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URA says Govt is monitoring private home prices; analysts say take action to calm frenzy

IT LOOKS like an outright seller’s market — even for those in non-prime districts.

Across the board, private home prices are quickening their surge towards the pre-crisis levels of 1996, according to official data released yesterday.

Heading For The Peak

Worrying? Yes, for aspiring public housing upgraders who may be priced out of the suburban areas, say analysts. The Government doesn’t seem to be resting easy, either.

Private home prices spiked 7.9 per cent in the second quarter, surpassing the first quarter’s 4.8-per-cent increase at a pace not seen since late 1999, said the Urban Redevelopment Authority (URA), basing its data on caveats lodged for new units sold during the first 10 weeks of the quarter. It will release updated figures in four weeks.

The URA also took the unusual step of warning that “the Government will continue to monitor the market very closely”, besides bolstering supply.

“Prospective homebuyers should take into consideration the sufficient pipeline of private housing, as well as the potential supply from Government Land Sale (GLS) sites, when deciding to make a property purchase,” it said.

Private housing prices have been increasing at a faster pace because of economic prospects and the increasing attractiveness of Singapore as a global city, the URA added.

According to ERA Singapore’s assistant vice-president Eugene Lim, the boom, which ignited in the downtown core, has “filtered outwards”. Condominiums in the core central area — districts 9, 10 and 11, as well as downtown and Sentosa — rose 7.6 per cent in the second quarter. The rest of the central region — such as Upper Thomson Road and Alexandra Road — rose even faster at 7.9 per cent, while the remaining districts typified by mass-market condominiums registered a 6.5-per-cent rise.

Sales at new launches moved at a brisk pace as foreign funds and investors, confident of Singapore’s growth as a regional financial centre, bought multiple units in several projects, said CB Richard Ellis Research’s executive director Li Hiaw Ho.

But “another cause of the current frenzy in the market is the ‘fear’ among home buyers that they may lose out on good property buys,” said ERA’s Mr Lim.

“I’m worried it’s becoming like a stock market,” said Chesterton International’s research director Colin Tan, who frets that Housing Development Board (HDB) upgraders are being increasingly priced out. The latest figures show that private residences outside the core region jumped at three times the pace of the first quarter’s 2 per cent.

Mr Tan wants the Government to “stop monitoring and act fast” by issuing a warning that prices are getting out of hand.

A URA spokesperson told Today “the Government will ensure there is sufficient supply to meet demand. If necessary, the Government will make available more sites for private residential development through the GLS Programme next year.”

URA has released sites “that can generate substantial new supply of private housing under the GLS programme for the second half of the year. There will also be 42,200 units expected to be completed from now till 2010″, the spokesperson added.

Still, CBRE’s Mr Li expects home prices to rise by 20 to 25 per cent for the whole of this year, after the first six months registered an increase of 13.1 per cent. This exceeds last year’s growth of 17 per cent.

Source : Today - 3 Jul 2007

Property run gathers speed with HDB resale prices up

FURTHER evidence that the rally in the property market is broadening into the lower-end mass market came yesterday with the resale price index of HDB flats reaching 107.9 points in the second quarter, up 2.9 per cent from three months before.

The preliminary data sparked optimism that prices will continue to rise, with some forecasting a 10-per-cent gain this year for this sector, against the Government’s earlier 5-per-cent forecast. “The overall price increase is largely expected, as the resale HDB market is experiencing a filter-down effect caused in part by the private property market,” ERA Singapore said in a statement.

Mr Eugene Lim, ERA Singapore’s assistant vice-president, said price increases have been seen in “Bukit Merah, Queenstown and other mature estates near MRTs. The rest of the market is rising, but not as fast as these areas.”

HDB flats in mature estates closer to the city area have been going for prices $50,000 to $80,000 above market valuations, said Dennis Wee Group vice-president Chris Koh. The resale price index’s 2.9 per cent quarter-on-quarter increase compares with a 1.3-per-cent rise in the January-to-March period, and the almost-1-per-cent gain in the fourth quarter last year. From a year earlier, resale HDB prices were nearly 5 per cent higher.

“HDB prices were expected to increase 5 per cent for 2007. Because of the strong demand and positive economy, we’ve reached a 4-per-cent increase in the first half of this year,” said PropNex chief executive officer Mohamed Ismail. He expects the HDB resale market to rise by 10 per cent this year, pushing it above the previous peak of 1999.

According to him, two groups of buyers are driving the HDB resale market. Those who profited last year from en bloc sales “have cash on hand, (but) can’t afford a similar unit in the same area, so they move away from the city or downgrade. They can pay in cash because they have at least $800,000 to play with,” Mr Koh said. Then, there are older buyers, he said — “planning for retirement” — who are selling off their private properties to boost retirement funds.

Source : Today - 3 Jul 2007

What safeguards should be put in place to make en bloc sale process smoother and fairer? Or is there a need for broader policy changes to cool the en bloc fever?

As Singapore moves towards redefining itself, en bloc sales to rejuvenate and refurbish older buildings, as part of the city’s transformation, is understandable and natural. Halting en bloc sales will be interfering in the market mechanism. This clearly is not the wish of the city planners. What is required though, is to clarify the underlying rules and laws pertaining to such sales, which will make it easier to understand, interpret and reduce litigation. Rights of minorities need to be defined clearly. That the government is currently in a consultation phase on laws relating to this, is welcome.

What we will also have to keep in mind is the substantial increase in overall operating costs of entities based in Singapore of late and the relative costs vis-a-vis other cities. This is to ensure that Singapore does not become uncompetitive and new companies wishing to set up in Singapore are not disadvantaged. This is critical for long-term sustainability and anything that will damage it should be resisted. Recent government order prohibiting conversion of office property in certain areas to condominiums is consequently welcome. Similar steps to balance demand and supply so that runaway rentals of both offices and apartments are reined in, will certainly assist in breaking the ‘inflationary expectations’ so evident in Singapore today.

- Girija Pande Regional Director Tata Consultancy Services

Leave it to market forces

I THINK the current measures are sufficient to ensure the en bloc process is fair to property owners. It is up to each individual owner or groups of owners to lobby the other owners on their views to sell or not to sell the property. Ultimately, the decision of the majority has to prevail and be respected. I feel that the en bloc process itself is an integral part of urban renewal for Singapore. Being land-scarce, the en bloc process helps to continuously rejuvenate the cityscape by removing older developments and replacing them with newer and more land efficient ones. Whether the en bloc fever needs to be cooled, I feel that it is best left to market forces. Ultimately, the developers will have to do their sums before they keep chasing each en bloc at higher prices and it is they who have to pay the price if they get their numbers wrong.

- Wee Piew CEO HG Metal Manufacturing

THE market forces of supply and demand for en bloc sales should be left to take its own course. The problem appears to be with the sales committee. Perhaps the government should take immediate steps to regulate the set-up of the sales committee and formalise the appointment of members to address the current concerns and unhappiness of homeowners involved in an en bloc sale regarding fair representation and conflict of interests.

- Lim Soon Hock Managing Director PLAN-B Icag

WE HAVE this unique process of unlocking asset wealth and people generally have different circumstances and needs. The en bloc sale process could never be fair for everyone. For those who have felt shortchanged because the neighbours are getting a better deal, they should just be thankful for the newfound wealth and enjoy their wealth instead of bickering about being shortchanged. As in all free market practices, we could never sell at the highest and buy at the lowest.

I think we should allow market forces to work as at some point, the law of supply and demand will cool this fever and those who could not get on the bandwagon will regret being too greedy. Give me an en bloc any day. I prefer an en bloc over a gazette!

- Fong Loo Fern Managing Director CYC The Custom Shop

EN BLOC sales are commercial transaction dependent on market forces. Therefore, there should be minimal government intervention to control prices. Although, the real estate boom does have an impact on public housing prices, but it is not inflationary.

Let the natural economic forces and regulatory processes moderate the fever in such sales.

En bloc sales is, in fact, a form of property renewal which rejuvenates an entire estate and has a positive effect on the property values.

- Derek Goh Executive Chairman/Group CEO Serial System

EN BLOC sales allow the renewal of the urban fabric. The market will find its own level. There is no need to cool this fever as long as it does not affect affordability to fulfil basic housing needs of the masses.

Some owners are unhappy as they tend to compare their gains with other developments with higher untapped development potential. Availability of replacement properties is also an issue. The application to get an order of sale from the STB is a lengthy process. Money comes too late for owners to reinvest in replacement properties.

- Tan Tiong Cheng Managing Director Knight Frank

Mind the minorities

EN BLOC sale of properties is a good concept for a country to grow economically and financially. The concept may be great but it may also harm people who love their homes emotionally and are not happy to live in other locations. The safeguard to make the en bloc sale smoother and fairer is to grant an option to those who want to stay back at the same location at a price they are forced to sell plus the construction cost of the new building. The broader policy to cool the en bloc sale fever is to amend the Act allowing the en bloc sale to be consummated with a minimum of 90 per cent, instead of 80 per cent, agreeing to sell. The buyer shall grant an option to the 10 per cent who do not want to sell to buy back at the price they are forced to sell, plus construction cost.

- Ng Kong Yeam Group Executive Chairman Sino-America Tours Corporation

MORE should be done to safeguard the rights of the minority. These are people’s homes and a lot of sentimental value has been built into them. Unlike money, you cannot recover these things once they are gone and no amount of compensation can make up for the loss. People think they can just sell and make money, but with the cost of new property shooting through the roof, some sellers are even finding themselves in a ‘homeless’ state. Sure, development must continue, but we should really stop and ask ourselves whether we’re paying too high a price for it.

- Glenn Tan Group Chief Executive Motor Image Group

TO ADDRESS the grievances of owners who are unhappy about en bloc property sales, it is pertinent for the Sales Committee, Marketing Agent(s) and lawyer(s) involved to be more proactive in terms of transparent communication.

We must understand that they are far from being recalcitrant criminals and should not be threaten with legal action. Rather, a softer approach through engagement via honest open communication, counselling and assistance (with alternative accommodation, etc.) is the key.

Developers should be socially responsible in executing the deal; and lawyers ought to assist them in understanding the relevant terms and conditions as well as their legal rights and obligations in clear layman terms.

The hard hand of the law MUST be tempered with compassion.

- Sam Yap S G Executive Chairman Cherie Hearts Group

Enforce stringent safeguards

THE current steep climb in property prices is a double-edged sword. Along with the vibrant en bloc sales and the sharp climb in property prices, more and more home owners are feeling marginalised in the process.

As more home owners lodged their complaints with Strata Titles Board (STB), the government had decided to change the ruling come this August/September. I support this move as I feel that more stringent measures should be in place to ensure that the en bloc process will be more transparent and fairer. Perhaps one of the suggested measures could be to increase the percentage of approval to 90 per cent from the present 80 per cent. The other factor could be to limit the properties eligible for en bloc by increasing the age of the property to more than 25 years.

With the growing chorus of dissent, there is definitely a need for broader policy changes. This will indeed help to safeguard the interest of the general public since no homeowners should be made to feel pressurised into entering a transaction that they are ill-prepared for. Globally, the current cycle of such unprecedented steep climb in both the housing and office sales and rental may ultimately hurt the competitiveness of Singapore. The sudden increase in both office and housing sales and rental is a double whammy for overseas companies looking to set up regional offices in Singapore. Thus, this may result in companies deciding to relocate their regional offices to a much more cost efficient Asian city.

- Benjamin Low Managing Director, South-East Asia and India Secure Computing

EN BLOC property sales need to be closely regulated by the government as well as independent bodies to ensure that the process is transparent and just, especially to innocent homeowners. Penalties ought to be enforced accordingly on any party deemed to have manipulated or influenced the process unfairly.

The recent proposed changes by the government on en bloc sales procedures such as allowing en bloc sale committees to be formed only at extraordinary general meetings convened by management corporations is one effective method to regulate the process.

These safeguards should ultimately result in an en bloc sale process that is fair to both developers and owners and will ensure the sustainability of a strong property market in Singapore.

- Charles Reed CEO interTouch

EN BLOC sales may be good news to people who want to make a quick buck from the sale of the property but not so good news for people who love the place and whose family calls it home. Collective property sales are necessary for a land-scarce country like Singapore. Collective sales can be a useful engine of growth in the key property sector of our economy. But now that they have become so important and so frequent, it is vital that some measures be put in place to check the frenzy we are witnessing now. This is not healthy for the fabric of Singapore.

- Dora Hoan Group CEO Best World International

THE en bloc fever has given rise to a steep uptrend in property prices and growing concern regarding the transparency and fairness of en bloc transactions.

To address this concern, stringent regulations are already being considered by the relevant authorities. Additional measures that can be implemented to enhance this process include improving accessibility to professional advice for affected residents to enable them to make a informed decision, discourage pressure tactics towards dissenters and exploring how efficiency of these sale transactions can be further improved.

Like all free markets governed by demand and supply forces, the property market also contains a self-regulating mechanism which will correct irregularities in the long run.

- Lars Ronning President, North & South-east Asia, India, Australia & New Zealand Tandberg

AN en bloc sale enhances property value and it helps the developer in acquiring group property and land faster. It is positive to property boom in Singapore.

The en bloc sale process, however, may take too long to complete, settle disputes, and obtain official approval. Before deal closing, a new wave of property price surge could have already begun, making the completed deal unattractive and out-of-date.

Guidelines on appointment of sales committee, marketing agent, and deal closing, option given to the objector of sale to buy back at a discount, bridging loans to sellers to facilitate their home purchase long before payment from developer, faster approval on closed deals - all this will help to make the sale process shorter, smoother and fairer.

- Tan Kok Leong Principal TKL Consulting

Raise awareness

THE proposed changes include an extraordinary general meeting (EGM) to start the intended en bloc sale. This will be a good implementation to ensure transparency.

There should be more informative and regular updates. Besides the mandatory eight-weekly notice, there should be encouragement to raise the awareness and understanding of the complexity of the collective sale process for the owners of the en bloc estate.

- Mohamed Ismail CEO PropNex Realty

IN A democracy a majority of 50%+1 is sufficient for electing a government, a super-majority is sufficient for changing the constitution. In an en bloc sale of a collective property like a condominium, an 80 per cent majority is currently required. In a private housing estate with individual titles there is no issue of an en bloc sale as every owner must agree. So condominium owners must be aware what their rights and obligations are before they buy a condominium!

- Choo Chiau Beng Chairman Keppel Offshore & Marine

Source : Business Times - 2 Jul 2007

Back in 1997, Mr Felix Chua and his wife Margaret paid $730,000 for a 14th floor, 146 sq m executive maisonette in Bishan.

Both property agents, they believed they had struck a good deal.

They had earlier missed out on two flats in the same block - an 18th floor unit which sold for $750,000, and another on the eighth floor that went for $720,000.

Today, their flat is not worth anything close.

Property analysts put the current value of executive maisonettes at Bishan Street 23 at about $480,000 - already 10 per cent more than at the start of this year, when prices were closer to $440,000.

So buyers - especially those now flush with cash from the collective sale of their old homes - thinking of paying top dollar for resale flats might well take this as a cautionary tale.

Last month, a six-year-old 115 sq m Housing Board flat at Kim Tian Place went for $720,000 - setting a record for five-room flats.

The buyer had cash from a collective sale to blow; the seller pocketed a tidy profit of $350,000.

Residents in this Tiong Bahru neighbourhood are not short of interested buyers, some of whom are willing to pay $60,000 to $70,000 above the valuation of about $530,000 - all in cash.

Almost every day, residents receive fliers from various real-estate companies in their mailboxes. Property agents have also shown up in person at their doors.

Occasionally, these residents get handwritten notes slipped in under their doors from buyers looking for a quick purchase without going through a property agent.

Just down the road from Kim Tian, at the Jalan Membina HDB estate, a buyer paid $675,000 for a 16th floor unit last month.

Property analysts are surprised by these purchases.

Chesterton International research director Colin Tan said such prices are not justified by the expected rentals.

He said: ‘Sometimes, people do pay 10 per cent more for benefits such as staying near their parents or being near a school.

‘But if they are thinking of paying 50 per cent more, there are alternatives in the resale market.’

Analysts say the recent rash of collective sales is fuelling this buying frenzy.

PropNex chief executive Mohamad Ismail said: ‘If not for that, I do not think anyone will pay $700,000 for a five-room flat.’

He said that while those who have windfalls from properties sold en bloc will not feel the pinch because they are paying just a fraction of what they have made, HDB upgraders in the market for resale flats do need to worry about paying such high prices, he said.

Even though he expects HDB prices to go up over the next two to three years, he reckons that buyers who paid more than $100,000 above valuation previously will not be able to sell at today’s prices.

Retiree Alan Pwee, 63, has been down that very road.

In 1997, he upgraded from a five-room flat in Bishan Street 23 to a $760,000 top-floor maisonette a few blocks away.

The maisonette is now worth only $480,000.

‘Of course, I regret buying at that price. It was partly an investment. Now, I have no choice but to take it as a paper loss,’ he said resignedly.

Mr Pwee and the Chuas are among those who bought homes during the last property boom a decade ago.

Mr Ismail said: ‘Anyone who bought in 1996 will not make a dollar’s profit today.’

However, those in Bishan are counting bigger paper losses. The inflated prices back then came from the demand for five-room and executive flats in the estate.

A decade ago, Bishan was a new satellite town.

Demand for homes there was jacked up because of its good location: It is served by expressways and the MRT, and amenities and premier schools - such as Raffles Institution and Catholic High School - are in the neighbourhood.

The only comfort from the paper loss for Mr Chua, now 50, is that he and his wife feel they ‘got what they wanted’.

But given a chance, they would like to downgrade to a four-room flat.

Those hoping to ‘let go’ properties they paid a high price for are saying they will wait out the current market.

Mr John Ching moved into Bishan about 10 years ago when he bought a maisonette at $620,000.

‘I won’t sell unless the price is about $600,000,’ said the 59-year-old retiree.

But property analysts say Bishan residents would have to wait for the economy to improve further to stand a chance of breaking even.

Mr Ismail noted that the price index is 20 per cent lower than in 1996.

And Bishan is no longer the estate buyers are eyeing.

The choice locations now are Telok Blangah, Redhill and Tiong Bahru because they are near the city and the upcoming integrated resorts, said Mr Ismail.

Mr Nicholas Mak, director of research and consultancy at Knight Frank, said: ‘Flats are not an ageless commodity like gold.

‘Bishan is no longer the hot area as flats there are much older now.

RESIGNED TO A PAPER LOSS

‘Of course, I regret buying at that price. It was partly an investment. Now, I have no choice but to take it as a paper loss.’ RETIREE ALAN PWEE, 63, who paid $760,000 for a top-floor maisonette in 1997. The maisonette is now worth only $480,000

NO PROFITS TO REAP

‘Anyone who bought in 1996 will not make a dollar’s profit today.’ PROPNEX CHIEF EXECUTIVE MOHAMAD ISMAIL
 
Source : Straits Times - 2 Jul 2007

Average asking prices now close to $1,000 psf on the back of rising land values, larger plots

DEMAND for prime bungalows is still high and prices show no sign of easing either - no surprise given the property market’s resurgence.

So far this year, 47 deals for good class bungalows have been done to the tune of $560 million, said CBRE Research.

This compares with 55 deals worth $564 million completed in the same period last year.

Good class bungalows are defined as those on at least 15,000 sq ft of land in 39 designated areas.

Asking prices for bungalows in coveted areas such as Nassim Road, Dalvey Estate, White House Park and Cluny Park now average $900 per sq ft (psf) to $1,000 psf, said Mr Douglas Wong, who heads PropNex Grandeur Homes.

This is up from transacted prices of $400 psf to $450 psf three years ago when the market for good class bungalows showed its first signs of recovery, he said.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, said asking prices for Nassim Road have crept up to about $1,200 psf.

Average total prices for good class bungalow deals this year have crossed the $12 million mark, compared with last year’s average of $10.8 million and the 2005 average of $8.5 million, he said.

A bungalow on 15,075 sq ft in next door Dalvey Estate in district 10 was sold for $1,091 psf of land area in March. This brought the average price of done deals in the area to $898 psf this year.

It represents an 83 per cent rise from the average price of $501 psf recorded for five deals done last year, said CB Richard Ellis Research (CBRE Research).

Another Dalvey Road bungalow with a land area of 20,139 sq ft was sold in April for $14.2 million, up 63 per cent from the $8.7 million price that the seller paid last February, it said.

The Binjai Park area in district 21, near Bukit Timah Road, has also seen a significant price increase this year.

Three deals worth an average of $666 psf have been done compared with an average of $363 psf for three sales last year.

Higher-priced deals are being recorded because of rising land values, larger plots being sold and newer houses on those plots, said Savills Singapore’s Mr Ku.

Some owners who had bought a few years ago rebuilt or renovated their homes before putting the properties back on the market at higher prices, he said.

The prime bungalow market had a record year last year with 119 deals worth $1.23 billion.

But it cannot be compared with the condominium market as it is largely restricted to local buyers, consultants said.

Foreigners have to be permanent residents and apply for special approval to buy landed homes on mainland Singapore, with Sentosa Cove being the only location where non-PR foreigners can purchase landed property.

Foreigners are further restricted to landed properties with a land area of no more than 15,000 sq ft.

CBRE Research said good class bungalow sales this year would be similar in value to those of last year, but the number of sales may not be as high as the 119 recorded last year.

‘That is because sellers’ expectations are now much higher than before, given the very positive outlook,’ it said.

Nevertheless, where value is concerned, there is still room to move up, said Mr Wong, who predicts a 5 per cent to 10 per cent rise in bungalow prices for the rest of the year.

Prices could move even higher next year given that 99-year leasehold Sentosa Cove bungalow plots have sold for higher prices than good class bungalow plots.

‘Good class bungalows are a unique product. There are only 2,500 units in Singapore and all are freehold,’ said Mr Wong.

Source : Straits Times - 2 Jul 2007