Lowered price gaps between private properties in city and suburbs, Strong consumer response at latest property launches, EC sites less attractive for developers than private residential sites, Tighter regulations – positive for banks and economy but affecting consumers
Lowered price gaps between private properties in city and suburbs
According to a report released by international realtors HSR on 3 October, the price gaps for resale private properties in the Core Central Region (CCR) versus the Rest of Central Region (RCR) and the Outside Central Region (OCR) have narrowed in Q2 2014. HSR identifies the narrowing gap with the profile of buyers, indicating that a higher gap corresponds directly to the higher percentage of non-Singaporean buyers. Foreign demand has slowed down, in part due to the Additional Buyer’s Stamp Duty ABSD, causing property prices in the CCR to fall. The report noted, “At the peak of the gap in Q4 2011, non-Singaporeans represented 61 per cent of the total secondary transactions for non-landed properties in CCR, compared to 35 per cent in Q1 2014”.
Strong consumer response at latest property launches
Lake Life, situated in Jurong Lake District developed by Evia Real Estate, is set to for launch this year. This is the second executive condominium to be launched in 2014. With 546 units on offer, at approximately S$880 to S$890 per square foot (psf), the project has received above 1,200 e-applications within the first three days of opening. Evia Real Estate stated that one out of three applicants were first-time homebuyers due to its “attractive location and active living concept”.
M+S has offered a ten per cent early bird discount for one- to three-bedroom units at the upcoming Marina One Residences. Buyers who purchase at least three units would be given an additional one per cent discount. Tan Ong Choon Fah, Chief Operating Officer of DTZ commented to The Edge, “These are mainly seasoned investors buying for investment, for their children or for their own use. There has been quite a lot of interest from foreigners as well”. Furthermore, M+S has stated that the number of potential buyers who have indicated interest outnumbers the number of units offered under Phase One. Since its launch last Friday, Marina One has reportedly received a strong response due to its early bird discounts.
EC sites less attractive for developers than private residential sites
The latest tender for the Sembawang Road/Canberra Link site for an EC housing development received just two bids, with Qingjian Realty bidding S$229.38 million and Verwood Holdings and TID Residential jointly bidding S$208.5 million. The tender was eventually awarded to Qingjian Realty. Government restrictions and lower profits have caused many developers to hold back on bidding for new EC sites. Mr Vincent Ong, Managing Partner of Evia Real Estate, commented to Channel NewsAsia that the “reduction of cancellation fees from 20 per cent to five per cent raises the risk for developers”. Developers are more cautious of bidding in tenders unless the EC site is especially attractive. Analysts also commented to Channel NewsAsia that the 15-month regulation has led to “a “bunching up” of EC launches. For example, there are two upcoming EC projects that will be launched in Punggol around the same period at the end of 2014. Mr Mohamed Ismail, CEO of Propnex said to Channel NewsAsia, “If three plots are being launched at the same time and everyone has a 15-month period of foundation, then it creates a keen competition or interest to outbid the 15-month rule so that your launch date will not coincide.”
Interest in private residential sites continues to sustain its momentum. A 99-year leasehold, 113,051 square foot private residential site in Lorong Putong, near Upper Thomson Road, received 18 bids – the highest number of bids since implementation of the TDSR last year. The Urban Redevelopment Authority revealed that the highest bid was S$173.6 million placed by China-based Nanshan Group Singapore. Mr Desmond Sim Head of CBRE Research said to TODAY, “This plot is relatively small and thus commands a smaller quantum of below S$200 million … The bidders were probably also encouraged by the good attributes of the site — it is located in a mature estate and supported by a comprehensive network of amenities and renowned schools”. Two upcoming Mass Rapid Transport (MRT) stations, Bright Hill and Upper Thomson are situated nearby.
Tighter regulations – positive for banks and economy but affecting consumers
On 6 October, Moody’s investment service revealed that the fall in property prices have led to Singapore banks being credit positive, with reduced pressure on their asset quality. The Monetary Authority of Singapore (MAS) had introduced eight rounds of cooling measures to avoid a property price bubble between 2009 and 2013. As a result, banks have seen lowered demand for housing loans, the lowest year-on-year growth since 2009, as well as a fall in problem loans by overleveraged borrowers.
On the consumer front, the Total Debt Servicing Ratio (TDSR) has rendered a majority of Singaporeans unable to get a loan or to obtain sufficient funds to purchase property. According to a survey conducted by brokerage and investment group CLSA, a majority of Singaporeans think property prices are still too high despite the decrease in prices, and therefore do not intend to purchase. Apart from high prices, respondents cited restrictions in buying due to tight borrowing regulations, and lesser interest in investing in properties as they expect prices to fall further.
Property cooling measures continue to serve as a recommendation. World Bank revealed in its latest East Asia Pacific (EAP) Economic Outlook Update that the rapid increase in property prices over the past few years would have a negative consequence on housing affordability as it outpaces income growth in EAP economies such as Singapore. World Bank has identified that loose monetary policies have resulted in many purchasing properties through taking up loans and on credit, as a result of rising prices and worsened housing affordability. Hence, to ensure sustainable growth in property prices, tightening monetary policies and government measures are necessary to prevent a property bubble.
Singapore has, in the meanwhile, fallen out of ranking of the top 20 cities for global property investment as seen in a report by property consultancy Cushman & Wakefield. The report stated that more foreign buyers are holding back from investing in Singapore properties due to the softening property market and tightening lending policies in Singapore.