Singapore Property News This Week #164

Residential

HDB resale prices lowest in two years

In June this year, HDB resale prices have fallen 6.1 per cent year-on-year—the lowest it has been since April 2012. According to the Singapore Real Estate Exchange (SRX), there was a 0.6 per cent month-on-month fall in June. Not only so, data from SRX showed that 1,315 HDB flats changed hands in June this year, compared to the 1,320 resale flats that were transacted in May. For five months straight, HDB resale prices have been falling. While resale prices of HDB executive flats have increased by 1.3 per cent month-on-month in June this year, resale prices of three, four and five-room flats have dipped. According to Eugene Lim from ERA Realty, prices are expected to fall further as cooling measures take effect. Ong Kah Seng from R’ST Research agrees that prices may continue to stabilise in the upcoming months as resale flats become more affordable. Market analysts believe the increased restrictions on mortgage loans, together with the surge in built-to-order flats have lowered demand for resale flats. Also, more home owners may look to selling their flats since the rental market has been weak. This may have pushed supply in excess of the demand.

(Source: Business Times)

Unsold Balmoral condo units up for bulk sale

Under the government’s Qualifying Certificate rules, developers who wish to extend their sales period have to pay extension fees two years after the completion of a project. To avoid having to pay extension charges, Hiap Hoe Group has put up 48 units in its District 10 project, Treasure on Balmoral for bulk sale. The units are going for a guided price of $1,850 per square foot or $191.4 million in total. The project is due for an extension in November this year as it was issued its temporary occupation permit in November 2012. Market analysts believe that discounted bulk sales will be popular among high-end projects due to the weak market demands. According to Nicholas Mak from SLP International, high-end project developers may not recover their losses in the short term if the cooling measures are not lifted. Nonetheless, Steven Ming from Savills Singapore which is the sole marketing agent for Treasure on Balmoral expects the high-end property market to pick up soon.

(Source: Business Times)

Market for executive condos shrinking

The market for executive condominium units may be shrinking. A state tender for an executive condominium site in Sembawang Avenue has only received four bids. The site is expected to yield 660 units. The tender was won with a $320.11 per square foot per plot ratio bid. This is lower than the winning bid of $350 per square foot per plot ratio for a separate executive condominium site in Sembawang that was sold in January. The site that was sold in January received six bids despite its less ideal location. It was located further away from Sembawang MRT Station, along Canberra Drive. According to Ong Teck Hui from JLL, the $320.11 per square foot per plot ratio bid is the lowest winning bid for executive condominium sites since November 2012. Not only so, there was also fewer bids made, compared to the average of 8.6 bids made for each executive condominium tender that closed in 2013. This may reflect developers’ weakened interest in the market as demand for executive condominium falls. According to market analysts, the fall in demand comes as no surprise as the government’s cooling measures take effect.

(Source: Business Times)

Commercial

Demand for shophouses fall and forces prices down

According to a report by Knight Frank, demand for shophouses is slipping, and this may force prices of shophouses down as the gap between sellers’ asking price and buyers’ willingness to pay widens. The average price of freehold shophouses have fallen by 10.8 per cent from $3,626 per square foot in H2 2013 to $3,235 per square foot in H1 this year. Not only so, prices of shophouses are pushed down further as their demand from food and beverage (F&B), and retail businesses have weakened. In the H1 this year, 40 shophouses were sold, compared to the 49 transactions that were made in H2 in 2013. Mary Sai from Knight Frank said that sellers may be unwilling to lower prices because conserved shophouses in central locations are scarce and thus are not typically available for sale. Furthermore, current shophouse owners may be receiving sufficient rental yields and thus may be less willing to sell off their units at a lower price.

(Source: Business Times)

Strata-titled shops in Toa Payoh for sale

A strata-titled shop located at Block 190 Toa Payoh Central is on sale by tender for $65 million or $11,245 per square foot. The 5,780 square feet shop is subdivided for lease to four tenants, including Watsons. The shop still has a lease of 57 years and its tender will close on August 12. According to Savills, which is the marketing agent for the shop, the HDB hub is the only retail centre which serves the 109,000 Toa Payoh residents. Eugene Lim from ERA Realty believes that the shops along Toa Payoh Central enjoy a high human traffic due to their prime location at the HDB hub. Hence the shop at Block 190 is expected to fetch a high price. According to PropNex, the premium price can be justified if its rental yields are about 3 per cent.

(Source: Business Times)

Tighter subletting rules for industrial properties

JTC has revised its policies to promote productive use of scarce industrial land. According to the new subletting rules, industrialist can only lease out 30 per cent of their total gross floor area instead of 50 per cent of it. According to JTC, this new ruling will be implemented to ensure that tenants continue to occupy the majority of the space for their own productive use. JTC believes that the 30 per cent gross floor area space will be sufficient for a company to use as buffer to cater to fluctuating business volumes. Also, tenants who rent industrial space directly from JTC are no longer allowed to sublet any of the space. JTC said that tenants who no longer require the space can renew their tenancy for a lower quantum when their current term ends. This new policy will take effect from October 1 this year, however, tenants and lessees have till 2017 to make the necessary adjustment. Nicholas Mak from SLP International believes that following the policy change, current sub-tenants may move to new spaces such as strata unit factories.

(Source: Business Times)

Reits acquisition may be slowed by JTC’s revised subletting policy

Real Estate Investment Trusts (Reits) may be affected by JTC’s revised policy. The revised policy states that an anchor tenant must occupy at least 70 per cent of the gross floor area. This policy is expected to affect sale and leaseback transactions. Derek Tan from DBS Group equity research believes that the revised policy will temper Reits’ acquisition and portfolio expansion. On the other hand, JTC has justified its policy move by stating that it hopes to ensure that the bulk of its space will be rented out to industrialists so as to maximise the land for industrial use. JTC also said that it may allow multiple anchor sub-tenants if a Reit is unable to find a major anchor tenant to occupy 70 per cent of the space. However, each of the sub-tenants still has to occupy at least 1,500 square meters and has to meet its productivity criteria. Desmond Sim from CBRE research believes that this policy change will lead to the formation of an anchor tenants’ market, and Derek Tan from DBS notes that the policy may attract better quality tenants that are longer-lasting.

(Source: Business Times)