For those who committed to a property last month, the government measures introduced last Monday may have come a little too late. Take S Bariar and her husband, both professionals in their mid-40s, who had been house-hunting in earnest since the end of May this year when the en bloc sale of their apartment at Gillman Heights was completed. The owners of Gillman Heights have to move out within six months of the sale completion date, and in their case, it’s by end-November.

Gillman Heights, the privatised HUDC estate, was sold for S$548 million (RM1.3 billion) or S$363 psf per plot ratio to a joint venture made up of CapitaLand (with a 60% stake), Hotel Properties Ltd (25%) and National University of Singapore (15%). The price was agreed upon in early 2007 before prices started to escalate in the second half of the year.

Unlike the so-called “en bloc millionaires”, Bariar and her husband actually incurred a loss on their sale. The couple bought their 19th floor, three-bedroom 1,700 sq ft apartment at Gillman Heights in 1996 for S$820,000 when they got married. “We were not keen on the en bloc sale initiative because we have a spacious and cosy apartment, good location and we have grown very attached to the place,” says Bariar. “We bought it to stay in.” They got S$880,000 for their unit in the en bloc sale. On paper, it looks like a gain of S$60,000, but the reality was that they had an interest loss of around S$300,000 on their Central Provident Fund (CPF). Will homebuyers continue to throng showflats or will they take a step back and wait?

“We were shocked when we received a letter from the lawyers early this year stating that we had a shortfall due to interest loss in [our] CPF amounting to a few hundred thousand,” she says. They had also taken a 30-year loan at a 5% interest rate 13 years ago when they first bought the property. They hadn’t refinanced over time, and still had an outstanding mortgage to be repaid. In order to just break even after taking into consideration the CPF interest loss and mortgage repayment, Bariar says they would have had to sell their apartment at Gillman Heights for S$1.2 million.

Priced out
Their hunt for a new home, they had initially capped their budget at S$550,000 and were even willing to downgrade to an old HDB resale flat. They focused their search on the HDB five-room resale flats in point blocks in the Queenstown, Bukit Merah and Telok Blangah areas. But they soon found that even some of those exceeded their budget — in Bukit Merah and Telok Blangah, resale prices of five-room flats last month ranged from S$455,000 for low-floor units to S$660,000 for high-floor apartments, according to the HDB website of resale prices.

Meanwhile, older 99-year leasehold private condos in the West Coast area were priced in the region of S$700,000.

According to caveats lodged with URA Realis, a 926 sq ft unit changed hands for S$710,000 (S$767 psf) last month at the Blue Horizon, which was completed in 2000, while at Westcove Condo, completed 11 years ago, a 1,141 sq ft apartment traded for S$695,000 (S$609 psf). At the 16-year-old West Bay Condo, a 1,227 sq ft apartment went for S$810,000 (S$660 psf) last month.

Bariar and her husband had no choice but to stretch their budget to $700,000 and opted for an old 99-year leasehold condo since the price differential wasn’t much higher than that of an HDB resale flat. Last month, they signed on to purchase a 4th level, 1,248 sq ft apartment at Le Wood for S$708,000 (S$567 psf). The boutique 58-unit, 99-year leasehold low-rise condominium completed nine years ago is located along Hindhede Drive, off Upper Bukit Timah Road and next to the Bukit Timah Nature Reserve, and Bariar is only moving into it in November.

Last Tuesday, Bariar attended the private preview of The Interlace for former Gillman Heights owners, and it was a bittersweet moment for her. Her current apartment on the 19th floor has great views, she says. “Over dinner that night, I told my husband that we have to enjoy the view as much as possible as that’s the view the new penthouse owner at The Interlace will be getting.”

Gillman Heights will be redeveloped into the brand new 1,040-unit Interlace, a condominium project designed by star architect Ole Scheeren, partner of Office for Metropolitan Architecture (OMA). At the private previews for former owners of Gillman Heights held on Sept 15 and 16, a total of five blocks with 153 units ranging in size from 807 to 5,877 sq ft and located on different levels were released. At S$850 to S$1,150 psf, quantum prices were said to range from S$900,000 for the smallest two-bedroom apartment to around S$5 million for a penthouse.

“Most of the two-bedroom units were priced around S$1 million, so it wasn’t something I could afford anyway,” says Bariar. “I’ve come to the conclusion that we don’t have much luck when it comes to property.”

It is perhaps with buyers like Bariar in mind that the government has stepped in to curb the exuberance in the property market earlier this month. First, the Interest Absorption Scheme (IAS) and Interest-Only Housing Loan (IOL) were removed with immediate effect. Second, the government is reactivating the confirmed list of the government land sales programme in 1H2010, which will be announced by year-end. Third, the government is going to let the budget measures introduced in January 2009 lapse when they expire.

Apart from end-users like Bariar, even Mrs Lo, a 50-year-old Indonesian property investor who’s been hunting for a property for two years, feels sidelined by the skyrocketing property prices. Lo had started her search for a property in Singapore in early 2007 but abandoned it six months later when the property market took off in 2H2007. Prices of private residential properties jumped an average of 31.2% for the full year in 2007 and developers sold a record 14,811 new homes. CB Richard Ellis (CBRE) is expecting the full-year new home sales level in 2009 to surpass that of 2007, and DMG’s property analyst Brandon Lee is sticking to his forecast of 15,000 new home sales to be achieved this year.

After the collapse of Lehman Brothers in mid-September last year and market sentiment sank, Lo resumed her search, thinking that she could find a bargain. She had purchased her first investment property in Singapore, a three-bedroom apartment in Richmond Park (behind Paragon on Orchard Road), in 1998 during the Asian financial crisis. “But property prices really didn’t drop that much,” she complains. Instead, prices have gone up in recent months.

CBRE’s analysis of caveats lodged on Sept 15 seems to bear out Lo’s lament. According to the property consultant, for new launches of freehold and 999-year leasehold condominiums, median quantum prices have gone up significantly in 3Q. Averaging close to S$1.4 million, it is 32.2% higher than in 2Q and 43.9% higher than in 1Q this year. Even in the sub-sale market, the median price of 999-year leasehold and freehold condominiums are at S$1 million, which is 21% higher than in 1Q, but 3.7% lower than the last quarter. As for 99-year leasehold condos, the median quantum price for new launches was S$916,000 in 3Q, up 11% from 2Q and 18.4% compared with 1Q, which was just under S$700,000.

Lo is sticking to her requirements of either a newly completed development or a project that’s about to obtain Temporary Occupation Permit (TOP) within the next few months. Her interest is exclusively in new freehold condominiums in the prime Orchard Road districts of 9, 10, 11 and affluent district 15 in the East (the vicinity of Amber Road and Meyer Road). Her budget, she says, is between S$2 million and S$3 million. “I want a prime location, with easy access to public transport, and that’s why I like the Amber area,” she says.

In her recent visits to new developments in the Amber Road area, however, Lo found that prices there have soared above S$1,000 psf. At One Amber, which is scheduled for completion in early 2010, units were changing hands on the sub-sale market at S$1,000 to S$1,188 psf last month. At The Sea View, completed last year, units have gone for S$1,228 to S$1,408 psf. At The Silversea, a 99-year leasehold condo (the former Amberville HUDC site) launched in July, units have been sold at S$1,255 to S$1,576 psf. 

Some new launches of mass-market 99-year leasehold condominiums catering mainly to HDB upgraders in recent months have crossed the S$1,000 psf threshold. At Centro Residences at Ang Mo Kio Avenue 8, for instance, units were sold at a median price of S$1,231 psf last month. Even at Trevista in Toa Payoh, 71.8% of units were sold at a median price of S$943 psf last month.

“In light of the government’s recent cooling measures, we expect developers to price their upcoming mass-market projects within the S$800 to 900 psf mark to capture the sustainable HDB-upgrader buying appetite,” says DMG’s Lee in his report on Sept 16. “Given the seasonally low 4Q period and government initiatives, we expect monthly sales quantum to hit normalised levels of 600 to 800 units for the next four months.”

Removal of IAS unnecessary, say some

Some analysts and developers are of the opinion that the government’s recent measures to curb speculation, especially the removal of the IAS and IOL, are unnecessary.

Lim Yew Soon, managing director of boutique developer EL Developments, argues that as developers have to tie up with a partner bank in order to offer IAS or IOL, “in the event that the purchasers are deemed ineligible to take up the loan or have to take up a smaller loan quantum, they still have the option to decide if they wish to proceed with their purchases”. Unlike the deferred payment scheme (DPS), which was scrapped in October 2007, Lim feels that the IAS and IOL schemes have checks in place to ensure that speculators without the financial means will not be able to make a purchase.

To him, the removal of IAS and IOL will also mean that some genuine home upgraders may be penalised. “Without IAS or IOS, some upgraders who are still servicing the housing loans on their existing home will find it a challenge to finance another housing loan and may only be able to purchase homes in projects which have obtained TOP or are near TOP. By then, there may be fewer choices available and the units may cost even more.”

In recent months, though, most developers have noticed that fewer buyers were opting for the IAS scheme as interest rates remain low and the scheme comes at a 2% to 5% pricing premium compared with the normal progressive payment package. Interest rates of the home loans based on IAS are also higher when they kick in at TOP.

At the preview of the 297-unit Optima at Tanah Merah at end-July (the bulk of the units were sold out in two days of balloting), only about 20% of buyers opted for IAS, says Gerry de Silva, group corporate affairs manager for Hong Leong Group, joint-venture partner with Mitsui Fudosan in TID Pte Ltd, the developer of the project. The purchase price for those who opted for IAS was 3% higher than that for the normal progress payment scheme. Likewise, at the 272-unit Sophia Residence where IAS was offered at a 2% price premium, only 20% of the buyers opted for it, says Trina Loh, managing director of GuocoLand Singapore. To date, close to 80% of the project has been sold at a median price of S$1,504 psf. 

According to a CapitaLand spokeswoman, if IAS had been offered as an option for buyers of The Interlace, it would have come at a 5% pricing premium compared with the normal progress payment scheme. Even for the re-launch of The Wharf Residences in early April, less than 5% of the buyers took up IAS.

Last month, the overall monthly new home sales volume had already declined 39% to 1,699 units, which is a sharp contrast to the record 2,772 units sold in July. That’s also probably because it was the Hungry Ghost month, reckons DMG’s Lee, and apart from The Trizon and Trevista which were launched in end-August, other developers had not begun any new launches. Weekend turnout at showflats had therefore been subdued.

The tapering off of weekend visitors at showflats in recent weeks could also indicate that the pent-up demand of the last six months has more or less been satisfied, notes DTZ’s senior director of investment advisory services, Shaun Poh. “Going forward, we expect to see more fringe buying, and very location-specific purchases.”

Poh is expecting the government measures to slightly dampen market sentiment, and the litmus test will be in the previews over the next few weekends. “Some of the small- and medium-sized developers will be more cautious in their pricing,” he adds.

Most developers going ahead with planned previews

Most of the major developers are proceeding with their scheduled private previews in the coming weekends, confident that the overall property market is well on the path of recovery. “If the product and location is good, and the pricing is reasonable, there’s no reason for developers to delay their previews,” says Joseph Tan, executive director of residential project marketing at CBRE.

CapitaLand has already proceeded with VIP private previews of The Interlace following the exclusive preview for the former owners of Gillman Heights last week. According to market sources, some people had already submitted blank cheques last week to secure a unit, although the developer declined to disclose any sales figures.

GuocoLand is also holding private previews of the 119-unit Elliot at East Coast over the weekend of Sept 19 and 20. According to GuocoLand’s Loh, inquiries continued to stream in even after the government’s announcement of anti-speculation measures last Monday. “The interest level among genuine homebuyers remains strong,” she says.

The sustained level of interest could also be attributed to the fact that there hasn’t been any sizeable new launches in the neighbourhood over the last nine to 12 months, reckons Loh. The most recent launch was the 102-unit St Patrick’s Residences, where 50 units were released in the first phase. To date, 48 units have been sold at a median price of S$948 psf.

Elliot at East Coast is priced at an average of S$950 psf, with three-bedroom units starting at S$1.2 million. As the target audience is predominantly families, given the proximity to good schools, of the 119 units, 40 are three-bedroom and another 40 are four-bedroom apartments. Unit sizes range from 1,300 sq ft for a typical three-bedroom to 1,700 sq ft for a four-bedroom apartment. There are also 23 penthouses sized from 1,700 to 2,200 sq ft. There are only four one-bedroom units of 500 sq ft each, and 12 two-bedroom units of around 980 sq ft within the project. IAS is offered as an option to buyers at a 2% price premium as the scheme was approved prior to the government’s measures on Sept 14.

The introduction of more supply of 99-year leasehold land through the reactivation of the confirmed list will likely lead to greater pressure on the pricing of new 99-year leasehold condos, observes GuocoLand’s Loh. Freehold sites will become increasingly scarce as en bloc sales have not taken off yet. “There will be a more pronounced price gap between new 99-year leasehold projects and freehold properties,” she adds. “So, we’re quite confident of the success of this project [Elliot at East Coast] as it is a freehold development.”

City Developments will begin private previews of the 396-unit Hundred Trees at West Coast Grove (the former Hong Leong Gardens) in the last weekend of September. Some market sources are indicating VIP preview prices in the S$930 to S$980 psf range, while others are saying that “prices are expected to be competitive”. The developer declined to comment on pricing.

At Trizon in Mount Sinai, which was officially launched two weekends ago, Singapore Land’s group general manager Vito Koh says the government’s removal of the IAS and IOL has not affected sales. “We didn’t even offer IAS in the first place as we didn’t want speculators,” he says. “Given the profile of the buyers, most of them are long-term investors or owner occupiers.”

Ho Bee Group is said to be going ahead with the launch of its two freehold condominium projects next month, the 248-unit Parvis (the former Holland Hill Mansion), a joint venture with MCL Land, and the 205-unit Trilight (the former Elmira Heights) on Newton Road.

Genuine homebuyers and investors shouldn’t be affected by the recent government measures, says Francis Koh, group managing director and CEO of Koh Brothers. “Any impact on sentiment is likely to be just a knee-jerk reaction.” Koh Brothers and its joint-venture partners in the development of Lincoln Suites (at the former Lincoln Lodge) have yet to decide on the launch date for the upscale condominium in the Novena/Newton area.

Near Lincoln Suites, Allgreen Properties’ 235-unit Viva has been seeing brisk sales since private previews began in early August. As at end last month, 203 units have been snapped up at a median price of S$1,537 psf.

However, some boutique developers are deferring their private previews. For instance, the private preview of Siglap V (located opposite Siglap Centre), which was supposed to start at end-September, has been postponed to mid-October, according to market sources.

Others like construction group BBR Holdings and joint-venture partner Shing Kwan Group are going ahead with their scheduled launch of 8nassimhill at year-end. Construction of the show units is underway and they are expected to be ready in early December. According to BBR’s CEO, Andrew Tan, the scheduled launch in December shouldn’t be affected by the recent government measures.

The 16-unit boutique development offers luxury triplexes of around 4,000 sq ft, and was previewed in January 2008 when eight units were sold for around S$3,200 psf. The pricing of the project at the launch will “depend on the market at that point in time”, says Tan.

As for BBR’s Lush on Holland Hill where previews started in mid-July and the project was officially launched on July 25, more than half the units have been sold to date at prices ranging from S$1,400 to S$1,600 psf.

Another boutique developer, Hiap Hoe, launched The Beverly on Toh Tuck Road in February this year, and Signature at Lewis on Bukit Timah last year. As at end-August, 21 units of a total of 32 had been sold at a median price of S$1,425 psf. Meanwhile, at the 118-unit The Beverly, of a total of 88 units launched for sale, 77 have been sold at a median price of S$890 psf.

Up for launch in November or December is Hiap Hoe’s 200-unit The Waterscape at Cavenagh Road (the former Clemenceau Court and Le Chateau). The upmarket condominium was originally planned with 135 units, many of them sizeable. Given the demand for smaller units, especially in locations near the Central Business District, the project was resized into a 200-unit development with 80% of the units being a mix of one-, two- and three-bedroom apartments. “Given the location, properties in that area will command good rental, and it’s ideal for investors,” says Teo Ho Beng, managing director of Hiap Hoe. Pricing of the project is expected to be in the vicinity of S$1,800 psf.

Hiap Hoe has two other luxury projects, namely the 48-unit Treasure at Balmoral (former The Aspire) and the 66-unit Skyline 360 (former Phoenix Court) at St Thomas Walk. These two projects feature mainly large units — three-bedroom apartments are sized around 1,700 to 1,800 sq ft and four-bedroom units are above 2,000 sq ft. “We will hold back [these launches] until next year when the demand for large units returns,” says Teo. “Currently, larger units with high quantum prices are a little more difficult to move.”

Whether property prices can be sustained will depend very much on the holding power of developers, as well as whether buyers are prepared to continue chasing after prices. Last month, at the top end of the market in the prime Orchard Road district, three units at The Orchard Residences were sold at prices ranging from S$2,780 to S$4,099 psf. At Scotts Square, one unit was sold at S$4,304 psf, while at The Hamilton Scotts, a unit was sold at S$3,313 psf.

“Looking to 4Q, the residential sales momentum is likely to moderate because of the latest government measures to stabilise the market and fewer large-scale new launches,” says CBRE. “Further price increases will be checked because they had climbed substantially in the last six months and some resistance can be expected.”

This is good news for Indonesian investor, Lo, who’s hoping that the government measures will moderate property prices from hereon. Meanwhile, she continues in her relentless  hunt for a second investment property in Singapore’s prime districts.
Cecilia Chow is City and Country editor at The Edge Singapore

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 774, Sep 28-Oct 4, 2009.