Property News Upfront - Nov 08

Launches of private homes in Oct drops almost 80% on month
Only 159 private homes were launched in October this year - the lowest in more than a year.
The slide of almost 80 per cent from the 767 units launched in September is due to poor economic conditions, and the technical recession that has hit Singapore. About 194 units launched in August 2008, during the traditionally slow market in the seventh lunar month.

The central region made up almost half the new launches in October, at 74 units. The number of
new homes sold in October also fell to 112 units from 373 a month ago.
Homebuyers stayed out of the market in October as confidence was shaken by financial turmoil and news of job cuts. And buyers were only willing to spend on properties that offered value for money. “Price is a factor in today’s market. Projects priced well in very good locations have a strong take up,” said the head of research and consultancy at Jones Lang LaSalle, Chua Yang Liang.

Analysts expect the housing market to stay weak. Dr Chua said: “This pendulum effect we see in
supply and demand will continue going into next few months as developers try to ascertain what the demand is. Buyers being sensitive to market news will continue to fluctuate in their behaviour.” Analysts also say new home sales could hit lows not seen since the 1997 Asian financial crisis. Source : Channel NewsAsia - 17 Nov 2008

Home loans harder to get as prices fall
Check if bank can meet unit’s valuation to avoid overpaying for the property. A couple of telling anecdotes illustrate the unexpected glitches that home buyers can face as property prices start to fall. A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash.

The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan. Another buyer had to cancel his purchase recently after he learnt that banks’ valuation of the property was less than what he was supposed to pay.

Amid poor demand and falling prices, banks are sticking to lower property valuations in
anticipation of further price falls. ‘OCBC Bank engages independent, third-party valuers to determine the open market value of properties and there has been evidence of a fairly strong downward trend in property valuation,’ said its head of consumer secured lending Gregory Chan. Source : Sunday Times - 16 Nov 2008

About 50 homebuyers walked away from deals in October
But trend not likely to escalate as it was a month when bourses tanked
THE number of private homes returned to developers shot up last month on the back of a sharp dive in confidence due to the stockmarket crash.
Homebuyers returned 50-odd units to developers in October, compared with 10-plus units each in the preceding month and in October last year. The figures were estimated by BT from statistics on developers’ sales released by the Urban Redevelopment Authority (URA) yesterday. The figures exclude executive condos.
October also saw developers launching and selling the lowest number of private homes since URA started making monthly housing sales data available in June last year. Developers sold 112 private homes in October, down about 70 per cent from 376 units in the preceding month and 80 per cent below the 566 units sold in October last year. The 159 private homes developers launched last month was also 79 per cent lower than September and 75 per cent below that in the same year-ago period. Source : Business Times - 18 Nov 2008

Long term measures to help HDB mortgage defaulters
The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments. It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.

As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They
make up less than 8 per cent of the 420,000 households with outstanding HDB loans. Giving this
update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad
Maliki Osman said home owners should buy within their means.
But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit. More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats. Source : Channel NewsAsia - 18 Nov 2008

Retail rents flattens as consumer spending slows
The dip in consumer spending due to the economic downturn has caused concerns among many
retailers who are paying top dollar for retail space. Market watchers said they do not expect any
rental growth in the 4th quarter, but some retailers may be holding out for concessions.
Orchard Road, Singapore’s prime shopping district, is set to welcome four new malls next year -
ION Orchard, 313@Somerset, Orchard Central and The Mandarin Gallery.
The four-storey Mandarin Gallery will have 130,000 square feet of retail space, with rental rates ranging from S$12 to S$60 per square foot. About half of the space has been leased.

The landlord said it will find ways to help tenants cope with the tougher business climate, but it said cutting rents may not be best thing to do. OUE said it will try to woo shoppers to the mall with brands that are new to the Singapore market.
Many tenants along the shopping belt are locked in to their rental rates for up to three years, with the option to negotiate new deals thereafter. Analysts said high-end retailers tend to have the upper hand during such negotiations compared to mass market retailers.
“If the landlord feels that this tenant is important, if it’s a part of the mall’s image that he is trying to build up, he may be a bit more flexible in the rental negotiations. And it’s not just rentals, it could be other terms or incentives like rent-free periods,” said Nicholas Mak, director of Consultancy & Research at Knight Frank. Tan Huey Ying, director of Research & Advisory at Colliers International said: “It depends on when the economy is going to recover. But if the two integrated resorts were to proceed and open as scheduled, then I think there is some likelihood that the market may see a revival in the second half of 2010 or the first half of 2011.”
Source : Channel NewsAsia - 19 Nov 2008

Funds waiting to grab cheap Asian properties
They are raising funds for direct property investments in the region as values slide
AS property values in Asia slide, hedge funds, private equity funds and pension funds are waiting in the wings to swoop in on good buys, according to KPMG’s global head of real estate, Jonathan Thompson. ‘We’re aware that some (hedge funds and private equity funds) have been raising money for distressed situations,’ Mr Thompson told BT.
Investors have been on the lookout. Just last month, Merrill Lynch completed fundraising for its
Asian Real Estate Opportunity Fund, collecting some US$2.65 billion to invest in real estate assets and companies.

Reuters also reported on Wednesday that AMP Capital Investors is trying to raise up to S$2.9
billion for direct property investments in Asia. The Australian fund manager hopes to purchase
Japanese shopping malls at a bargain as falling sales hit retailers and credit tightening squeezes
landlords. Industrial buildings and offices beyond the main financial district in Singapore are other potential targets.

Pension funds are also showing more interest in Asian real estate, said Mr Thompson. According to him, these investors are drawn to growing economies with a structural shortage of properties. The economies would also have to be politically stable, with transparent and sound regulatory systems. ‘(Singapore and Australia) are the easiest countries to invest in,’ he said. Across Asia, Mr Thompson believed that ‘the fundamentals for real estate are better than they are in Europe or America’. But because of the global economic slowdown and tighter credit, property values in Asia will continue to fall. Source : Business Times - 22 Nov 2008

Private home rents may fall 15%
Selling prices of top-end units could drop by up to 22% in months ahead
PRIVATE home rents in Singapore are set to drop by up to 15 per cent next year, as the reality of a slowing economy hits home. Property consultants say landlords are expected to become more flexible, given factors such as ongoing job cuts. ‘The quarters ahead should, however, see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,’ said the report.

Given that the full force of the financial crisis erupted in mid-September, the rental property market has yet to feel the full impact, Savills Singapore said. In terms of top-of-the-market rents, known as prime rents, it expects a fall of 7 to 13 per cent next year. Another consultancy, Knight Frank, is projecting a bigger fall of 10 to 15 per cent in average islandwide rents next year. ‘Some landlords are already cutting rents to retain tenants. We may see more aggressive cuts by landlords if more multinational companies cut their headcounts,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. Next year, landlords in prime areas will have to contend with even more competition as more condos are completed. ‘Those who have advertised for a few months are willing to lower their asking rents but many others continue to hold on to the same asking levels.’

A renovated 1,650 sq ft unit at Pinewood Gardens at Balmoral Park is now available at $6,000 a
month or $3.64 per sq ft - already lower than most other done deals at the development - but a
potential tenant is willing to take it at only $5,000 a month or $3.03 psf, she said.
Source : Straits Times 21 Nov 2008

Savills sees over 20% drop in luxury home prices
Announced forecast for period ending 2009 grimmest yet by any consultancy
Savills Singapore is predicting price drops of more than 20 per cent in the next five quarters for
high-end and super-luxury private homes. This would follow declines of 14.3 per cent and 12 per
cent respectively for these two segments in the first nine months of 2008 from the peak in Q4 last year.

The forecast is probably the grimmest announced by a property consultancy here - although some rival firms BT spoke to yesterday said that privately, they have similar estimates. Research analysts at stockbroking houses/banks have already been making downbeat pronouncements, predicting declines of about 30 per cent or more for luxury home prices byl end-2009.

In its report yesterday, Savills said that the high-end and super luxury segments are more vulnerable to the deteriorating global investment climate. The average capital value for high-end (non-landed) residential homes fell to $2,065 per square foot in Q3 2008, 4.6 per cent lower than the preceding quarter and 14.3 per cent below the Q4 2007 peak of $2,410 psf.
In the super luxury league, the average capital value slipped to $3,240.40 psf in Q3, down 5.2 per cent from the preceding quarter and 12 per cent lower than the Q4 2007 figure.

The fundamentals of the mid-tier and mass-market segments are stronger today than during the Asian Crisis downturn, partly due to Singapore’s more open immigration policy, Savills said.
However, Savills expects rental demand drivers to weaken in coming quarters. Savills’ residential leasing head Patrick Lai says: ‘The inflow of expats is expected to slow down, although we’re still seeing an influx of foreign talent into Singapore, particularly in the healthcare, pharmaceutical, R&D and logistics industries.’
Source : Business Times - 21 Nov 2008

REAL ESTATE AGENTS: Downgraders, bargain hunters are
main clients
THE real estate industry is keeping its head above water as a result of bargain hunters attracted to the falling prices and home owners downgrading to smaller, cheaper properties.
The higher number of sales transactions has translated to better pickings for property agents. Major agencies contacted say they have had better sales for lower-end housing in the last three months.

PropNex’s stable of 5,000 agents sold more than 400 condominium units in the price range of
$1,000 per sq ft or less in that period, up a quarter from the preceding three months.
Sales of HDB flats and low-end landed houses have also jumped 10 per cent.
HSR Property Group, the largest agency here with 8,500 agents, is selling about 2,500 flats and
low-end condo units a month - 5 per cent more than three months ago.
At Dennis Wee Properties, sales - particularly of three and four-room flats - are ‘going strong’.

Two recent launches from the housing board also saw brisk activity, with applicants outnumbering the number of available flats by more than 10 times.
The rise in number of transactions for lower-end units more than makes up for the fall in that for high-end properties, said industry experts, who cite an average 7 per cent drop for that sector.

The downturn has made for good times for agents.
The executive director of HSR Property Group Eric Cheng said in good times, new agents join the industry because they think it is easy to make a quick buck. The pie is split among more people. ‘But in a downturn, the number of agents falls and each tends to earn more,’ he added.

Mr Ryan Tan, 40, for example, has sold 12 properties this month, up from five last month. His
clients are moving from prime areas to the suburbs, with many saying they need the extra cash.
His clients would know what it is like to be in the shoes of teacher C.Y. Leow, 51, who sold her
five-room private apartment in Somerset two months ago after losing $150,000 in Minibond
investments - money that was to be her retirement nest egg. She and her family will move into a
five-room Bishan flat next month- a move that nets her about $750,000.
PropNex chief executive Mohamed Ismail said the business seems recession proof. ‘At the end of
the day, everyone needs a roof over their heads. An agent will always have a job in any market.’
Source : Straits Times - 24 Nov 2008

S’pore govt will not implement measures to stimulate property
sector
The Singapore government will not introduce measures to stimulate demand or prop up prices
artificially in the property sector.Speaking at an industry event on Wednesday, National
Development Minister Mah Bow Tan said such efforts are not sustainable.
Developers are feeling the heat from the economic downturn, credit crunch and poor consumer
confidence, and many new project launches have been shelved. To boost property demand, some
developers hope the government could relax some of its policies, such as reviving the Deferred
Payment Scheme, reducing the development charge rate and introducing property tax exemptions. Source : Channel NewsAsia - 26 Nov 2008

Buyers paying less cash for HDB resale flats
Some deals may be done at valuation but no drop in prices; big flats moving slowly
THE private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away. Yet, the HDB resale flat market remains active and prices are still fairly strong. However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown. ‘In view of the current sentiment, HDB resale flat valuations should stay flat going forward,’ said Mr Lim. ‘So if COV is coming down, prices will eventually come down.’

Prices, however, will not plunge as there is a large base of potential buyers, he said.
Within the HDB market, the segment for small flats will likely be busier than the one for bigger
flats. Already, property experts say the market for bigger flats - five-room flats and executive flats - have started to slow down. ‘In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option’ than private homes, according to a recent ERA study.

It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis
began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units. ‘Many people were downgrading from private properties to HDB flats,’ explained Mr Lim. - MR EUGENE LIM, associate director of ERA Asia Pacific
Source : Sunday Times - 30 Nov 2008