Small property developers priced out of Singapore

Many small-sized property developers are seeing themselves priced out by foreign companies and big players, as tender bids for government and private land reach record highs in the country. This has made it more difficult for smaller developers to acquire land for development.

In the latest tender results for state land, the number of bidders and offered bid prices escalated to all-time highs, creating a bleak gap between the bids of smaller firms and big players.

For instance, Invest-Ho Properties, a boutique property developer, had submitted a bid of $9.1 million for a site at Tampines Road but lost out to the highest bid of $16.25 million by Fragrance Properties.

According to Mr. Edwin Ho, manager of Invest-Ho Properties Group, it was the group’s first time to bid for a site under the Government Land Sales (GLS) Programme, as buying private land and freehold land has become more expensive.

Small property developers are also affected by the entry of overseas developers planning to expand in the country – driving land prices even higher.

“With the current Chinese tightening measures, some Chinese developers are moving to familiar overseas markets to capitalise on their reserves of cash,” said Mr. Colin Tan, research and consultancy director of Chesterton Suntec International.

Analysts said that the industry could see a major shake-up, which could force small developers to look elsewhere for business opportunities if this trend continues.

Mr. Nicholas Mak, a property developer from Ngee Ann Polytechnic, said: “It’s a little difficult for them to go for en bloc (sales) because some of the prices are very high. As a result, they will turn to land sales – and if the Government does not sell enough of such land, it will affect their businesses.”

Owner expectations from en bloc sales also pose a challenge for small developers, said Mr. Joseph Tan, executive director of real estate consultancy firm CBRE. “The gestation period is longer and by the time the land is available, the market and pricing may have changed,” he said.

However, while small and medium developers may find options with GLS land parcels, the supply of such lands that may be “palatable” to them are limited, said Mr. Mak.

Besides forging joint ventures, several small property developers are considering acquiring land overseas, as market watchers say that the situation could go even grim for them.

“But the road will hardly be a smooth one even with such alternatives as joint ventures requiring competitors to work together will be difficult for smaller companies run by families or centered on personalities,” said Mr. Colin Tan.

As for foreign markets, he said that smaller developers face the risks of inexperience and unfamiliarity.

For some, they would opt to wait on the sidelines and rely on other means to generate business.

Mr. Teo Tiow Guan, director of Vigcon Construction, which lost its bid of about $9.9 million for a site in Tampines Road site, said that as property development is not its core business, the firm can afford to wait for plots that could be available and are within their means.

Two adjacent bungalows off Meyer Road sold for $38m

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Two adjacent bungalows in Margate Road off Meyer Road were sold for $38 million.
The buyer is said to be a low-profile boutique property investor that plans to build a block of apartment units on the 24,002-sq-ft combined freehold site. The plot can yield a 24-storey project of up to 55 to 60 units with an average size of 850 sq ft.

This translates to a land price of $1,023 psf of potential gross area, including a $13.6 million development charge (DC). This was nearly close to $1,047 psf ppr, inclusive of DC, which was paid for neighbouring 10, Margate Road in 2007.

Soilbuild Group Holdings, which purchased the property, later combined it with the adjacent Margate Mansions to form a bigger plot, which is now being redeveloped to Meier Suites. The land cost for the entire plot is said to be around $987 psf ppr.

Several market watchers said that the $1,023-psf-ppr land price for the latest deal, which involves 6 and 8 Margate Road, is close to the $1,000 psf ppr that Chip Eng Seng paid for 16 freehold terrace houses in Fort Road.

However, the latest property deal is still subject to acquiring outline planning permission for a new development and approval from the authorities to buy some state land for amalgamation with the property.

The sale of 6 and 8 Margate Road was brokered by Cushman & Wakefield through an expression-of-interest exercise, which attracted more than five bids.

The bungalow at 6 Margate Road was sold by the Estate of Tan Lai Choon, while the 8 Margate Road was sold by Bian Guan Realty. The two properties were zoned for residential use with a plot ratio of 2.1.

According to some analysts, assuming that the new owners use the balcony allowance of the additional ten percent gross floor area, the unit land price will be lowered to $954 psf ppr. With this, the new breakeven cost for the project could be $1,500 psf.

Meanwhile, according to URA’s monthly developer sales stats, Soilbuild sold some units in its Meier Suites project, which comprises three- and four-room apartments in February and March at prices ranging from $1,200 psf to $1,549 psf.

In a separate transaction, a consortium, which includes Soilbuild, recently signed a deal to purchase a freehold site at 23 New Industrial Road, which houses an industrial building that is being planned to be redeveloped.

Ying Li issues earnings warning for its H1 performance

Mainboard-listed property developer Ying Li International Real Estate has issued a profit warning for its performance for the first half of the year ending June 30.

The firm said that it expects an increase on its expenses after issuing convertible bonds worth S$200 million.

The residential and commercial developer expects to record lower sales from the San Ya Wan phase one development largely due to market timing factors.

Ying Li believes it will generate a net loss for the first quarter of 2010, compared to the RMB14,000 or S$2,812.73 net profit in the same period last year.

The company also expects to record a net loss in H2 ending June 30.

However, it remains optimistic and said it expects to record an overall profitable result in this financial year.

HDB quarterly resale prices hit new record but analysts say prices stabilising

SINGAPORE: HDB resale prices have hit a fresh record in the first quarter of this year rising by 2.8 per cent compared with the previous quarter. But the latest figures show signs of a market that’s finally stabilising after months of runaway prices.

Some analysts expect demand to continue to rise in the next few months but said cash premiums are unlikely to go much higher than the current median of S$25,000.

The official figures confirm estimates released earlier this month.

Resale transactions have dipped by about five per cent while median cash premiums, or COVs, have risen at a much slower pace than in previous quarters.

They went up S$1,000 in the last three months compared to the jump of S$12,000 between the third and fourth quarters last year.

They now stand at S$25,000, with flats in Bishan fetching the highest COVs, of about S$32,000.

Strong demand for newer estates has also translated into high premiums.

Towns like Punggol and Sengkang are seeing premiums of about S$30,000.

Eugene Lim, associate director, ERA Asia Pacific, said: “If you compare Punggol, Sengkang prices vis—a—vis mature HDB estates, they are still cheaper. Even though with high COVs of around S$30,000, you find that S$30,000 actually is the average COV nowadays for most flats. So, if you’re paying thereabouts, why not get something newer versus something older?

Analysts said measures to cool the market have worked including the launch of more HDB projects.

Other measures include restricting the cash portion of the second concessionary home loan, channeling the loan through the buyer’s CPF account.

Moving forward, ERA’a Eugene Lim said the government may consider further measures to ease demand.

And while some observers say possible interest rate increases later this year will hit buyers’ pockets, others disagree.

Jeffrey Hong, executive director, HSR International Realtors, said: In general they don’t look at, At the end of 30 years of loan, how much do I actually pay for my flat? The first—time buyers are more concerned about how much they pay on a monthly basis. So if the increase in the interest is not much, the increment of the monthly payment is probably S$20 to S$50 a month more.”

In the rental market, demand between January and March increased sharply, with transactions up 69 per cent over the previous quarter.

The HDB said subletting transactions went up from 3,902 in the last three months of 2009, to 6,606 cases.

Analysts said this is partly driven by foreigners returning to Singapore to work as the economy improves.

However, rents remain relatively stable, with median prices for four— and five—room flats hovering just under S$2,000 a month.

Analysts said this is partly driven by foreigners returning to Singapore to work as the economy improves while the HDB said the spike is also due to an increase in renewals of rental flats.

In the last three months, 2,323 flatowners applied to continue renting their flats, 19 per cent more than the previous quarter.

The HDB added that more homeowners are also aware that they have to apply to the HDB for approval which could add to the increase.

However, rents remain relatively stable with median prices for four— and five—room flats hovering just under S$2,000 a month.

ERA’s Eugene Lim said strong demand will not likely translate into escalating rents because the supply of flats that can be subletted is high.

Under HDB rules, flats can be sublet after a minimum of three years.

But analysts said there is no similar jump in demand in the private rental market, suggesting that rental budgets remain low.

In the private residential market, prices were up 5.6 per cent, marginally higher than the 5.1 percent hike initially estimated.

Government releases four residential sites in one go

The government has released four more residential sites for sale, which can accommodate more than 1,200 private home units.

The Urban Redevelopment Authority (URA) said yesterday that the potential land supply from the government’s land sales programme, as well as the supply from projects in the pipeline will be “more than sufficient to meet the demand for private housing”.

“The government will continue to monitor the property market closely,” it said. “If necessary, more supply can be injected via the second half 2010 government land sales programme to ensure that property prices are in line with economic fundamentals.”

Private home prices increased 7.4 percent in Q4 2009, following the 15.8 percent growth in the third quarter. Prices of private residential properties for the whole of 2009 rose by 1.8 percent.

Many analysts have said that the URA price index, which will be released in April, will likely show an increase in the Q1 2010 result, as more higher-value projects were sold in the current quarter of the year.

URA said that it is releasing three residential sites for sale located in Simei Street 3, Stirling Road and Boon Lay Way. URA last released three land sites for sale at one go in January 2000.

In addition to this, the Housing & Development Board (HDB) also plans to put a residential site in Tampines Road up for sale in the next two weeks. HDB is releasing the site as it was triggered by a bid from unknown developer.

Analysts said that the government’s “very rare” move of releasing four sites simultaneously was designed to emphasize its often-repeated point that the supply of land and homes in the country is more than enough to meet the demands.

The upcoming releases from the four land sites could also help reduce prices of private homes.

Colin Tan, research and consultancy director of Chesterton Suntec International, said that HDB and URA are coordinating their efforts and pushing out development sites quickly.

“This should stem the overly aggressive bids we have seen in recent weeks and also stem future price escalations from the supply side. Because if developers pay too much for their sites, their initial selling prices may be higher to recover the land cost,” said Mr. Tan.

URA’s three land sites can accommodate up to 1,180 private home units. The sites are “well-distributed across the island, namely in the west, east and central regions, to provide developers and home-buyers with more choice,” the agency said.

Two of the three land sites released by the URA yesterday, the one in Simei Street 3 and Boon Lay, were being offered through a confirmed list. The third site at Stirling Road was put into a reserved list, meaning it has to be triggered for sale before it will be launched.

Chua Chor Hoon, head of DTZ’s South-east Asia research team, said that the two sites on the confirmed list were both attractive. She estimates that the site in Boon Lay Way could fetch a price of $330-$390 psf of potential gross floor area, while the site at Simei could go for about $360-$410 psf of potential gross floor area.

HDB’s Tampines site could also receive strong interest. The land parcel will be put up for tender after a developer bid at least $6.5 million.

Updates from URA shows that the government has already sold four residential sites since January this year. These sites can potentially accommodate a total of 1,710 housing units.

Two more private residential sites – one in Upper Serangoon Road and another in Sembawang Road – will be put on sale next month through the confirmed list.

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Real estate developers to bring forward property launches

Singaporeans can look forward to more property launches. The Real Estate Developers’ Association of Singapore (REDAS) on Thursday announced that its members will be bringing forward property launches.

REDAS added that its efforts are only limited by the land available and hence the long—term solution to a stable market is still adequate supply.

The association celebrated the Lunar New Year, riding on an upbeat mood.

Joining in its Spring Festival was Finance Minister Tharman Shanmugaratnam, and the association shared with him its views on his recent Budget Statement.

Simon Cheong, president, Real Estate Developers’ Association of Singapore, said: “REDAS was hoping for more cash in our ang pows (red packets) from you, Minister. But when we opened the ang pow, we were disappointed there was not much inside for developers.

“Nonetheless, we are happy with your long—term productivity ang pow, as what is good for Singapore’s economy in the long run must also be good for the Singapore property market. It is what REDAS calls a deferred payment ang pow.”

REDAS said that its members are surprised with the speed with which Singapore’s property market has recovered. But they added that they are prepared to live with the current problems rather than the problems faced by the property market last year.

However, in the interest of a stable property market, REDAS said its members are committed to a fast—track supply to satisfy demand. This would also minimise excessive speculation in the property market.

Mr Cheong said: “Given the unexpected return of an active property market, developers over the next few months would also be actively bidding for more land to position for the future supply.

“As such, REDAS, unlike the situation in the preceding 12 months, is now looking forward to more sites in the confirmed list for developers to replenish their land bank.”

Just last week, the government introduced two more measures to cool the property market and pre—empt a bubble from forming in the private homes sector.

Singapore’s private-residential property prices rose during the third quarter, reversing four consecutive quarters of decline, but analysts warn that the rate of appreciation will slow following recent government measures to cool the market.

Prices rose 15.9% in the third quarter from the previous three months after sliding 4.7% in the second quarter, according to a flash estimate released by the Urban Redevelopment Authority Thursday.

The increase is an indication that the worst may be over for the property sector after prices fell sharply following the global financial crisis in late 2007.

Last month, worried of a possible bubble in the property market, the Singapore government announced steps such as the tightening of rules for home loans and the withdrawal of assistance to developers, including the withdrawal of a two-year deferral of property tax for land under development.

“Excessive price appreciation will likely be curbed by the threat of cooling measures but we will be worried if the euphoria comes back without tangible signs of a recovery in the real economy,” Donald Chua of CIMB said in a note.

Singapore’s property market rebounded strongly in early 2009 as the global economy displayed signs of recovery due to fiscal and monetary steps taken by governments around the world, including Singapore’s. The export-dependent nation, which had estimated the domestic economy to shrink as much as 9% in 2009, currently expects gross domestic product to contract between 4% and 6%.

“We believe developers’ mass market landbanking will continue as end-demand remains strong, but potential government supply increase may cap price rises,” Tricia Song, a research analyst with Credit Suisse, said in a recent note.

Thursday’s estimate is based on data for the first 10 weeks of the quarter. The final numbers will be released later this month, URA said.

“Everybody is still taking a wait and watch view, because people expect prices to correct a bit in coming quarters,” said another analyst with a foreign firm.

In a statement, the government said prices of private-residential properties rose 16.2% in the core central region, compared with a 5.2% fall in the second quarter.

Prices rose 19.1% in the rest of the central region, a reversal of the previous quarter’s 4.4% fall, while prices outside the central region were up 15.4%, compared with a 2.3% decline.

About 85% of Singaporeans live in public housing apartments built by the government’s Housing and Development Board. Private developers compete to provide housing for the remaining 15%, as well as for the sizable foreign population.

Govt may be taking steps to calm down the property market, say analysts

SINGAPORE: The government could re—introduce land sales through the confirmed list and analysts said this could mean the government is taking steps to cool down the property market.

Last October, recession woes saw the government suspending land sales through the confirmed list. But now the government said it will consider re—introducing it for the first half of next year.

National Development Minister Mah Bow Tan said: “Now that the market is coming back, demand is coming back and the take—up is strong. There is every likelihood that we will resume the confirmed list.”

This means land parcels will be tendered according to scheduled dates and this will translate to more residential property launches. But one analyst said while these changes will ease the market, they will take time to make any impact.

Nicholas Mak, property consultant, said: “This may be the first of actions by the government if they see that the property market shows signs of overheating especially if there is a lot of speculative buying, I think that could prompt the government to take further action.”

Public housing prices have gone up by almost 35 per cent over the last two years and the government said it is expecting prices to increase even further. However, it said buyers should not be complaining because these price increases are part of the reason why people invest in the first place.

Mr Mah added: “When you buy an HDB flat, you are investing for your future. We subsidise when you buy, we increase the value of the flat as you live in it and encourage you or facilitate you to cash out when you grow old.”

Mr Mah was speaking on Wednesday at the launch of the final skybridge at the Pinnacle @ Duxton, Singapore’s tallest public housing project.

He said while public housing remains affordable, with a range of flats to suit people from all levels of income, Singaporeans should continue to buy within their means.

Hungry Ghost Festival fails to dampen property demand

SINGAPORE: Some consider the seventh month of the lunar calendar an inauspicious time to buy a property

But it seems like the Hungry Ghost Festival is not going to spook homebuyers and property investors in Singapore.

A 99—year condominium at Toa Payoh was open for sale on Saturday and within a couple of hours, about 85 per cent of the 400 units available in the first two phases were snapped up.

In response to the strong demand, developer NTUC Choice Homes released another 60 units. The property development has a total of 590 units.

Market watchers said the average sale price of S$898 per square foot is lower than market expectations.

Ng Ser Miang, board chairman, NTUC Choice Homes, said: “A big majority of those who buy our units will have their homes here. As for price difference, I think we can expect some speculative elements, but I hope that these will be in the minorities.”

As for homebuyers, it seems that they are not going to pass up on good deals!

Said one homebuyer: “I don’t follow those superstitions. We’ll buy as long as the price is reasonable.”

Industry observers said they are confident that property sales during the seventh lunar month will remain strong, and they expect home prices to inch upwards over the next few months as the economy continues to improve.

Singapore July private home sales soar to record high

SINGAPORE, Aug 17 - Private home sales in Singapore soared to a record high for the second straight month in July, indicating increased confidence and speculation in the city-state’s property market, government data showed on Monday.

The Urban Redevelopment Authority website showed developers sold 2,767 private homes in July, smashing the previous monthly record of 1,825 units that was set in June.

Mohamed Ismail, CEO of PropNex, a real estate broker, noted that over 40 percent of sales involved mid to higher-tier homes costing above S$1,000 per square foot, indicating the boom was no longer restricted to cheaper apartments.

The higher selling prices were also “a result of developers reacting to consumers’ demand and raising the prices,” he added.

The URA data showed that City Developments <CTDM.SI>, Fraser & Neave’s <FRNM.SI> property arm Frasers Centrepoint and banker Wee Cho Yaw’s UOL Group <UTOS.SI> were among developers with the largest number of sales.

National Development Minister Mah Bow Tan said last month that there were signs of speculation in Singapore’s property market and warned the government may step in to calm the market. For stories on concerns about asset bubbles, see [ID:nSP511078].

Private home sales in Singapore, Hong Kong and China have soared since February this year, despite the weak global economy, helped by low interest rates and the huge amount of savings amassed by many households.

SINGAPORE (AFP) - - Despite Singapore’s worst economic slump since independence, the residential property sector is in the midst of a new boom reminiscent of 2007, when the city-state was known as the world’s hottest real estate market.

Greed and its twin brother fear are back in play as punters stake out condo launches days before sales open, with some offering blank cheques to pre-book flats, prompting the government to hint it may have to cool things down.

“Some of the practices and habits that you saw in the last property boom are beginning to come back, so I think we’ll have to be careful,” said Minister for National Development Mah Bow Tan, whose portfolio includes housing.

“A little bit of speculation is inevitable in every market, but when it becomes excessive, then it is something that we should try to avoid,” he said.

The minister’s words of caution fell on deaf ears.

A 297-unit condo called Optima in the extreme east — well outside prime districts — sold out in within three days in early August after Mah’s warning, fetching as much as two million Singapore dollars (1.38 million US) a unit.

The developer had to issue ballots “to address the needs of the genuine buyers” and disperse the huge crowd that turned up for the launch of the project, which will only be ready for occupancy in 2014, a spokesman said.

Within days, some units were already being advertised for resale in the secondary market.

An AFP reporter who recently walked into the sales office of another high-rise condo being built close to the Orchard Road shopping belt was treated like royalty by agents expecting to close deals within days, if not hours.

Bank officers were ready to process loans on the spot.

“Buy before prices go up further,” an agent whispered in his ear, gesturing to a “sky garden” bisecting the scale model of a glass-clad, 45-storey tower.

Singapore’s economic output is officially forecast to shrink by four to six percent this year — less severe than earlier estimates, but still its worst economic performance on record — and office rents are still soft, reflecting weak business activity.

“It is too early to celebrate,” Prime Minister Lee Hsien Loong warned over the weekend as he spelled out the country’s economic prospects. “The outlook remains clouded.”

The property frenzy began in middle-class condo projects due to pent-up demand from families upgrading from public to private housing but scared off by the 2007 price spiral.

Their enthusiasm quickly spilled over to more exclusive developments.

Prices of luxury condos — the segment worst hit by the recession — are now inching toward peak levels achieved around mid-2007, according to an analysis by business weekly The Edge.

Foreign investors, including Asians looking for a secure place to park their money, are also back in the Singapore market.

Singaporeans enjoy one of the world’s highest savings and home ownership rates, but most live in relatively spartan government-built flats, making owning condos an obsessive goal for families.

A pension system forces them to save more than a third of their monthly income, and the accumulated funds can be tapped before retirement to buy property, creating a massive pool of financing ready to be used when market conditions are good for buyers.

Chua Chor Hoon, senior director and head of Southeast Asia research at property advisers DTZ Debenham Tie Leung, said various factors combined to spur renewed buying in Singapore properties.

Signs of economic recovery, the stock market rally, the imminent completion of massive casino resorts, low interest rates and lack of confidence in complex financial products encouraged property buyers.

Asked if the government will have to intervene to stop a bubble from forming, she said: “There’s froth but no excessive speculation.”

“The government is likely to increase the supply of housing units through the sale of government land and monitor the situation first.”

Chua Yang Liang, head of Southeast Asia research at Jones Lang LaSalle, said demand is largely driven by buyers upgrading from government housing due to strong wealth creation in recent years, and the shrinking gap in cost between public and private housing.

“However, unless we begin to record positive growth in the larger global and domestic economies, the recent spike in demand and prices is short-lived and could cause asset driven inflation in the longer term, especially if wage increases do not keep pace,” Chua added.

“In our opinion, there isn’t enough compelling reason for the state to want to interfere into the market phenomenon just as yet, unless it affects the overall affordability for the masses and causes asset-driven inflation in the economy,” Chua said.

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Signs of speculation in private property market

SINGAPORE: The government is seeing some signs of speculation in the Singapore property market, according to National Development Minister Mah Bow Tan.

Speaking on the sidelines of the topping out ceremony of the Marina Bay Financial Centre on Wednesday morning, Mr Mah said the government is monitoring the situation.

It is uncertain if the buying momentum seen in recent months can be sustained, he added.

“The forecast is still for negative growth this year. Although it’s not as negative as it was in the beginning of the year, I think there is still uncertainty… But what is important really is for all of us, all the players in the market, to make sure that the market remains healthy,” said Mr Mah.

According to latest data from the Urban Redevelopment Authority (URA), sales of uncompleted private homes reached a record high of 1,825 units in June as improving sentiment in the market spurred homebuyers to snap up more units.

Mr Mah assured that there is adequate supply of units in the market for now and the government is prepared to release more land for sale if necessary.

On the Marina Bay Financial Centre, Mr Mah noted that it has already attracted over S$20 billion of private real estate investments from both local and international investors. About 61 per cent of space in the centre has been pre—leased.

Mr Mah also reiterated the government’s commitment to the project, saying another S$1 billion in infrastructure works will be invested over the next 10 to 15 years. The figure is on top of the S$7.5 billion already invested in Marina Bay.