Singapore - Housing 01 (May 08 - Oct 08)

[-dol-]

If rentals are good and viable for developers to do, there is good support for the property market. It means those hoping for bargain prices will be disappointed.

Only with decreasing rental yields can property prices follow south eventually.

All these need time to play out.

[LenaHuat]

It depends on the developer - that's absolutely on the spot. I recall shopping for a unit at Thomson 800 upteenth years ago. Li Ka Shing wouldn't budge. Some 2 years after TOP when I enquired abt another available unit, LKS still didn't budge. It even carried an unlucky number (to the Chinese, I mean).

[-dol-]

For the next 1-2 years, the big developers should be well-placed to rough it out. We might see some capitulation among the small & johnny-come-lately developers if things don't improve soon.

A possible worst case scenario is for the poor global economy to extend beyond the current consensus (which is still quite optimistic). Then, the more decisive and stronger developers should realise the game is up and cut their prices, thus triggering the hoped-for capitulation in prices that bargain hunters are hoping for. I think it can get very ugly.

One thing to note is that the last downturn, although very tough for Asia - was not that bad for the US. There was a lot pain due to the dotcom bust (and huge destruction in the tech space), but the average US consumer was able to depend on the rising US property market to finance their spending - they pretty much got on with their lives. That ATM is now gone - and will probably not return for quite some time - US consumers should have to adjust their spending significantly downwards this time. Now the US, UK, Europe and perhaps Australia/NZ all seeing the air coming out of elevated property prices after extended boom conditions. This seems even more synchronised in terms of the many areas going through declines than the last downturn.

We might not even need to wait for the worst case scenario to see some significant price cuts if the mass market & HDB upgraders start to wake up to the possibility that this might not be their garden variety downturn. When this bunch start to have doubts about property being the best long-term investment, it will be very tough even for the big developers to get some cashflows to sustain their current stance. May be a trend of job cuts should do the trick.

[LenaHuat]

HDB's pushing ahead for more housing :

The Housing & Development Board (HDB), on behalf of the Government, is inviting tender for the sale of an Executive Condominium housing site at Punggol Field/Punggol Road, under the Confirmed List of the Government Land Sales Programme on 17 Sep 08 (Wed). The tender will close on 11 Nov 08 (Tues).

[ishak]

Hungry Ghost slowdown
16 Sep 2008

Uncompleted private housing sales in August fell by 64% mom to 320 units as the property market took a breather in the Hungry Ghost month after selling 800+ units in June and July. New home take-up YTD stands at 3,581 units, less than half of the 10-year historical average of 7,515 units but at 80% of the 10-year trough of 4,497 units in 2003.

As expected, new home sales remained dominated by mass-market projects priced below S$1,000psf. Over 50% of the transactions fell under this category. Projects that did well included Beacon Heights and Livia at Pasir Ris with 34 and 32 units sold respectively. Of surprise was the stronger-than-expected showing from mid-high-end projects priced at S$1,001-2,000psf, which made up 41% of the new sales for the month. Take-up for Martin 38 developed by SC Global (SCGD SP, S$0.67, Not rated) was quite strong during its launch with 29 of the 90 units in total sold at S$1,970psf on average.

Other projects that did well in August included Urban Lofts, Parc Sophia and Park Infinia. Luxury property volumes remained thin, making up 8% of the total new sales, although projects in traditionally coveted addresses such as Nassim Park Residences continued to attract good demand.

Many familiar names re-appeared in “unsold” list. A review of the URA data shows many new projects with still lacklustre sales. Transactions for Breeze by the East, 8 Rodyk and Waterfront Waves have almost come to a halt after initial strong take-up during launch a few months ago. Others such as Signature at Lewis and Floridian have sold fewer than 10 units so far. We estimate that the ratio of unsold units to total saleable inventory has risen sharply from 23% in 3Q07 to around 39%, as developers continue to defer launches indefinitely.

Developers may need to lower prices to lure demand for new projects. We expect developers to step up project launches after the Hungry Ghost month. Projects such as Trilight by Ho Bee, Madison Residences by KepLand and The Arte by CityDev could enter the system soon. Mid-high-end projects that have started selling but with sales not yet captured by the August data include The Concourse (Hong Fok, ASP S$1,500-1,900psf), Martin Place Residences (F&N, ASP S$1,800psf) and Viva (Allgreen, S$1,500-1,600psf). While initial demand for The Concourse and Martin Place Residences was reportedly good, we sense that take-up could lose steam going forward if overall sentiment does not improve. Our on-the-ground feel is that many buyers are still window-shopping. While prices have surprisingly remained resilient, we believe developers could start to cut prices if unsold inventory continues to build up.

Current low yields of 2-3.5% in the upper-mid to high-end segment also point to more downside pressure in selling prices, especially if rents start to fall.

Valuation and recommendation
More activity expected in coming months but outlook remains cautious. We maintain our Neutral weight on the sector despite beaten-down valuations. We believe turbulence in global financial markets will continue to mute buyer interest in the near term. As developers launch more projects in the coming months, any better-than expected transaction volumes would return some shine to the sector.

For now, we believe compelling catalysts for a sector re-rating are still lacking. In the wake of a slowing cycle, we continue to take selective bets on well-capitalised stocks with good balance sheets and strong pre-sale earnings. CityDev (CIT SP, S$8.97, Outperform, target price S$13.05) and Wheelock Properties (WP SP, S$1.20, Outperform, target price S$1.94) remain our top picks in the sector.

[ishak]

Strong demand cuts HDB's stock of unsold units
Bookings for new flats jump 49% to 12,580 in financial year ended March
BT, 18 Sep 2008

The strong property market in the Housing and Development Board's (HDB) last financial year whittled down its stock of unsold flats. The board now holds about 1,500 completed units, compared with 3,500 last year.

Reflecting the boom, bookings for new flats rose 49 per cent year on year to 12,580 in the financial year ended March 31.

'There has been an increase in demand for new flats,' HDB chief executive Tay Kim Poh said at a press briefing on the board's annual report. 'We have been ramping up the building programme.'

The growing need for public housing prompted HDB to offer 8,400 new Build-To-Order (BTO) flats this year - 40 per cent higher than the 6,000 last year and more than three times the 2,400 in 2006.

Of this year's planned supply, about 5,000 new flats have already been launched, leaving more than 3,000 for the remaining months of 2008.

More flats from the BTO pipeline will be situated at Punggol and Sengkang. About 2,500 units are in Punggol, as part of HDB's plan to build up a critical mass to support a thriving town centre. The other new flats will be spread across various towns including Yishun, Woodlands and Bukit Panjang.

HDB has not decided on the supply of new BTO flats for 2009.

'We'll monitor demand,' said Mr Tay. 'When necessary, we'll make adjustments to our building programme to make sure our supply matches demand.'

ERA Asia-Pacific's assistant vice-president Eugene Lim said: 'So far, take-up for new BTO flats has been pretty good.'

Demand comes largely from first-time buyers, he said. But it can take up to three years for such flats to be ready, so some buyers turn instead to existing units in the resale market.

PropNex chief executive Mohamed Ismail expects demand for resale housing to remain strong, and reckons the Resale Price Index may grow another 5 per cent in H2 2008. The HDB market should suffer little or no effect from the US financial crisis, he said.

According to HDB's Mr Tay, resale flat demand has been driven by various market segments, including permanent residents and first-time and second-time home buyers. No details have been released on the profiles of resale flat buyers.

Beyond new and resale flats, demand for rental flats has also grown, prompting HDB to build another 2,000 units this year.

It plans to increase its stock of rental flats from 42,000 now to about 50,000 in the next few years and is reviewing eligibility rules to ensure these units go to people in genuine need.

HDB completed 6,247 flats last financial year, more than three times the number the year before. HDB also had 18,073 flats under construction, 27 per cent more than in the previous year.

Against a backdrop of rising construction costs, Mr Tay reaffirmed HDB's commitment to keep flats affordable. 'We are monitoring the situation closely,' he said.

According to HDB, a new four-room flat can cost about $300,000 to develop today, taking into account land, building and other costs. This is higher than the subsidised price of a four-room flat sold by HDB at $200,000 to $260,000.

HDB's greatest challenge is to continue to ensure that people in the mass consumer segment have affordable roofs over their heads, said PropNex's Mr Ismail. 'This may mean having to review certain policies, such as the income ceiling for HDB flat applicants, and perhaps even abolishing the resale levy.'

[blid2def]

Because people lose money, cancel their condo orders or sell their condo and "downgrade"?

[ishak]

Lehman's fall marks office rent peak here
Consultants expect demand for prime office space to ease as growth slows
Bloomberg, 18 Sep 2008

The collapse of Lehman Brothers Holdings Inc may contribute to an easing of demand for prime office space in Singapore, where commercial rents are already peaking amid slowing economic growth, property consultants said.

The market turmoil that also this week forced the sale of Merrill Lynch & Co to Bank of America Corp and a bailout of American International Group Inc will probably further slow expansion by international companies in Singapore, said analysts at DTZ Debenham Tie Leung and Cushman & Wakefield.

'Rents have peaked and with the collapse of Lehman and the further shakeout in financial markets, this is going to accelerate,' said Ong Choon Fah, Singapore-based regional head of research at DTZ Debenham, a property consulting firm. 'Financial companies are the ones occupying the very prime space and a lot of them are in survival mode.'

Home prices and office rents in Singapore have cooled after rising to records last year, and Colliers International said this month that office-vacancy rates in the US will rise to the highest in three years as financial-services companies slash jobs after reporting writedowns of US$515.8 billion.

Gains in Singapore office rents will be limited as global economic growth slows, the property researchers said. Singapore's economy is forecast to grow between 4 per cent and 5 per cent this year, slowing from 7.7 per cent in 2007, as demand for Asian-made goods wanes and writedowns mount at banks and securities firms.

Lehman, which this week filed the biggest Chapter 11 bankruptcy in history, occupies office space in Suntec Real Estate Investment Trust's Suntec development. The firm has about 270 employees in Singapore.

Suntec Reit, a property trust partly owned by Hong Kong billionaire Li Ka-shing, has dropped 26 per cent in Singapore trading this year. CapitaCommercial Trust, an office landlord run by South-east Asia's largest developer, has slumped 36 per cent during the period.

So-called Grade A office rents will probably drop to about S$14 a square foot a month in 2009 from S$16 this year, Merrill Lynch analysts led by Kar Weng Loo estimated in an Aug 26 report.

Rents may fall further to S$10 in 2010, when the first phase of the 2.6 million-square-foot Marina Bay Financial Centre is scheduled to be completed, and to S$8 by 2011, the brokerage said. For the second half of 2008, rents for prime office space will be little changed after climbing about 7 per cent in the previous six months, said Donald Han, Singapore-based managing director of Cushman & Wakefield. Still, supply of prime office space is likely to remain tight until 2010 and any office space vacated by Lehman will probably be filled quickly, Mr Han said.

'The market is still in a very healthy state and occupancy in Suntec, where Lehman has its offices, is in excess of 96 per cent,' Mr Han said.

'The only issue is that negative sentiment will creep in, with the fact that such a big investment bank that has a long history of operating in Singapore is collapsing will shock the market.'

[ishak]

Slide in property investment deals continues in Q3
Global financial instability, stock market volatility hit sentiment: CBRE
BT, 19 Sep 2008

Property investment sales continue to soften in Q3 2008 and global financial instability could keep investors out of the market, said a CB Richard Ellis (CBRE) report.

According to latest figures from CBRE Research, property investment transactions in Q3 (up to Sept 18) reached $3.17 billion. This is a 35 per cent drop from $4.86 billion in Q2 and a 65 per cent slide from $9.09 billion in Q1 this year. On a quarterly basis, property investment sales last peaked in Q3 2007 at $16.51 billion.

'The lingering worldwide impact of the US-spawned credit crisis has compounded financial instability in most global economies, compelling many regional investors to adopt a cautionary attitude,' said CBRE's report.

Many are holding back on major investment decisions as credit conditions tighten, and stock market volatility has also hit investor sentiments, it said.

Driving property investment sales in Q3 was the industrial sector, which accounted for 61 per cent or $1.92 billion of transaction value. However, most of the sector's contribution came from a single $1.71 billion deal, in which JTC Corporation divested its industrial property portfolio to Mapletree Industrial Trust.

The residential sector was the next largest contributor, registering 26 per cent or $807.79 million of property investment sales in Q3. There was only one successful collective-sale deal in the period, where an unnamed developer bought Ruby Apartments for $11 million.

'Developers' ability to acquire sites was dampened by rising construction costs, rising interest rates and tighter lending measures,' said the report. Investment activity in the retail and office sectors was also quiet in Q3, with transaction values of $215.04 million and $142.84 million respectively.

While the hospitality sector accounted for just $100 million of property investment sales, CBRE noted that the limited supply of hotel rooms today would attract greater investor interest in the medium term.

Property investment sales chalked up in the year to date stood at $17.12 billion, with 65 per cent coming from the residential and office sectors. While this is some distance from the $54.02 billion achieved for the whole of 2007, it has already exceeded the $14.66 billion in 2005.

'Looking ahead, investors are expected to stay on the sidelines in view of the cautious market conditions that are likely to prevail until the end of the year,' said the CBRE report. Nevertheless, it noted that demand for quality assets as a hedge against inflation may provide some support for investment activity the rest of the year.

[winston]

Residents & foreign workers at Jalan Kayu live side by side through compromise

Channel NewsAsia - Saturday, September 20SINGAPORE: When the first batch of 90 foreign workers moved into the Tee Up Dormitory at Jalan Kayu in 2006, complaints from residents came in fast and furious.

For more than a year after, dormitory general manager Kelvin Low sat down each month with the neighbourhood’s grassroots leaders to address the concerns and gripes.

"They didn’t want workers sitting by the road, drinking beer, littering and peeing by the road. It was unsightly," he told Today.

These days, the complaints have dwindled, even as the dorm’s resident population has grown to 3,000.

Altogether, about 6,000 foreign workers live in the two privately—run dorms in Jalan Kayu, just down the road from private and public housing estates.

The relative peace, Mr Low said, is a result of compromises hammered out between the dorm management and the residents’ committees, as well as assistance from parties such as the National Environment Agency and the neighbourhood police force.

"I suppose the residents are also tired of complaining, or perhaps they have gotten used to the workers," said Mr Low. "I can understand why they would be worried, but so far, there hasn’t been trouble."

The dorm has played its part by enforcing rules that, if broken, result in S$50 fines — equivalent to three days’ wages.

For one, workers are not allowed to leave the premises in their sarongs, a form of dressing that had disturbed residents. "It’s not nice especially when they wear the short knee—length sarongs, and sit by the road with their legs wide open," said Mr Low.

Each room features a poster with pictures of unacceptable behaviour and explanations in seven languages. Some of the no—nos, such as peeing in public, were mooted by the area’s residents.

Also, a shortcut from the dorm to the main road passing through the private housing estate was sealed off, at residents’ request.

High—tech security and volunteer patrols

Tight security also keeps out illegal squatters: A fence encloses the dorm, while workers enter by tapping access cards at gantries equipped with face—recognition systems. A security guard is present at all times.

Meanwhile, the Jalan Kayu Rangers programme was established: Residents and 40 workers volunteered and were trained to patrol the dorms and its surroundings on weekend nights.

One such worker, Mr N Saravanakumar, 28, said: "We go around and make sure there is no trouble, no fighting."

Fights, he said, sometimes happen in the dorms when workers drink too much, though littering is a bigger problem. Outside the dorms, the rangers make sure the workers aren’t too noisy, and remind those who’ve had too much to drink to go back to the dorms.

Mr Low said the patrols are more effective when the enforcers are one of the workers’ own. "We make it so that they are from all the nationalities," he said.

Mr Terry Fong, chairman of the Jalan Kayu Neighbourhood Committee, said the rangers programme was key in assuring residents that their interests were being looked after.

"Our residents rangers also can interact with the worker rangers, so there’s a level of understanding at the end of the day."

The resident’s committees also worked with the dorm to hold a walkathon for residents and foreign workers, and festivities were held at the dorms afterwards, so residents could see what life in there was like.

Jalan Kayu resident Peggy Tan, 55, had her worries when foreign workers started gathering by the estate’s roads at night, often drinking. "I have a daughter, of course I was scared. What if they become drunk and molest her?"

Having had no trouble after more than two years, she has gotten used to their presence.

"They are not noisy, and they don’t litter and I’m fine with that," she said. "But I wouldn’t want more dorms here as I think it brings down the land value. No matter what, people prefer not to live too near such dorms." — TODAY/fa