Market News

31 Jan 2018

CDL top bidder for two of three private housing sites

City Developments (CDL) was the top bidder for two of the three private housing sites at a state tender that closed yesterday. It lodged the top bid of $212.2 million, or $1,722 per sq ft per plot ratio (psf ppr), for a plot in Handy Road near Dhoby Ghaut MRT station. The developer also bid $472.4 million, or $800 psf ppr, for a land parcel in West Coast Vale. The third site on offer - in Chong Kuo Road in the Sembawang/Mandai area - received a top bid of $43.95 million, or $681 psf ppr, from a partnership between Lian Soon Holdings and OKP Land. CDL group chief executive Sherman Kwek said: "We... see great potential in the two sites... As Singapore's residential market begins to gradually recover, we will continue to seek suitable opportunities to increase our local land bank." The firm said it will explore developing three residential towers - eight to 10 storeys high - with about 200 apartments and a basement carpark for the Handy Road site. It will convert a conservation building on the site into a clubhouse.   The West Coast Vale site could house two 36-storey towers. The Urban Redevelopment Authority has stipulated a maximum of 730 residential units for this plot. The tender for the Handy Road site drew 10 bids, while the Chong Kuo Road site received eight, and the West Coast Vale plot got six.   CDL's bid for the Handy Road plot - the most attractive of the three sites because of its District 9 location off Orchard Road - was 12.3 per cent higher than the next offer, from Sing Essential, believed to be linked to Hong Kong parties. The bid price was also just 0.6 per cent shy of the benchmark price of $1,733 psf ppr that was set for the Jiak Kim Street site awarded to Frasers Centrepoint last month, noted Colliers International's head of Singapore research Tricia Song. She estimates CDL's break-even cost for a Handy Road project at $2,300 psf and reckons the group could be looking at an average selling price of $2,650 psf. Nearby, the 493-unit, 99-year leasehold Sophia Hills was 95 per cent sold as of December last year and median prices have increased to $2,127 psf in December from an average of $1,900 psf to $2,000 psf earlier," she said. CDL's bid for the West Coast Vale plot was 35 per cent higher than the $592 psf ppr paid for the site of the yet-to-be-launched Twin View project, Ms Song noted. The adjacent 752-unit Parc Riviera was 97 per cent sold as of last month at an average price of $1,200 psf, within 13 months of its launch in November 2016. This could have increased the confidence of developers in the location, despite the abundant supply, said Ms Song. She estimates CDL's break-even for the West Coast Vale plot at $1,250 psf and an average selling price of $1,400 psf to $1,500 psf. The group's bid was just 0.7 per cent more than the next highest bid, by China Construction (South Pacific) Development. CDL is no stranger to the West Coast area, having developed Monterey Park Condominium and Hundred Trees. The top bid for the Chong Kuo Road site was just 0.1 per cent more than the second highest. The simultaneous tender closings for three sites appear to have had little impact in tempering bid prices, said property consultants. JLL national director Ong Teck Hui said: "Bidding for all three sites was bullish, with top bids exceeding or at the top end of expectations. "This is despite the batch tender closing, which did not seem to temper bidding in any way, as well as the availability of collective sale sites on the market." Source from The Straits Times 31 Jan 2018

29 Jan 2018

Developers in Singapore still on the prowl for land

Listed developer Oxley Holdings is holding the largest residential land bank in the Republic, in terms of number of dwelling units, after successfully bidding for several collective sale sites last year, estimates by The Business Times show. After acquiring the huge former HUDC sites Rio Casa and Serangoon Ville as part of a consortium last year, Oxley went on to snap up two other sizeable collective sale sites - Mayfair Gardens and Vista Park - as well as smaller plots Toho Green and Apartment 8. See Also Affinity At Serangoon and Riverfront Residences Oxley chief executive Ching Chiat Kwong said the company's average land cost is relatively cheaper than its peers' as the sites are in good locations. "Hence, we remain optimistic for the next two years," he added. "Furthermore, with so many en bloc deals going on, residents will need to buy homes." Estimates by BT show that close to 4,000 units could be generated from Oxley's land bank, of which more than 2,300 homes are based on its equity stakes in the sites acquired. In terms of value of land bank, however, some analysts believe City Developments (CDL) could be top. DBS Group Research estimates that CDL's inventory has the highest gross development value of $4 billion by virtue of the number of luxury projects it has on its books. CDL is estimated to have 1,770 units. After Oxley, in terms of the potential number of homes that can be built from its land bank, is new market entrant Logan Property Holdings, a Hong Kong-listed Chinese developer. Its share in two large land parcels acquired last year - one from a government land sale and the other from a collective sale - puts it in second place with more than 2,000 units. Other China developers that rank high in residential land bank after ramping up their exposure last year include Kingsford Development, Qingjian Realty and SingHaiyi Group. SingHaiyi's majority shareholders Gordon Tang and his wife have exposure to a substantial residential land bank (above 1,800 units) via the firms they control, namely SingHaiyi, Haiyi Wealth and Huajiang International Corporation. MCL Land, Allgreen and Frasers Centrepoint - which have been operating in Singapore for a long time but are deemed foreign by virtue of their controlling shareholding - also bumped up their residential land bank significantly last year. Allgreen, run by property tycoon Robert Kuok, scooped up three sites last month for a total $1.2 billion after a six-year hiatus. But with the overall land bank of developers believed to be at its lowest since 2007, market watchers expect them to continue replenishing their inventory, albeit more selectively in view of the more than 22,000 new units that could hit the market in 2018-2019 across more than 40 sites. Savills Singapore senior director of investment sales Suzie Mok noted that developers are still scouring for sites, but are not aggressively accumulating due to the five-year timeline to finish building and selling their units under the additional buyer's stamp duty regime, and potential competition from the upcoming supply of new units from recently sold sites. Ms Mok said land plots with digestible quantum and in prime locations are more attractive because of the narrowing price gap between suburban and prime projects. There are also developers that have not managed to acquire any sites and are still on the lookout. These include CapitaLand, Far East Organization, Ho Bee Land and Wheelock Properties. As the residential upcycle enters its nascent phase, listed developers are "faced with a conundrum", JPMorgan property analyst Brandon Lee observed. "While they acknowledge their declining land banks and are cognisant of a price recovery, most are unwilling to be too aggressive on pure residential sites in view of subdued single-digit margins, their inability to differentiate the end-product unlike integrated or mixed-use projects, and higher internal hurdle rates," he added. Source from The Straits Times 29 Jan 2018

27 Jan 2018

Private home recovery 'set to continue this year'

The recovery in prices and transactions of private homes is expected to continue this year due to pent-up demand, improved sentiments and new launches by developers, consultants say. Rents, too, will likely find their footing in the second half of the year, thanks to a steep fall in completions of new homes. But favourable supply conditions may not stay interminably, with the Government flagging a potential supply of 19,900 units from land sale sites that have yet to be granted planning approvals. These could be made available for sale later this year or next year, and be completed from 2021 onwards. This is on top of the 19,755 unsold uncompleted units with planning approval as at end-2017. Figures released by the Urban Redevelopment Authority yesterday showed a 1.1 per cent rise in prices and 53 per cent surge in all private residential transactions to 25,010 units last year. This broke a price fall lasting over three years since the third quarter of 2013, and followed a 3.1 per cent drop in prices and 16 per cent rise in transactions in 2016. The price rebound was led by non-landed properties, whose prices rose 0.8 per cent during the three months to December, and 1.3 per cent for the full year. The prime area or Core Central Region led the price recovery in the fourth quarter with a 1.4 per cent rise. For the full year, the city fringe or Rest of Central Region saw the strongest price uptick of 1.8 per cent. While rents continued to fall 1.9 per cent last year, analysts did see improved occupancies. The vacancy rate for completed private homes improved to 7.8 per cent at the end of the fourth quarter, from 8.4 per cent a year ago. The 1.9 per cent full-year rental decline in 2017 was also less severe than the 4 per cent drop the preceding year. "The good news is vacancy is improving and could hit a critical inflection point in 2018," said Ms Tricia Song, Singapore research head at Colliers International. "Rents could resume a growth trajectory when most of the new supply that has been completed over the past two years is gradually digested over the next six to 12 months." ZACD Group executive director Nicholas Mak expects 10,000 private housing units to be completed this year, down from the average of 17,000 new units being occupied per year from 2015 to 2017. The resale market made up 56 per cent of residential transactions last year, amid a 78 per cent surge in resales to 14,043 units. Developers also sold more units than they launched last year. While they put 6,020 new private units and 1,555 executive condominium (EC) units on the market, they sold 10,566 new private units and 4,011 EC units. Their total sales jumped by 22 per cent from 2016. Consultants are expecting more launches by developers this year. Source from The Straits Times 27 Jan 2018

27 Jan 2018

Roxy-Pacific, Tong Eng group MD to buy The Wilshire for S$98.8m

ROXY-PACIFIC Holdings has partnered Tong Eng Group's managing director Teo Tong Lim to acquire another residential site - this time the freehold Wilshire in District 10 - for S$98.8 million. The 39,130 sq ft site has been collectively sold to a joint venture between Roxy-Pacific subsidiary RP Ventures, which has a 40 per cent stake, and Mr Teo's private family office TE2 Development, which holds 45 per cent. The remaining 15 per cent is held by Kim Seng Holdings. The cost of the acquisition will be financed by internal funds and bank borrowings, said Roxy-Pacific in a regulatory filing yesterday. This follows last week's announcement that Roxy-Pacific and TE2 Development had acquired leasehold site Kismis View in Upper Bukit Timah for S$102.75 million, in the third joint venture between both groups. The Wilshire's sale price reflects a land rate of about S$1,536 psf per plot ratio. Savills Singapore, which brokered the deal, said that the land rate would fall to S$1,455 psf per plot ratio after allowing a development charge of about S$4.1 million for the 10 per cent bonus GFA for balcony space. Located in the upmarket Farrer-Holland area, the site now houses the 20-unit Wilshire condominium. Under the Master Plan 2014, the site has a plot ratio of 1.6 and can be redeveloped up to a height of 12 storeys, with a maximum gross floor area (GFA) of 64,310 q ft. "Quality boutique sites in the likes of The Wilshire ... will continue to attract boutique and mid-sized developers who take the view of an upturn in the prime residential segment", said Savills senior director of investment sales Suzie Mok. The owners can expect to receive gross sale proceeds ranging from S$3.76 million to S$7.46 million. Source from The Business Times 27 Jan 2018

26 Jan 2018

Private home prices recovered in 2017, occupancies improved, says URA

SINGAPORE - Private home prices rose 0.8 per cent in the fourth quarter from a quarter ago, bringing the full year increase to 1.1 per cent following a 3.1 per cent decline in 2016. This came even as private home rents fell again in the fourth quarter, though the full-year rental decline eased on the back of improved occupancies. These figures were released by the Urban Revelopment Authority (URA) in its fourth-quarter real estate statistics report on Friday (Jan 26). Its report shows that the price rebound was led by non-landed properties, which rose 0.8 per cent quarter-on-quarter in the three months to December, compared to 0.6 per cent in the preceding quarter. This brings full-year price increase for non-landed properties to 1.3 per cent. The recovery was less decisive in the landed segment. Prices of landed properties rose 0.5 per cent in the fourth quarter, after a 1.2 per cent rise in the preceding quarter. For the full-year, however, landed home prices still slipped 0.5 per cent. The improvement in non-landed home prices in the fourth quarter was buoyed mainly by Singapore's prime area or the Core Central Region (CCR), where prices rose 1.4 per cent during the quarter, followed by 0.8 per cent in the suburban or Outside Central Region (OCR) and 0.4 per cent in the city-fringe or Rest of Central Region (RCR). Prices in the CCR, RCR and OCR rose 0.6 per cent, 1.8 per cent and 1.4 per cent for the full year respectively. URA's data shows that rents of private homes fell 0.9 per cent in the fourth quarter, after being flat in the preceding quarter. For the whole of 2017, rents slipped 1.9 per cent, compared to a 4 per cent fall in 2016. One bright data spot was seen in the vacancy rates. Despite a larger increase in completed private homes in the fourth quarter of 4,205 units (compated to 3,974 units in the third quarter), the vacancy rate for completed private homes, excluding executive condominiums (ECs), improved to 7.8 per cent at end-Q4, compared to 8.4 per cent a quarter ago. Last year, developers sold more homes than they launched. A total of 6,020 new private units were put on the market, compared with 7,877 units in 2016; developers sold 10,566 units, against 7,972 units in 2016. They sold 4,011 EC units, though they launched only 1,555 EC units. During the fourth quarter alone, 1,864 private residential units and 446 EC units were sold. Resale transactions also saw a recovery, with 4,226 transactions accounting for 68.1 per cent of all sales in the fourth quarter compared to 59 per cent in the previous quarter. For the whole of 2017, there were 14,043 resale transactions - a 77.7 per cent surge from 2016. Meanwhile, near-term supply for now remains benign. There were 36,029 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals as at end-2017, compared with the 35,022 units in the previous quarter. Of this, 18,891 units remained unsold, up from 16,031 units in the third quarter. There were another 6,144 uncompleted EC units with planning approvals as at end-2017, of which 864 units remained unsold. See Also Executive Condominium (EC) At the same time, the completion of new homes is tapering off. Some 14,764 private homes and ECs will be completed this year, while another 8,760 next year. These are significantly lower than the completion of 20,568 private units and ECs last year. But URA pointed out that in addition to the 19,755 unsold uncompleted units with planning approval as at end-2017, there is a potential supply of 19,900 units from land sale sites that have not been granted planning approvals yet. These include about 12,100 units from en-bloc sale sites sold up to mid-January 2018, as well as the 7,800 units from awarded government land sales (GLS) sites, sites on the GLS Reserve List that have been triggered for sale but not awarded yet, and GLS Confirmed List sites that have not been awarded yet. "A large part of this new supply of 19,900 units could be made available for sale later this year or next year, and will be completed from 2021 onwards," URA said.  Source from The Straits Times 26 Jan 2018

25 Jan 2018

A new way of reining in property price increases?

HEATED land sales have prompted Singapore's central bank to scrutinise bank financing for property development more closely through a new survey of banks last month. The Monetary Authority of Singapore (MAS) is said to have sought information from banks on their exposures and details of loan facilities granted for each project, such as key covenants and loan-to-value (LTV) ratios. While it is not unusual for the MAS to collect data from banks to monitor their lending practices from time to time, this survey has set some market watchers pondering whether it may be a precursor to a new cooling measure. If the government decides to tighten the screws on development loans to take the steam out of land prices, that would indeed spell bad news for developers. The logic behind this is clear: if developers buy land at higher prices, they would have to sell their projects at higher prices too to preserve their margins. One way to prevent prices from spiking up too quickly is to temper developers' land bids, thus nipping the problem in the bud. While there are existing LTV limits on housing loans to homebuyers, there are no specific limits for bank loans to developers. It is believed that by having prudent LTV limits for land or development loans, developers will be less aggressive in their land bids. If such a new measure does pan out, it will mirror the policy of the Hong Kong Monetary Authority (HKMA), which not only has LTV limits on development loans but also lowered the caps further last June to rein in the city's red-hot property market. But due to various reasons, Hong Kong has seen limited success in tempering land bids and home prices despite the tightened LTV limits and mortgage rules. Singapore's market, however, is a different kettle of fish. Such LTV limits on development loans may well prove effective here, just as previous macro-prudential measures addressing residential buying demand have reined in home prices and the growth of households' mortgage loans in the last four years. Caps on development loans could hurt foreign developers too; BT understands that those that acquire development sites in Singapore have typically sought bank financing here. Such a new policy may, however, unintentionally weed out marginal players that rely heavily on bank borrowings. The larger companies, especially the listed ones, are able to obtain alternative funding more easily such as bonds, medium-term notes and unsecured loans. Other than reining in property prices, it's worth pondering if there are other reasons to justify any form of financing curb for developers. Though the LTV limits on land cost are said to have gone from between 70-80 per cent on average to above 80 per cent in some cases, banks' exposure to the property sector is not excessive for now. As at November last year, building and construction loans accounted for 12.6 per cent of total non-bank loans while housing and bridging loans accounted for 16.4 per cent. Among the three local banks, building and construction loans made up 15-23 per cent of their gross loans while housing loans accounted for 22-27 per cent as at Sept 30, 2017. DBS' annual report 2016 stated that a majority of loans extended for acquisition and/or development of real estate as well as for general working capital have a LTV of below 80 per cent. Admittedly, banks are generally comfortable lending to the property sector, which though cyclical, enjoys a high level of transparency and cashflow visibility. The local banks are all too familiar with the sector and its attendant risks, having been in the property business themselves before the MAS rules barred banks from "non-financial business" and capped their property holdings. Some market players argue that existing safeguards on bank lending to the property sector suffice. Under the Banking Act, banks' total exposure to the property sector is capped at 35 per cent of total eligible assets; there are also restrictions on exposures to single counter-party groups to prevent concentration of risks. On the whole, banks' asset quality remains healthy, based on the MAS' Financial Stability Review published in November. The results of its annual industry-wide stress test showed that banks have strong capital and liquidity buffers to withstand shocks. Meanwhile, the asset quality of housing loans remains strong, with both loans in arrears and non-performing loans still low. MAS' stress test results also indicated that the banking system can withstand a 50 per cent drop in property prices over a three-year period. As for developers' balance sheets, it should be noted that high net gearings are still largely confined to a few small to mid-sized developers, which are unlikely to pose a systemic risk even if they go under in the worst-case scenario. Given rising interest rates, developers will have to contend with higher financing costs in the future. We may not be told the findings of the MAS survey. For now, it may not seem necessary to stipulate limits on development loans yet. But given how home prices can easily become a hot political issue, it is hard to gauge how fast prices will be allowed to move before actions are taken to rein them in. Source from The Business Times 25 Jan 2018

24 Jan 2018

Juggernaut sites like Mandarin Gardens take en bloc game to new level

SINGAPORE (THE BUSINESS TIMES) - Home owners are taking Singapore's latest en bloc craze to a new level, with mega developments - sitting on sites close to or over one million sq ft each - joining the bandwagon. Owners of Mandarin Gardens, a 99-year condominium on a one million sq ft plot off East Coast Park, have given the green light to kickstart its collective sale process. It formed its collective sale committee over the weekend, and the committee is in the process of contacting marketing agents. While it is still early days, Alan Cheong, Savills Singapore's research head, said the deal, if it goes through, could go for "way past a billion", and "will definitely be another major landmark in the history of en bloc sales". ZACD Group executive director Nicholas Mak estimates that a redevelopment of Mandarin Gardens could yield almost 3,000 new housing units. In the same league, late last year, the 1.124 million sq ft Braddell View estate voted to form its collective committee, after the 918-unit development was privatised in March that year. Over in Upper Bukit Timah, the 999-year leasehold Cashew Heights also formed its committee last year. The project, which occupies a 953,000 sq ft parcel, is on its third en bloc attempt. In the Holland area, Pine Grove, a former HUDC estate like Braddell View, is collecting signatures for the 80 per cent mandate. Its owners have a reserve price of S$1.65 billion for the over-893,000 sq ft site. It is also the estate's third try. Price-wise, the biggest successful en bloc sale to date is Farrer Court, which went for S$1.3388 billion when a consortium bought the 838,488 sq ft estate and redeveloped it into the D'Leedon condo. The successful collective sale of sites like Mandarin Gardens will give a big boost to Singapore's residential investment sales this year. Last year, over 30 en bloc sites were sold for close to S$8.7 billion. Another six tenders have closed but sales have not been concluded. Mandarin Gardens, built in 1986, has 1,006 units, along with 10 shoplots, one minimart, one restaurant and one kindergarten. It is near other en bloc hopefuls like Lagoon View and Laguna Park, and is close to Victoria School and St Patrick's School. Savills' Mr Cheong said that a developer who pays an all-in price, including a land lease topping up premium and other charges, would likely "set a base price of S$1,300 to S$1,400 psf ppr". While these big projects are in attractive locations, they face the same hurdle to a successful en bloc deal - their size, which was a major factor in the failure of previous sale attempts. Mandarin Gardens' sheer land size - at 1.07 million sq ft - could make it a "tough sell", said ZACD's Mr Mak. "I have never seen a sale of anything so big, like this, in the East Coast," he added. "It's so big that even the big boys may want to go in as a joint venture to basically share the risk." He said that if indeed a deal is clinched, close to 3,000 units could be developed on the existing area; and it could also be split into two developments. Mr Cheong added: "With the current regulations in place such as the additional buyers' stamp duty (ABSD) and qualifying certificate (QC), and with land prices getting to a multiple of what Mandarin Gardens was sold at in the 1980s - the risk to the potential buyer is much higher." But size is a problem not just for potential buyers but also for residents keen to go the en bloc way. With so many owners involved, the process gets more complicated and often turns ugly. In Mandarin Gardens' previous attempt at a collective sale, acrimony broke out when residents against the sale claimed the sales committees had gone round collecting proxy votes to control the outcome of the annual general meetings. Over at Pine Grove, it was recently reported that the process had led to residents forming factions and a lawsuit pitting the chairman of the management committee against the chairman of the collective sales committee. Source from The Straits Times 24 Jan 2018

21 Jan 2018

Masterplan for 'digital district' in Punggol North launched; area to generate up to 28,000 tech jobs

SINGAPORE -When its first buildings are ready in five years, Punggol North could become something of a mini Silicon Valley in Singapore - a centre of digital and cybersecurity industries that generates up to 28,000 digital economy jobs. The masterplan for the 50ha Punggol Digital District was launched on Sunday (Jan 21) by Deputy Prime Minister Teo Chee Hean at Waterway Point mall, together with an exhibition on what the district would look like. Speaking at the event, DPM Teo said the plan is to make Punggol “a hub for key growth sectors of the Digital Economy” and that could even involve moving government agencies, such as the Cyber Security Agency of Singapore - currently in Maxwell Road - to the district. “This will help create a new cluster of cybersecurity and technology firms in Punggol. Our residents can look forward to many exciting jobs in the future close to home.” The district will also serve as a testbed for a slew of new features and planning practices. The area will also be car-lite, with infrastructure such as parking spaces located underground. That leaves the streets for pedestrians, cyclists and users of personal mobility devices. It will be connected to other parts of Singapore by a host of new transport infrastructure, including the new Punggol Coast MRT station. The Singapore Institute of Technology’s (SIT) new campus will also be in the district, a move that DPM Teo said would create opportunities for students and faculty to exchange ideas with industry practitioners working there. The Punggol Digital District is a pilot project for what is being termed an “enterprise district”, with the authorities studying if this model can be applied to other areas in the future. JTC Corporation, which is working with SIT to develop the area, hopes to attract tech-centric enterprises specialising in areas such as cyber security and artificial intelligence to set up shop there. Prime Minister Lee Hsien Loong first mentioned the plans for developing Punggol North during his 2015 National Day Rally speech. More details - such as more flexible land use rules for the new district - were later revealed by National Development Minister Lawrence Wong in Parliament last year. The new district is a collaboration among four agencies - the Urban Redevelopment Authority, Infocomm Media Development Authority, JTC and SIT. They envision a cluster of buildings managed by centralised systems which would handle waste collection, cooling and logistics for the whole area. It could even be cooled by "smart" thermostats which can detect changes outdoors and adjust the temperature indoors accordingly. Flanking the area will be Housing Board flats, such as the upcoming Northshore Edge development, which is slated to be completed in 2021. Mr David Tan, who is assistant chief executive officer at JTC, said that it will be applying lessons it has learnt from other developments it has been involved in. This includes striking the right balance between work and leisure spaces, and even how closely spaced the buildings are. For example, buildings at the International Business Park are "very standalone" compared with those in one-north, said Mr Tan. Both developments are operated by JTC. "At one-north, the buildings are much closer together and so you have more interaction," he said. Ms Lam Lee Choo, who has lived in Punggol for 11 years, said that the transformation plan will appeal to residents. "The Punggol residents are generally young. They will welcome the use of technology that improves their lives," said the 52-year-old housewife, who is also a grassroots leader. "An area that they will look forward to is the use of technology to deliver government services, so that they don't have to visit the government offices," she added. See Also New EC at Punggol, Affinity At Serangoon, Parc Botannia, Riverfront Residences, Park Colonial Source from The Straits Times 21 Jan 2018

18 Jan 2018

Further upside for developers that can turn hope to reality

SHARES of property developers have had a good run over 2017 in anticipation of a property market recovery; investors are now looking to the companies to deliver. Those who can turn anticipation into reality with strong property sales and higher selling prices will even enjoy further re-rating, analysts say. Property counters favoured by analysts are hence those supported by a robust line-up of new launches to ride the market upswing, particularly if their landbank was shored up before the spike in land prices. DBS senior vice-president for group equity research Derek Tan believes developer stocks could rise at least 10-15 per cent. "2018 is all about execution," he said. "Developers will have to deliver on market expectations that the strong rebound in transaction volumes will continue in 2018, translating into strong take-up rates for upcoming new launches." But he cautioned that while there is still pent-up demand from homebuyers in the first half of 2018, there may be greater uncertainties in the second half of the year as more projects from sites acquired at higher prices come onstream. Reflecting the surge in the share prices of Singapore-listed developers, FTSE Straits Times Real Estate Holding and Development Index, a weighted index tracking the sector's performance, jumped 26.8 per cent last year. Analysts expect developers' share price discounts to their revalued net asset values (RNAV) should narrow, buoyed by a multi-year market recovery. JPMorgan property analyst Brandon Lee also see a re-rating of some property stocks this year, after last year's 30-40 per cent jump in share prices, adding that the risk of an immediate profit-taking is low as the property market is still in the nascent stage of what could potentially be a three-year upswing. Based on Mr Lee's analysis of major land tenders last year, prices must increase by at least 6-13 per cent over the next one to two years for developers to achieve a pre-tax profit margin of 5-10 per cent. Another analysis by Jefferies Singapore equity analyst Krishna Guha on en bloc and GLS sites suggests breakeven prices are at an average 40 per cent premium to current residential prices in the vicinity. Though the estimated price premiums for new projects vis-a-vis comparables may vary from one analyst to another, what is clear is that there is a bigger margin of safety for developers who have land-banked earlier at lower land prices, given the uncertainty over whether buyers will bite at higher prices. RHB Research Institute's property and Reits analyst Vijay Natarajan noted that developers have paid a hefty price for the intense competition for land lately. He expects a 3 to 7 per cent rise in property prices this year, which is lower than his estimate of a 10-40 per cent price appreciation factored in by recent winning land bids, assuming developers maintain their typical profit margin of 10-15 per cent. But developers still have to build, sell and complete a project within five years or else pay additional buyer's stamp duty (ABSD) on land cost with interest. Also adding pressure is that banks have already started to tighten some of their home loan packages, which reduces affordability for buyers. The overly optimistic land bids thus limits developers' profit margins, and also raises the risk of more supply-side cooling measures from the government, Mr Natarajan said. "For developers who have acquired land bank recently, the price upside will depend on how fast the market recovers, their marketing strategy and timing of their launch." There are yet others who see higher home prices already being accepted by buyers today, going by the strong take-up in some new project launches last year with high price premiums over comparable projects. "With household balance sheets in a growing net cash position, a low overall mortgage loan-to-value (LTV) of 27 per cent and macro-prudential measures such as the LTV and total debt servicing ratio (TDSR) restrictions in place, we believe households are well positioned to withstand a rising interest rate environment into 2018," Credit Suisse property analysts said in a note this month. Concurring, Maybank Kim Eng analyst Derrick Heng noted that the recent uptick in mortgage rates is manageable, even as loans pegged to the Sibor or Singapore interbank offered rate have effectively risen by 50 basis points year-on-year to about 2.5 per cent. The rise in mortgage rate should not come as a surprise and home buyers have already been "stress-tested" to a normalised rate of 3.5 per cent under the total debt servicing ratio (TDSR) framework introduced in June 2013, he said. "Even after the recent pick-up in home prices, we estimate healthy home price-to-income ratio of 4.5 times for mass-market private homes. Overall, affordability of homes in Singapore is not excessive." City Developments (CDL) and UOL Group are seen by most analysts as among the best large-cap proxies to ride the impending market ascent given their sizeable Singapore residential landbank and decent exposure to the Singapore office sector, where there is also an ongoing upcycle. Mr Lee noted that CDL's potential acquisition of the remaining 35 per cent stake in Millennium & Copthorne Hotels and UOL Group's potential acquisition of the remaining stake it does not own in United Industrial Corporation could also result in operational synergies and more capital recycling opportunities. DBS Group Research's top picks also include Frasers Centrepoint and small-cap developer Roxy-Pacific. The latter has land-banked ahead of peers with seven freehold residential projects in Singapore that are ready to launch this year. Roxy-Pacific has also beefed up its recurring income and diversified geographically last year with the acquisition of four new commercial buildings in Australia and New Zealand and one hotel in Japan. Mr Natarajan favours the small-mid cap space where stocks are still trading at relatively higher discounts of 30-50 per cent. "We believe the best way to play the recovery is a volume-driven play," he said. "We expect the property transaction numbers (in primary and secondary markets) to remain strong irrespective of price movements as developers are bound by ABSD timelines to launch and sell their units. Thus, our top pick is APAC Realty. "For large cap stocks a re-rating could come if the property prices start increasing better than what market expectation is," Mr Natarajan added. "In my view, if property prices climb more than 5 per cent, there should be another rally in large-cap developers." Mr Heng noted that potential catalysts to watch include an improvement in residential vacancy rates and a rental recovery that would follow. He also sees more value in the mid-cap space given the trading discounts to RNAV. "While lower stock liquidity is a concern for smaller players, we believe a significant valuation gap between mid-cap developers and their large-cap peers more than compensates for this. GuocoLand and Bukit Sembawang Estates are our preferred mid-cap developers." Source from The Business Times 18 Jan 2018

16 Jan 2018

Developer sales of private homes, ECs hit four-year high

Developer sales of private homes and executive condominiums (ECs) hit the highest in four years in 2017. There were 14,707 units moved, according to early estimates, 23 per cent higher than the 11,971 units sold in 2016. These included 10,682 private residential units, 34 per cent more than the 7,972 units sold in 2016. Sales of ECs held steady at around 4,000 last year, according to data compiled by the Urban Redevelopment Authority (URA). "The encouraging sales volume and the pickup in home prices in the second half of 2017 signalled that the private residential market has turned a corner and should continue to recover this year," said Ms Tricia Song, head of Singapore research at Colliers International. About 25 major private non-landed projects with the potential to yield 15,000 to 16,000 units (excluding ECs) could be put on the market this year, she added. Cushman & Wakefield research director Christine Li said the 2017 sales tally could have been higher, but several developers held back launches in anticipation of an expected upturn in prices this year. Developers have pared down unsold inventories in older existing projects, with most of the top 20 sellers last month already more than 80 per cent sold.   "As such, we could see high sales volumes in 2018 as the launch pipeline expands due to expected launches from the en bloc market, government land sale sites and relaunches from existing projects," Ms Li added. "We expect around 13,000 to 14,000 units sold by developers in 2018." JLL's national director of research and consultancy Ong Teck Hui estimated that 9,000 to 10,000 private residential units could be launched this year and, together with about 2,000 units unsold in launched projects, should provide a healthy level of supply. The diverse risk appetite that developers have demonstrated in their land bids have drawn varied projections from consultants on the potential price increase this year - from 3 per cent to as high as 15 per cent, following a 1 per cent uptick last year. "If launches are slowed deliberately and pricing becomes over-optimistic, sales could be less brisk than anticipated," Mr Ong said. There is also the risk of rising interest rates that could keep buying demand in check. "If interest rates are raised gradually, that will not hurt the market but it will dampen over-exuberance among buyers who are overly optimistic," Mr Ong added. Developers that sold the most units last year were Qingjian Realty, Frasers Centrepoint and City Developments (CDL), each clocking sales of over 1,000 units, based on a tabulation by consultancy SRI Research. The URA's estimates also show that developers sold 531 private residential units and ECs in the traditionally slow month of December. This was 43 per cent below what they sold in November and 8 per cent less than in December 2016. The first project to come onstream this year is CDL's New Futura, a 124-unit freehold development in Leonie Hill in District 9. Sales start on Thursday through appointment-only viewing, with prices starting from $3.8 million for a two-bedroom unit of 1,098 sq ft, according to agents. Also in the pipeline is the only new EC project this year - Rivercove Residences, jointly developed by Hoi Hup Realty and Sunway Developments. It is likely to launch in March. Twin View at West Coast Vale by China Construction (South Pacific) Developments is expected to be launched in March or April. See Also Rivercove Residences Source from The Straits Times 16 Jan 2018

11 Jan 2018

Singapore property prices seen to rebound in 2018

CREDIT Suisse Group and Morgan Stanley are calling the end of Singapore's property downturn, after a second consecutive quarterly increase in private residential prices. Home prices may rise as much as 10 per cent this year, according to analysts at Credit Suisse, while Morgan Stanley and OCBC Investment Research expect as much as an 8 per cent increase, according to reports from the brokerage firms. Private residential prices rose for a second straight quarter in the final three months of 2017, reinforcing signs that Singapore's property market is emerging from a four-year slump. Developer valuations remain attractive, according to Credit Suisse, whose top stock pick is UOL Group due to its high exposure to Singapore and its residential market. UOL is also one of two developers cited by OCBC as having the best prospects. City Developments is Morgan Stanley's favourite, and also one of OCBC's best picks. Collective sales, or "en-bloc" deals, valued at S$8.3 billion last year should continue to enhance the property market in 2018, said Credit Suisse. Home sales may increase 40 per cent in 2018, said Morgan Stanley, adding that the housing recovery will extend through 2019. Potential government cooling measures pose risk but such moves may be premature as the market is just two quarters into a recovery, the firm said. The surge in home completions from 2021 could begin to dampen sentiment but prices could double by 2030, Morgan Stanley added. OCBC said new home sales could hit an estimated 12,000 to 15,000 units in 2018 while rental prices could climb between 5 per cent and 10 per cent this year. Real estate services firm Colliers on Wednesday said average home prices may rise by 17 per cent over the period from 2018 to 2021, supported by higher economic growth, falling physical completions and ongoing collective sale deals. REUTERS, BLOOMBERG Source from The Business Times 11 Jan 2018

11 Jan 2018

SingHaiyi snags Clementi site for $841m

SINGAPORE - It is third time lucky for owners of Park West. Developer SingHaiyi Group has snagged the residential site in Clementi for $840.9 million amid the ongoing en bloc sale fever. Park West is located at Jalan Lempeng, near Clementi MRT station. It is being acquired by Sing-Haiyi Gold, a 50-50 joint venture between SingHaiyi's wholly owned subsidiary SingHaiyi Land and Haiyi Wealth, an entity controlled by Gordon Tang and Celine Tang, SingHaiyi said in a statement late on Thursday (Jan 11). The husband-and-wife duo are also controlling shareholders and directors of SingHaiyi through Haiyi Holdings. Park West is a 99-year-leasehold estate occupying a land area of about 633,644 sq ft, with a plot ratio of 2.1. Its lease commenced on March 8, 1982. Marketing agent Huttons Asia said the site can yield about 1.33 million sq ft of gross floor area upon redevelopment. At $840.9 million plus an estimated $290.6 million in differential premium and lease upgrading premium, the price tag works out to a land cost of $850 per sq ft per plot ratio. Huttons Asia said the successful transaction is the third attempt at a collective sale by the property owners. Mr Terence Lian, head of investment sales, Huttons Asia, said the regular shape plot of land offers good redevelopment opportunity given its strategic location. The land is near the One-North R&D Park and Singapore's second Central Business District at Jurong Lake. "We expect there to be strong demand for the new project judging from the high popularity of nearby projects such as The Trilinq and The Clement Canopy," Mr Lian said. The buyer intends to apply to the Singapore Land Authority for the grant of a fresh 99-year lease for the property, and to lift certain title restrictions. SingHaiyi said the latest acquisition gives it access to a land site within an established residential area, and allows the firm to expand its development portfolio in Singapore. The deal comes as the property developer in December moved to raise some $143 million for property investments through a rights issue. It proposed a renounceable non-underwritten rights issue of up to about 1.44 billion new shares at 10 cents each, to be issued on the basis of one rights share for every two existing shares. Majority shareholder Haiyi Holdings, which has a 56.17 per cent stake in SingHaiyi, has committed to subscribe for not only its pro-rata entitlement of 806 million rights shares, but also to mop up any rights shares that are not taken up. Source from The Straits Times 11 Jan 2018

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