Singapore - Housing 01 (May 08 - Oct 08)

[green]

Every aspect of the economy is pointing towards a slow down in the coming months. I really cannot see why Singapore's property will be an exception to this slowdown. I am not sure if this comment by Tie Leung is genuine, but even if he is thinking "Buyers waiting for a major price correction will NOT be disappointed", I believe he won't say it out publicly.

I certainly won't bet on it....to me the only reliable source is from those reputable independent research firm who charges fees for their research report. Unfortunately, there isn't many here and most are not circulated widely.

[ishak]

Rental eligibility now a game of cunning
ST, Aug 26, 2008

THE Housing Board has found itself in a quandary over sharply rising demand for the small stock of rental flats available. The twin trends - high rents for conventional HDB apartments and more people conserving assets for fear of prolonged economic uncertainty - that had been building for a year now are not easing. The HDB can expect the tight rental situation to persist, or worsen. Ineligible renters playing the system have added to the long application queues, but the HDB can be counted upon to weed them out at first sieve. To satisfy medium-term demand, raising the current stock of some 43,000 rental flats is an inevitable response.

This the HDB is doing. But the gestation period of about three years for the additional 7,000 to 8,000 units that will be built gives little comfort to those applicants who need shelter now, not three years later. There are an estimated 4,400 of these. These are families with household income of about $1,500 and no assets. Divorcees with young children are common among them. The HDB could consider releasing unsold smaller units from its normal stock for fixed-term leases to relieve pressure.

This is socially more enlightened than keeping the flats, usually in less favoured locations, for choosy purchasers to make up their minds about bidding. Beyond this, means testing which the HDB is considering is the fairest way of sorting out the scale of need.

Abuse of the low-rent dispensation was not a problem when granny flats were being built for retirees and rents for normal HDB flats were about half the current rates. But since the spike of a year ago, rent seekers have resorted to the deplorable practice of sub-letting rooms or whole flats, sometimes to ineligible foreigners. Families of some means, plainly not eligible, have joined the queue, attracted by rents of as low as $26 a month. They should be forced onto the open rental market by fail-safe administrative measures.

To disqualify applicants who own assets and whose household income exceeds the cut-off mark is easy. Trickier is checking the assets of their children and siblings, which the HDB is considering. The thinking is that immediate families should take them in. In practice, this may not always be practical owing to relationship frictions and family feuds. But it does not weaken the case for wholesale means testing.

It remains a logical way to ascertain need but the line should be drawn at checking the assets of applicants' brothers and sisters. If these siblings are married, with their own grown children and consequent obligations, they are effectively separate families.

[ishak]

S'pore housing: Get the bigger picture right
BT, 27 Aug 2008

THE media recently highlighted bearish analyst reports about the Singapore residential market. One, I recall, predicted a decline of 40 per cent over three years. Another forecast plunging rents in 2009 and consequent sharp falls in capital values. Perhaps this is why some owners have chosen to sell prime freehold units at implied gross yields of 4 per cent.

However, looking at the same data, I could not arrive at the same dour conclusion. I could not arrive at the same conclusion because I looked at data from other sources as well - in particular, HDB statistics. Since HDB rules on owners leasing out flats have been liberalised, the housing market is now a continuum. Indeed, on a per sq ft basis, rents commanded by well-located HDB flats are now comparable to those for private residential apartments, going by HDB and URA data.

The big picture in housing has always been driven by supply and demand - total supply and demand, not just private residential. If more households are created than housing units completed, there is upward pressure on rents and capital values.
Let's look at supply first: A net 10,000 private residential homes are estimated to be completed in 2009. HDB does not publish completion data, but based on 2006 build-to-order data, only 2,400 units are estimated to be completed in 2009. In total, that's 12,400 housing units.

Now let's look at demand: According to the HDB's website, sub-letting approvals in 2007 totalled about 12,800, or 50 per cent more than 2006. Yes, the HDB rental market is hot. For 2008, sub-letting approvals are running 30 per cent higher than in 2007, or about 16,300 units. This is consistent with data from the Department of Statistics on population and workforce growth in Singapore. The new (foreign) households are not living in tents. If they cannot afford private housing, they rent HDB flats.

We see that rental demand alone for HDB flats will probably exceed total private and HDB housing completions of about 12,400 units in 2009. Although the world economy is probably going to feel recessionary in 2009, Singapore will be somewhat insulated. This is because of a number of large projects coming on stream will boost job creation significantly in 2009. In particular, the integrated resorts (IRs) are expected to have 20,000 employees and create 50,000 new jobs overall. Given the nature of the IRs, I would expect a significant portion - perhaps 50 per cent of their employees initially to be foreigners, thus boosting household formation in 2009.

Nonetheless, I expect some softness in the private residential rental market relative to the HDB in 2009, as the bulk of completions will be private. For developments with adjacent completions, rents will be restrained by competition. Indeed, we see this happening already.

URA publishes comprehensive data on the property market. I believe it would be helpful for the market if the HDB published similar data, especially vacancy rates and building completion numbers. Even better would be for the authorities to publish composite data that amalgamates HDB and URA data.

Interestingly, despite the liberalised HDB rental market, HDB rents have risen despite volume growth. Demand has clearly been very strong. With average gross HDB rental yields of 6 per cent, or a net yield of about 5 per cent, HDB upgraders buying private property have a financial planning and investment choice. Upgraders who have the liquidity and risk tolerance may want to look out leasing out their HDB flats and taking a bigger mortgage, instead of selling their flats to finance the upgrade to private housing.

The net rental yield of about 5 per cent versus mortgage costs of about 3 per cent means a positive spread of 2 per cent. This 2 per cent on $400,000 delivers an additional $8,000 a year, assuming rental income does not rise with time. This would be handy in accelerating the reduction of the overall mortgage principal. Over the life of the mortgage, it could amount to more than $200,000 - a nice contribution to the retirement nest egg.

[ishak]

HDB Lease Buyback Scheme could be implemented in January 2009
CNA, 26 Aug 2008

The Lease Buyback Scheme (LBS) to help low-income households monetise their flats for their retirement needs could be implemented as early as January next year.

Senior Minister of State for National Development Grace Fu gave this update in Parliament on Tuesday when replying to a question brought up by MP for Aljunied GRC Cynthia Phua.

Under the scheme, first announced by Prime Minister Lee Hsien Loong in his 2007 National Day Rally speech, the elderly will get a S$5,000 up-front bonus when they sell their remaining flat lease, less the first 30 years, to the Housing and Development Board (HDB).

The remainder of the sale proceeds will be used to buy a CPF LIFE Plan, which provides a lifelong income stream of about S$550 a month for the flat owner.

Some 25,000 low-income elderly households owning 2- and 3-room flats could benefit from the scheme.

Ms Fu also addressed a concern that the elderly have over the scheme.

She said: "A commonly asked question on the LBS concerns the arrangement should the flat owner outlive the 30-year LBS lease. I want to assure Madam Phua that no elderly will be left homeless in that scenario.

"One option is lease extension. However, we do recognise that not all can afford the full price for such extension. HDB will have to assess the housing options available for each case on an individual basis, and be sensitive to the financial health and family circumstances of the elderly concerned.

"On the other hand, if the lease needs to be terminated prematurely because the elderly has passed away, his estate will receive a pro-rated refund on the residual lease."

[millionairemind]

Published August 28, 2008
Developers weigh odds for launches after Ghost Month
Some may want to test market now rather than risk deterioration in sentiment
By KALPANA RASHIWALA

(SINGAPORE) Some developers have been quietly oiling their launch machinery in the past few weeks as they get ready for previews and launches, especially with the Hungry Ghosts Month ending this Saturday.

Boulevard Vue's facade will be designed by well-known Japanese interior designer Super Potato. The freehold project's 26 apartments (one per floor) are about 4,500 sq ft each, while the two duplex penthouses occupying the top four levels are 8,000-plus sq ft and 11,000-plus sq ft.

With the property outlook expected to worsen before it gets better, there may just be an incentive for some to launch their projects sooner - or wait it out till late-2009/2010, a seasoned property consultant told BT.

Another consultant, Knight Frank executive director Peter Ow, said: 'Whatever name you call it - preview, private invitation, etc, the aim is for developers to test the market. If the response is sufficient at the price they want, they'll begin sales. If the response isn't up to what they want, they won't sell. As a developer, you don't want to risk launching a project, selling a few units and getting stuck.'

Projects that have begun to be previewed this month include Far East Organization's 85-unit freehold Miro at the corner of Lincoln and Keng Lee roads (at an average $1,600 per square foot) and a 54-unit cluster housing project at Greenwood Avenue. Units in the 103-year leasehold development range from 3,000 to 3,700 sq ft.

Over at Nathan Road, Tat Aik Group has been inviting potential buyers to view Nathan Residences, a 91-unit freehold project priced at around $2,000 psf on average.

Keppel Land is also expected to release this weekend in Hong Kong and Singapore about 30-40 units under the next phase of Reflections at Keppel Bay.

The average price is expected to be similar to the earlier phase launched around April last year, at about $1,800 to $2,000 psf. Deferred payment is expected to continue to be offered.

Hong Fok Corporation's 360-unit Concourse Skyline apartments at Beach Road, KepLand's 56-unit freehold Madision Residence near the junction of Bukit Timah and Keng Chin roads, and City Developments Ltd's The Arte at Thomson are understood to be other projects that could hit the market soon.

In the high-end segment - where sentiment is weakest - Far East Organization, which has already sold two units at its 28-unit luxury development Boulevard Vue at Cuscaden Road, opened its showflat for the project recently and is expected to step up marketing activity.

The project's 26 apartments (one per floor) are about 4,500 sq ft each, while the two duplex penthouses occupying the top four levels are 8,000-plus sq ft and 11,000-plus sq ft. Prices for low- and mid-level units in the 33-storey freehold project range from $3,600 psf to $3,900 psf.

BT understands the price tag for the bigger penthouse will likely be around the $4,500 psf mark, working out to an absolute sum of about $50 million. If achieved, the absolute amount would set a new record for a penthouse in Singapore.

Boulevard Vue's facade will be designed by well-known Japanese interior designer Super Potato. BT understands that the unit layouts will be customised to buyers' preference.

A critical factor affecting developers' launch decisions is pricing, given the bearish sentiment.

'Pricing will be more realistic for fresh launches, but for projects released earlier, it would be difficult for established developers to trim prices without upsetting earlier buyers, especially VIPs,' the seasoned property consultant said.

Agreeing, Jones Lang LaSalle Singapore's residential head Jacqueline Wong said: 'Such developers may just hold the remaining units in the project if necessary and have another shot at selling them upon the project's completion. For new projects too, the financially stronger players can hold off developing for a while.

'However, developers who are fairly new or need the cashflow will have to be realistic in their pricing and will be more amenable to negotiating with buyers.'

Another industry observer said that instead of outright price cuts, it may be easier for developers to attract new buyers into existing projects by offering furnishing vouchers, guaranteed yields (for newly completed projects) or arranging for attractive mortgage packages.

A mid-sized developer said: 'We have to accept the fact that prices have to be marked to market; otherwise we can't sell enough units to generate the required cashflow. For sites bought within the past 12 months, developers would need to sell at least 50 per cent of the development to generate sufficient cashflow to finance the project's construction - taking into account high land price paid and rising construction costs, among other factors.'

[kennynah]

today....i bumped into a long time acquaintance...she told me that our property market is rather "soft".... i assume she meant, no buyers...cos she said advertise also not generating much buying interests...

[HengHeng]

music to my ears. Now actually is buyer and seller dun mismatch.

Soon it would be a buyer's market expecially with alot of speculators chop hand chop leg .. to tong the installments.

alot of developers because of IR think they can earn one shot.. now sure tio liaoz... alot of "new" condos now need to lelong liaoz .. soon got lucky draw liaoz. when it really happens i would be keeping my moneys waiting.

From what i know , the IR project would cause alot of contractors and sub contractors to bankrupt and run assuming if they dun meet targets ... and issue is they are already behind targets now!

1 million a day .. i duno how they going to pay for it ... expecially with the thin margins they now have for bidding these cut throat projects.. jia lat lah.

[kennynah]

wah brudder...u went to pai sin ah....so long MIA.... i tot have to go bangkok look for you already....

[HengHeng]

huh busy leh .. alot of reports and research to do .. looking for bargains and talking to people...

thot i mention that towards the end of the year then i need to start working liaoz ..

rest a v long time liaoz.. since start of the year til now...

only now then value investing works .. past few months .. that thing is crap.

[winston]

Stocks and factors to watch: --Singapore property - Goldman Sachs advised investors to avoid the real estate sector for 6-9 months in a report on Friday naming weakening economics, imminent supply increases and uncertain equity markets.

It expects residential prime prices to fall a further 20 pecent and mass prices to decline 10 percent between now and end-2009.

It initiated coverage of Wing Tai with a "sell" rating and a target price of S$1.12 as the group has the most exposure to the Singapore residential market in its coverage universe with the highest concentration in the high end.

It also initiated UOL at "neutral" with a target price of S$3.42, citing its Singapore portfolio which is skewed to office and retail and has substantial exposure to assets in the Marina Bay area.

Goldman Sachs maintained its "sell" on City Developments and named CapitaCommercial Trust and Suntec REIT as its favourite stocks.