Published January 18, 2011

After red-hot December, property braces for chill
Private home sales sizzled before cooling measures; 2011 expected to be a more sobering story

By KALPANA RASHIWALA

(SINGAPORE) December may have been chilly in the rest of the world, but for Singapore's property market, it was simply sizzling. The latest numbers underscore the backdrop against which authorities introduced last week's cooling measures.




Developers sold 1,332 private homes (excluding executive condos) in the traditionally slow month, exceeding the combined figure for the three preceding Decembers. This took the total for 2010 to a fresh high.

But property consultants expect the numbers to drop dramatically this year from the 16,364 private homes that developers sold in 2010 - in the face of the latest cooling measures.

Forecasts for developers' private home sales this year range from 8,000 to 12,000 units. Prices too are expected to drop with one consultant pegging the dip at 5 per cent for the mass market in the first quarter.

Speculators may now turn their attention to shoebox industrial units and strata offices and shops as non-residential property has been spared under the latest cooling package, observers say.

The 2010 sales number was 11.4 per cent above 2009's 14,688 units and surpassed the previous high of 14,811 units set in 2007, according to figures released yesterday by the Urban Redevelopment Authority.

The secondary market has also been buoyant.

Knight Frank's analysis of URA Realis caveats data shows a 23 per cent increase in the number of private homes (excluding ECs and en bloc sale units) sold in the resale market last year to 18,468 units. In addition, 3,264 caveats were lodged for private homes traded in the subsale market in 2010, close to the 3,838 units in 2009.

The 2010 resale and subsale figures are expected to increase as more caveats are lodged in the coming weeks. Resales refer to secondary market deals in projects which have received Certificate of Statutory Completion while subsales involve secondary market transactions in projects that have yet to receive CSC.

DTZ's South-east Asia research head, Chua Chor Hoon, forecasts that this year, developers may sell about 8,000-10,000 private homes. Knight Frank's number is 10,000-12,000 units.

Ms Chua reckons that prices would decline this year but not in the first quarter, when transactions are likely to thin amid a standoff between buyers and sellers. 'When sellers see demand is not coming back, those who need to sell will have to be more open to negotiation. I think prices in the mass and mid-market segments are likely to fall more as the lower loan-to-value (LTV) limits will hit those on a tighter budget.'

Knight Frank consultancy and research head Png Poh Soon foresees an up to 5 per cent price decline in Q1 for the mass-market segment while prices remain flat in the mid and luxury markets. 'Developers of mass-market projects, which are typically bigger, may be more inclined to price their projects attractively to draw buyers.'

Mr Png also reckons that sales of shoebox apartments would plunge as these have drawn many speculators, who are expected to be affected by the stiffer penalties for short-term trading now.

The government last week hiked the seller's stamp duty rate to as high as 16 per cent for private homes sold within the first year. The LTV limit for new home purchases by individuals servicing one or more existing housing loans has been lowered from 70 per cent to 60 per cent.

Ms Chua said that strong primary market sales for two consecutive years reflect 'a lot of speculative and investment demand'. 'Now, with the clampdown on the residential sector, a lot of investors will look at other property sectors as well as overseas properties.'

Savills Singapore senior manager Christine Sun said: 'Small investors may switch from buying 'mickey mouse' apartments to small strata industrial and office units, or HDB shophouses which still command attractive yields without bearing the brunt of the property measures.'

URA's figure of 1,332 private homes sold by developers in December was 30.4 per cent lower than November's 1,915 units but significantly above sales of 481 units in December 2009, 131 units in December 2008 and 305 units in December 2007.

Including ECs, the trend was similar, with the sales tally at 1,699 units for December 2010, more than the 940-unit total for the preceding three Decembers.

Including ECs, developers sold 17,438 private homes last year, up from 14,688 units in 2009 and also surpassing the 2007 figure of 14,967 units.

The Outside Central Region (OCR), where mass-market projects are located, made up 45 per cent of private homes (excluding ECs) sold by developers in December. The number of units they sold in Core Central Region (CCR), which includes the prime districts, CBD and Sentosa Cove, doubled from 218 in November to 449 in December.

'Reflecting the pick-up in investor confidence in CCR, where the price rise has lagged, 75 non-landed homes were transacted at above $3,000 psf in December, up significantly from 11 units in November and the most deals in this price-band since the 103 units sold in December 2007,' said Colliers director Tay Huey Ying

December's priciest deal was $4,307 per square foot, for a unit at The Ritz-Carlton Residences Singapore Cairnhill, followed by Nassim Park Residences ($3,833 psf) and Tomlinson Heights ($3,643 psf). Last month's best selling project was Prive, an EC in Punggol (326 units), followed by The Tennery in Choa Chu Kang (220 units), D'Leedon at Farrer Road (180 units) and Robinson Suites (157 units

Source: www.businesstimes.com.sg

Published January 17, 2011


'Shoe boxes' here to stay
Catalist firm Oxley banks on affordability, reports VEN SREENIVASAN

THE demand for 'shoe-box' apartment is here to stay, says Ching Chiat Kwong, controlling shareholder and chief executive officer of Oxley Holdings.

'If you look at the way Singapore is developing - high economic growth, rising home-owning aspirations, more local and expatriate singles, young couples who prefer dogs rather than kids - you can see a very clear demand pattern emerging,' he noted. 'There is a market for good-quality, affordable private homes in good locations.'

And it is a demand which Catalist-quoted Oxley hopes to capitalise on. The company specialises in building private apartments sized at around 350-400 sq ft, with a living room, one bedroom and fully fitted kitchenettes.

In just three months following its October 2010 listing, the company has sold out five of its 'shoebox' apartment projects. Its Loft@Holland sold out within two hours of launch last week. This year it will launch at least nine more, and at least two commercial projects.

Mr Ching says the buyers of his apartments are not just singles and young couples, but also investors. 'The rental yields from these properties tend to be good, so they make attractive investments as well,' he said.

The market may have started noticing Oxley's potential, judging by the recent stirring of its stock price. The company launched its IPO in October 2010 at 38 cents to raise gross proceeds of about $85 million. But the shares soon slumped to as low as 31 cents. In recent weeks, the stock has rallied past the 40 cents level on strong buying interest, and remained there despite property market curbs unveiled last week.

Mr Ching does not appear to be overly concerned about the curbs. 'The key is affordability, and this becomes even more important under the new rules,' he said. 'The projects we will launch this year are in prime locations, and more importantly, they are affordable. We will also launch several major commercial developments which are not impacted by the residential property curbs.'

Oxley's business model is simple: Gear up to the maximum to acquire land, quickly launch units off the plans, maximise plot ratio, keep prices affordable, and keep project turnover short at around 7-9 months.

The company has used some $35 million of its IPO proceeds to date. But its gearing is some 300 per cent.

Analysts note that this model is similar to that of SC Global, at least in the latter's early days. Mr Ching acknowledges this, but added that Oxley occupies a different position on the private property spectrum.

'They are high-end luxury, but we are affordable luxury,' he quipped.

The company's five projects launched last year raked in sales of some $260 million. Given its 40 to 50 per cent margin, analysts reckon the profit from these could come up to over $100 million. This year it will bring to market almost $2.5 billion worth of projects.

These include nine apartment projects at prime urban and sub-urban locations like Holland Village (last week), Stevens Road, Devonshire, Telok Kurau, River Valley Road and Braddell Road.

It is also planning to launch its 35-storey office-cum-commercial centre on the 16,000 sq ft plot at 138 Robinson Road which it bought from City Developments for $215 million recently. The project has a saleable area of more than 200,000 sq feet, potentially worth over $600 million.

It is also building a one million sq ft high-tech industrial building at Ubi whose market value could be almost $700 million.

Another commercial project in the pipeline is 144 Robinson Road, which Oxley bought last week from City Developments for some $57 million.

Kevin Scully of NetResearch Asia reckons that if Oxley sells all the projects, excluding 144 Robinson Road, it could generate a profit stream of almost $1 billion over the next four to five years.

'The company only recognises profit on progressive completion,' he said. 'We are looking at a future RNAV of $900 million or about 62 cents per share. If we discount this future income to the present day using a discount rate of 8 per cent, we get a present value RNAV of 51 cents.'

Mr Ching says Oxley's business model can be sustained as Singapore's population increases towards the six million mark.

'As long as the HDB market is not breached (ie liberalised), we will always find a ready market,' he said.

Not bad for a company set up in 2009 by Mr Ching, who is an ex-police officer, and his two partners. Mr Ching controls 38 per cent of Oxley, while Eric Low, who owns building materials firm Hafary, has 27 per cent. A third partner, Tee Wee Sien, has 12 per cent.


Source: www.businesstimes.com.sg

by Ku Swee Yong
05:55 AM Nov 26, 2010

In the early 1990s, I lived in a bedsit - a bedroom, sitting room and kitchen rolled into one. About 120 sq ft worth of space containing just seven items: A single bed, a two-door wardrobe, a table measuring 1m by 0.5m, a chair, an electric hob with two hotplates, a three-foot tall refrigerator and a sink with some counter-top space that supported the cooker hob. Bathrooms and toilets were in the common area.

As a poor student struggling with a British pound almost three times the Singapore dollar at the time, that was the best I could afford. I could also save some money by walking to college, even in the wet, slushy and grey winter days.

This little hole exists in the prime postal district of SW7 London: South Kensington and Knightsbridge. The street address: Emperor's Gate, off Cromwell Road. A mini-slum within a prestigious neighbourhood of luxury Victorian-era homes.

Having lived in a tiny space for about nine months during my first year in London, I am curious about the recent fascination with "Mickey Mouse" or "shoebox" apartments in Singapore.

The low price quantum, ie affordability, is often quoted as a reason for the strong take-up of such apartments. In my view, that is only half correct because investors seem to be willing to bear with much-higher-than average price-per-sq-ft for these apartments.

I believe that the other half of the equation is this: Investors simply do not know what they are buying into.

Let's take an analogy from the car market. We do not see strong take-up rates for Chery QQs and Perodua Kancils despite the very low entry price of about $48,000 per car. In fact, I see many more Toyota Corolla Altis, at $85,000 each, on the roads.

Why is the easy affordability of a Chery QQ not creating a flood of demand for such cars? The reason: Buyers can test-drive the cars, sit inside an actual car, drive it around and feel the comfort and the space. Buyers are not sitting in mock-up cars that have doors removed to create a sense of space, nor full-length mirrors on the insides to make the interiors look bigger.

"Shoebox" apartments are selling well because few investors know what these units look like physically. Few of us have friends and relatives who live in such units. Fewer have lived in apartments of less than 500 sq ft.

Of the roughly 2,800 apartments below 500 sq ft that were sold by developers in the last 10 years, only about 1,000 have been completed, available for us to physically experience the size and space.

About 50 per cent of these developers' units were purchased by investors with HDB addresses - not surprising considering the prices of these units are usually lower than prices of five-room HDB flats.

Showflats of residential projects that have a mix of large and small units do not feature the shoebox units as these generally sell out fastest, at the highest price-psf levels and to investors who have relatively little experience with apartments of such sizes.

Residential projects consisting solely of shoebox units may be launched with simple sales galleries, that is, without mock-up apartment units or show units. Investors buy off-the-plan simply by considering the materials used, drawings and again, the low absolute dollar value of the units.

However, there are a handful of projects that do feature full-sized shoebox units in the showflats. These show units, while true to the floor plans in terms of size, have interior designs and modifications that make them appear larger than they should be, for example, with the use of mirror walls.

As investors walk through with responsible sales agents, they might hear one or more of the following:

- The actual unit will not have such a high ceiling as you see here,

- This living room has been extended into the balcony,

- The actual unit will come with a solid wall between living room and bedroom instead of this glass wall that you see here,

- There should be a side wall for the apartment here (pointing to the floor with a line that demarcates the perimeter of the actual unit),

- Although not shown here, there will be a bifold door in this location in the actual unit etc.



I am concerned that many have recently invested in a relatively new product that may not find widespread acceptance when completed.

Fewer than 1,000 shoebox units were sold by developers from 2001 to 2008, but in the last 24 months, 2,000 shoebox units were sold.

When they are completed next year and beyond, market acceptance of this category of residential product will be tested in terms of tenant quality and profile, rental yields, maintenance of the estate, as well as returns on investments, among others.



The writer is the founder of real estate agency International Property Advisor (IPA), which provides services to high-net-worth individuals.


Source: www.todayonline.com