decline year-on-year. The average price of luxury apartments in the secondary market declined by 6.2 per cent, from S$2,825 psf at end 2013, to S$2,650 psf at end 2014. CBRE said that the luxury housing market is encountering “challenging times”. According to the report, prices for good class bungalows (GCB) remain strong, based on transactions in 2014. The land rate for GCBs increased by 6.7 per cent year-on-year, from S$1,338 psf to S$1,428 psf. Sentosa Cove bungalows fared the worst among GCBs however, with average prices dropping 20 per cent year-on-year to S$1,676 psf.
CBRE reported that overall transactions for both housing types saw a slowdown in 2014. 28 GCBs were sold in 2014, down from 29 units in 2013. The number of luxury apartments also declined from 243 caveats in 2013 to 136 caveats in 2014.
Lower development charges for non-landed residential projects
The Ministry of National Development (MND) announced that it has cut development charges (DC) for non-landed residential projects, including condominiums. The new DC rates, effective from 1 March 2015, are three per cent lower on average than previously. Out of 118 sectors, 73 sectors recorded decreases of between two per cent to 13 per cent. The remaining 45 sectors; DC rates are unchanged. DC rates for Sector 100, which covers the Tampines Road / Hougang / Punggol / Sengkang area fell the most at 13 per cent.
Tussle between sellers and buyers continues 
Sellers are holding firm on asking prices even as buyers search for bargains. According to a TODAY report, only two out of 20 properties that the newspaper surveyed have asking prices below valuation, while the remaining properties have prices above valuation. Eight properties are seeking at least 20 per cent more than their respective valuations. Owners of higher-end residences in particular were asking for higher premiums over valuation such as a unit at Marina Bay Residences that indicated an asking price that was 85.9 per cent above valuation.  Owners of lower-end residences were slightly more modest with asking prices. Units at Florida condominium in Hougang and Castle Green at Yio Chu Kang Road were selling at 2.7 per cent and 4.8 per cent above respective valuation prices.
Property analysts interviewed by TODAY said that in the current subdued market, there is a mismatch of “unrealistic” expectations between buyers and sellers, causing the number of transactions to fall. 
Mr Jeff Foo, President of the Institute Of Estate Agents in Singapore said, “Some sellers till today are not realistic … A lot of buyers too are adopting a wait-and-see attitude, because they are hoping for cooling measures to be tweaked. However, if people want a particular location or if they like the uniqueness of a property, they will still buy.”
REDAS to government: Loosen reign on high-end properties
The Real Estate Developers’ Association of Singapore (REDAS) urged the government to ease its cooling measures, in particular the Additional Buyer’s Stamp Duties (ABSD), on high-end properties. Mr Augustine Tan, President of REDAS, said that “the high-end market was not a segment the Government needs to safeguard”. He explained that the ABSD policy inhibits foreigners from investing in Singapore, which contradicts the city-state’s goals of growing investments and jobs. Mr Tan added that a further drop in property rental and prices is expected, with over 75,000 private residential units to be completed from 2015 to 2019, which will affect home owners and investors.
Steady growth in overseas investments by Singaporean developers
CBRE estimated that Singapore-based property investors, including GIC, increased their overseas investments from US$9.4 billion in 2013 to US$11.9 billion in 2014. This is the second year that Singapore is the largest source of outbound real estate investments in Asia. CBRE also reported that Asian outbound real estate investment broke a record, rising by 23 per cent year-on-year to US$40 billion in 2014.
Ms Ada Choi, Senior Director for CBRE Research Asia, said that “Singaporean investors looked offshore as a result of compressed yields in their home market and a shortage of investible assets, while Chinese outbound growth was in particular driven by the emergence of new sources of real estate capital, particularly insurers as they sought to increase their allocation to real estate under more relaxed rules.”
Singaporean investors set their sights on London and Malaysia
Singaporean investors are looking at London. Singaporeans are said to be among “Black Brick’s biggest spenders [from East Asia with an average deal size of S$8.5 million (RM22.6 million)]”. Ms Camilla Dell, Managing Partner at Black Brick, is optimistic about the investment growth and said to The Edge, “Although Singapore’s property market is cooling, its economy is not… Buy-to-let landlords can expect to achieve up to a 4% yield in some areas of London and with forecasts predicting between 20% and 25% capital appreciation over the next five years for many of our international clients, London remains an attractive asset class.”
Malaysia was also identified as another favourite destination for Singaporean investors. Hatten Group, developer for Harbour City@Pulau Melaka, said to TODAY that over 60 Singaporeans have invested in retail and hotel units at the mixed development. Analysts attributed this to Malacca’s close proximity to Singapore (a three-hour drive) and the oversupply of Malaysian properties.
Mr Lim, a potential Singapore investor said to TODAY, “Tourism in Malacca has potential and the (weak) ringgit now means it is cheaper for us to invest. Besides, the property market in Singapore now is not as good (for investment).”
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