Week in Review – 7 August 2014

RESI Report shows declining local market sentiments; increasing overseas investments, Singapore continues to feel the impact of property cooling measures, New developments for Woodlands and Yishun, Potential effect of increased toll charges and VEP on Iskandar Malaysia project, EASE to benefit more seniors living in HDB flats
RESI Report shows declining local market sentiments; increasing overseas investments
The Real Estate Developers’ Association of Singapore (REDAS) and the Department of Real Estate (DRE), National University of Singapore released the Real Estate Sentiment Index (RESI) report this Wednesday, indicating a decline in overall sentiment at 3.5 compared to 4.5 in 2013. The RESI is compiled based on a survey of Singapore developers. According to Sing Tien Foo Associate Professor at NUS, “The further weakening of the future sentiment index reflects the pessimistic outlooks of developers on the property market in the next six months. The pressure of declining residential property prices and low take up in new launches is greatly felt.” More than three quarters of the respondents (77.8 per cent) felt that there would be strong investment outflows into overseas real estate markets in the next 12 months. High transaction costs and high property prices in the local market were cited as key local drivers, whereas affordable prices and high yield returns were cited as key overseas drivers, conducive to foreign investment. United Kingdom (UK), Australia and Malaysia were singled as the top 3 countries expected to attract strong interest from Singaporean investors.
Singapore continues to feel the impact of property cooling measures
The effects of Singapore’s property cooling measures are evidenced through rising vacancy rates, increases in the number of bad loans and lowered revenues for some developers. 
Rising Vacancies
Barclays recently reported that “of the 6,120 (private condominium) units that were uncompleted, launched and unsold as of 2Q14, 49% are from the Outside Central Region (OCR), a proxy for mass market private homes”. CIMB provided similar findings indicating that “(Private homes) vacancy rate increased from 6.6% in 1Q to 7.1% (in 2Q)” and “Median rents fell slightly across all regions as physical supply increased with the completion of 4,902 units during the quarter (vs 4,114 in 1Q14)”.
Bad loans
While most banks have reported positive earnings and no systemic risk in their housing loan portfolios, UOB had stated that the number of bad loans has risen, particularly for home loan in high-end investments.
Lowered revenues
CapitaLand Group reported a drop in revenue of 13.2 per cent to S$875.3 million in Q2 2014. This was attributed to lower revenue in Singapore and China. In Singapore, the developer saw a 20.9 per cent year-on-year slip to S$317.8 million. OUE Limited also reported significantly lower revenues compared to its previous year, dropping 69.9 per cent from S$14.6m in Q2 2013 to S$4.4m in Q2 2014. Similar to CapitaLand, OUE attributed the lowered revenue to the lacklustre Singapore residential property market sentiment and the absence of contribution from the China hotels which were divested in September 2013.
Despite the effects on the market, Minister for National Development Mr Khaw Boon Wan noted that the current market conditions are premature to relax cooling measures. Earlier this week, Mr Khaw mentioned in Parliament that “Such a move could lead to an upswing in demand which would increase the number of transactions and raise housing prices.” Real estate firm Savills’ latest report indicate a continued strong market based on a 44.8 per cent increase of private residential units sold in Q2 2014 compared to Q1 2014. According to Savills, the increase was likely due to the strong sales for Lakeville, The Sorrento and Coco Palms which all saw take-up rates of over 90 per cent. The firm also notes that sales figures in June have affected the overall figures for the quarter, due to “school holidays and the World Cup”.
New developments for Woodlands and Yishun 
The towns of Woodlands and Yishun look set for revitalisation. In Woodlands, a retail and food complex project by the National Environment Agency (NEA) and Housing and Development Board (HDB) is targeted for completion by 2017. In Yishun, residents can look forward to a new integrated development called Northpoint City by 2018. The development will house an air-conditioned bus interchange, the first community club located in a shopping mall, a new town plaza, a roof-top Community Garden, and 920 private residential units. A town plaza, equivalent to the size of 10 basketball courts will be located within the development for hosting events, and the mall is said to be the largest shopping centre in the northern region of Singapore. 
Potential effect of increased toll charges and VEP on Iskandar Malaysia project
On 1 August 2014, Malaysia increased toll charges for all motorists, except motorcyclists, travelling from Singapore to Johor through the Causeway. It has also introduced a new Causeway toll for all vehicles travelling from Johor to Singapore. This increase was announced after Singapore said on 1 July that a hike in Vehicle Entry Permit (VEP) will take place from 1 August. The Edge has reported a potential impact on the Iskandar Malaysia project following increased toll charges, and VEP by both the Malaysia and Singapore governments. In an interview with The Edge, Singapore Permanent Resident Andrew Gibson who lives in Leisure Farm in Johor, said that he will be affected daily “if Malaysia increases (their toll charges)”. In the same article, Mohd Azizuddin Mohd Sani, Senior Lecturer at Universiti Utara Malaysia stated that “The decision in this charges hike by both countries…will definitely affect the Iskandar project if people movement is restricted by this hike”.
EASE to benefit more seniors living in HDB flats
HDB is now extending the EASE programme to Singapore Citizen households with elderly family members aged 65 years and above (lowered from 70 years old), or aged between 60 and 64 years old (lowered from between 65 and 69 years old) and require assistance for at least one of the Activities of Daily Living (ADL). Launched in 2012, the EASE programme provides home owners with a range of elderly-friendly fittings including slip-resistant treatment to bathroom floor tiles, grab bars and ramps. More information on the programme is available on HDB InfoWEB at http://www.hdb.gov.sg or through the EASE toll-free hotline at 1800-9332990 from 8:00 am to 5:00 pm on weekdays (excluding Public Holidays).