Sunday, July 18, 2010

Home Run

A large number of new properties are set to be launched in the next six to 12 months. The Sunday Times looks at what savvy buyers should look out for.

Sovereign debt crises may have hobbled property markets elsewhere, but not here it seems.

Buoyed by Singapore’s strong economic recovery, optimism has staged a vigorous comeback, with property developers set to launch at least 3,500 new homes by year-end on top of about 8,500 they have already released so far this year.

This will result in an estimated total of between 12,000 and 14,000 new units this year.

And the supply of available building land shows no sign of drying up: 31 residential sites will be up for grabs from the Government Land Sales (GLS) programme in the second half of this year.

In the years ahead, new residential enclaves are predicted to emerge with the completion of the Circle Line, boosting once sleepy areas such as Paya Lebar, Mountbatten and Dakota.

Up, up and away

Analysts say that despite the uncertainty triggered by eurozone sovereign debt issues, overall buying interest here remains positive – especially in mass-market and mid-tier projects.

Although the overall upbeat sentiment has dipped slightly of late, with lower volume and slower price increases, the residential market looks set to remain largely strong given the strength of the economic rebound.

The Government forecasts a stunning 13 to 15 per cent growth in gross domestic product (GDP) this year, up sharply from an earlier prediction of 7 to 9 per cent, due mainly to the huge recent surge in manufacturing.

DTZ South-east Asia research head Chua Chor Hoon is upbeat about the market. ‘There is still buying interest and more new developments are being planned for launch in the coming months. If they are well taken up, that would motivate more developers to launch other projects and stimulate more buyer interest,’ she said.

Knight Frank manager of consultancy and research Ong Kah Seng is slightly more cautious about prospects, but still thinks the outlook is good.

‘Buyers are likely to rethink about rushing into home purchases and adopt a wait-and-see attitude… However, although sales will moderate, it is still reflective of a healthy residential market.’

Against this broadly bullish backdrop, prices have continued to climb ever higher.

Official estimates show they rose a higher-than-expected 5.2 per cent in the second quarter of this year after a 5.6 per cent jump in the first.

Prices are now 1.5 per cent above their peak in the second quarter of 1996.

And property experts are pencilling in price increases for the full year of between 12 per cent and 20 per cent, with the average estimate at about 15 per cent.

CB Richard Ellis (CBRE) residential director Joseph Tan thinks that because economic fundamentals ‘are still intact’, home prices will increase slightly in the second half of the year.

‘Projects which are well located and are close to main transport nodes could still enjoy a slight premium,’ he added.

Prime pickings

With developers looking to make the most of this positive market, Knight Frank is anticipating another 17 major launches (of at least 50 units each) within the next six months – a total of 4,056 apartments added to the market.

Upscale residences in districts 9, 10 and 11 are likely to make up almost half of these major launches, but a surge of mid and mass-market developments is slated from next year onwards as GLS land sites situated mainly outside the central regions are released, Mr Ong said.

CBRE notes that 38 apartment launches – inclusive of small to mid-size projects – are likely within the next six months.

Of these, 22 are located in the core central region, 10 in the rest of the central region and six outside the central region – allowing home buyers to cherry pick according to their budgets.

They range from Allgreen Properties’ prime 360-unit Skysuites @ Anson in Enggor Street to the mass market 408-unit executive condominium project in Yishun Avenue 10 by MCC Land.

In addition, experts say that prime developments are beginning to appear in numbers on the horizon as developers scent rising prices.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said developers may have held back many of their high-end launch-ready projects, some of which were prime freehold sites from the ‘en bloc’ fever three years ago.

‘Some developers may have decided that high-end prices may take even longer to reach their desired levels. Given that there are still risks ahead, they may decide to make the best of an uncertain situation and launch within the next few weeks and months,’ he added.

A buyer’s spread

With 15 residential sites sold through the GLS programme in the first half of this year (four of which were executive condominiums) – and more than double that number planned for the second half – the property pipeline shows no sign of drying up.

Mass and mid-market homes are likely to be launched on these sites in areas such as Simei Street 3 and Hougang Avenue 2 as the Government attempts to dampen demand.

The plots are certainly being snapped up by developers eager to replenish their land banks and willing to pay top dollar for well-located plots.

A 99-year leasehold residential site at Simei Street was released for tender in March received a total of 18 bids, with the top bid at $152.7 million or $523 psf per plot ratio (ppr) coming from developer Chip Eng Seng. This was well above market expectations of between $300 and $400 psf ppr.

UOB Kay Hian property analyst Vikrant Pandey estimates the break-even price for the site to be in the range of $800 to $850 psf and, assuming a 15 per cent development margin, the average selling price to upwards of $970 psf.

‘Resale prices for the secondary market projects in the vicinity are in the range of $600 to $800 psf. The top bid is quite aggressive, factoring in a 20 to 30 per cent future price appreciation in the region,’ he said.

Similarly, the hotly contested tender of a choice residential plot in Boon Lay Way next to Lakeside MRT station attracted a whopping 14 bids in May, with Keppel Land (Mayfair) putting in the top bid of $499 psf ppr, or $302.98 million.

Property experts estimate the break-even level for units on the site will be $800 to $850 psf, with an eventual selling price of about $950 psf – which factors in a 10 to 20 per cent future rise in prices within the next year.

DTZ’s Ms Chua said that developers were already inching up prices at new projects, with many recent launches being priced higher than neighbouring projects.

However, the bumper release of 31 residential sites by the GLS programme in the second half of this year could dampen some of the exuberance in the market, moderating mass market prices.

There are 18 residential or residential/commercial sites on the programme for confirmed sale, with another 13 sites for residential use put on the reserve list.

The plots – which include 20 that are new and not rolled over – could accommodate 13,905 new homes and are anticipated for launch next year.

They are located in areas such as Jurong West and Pasir Ris but also in mass-market areas like Hougang and Tampines.

The sites commanding the most attention are, predictably, those with the best locations and amenities.

CBRE’s Mr Tan said sites with better amenities and close to MRT stations will generally attract more interest from developers. And mixed-use sites located at the town centre of HDB estates are likely to be vied for.

One of the most attractive sites is the land parcel at the junction of Woodland Avenue 1 and Woodgrove Avenue, he said, which is located within the American expatriate enclave and close to the Singapore American School.

Mr Tan pointed out that condominiums and landed homes in the nearby Woodgrove Estate were enjoying strong rentals, and the last condominium project launched in this location – Rosewood Suites in November 2008 – was fully sold.

Elsewhere, the commercial- cum-residential site in New Upper Changi Road and Bedok North Drive is expected to attract strong bidding, given that it will be the first comprehensive development in Bedok New Town and comprise a retail mall, residential units and a bus interchange.

Knight Frank’s Mr Ong added that close proximity to existing and upcoming MRT sites could well drive prices higher at a number of new plots.

These include the Alexandra Road site, the Tanah Merah Kechil site – near existing condos East Meadows and Optima@Tanah Merah – and the Petir site next to City Developments’ recently launched 429-unit Tree House.

Chesterton’s Mr Tan said: ‘The fact that there are still en bloc transactions taking place – most of which are in the suburbs – indicates that developers will still bid for land.’

However, with economists predicting a slowdown in growth in the second half of this year due to concerns over the European debt crisis and the bumper supply of land released, some analysts are less bullish.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that with an average of three tenders a month, developers were both limited in their budget and manpower resources.

‘We might see the level of interest in GLS sites drop towards the end of this year… If signs of economic uncertainty re-emerge and if companies start putting their expansion plans on the backburner, developers might start bidding more cautiously,’ he said.

Source: Sunday Times, 18 Jul 2010

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