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Volumes shrink, prices weaken but some segments are holding firm

Based on the latest monthly developer sales data from the Urban Redevelopment Authority (URA), property prices could be on the downward trend.

Developer sales fell, with April seeing only 274 transactions. This is about 9 per cent lower than the 301 units sold in March, though still higher than the 174 units sold in February.

And while it is difficult to accurately pinpoint price movements with such low volume, an analysis by Knight Frank of overall median prices achieved nevertheless registered an 8.9 per cent drop in April, falling to $943 psf compared to $1,035 psf in March.

The peak median price of over $1,400 psf was reached in August 2007.

Knight Frank director (research and consultancy) Nicholas Mak also explained that the analysis was a ‘median of median prices’, and so may not be a precise reflection of price movements.

Mr Mak also said that applying a different mode of analysis to the same data - the formula used to calculate URA’s quarterly property price index for instance - could even show that prices have increased slightly.

Still, a comparison of monthly median prices of recently launched developments does suggest that prices could be falling.

The 79-unit Blu Coral was launched in February with nine units sold at a median price of $872 psf. In March, 28 units were sold at a median price of $802 psf, while in April, 18 units were sold at a median price of $657.

Similarly, 53 units of the 106-unit, The Verve, were launched in March with 36 units sold at a median price of $1,187 psf. In April, 8 units were sold at a median price of $1,055 psf.

And nine units of the 625-unit, The Quartz, were sold in March at a median price of $742 psf, followed by 14 units sold in April at a median price of $721 psf.

Interestingly, one unit of Waterfront Waves was sold at $909 psf in April, higher than the median price of $806 in March when 14 units were sold.

Perhaps another indication of the weakening market is that 43 units of 659-unit The Parc Condominium, previously reported as being fully sold, have re-emerged on the market. According to the monthly data, the returned units first appeared in February.

A source that did not want to be named also said that these units were returned by buyers who chose not to exercise their options, forfeiting a quarter of the 5 per cent downpayment in the process.

Jones Lang LaSalle head of research (South-East Asia) Chua Yang Liang has also analysed median prices as a measure of volatility and suggests that this has increased in the Outside Central Region (OCR).

Dr Chua explained that volatility, as a measure of how wide market prices are per unit dollar of the median price achieved could also reflect, ‘the market’s speculative level’. As such, he said: ‘It would appear that upgraders may be returning, with entry level projects that are moderately priced between $750 to $850 psf as the preferred choice.’

Supporting this were the healthy sales of the 56-unit Stadia at Yio Chu Kang, which saw 52 units sold. Two units were sold for under $750 psf while the remaining 50 were sold at between $750 and $1,000 psf.

In the OCR, Dr Chua said based on the analysis, median prices continued to soften by 4.2 per cent. But he also added that the analysis was just an ‘indication of the market’s mood’, and does not account for product differentiation or physical attributes of each development.

While the volume of sales was low in the Central Core Region with just 19 non-landed homes transacted, Dr Chua believes that the low volatility in median prices there suggests that market activity and future prices in the high end market are likely to remain stable.

Also holding this view is CB Richard Ellis Research executive director Li Hiaw Ho who noted that two units in Scotts Square were sold at around $4,300 psf, a unit at Orchard Scotts was sold at $2,520 psf and two units at Skypark were sold at around $2,300 psf.

‘Although high-value transactions were limited, the individual transactions seemed to indicate that prices in the high-end market were still holding firm,’ he added.

The analysis of price movements will however, remain an academic one, and as such will remain open to debate.

Colliers International director (research and advisory) Tay Huey Ying said there were too few transactions at the higher end of the market to comment fairly on the sector.

And even for the OCR, she noted that the median transacted price for mass-market units averaged $792 psf in April, about 8 per cent higher than the average median price of $729 in August 2007 when the highest sale volume for the sector was registered.

Source : Business Times - 16 May 2008

GIC Real Estate says weaker market favours those taking strategic position

The sub-prime crisis may have affected Asian property markets, but interest in the sector is likely to grow. The Government of Singapore Investment Corp’s (GIC) real estate arm is also confident about investment opportunities going forward.

‘There is plenty to go around - we will all have fun competing,’ said president of GIC Real Estate Seek Ngee Huat at a property conference yesterday.

Going by the pace at which real estate projects are emerging in Asian cities, Dr Seek believed that there would be a continuous supply to meet different risk-return appetites.

Dr Seek recognised that the sub-prime crisis has weakened Asian markets, particularly Japan and Australia. ‘The contagion effects of the sub-prime crisis . . . can potentially accelerate the downward spin of the current cycle,’ he said.

Nevertheless, the outlook for the property market was not entirely bleak. ‘Weak markets favour those who have capacity to take a strategic position,’ Dr Seek said. ‘The sub-prime meltdown presents threats but there are also opportunities.’

And many around the world are likely to see investment opportunities in Asian property markets as well. ‘Massive build-up of investment funds in the world, coupled with the attraction of Asia as a growth region of the future, will ensure continuous global interest in Asian real estate,’ said Dr Seek. He pointed out that this will inevitably lead to greater competition.

Dr Seek said that GIC Real Estate had focused mainly on developed markets in its first 10 years, and only started investing in Asia in the 1990s. Even then, it was ‘way ahead’ of other institutional investors.

GIC Real Estate ranks among the world’s top 10 real estate investment firms, according to its website. The unit has over 200 investments across more than 30 countries, culminating in a multi-billion US dollar portfolio.

GIC Real Estate had in March, through its affiliate Reco Hotels JV Private Ltd, entered into a joint venture with Host Hotels & Resorts Inc to explore investment opportunities in Asia and Australia. The real estate unit also bought the Westin Tokyo hotel for about 80 billion yen (S$1.05 billion) in February.

Source : Business Times - 16 May 2008

Amid a quiet property market, NTUC Income is selling a small commercial property in Beach Road that could fetch around $24 million to $26 million.

Beach Junction, at 67 Beach Road, is a 999-year leasehold building opposite Shaw Towers. It sits at the junction of Beach Road and Middle Road.

The six-storey development has a net lettable area of about 19,000 sq ft and is fully tenanted.

More than half of the leases expire this year, which means there is potential for near-term rental appreciation, according to marketing agent CB Richard Ellis.

‘This is also a unique opportunity for owner-occupiers looking for their own building in a very accessible location,’ it said.

The property is served by City Hall and Bugis MRT stations. Accessibility will be enhanced by the completion of Esplanade station on the Circle Line by 2010.

New investors or owner-occupiers will also be able to give the building a new name.

An industry source told BT that the site is worth about $1,300-$1,400 psf.

Besides being close to the huge, eco-friendly South Beach mixed project by a City Developments-led consortium, Beach Junction is expected to benefit from plans for the nearby Ophir Road/Rochor Road corridor, which will be transformed into a commercial node with offices, hotels and supporting uses.

Expression of interest for Beach Junction closes at 3pm on June 5.

Source : Business Times - 16 May 2008

CityDev boss sees further investment opportunities ahead

Hotel and property tycoon Kwek Leng Beng believes Singapore’s real estate market is sustainable and further investment opportunities lie ahead.

‘I am also waiting for the opportunity … to go in and buy at the right time,’ he said at a property conference yesterday.

The executive chairman of City Developments said growth in Macau’s gaming industry had driven up residential property prices there sharply. And with two integrated resorts and big events such as the Youth Olympics in the next few years, Mr Kwek reckons the future is bright for Singapore real estate.

According to country head of Jones Lang LaSalle Singapore Christopher Fossick, the current slowdown in property demand is largely sentiment-driven, and many investors are probably waiting to purchase at better prices.

In terms of office space, Mr Kwek said: ‘There has been a lot of talk that by 2010 and 2011 there will be a lot of oversupply. I do not believe so because in the first place, construction is a problem here.’

He cited rising construction costs as a reason for this view.

While office rents have been rising, Mr Fossick does not see this as a major business concern. Sharing feedback from multinational companies, he said wages are a much larger component of the cost of doing business, compared with rents.

Mr Kwek is also positive on the outlook for the hospitality real estate market. He believes the shortage of hotel rooms in Singapore and the rise in intra-regional travel will keep room rates on an uptrend.

Although Mr Kwek is generally upbeat on prospects for local real estate, he did express one concern. While investments from institutional funds have helped steady the market, ‘funds have a duration of life and will get out’, he said.

On the other hand, ‘for the retail buyers, when they get out, they don’t get out all at the same time’.

Mr Kwek asked in a panel discussion why the recent boom in Singapore’s property market did not attract many individual investors from the West, while funds showed huge interest. The director of property at Henderson Global Investors Asia, Chris Reilly, said this could be due to the lack of familiarity with Asian real estate among retail buyers in the West.

Source : Business Times - 16 May 2008

The Building and Construction Authority (BCA) announced the results of its 2008 Universal Design Awards yesterday.

Out of 34 entries - one more than in the inaugural competition last year - three buildings garnered a silver award and six attained a bronze award.

Buildings were judged on six criteria - connectivity, accessibility, user-friendliness, safety, aesthetics and corporate philosophy. ‘No gold awards were given out because we have raised the bar,’ said assessment panel chairman Cheong Hee Kiat.

Prof Cheong explained that this year the judges went beyond surface compliance with the first four criteria, deciding that barrier-free access was the bare minimum. They looked for a corporate commitment to universal design, which broadly means ‘design that is friendly to all’, on the part of building owners, designers and developers.

BCA building plan and management director Wong Wai Ching said universal design is ‘an increasing concern against the backdrop of a greying population’, and encouraged the public to highlight the lack of friendly features through BCA’s feedback channels.

Alluding to a 1990 code that legally requires all new buildings to meet minimum accessibility standards, Mr Wong said: ‘Over the years we have been upgrading the barrier-free code to make more requirements mandatory.’

In that vein, BCA is looking at incorporating current universal design recommendations into the code when it next comes under review five years from now.

More owners and developers are using BCA awards to market their buildings, Mr Wong said. It is a ‘differentiating factor in a highly competitive market’, he believes.

The nine winners will receive their awards from National Development Minister Mah Bow Tan at the BCA Awards Night next Thursday.

Source : Business Times - 16 May 2008