Published January 29, 2011

The charge of the bungalows brigade
URA's sub-index for detached homes soars 37.6%, boosting overall index's gain to 17.6%

By KALPANA RASHIWALA

IN a year fuelled by strong liquidity and economic growth, bungalows were the stars that led the surge in the Singapore property market in 2010. Latest data from the Urban Redevelopment Authority shows that its price index for landed homes climbed 30.8 per cent last year. The sub-index for detached houses, or bungalows, soared 37.6 per cent against a 5.6 per cent rise in 2009.

The index for non-landed private homes rose 14 per cent last year, following a 0.5 per cent gain in 2009. The biggest price hike in 2010 in this segment was for completed non-landed homes in Core Central Region, which climbed 19.5 per cent last year, although prices of uncompleted units in the same region rose at a much slower rate of 10.6 per cent in 2010.

URA's overall price index for private homes swelled 17.6 per cent last year, after posting a 1.8 per cent rise in 2009. It rose 2.7 per cent quarter on quarter in Q4 2010.

Knight Frank chairman Tan Tiong Cheng observed that the index has appreciated by about 65 per cent over the past five years, translating to an average annual increase of 13 per cent. 'This is a very significant increase considering that we had the biggest financial crisis during this period,' he added. Developers sold a record 16,292 private homes (excluding executive condos) last year, up 10.9 per cent from 2009 and busting the previous high of 14,811 units in 2007.

The other sectors of the property market also saw sharp turnarounds last year, according to the latest URA numbers. For instance, the office price index rose 18.9 per cent in 2010, against a 16.4 per cent drop in 2009. Flatted factory and warehouse prices, too, shot up 23.7 per cent last year, compared with respective declines of 14.2 per cent and 16 per cent in 2009.

Looking ahead, market watchers expect some wind to be taken out of the residential sector following the latest property cooling measures. Investors are channelling their money to the commercial and industrial property segments, which were not the target of the cooling measures announced on Jan 13.

DTZ's SE Asia research head Chua Chor Hoon is predicting a minus 5 per cent to 0 per cent change in URA's overall private home price index this year. Others are more sanguine. Colliers International director of research and advisory Tay Huey Ying forecasts a 5-8 per cent rise with the increase led by mid and high-end properties.

Prices of mass market homes are expected to stay relatively unchanged or ease by up to 2 per cent given the ample new supply in this segment, she said.

As for the landed segment, RealStar Premier Property managing director William Wong, who had earlier predicted an average 10 per cent rise this year in Good Class Bungalow (GCB) prices - the creme de la creme of landed homes on mainland Singapore, now expects prices to hold in 2011.

'Transaction volumes are expected to fall 20-30 per cent over the next 3-6 months. Owners are not prepared to adjust prices downwards while buyers are waiting for prices to go down. This may not happen.'

Another bungalow specialist, KH Tan, managing director of Newsman Realty, said that some sellers have started to withdraw GCBs from the market following the latest cooling measures as they would face longer holding periods on any replacement bungalows they may purchase because of the hikes in seller's stamp duties.

Nevertheless, he predicts an increase of about 10 per cent in GCB prices this year, following last year's appreciation of about 35 per cent, because of the limited stock of GCBs, wealth effect from new ultra high net worth citizens and low interest rates. On Sentosa Cove, where foreigners may buy landed homes, the price gain this year could be higher, about 15 per cent, as 'there are still a lot of rich Chinese foreigners coming in'. Bungalow prices on Sentosa climbed 30 per cent last year on average, he estimated.

On URA's numbers, CB Richard Ellis executive director Li Hiaw Ho observed that while the price index for uncompleted non-landed homes in Outside Central Region (where mass-market condos are located) has surpassed the peak in Q2 2008 by 19.1 per cent, the equivalent index for Core Central Region (which covers the traditional prime districts, financial district and Sentosa Cove) is still 7.1 per cent below its Q1 2008 high.

Meanwhile, the National University of Singapore's Singapore Residential Price Index (SRPI) flash estimate shows that prices of completed non-landed private homes in Singapore's Central region (postal districts 1-4 and 9-11) appreciated 7.8 per cent last year, while the sub-index for the Non-Central region rose 15 per cent. As a result, the overall SRPI increased 11.9 per cent in 2010. In 2009, the three indices posted respective gains of 27.3 per cent, 19.5 per cent and 22.2 per cent.

URA's data showed that 10,399 private homes were completed last year - close to the 10,488 units in 2009 and 10,122 units in 2008. The overall private residential rental index rose 17.9 per cent last year, a sharp reversal from the 14.6 per cent slide in 2009.

Savills Singapore director for residential leasing Patrick Lai said that overall residential rents may increase a further 5 per cent in 2011. 'We believe that the rental rates for super high-end condominiums and GCBs will remain robust and are likely to increase by 6-10 per cent as more top executives relocate to Singapore.

'For example, we have just leased out a 2,852 square foot unit at The Orchard Residences for $20,000 per month. We also recently handled the leasing of a GCB in the Peirce Villas/Swettenham Road neighbourhood for $40,000-45,000 per month.'


Source: www.businesstimes.com.sg

by Colin Tan

05:55 AM Jan 07, 2011

When the real estate figures for the private housing market for Q3 2010 were released in late October, the landed sector pulled off a huge surprise by going against the market trend.

Instead of slowing down like the rest of the market as it absorbed the impact of the most recent set of cooling measures, prices rose at an accelerated pace.

The rate of price increase for high-rise apartments and condominiums slowed from 5 per cent in Q2 to 1.6 per cent in Q3, while that of landed homes rose from 6.2 per cent in Q2 to 7.7 per cent in Q3.

The usual reasons were trotted out. The supply remains limited while buyers of landed homes are not hindered by affordability concerns and are therefore better able to cope with price increases.

Personally, I think this is a common marketing ploy of real estate agents to get buyers to pay higher prices. Anyone who has been following the market for many years will know that prices of all properties, when faced with the same set of measures or regulations, will behave in the same way - meaning, they follow the same trend, if not the magnitude, of the impact.

Since the release of the Q3 statistics, there have been a lot more news reports and articles than usual extolling the appeal of landed homes, especially good class bungalows (GCB). Limited supply is the most common reason given to support the strong growth potential of GCBs.

But given the high cost of GCBs, how big really is the market for such properties? Buying one is already such a big commitment; maintaining it thereafter is another. The demand for such properties is inelastic. Whether prices rise or fall, real owner-occupier demand remains more or less the same. How often do we hear of tycoons and CEOs owning and living in two or even three GCBs at the same time?

All this means that the surge in demand must come mainly from investors. Rapid price growth in this segment can come about only when investors sell to other investors.

This brings me to the other commonly cited factor: Affordability. For owner-occupiers, this is not likely to be a concern. For investors, who tend to fully leverage their cash resources, affordability is definitely a concern, especially if they already have a number of properties on their hands. They carefully weigh the risks against the potential capital gain before investing.

Is landed property among the safest buys? For one, when prices of this segment shoot up too rapidly, it is difficult to get valuations to match the purchase price. A large proportion may then have to be paid in cash.

As real demand is inelastic, what happens to the last investor holding the property? Yes, you've guessed it - he walks away from the deal with a substantial loss.

It was therefore not a real surprise that the buyer of the $36 million bungalow in Sentosa Cove walked away from the deal. I hear another similar over-the-top purchase on the island met with the same fate. My sources tell me there are also similar aborted deals on the main island. I personally know of one case.

All these aborted deals leave me wondering whether the caveats filed for these purchases have added more spice than usual to the price index for landed homes. It will certainly explain the Q3 anomaly.

The same reasoning can be applied to semi-detached and terrace houses. However, here, the budgets of owner occupiers are constrained by their wealth and household incomes.

You will know when this segment becomes highly speculative. It is when the dirty tricks come out. There is big money to be made and fair play is the least concern of many housing agents.

The complaints have been piling up and I am hearing of many of them. I expect the newly-formed Council for Estate Agencies (CEA) to be really busy.

Finally, the flash estimates for 4Q 2010 have indicated that price growth of private homes has slowed to reasonable levels. Most of us have been wondering whether another set of cooling measures is imminent. If rapid growth is the main concern of the authorities, I do not expect another set any time soon.



The writer is Head, Research & Consultancy at Chesterton Suntec International.

Source:  www.todayonline.com

by Ong Kah Seng
05:55 AM Dec 31, 2010

2010 has been an impressive year for the landed housing segment, with prices rising 23 per cent in the first three quarters, including a 7.7-per-cent increase in the third quarter from the second.

Amid the outstanding overall results, the superlative in the landed housing segment - good-class bungalows (GCBs) - continued to shine. GCBs are essentially detached homes sitting on at least 1,400 sq m of land, in 39 designated areas such as Swettenham Road, White House Park, Nassim Road and Chatsworth Park.

Although the number of transactions of GCBs in the first 11 months of the year was similar to the corresponding period last year, the value transacted climbed to a new record high of $1.69 billion.

This is 18 per cent above the value of GCBs transacted in the whole of last year, the previous historic high.

The most striking achievement is that on a psf of land basis, the $1,052 average price of GCBs transacted this year reflected a 28 per cent increase in the first 11 months of the year.

This price rise was above a corresponding 25 per cent average annual increase for all landed residential properties.

Some GCBs have been sold repeatedly over the years, reflecting sustainable capital appreciation in this premium segment.

For example, a GCB in Nassim Road changed hands five times in the past six years - beginning from a transaction at $405 psf of land in Feb 2005 to a fifth in April this year at $1,800 psf of land.



DWINDLING SUPPLY, RISING DEMAND

GCB values, fundamentally underpinned by limited supply, have been given a further boost on the demand side from buyers who are increasingly discerning and contesting for homes with special selling points for future appreciation.

Moreover, with prices already at record highs, the cost of a home for a purchaser is becoming a secondary concern compared to the potential for capital appreciation.

GCBs, which are at the highest rung of private homes and which are unlikely to see a major rise in new completions, will be among the safest buys for a purchaser who is not burdened by affordability concerns.

A GCB, exclusive and rare in supply, is thus felt to offer more room for capital gains.

Singapore has embraced vertical city living over the past decade due to land scarcity. Developers' offerings are predominantly non-landed residential properties and choice landed homes, including some at off-the-beaten locations, are becoming more and more attractive.

Notwithstanding developers' efforts to brand condominiums with innovative concepts, such homes are fairly homogenous and the exclusivity is at most "development specific", i.e. there will be at least several similar units in a development with similar designs.

In contrast, buyers of GCBs will be able to customise their homes to be materially different from another.

Although many landed homes are not in a central location, i.e. close to major transport nodes, they will still be prized by those who value privacy and an exclusive environment, away from major activity areas and town centres.

Landed homes in off-the-beaten places may continue to receive buying interest predominantly for owner occupation, from those who wish to have differentiation between work and leisure.

The merit of GCBs is that many of such homes are centrally located, further enhancing their appeal to potential buyers of landed housing.

Some buyers are also interested in the redevelopment potential of the land on which the GCB sits.

GCB owners are often property connoisseurs who will only part with their home if prices significantly exceed personal value.

But while the limited supply will support price increases, buyers will not be hasty as a GCB purchase is a major decision.



MORE UPSIDE BUT AT A SLOWER PACE

Landed homes are also not likely to be significantly affected by the Government's efforts to cool the overall housing market.

This segment of the market is different from the non-landed residential sector as it appeals to buyers who are not burdened by affordability concerns and the case for Government intervention to ensure prices are affordable is weaker.

And if prices are suppressed, these properties will become even more attractive and the buying interest for such special value buys may further increase, notwithstanding new restrictions.

Going into 2011, the price increase for GCBs is expected to continue, backed by the sustained economic recovery and rising awareness of GCBs as special value buys.

But the rate of capital appreciation is set to slow to an expected 3 per cent per quarter increase next year, as higher prices face increasing resistance even as the product offerings are unique.



The writer is Senior Manager, Research - Asia Pacific at Cushman & Wakefield.


Source: www.todayonline.com

Published December 9, 2010


Good Class Bungalow deals hit record $1.85b
At least another $100m of GCB deals could be finalised by year-end

THE value of Good Class Bungalow (GCB) transactions so far this year has reached nearly $1.85 billion, a new record and up 7.3 per cent from the $1.72 billion worth of deals done for the whole of 2009, based on CB Richard Ellis's analysis of URA Realis caveats information as at Dec 8.

However, based on information gathered by BT, there could be at least another $100 million of GCB deals where options have yet to be exercised and which could be finalised by year's end.

Among the deals already closed but for which caveats have yet to be lodged is said to be the Japanese government's sale of 18 Astrid Hill for about $28.4 million or about $1,500 per square foot on the land area of 18,939 sq ft.

BT understands the buyer is Hersing Corporation chairman Harry Chua, who is expected to tear down and redevelop the freehold property. The current two-storey bungalow on the site was the former home of the Japanese ambassador in Singapore. The property was sold through a tender conducted by Knight Frank on behalf of the Japanese government.

Interestingly, a neighbouring property in Astrid Hill was sold in November for $25 million or $1,169 psf based on the land area of 21,377 sq ft. Its seller reaped a handsome profit of $6.4 million or about 34 per cent from a holding period of under a year; the property was previously transacted in February this year for $18.6 million.

Another recent profitable GCB transaction was a property at Cluny Hill, which sold last month for $30 million or $1,533 psf, a 63 per cent return measured against the seller's purchase price of $18.38 million in April last year.

A profitable exit was also achieved on a bungalow at Belmont Road that traded in October at $35.76 million or $1,220 psf on land area of 29,310 sq ft; it previously changed hands in October last year for $27.35 million. The latest buyer is said to be Jardine Cycle & Carriage.

The $1.85 billion of GCB deals YTD 2010 involved 101 transactions - slightly shy of the 109 deals in 2009 and 119 deals in 2006. The average price of GCBs sold has doubled from $501 psf on land area in 2006 to $1,056 psf for YTD 2010. The latest figure is also 27.1 per cent higher than the $831 psf average price for last year.

As well, the average GCB transaction size has also grown from $10.3 million in 2006 to $18.3 million so far this year. The latest figure is up 15.8 per cent from last year.

CB Richard Ellis's director, luxury homes, Douglas Wong credits the increase in GCB prices to Singapore's economic growth, its ability to attract ultra high net worth permanent residents and citizens in recent years, the opening of the integrated resorts, and the limited stock of GCBs, numbering about 2,400.

'GCBs have also appealed to ultra high networths seeking a hedge against inflation, especially given Singapore's political stability,' he added.

CBRE forecasts about 100 GCB deals next year at about $2 billion with average price appreciation of about 8-10 per cent.

'The GCB market is set to remain firm based on the interplay of demand and supply factors. Like an evergreen product, GCBs will continue to attract well-heeled local businessmen, bankers, doctors and lawyers as well as permanent residents,' he added.

RealStar Premier Property managing director William Wong too is optimistic about the GCB market next year. 'We'll be seeing more PRs turning to Singapore citizens next year and this will allow them to buy bigger-plot GCBs or more than one GCB. I believe there will be shortage of big-plot GCBs to meet the demand of some of these ultra-rich new citizens. Prices of GCBs in prime locations such as Tanglin will likely hit above $2,000 psf next year from about $1,800 psf currently,' he said.

Typically, one has to be a Singapore citizen before one can own a GCB. However, PRs who have made sufficient economic contribution are known to have been given permission by the Land Dealings (Approval) Unit on a case-by-case basis to buy a small GCB with land area up to 15,000 sq ft for owner occupation.

Some foreign companies, depending on their economic footprint here, have also been given LDAU's nod to buy a GCB, typically for use as their chief executive's residence.

Typically the minimum land area of a GCB is 15,069 sq ft. However, when GCB Areas were gazetted in 1980, there were some existing sites smaller than that in these locations. They are still considered GCBs and bound by the other planning rules.

Source: www.businesstimes.com.sg