by Ku Swee Yong
05:55 AM Nov 19, 2010

Singapore is about 700 sq km in size and has roughly 890,000 public housing, 70,000 landed residential and 187,000 non-landed residential units. It is a small country with a small residential property market compared to 100 or more countries. However, the challenge of keeping tab on the physical supply of residential units in Singapore seems insurmountable, especially when trying to estimate future supply.

It seems easier to track completions for the private residential sector as the Urban Redevelopment Authority (URA) publishes quarterly data. Data for Housing and Development Board (HDB) completions and total HDB supply are available once a year from its annual reports. As we have no ability to forecast the HDB demolition pipeline, net additional supply of HDB stock is also impossible to predict.

Let's examine the anticipated supply of private residential units this year. In the URA's 1Q2006 publication, it was anticipated that 6,115 units will be completed this year. Most of those were "planned" and not yet "under construction".

Over the next few quarters, this number grew and by 3Q2007, it was anticipated that up to 21,451 units will get the Temporary Occupation Permit (TOP) this year. This is a 251 per cent rise over 18 months. During that time, there were worries that private residential prices were rising beyond the reach of HDB upgraders. The strong supply numbers sought to alleviate these concerns.

However, as the global economy faltered with Bear Stearns disappearing in March 2008 and Lehman Brothers collapsing in September 2008, the anticipated number of units getting TOP for this year dropped to a low of 5,394 in 2Q2009, coinciding with the worst point of most major stock market indices. This was only nine months away from 2010.

What happened? Did construction companies stop work? Did developers request construction companies to slow down? How did the anticipated supply ratchet down as quickly as it had sprung up?

Forecasts should get sharper and more precise as the event draws nearer. Yet those were turbulent times and the URA's survey of developers could have reflected high degrees of uncertainty too.

But the swing from a high of 21,000 to 5,400 and now back to around 10,000 makes challenging work for investment consultants.

Average annual completions in the last decade numbered about 8,000 units. In mid-2007, an investor holding a residential unit that should be completed this year would think that there was way too much supply coming onstream. He would decide to sell.

In the middle of last year, an investor holding a unit that should be completed this year would decide to hold, because there seemed to be inadequate supply coming onstream. However, the 5,394 units that were anticipated to be completed in the whole of this year were surpassed by June this year, when 5,786 units obtained TOP.

We anticipate this year will close off with 10,536 units completed, almost double the number that the investor in the middle of last year had thought and 32 per cent higher than the long term average of 8,000 units. It poses a challenge for us in advising clients who may want to time their investments and divestments.

What's the supply outlook for the next few years?

As we approach next year, I anticipate that we would also face an upsurge in TOP numbers. Although current official data show that 6,766 units will get TOP next year, my estimate is that we are likely to close next year with more than 10,000 units completed per year. There is a very high chance that many of the units anticipated to complete in 2012 will be ahead of schedule.

Two financial analysts I hold in high regard are Ms Wendy Koh and Mr Tan Chun Keong from Citibank Equities Research, who faithfully track and make projections for private residential completions. In their report Singapore Property - Increasingly Unfavorable Risk/Reward Ratio, they forecast a completion of over 10,000 units in this year and 11,000 each next year and 2012.

Responding to the thirst for private housing and for land to build private residential developments, the Government Land Sales (GLS) programme for 2H2010 has 18 sites on the Confirmed List and 13 sites on the Reserve List. These 31 sites can generate 13,905 units. This is the highest potential supply quantum in the history of the GLS programme.

The HDB has also stepped up its supply of new homes. In his National Day Rally speech, Prime Minister Lee Hsien Loong said 16,000 new HDB flats would be built this year and up to 22,000 next year. In addition, the HDB will accelerate the completion of flats to 2.5 years.

As for the total supply pipeline of private homes, there are almost 73,000 coming onstream within the next five to six years. As many as 55,000 units are expected to be completed by 2014. This represents more than 20 per cent of today's total stock of about 257,000 units.

Of the 19,535 units that are expected to get TOP in 2013, 11,621 are already under construction. Of the 20,504 in 2014, 8,768 are already under construction. We estimate the bulk of those "under construction" units will be completed ahead of schedule because building a typical condominium project takes 24 to 30 months. Exceptions would be very large-scale developments such as The Interlace that has over 1,000 units. Most projects that have begun construction should be completed in late 2012 or in 2013.

What does this all mean?

To sum it up, we believe that in the private residential space, there will be about 11,000 to 12,000 units completing next year and in 2012, and about 12,000 to 14,000 units completing in 2013 and 2014. The completions this year and next will be heavier in the prime districts but completions in 2013 to 2014 will be mainly in the mass market segment.

Adding to this are 16,000 to 22,000 HDB flats that will be completed per year. So, prices may slide from the potential oversupply rather than from the policy measures announced on Aug 30.

What about the demand side of the equation? Singapore's economic make-up has been overhauled and restructured in the 13 years since the Asian financial crisis. Job creation has been strong, with the services sector expanding and financial institutions abuzz with activity, and demand for housing will be driven by the population growth.

So while we may see a potential price drop of 10 per cent next year, the global economic recovery anticipated in 2012 may bring new levels of demand to Singapore.

Supply within three years we can confidently forecast. As for demand, we can be optimistic, but to be able to forecast whether it will match or exceed supply, I'll sign up for tea-leaves-reading classes.



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

Source: www.todayonline.com

Published November 15, 2010

Getting burnt over high-end homes
However, 90% of sub-sale transactions still turned a profit

By UMA SHANKARI

(SINGAPORE) A handful of private homes nearing completion in the prime Orchard Road area have been re-sold at a loss.

A Savills analysis of caveats captured by the Urban Redevelopment Authority's Real Estate Information System (Realis) as at Oct 19 showed that nine units bought in 2007 were sold in 2010 at a loss in the sub-sale market.

But the bulk of homes bought from 2006 to 2009 - 78 out of 87 - were sold for a profit, the analysis found.

The sellers who lost money sold units in the following developments: three in Scotts Square, two in Parkview Eclat and one each in Grange Infinite, Leonie Parc View, Orion and Paterson Linc. Eight of the nine units were bought from developers. Size was not a factor - the units sold at a loss ranged from 818 to 3,250 square feet.

The two biggest losses were at Parkview Eclat, where two sellers were $1.75 million and $1.72 million poorer. Both owners bought the units from developer Chyau Fwu Group in 2007.

Steven Ming, executive director for prestige homes at Savills Singapore, said that the high-end market has not recovered to the peak levels of 2007 and 2008 and homes are still generally trading at discounts of 10-15 per cent.

The fact that all nine losses were on units bought in 2007 'may be due to the high prices the owners paid when the residential market reached its peak in 2007', Mr Ming said.

In contrast, units bought in 2006, 2008 and 2009 were re-sold at a profit in 2010. Mr Ming also noted that more owners suffered losses in the second and third quarters of this year than in the first.

Ku Swee Yong, chief executive of International Property Advisor, said that some owners could just be 'weary' of holding on to their properties, especially as tenants have become harder to find after an outflow of expatriates in 2009.

'If you were a tenant with a monthly budget of $9,000-12,000, there will be many vacant brand new properties to choose from - Ardmore II, CityVista, BelleVue, St Thomas Suites and Latitude, just to name a few - and these new projects will be competing with older, more established and larger-sized units such as those in Ardmore Park and Grange Residences,' Mr Ku said.

As of now, the number of loss-making transactions remains very low, Savills' Mr Ming noted. Ninety per cent of sub-sale transactions this year still made profits, ranging from $3,620 to $1.92 million.

By project, St Thomas Suites led the number of gains, with all 17 units sold at profits ranging from $3,620 to $1.36 million.

Ardmore II ranked second with 13 gains. A 34-storey unit in the development made the highest profit of $1.92 million among all 87 matched sub-sale transactions, followed by a 27-storey unit with a gain of $1.9 million.

The first unit was purchased in the sub-sale market at $3.74 million (or $1,849 per sq ft) in April 2009 and flipped for $5.66 million ($2,799 psf) in August 2010.The second unit was also purchased in the sub-sale market. The buyer paid $3.75 million ($1,853 psf) in January 2009, then sold it in July 2010 for $5.65 million ($2,792 psf).

Looking ahead, more owners could be keen to sell high-end units - even at losses - as oversupply concerns loom on the back of ample new inventory in the pipeline in the prime districts 9 and 10.

'The wave of construction that began in 2007 and 2008 means we are seeing significant completions of luxury properties from 2010 to 2012,' said Mr Ku. 'Coming soon are The Marq on Paterson Hill, Cliveden at Grange, Nassim Park Residences, Helios, Hilltops, The Orange Grove and Ritz Carlton Residences, among others.'

Mr Ming added: 'Property investments are best left to those that can afford to take knocks. While the middle to long-term market outlook is bright, it is not without some degree of volatility as hot money can go as quickly as it comes.'

For its analysis, Savills only compared sub-sale transactions for which there were caveats of previous transactions. The amount of profit or loss was calculated as the difference between sale and purchase prices and does not take into account stamp duty and other expenses.

Based on caveats downloaded on Oct 19, Savills found that 108 units in 16 projects in the Orchard Road vicinity were sold in the sub-sale market in 2010.

Of these units, the firm managed to match 87 units with their previous transactions. It found that nine units were re-sold for losses in the sub-sale market.

Sub-sales - which refer to secondary market transactions involving projects that have yet to receive a Certificate of Statutory Completion - are tracked as a gauge of property speculation.

At the low point of the market in Q1 2009, only 67.5 per cent of sub-sales of private apartments and condos yielded a profit. That proportion grew to 95.1 per cent in Q1 2010.

Source: www.businesstimes.com.sg

Published November 4, 2010

By EMILYN YAP

(SINGAPORE) Industrial properties are attracting their fair share of buyers even as glitzy condominiums and gilded bungalows hog the limelight.


According to Cushman & Wakefield, $3.42 billion worth of factory units changed hands in the first three quarters of the year. This already exceeds the $1.83 billion for the whole of 2009 by 87 per cent.

The transaction value so far this year is just $290 million shy of the record high in 2008, when $3.71 billion worth of factory units were sold.

Warehouses have also been sought after. Transactions in the first three quarters came up to $83.3 million - almost triple last year's $28 million.

'The keen buying interest for industrial properties was fundamentally underpinned by a recovery of the manufacturing sector. The healthy performance of manufacturing encouraged industrialists to expand,' said Cushman & Wakefield senior manager of Asia-Pacific research Ong Kah Seng.

Growing demand for industrial space has led to rising rents. In a report yesterday, Colliers International said the average prime warehouse rent in Singapore was $1.56 per square foot per month in the first half of the year, up 3.3 per cent from $1.51 psf in the second half of 2009.

As a result, Singapore became the seventh most expensive market in the world to rent a prime warehouse - climbing two notches from ninth place six months ago.

Tokyo, London's Heathrow and Hong Kong took the top three spots in the latest ranking.

Apart from end-users, investors have also taken a fancy to industrial assets - a factory unit requires a smaller capital outlay and generates a higher yield compared with a private home, Mr Ong said.

For instance, the net yield of a factory unit would be at least 6 per cent while that of a private home would be about 3 per cent, he said.

Institutional funds are among some investors in the industrial property market, said Colliers International industrial director Tan Boon Leong.

He suggested that with the government introducing cooling-off measures for the residential sector, some investors may also divert their funds to the commercial or industrial sectors.

Interest in the industrial property sector has not been restricted to completed factory or warehouse units; there has also been intense bidding for land.

Just yesterday, the Urban Redevelopment Authority (URA) put a 30-year leasehold industrial site at Pioneer Road North/Soon Lee Street up for bidding. A developer triggered the sale of the reserve list site by committing to pay at least $13.8 million for it.

While prospects for the industrial property sector have certainly improved since the global financial crisis, they are not all bright and cheery.

Some consultants expect to see little or no rental growth in the next few quarters, given renewed fears of a slowdown in the manufacturing sector.

'Industrial rents are expected to stay relatively flat till the end of 2010,' said Colliers research and advisory director Tay Huey Ying. She cited the Economic Development Board's survey of the manufacturing sector, showing that business sentiment for October to next March has moderated.

The amount of rent that industrial properties can fetch will be crucial to investors, since returns are more likely to come from rents than from capital appreciation, said SLP International Property Consultants research executive director Nicholas Mak.

'They should not be buying industrial property with the same kind of investment strategy as buying residential property,' he said.

Investors should also recognise that the industrial property market is less liquid than the residential one when it comes to leasing or selling units, he added.

Source: http://www.businesstimes.com.sg