Archive for the ‘Real Estate’ Category

Bearish news for Singapore property

Thanks to Bernard’s post that led me to the below article.

Singapore developers bunker down:

“This is the start of a multi-year price correction. Private residential property prices could easily fall by up to 30 per cent by 2010,” says Barclays Capital economist Leong Wai Ho.

Credit Suisse in a report this month saw rents and property prices falling even more steeply by as much as 40 per cent, and downgraded its investment recommendation for the sector to “underweight”.

Leong said an impending oversupply will worsen the problem, with 66,000 new homes expected to be completed over the next four years, against forecast demand for 50,000 in the same period.


Home prices to drop in Singapore

This article makes me happy. From the May 21 Straits Times:

Banks see plunge in home prices in next two years
New homes, rising vacancy rates, unsold condos and fewer rental deals cited as reasons
By Fiona Chan, Property Reporter


THE slowdown in the Singapore housing market has prompted two banks to predict a dramatic plunge in home values in the next two years.

In two starkly bearish reports, Barclays Capital and Credit Suisse have forecast drops of up to 40 per cent in home rents and prices, as demand and supply dynamics move in favour of buyers.

The reports, issued in the last two weeks, pointed to the malign cocktail of a flood of new homes coming on the market, climbing vacancy rates, a rising number of unsold condominiums and fewer rental transactions.

They also raised concerns about the possible dumping of units by speculators. Barclays said that should this happen, private home prices could slide 28 per cent to 30 per cent by 2010.

Credit Suisse predicted a possible 40 per cent drop in rents and prices. Its analysis showed that sub-sale prices recently started to dip at several developments.

Both banks also noted that developers were now more generous with price cuts, stamp duty rebates and agent commissions in an effort to move units. They warned that smaller developers were likely to ‘break’ first.

‘Just six months ago, City Developments and a few others gave zero commissions to agents,’ Credit Suisse said. By March, most were giving 1 per cent to 5 per cent, an increase of three to 10 times in just six months.

‘When Singaporean developers start to reach out to agents with higher commissions, you know they are feeling the pain,’ it said.

The pain is coming from slower growth in home rents and prices, as the effects of the United States sub-prime mortgage crisis takes its toll on market sentiment in Singapore.

Private home prices rose a smaller-than-forecast 3.7 per cent in the first quarter. Even then, Barclays analysts said this could have been boosted by a handful of high-priced transactions and ‘may not reflect the depth of pessimism in the market’.

Sales and launches of new homes also fell sharply last month, extending the slump.

Mr Colin Tan, the head of research and consultancy at Chesterton International, agreed with the Barclays report about a correction in prices.

As more new homes are completed over the next few years, he said, rents will feel the pressure and prices will start to fall.

Not all property analysts, however, have such a gloomy take on the housing sector.

Kim Eng analyst Wilson Liew believes the oversupply situation may be overstated. While there are 32,000 units being built and 42,000 more in the pipeline, current market sentiment could help slow the rate at which the planned units come onstream.

‘It is likely that most of these units would be deferred indefinitely until sentiment returns or when construction resources ease,’ he said.

Developers could also keep lands in their landbank rather than develop them if there is no demand, suggested Macquarie Securities’ head of Asean research, Mr Soong Tuck Yin.

Both he and Mr Liew believe the upcoming integrated resorts will give Singapore a boost and, while there may be a temporary weakness, home prices are unlikely to collapse.

Mr Soong also said developers had stronger balance sheets now than in previous market troughs, and the current low interest rates and high inflation could lead people to buy properties as a hedge against inflation.

The Credit Suisse report, however, said negative real interest rates – often touted as a driver for property purchases – had not historically helped home sales. It also said that even with construction delays, actual completions had usually come in higher than forecast.

Condo-flippers getting antsy?

I hope property prices plunge. Yes, I’m selfish that way.

From today’s Straits Times:

Bought last year
Stuck this year
Speculators paying the price of market cooldown as offers slow to a trickle
By Fiona Chan, Property Reporter

“BUSINESSMAN Alan Lim is a seasoned property investor, so he knows the value of not losing his nerve in testing times like now.

Last year, when the property market was scorching hot, he picked up a new condominium unit at Lumiere off Shenton Way for about $1.3 million, and another at The Inspira off Mohamed Sultan Road for more than $1.4 million.

He intended to ‘flip’ or resell them for a quick profit.

Property agents flocked to him with eager would-be buyers. But he rejected them all in anticipation that prices would keep soaring.

Now, the offers have slowed to a trickle and the prices buyers are willing to pay are falling, falling.

But he claims to be not too worried.

‘Of course, when the market was hot last year, everybody called me. This year, there are still agents calling, there are still offers but they are lower,’ said Mr Lim, who is in his 40s and lives with his accountant wife and three kids in a Clementi Park condo which he bought nine years ago.

He looks at property in the same light as the stock market: ‘If you have holding power, you’re all right. I think I can hold.’

While Mr Lim may be able to wait out the market cooldown, other would-be ‘flippers’ are not so lucky.

Agents say a rash of people who bought condos at the height of the property fever last year with the intention of offloading them for fat returns are now having trouble doing so.

Many are meeting an icy response in today’s fast-cooling market where collective sales have come to a standstill, new project launches are being delayed and once-ubiquitous record prices are few and far between.

A detached house in Kembangan, for instance, has been on the market for more than two months with no takers even though it is going for $2.5 million – well below the market price of $2.8 million to $2.9 million, said Mr Eric Cheng, executive director of HSR property group.

‘If you look at newspaper ads now, sellers are giving more commissions to agents because they want to dispose of their house quickly. Price may not be their greatest concern,’ he said.

A major property firm, which declined to be named in the interests of its clients, also said home-buying interest has dwindled in recent months.

‘According to our agents, the sub-sale market has been very quiet, in line with the cautious mood of the general market,’ said a company spokesman.

This has led to owners ‘not asking for sky-high prices. They’re more realistic and more willing to negotiate’, he added.

Sub-sales are when a person buys an uncompleted home and then sells it again before it is built, without ever living in it. They are often used to measure speculation, or ‘flipping’ in the property market.

‘Flipping’ is not a new phenomenon, having been around for as long as there were profits to be made in buying and reselling homes.

In fact, there has been much less speculative behaviour in this property boom than during the last peak in the 1990s, said industry players.

‘Those who have tried flipping before and were burned when the market crashed, either in the mid-1990s or the early 2000s, tended to be a bit more cautious this time round,’ said Mr Nicholas Mak, director of research and consultancy at property consultancy Knight Frank.

He added that most would-be flippers are well-heeled as they have to be able to pay for the property – usually high-end condos – in the first place.

Alternatively, some younger buyers may pool their money to target the mid-tier market, where properties cost less than $3 million each.

But one thing most flippers had in common now was that they probably did not expect the quick turnaround in the market, said Mr Mak.

‘Seven, eight months ago, no one knew that the United States sub-prime mortgage crisis would have such a great effect. Nobody expected the sentiment in the property market to cool so suddenly.’

But the spokesman for the major property firm noted that while transaction volumes have slowed, home prices are not exactly plunging.

‘At this point in time, we have not noticed any sub-sales done below the original sale price. Sellers are still making some margins though they may be lower than they expected,’ he said.

This is because most sellers seem unwilling to let go of their property below a certain price level. One agent is marketing a two-bedroom unit at Viz@Holland near Holland Village for $1.03 million, or $1,260 per sq ft (psf). This is below the bank’s valuation which she said is between $1,300 and $1,500 psf.

‘Last year, the owner had an offer for $1,240 psf but he didn’t take it. Now he’s willing to settle for $1,200 psf, but not lower,’ she said.

Soon, however, more sellers may find themselves squeezed for cash. Several projects, including The Sail @ Marina Bay and One Amber in Marine Parade, are scheduled to be completed soon, at which point buyers will have to cough up large payments for the homes.

Signs of strain have already appeared.

Three of the top five projects with the most sub-sales recorded slight dips in the median prices of such deals last month, according to consultancy CB Richard Ellis. These are Icon in Tanjong Pagar, Citylights in Lavender and One Amber.

‘Most sellers still think the market will pick up so it’s all about holding power now,’ said HSR’s Mr Cheng. ‘But a minority over-committed thanks to deferred payment schemes, and the lump sums are due soon, so they are in a hurry to sell.’

Deferred payment plans allowed buyers to put an upfront deposit for an uncompleted home and then delay the bulk of payments until the property was built, which could be up to a few years later.

Such schemes were exploited by speculators who would resell the property before completion without needing to fork out the bulk of payments. But the schemes were removed in October last year precisely to discourage speculation.

Those who bought under these plans could now have trouble reselling the homes as deferred payment may no longer be available for their would-be buyers.

On the bright side, this could present buying opportunities for home seekers, Mr Cheng said.

‘If the owners are desperate, they may ask for $700,000 but accept 10 per cent less. Some of these condos would be worth considering for buyers.’

Private home rents jump by 8% to 10%

From Straits Times – September 27, 2007:

“RENTS of private homes continued to rise strongly between July and September.

They jumped 8 per cent to 10 per cent islandwide over the previous three months, estimated property consultancy Knight Frank.

This was on top of a record 10.4 per cent growth in the second quarter, added Mr Nicholas Mak, Knight Frank’s director of research and consultancy.

Rents in the Woodlands and Mandai area saw some of the highest growth rates in the third quarter. They surged between 25 per cent and 30 per cent, largely because of the draw of the Singapore American School in the area, said Mr Mak.

‘This is an indication that although expatriates are concerned with rising housing rentals and costs, they are still willing to pay a premium to stay near international schools in Singapore,’ he added.

For the last three months of the year, Mr Mak expects rents to rise slightly less, by 5 per cent to 10 per cent. This would bring full-year rental growth to between 30 per cent and 40 per cent, he said.

Knight Frank added that market activity is expected to pick up in the last quarter, as developers step up launches to meet year-end targets.

Another 3,500 to 4,500 units are likely to be launched for sale, and home prices for the whole year are expected to grow by up to 25 per cent.”

More reasons to rent instead of buy a house

When you rent, most people mistakenly assume the decision is made out of necessity, not rationality. But there is a very good reason to rent in today’s bubble-stricken market: median incomes do not support median home prices.”

Read more…

Boom time Malaysia

Perhaps I should really think about buying in Malaysia instead of Singapore.  Prices there sound dirt-cheap compared to Singapore.  Plus freehold…

Of course if I’m going to buy in Malaysia, I might as well explore what Philippines and other countries around the region have to offer.

From Straits Times, September 23, 2007:

“Buying into booming Malaysia

Foreigners grab residential properties in KL and other hot sites, forcing prices to double in prime districts

By Jessica Cheam

SWANKY PROJECTS IN THE KLCC such as The Troika (above) are fetching as much as RM2,000 (S$874) psf. The boom has spread to surrounding districts, including U-Thant, near where the 9 Madge freehold condominium is located.

JUST a few months ago, the notion that sale prices for residential properties in Malaysia would reach the RM2,000 (S$874) per sq ft (psf) mark would have seemed preposterous.

Today, however, swanky and luxurious high-end projects such as The Troika – designed by world-famous architect Norman Foster – in the Kuala Lumpur City Centre (KLCC) have done just that. Only six months ago, homes at The Troika were available at half that price (RM1,000 psf).

Singapore’s property market is not the only one that has surged forward in recent months. Across the Causeway, KLCC is enjoying its own property boom – spurred by various factors, including the relaxation of foreign ownership rules and the elimination of a property gains tax in April.

As a result, Malaysian properties are increasingly catching the investor’s eye – and are now ‘back on the international radar’, said Mr Tim Murphy, the managing director of Hong-Kong based property investment firm Intellectual Property.

Mr Murphy was speaking to 200 investors here in Singapore as part of a series of educational seminars on emerging markets for property investments that the firm is holding this week.

Malaysia and Vietnam were singled out as good ‘buy to let’ investment markets, as property prices in these two countries, although rising, are still lower than those in mature markets such as Singapore and Hong Kong. Prices of high-end homes in prime locations in Singapore, for example, have now exceeded $5,000 psf.

Mr Rohan Cavaliero, one of the seminar speakers, said ‘foreign investors are flocking in droves’ to Malaysia now. Until recently, he was the group general manager of Malaysian developer Bandar Raya Developments, which is behind prime freehold projects such as The Troika and The Capsquare Residences.

‘There has been a general capital appreciation across the board for KLCC properties, even for suburban markets in the vicinity,’ said Mr Cavaliero, who has lived in Kuala Lumpur for 14 years.

Prices in areas around KLCC – Bangsar and Mont Kiara, for example – recently reached RM1,000 psf, up from RM400 to RM600 psf in the first half of this year, he said. ‘Those who bought a year ago are really laughing all the way to the bank now,’ he said.

Investors who buy to rent out can achieve high rental yields of 5 per cent to 7 per cent, although at current prices, yields are starting to fall for high-end homes, he added.

Mr K.K. Yap, who manages the prestige homes division of Rahim & Co, a sales associate of property consultancy Savills in Malaysia, said foreign investors are the main driver behind the boom in high-profile properties; local residents buy mainly suburban projects. ‘In the first half, locals were driving the boom. Now, more foreigners are driving it because the market is still very cheap,’ he said.

He said local residents will continue to invest in good-quality projects in KLCC’s suburbs priced at RM600 to RM900 psf as ‘most are undervalued and have big potential upside’.

Knight Frank Malaysia said in a recent report that it expects an exciting second half for KLCC, with more than 10 launches likely, including Hampshire Place, Icon Kuala Lumpur and Seni Mont’Kiara.

Singapore investor Chan Ye-Pan, a 40-year-old sales manager who was at the seminar, said his interest in Malaysian properties had been revived. But he said he would tread cautiously as he was wary of the nation’s ‘changing laws’.

However, Mr Murphy pointed to Malaysia’s commitment to deregulating the property market. Also, it is pushing its Malaysia, My Second Home programme to entice foreigners.

Mr Murphy said Penang, Langkawi and the Iskandar Development Region in Johor Baru are also potential sites for good investment properties.

Mr Cavaliero is already investing in Langkawi. He is a founding director of 99 East Langkawi, a property developer currently constructing a low-density, high-end residential oceanfront project on Bukit Malut, where the Langkawi Golf Club is located.

Property investments in such areas, however, can take three to five years or more to mature, said Mr Murphy. ‘These are not suitable for short-term gains. But ultimately, if you do your due diligence and are patient, the potential is enormous.’

Some tips for property investors

  • It may sound simple, but be sure to do your research. Take time to understand the dynamics of the market and don’t be a ‘sheep investor’, buying impetuously without first checking out the financial viability of the investment.
  • Six words to remember when researching a market: Legals, borrowing, liquidity, yields, tax and currency.
  • Look for properties built by established developers with good track records, especially if you’re investing in a developing market.
  • Choose properties that can be supported by the local market – homes that will attract locals to rent.
  • Always engage a lawyer to read all the legal documents, for example, the sales purchase agreement and deed of mutual covenant, which contains terms that are binding on all flat owners of a multi-unit building.”
  • Buy property in Langkawi?

    Hmm… I was at the seminar where there was a presentation on how attractive it is to buy land in Malaysia – especially in Langkawi.  But… Langkawi is already pretty developed… and the presentation was done by a high-end property developer who is constructing luxury homes on Langkawi.

    From Straits Times, September 23:

    “Langkawi – island retreat now in vogue

    HIGH-END LUXURY HOMES are in short supply on the island, so developers are snapping up sites in prime areas such as Bukit Malut, which offers fabulous ocean views.

    LANGKAWI has just been quietly rebranded as ‘Langkawi GeoPark’ – after it was bestowed World GeoPark status by the United Nations body Unesco in June.

    This means the archipelago of 99 islands in the Andaman Sea, about 30km off north-western Malaysia, has provided a plan for environmentally sustainable development.

    The main island is already one of Malaysia’s hottest tourist spots with its white sand beaches set against lush, tropical jungle foliage and mountain peaks.

    Despite this allure, there is a ‘massive undersupply’ of high- end residential accommodation, said Mr Rohan Cavaliero, a director of property developer 99 East Langkawi.

    His company is one of the few developers currently building low-density luxury homes, which Mr Cavaliero expects to be snapped up quickly by well- heeled foreign investors.

    The development, 99 East, is located on Bukit Malut and will offer 120 units in its first phase – mainly villas. The company is hoping to launch the units for sale by the end of the year, with prices starting at between RM600 and RM800 (S$262 and S$350) per sq ft (psf). The project has started construction.

    Other projects under way on the island include a residential one for luxury villas called The Westin Residences by property developer Langkawi Island Resort, which is also behind The Westin Langkawi Resort & Spa.

    Dubai-based developer Kingdom Hotel Investments, of the Four Seasons brand, is planning a similar project in Langkawi.

    Mr K.K. Yap, of Rahim & Co, a sales associate of property consultancy Savills in Malaysia, said there is demand for high-quality, well-managed developments in Langkawi.

    The island offers good road infrastructure and easy access to an international airport. These make it an ideal location, said Mr Yap, for tourists and investors alike.:”