Residential and commercial property sectors in Singapore are still attractive to several medium- to long-term investors.
Property observers see Singapore’s commercial status as one of the international financial hub. Despite this year's difficult times for all marketing sectors, market watchers noted that property investment fundamentals remain positive and strong.
As many financial institutions across the globe cut costs, they are now planning to move their business operations out of the luxury cities in Europe and the US, and bring them to Asian cities where cost of business are much cheaper. For instance, corporate tax rate in Singapore is 18 percent, compared to 40 percent in the US and 29 percent in the UK.
This event can spur demands for office and business spaces in most financial centres in Asia like Singapore, bringing investment opportunities in commercial property sectors.
“Financial institutions are growing, in many cases from hundreds to thousands of jobs here in Singapore. The bigger these institutions become, the more real estate they need,” Jones Lang LaSalle Managing Director Christopher Fossick said.
However, opportunities in residential markets are visible as well. Closing gap between rentals and debt servicing, as well as the falling valuation this year can attract many investors who are looking for good deals.
“For example, those in district 9, 10, and 11, they tend to be more elastic, the prices. So when the economy is not doing too well, the prices come down quite a lot, especially amongst those who have, for example, bought from the developer and then now need to sell to raise cash flow. They are prepared to cut losses,” said ERA Asia Pacific Associate Director Eugene Lim.
Observers see property market is offering rich pickings to investors who would bring long-term returns in the country.
Friday, 30 March 2012
Further Property Deflation Foreseen in 2009 (30 Dec 2008)
DTZ predicts 15%–20% decline (year-on-year) in the prices of condominiums and apartments in prime districts in 2009.
Official data for the fourth quarter of 2008 showed that the prices of non-landed private homes in high-end districts (including District 9, 10 and 11) plunged by 14% on quarterly basis, compared to 4.5% price declines in the last two quarters. Average prices of prime properties dropped by 21.6% year-on-year to $1,160, compared to $1,200 psf in the second quarter of 2007.
The prices of freehold non-landed houses beyond the prime districts fell by 9.3% on quarterly basis and by 10.5 % on yearly basis, whereas nationwide landed housing prices dropped by 5.7% on quarterly basis and 2.9% on yearly basis.
Prices began falling steeply following dismal sales of prime properties after the third quarter of 2008. Only 112 and 192 units were sold in October and November, respectively, compared to the monthly average of 444 units (based on sales record from January to September 2008).
According to DTZ, leasable prime non-landed homes also suffered from deflationary pressures, with monthly rents dropping by 9.4% on quarterly basis and 9.2% on yearly basis, hitting $4.36 psf. Non-prime rents fell by only 2% on quarterly basis, but increased 1.2% on yearly basis.
DTZ predicts that the economic slowdown will dampen the demand in the property market until 2009. Prices of luxury homes and mass residential properties are expected to fall by 43.8% and 32.1%, respectively, based on the 2007 benchmark.
Official data for the fourth quarter of 2008 showed that the prices of non-landed private homes in high-end districts (including District 9, 10 and 11) plunged by 14% on quarterly basis, compared to 4.5% price declines in the last two quarters. Average prices of prime properties dropped by 21.6% year-on-year to $1,160, compared to $1,200 psf in the second quarter of 2007.
The prices of freehold non-landed houses beyond the prime districts fell by 9.3% on quarterly basis and by 10.5 % on yearly basis, whereas nationwide landed housing prices dropped by 5.7% on quarterly basis and 2.9% on yearly basis.
Prices began falling steeply following dismal sales of prime properties after the third quarter of 2008. Only 112 and 192 units were sold in October and November, respectively, compared to the monthly average of 444 units (based on sales record from January to September 2008).
According to DTZ, leasable prime non-landed homes also suffered from deflationary pressures, with monthly rents dropping by 9.4% on quarterly basis and 9.2% on yearly basis, hitting $4.36 psf. Non-prime rents fell by only 2% on quarterly basis, but increased 1.2% on yearly basis.
DTZ predicts that the economic slowdown will dampen the demand in the property market until 2009. Prices of luxury homes and mass residential properties are expected to fall by 43.8% and 32.1%, respectively, based on the 2007 benchmark.
Home Prices Keep Tumbling (28 Dec 2008)
Even if developers beg to differ, private home prices are dropping, and it will keep falling even further until next year. The figures for sold homes is going for an 18 year-low this year, to make it worse, supply is nowhere near deficient.
“In every bear market, no matter what the developers say, it will happen,” the president of the Society of Financial Service Professionals, Mr. Leong Sze Hian, said in lieu of the dropping home prices. He also added that the only indefinite is until when or how is the fall.
From first quarter’s $3,982 to third quarter’s $3,307, Manpower Ministry statistics confirms that the average monthly real earnings got knocked down by 17 percent. In addition to that, the 5.3 percent reduction that the second quarter endured is continuing to the third quarter with a fall of 6.8 percent; this includes the quarter-on-quarter basis, gross domestic product, etc.
“All these will filter through to the property market,” further explained by Mr. Leong.
At the moment, consumers are moonlighting, there are hardly any new launches, and there are only a few distressed sellers.
Mr. Nicholas Mak, Knight Frank's director of research and consultancy said, “Most are not feeling any pain from the recession yet. In the secondary market, many sellers are still hoping to do sub-sale at a profit.” He also added that there are no chief price cutbacks so far.
“In every bear market, no matter what the developers say, it will happen,” the president of the Society of Financial Service Professionals, Mr. Leong Sze Hian, said in lieu of the dropping home prices. He also added that the only indefinite is until when or how is the fall.
From first quarter’s $3,982 to third quarter’s $3,307, Manpower Ministry statistics confirms that the average monthly real earnings got knocked down by 17 percent. In addition to that, the 5.3 percent reduction that the second quarter endured is continuing to the third quarter with a fall of 6.8 percent; this includes the quarter-on-quarter basis, gross domestic product, etc.
“All these will filter through to the property market,” further explained by Mr. Leong.
At the moment, consumers are moonlighting, there are hardly any new launches, and there are only a few distressed sellers.
Mr. Nicholas Mak, Knight Frank's director of research and consultancy said, “Most are not feeling any pain from the recession yet. In the secondary market, many sellers are still hoping to do sub-sale at a profit.” He also added that there are no chief price cutbacks so far.
Problems of Deferred Payment Scheme (20 Dec 2008)
During the Asian financial crises, deferred payment on homes was adapted to stimulate the property market. With a little cash, a buyer could secure a property before it was in fact built. This scheme was later stopped because it encouraged widespread speculation.
As of 2008, there were 3350 deferred homes, with more partially “paid for” homes in 2009 totalling to 4,560 and in 2010 to 2,540. What becomes a problem with these 10,540 deferred payment homes is that the owners or buyers may not complete their payments in the foreseeable future, causing losses in a falling market.
These buyers already experience hard time borrowing money from the bank just to settle their balances. Now, the banks, wary of the foreseeable risk, are requiring more cash out on the part of the home owners before they will lend credit. If the home owners cannot raise their own money, as most are, and they cannot get credit, then they too will cut their loses by selling their deferred payment homes in an already falling property market.
One bright outlook however is that according to Mr. Tan Tion Chen of Frank Knight, buyers who bought in 2005 and 2006, when prices were not so high, have only a slim chance of defaulting on their payments.
This positive outlook was also shared by Mr. Chua Yan Liang of Jones Lang LaSalle. He said, “The 10,450 number seems large but…if buyers can get loans, the problem won’t be as severe as some people think (although) buyers may see it as a reason to bring prices down.”
As of 2008, there were 3350 deferred homes, with more partially “paid for” homes in 2009 totalling to 4,560 and in 2010 to 2,540. What becomes a problem with these 10,540 deferred payment homes is that the owners or buyers may not complete their payments in the foreseeable future, causing losses in a falling market.
These buyers already experience hard time borrowing money from the bank just to settle their balances. Now, the banks, wary of the foreseeable risk, are requiring more cash out on the part of the home owners before they will lend credit. If the home owners cannot raise their own money, as most are, and they cannot get credit, then they too will cut their loses by selling their deferred payment homes in an already falling property market.
One bright outlook however is that according to Mr. Tan Tion Chen of Frank Knight, buyers who bought in 2005 and 2006, when prices were not so high, have only a slim chance of defaulting on their payments.
This positive outlook was also shared by Mr. Chua Yan Liang of Jones Lang LaSalle. He said, “The 10,450 number seems large but…if buyers can get loans, the problem won’t be as severe as some people think (although) buyers may see it as a reason to bring prices down.”
Buyers Take Advantage of Lower Sibor (13 Dec 2008)
Home loan borrowers take advantage on the low Singapore Interbank Offered Rate (Sibor) as interest rates dropped to about 0.9 percent this month.
Economists claimed the three-month Sibor would stay low until New Year.
With the rates continuously depressing, more and more home buyers look for Sibor-related loan bundles.
Geoffrey Ying, head of the mortgage division at financial advisory firm New Independent, approximates that 6 out of 10 customers consulting him inquires about Sibor-linked packages not only for buying high-end units, but also HDB flats.
He also said that only three to four out of ten customers show interest to Sibor-linked bundles last year when it was notably above one percent.
To illustrate this scenario, take for example buying an HDB flat. The best rate offered in town is 2.6 percent annual rate for qualified loaners. This rate is pinned at a level to only as little as above 0.1 percent of the prevailing CPF ordinary account interest rate.
If you are going to compare rates, for instance, with Standard Chartered Bank at a two-year lock-in deal, its Sibor-linked package to Sibor plus 0.95 percent, in the case of the bank.
Therefore in this case, a buyer can pay an annual rate of as little as 1.85 percent – lower than the usual HDB concessionary rate – since the Sibor stay at 0.9 percent.
However, experts say that the Sibor still has the tendency to go up, giving risks to the homebuyers.
Economists claimed the three-month Sibor would stay low until New Year.
With the rates continuously depressing, more and more home buyers look for Sibor-related loan bundles.
Geoffrey Ying, head of the mortgage division at financial advisory firm New Independent, approximates that 6 out of 10 customers consulting him inquires about Sibor-linked packages not only for buying high-end units, but also HDB flats.
He also said that only three to four out of ten customers show interest to Sibor-linked bundles last year when it was notably above one percent.
To illustrate this scenario, take for example buying an HDB flat. The best rate offered in town is 2.6 percent annual rate for qualified loaners. This rate is pinned at a level to only as little as above 0.1 percent of the prevailing CPF ordinary account interest rate.
If you are going to compare rates, for instance, with Standard Chartered Bank at a two-year lock-in deal, its Sibor-linked package to Sibor plus 0.95 percent, in the case of the bank.
Therefore in this case, a buyer can pay an annual rate of as little as 1.85 percent – lower than the usual HDB concessionary rate – since the Sibor stay at 0.9 percent.
However, experts say that the Sibor still has the tendency to go up, giving risks to the homebuyers.
Lessons from the US Subprime Mortgage Crisis (28 Nov 2008)
“I and others were mistaken early on in saying that the subprime crisis would be contained,” said US Federal Reserve Chairman Ben Bernanke at the onslaught of the subprime mortgage crisis which crippled even the biggest players in the US financial industry.
Way back in 2007, US President George W. Bush refused to grant bailouts to struggling banks, believing that the mortgage market would self-correct. Months later, Merrill Lynch wrote down $7.9 billion worth of CDOs and incurred $2.3 billion in losses. Its stock price fell uncontrollably as it sought emergency assistance from sovereign wealth funds. Then came the historic demise of Lehman Brothers.
The subprime mortgage crisis can be traced back to the generous housing program of the president. It took a year before the president saw the looming crisis and eventually announced a $700 billion bailout program.
The crisis brought to light the lack of government intervention at the stage where the financial crisis can be prevented the most. When the Singaporean property market suffered a similar fate in the 1980s, the government immediately intervened and asked banks to restructure their loans, delay debt repayments and forgo additional margins – all of which came too late in the case of the US
The second thing to learn from the mortgage crisis is the importance of bailouts. The government must reassure financial institutions that it will shoulder mortgage payments when all other measures have been exhausted in the event of delinquency.
The mortgage crisis has shed light on the importance of restoring business confidence and early government intervention. Every country must learn from the failure of the US government to address financial meltdown in a timely manner.
Way back in 2007, US President George W. Bush refused to grant bailouts to struggling banks, believing that the mortgage market would self-correct. Months later, Merrill Lynch wrote down $7.9 billion worth of CDOs and incurred $2.3 billion in losses. Its stock price fell uncontrollably as it sought emergency assistance from sovereign wealth funds. Then came the historic demise of Lehman Brothers.
The subprime mortgage crisis can be traced back to the generous housing program of the president. It took a year before the president saw the looming crisis and eventually announced a $700 billion bailout program.
The crisis brought to light the lack of government intervention at the stage where the financial crisis can be prevented the most. When the Singaporean property market suffered a similar fate in the 1980s, the government immediately intervened and asked banks to restructure their loans, delay debt repayments and forgo additional margins – all of which came too late in the case of the US
The second thing to learn from the mortgage crisis is the importance of bailouts. The government must reassure financial institutions that it will shoulder mortgage payments when all other measures have been exhausted in the event of delinquency.
The mortgage crisis has shed light on the importance of restoring business confidence and early government intervention. Every country must learn from the failure of the US government to address financial meltdown in a timely manner.
Shopping Mecca To Rise at Serangoon (26 Nov 2008)
The current economic slowdown is not holding back the construction of a mega shopping mall at Serangoon Central. Gold Ridge contracted Low Keng Huat to construct the $295 million commercial property, which is poised to become an iconic retail center in North East.
Gold Ridge is a special purpose vehicle comprising institutional investors from Europe and the US. The developer won the tender in May this year with an $800.9 million bid or $850/sq ft per plot ratio. Chin Yeok Yuen, chief financial officer of the contractor, was grateful that such big contract materialised despite the downturn in the real estate market.
Victoria Sharpe, chief executive of Pramerica Real Estate Investors (Asia), believed that the mall is poised to be at the forefront of shopping arena in the northeastern region. Strategically located at the centre of Serangoon, the site is near densely populated residential areas and schools. Standing six-storey high, the mall will be integrated with the Serangoon MRT station and the future Serangoon Circle Line station.
The shopping mall will be open 24 hours and have more than 618,000 sq. ft. of total lease area, making it bigger than Ang Mo Kio Hub and other traditional suburban malls which measure 300,000 sq. ft. to 400,000 sq. ft. Gold Ridge also plans to add a department store measuring 60,000 sq ft. and a food court with a 500-seat capacity. There will also be 400 specialty shops, a 10-screen cineplex, a 10,000-sq. ft. gourmet supermarket and a 60,000-sq. ft. hypermarket.
Gold Ridge is a special purpose vehicle comprising institutional investors from Europe and the US. The developer won the tender in May this year with an $800.9 million bid or $850/sq ft per plot ratio. Chin Yeok Yuen, chief financial officer of the contractor, was grateful that such big contract materialised despite the downturn in the real estate market.
Victoria Sharpe, chief executive of Pramerica Real Estate Investors (Asia), believed that the mall is poised to be at the forefront of shopping arena in the northeastern region. Strategically located at the centre of Serangoon, the site is near densely populated residential areas and schools. Standing six-storey high, the mall will be integrated with the Serangoon MRT station and the future Serangoon Circle Line station.
The shopping mall will be open 24 hours and have more than 618,000 sq. ft. of total lease area, making it bigger than Ang Mo Kio Hub and other traditional suburban malls which measure 300,000 sq. ft. to 400,000 sq. ft. Gold Ridge also plans to add a department store measuring 60,000 sq ft. and a food court with a 500-seat capacity. There will also be 400 specialty shops, a 10-screen cineplex, a 10,000-sq. ft. gourmet supermarket and a 60,000-sq. ft. hypermarket.
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