DTZ expects 2009 to echo property price plunge of 2008

Prime district property prices fall by 20%; similar decline seen in 2009

Prices of condominiums and apartments in the prime districts have fallen by more than 20 per cent in 2008 on a year-on-year basis, says DTZ.

DTZ is also forecasting a further decline of 15-20 per cent for this segment of the market in 2009.

Based on its preliminary analysis of official data, DTZ said that prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter (qoq) in the fourth quarter of 2008.

This follows two consecutive quarters of declines of around 4.5 per cent each.

The prime districts include District 9, 10 and 11.

Overall average prime prices fell 21.6 per cent year-on-year (yoy) to $1,160 per square foot (psf), below the level of $1,200 psf registered in Q207.

Freehold non-landed homes outside the prime districts fell in Q408 but at a lower rate of 9.3 per cent qoq or 10.5 per cent yoy.

Landed housing prices also fell 5.7 per cent qoq, or 2.9 per cent yoy, islandwide in Q408.

The fall in prices follows dismal developer sales in October and November with only 112 and 192 units sold in the primary market respectively, compared to the monthly average of 444 units sold in the first nine months of the year.

DTZ said that based on caveats lodged, preliminary data from URA’s REALIS showed that the number of transactions in the year is only about 35 per cent of last year’s 38,100 units.

On the upside, the percentage of HDB upgraders continued to grow. In 2008, a higher proportion of purchasers with HDB addresses was registered with 37 per cent of all buyers expected to be HDB upgraders in 2008 compared to 22 per cent in 2007.

Based on available caveats in URA’s REALIS, the number of buyers with HDB addresses in Q408 is 582. While this is a preliminary number, it represents 43 per cent of total caveats lodged so far in the fourth quarter. DTZ noted that this is higher than the 41 per cent in Q308, 36 per cent in Q208, and 28 per cent in Q108.

‘HDB upgraders buy mainly for owner occupation, so falling private home prices is a good opportunity for them to upgrade with greater affordability,’ said DTZ senior director (research), Chua Chor Hoon.

But DTZ said that the downturn in the economy will deter buyers from committing to property purchases and sales are expected to continue to remain low in 2009.

Lower rental returns will not help either.

DTZ said that average monthly rents of prime non-landed homes decreased in Q408 by 9.4 per cent qoq or 9.2 per cent yoy to $4.36 psf.

Outside the prime districts, rents held up better with an increase of 2 per cent yoy, despite a fall of 1.2 per cent qoq.

The extent of price corrections is still uncertain but Nomura has already adjusted its forecasts. In March, it forecast average prices in the luxury sector to fall by 32.3 per cent from the 2007 peak over 2008-2010 – 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010.

It now expects luxury prices to fall 43.8 per cent from the peak, and mass residential prices to fall 32.1 per cent as yields move out by an additional 25-50 basis-points.

OCBC analysts also believe that high-end property prices could decline by 15-20 per cent in 2009 due to weak sentiment, unsold inventories and potential risks of buyers’ default and fire-sales.

OCBC expects mass market property prices to remain resilient, supported by the stability in HDB prices. For the mid-market properties, it expects prices to fall further in 2009, with a projected decline of 5-10 per cent.

Source : Business Times -  Dec 2008

Depa of Dubai wins US$32m Sentosa IR deal

Depa Ltd, the United Arab Emirates-based interiors contractor fitting out the world’s tallest tower in Dubai, won a 118 million-dirham (US$32 million) contract at a holiday resort in Singapore.

Depa and its partner DDS Contracts & Interior Solutions Pte Ltd will fit out an entertainment venue at Resorts World, a resort on the Sentosa island in Singapore, the companies said on Monday in a joint emailed statement.

DDS, in which Depa holds 55 per cent and Singapore-listed Design Studio 45 per cent, targets interior contracts in the hospitality & commercial segments within Singapore, Malaysia, Thailand, Indonesia and Vietnam.

This contract is expected to contribute positively to Design Studio’s and Depa’s financial performance for FY2009/2010.

Source : Business Times -  Dec 2008

Prices of private homes falling

Developers offer soft discounts, for example, by absorbing legal fees

Private home prices are falling – and they will fall even more next year.

Property developers may disagree, but there is no question about it, if you ask industry observers.

The economy has slowed considerably and there have been retrenchments and wage cuts.

Sales volume of new homes looks set to reach an 18-year low this year, while supply is far from lacking.

‘In every bear market, no matter what the developers say, it will happen,’ Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, said of the price falls.

The only unknown, he added, is the extent of the fall.

Manpower Ministry data already shows that average monthly real earnings – pay minus the effect of inflation – fell by 17 per cent from $3,982 in the first quarter to $3,307 in the third quarter.

Also, on an annualised quarter-on-quarter basis, gross domestic product growth in the third quarter declined by 6.8 per cent, continuing the 5.3 per cent contraction experienced in the second quarter.

‘All these will filter through to the property market,’ said Mr Leong.

Right now, most buyers are remaining on the sidelines. New launches are few, and there are not many desperate sellers out there yet.

‘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,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

The result? There are no major price reductions yet, he said.

Going forward, though, there could be more speculators desperate to get rid of their properties because they do not want to be saddled with huge loans, experts say.

These are people who bought properties when the market was booming under the deferred payment scheme, which means they will have to pay the full sum for the property upon completion.

The Government has said some 10,450 units of private homes sold under the deferred payment scheme have yet to be completed. Some 2,540 units – largely bought during last year’s boom – will be completed in 2010.

In the new homes market, there will be more new property launches or re-launches after Chinese New Year late next month, consultants say.

Frasers Centrepoint, for one, has plans to release Caspian, its 700-unit condo near the Lakeside MRT station.

‘The smaller projects or those in less attractive locations will likely need to offer more discount,’ said Mr Mak.

‘Others may offer soft discount, so that the prices reflected in the caveats will not be reduced.’

Soft discounts can take the form of furniture vouchers or the absorption of legal fees or stamp duty.

There could be price cuts in some mid-tier or prime developments where prices are ‘fairly toppish’, Mr Mak said. ‘They would, thus, have to adjust their prices to a more reasonable level.’

Novelty Group, for one, last month cut its price for the 75-unit Luma at River Valley Grove from $2,800 per sq ft (psf) to $1,450 psf.

Recently, City Developments adjusted its price for the 77-unit Shelford Suites in Shelford Road to $1,400 psf from a preview price of $1,600 psf on average in June. The price then was already lower than expected, as two units were sold in March at $1,869 psf and $1,905 psf.

Those seeking information on new launches can check out the Urban Redevelopment Authority’s (URA’s) website, which offers monthly sales and price data on the 15th of every month.

It shows the number of units sold in the past month, as well as the median, lowest and highest prices done.

The URA website also has information on individual caveats lodged for properties sold, so you can find out the prices done at a particular condo.

The problem here is that the information is not very up-to- date because deals take time to complete and caveats take time to lodge.

The price data can easily be two to three months old, which can be a long time in today’s fast-moving market.

Potential buyers should check with their agents to ascertain the previous price levels done or check classified advertisements for the latest asking prices, experts say.

They should also try to get a bank valuation on the property they are eyeing, said HSR Property Group executive director Eric Cheng.

Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 per cent to 8 per cent below asking levels, said Mr Cheng.

Also, buyers should look for tenanted resale properties that can offer a 4 per cent to 5 per cent rental yield for at least the next year, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

‘In today’s market, it is wise to buy something that you can see and profit from immediately,’ he said.

The risk with new projects is that they could be delayed or their prices could fall from today’s levels, he said.

But, be prudent and patient, warned Mr Cheng. ‘Don’t buy on impulse.’

Buying opportunity

Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 to 8 per cent below asking levels, said HSR Property Group executive director Eric Cheng.

Source : Sunday Times -  Dec 2008

The story of three slumps

The current downturn bears little resemblance to those of 1998 and 2001

HOW does the current property market slump compare with the earlier ones in 1998 and 2001?

Sitting here at my desk, looking out over the huge Marina Bay building site that will grow into Singapore’s first integrated resort, it doesn’t look much like a market in a downturn. But, we are currently experiencing some very special market conditions that started 18 months ago with the sub-prime issue in the US. It has had a knock-on effect across the global economy that few at the time anticipated.

To make some sense of it all, I find myself thinking about how very different from 1998 and 2001 this current situation is. In 1998, the turmoil came from some parts of Asia, as a result of weak fundamentals such as inadequate regulatory oversight, and overexposure to foreign exchange risks. There were also two further events – the dotcom failure in 2000 and Sars in 2003 – that derailed the recovery and shut down tourism, dampening consumers’ confidence in Asia until 2005. As a consequence of this sequence of events that started in 1997, a number of the Asian markets underwent a substantial structural revamp, harried on and supported by the developed economies.

Today, thanks to these economic storms, the Asian economy is in much better shape than in 1998.

However, the current downturn is more serious than we’ve seen before. Credit – a key tool in the business world – is at the centre of the crisis. As the credit markets froze earlier this year, consumption in the developed markets shifted to low gear and this is affecting the global economy. With debt availability low, businesses find it difficult to continue functioning as before. Even a growing company is stymied without investment.

So, coming back to Singapore, it showed itself to be strong in 1998 and has continued to use the experiences of the last 10 years to advance its economic and financial structure even further. It is now better positioned to manage this global slowdown. And, more importantly, to come out of it faster and stronger.

For example, Singapore has been very successful in attracting foreign direct investment (FDI), with an estimated $348 billion in 2007, compared to $165 billion in 1998 in (estimated real value terms). This is a direct endorsement of the business-friendly measures that Singapore has put in place. These have ranged from the removal of capital gains tax through to the signing of tax treaties with 50 countries that allow companies based here to reduce taxes in dividends, interest and royalties.

The property market here benefited from this investment influx. The value of property investment in Singapore has increased from $15 billion in 1997 to $43 billion by 2007 (estimated real value terms) – almost a 290 per cent increase.

Part of this property investment has come from Reits. The Monetary Authority of Singapore’s issuance of the guidelines for property trusts in 1999 opened the door for Singapore to become the Asian Reit hub it is today. There are now 20 Reits listed on the Singapore Exchange built from a variety of properties across Asia.

The formation of the Reit market has made this chunky and illiquid investment class accessible to a larger pool of retail investors and improved the transparency of this market – a key determinant in attracting foreign investments that has provided more liquidity.

One of the most striking changes from 1998 is that, despite its size, Singapore has increased its resident population from 3.6 million in 2005 to 4.6 million today.

With the enlarged population, the proportion of non-Singaporeans has also increased by 5 percentage points to 25 per cent. It is with no surprise that the volume and demand for new residential launches has similarly jumped.

In 2007, there were over 13,000 units launched and sold – 25 per cent more than the 10,000 units launched in the 1996 peak. Demand, spurred by a relaxation in government policy on foreign ownership of residential properties in Singapore, increased some 64 per cent over the same period.

There is much talk about the health of the property market in Singapore at the moment, but looking at the figures, our market today is in a more robust state than in 1998. Vacancy rates are much lower, with grade A office vacancy at 1.8 per cent today, against 14.4 per cent 10 years ago. This indicates a very tight market.

In the residential sector, we see the same strong story, with capital values in the prime market still 57 per cent higher than in 1998 and affordability improving. So those who see themselves in Singapore for the long term and missed the last market rise, now have an opportunity to enter the market.

As the global economy continues to struggle, Singapore is still likely to feel the pinch. However, the pro-business mindset and innovative attitude of its government are two crucial ingredients that will support the economy – and the property market – through the downswing.

We all know that there will be a turning point in the current cycle. Perhaps when buyers and sellers of physical assets finally agree on price expectations, or liquidity returns to the market as credit conditions revert to normal. Or perhaps a change in people’s sentiment could cause the turnaround. Whichever it is, Singapore has worked hard on managing its economic fundamentals and infrastructure, to be ready to capitalise swiftly on any positive economic moves. Certainly, the Marina Bay Sands coming to life outside my window will be ready to take advantage of the upswing.

Chris Fossick
Managing Director, Head of SE Asia
Jones Lang LaSalle

Source : Business Times -  Dec 2008

Private properties looking attractive

What to look out for when hunting for that perfect condo or house

THE recession has resulted in a 25-per-cent fall in private- property prices from their market peak, and with prices expected to dip further next year, there may be opportunities to pick up some bargains.

However, buyers of properties – whether for investment or occupancy – should do their homework before committing to such big-ticket items.

Here are 10 tips to keep firmly in mind.

1 CONSIDER LANDED

The executive director of HSR Property Group, Mr Eric Cheng, feels that if buyers are willing to fork out $1.2 million to $1.3million for a condominium, they should consider buying landed property instead.

Due to land scarcity in Singapore, there is always more demand than supply for landed property, which is not the case with condos, said Mr Cheng.

2 INSTALMENT RESERVE

Mr Cheng said it is important to invest within your means. Have a reserve of at least one year’s worth of instalments in case of shocks, like a loss of income.

3 LEASING OR LIVING?

Mr Arvin Sylvester Lim, division director of Century 21 SHL Realty, said it is important to be sure if you plan to live in the property or rent it out.

If you are making it your home, the equation is simple: Find something that you like and can afford.

If you are looking to invest and rent out, do your research to see if there is good demand in an area, and if the rent will be enough to cover the instalment payment and still allow a profit.

4 DON’T WAIT TOO LONG

While one should hold back until one finds something ideal, Mr Lim does not encourage overspeculating on trends.

“Buying a house is not like buying a car. The moment you drive the car…the value drops, but with property the value can go up or down,” he said.

Even though prices are expected to fall further, “a home is a must”, Mr Lim said. He advises against pegging buying one to unpredictable market movements.

5 MAKE OFFERS FAST

Buyers who bought too many properties or can’t afford to keep up with payments, given the weak economy, will be selling off their investments now, said Mr Shannan Govindarajoo, marketing manager at ERA.

He suggests you start looking and making reasonable offers as he thinks more buyers will be entering the market, which could mean prices for these “must-sell” properties may rise.

6 CHECK MASTER PLAN

Look at the Urban Redevelopment Authority’s master plan and invest where the Government is pumping in money, said Mr Govindarajoo.

For instance, he thinks those interested in the Marina area should strike now, as prices are down by 40 per cent, compared to last year’s.

Mr Lim said investing in property in that area will reap great returns when the integrated resort is ready as “a lot of the management staff will be living there, so rentals will be high”.

7 SHOP FOR A LOAN

Banks are now becoming more cautious with making home loans and how much they are willing to lend, said Mr Govindarajoo.

He advised shopping around for a good home loan first, so that you do not commit yourself to a seller before knowing how much you have to work with.

8 PRICE VS VALUATION

Check the valuations of the property you are considering at different banks to make sure you’re getting a good deal, said Mr Govindarajoo.

9 OLDER CONDOS

Mr Parthiban Sadagopal, a Prop- Nex realtor, suggests buying a condo “between seven and 10 years old in the outskirts”, like Pasir Ris or Tampines.

Judging from the trend seen after the 2003 recession, such condos are good buys for living in and investment, as you could hope to buy one at $400,000 to $500,000 now and sell it for up to $800,000 when the economy picks up.

Renting it out could fetch $3,000 a month as well.

10 DISTRICT 15

Keep your sights on the East Coast area of District 15, said Mr Cheng, as prices there are unlikely to dip drastically.

Good schools, malls and eateries add value, making it a good option for those who feel prime locations are too expensive. Meyer Road, Ceylon Road, Telok Kurau and Crane Road are some of the best places to buy a house, according to him.

Mr Govindarajoo agrees, saying District 15 is “evergreen”.

Source : AsiaOne – Dec 2008

Firms shelve supply of 1,000 new apartments

Project development deferred; en bloc properties return to rental market

At least 1,000 projected new apartment units can be expected to be withdrawn from immediate supply in Singapore’s property market, as properties that were sold en bloc in recent years are put back on the market for rental.

The latest of these is Lucky Tower at Grange Road which was bought by City Developments Ltd (CDL) in May 2006.

A CDL spokesman said that the entire development of 91 units has been leased to a master tenant that intends to sub-let the units.

According to data complied by Savills Singapore, Lucky Tower was expected to be redeveloped into a 178-unit condominium. However, with redevelopment pushed back, these units are not expected to come on to the market anytime soon.

Another development, the 192-unit The Grangeford at Leonie Hill, acquired by OUE in 2007, has also been put back on the rental market.

OUE is controlled by the Lippo Group and Malaysian tycoon Ananda Krishnan. Lippo Realty executive director Thio Gim Hock said that approximately 70 per cent of the units have already been leased, mainly to expatriates.

On why it decided to defer redevelopment, Mr Thio said: ‘The market does not look good for this year or the next.’

It is understood that asking rents for The Grangeford start at about $3,500 for 1,110 square foot two-bedroom units and about $4,500 for a 1,700 sq ft three-bedroom unit.

The Pontiac Land Group has also started to lease out Pin Tjoe Court, which it acquired in September 2006. Senior vice-president (residential leasing) William Teh said that it expects to redevelop the site next year. ‘Till then, we are offering very short-term leases, and this is not representative of typical rental in the market,’ he added.

Frasers Centrepoint said that Flamingo Valley, which it acquired in early 2007, has been put on the rental market with close to 60 per cent of the 185 units leased out.

Other en bloc developments back on the rental market include Furama Towers, Fairways Condominium, Sophia Court, and Lincoln Lodge.

The increasing number of en bloc sites put back on the rental market is expected to further depress already weakening rentals.

Referring to this ‘hidden leasing supply’, Japanese investment house Nomura said: ‘The move by developers to return en bloc units back to the leasing market to cover to a degree of the holding costs is not unanticipated.’

In the case of Grangeford, assuming a gross rent of $3.40 psf for the 396,483 sq ft apartment block, Nomura estimates that it could secure net income of $14.6 million, equating to a 2.3 per cent yield over its $625 million acquisition price, ‘providing some relief to covering the site’s holding costs’.

Regardless of ‘hidden leasing supply’, rentals are already expected to fall. Still, Knight Frank director (research and consultancy) Nicholas Mak believes that the ‘hidden supply’ of leasing units will not make much of a dent on the rental market. For starters, he notes, many of these en bloc developments have already reached a state of disrepair.

Pointing out that the 108-unit Fairways is about 10 per cent leased, he says that many of the units have been ’stripped bare’.

He also noted that these units have short leases and tenants may be given only one-month’s notice to vacate.

Another consequence of deferred en bloc redevelopment is the impact this has on future supply.

Savills Singapore estimates that based on the en bloc deals between 2005 and 2007, over 23,000 new units could be added to the market.

But, as Nomura notes, supply has been increasingly pushed to 2012. As at the third quarter of this year, it found that some 16,762 units are scheduled for completion in 2012, versus the previous quarter’s estimate of 14,179 units.

Based on an analysis of official data since Q499, it also found that actual completions lagged behind forecast completions.

The Urban Redevelopment Authority (URA) has also clarified that while developments are deemed ‘under construction’ in its database, this does not necessarily mean construction has begun.

A spokesman for URA said that it considers a project to be ‘under construction’ once the Building and Construction Authority records indicate that a project has been issued a permit to commence structural works.

As at Q308, there are 10,007 units under construction. URA said: ‘As developers do not have to inform the government of actual ground-breaking after obtaining the permit to commence structural works, URA does not have information on the number of units, expected to be completed in 2009, which have actually broken ground.’

However, it added that it understands that actual construction for a project typically begins within 1-3 months after the developer obtains the permit to commence structural works for the project.

The number of developments that could be deferred will remain unknown. CB Richard Ellis executive director Jeremy Lake pointed out: ‘Even if the property has been demolished, a meaningful number of projects will be delayed as construction costs are expected to fall over the next 18 months.’

Source : Business Times – Dec 2008

Sale of Kallang River hotel plot delayed

URA says release of the site will be deferred to June 2009

THE Urban Redevelopment Authority (URA) has deferred the release of a hotel site along Kallang River from this month to June 2009. The site was originally due to be made available for December 2008, as part of the government’s plans to transform the Kallang Riverside into a waterfront lifestyle precinct by the edge of the city.

‘URA is currently working with other agencies to finalise the detailed planning and development conditions of the Kallang River site to relate to the broader plans for Kallang Riverside and, as more time is needed, the release of this site at Kallang River on the reserve list will be deferred to June 2009,’ the agency said yesterday.

The deferment ‘makes sense’ as the site is unlikely to be triggered in the current market conditions even if it is made available, market watchers said.

URA also announced yesterday that a commercial site at the corner of Stamford Road and North Bridge Road is now open for application under the reserve list system.

The site contains three historical buildings – Capitol Theatre, Capitol Building and Stamford House – that are to be retained and restored for use. The Capitol Theatre, for one, is required to be restored into an arts or entertainment-related performance venue, said URA.

And to strengthen the hotel cluster in the area, the developer of the site will be required to develop a minimum of 40 per cent of the total gross floor area (GFA) for hotel use as well.

Analysts said that the site is unlikely to see interest anytime soon. ‘This is an irreplaceable site in terms of its location and heritage value but the timing may be inappropriate to realise its full potential,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore.

‘I don’t think the site will be triggered in the next six months,’ said Nicholas Mak, director of research and consultancy at Knight Frank.

Other than the poor economic outlook, potential bidders are also likely to be deterred by a few other factors, he said. For one, the conservation element might put off some developers. Others are likely to be deterred by the fact that some of the GFA has to be devoted to hotel use.

Developers are also not too keen on the ‘two envelope’ system, under which the site is being sold, Mr Mak said. Under such a system, the government first picks out developers whose concepts gel with its vision, then awards the site to the highest bidder.

Analysts also expressed concern that if the government keeps releasing sites on the reserve list, there could soon be too many sites on the list.

Source : Business Times -  Dec 2008

Should you jump in to buy now?

JLL says yes; other property pundits not so sure

THANKS in part to falling interest rates, the affordability for luxury homes in Singapore has improved by 24 per cent since the third quarter of last year, according to property consultancy Jones Lang LaSalle (JLL).

JLL compiles an affordability index for private homes, which takes into account factors such as property prices, national wages and interest rates.

Based on the movement of this index in the past year, JLL said during a media briefing yesterday that luxury residential properties have become 24 per cent more affordable since last year, while mass market homes have become 5 per cent more affordable.

Hence, the consultancy sees investment opportunities in the luxury segment.

In addition, resale capital values and rentals of residential properties have come off the highs seen last year, while monthly rental payments have caught up with monthly mortgage payments.

These reasons, according to JLL, coupled with the assessment by the Economist Intelligence Unit that Singapore’s economy will rebound and grow about 2 per cent in 2010, all point to one thing: This is a good time for property investment funds and developers to inject capital into the property market.

Similar investment opportunities exist in the commercial property sector, said JLL’s head of markets in Singapore, Mr Chris Archibold.

“We are very aware that there are issues in the financial market, but they’re not going to be there forever; it’s in the short term,” he said.

“If you look at the supply that is on offer to the banking and finance community and Grade A central business district (CBD) occupiers, currently of the CBD office stock, 78 per cent is less than 15,000 sq ft.

“If you looked at it in 2005, it was 81 per cent. So, we are slowly growing our pure Grade A office supply, and that’s something we feel we need to do, given the fact that we want to maintain and build our position as a financial hub going forward.”

As many financial firms typically need large spaces for trading and dealing floors, the past three years have seen an increasing proportion of Grade A office space being bigger than 15,000 sq ft to cater to such needs.

On the other hand, property consultancy Chesterton Suntec International would hesitate to plunge into the investment property market now.

Its consultancy and research head Colin Tan feels investors should hold back for the time being, until the market bottoms out, corrects itself and reflects the fundamentals.

“Prices and rentals are still pretty high. I think you have to wait for the indices to be really negative. Right now, we’re just past the turning stage, on our way down. We haven’t quite got the worst of it yet,” said Mr Tan.

Although he said now might be a good time for investors to look around, Mr Tan expects few transactions to be concluded in the next year or so, as property prices and rentals have not corrected much.

Source : Today – Dec 2008

Long-term property investors should bet on S’pore: Analyst

SINGAPORE looks a pretty good bet for long-term property investors, given its strong savings rate, low corporate taxes and near-full employment, according to a key real estate player here yesterday.

And if prices fall further next year, it would be a good time to buy, said Mr Christopher Fossick, Jones Lang LaSalle’s managing director for Singapore and South-east Asia at a media briefing at the firm’s office. There is a consensus that the economy will go through a tough time next year, which means it will be tough for everybody, including those in property, he said.

‘If prices are lower, that provides opportunities,’ Mr Fossick added. He pointed out that Asia, particularly Singapore, given its status as a financial services hub, is better off economically than the United States and Europe. The level of household borrowings and corporate loans here is lower than in the US and Britain, he said.

He quoted a recent report commissioned by London Mayor Boris Johnson that said that the rising status of regional hubs such as Dubai and Singapore is threatening London’s position as the world’s financial capital.

He listed some of the key factors that should continue to attract investors here. Singapore’s corporate tax rate of 18 per cent, he said, is a tad above Hong Kong’s 17 per cent but below the 29 per cent rate in Britain and the 40 per cent levy in the US.

There is near full employment and a strong savings culture here. Singapore has a gross national savings rate of 45 per cent, compared with 11 per cent in the US, 14 per cent in Britain and 32 per cent in Hong Kong. Also, about 76.5 per cent of Singapore’s population are working, compared with 67.1 per cent in the US and Britain.

Property is always a medium- to long-term proposition, he added. Most investors treat it as such and have an investment horizon of more than 24 months. Jones Lang LaSalle’s regional director and head of markets, Mr Chris Archibold, said the office market will have a lower take-up rate over the next year but most of the expected new supply will not come to market until late next year anyway.

There are a lot of institutional investors on the sidelines waiting to enter the Singapore market, according to Mr Fossick.

‘They are saying, come 2009 and 2010, there will be opportunities to buy properties in Singapore,’ he said. ‘Obviously, it’s going to be at some discount from prices we saw in 2007.’

Source : Straits Times – Dec 2008

Quiet auction market seen perking up next year

Consultants expect spike in mortgagee sales as downturn takes its toll

The property auction market was less active this year but things are expected to hot up in 2009 as more owners struggle to hang on to their properties.

Knight Frank figures show that the total number of properties put up for auction this year has dropped almost 35 per cent to 852 from 1,302 in 2007.

The number of properties sold at auctions so far this year has also declined to 66, compared with 204 last year. In terms of value, about $69.1 million of real estate has changed hands, some 84 per cent below last year’s $422.3 million.

However, this tally excludes the results of the final two auctions for the year, being held this week.

Knight Frank executive director Mary Sai says that auction sale activity has been low in 2008 as ‘distressed sales have yet to develop’.

‘This is still considered the beginning of a major economic crisis and the number of owners hit by the economic crisis is not yet significant. Hence, owners who are not yet being forced by severe circumstances to dispose of properties continued to hold them.’

Another veteran auctioneer, Colliers International deputy managing director Grace Ng, says that there have been fewer mortgagee sales this year as borrowers have been able to service their property loans since employment figures have been healthy for the most part of 2008.

The rental market was also firm until fairly recently, which means that these properties may still be generating good yields for their owners, who are able to service their mortgages.

Looking ahead, DTZ senior director Shaun Poh said: ‘We will see more owner and mortgagee sale properties at auctions next year. But in the first-half, we’re still likely to see mostly sales by owners who feel pressure from banks; for instance, if they’re having difficulty servicing their mortgage.

‘These guys will be put on notice by their banks. That’s the first step. After mid-2009, some of these cases may convert to mortgagee sales as banks take possession.’

Mr Poh says that a price gap of ‘easily 25 per cent’ has emerged of late between buyers and sellers at auctions. ‘I think the buyers may get their way next year for some of the properties. There are some investors trying to cut their loss on the second or third investment property that they bought on deferred payment scheme from the developer and who’ve not secured a bank loan yet.’

Knight Frank’s Ms Sai, too, agrees that ’success rates at auctions may improve if a continued worsening in economic conditions forces some sellers to further lower reserve prices and satisfy the price expectations of some buyers who are bottom fishing’.

Against the backdrop of rising business failures and unemployment, mortgage defaults could increase and give rise to more mortgagee sales at auctions in the near future, Ms Sai predicts. Out of the $69.1 million auction sales this year, about 36 per cent were mortgagee sales, slightly higher than the 32 per cent mortgagee sale share of the total $422.3 million auction sales in 2007.

Knight Frank’s analysis of auctions activity in 2008 showed that things slowed down considerably in the second half. For instance, 477 properties went under the hammer in January-June but the number slipped to 375 in the second half of the year.

The number of properties that made their way to the auction block fell across most sectors but increased slightly for office units.

Residential properties continue to make up the lion’s share of properties put up for auction, at 50.2 per cent. However, the 428 homes that went on the auction block was a 27 per cent drop from last year.

Knight Frank observed that the slide in value of properties sold during auctions took place on the back of subdued buying sentiments as well as the general fall in property prices.

For instance, an eighth floor unit in Merawoods condo in the Hillview area was sold in November for $720,000 or $535 per square foot, but lower floor units had been transacted at about $630-650 psf in the open market in H1 2008.

Similarly, a 14th floor apartment at King’s Mansion in Katong changed hands for $842 psf during an auction in August, 15 per cent lower than a similar unit during an April auction.

Source : Business Times – Dec 2008