(B) Private property sales in Singapore
- (B.1) Developers face higher funding costs
Banks are lending less against the value of new projects. Before the US sub-prime mortgage crisis broke, property companies in Asia could borrow at spreads of less than 100 basis points or one percentage point above interbank lending rates. But now banks are quoting 200, 300 and for some smaller developers they are being quoted 400 basis-point spreads.
What this means is that developers will have to pay higher interest rate on loans.
- (B.2) Price correction for private homes appears to be on the card
A pessimistic economist from the Barclays Capital thought that this is the beginning of a multi-year price correction. He reckoned that the private residential property prices could easily fall by up to 30% by 2010.
A property review conducted by Credit Suisse in May 2008 saw rents and property prices falling even more steeply by as much as 40%, and downgraded its investment recommendation for the sector to 'underweight'.
[Full details in Annex B]
- (B.3) A number of high profile transactions of luxury properties – a sign of things to come?
There is some good news in the high-end market in May 2008. There were some high profile transactions in the high-end segment which may signal the end of the drought; and here are the numbers:
- Four bungalows near Eng Neo Avenue were sold for $5.5 million each at a preview on 9 May. The $22 million transaction works out to $1,128 psf of built-up area.
- A penthouse at The Grange was sold for 11 million recently.
- The first high-end condo project, Nassim Park Residence, that has been released this year has achieved good supports from buyers who snapped up 38 units [out of 100]. The project in the prestigious Nassim area has reportedly bagged a whopping $10 million or more for each apartment. Each unit is believed to be priced upwards of $3,000 psf.
- (B.6) Singapore luxury homes ninth most expensive globally
At about US$2,423 per sq ft, luxury homes in Singapore are the second most expensive in Asia and the ninth most expensive in the world.
At US$4,507 psf, high-end apartments in Hong Kong are the most expensive in Asia; while London is the most expensive place on earth to own a luxury residence at an average of US$6,191 psf.
(C) Non-residential properties and the rental market
- (C.1) Sales of strata offices down, may fall further
With only eleven transactions, sales of strata-titled offices have dropped considerably in 2008 so far. While prices are holding up for now, there are telltale sign to suggest that prices might start to ease in the coming months. For example, at International Plaza, the average price of units sold in January to March 2008 was $1,375 per sq ft (psf), down from $1,449 psf in the previous three months.
The slowdown in deals comes despite a continuing shortage of office supply, which helped boost sales and prices of strata office units to record highs last year. Some $1.7 billion of offices changed hands last year.
- (C.2) Rental continue to hold up
A telltale sign to suggest that the rental market is still holding up is the recent rental transaction at Seletar airbases vicinity. Rents there have almost doubled for the 131 units that will remain intact in the former Seletar airbase after the area has been earmarked for redevelopment into an aerospace hub in 2018.
Of the 378 Seletar houses, 131 will be retained as homes, and as a result the rentals for these houses have soared. In one such case, a two-storey terrace house recently attracted a bid of $5,000 - more than three times the guide rent of $1,500 set by the Singapore Land Authority (SLA).
Across the nation, rental rates jumped 69% between the first quarter of 2006 and the first quarter of this year.
- (C.3) Sale of NTUC Income Beach Road Property keenly watched as market going through lull
NTUC Income is selling Beach Junction, a small 999-year leasehold commercial property in Beach Road that could fetch around $24 million to $26 million.
New investors or owner-occupiers will also be able to give the building a new name.
The six-storey development has a net lettable area of about 19,000 sq ft and is fully tenanted. It is expected to worth about $1,300 to $1,400 psf. Many analysts are watching this closely as a gauge of sentiments in the commercial property market.
- (C.4) Real Estate Investment Trust (REIT) market may see some M&A or privatisations
As the market for listed property trusts in Singapore matures, analysts are predicting that some will merge or go private. One analyst went as far as to say that there are three to five Reits in Singapore that seem obvious for acquisitions or privatisations.
One reason why consolidation has not happened is that private equity funds, which could help engineer some of these deals, might be 'all cashed out' due to the global credit squeeze.
(D) News on En bloc Sale
There have been no new en bloc projects being introduced into the market.
- (D.1) Developers renting rather than building new project on en bloc sites
Due to the market weakness, some developers have decided to ride out the lull by putting up those en bloc sites that they have earlier acquired onto the rental market for income, rather than launching them for sale.
This is another evidence that the developers are feeling the pinch of the current weakness and are improvising in the interim.
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