Singapore Property News This Week #12

RESIDENTIAL

Despite large number of interested parties, units are selling at slower rate

Despite a strong demand for residential property, buyers are becoming more cautious under the gloomy stock market situation. For instance, the 99-year leasehold 493-units private condo project Boathouse Residences at Upper Serangoon, which was launched together by Fraser Centrepoint, Sekisui House, and Far East Organisation, sold only about 90 out of its released 200 units at $880 psf. The rate of sale is much slower as compared to the 99-year leasehold Eight-Courtyards in Yishun, where 202 units at an average price of $795 psf were snapped up within four days during its launch in April. Frasers mentioned that buyers now take a longer time to decide, from 45 minutes in the past to about 60 to 90 minutes now.

More luxury projects are bought by owner occupiers rather than investors and speculators

While the rental yields in luxury market are decreasing and more investors are shifting their investment away from the residential to commercial market, the luxury residential market still reserved its appeal for buyers who buy the properties for personal occupation purposes. According to JTResi, foreigners buy luxury condos for occupation purposes in order to integrate into and experience the vibrant culture of Singapore. Just earlier this year, JTResi sold a three-bedroom apartment at The Orchard Residences at approximately $4,800 psf (about $8.7 million) to an Eastern European couple. Also, a South-East Asian tycoon bought a 3,003 sq ft four-bedroom unit at The Marq for $5,842 sq ft, intending to use the unit as his accommodation whenever he visits Singapore.

Developers are more cautious in bidding for sites

Developers, who are positive about the demand for private houses in selected suburban areas in the mid of economic uncertainties, are preparing for a possible price fall. Just after the start of the stockmarket rout, a 99-year private condo site at Pheng Geck Avenue received 15 bids at a tender. The site, which has received a highest bid of $567.31 psf of potential GFA, had a second highest bid of $548.11 psf ppr and a third highest bid of $536.16 psf ppr. Credo Real Estate mentioned that the narrow differences between the bids indicate that the bidding parties are looking at the current market situation in a similar perspective.

Private houses near to MRT stations likely to be more resilient

Kwek Leng Beng of City Developments believed that developers may need to lower their prices by around 5% for residential projects that are not near to MRT stations over the next six months to increase their competiveness. But developers with residential projects near to MRT stations are likely able to maintain or increase their prices by 1% to 3%. With the market full of liquidity and in the current low interest rate environment, City Developments believed that the current economic crisis in US and Europe will not have a strong impact on Singapore condo prices.

Leasing demand for luxury properties expected to grow

Rentals for luxury non-landed properties increased 3.7% to $4.45 psf pm in H1 2011; and, over the longer period from end-2000 to end-2010, rentals have been increasing at a 5% yearly compound rate. Despite an expected slowdown in the increase of PRs and foreigners in Singapore, leasing demand for luxury non-landed properties is expected to remain strong over the years. Analysts expect demand for 3,350 units per year, which equates to 16,750 units over the next five years. Rentals for GCBs, which have a median rent of $3.41 psf pm in Q2 2011, have been growing steadily at 1.7% per year. Rentals and demand for GCB are also expected to increase due to limited supply.

COMMERCIAL

Office landlords are concerned about the economic situation in the US and Europe

Despite the great demand for Grade A office, office landlords are now concerned with the market situation due to the economic uncertainties happening in the US and Europe. JLL is optimistic about the office demand in Singapore as MNCs that are retrenching staff worldwide are hiring staff in Asia, particularly Singapore. Generally, the average CBD Grade A gross effective rent rose by 1.5% quarter-on-quarter to $10.15 psf pm in Q2 2011; this is a hike from the $10.00 psf pm in Q1 2011, and a 27.7% year-on-year hike from the $7.95 psf pm in Q2 2010. JLL predicted that new supply of office space in the CBD area over the next six months will moderate the rental hike.