Seeking underpriced apartments
There really are such units available out there, especially at new condominium launches
05:55 AM Feb 27, 2010
by Colin Tan
A colleague recently handed me a market report that forecasted it will not be long before fools and their money are parted in 2010. This brought a smile to my face for it seemed a pretty far-fetched notion - that is, until I continued to come across persistent situations of liquidity-laden property investors. Having come out of equities and from earlier property deals, they are now having great difficulty staying in cash.
While admitting that they would have preferred the economic fundamentals to be better, these investors do not think they can get higher returns from other investments. They are eager - nay, some seemed desperate - to get back into the property market.
But if they are already over-paying for an inflated asset, what kind of returns can they get back at the end of their investment period? If one had bought at the height of the last property peak in 1996, it took about ten years or more for the asset to recover its value, and that's leaving out borrowing costs.
With every new sales launch, I am frequently asked my opinion by these investors. Many want a strategy to invest in these "inflated" assets. Someone remarked that if he had to overpay, he would prefer to overpay for quality assets.
The simplest strategy would be to seek quality properties in prime locations. And look for underpriced assets. But most of such properties would have been highly priced already.
Are there still underpriced units in the market?
Actually there are. Typically, at a new sales launch, we see the better units being taken up first. If all the units were priced according to their true market worth, would not the units be taken up randomly, that is, the least popular unit would have the same chance of being sold as the most popular unit?
Does this not suggest that the better units are under-priced? And how often do developers have to give bigger discounts to get rid of unpopular remnant units, suggesting again these unattractive units were overpriced in the first place?
So why do developers under-price popular units? It has to do with marketing strategy. Often, the better units kick-start the sales and build up the buying momentum. So, these underpriced units are only available at the launch. Once they are completed and re-sold, they are no longer under-priced.
That is why you tend to see a wide range in selling prices within a completed project, compared to when the units were sold at launch.
From experience, I would suggest that about a fifth of all units in a project belong to this under-priced category. These units have the best of all the attributes of the project.
Another three-fifths will have a mix of both good and bad attributes, while the remaining fifth has the worst of each attribute. Never touch these units unless you are given a deep discount.
But buying property is an emotional decision for most people. How do I discipline myself to stick to only the best 20 per cent of each project? Here, I am assuming the selection of the project was the right one in the first place. What happens when a developer launches an unpopular block first?
You will need to sort these out yourself, but is the effort worth it? Because the top 20 per cent of the units in a quality project have all the good attributes, I would suggest that its value will be the first to recover among all units. And what price are we willing to pay for a beautiful view? ¢
The writer is the director, head research and consultancy at Chesterton Suntec International.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
Sunday, February 28, 2010
TODAY Online : Soon: Launch of 20k private homes?
Soon: Launch of 20k private homes?
05:55 AM Feb 27, 2010
by Leong Wee Keat
SINGAPORE - As the market waits to see the impact of recent cooling-off measures, private property hunters can expect 20,297 residential units to be launched "within a few months".
This number, shared by the Ministry for National Development (MND) in response to MediaCorp's queries, is based on uncompleted private residential developments being built on land sold under the Government's land sales scheme.
And it includes units private developers have stowed away in the pipeline for almost three years - sites bid for at the market's height in 2007.
According to the MND, developers of these units could launch a sale within five working days, which is the time needed to get a sale licence - or, if they have yet to obtain prior building plan approvals, seven working days at the minimum.
So, why are developers holding back?
On Thursday, the Real Estate Developers' Association of Singapore said they were eager to bring forward project launches to ride on the buoyant market, but were being held back by their limited land bank.
Examples of delayed projects are Allgreen Properties' two sites at Handy Road and Enggor Street, bought in March and November 2007 respectively. Both sites, which totalled 418 units, were slated to be launched before the onset of the financial crisis in late 2008. Allgreen Properties is now planning launches for both sites.
Meanwhile, The Vision at West Coast Crescent is slated to go on sale next month, two years after a Singapore unit of Cheung Kong Holdings won the bid in March 2008.
While industry observers reckon it the norm for launches to take two to three years after the successful bid, some believe developers are holding back due to the high land prices paid in 2007.
"If developers launched them last year when the market was in the doldrums, they would probably lose money," said Cushman and Wakefield Singapore managing director Donald Han. "What the developers are doing this year is to anticipate that prices of high-end luxury market properties will rise even further, and are waiting for the right timing to launch."
Some land sales require projects to be completed within six years. One developer felt the time frame was "about right" - two years for planning and sales, three years for construction. "There may be some delays, but no developer will want to hold on to land unnecessarily," he said.
The Government could speed up property launches through its land sales programme, Ngee Ann Polytechnic real estate lecturer Nicholas Mak said. "If it keeps bumping up land to the confirmed list (for the second half of this year), developers will feel the pressure and stop holding back. It could also moderate prices," he said.
The MND assured property buyers there is sufficient stock to meet immediate demand: 3,317 units which are launched but unsold, and 10,620 units that can be launched at once.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
05:55 AM Feb 27, 2010
by Leong Wee Keat
SINGAPORE - As the market waits to see the impact of recent cooling-off measures, private property hunters can expect 20,297 residential units to be launched "within a few months".
This number, shared by the Ministry for National Development (MND) in response to MediaCorp's queries, is based on uncompleted private residential developments being built on land sold under the Government's land sales scheme.
And it includes units private developers have stowed away in the pipeline for almost three years - sites bid for at the market's height in 2007.
According to the MND, developers of these units could launch a sale within five working days, which is the time needed to get a sale licence - or, if they have yet to obtain prior building plan approvals, seven working days at the minimum.
So, why are developers holding back?
On Thursday, the Real Estate Developers' Association of Singapore said they were eager to bring forward project launches to ride on the buoyant market, but were being held back by their limited land bank.
Examples of delayed projects are Allgreen Properties' two sites at Handy Road and Enggor Street, bought in March and November 2007 respectively. Both sites, which totalled 418 units, were slated to be launched before the onset of the financial crisis in late 2008. Allgreen Properties is now planning launches for both sites.
Meanwhile, The Vision at West Coast Crescent is slated to go on sale next month, two years after a Singapore unit of Cheung Kong Holdings won the bid in March 2008.
While industry observers reckon it the norm for launches to take two to three years after the successful bid, some believe developers are holding back due to the high land prices paid in 2007.
"If developers launched them last year when the market was in the doldrums, they would probably lose money," said Cushman and Wakefield Singapore managing director Donald Han. "What the developers are doing this year is to anticipate that prices of high-end luxury market properties will rise even further, and are waiting for the right timing to launch."
Some land sales require projects to be completed within six years. One developer felt the time frame was "about right" - two years for planning and sales, three years for construction. "There may be some delays, but no developer will want to hold on to land unnecessarily," he said.
The Government could speed up property launches through its land sales programme, Ngee Ann Polytechnic real estate lecturer Nicholas Mak said. "If it keeps bumping up land to the confirmed list (for the second half of this year), developers will feel the pressure and stop holding back. It could also moderate prices," he said.
The MND assured property buyers there is sufficient stock to meet immediate demand: 3,317 units which are launched but unsold, and 10,620 units that can be launched at once.
Copyright 2010 MediaCorp Pte Ltd | All Rights Reserved
BT : DC rates take striking hike in scenic Sentosa
Business Times - 27 Feb 2010
DC rates take striking hike in scenic Sentosa
RWS effect reflected in higher land values on island while interesting trend emerges in CBD
By KALPANA RASHIWALA
SENTOSA has seen a big jump in development charge (DC) rates, reflecting higher land values on the island following this month's opening of Resorts World Sentosa (RWS).
On average, the government is raising DC rates (payable for intensifying or enhancing the use of some sites) about 12 per cent for landed residential use from March 1; but in Sentosa, they will climb 17.3 per cent. For non-landed residential use, Sentosa saw a 10 per cent hike in DC rates compared to the average rise of about 8 per cent. And while DC rates for commercial use will be cut roughly 2 per cent on average against the backdrop of weak office rentals, Sentosa is the only location where they will be raised - to the tune of 12.5 per cent.
It is also the only location where the government increased the hotel-use DC rate; the hike was 12.2 per cent. In all other locations, the DC rate for hotel use (which also covers hospitals) was left untouched.
DC rates - which are revised on March 1 and Sept 1 each year - are specified by use groups across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with the Chief Valuer, who takes into account current market values.
Some analysts pointed to an interesting trend emerging in the Central Business District. DC rates for commercial use in the CBD fell further while non-landed residential rates rose and actually surpassed the commercial rates. This could mean paying a higher DC for those who redevelop old CBD office blocks into apartments and could impact such conversions, especially in the case of 99- year leasehold sites as their owners would also want a lease top- up, says DTZ's South- east Asia research head Chua Chor Hoon.
Jones Lang LaSalle's SE Asia research head Chua Yang Liang goes a step further, predicting that the new trend could have an 'unexpected effect of encouraging the redevelopment of existing older office stock into the same office use and discouraging conversions to residential'. Jones Lang LaSalle's (JLL) analysis showed that DC rates for non-landed residential use were raised for 116 geographical sectors and left unchanged for the remaining two areas.
The biggest hike of 15.4 per cent was seen in three sectors: 91 (which covers the Mountbatten, Meyer and Broadrick areas); 98 (Tampines, Bedok Reservoir, Bedok North, Kembangan); and 101 (Paya Lebar Way/Eunos/Sims Avenue).
This was followed by Sector 76 (Everton/Spottiswoode Park) with a 14.5 per cent increase. Market watchers attribute this to last October's en bloc sale of Dragon Mansion at a land price about 68 per cent above the land value implied by the prevailing Sept 1, 2009 DC rate for the location.
Also, the geographical sectors covering Serangoon Ave 3, Upper Thomson Rd and Sengkang West Avenue - where residential sites have been sold at bullish prices at state tenders in the past six months - were raised 12.5 per cent, 10.5 per cent and 9.1 per cent respectively.
Colliers International executive director (investment sales) Ho Eng Joo said that overall, the growth in non-landed residential DC rates may hamper developers' landbanking plans, especially for collective sales sites that require DC payment.
Credo Real Estate managing director Karamjit Singh, however, said yesterday: 'Three quarters of the en bloc projects our company is working on don't involve any DC payment. As for the rest, DC as a component of the entire land cost is not very high and hence the increase in DC rates will have minimal impact on the en bloc sale exercise.'
For landed residential use too, charges were raised in 116 sectors and left unchanged in the other two.
Besides Sentosa, other areas with the biggest hikes include Holland/Dunearn Rd/Sixth Avenue (up 17.1 per cent) as well as the Good Class Bungalow areas of Botanic Gardens/Gallop Rd/Tyersall and Ridout/Peirce Hill/Swettenham Road (each up 16.9 per cent), JLL's analysis shows.
Commercial DC rates were trimmed between 3.2 and 13.3 per cent in 23 sectors. The biggest chop was in the Cecil St/Robinson Road area. There were also cuts in other parts of the financial district, such as Marina Bay, Raffles Place and Fullerton Road, as well as in the Thomson/Moulmein, Newton Circus, Bugis and Tanglin/Cuscaden areas.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
DC rates take striking hike in scenic Sentosa
RWS effect reflected in higher land values on island while interesting trend emerges in CBD
By KALPANA RASHIWALA
SENTOSA has seen a big jump in development charge (DC) rates, reflecting higher land values on the island following this month's opening of Resorts World Sentosa (RWS).
On average, the government is raising DC rates (payable for intensifying or enhancing the use of some sites) about 12 per cent for landed residential use from March 1; but in Sentosa, they will climb 17.3 per cent. For non-landed residential use, Sentosa saw a 10 per cent hike in DC rates compared to the average rise of about 8 per cent. And while DC rates for commercial use will be cut roughly 2 per cent on average against the backdrop of weak office rentals, Sentosa is the only location where they will be raised - to the tune of 12.5 per cent.
It is also the only location where the government increased the hotel-use DC rate; the hike was 12.2 per cent. In all other locations, the DC rate for hotel use (which also covers hospitals) was left untouched.
DC rates - which are revised on March 1 and Sept 1 each year - are specified by use groups across 118 geographical sectors throughout Singapore. The review is conducted by the Ministry of National Development in consultation with the Chief Valuer, who takes into account current market values.
Some analysts pointed to an interesting trend emerging in the Central Business District. DC rates for commercial use in the CBD fell further while non-landed residential rates rose and actually surpassed the commercial rates. This could mean paying a higher DC for those who redevelop old CBD office blocks into apartments and could impact such conversions, especially in the case of 99- year leasehold sites as their owners would also want a lease top- up, says DTZ's South- east Asia research head Chua Chor Hoon.
Jones Lang LaSalle's SE Asia research head Chua Yang Liang goes a step further, predicting that the new trend could have an 'unexpected effect of encouraging the redevelopment of existing older office stock into the same office use and discouraging conversions to residential'. Jones Lang LaSalle's (JLL) analysis showed that DC rates for non-landed residential use were raised for 116 geographical sectors and left unchanged for the remaining two areas.
The biggest hike of 15.4 per cent was seen in three sectors: 91 (which covers the Mountbatten, Meyer and Broadrick areas); 98 (Tampines, Bedok Reservoir, Bedok North, Kembangan); and 101 (Paya Lebar Way/Eunos/Sims Avenue).
This was followed by Sector 76 (Everton/Spottiswoode Park) with a 14.5 per cent increase. Market watchers attribute this to last October's en bloc sale of Dragon Mansion at a land price about 68 per cent above the land value implied by the prevailing Sept 1, 2009 DC rate for the location.
Also, the geographical sectors covering Serangoon Ave 3, Upper Thomson Rd and Sengkang West Avenue - where residential sites have been sold at bullish prices at state tenders in the past six months - were raised 12.5 per cent, 10.5 per cent and 9.1 per cent respectively.
Colliers International executive director (investment sales) Ho Eng Joo said that overall, the growth in non-landed residential DC rates may hamper developers' landbanking plans, especially for collective sales sites that require DC payment.
Credo Real Estate managing director Karamjit Singh, however, said yesterday: 'Three quarters of the en bloc projects our company is working on don't involve any DC payment. As for the rest, DC as a component of the entire land cost is not very high and hence the increase in DC rates will have minimal impact on the en bloc sale exercise.'
For landed residential use too, charges were raised in 116 sectors and left unchanged in the other two.
Besides Sentosa, other areas with the biggest hikes include Holland/Dunearn Rd/Sixth Avenue (up 17.1 per cent) as well as the Good Class Bungalow areas of Botanic Gardens/Gallop Rd/Tyersall and Ridout/Peirce Hill/Swettenham Road (each up 16.9 per cent), JLL's analysis shows.
Commercial DC rates were trimmed between 3.2 and 13.3 per cent in 23 sectors. The biggest chop was in the Cecil St/Robinson Road area. There were also cuts in other parts of the financial district, such as Marina Bay, Raffles Place and Fullerton Road, as well as in the Thomson/Moulmein, Newton Circus, Bugis and Tanglin/Cuscaden areas.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
ST : Property measures: Keep them guessing
Feb 26, 2010
Property measures: Keep them guessing
IF THERE was a party in the property market going on after the Chinese New Year, the Government would have been the party pooper. Barely a week into the new year, it introduced measures to cool the febrile-prone property market. A new seller's stamp duty was introduced, together with a reduction in the loan-to-value limit for home loans, from 90 per cent to 80 per cent. The measures came just five months after the Government implemented moves to kill innovative interest absorption home loan schemes.
For property prices to go up is patently reasonable. After all, the property market is now seeing ample liquidity, low interest rates and growing consumer confidence buoyed by a recovering economy. That said, however, the speed at which the market is heating up is puzzling. In January, property developers sold 1,476 units - a figure treble that of the preceding month. Prices have increased at a faster rate compared to rebounds from the troughs of previous property cycles. Mortgage lending has also increased steadily by about 12 per cent year-on-year through the whole of last year. Market watchers can only surmise that the strong demand could be coming from either pent-up demand or buyers flush with cash from collective sales.
Typically, official measures to cool the market are inevitably late, given that they occur after the fact. But thankfully, they do not come so late as to fail to pre-empt any speculative bubble. In essence, the Government is doing what it has been adept at doing - precision targeting to put a brake on speculative demand before it spirals out of control. The stamp duty will hit short-term speculators, while the bank loan limit will affect buyers at the margins.
The most powerful weapon in the Government market-cooling arsenal, however, is not the series of measures already announced, but those yet to be. This is one of the oldest tricks in the book, be it in fields as diverse as nuclear strategy, politics or an endeavour as earthy as property: to receive pain in one big dose is bad; to get the same pain in small but discrete instalments is worse, but to have no certainty as to when the dose will come is the worst. As one industry watcher noted, if the Government can enact the measures so fast and without warning, it can do something 'faster and more painful' if prices continue to head north. Here, in essence, is the nub of the Government's pre-emptive strategy that will keep property developers and speculators awake at night: keep them guessing.
Property measures: Keep them guessing
IF THERE was a party in the property market going on after the Chinese New Year, the Government would have been the party pooper. Barely a week into the new year, it introduced measures to cool the febrile-prone property market. A new seller's stamp duty was introduced, together with a reduction in the loan-to-value limit for home loans, from 90 per cent to 80 per cent. The measures came just five months after the Government implemented moves to kill innovative interest absorption home loan schemes.
For property prices to go up is patently reasonable. After all, the property market is now seeing ample liquidity, low interest rates and growing consumer confidence buoyed by a recovering economy. That said, however, the speed at which the market is heating up is puzzling. In January, property developers sold 1,476 units - a figure treble that of the preceding month. Prices have increased at a faster rate compared to rebounds from the troughs of previous property cycles. Mortgage lending has also increased steadily by about 12 per cent year-on-year through the whole of last year. Market watchers can only surmise that the strong demand could be coming from either pent-up demand or buyers flush with cash from collective sales.
Typically, official measures to cool the market are inevitably late, given that they occur after the fact. But thankfully, they do not come so late as to fail to pre-empt any speculative bubble. In essence, the Government is doing what it has been adept at doing - precision targeting to put a brake on speculative demand before it spirals out of control. The stamp duty will hit short-term speculators, while the bank loan limit will affect buyers at the margins.
The most powerful weapon in the Government market-cooling arsenal, however, is not the series of measures already announced, but those yet to be. This is one of the oldest tricks in the book, be it in fields as diverse as nuclear strategy, politics or an endeavour as earthy as property: to receive pain in one big dose is bad; to get the same pain in small but discrete instalments is worse, but to have no certainty as to when the dose will come is the worst. As one industry watcher noted, if the Government can enact the measures so fast and without warning, it can do something 'faster and more painful' if prices continue to head north. Here, in essence, is the nub of the Government's pre-emptive strategy that will keep property developers and speculators awake at night: keep them guessing.
CNA : Govt to increase development charge rate for residential homes in S'pore
Govt to increase development charge rate for residential homes in S'pore
By Wong Siew Ying, Channel NewsAsia | Posted: 26 February 2010 1838 hrs
SINGAPORE: The government has increased the development charge rate for both non-landed and landed residential homes. Analysts said this is in line with the strong rebound in home sales and prices over the last six months.
The rise in non-landed residential DC rates, in particular, is expected to add on to developers' land banking cost.
Private homes were hot property in 2009. Some 6,300 units have been sold in the last six months.
And market watchers said the upward revision in development charge for residential homes is widely expected.
A development charge is the tax payable by the developer when a property site is developed into more valuable project.
This allows the government to have a share of the gains from the enhanced value.
The DC Rate for non-landed home will go up by eight per cent on average with prime areas like Orchard Road, Sentosa and Cantonment seeing double-digit increase.
The DC rates for suburban locations like Paya Lebar, Eunos, Bedok North and Tampines also went up .
Some observers said the upward revision could have a marginal impact on developers' land banking plans.
Dr Chua Yang Liang, head of Research, Southeast Asia, Jones Lang LaSalle, said: "The DC rate revision will have some bearing on potential developers looking at en bloc deal especially those which have an increase in plot ratio, it might have some effect."
DC rates for landed residential homes will also go up by an average 12 per cent.
The largest increase of 17 per cent will apply to developments in Sentosa, Tanglin and Holland and even Hougang, Toa Payoh and Ang Mo Kio.
In contrast, the levy for commercial sites will fall by two per cent on average.
Sites in Raffles Quay and Shenton way will see a 13 per cent reduction.
Sentosa is the only sector in the Commercial category to see an uptick in DC rate by 12.5 per cent.
Mr Chua believes the opening of the Integrated Resort and its retail spaces has put an upward pressure to close the gap between sectors like Sentosa and World Trade Center where Vivocity is located.
With this revision, the gap has narrowed from S$1,750 to S$1,400.
Some said this reduction could have an unintended effect.
Dr Chua added: "If you look at DC rate between residential and commercial, residential continues to rise in the downtown areas, whereas the office market, office use, continue to contract.
This means there will be a wider gap between these two land use groups suggesting redevelopment into office use rather then conversion into residential.”
The change in DC rate will take effect from March 1 and will last for six months. - CNA/vm
By Wong Siew Ying, Channel NewsAsia | Posted: 26 February 2010 1838 hrs
SINGAPORE: The government has increased the development charge rate for both non-landed and landed residential homes. Analysts said this is in line with the strong rebound in home sales and prices over the last six months.
The rise in non-landed residential DC rates, in particular, is expected to add on to developers' land banking cost.
Private homes were hot property in 2009. Some 6,300 units have been sold in the last six months.
And market watchers said the upward revision in development charge for residential homes is widely expected.
A development charge is the tax payable by the developer when a property site is developed into more valuable project.
This allows the government to have a share of the gains from the enhanced value.
The DC Rate for non-landed home will go up by eight per cent on average with prime areas like Orchard Road, Sentosa and Cantonment seeing double-digit increase.
The DC rates for suburban locations like Paya Lebar, Eunos, Bedok North and Tampines also went up .
Some observers said the upward revision could have a marginal impact on developers' land banking plans.
Dr Chua Yang Liang, head of Research, Southeast Asia, Jones Lang LaSalle, said: "The DC rate revision will have some bearing on potential developers looking at en bloc deal especially those which have an increase in plot ratio, it might have some effect."
DC rates for landed residential homes will also go up by an average 12 per cent.
The largest increase of 17 per cent will apply to developments in Sentosa, Tanglin and Holland and even Hougang, Toa Payoh and Ang Mo Kio.
In contrast, the levy for commercial sites will fall by two per cent on average.
Sites in Raffles Quay and Shenton way will see a 13 per cent reduction.
Sentosa is the only sector in the Commercial category to see an uptick in DC rate by 12.5 per cent.
Mr Chua believes the opening of the Integrated Resort and its retail spaces has put an upward pressure to close the gap between sectors like Sentosa and World Trade Center where Vivocity is located.
With this revision, the gap has narrowed from S$1,750 to S$1,400.
Some said this reduction could have an unintended effect.
Dr Chua added: "If you look at DC rate between residential and commercial, residential continues to rise in the downtown areas, whereas the office market, office use, continue to contract.
This means there will be a wider gap between these two land use groups suggesting redevelopment into office use rather then conversion into residential.”
The change in DC rate will take effect from March 1 and will last for six months. - CNA/vm
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