27 November, 2014 RESIDENTIAL MARKET Redas urges government to intervene if property market turns volatile The president of the Real Estate Developers Association of Singapore (Redas) Chia Boon Kuah on Wednesday urged the government to stand ready to take supportive measures to prevent a tipping point if the property market turns volatile and worsens. Speaking at the associations 55th anniversary dinner at The Ritz-Carlton, Millenia hotel, he said developers were concerned about the slowdown that has gripped the residential market since the cooling measures and the total debt servicing ratio kicked in. The data and facts truly speak for themselves, he said. The transaction volume is expected to halve to under 9,000 this year, from around 18,000 in 2013; overall private home prices have declined in the last four consecutive quarters. Mr Chia said: The industry is expecting unabated headwinds as the slew of cooling measures continue to bite and dampen buying sentiment. The looming supply of 68,000 completed new residential units in the next few years is likely to cause the home vacancy rate to head towards 10 per cent. This will add even more pressure on the residential market. He added, too, that the dampened buying sentiment has led the genuine home buyers among Singaporeans to adopt a wait-and-see attitude. The malaise in the property market could also infect the economy at large: After all, a quarter of the top 20 listed companies in Singapore are property or property-related firms, and one in five persons has a job in the real estate or construction. Approached later, Mr Chia declined to elaborate on the kind of supportive measures he thought the government ought to make. But the developers who spoke to The Business Times at the event echoed his views, although they did not recommend a complete roll-back of the cooling measures and loan curbs. Qingjian Realty (South Pacific) Group general manager Li Jun was one of those who said the market was already at a point where the government should intervene. He cited as one of his reasons the outflow of capital into overseas foreign properties at a time when investing in overseas real estate assets carries higher risks. Its hard to say what kind of supporting measures the government should extend. I dont suggest removing all the measures but perhaps some, and gradually, to prevent a hard landing, he said in Mandarin. Tuan Sing group chief financial officer Chong Chou Yuen suggested drawing the line for cooling measures at the mass-market mid-end homes to maintain their affordability. He suggested that the government could afford to relax the policy for high-end investment properties for both local and foreign investors, and spoke of a mismatch between what the government and what developers deemed as a sufficient price correction. An analyst said the government was playing a very delicate game. Part of the rationale for keeping the cooling measures in place was to keep property prices down to give wages time to catch up. The government is acutely aware that real estate forms a big part of Singaporeans collective wealth. They are not about to allow the situation to deteriorate to a panic stage. But they do have priorities to take care of before developers interests. In a low-interest-rate environment, the only way to cool the market is to ensure that buyers dont over-borrow, and reduce competition among investor-buyers of second and third properties. This is so that when interest rates rise, these people will not find themselves financially stretched. Adapted from: The Business Times, 27 Nov 2014 Nanshan Groups Song family buys GCB in Holland Park Some members of the Song family behind Nanshan Group Singapore, which has been increasing its presence in the Singapore property market, are said to have bought a brand-new Good Class Bungalow (GCB) in Holland Park sold recently by Frasers Centrepoint for S$30 million. Talk in the market has it that the purchase was made through Sui Yongqing, wife of Song Jianbo, eldest son of China-based Nanshan Group founder Song Zuowen. The group, which is headquartered in Longkou City, Shandong Province, has interests as diverse as aluminium and golf courses to education, wine and real estate. Ms Sui is understood to have become a Singapore citizen a few years ago. Her husband is believed to have become a Singapore citizen very recently. Ms Sui, a director of Nanshan Group Singapore, is said to be an authorised signatory for the groups business in Singapore. The couple, along with three of their four children, are said to currently reside in a condo in the Newton area. Their eldest daughter is in university in the US, according to a recent article in Lianhe Zaobao. The S$30 million price of the freehold GCB translates to about S$1,991 per square foot (psf) on land area of 15,070.54 sq ft. The two-storey property has a pool, lift, five bedrooms, family area and a helpers room. Adapted from: The Business Times, 25 Nov 2014 COMMERCIAL MARKET No small strata office, retail units allowed for Beach Road site A minimum 70 per cent office component has been stipulated for the commercial site next to Shaw Tower along Beach Road. Small strata office or retail units will not be allowed in this 99-year leasehold site, which has just been made available for applications by developers through the reserve list. Market watchers estimate that its price will come in at more than S$1,000 per square foot per plot ratio (psf ppr) if it were to go on the market today. The site is on the reserve list for the current second-half 2014 Government Land Sales Programme. Sites on this list are launched for tender only upon successful application by a developer, accompanied by an undertaking to submit a minimum bid price that is acceptable to the state. Located diagonally opposite the Duo project, the site includes the former Beach Road Police Station, a gazetted conservation building which has to be restored. The land parcel predominantly comprises a 2.1-ha site which can be developed into a maximum gross floor area (GFA) of 950,592 sq ft. At least 70 per cent of this (665,424 sq ft) has to be set aside for office use. The retail quantum can take up to 86,111 sq ft. There is also underground space of 12,648 sq ft for an underground pedestrian link to Duo, and to state land on Tan Quee Lan Street. The Urban Redevelopment Authority (URA) on Wednesday, in releasing the sales conditions for the site, has stipulated that the whole development - excluding any GFA for hotel, serviced apartments or residential use - shall consist of not more than three strata lots. The former police station conservation building must be held within one of these three lots. Referring to the location of the site, a stones throw from the South Beach project and Suntec City, the URA said in its statement: The land parcel is located on the fringe of the Singapore city centre and the intersection of two key development corridors along Beach Road and the Ophir-Rochor roads. Fronting Beach Road, Rochor Road and Nicoll Highway, the future development is envisaged to provide high-quality office space with complementary uses that can meet the needs of financial and business services. This new development will also reinforce the areas positioning as an attractive and vibrant mixed-use precinct within the city centre. ... The future development on the land parcel can reach a height of 45 storeys... An analyst commented that the development of the site would support the rejuvenation of the Beach Road/Ophir Road vicinity, but expressed doubt over when this would happen: While the site is attractive, it will take a while for it to be triggered, mainly because you have a significant amount of office space within two large mixed development projects in the immediate vicinity - at South Beach and Duo. Potential bidders would be looking for these new surrounding commercial developments to reach fuller occupancy before they make an application for the release of the latest site. After setting aside the office and retail components, some potential bidders may be keen on putting in a hotel for the balance GFA. There is an attractive proposition for a new mid-scale hotel, if you look at the City Hall micromarket, where this land parcel is located. Noting that the retail component for the site would be only about half the size of the Shaw Leisure Gallery next door, it was suggested that if a larger retail quantum were to be allowed on the site, an earlier trigger date for the site could come to pass. Retail in the area would do well because of the sizeable supply of new office space coming up in the locale, in addition to providing a natural shopping linkage from Bugis Junction to Suntec City. Perhaps the authorities were concerned about traffic congestion, hence the decision to cap the retail quantum. Another analyst said that based on the conditions just released, the site is likely to command a land bid of some S$1,300 to S$1,500 psf ppr, depending on whether there is a residential component. He reckons the site may be triggered for launch next year. However, given its size - the land price alone could hit S$1.2 billion to S$1.4 billion - this land parcel is likely to attract the bigger players, possibly forming consortiums. It could draw some foreign players such as the larger Chinese developers that have been looking for opportunities in the Singapore commercial property market. Adapted from: The Business Times, 27 Nov 2014 Tight supply rather than demand driving up office rents Singapore office rents have continued to rise this quarter, taking the full-year growth past that for last year, amid shrinking vacancies. CBD office rents are projected to continue climbing in 2015, albeit at a slower clip in the choicest segment. While the current landlords market is set to continue next year, there is an air of caution among office-leasing agents. Analysts are slightly concerned that the market performance appears to have been driven more by the tightness of availability rather than an abundance of demand. Since last year, demand has softened. Net absorption is low compared to the 20-year average of 1.5 million sq ft; 2013 was 1.2 million sq ft and 2014 looks like its coming in at about 900,000 sq ft to one million sq ft. Financial institutions, which have been the largest contributor to office space demand over the past 10 years, are not expanding and in some cases have been giving up space. An analyst highlighted that a decent share of the leasing transactions this year stem from firms playing musical chairs, moving from one building to another to lower their rental expense. Tenants are still trying to come to terms with rising cost of premises, which is forcing some to look at lower-cost alternatives or buildings that would enable better space utilisation. Looking ahead, the prospect of slower economic growth would inextricably lead to lower take-up levels. And with supply continuing to remain tight over the next couple of years, the scene is set for further rent growth in the short term, though downward pressure will start to emerge as the time draws nearer to a big pick-up in office project completions come 2017. For the fourth quarter of 2014, it is estimated that a 4.2 per cent quarter-on-quarter rise in the average gross monthly rental value for Prime Grade A CBD office space to S$12.44 per square foot (psf). This would be the same pace of growth as Q3 2014 and translate to a full-year increase of 19.8 per cent - double the 9.3 per cent appreciation for 2013. Another market watcher estimates a full-year 2014 increase of 15.5 per cent for its Premium Grade Raffles Place/New Downtown average rental value, nearly double the 8 per cent growth last year. Its baskets for various office micro-markets across the island also reflect rent appreciation for Grade A and B space this year. The increases vary widely though, from 3.6 per cent for Grade B offices in Orchard Road to 12.2 per cent for suburban Grade A offices. Next year, it is predicted that further rent growth of 11.5 per cent for Premium Grade Raffles Place/New Downtown offices, before the figure tapers off in 2016 with a 0.9 per cent rise. In all other micromarkets, too, the property consulting group forecasts rents will continue climbing next year before either plateauing (for Grade A space in all micromarkets except Shenton Way/Tanjong Pagar) or falling (for Grade B space in all areas) in 2016. In that year, Grade A rents in Shenton Way/Tanjong Pagar are forecast to dip. Another analyst expects Prime, Grade A CBD rents to appreciate 7 per cent next year. Rents will continue to go up in the early part of next year because of the low vacancies. There is bound to be some pressure on rents based on the new supply that will be coming in from early 2017. Exactly when that will kick in is difficult to ascertain. However, based on previous history, it would be around 12 months before completion of the next wave of supply. This has to slow down rental growth and could potentially have a slightly negative impact on rents. A third analyst estimates a 15.4 per cent full-year 2014 rise in its Grade A (CBD Core) average monthly rental value to S$11.25 psf after last years 1.8 per cent gain. Rental growth is anticipated particularly in the early part of next year, with the pace of increase likely to slacken later in 2015 as the impact of the upcoming future supply becomes apparent. Full-year 2015, the increase could amount to 10-15 per cent. The office rental appreciation has been accompanied by a fall in vacancy rates, reflecting a tightening of supply. CBREs Grade A vacancy rate has eased from 9.2 per cent in Q3 2013 to 4.3 per cent in Q3 2014. On the supply front, by some accounts, so far this year the net increase in completed office space (taking into account withdrawal of stock) has amounted to around 970,000 sq ft, with hardly any new offices completed in the financial district. CapitaGreen and South Beach Tower are expected to receive Temporary Occupation Permit (TOP) by year-end, taking the 2014 net increase in supply to around 2.2 million sq ft - ahead of 1.76 million sq ft in 2013, 1.62 million sq ft in 2012 and 1.97 million sq ft in 2011. However, new completions next year will be just about 350,000 sq ft, followed by 1.3 million sq ft in 2016 before rising to 2.8 million sq ft in 2017. M+S, the developer of the Marina One and Duo projects, has told BT the estimated TOP dates for the office components of the two developments will be in 2017. Despite the anticipated supply gap next year, some relief is expected from the nearly one million sq ft of offices estimated to become available in 2015 when tenants move out of existing buildings to their new offices, DTZ pointed out in an earlier report. Net increase in demand in the first nine months of this year has been sluggish at around 760,000 sq ft (based on JLL figures). Full year, the figure could be around 900,000 to one million sq ft, below the 1.4 million sq ft average annual take-up between 2009 and 2013. Next year, demand will be similar to 2014; we do not see demand from the banks coming back in 2015. We will likely be reliant on the key sectors that have been driving the market this year - notably insurance, IT including e-commerce, professional services and Asia-Pacific financial institutions. We are at this stage still applying only hope value to the return of US and European banks to the Singapore office market. While the current landlords market will prevail in the short term, a number of landlords are securing longer tenancies that go past 2017 to minimise the impact of new completions. This is being done selectively for sizeable tenants, relative to the size of the building. Tenants are offered more attractive rental rates to encourage them to lock in for a longer lease. Landlords will likely be more motivated by tenant retention in the medium term. We foresee an increase in early restructuring of existing leases possibly with incentives to tie in longer-term lease deals. Landlords that may have future vacancy arising from loss of tenants to new developments will need to be pro-active in order to mitigate against voids. Adapted from: The Business Times, 24 Nov 2014
Posted on: Thu, 27 Nov 2014 05:54:08 +0000
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