WITH the seventh round of government cooling measures, some buyers have tightened their belts while others are looking at opportunities overseas or in the strata commercial segment. Will the current buying momentum continue?
Despite the heavy downpour on Jan 19, Mr Ng, a Singaporean, visited the showflat of Q Bay Residences twice that afternoon. On the second visit, the 35-year-old engineer came with his wife, and they signed on the dotted line to purchase a 527 sq ft one-bedroom unit for around $600,000. "We have been thinking about buying a second property for the last few months," Ng says, in a phone interview with The Edge Singapore. "And my wife really liked what she saw."
As the unit at Q Bay Residences is the Ngs' second property purchase, the couple will have to stump up a cash down payment of at least 25% for the property, which works out to about $150,000. Under the new regulations that kicked in on Jan 12, the balance 25% cash payment can be made with a combination of their savings and Central Provident Fund (CPF). The borrowing limit for those buying a second property has been reduced from 60% previously to 50% loan-to-value (LTV) ratio. For the Ngs, the difference works out to an additional $60,000 in cash, excluding the additional buyer's stamp duty (ABSD) of 7%, which would have added $42,000 to the cost of the property. During the launch weekend, however, the joint developers of Q Bay — Frasers Centrepoint, Far East Organization and Sekisui House — offered buyers a 15% discount plus a 7% stamp duty discount.
Interest in smaller units
With the significantly higher cash outlay required, anecdotal evidence is that many investors are opting for smaller units to keep the absolute quantum affordable. Ng is an example of such a buyer. "We thought we should start with a one-bedroom unit as our first property investment since it's what we can afford," he reasons. "In the future, if the price of this property appreciates, we can always sell it and buy a larger unit."
Not surprisingly, the most popular units in Q Bay Residences were the one-bedroom and one-plus-study units, and were the first to be snapped up during the preview on Jan 18 and the launch weekend of Jan 19 and 20, as these were the most affordable in terms of absolute price. As at Jan 23, 330 of a total of 630 units in the 99-year leasehold condo located at the junction of Tampines Avenue 1 and 10 had been sold at an average price of $1,080 psf.
"Even in the good times, before the measures were introduced, we typically didn't sell half the units within one weekend," says Elso Poo, Frasers Centrepoint's general manager of marketing and sales. Attributing the good response to the project quality and offerings, he adds that first-time homebuyers accounted for up to 70% of purchasers at the first launch weekend at Q Bay.
After the latest and harshest round of property cooling measures imposed by the government, first-time homebuyers are likely to form the bulk of home purchasers this year, observes Lee Lay Keng, associate director of research at DTZ. An increasing number of investors have turned to alternative markets, for instance, overseas projects in London and Malaysia. Others have turned to the commercial sector, especially the strata commercial segment, which has yet to be hit by property cooling measures in the form of ABSD or seller's stamp duty (SSD) and has seen some interest diverted from the residential and industrial sectors.
At the launch of the first phase of residences at London's iconic Battersea Power Station, a total of 102 units was said to have been snapped up in Singapore from Jan 17 to 20. "Sales exceeded expectations," says Robert Tincknell, CEO of the Battersea Power Station Development Co, the joint-venture company of the Malaysian consortium comprising S P Setia, Sime Darby and the Employees Provident Fund.
Many of the buyers of the Battersea project fit the profile of Singaporean investor Joycely Poh. The 35-year-old banker had gone to the property exhibition at St Regis Singapore with her husband and two friends on the afternoon of Jan 20. After a presentation by the developer, they decided to jointly purchase a 741 sq ft two-bedroom unit on the fourth level of one of the eight residential blocks. The unit overlooks an internal courtyard and the railway line. "The overall design and layout of the project is nice," she says.
While Poh and her friends had been talking about investing in an overseas property for some time, "we didn't come across any interesting propositions until the Battersea [Powe Station] project came along", she says in a phone interview. The purchase price of the two-bedroom unit at Battersea Power Station came up to £626,000 ($1.2 million) prior to a developer discount. The cash outlay was minimal, as they needed to pay only a 7% deposit with the next 10% due only in 2014, and the balance payable towards end-2016 or early 2017, when the first phase of 800 units is completed.
Poh's stake in the unit at Battersea is 30%, while her two friends have a 35% stake each. She admits that her decision to buy the apartment in London was "partly" driven by the recent property cooling measures by the Singapore government the week before. "With the down payment and ABSD required on a second and third property in Singapore, you can buy two or even three properties overseas," she says. "It also helps spread the risk."
Even Barratt Homes' Fulham Riverside, located on the north bank of River Thames and which was showcased in Singapore that same weekend, saw strong sales. "The developer was very happy with the response and take-up rate in Singapore," says Stephen Ho, CBRE's director of international project marketing.
That weekend (Jan 19 and 20) also saw the launch of the 461-unit Tower A at Paragon Suites, located a short distance from the Johor Baru Custom and Immigration Quarantine Complex (CIQ). It is a joint-venture project by Joland Group, which has developed projects mainly in Johor since the 1980s, and Ang Cheng Guan. All the one- and two-bedroom serviced apartment units priced from RM500,000 ($201,560) to under RM1 million released in Singapore were sold out that weekend. The remaining units are three-bedroom, high-floor apartments from RM1.3 million. The developer is said to have offered cash rebates of up to 10% on the price. Its other project, Paragon Residences near Danga Bay, was launched in Singapore last July and saw equally strong response. The marketing agent for both projects in Singapore is said to be Huttons Real Estate.
Strata commercial still untouched — for now
Meanwhile, Chip Eng Seng held a VIP preview over the weekend of Jan 19 and 20 for interested parties to view Alexandra Central, its three-storey commercial podium consisting of 116 strata-titled units, on top of which sits a 450-room hotel that will be managed by Park Hotel Group. Owing to the strong interest, and feedback from agents, the developer decided that the most effective way would be to sell the units by a balloting system on Jan 21. "The good response is because of the location and the product," says Raymond Chia, group CEO of Chip Eng Seng. "It's designed like a contemporary mall."
The commercial podium comprises 31 F&B units and 85 shops. On Jan 21, the morning of the public preview, some people came in as early as 8am to hand in their cheques as an expression of interest. The balloting for F&B units that morning saw all but one unit snapped up. Balloting for shop units took place in the afternoon, with most shops receiving more than 10 blank cheques and many up to 30 to 40 cheques. One particular 10 sq m (107.64 sq ft) unit priced at $710,000 received more than 150 cheques. The third-floor unit is believed to have a good frontage, as it faces the escalators, according to a property agent who declined to be named. By the end of the day, only one shop remained unsold. All the commercial units were snapped up for $5,000 to $8,000 psf. The project was jointly marketed by Huttons Real Estate and Knight Frank.
"It was a major success," says Mary Sai, executive director of Knight Frank. "It will be a new icon in the Alexandra area, with the new condominium projects nearby and its proximity to the CBD and Alexandra industrial estate. It's a good catchment, as in the vicinity are the likes of Ikea, the Anchorpoint shopping mall and Queensway Shopping Centre." The commercial space at Alexandra Central will have a total gross floor area of about 52,000 sq ft when completed in 2016.
Sai reckons that there was an even split between business occupiers and investors among the buyers at Alexandra Central. "With the new measures in residential and industrial sectors, interest has turned to commercial," she says.
Up next is Far East Organization's SBF Centre which is expected to be launched in mid-February and marketed by Savills Singapore. It has received strong interest from potential buyers for its office and medical units. Prices of office units start from $3,300 psf, and medical suites start from $3,800 psf, according to a source.
This is the last 99-year leasehold site with strata-titled commercial units for sale in the foreseeable future, says Alan Cheong, head of research at Savills Singapore. "The strata office space is the size that entrepreneurs want today," he adds. "For now, there aren't any financial institutions or MNCs looking for offices with huge floor plates in the CBD." SBF Centre has 192 strata units measuring 582 to 1,442 sq ft and five large floor plate offices of 10,549 sq ft.
SBF Centre has 48 medical suites of 614 to 1,345 sq ft for sale. "The medical suites for small private practices in the CBD area is an untapped market," observes Cheong, estimating that there are at least 200,000 people working in Raffles Place, Shenton Way and Tanjong Pagar, and only 50 medical practices in the area. This figure is below the national average of 17 doctors per 10,000 people, based on the figures from the Department of Statistics last year. Thus, he feels there is scope for more medical practices to be located in the CBD.
However, buying into new commercial properties is constrained by a lack of new supply, says DTZ's Lee. There are also fears that the government may introduce new measures in the strata commercial segment. "We do not rule out government intervention in the commercial sector if prices rise too fast and developers are carving up very small units to cater to investment demand rather than occupier demand," she adds.
Re-launches, new launches
In the residential market, some developers with existing launches and unsold units have reacted to the recent measures by offering discounts to entice buyers. At the 1,715-unit D'Leedon fronting Farrer Road, the consortium led by CapitaLand is said to be offering a 10% discount for one-bedroom-plus-study and two-bedroom units, 15% discount for three-bedroom and three-bedroom-plus-study units, and 12% discount for four-bedroom units. Thus, prices work out to an average of $1,250 psf, according to sources.
Since the discount was introduced at the end of last week, more than 60 units have been snapped up over the weekend of Jan 19 and 20, with most buyers being Singaporeans, including a mix of first-time homebuyers and investors. "These are savvy investors who feel it's a good buy at this price level and given the prime location," says a property agent who declined to be named. The project is jointly marketed by ERA, Knight Frank and Savills.
Launches that have been planned and are likely to go ahead include Fragrance Group and World Class Land's Urban Vista, located within walking distance to the Tanah Merah MRT station. The project will comprise 582 residential units and three shops. Residences include a mix of one- to four-bedroom apartments, SOHOs, dual-key apartments and penthouses, according to the project's website. The project is expected to be launched in February and, according to sources, the indicative price could range from $1,300 to $1,500 psf.
At the 748-unit Eco, located on Bedok South Avenue 3 across the road, more than 600 units have been sold. Based on URA's latest data on new-home sales, the median price achieved in Eco as at Dec 31, 2012 was $1,408 psf. The project is jointly developed by Far East Organization, Frasers Centrepoint and Sekisui House, the same consortium developing Q Bay.
Will the buying momentum continue? "Sales volume for subsequent launches [after Q Bay] will depend on specific project attributes," adds DTZ's Lee. "Projects that are well-located, near MRT stations or bus interchanges, and competitively priced will continu to attract buyers."
Shrinking pool of buyers
In his blog on Jan 18, Khaw Boon Wan, Minister for National Development, says a total of 197,559 new homes will be completed from now until 2016, the equivalent of "building four new Ang Mo Kio towns". Of this number, about 80,000 are private homes, 10,000 are executive condos and 110,000 are public flats. Khaw says the current imbalance in the market is due to insufficient building in the past and high investment demand today. "The alternative of doing nothing, allowing prices to run beyond economic fundamentals, will only invite a large and serious price correction in the future," he observes. "This will not do anyone any good."
The new measures are designed to protect first-time homebuyers while making it more difficult for investors to take advantage of the current low interest rates and drive up prices, he says. In any case, many of these measures are "counter-cyclical in nature" and will be lifted "when the market regains its balance".
One could say this latest set of measures is starting to bite. Observations of buying behaviour show that, for those buying their second or subsequent property, the biggest hurdle is the 50% to 60% cash payment. While some have backed out, others have lowered their expectations to fit their tighter budgets.Some have shelved the idea of buying for now. "Most people have no problems with the mortgage payments," says a mortgage specialist with a local bank. "The stumbling block is the upfront cash payment."
DTZ expects sales volume to drop 20% to 40% this year, as permanent residents and foreign investors are affected by this latest round of cooling measures. "We do not expect a crash in prices, as developers have stronger balance sheets and sellers have holding power," says Lee. "Property demand, albeit lower, will remain healthy against the backdrop of the current low-interest-rate environment and tight employment market."
She foresees, however, that prices in the prime and high-end segment will be affected and could fall up to 10% because of the higher ABSD of 15% for foreigners. Meanwhile, price in the mass market segment are expected to fall by a smaller extent, as units are more affordable and there is still a pool of first-timer and HDB upgrader demand.
The Ngs, who bought a unit at Q Bay Residences, are a good example. They have two children, aged five and eight, and live in an HDB executive maisonette in Tampines, which are now worth $700,000, according to a recent HDB resale transaction. The Ngs have no intention of moving out of their 1,600 sq ft home, even though the minimum occupation period of five years is almost over.
"These executive apartments are large, and HDB doesn't build them anymore," says Ng. Instead, when Q Bay Residences is completed in 2017, the Ngs intend to use the one-bedroom apartment as a weekend home for the family to enjoy the facilities. "It's a six-minute walk from our block," says Ng.
This story first appeared in The Edge Singapore weekly edition of Jan 28-Feb 3, 2013.
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