• High rental return - Rents of landed homes have outpaced its capital values, according to URA's rental indices for all the landed property types. In the first half of the year, rents of detached houses increased by 13%, semi-detached houses by 11.4% and terrace houses 17.3% hike in rents.

Table 4 - Sale of Landed Properties in First-half of 2007

Source of statistics SISV Realink

Table 5 - Sale of Landed Properties in Second-half of 2007

Source of statistics SISV Realink

Table 6 – Sale of Landed Properties in 3 Years starting 2005

Myth or Reality (3): The increase in demand for landed properties continues to go up from 2005 onwards. However, the fundamentals on landed properties are different from non-landed properties. The former hinges on continued good performance of locals; while the latter the continued confidence in Singapore by foreigners. The following factors may lead to more locals having to dispose of their landed properties and down grade to smaller homes in 2008 and 2009:

1. the domestic economy relies only on the construction and services sector,
2. the traditional economic drivers such as electronics and pharmaceuticals continue their slump especially the electronics sector which has gone through 15 quarters without growth,
3. the threat of our trading partners, i.e. the EU and the US going into recession this year.

Awkwardness (3) :  With more positives than negatives in the domestic economy in 2008 and a general expectation that 2009 will be an even better year, sellers in general will factor in the completed casinos, the F1 Circuit, the Gardens at the Marina (which has nothing to do with their landed property prices) when putting their homes on the market. With such a rosy economic backdrop, it will be tough for inexperienced agents to ‘talk down’ the asking price.

(4) Sub-sales of private homes – volume down but value hit 10-year high

The number of sub-sale transactions fell to 1,374 (or a quarter-to-quarter decline of 23%) in the third quarter of 2007. There were 1,184 or 13.9% of sub-sales in the second quarter and 6.3% in the first quarter of 2007.

Sub-sale value of apartments transacted in the first three quarters of 2007 was at an all-time annual high of $6.7 billion. However, in terms of volume, it is about half of what it was in 1995.

Sub-sales deals made up 19% of the volume, up from 16% in the second quarter. Median sub-sale prices are at a new record high of $1,246 psf. Quarter-to-quarter, the increase is 13.6% and a year-on-year increase of 25%.

The value per transaction of sub-sale apartments is also at a record high this year at $1.71 million per transaction. However, some prestigious projects have already shown sign of fatigues such as The Sail in Marina Bay which, according to caveats lodged, only saw six (6) transactions in December 2007. The sub-sale prices of many units have drastically dropped – suggesting forced sales.

Table 7 – Sub-sale activities over the past 3 years

Myth or Reality (4): In 2008, the developers will price their new launch projects at a 15% to 20% premium to factor in higher inflation risks and to protect the value of redevelopment sites where construction have not started. It will take longer time for developers to offload leftover units due to higher asking prices and ample supply of new condos and hybrid HDB flats in the next one to two years. By 2010, there will be an additional 43,000 new condos and apartments available either for occupation or launches in many parts of Singapore.

Awkwardness (4) :  With a short-lived bull-run, investors and speculators alike will be left with high-priced properties that they have bought in 2007 before the en bloc craze came to a sudden halt. With Deferred Payment Scheme scrapped and banks tightening credit, sellers and agents will be hit be a double whammy of high inflationary pressure on holding / marketing costs while new supply of similar condos continue to rise.

(5) En bloc deals at all time high

For the whole of 2007, a total of 109 en bloc sale deals worth $13.3 billion were done. But, en bloc sales will be a passing phenomenon this year due to a combination of negative factors against en bloc sales such as:

1. Massive Government Land Sale Programme (since January 2007)
2. Withdrawal of Stamp Duty postponement (from January 2007)
3. Withdrawal of Deferred Payment Scheme (from September 2007)
4. Increase of Development Charge percentage from 50% to 70% of market value (from July 2007)
5. Change in the Collective Sale Law (from Oct 2007)

Table 8 – Past 10-year en bloc sale record

Myth or Reality (5): The slew of collective sales in the whole year of 2007 yielded $13.3 billion in total collective sale proceeds. The huge cash windfalls would be arriving for thousands of en bloc sellers who would need replacement properties.  Most of the amount is due to come in between mid 2008 all the way to 2010, and this will prompt a pickup in market activity. Assuming 50% of the sellers affected by en bloc sales already have a second home, there will be at least $5 billion about to be ploughed back into the market from 2008 through to 2011.

Many owners of old condos and apartments, such Bayshore Park and some privatised HUDC projects, are hoping that the Government will increase the plot ratio in the new Master Plan to be promulgated this year, and this will allow them to sell their apartments collectively for a huge windfall.

Awkwardness (5) :  A minority of en bloc sellers already flexed their muscles at the HDB resale flat market pumping up prices to unrealistically high level. Almost all flat sellers are now hoping to sell their flats to en bloc sellers and they will be willing to pass over a chance to sell at the market price and prefer to wait for their ‘Prince charming’.

(6) Investment sales hit historic high at $51 billion in 2007

Total investment sales of property registered an all-time historic record of $50.8 billion in 2007. It is a 66% jump from 2006’s $30.57 billion. Incidentally, the aggregate investment sales figure for eight long years of recession - from 1996 to 2003 - was only $54.9 billion.

Investment sales refer to major investment transactions like office buildings and shopping centres, as well as sites bought for development including collective sale deals, Government Land Sale (GLS) programme and strata-titled units of at least $5 million. They do not cover purchases of single property units by individuals.

Investment sales are considered a barometer of developers' and big investors' mid-to-long-term confidence in the market.

Table 9

With the passing of the new collective sales law and hefty increase in Development Charge percentage and DC rate, en bloc sales are expected to dwindle.

Residential deals halved from $20.3 billion in first half of the year (due mainly to robust collective sales) to $10.3 billion in the second, due to the sudden and drastic slowdown in collective sales.

Myth or Reality (6): 2008’s overall investment sales of property are likely to be lower and hover around $30 billion. This is based on the assumption that foreign funds are still keen on Singapore’s commercial buildings and developers are still bullish about the Government Land Sale Programme. However, the situation will pan out depending very much on the resilience of the US economy against recession.

Awkwardness (6) :  Sale of big ticket properties continue to shore up official numbers while individual agents are struggling to attract enquiries about their resale residential listings.

(7) HDB Resale Flat Prices Grew 17.4% in 2007

HDB resale flats price index registered a 5.6% increase in the fourth quarter of 2007. The quarter-on-quarter increases of HDB resale flats are as follows:

Table 10 – Price growth of HDB resale flats quarter-on-quarter

For the whole year, prices of HDB resale flats grew by 17.4% in 2007. The whole year resale transaction volume was 26,215 (excluding resale flats sold by HDB itself) and the majority of resale flats were transacted at high cash-over-valuation (COV) towards the second half of the year.

(7.1) More and more resale flat buyers need to fork out higher cash
Spurred on by the upward trend, flat sellers are now asking for prices that are significantly higher than valuations. And since July 2007, Cash-over-Valuation (COV) has become a norm for HDB resale flats and about 80% of HDB resale transactions attracted cash above valuation.

According to HDB figures, the median price for four- and five-room flats are $18,000 above valuation. For two- and three-room flats, the median amount was $15,000. The highest amount paid above valuation for a five-room flat was $150,000. The figures were $57,500 for a four-room flat and $40,000 for a three-room flat.

HDB statistics show that the median COV for executive flats in Bukit Timah rose to $137,500 in the third quarter of 2007. In Marine Parade, the COV for five-room flats hit $84,000 in the same quarter.

^ Back to top