Singapore Home Sales Face a Billion-Dollar Litmus Test
Barely a week into 2019 and Singapore’s residential home sales market is facing a S$1.1 billion ($811 million) litmus test. Horizon Towers, an older-style building near the popular Orchard Road shopping district, has gone on the market for redevelopment a third time after two failed attempts.
The sellers’ collective has retained its reserve price but other groups of homeowners also seeking so-called en-bloc deals are cutting their asking bids in the hope developers will bite.
En-bloc sales announced in 2019
Source: JLL, CBRE, Cushman & Wakefield
For individuals who have held apartments for several years and ridden the property boom, the profits can be handsome. En-bloc, or collective, sales are where a group of apartments are sold to a common developer and the proceeds divided among unit owners. (In general, if a development is more than 10 years old, at least 80 percent of owners must agree to a sale.)
But government cooling measures introduced in July that increased the stamp duties home builders need to pay when acquiring land have made market watchers skeptical about how many transactions will be a success.
“Billion-dollar en-bloc deals will be very hard to get through,” said Nicholas Mak, an executive director at real estate asset manager ZACD Group. “Developers are no longer land hungry and are more concerned about selling existing projects.”
Singapore imposed higher stamp duties and tougher loan-to-value rules in early July after residential prices in the city-state rose 7 percent in the first half of 2018. Extra constraints since then have included curbs on the number of “shoe-box-sized” apartments, limiting transactions at the cheaper end of the market.
That’s a particular blow for en-bloc deals because developers often acquire older buildings with larger units and then redo the floor sizes to accommodate more dwellings. The new guidelines on size, outlined in October, effectively cut the maximum number of apartments allowed in any one development by 18 percent. The changes only affect projects outside the city-state’s central area, and come into effect later this month.
“With expectations of a slowdown in sales in 2019, developers might re-think their land banking strategy, or even stop looking altogether,” said Derek Tan, an analyst at DBS Group Holdings Ltd. “As the government moves in with more restrictive measures to curb both demand and supply, we expect developers to focus on clearing inventories rather than adding more.”
The Southeast Asian lender expects new home sales to drop 20 percent this year to between 7,500 and 8,500 units, and prices to slip as much as 3 percent.
Horizon Towers was relaunched for sale after an unsuccessful attempt last year. The 99-year leasehold estate, which was completed in 1984, comprises about 210 units and was most recently renovated in 2014. The first attempt for an en-bloc sale was made a decade ago at S$500 million, but the transaction fell through after a court ruled the sales process was improperly handled.
Park View Mansions is another relaunch, but at a reserve price that’s 22 percent lower. Gilstead Mansion, a condominium near Singapore’s Little India district, reduced its price guide by S$3 million to S$65 million and still couldn’t find a taker.
“Although some sites have slashed their reserve prices, developers have turned cautious and many won’t be in a hurry to bid for land unless an attractive deal comes to market,” Christine Li, head of research for Singapore at Cushman & Wakefield Inc., said.
Source: JLL
Developers spent around S$30 billion between late 2016 and June last year acquiring land through government tenders or redevelopment deals, one of the most-active periods since 2013, DBS said. They’ll need to shell out significantly more after the hike in stamp duties, increasing business risk.
“The en-bloc outlook remains challenging,” Li said. “There’s a mismatch in expectations between developers and sellers -- asking prices are still relatively high and developers are wary about paying top dollar.”
Three large units at Marina Bay Residences sold > $3,000 psf
Three units of four-bedroom apartments on the higher levels at Marina Bay Residences have changed hands in recent weeks at prices well above S$3,000 psf.
However, market watchers said that this does not signal a reversal of the current lull in the high-end market, which has been hit by the absence of foreign buyers due to the additional buyer's stamp duty.
"These latest transactions at Marina Bay Residences can be seen as one-off and specific to the type of units, which are the most sought-after apartments in the development because of their large size, at 2,368 sq ft, and with views of the bayfront and casino," said a veteran agent.
The 55-storey project, which received Temporary Occupation Permit in 2010, is on a site that has a balance lease term of about 89 years. The three units that changed hands last month all fetched higher prices than what they had transacted for previously, several years ago, based on caveats information.
A unit on the 38th floor sold for S$3,450 psf totalling almost S$8.17 million. The unit directly above it sold for S$3,150 psf or S$7.46 million.
The two transactions involved separate sellers; however, the two units have been picked up by buyers who are believed to be related to each other and who exercised their respective options for the two units on the same date last month.
Both buyers are Chinese citizens who are Singapore permanent residents.
One of them is understood to be Yin Xidi, a member of the founding family of Chongqing-based Lifan group, which is involved in motorcycles, cars and petrol engines, among other things.
The 38th floor unit was previously transacted at S$6.31 million or S$2,666 psf in December 2006, while the 39th floor unit was previously sold at nearly S$4.8 million or S$2,027 psf back in January 2007, going by caveats data. Both were developer sales.
Eight years ago, as well as in the recent transactions, the 38th floor unit was sold at a higher price than the one on the 39th floor - going against the norm, where one would expect an apartment on a higher level to command a higher price than the one below it.
"The number 38 has an auspicious ring to it in Chinese," said an agent.
As for the third unit that was sold recently, which is on the 44th level, an option has been granted for its sale at S$3,665 psf or S$8.68 million. A seasoned property investor is selling the unit to a Malaysian citizen who is not a Singapore PR.
Interestingly, the same parties had entered into a deal in 2012 for a bungalow on Sentosa Cove in what was to have been a record price of S$3,214 psf on land area in the upscale waterfront housing district. However, the transaction was not completed, say sources.
The Marina Bay Residences unit that the seasoned investor is selling previously changed hands in 2010 through the subsale market at S$3,135 psf or S$7.4 million.
Marina Bay Residences was developed by Keppel Land, Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land. Comprising 418 apartments and 10 penthouses, the project was sold out in three days in December 2006.
At the time, the consortium said that the average price achieved was in the region of S$1,850 psf although some of the penthouses sold at more than S$3,000 psf.
- Singapore Times, 2015 March 9
PUBLISHED SEPTEMBER 15, 2014
More owners of luxury condos selling at a loss
Yields also under pressure; low rentals leave more people struggling to pay mortgages
[SINGAPORE] A larger percentage of high-end luxury condo homes on the resale market are selling at a loss and a smaller percentage at a profit, as the tide of the once-rosy property market recedes and reveals those who have been "swimming naked" - that is, those without adequate holding power for their extravagant purchases
According to data compiled by STProperty.sg from URA Realis, 7 per cent of transacted units in the prime districts 9, 10 and 11 sold at a loss in the first eight months of this year, up from 5.5 per cent over the same year-ago period.
According to data compiled by STProperty.sg from URA Realis, 7 per cent of transacted units in the prime districts 9, 10 and 11 sold at a loss in the first eight months of this year, up from 5.5 per cent over the same year-ago period.
Fewer people are profiting from their resales too: only 62.2 per cent enjoyed any capital gains - a steep drop from 83.5 per cent a year ago. And 4.5 per cent sold without making a profit or a loss (versus 0.4 per cent a year ago).
Yields are also under pressure. The low-rental environment is leaving more owners struggling to repay their mortgages. Assuming a S$1.6 million loan (equivalent to an 80 per cent loan limit for a S$2 million property) is taken out at an annual 1.5 per cent interest rate over a 30-year tenure, this would amount to a monthly mortgage of S$5,500. Rentals would therefore have to be in excess of this to cover mortgage payments.
"In some cases, the monthly rental cannot cover the mortgage. Take a S$5 million Sentosa Cove condo: it would take a monthly rent of S$13,800 to cover your loan," said Christine Li, head of research and consultancy at OrangeTee.
"That said, it's quite common that rents cannot cover monthly instalments, especially for bigger units. But those who don't have holding power would have to let go of their units. Others may be forced to do mortgagee sales," she added.
But not all the sellers who were willing to stomach losses were over-leveraged. Some could simply want to exit the market because they don't see the cooling measures ending anytime soon (meaning, they expect that price recovery is still far off), or just as a way of rebalancing their overall portfolio.
"A large proportion of purchases in the prime districts are by foreigners; perhaps they are just pulling out of Singapore. But the fall in demand for private homes makes it harder for sellers to find buyers. So if they really need to sell, they will have to lower their prices significantly," said Lee Lay Keng, DTZ's Southeast Asia regional head of research.
Investors would also have bought into high-end properties in major cities in the US, Europe and Australia, where there have been exciting properties launched in recent years, RST Research director Ong Kah Seng said.
In all likelihood, despite pulling out of Singapore, they might have profited elsewhere as other countries saw an uptick in residential property prices after the global financial crisis.
Meanwhile, loan curbs and price cutting by developers at new condo launches also continue to sap strength from the resale market.
Condo homes in the prime districts 9 (Orchard Road, River Valley), 10 (Bukit Timah, Holland, Balmoral) and 11 (Novena, Newton, Thomson) have traditionally been purchased as investment homes for capital gains and rental yields.
Buyers bank on demand from expatriate lessees, most of whom enjoy staying near the city. But with corporate housing budgets having shrunk post-financial crisis, these foreign workers are moving instead to the city fringes and suburbs, with some even renting HDB flats.
Losses made in resale transactions from January to August 2014 range from S$9,300 for a unit at The Hillier in Bukit Timah, to S$2.06 million for a unit at St Regis Residences in Tanglin. The latter was purchased at S$6.8 million in 2007, and sold for S$4.7 million in April this year.
Four units at The Promont (at Cairnhill), St Thomas Suites (near River Valley), Tanglin View and Waterscape At Cavenagh also resold at considerable losses of S$800,000 to S$1.2 million each (see table).
Notably, there were also four units at Robinson Suites on Shenton Way which resold at losses of about S$300,000.
Many of the loss-making resale transactions from the first eight months of this year were from sellers who bought their units in 2007, in the run-up to the previous peak in property prices and just when the financial crisis was starting.
Prices of these prime-location condos have recovered since, but dipped back down slightly from 2012 due to cooling measures. As at Q2 2014, prices were roughly on a par with the previous peak in 2008.
This means that not only would buyers who picked up condo units fresh at launch in 2007 not enjoy much capital gains, they may also suffer a loss if they sell now.
While analysts expect the trend of loss-making resale transactions to continue, they say it is unlikely to worsen significantly as long as economic conditions - such as low unemployment and interest rates - remain favourable.
PUBLISHED JANUARY 23, 2014
Chinese buying of homes holding up
Drop in number of units is smallest in percentage terms
Private home purchases here by non-Singaporeans fell nearly 35 per cent last year. And the biggest drop, in percentage terms, among the top four nationalities came from the Indians while the smallest was from the mainland Chinese -
'Singapore will continue to be attractive to people from China - it's stable, liveable . . . Often, they use Singapore as a first stop before moving on to the West. So Singapore tends to be "a hotel" rather than a home . . .'
- DTZ's Ong Choon Fah
[SINGAPORE] Private home purchases here by non-Singaporeans fell nearly 35 per cent last year. And the biggest drop, in percentage terms, among the top four nationalities came from the Indians while the smallest was from the mainland Chinese.
According to a caveats analysis by DTZ, the Indians picked up 460 homes, down 52.5 per cent from 968 in 2012. The mainland Chinese bought 1,479, or just 16.9 per cent fewer than the 1,780 in 2012.
This was smaller than the 36 per cent slide in purchases by the Malaysians, whose tally came to 1,303 compared with 2,037 in 2012. As a result, the mainland Chinese overtook the Malaysians last year to once again be the top group of non-Singaporean buyers of private homes.
The Indonesians, meanwhile, bought 41.7 per cent fewer homes last year - 880 units against 1,510 in 2012.
DTZ combined Singapore permanent residents (PRs) and foreigners in its nationality breakdown of overseas buyers.
It found that the bulk, or about 65 per cent, of the 1,479 homes bought by the mainland Chinese were priced below $1.5 million. Around 62 per cent of the total were bought from developers. And more than 80 per cent were outside the traditional prime districts of 9, 10 and 11.
The three most popular planning areas among the mainland Chinese were Pasir Ris (131 units), Bukit Timah (129 units) and Bedok (123 units).
New project launches in Bedok last year include Urban Vista and The Glades. In Pasir Ris, D'Nest, The Inflora and Vue 8 Residence were among the new launches. The Bukit Timah planning area includes CapitaLand's D'Leedon project and Far East Organization's new development, The Siena.
Demand from the mainland Chinese could be more resilient due to a few factors. Buying restrictions back home have led them to look overseas for opportunities, and Singapore is still one of their favourite investment destinations, said Lee Lay Keng, head of Singapore research at DTZ.
"They are attracted by the similarity in the culture with our majority Chinese population, and Singapore continues to offer a stable and secure environment for their investments. Some of them are investing in Singapore as they have business links here or are planning to send their children here for education."
Currency exchange rates may also have been a factor behind the smaller drop in purchases by the mainland Chinese compared with the other key nationalities. While the yuan strengthened against the Singapore dollar last year, the currencies of Malaysia, India and Indonesia weakened against the Sing dollar, making property here more expensive, market watchers say.
In DTZ's analysis, if PRs were excluded, foreigners' share of total private home purchases rose to 9 per cent from 6 per cent in 2012. This is because they posted a smaller percentage drop in units bought in 2013 compared with PRs and Singaporeans.
While purchases of foreigners fell 20 per cent year on year to 1,821, the number for PRs declined nearly 41 per cent to 3,256 units.
The 15,798 units that Singaporeans bought represents an almost 42 per cent slide from 2012.
Ms Lee said: "Although the year-on-year drop in foreign purchases in 2013 was the smallest across the different buyer groups, it should be noted that foreign purchases had already fallen about 60 per cent year on year in 2012, after the ABSD (additional buyer's stamp duty) was first introduced in December 2011.
"The impact of the increased ABSD in January 2013 therefore was felt less among foreign buyers who already had to pay ABSD (on all residential property purchases here), compared to Singaporeans buying their second property and PRs buying their first property, who previously did not have to pay any ABSD."
In 2012, purchases by Singaporeans and PRs rose 26 per cent and 29 per cent, respectively.
Another trend among foreign buyers was that their purchases of homes above $5 million held firm, even as overall purchases of properties in this price range fell 34 per cent. Foreigners bought 106 homes priced over $5 million in 2013 - similar to 2012. In contrast, purchases of such properties by Singaporeans and PRs slipped 44 per cent and 27 per cent respectively.
On the whole, foreign buying is expected to remain subdued this year in the face of the property cooling measures, the strong Singapore dollar and competition from overseas property markets, such as London, New York and Tokyo.
"However, some high-profile projects here - either those being built by foreign developers or marketed aggressively overseas - may draw a higher proportion of foreign buyers," said DTZ's South-east Asia chief operating officer, Ong Choon Fah.
Mainland China buyers are expected to continue outperforming the other three key nationalities of overseas buyers in 2014.
"Singapore will continue to be attractive to people from China - it's stable, liveable, close to China and a great place to learn English," said Mrs Ong. "Often, they use Singapore as a first stop before moving on to the West. So Singapore tends to be 'a hotel' rather than a home for them."
The proposed establishment of the Asean Economic Community by 2015 will draw more buyers from the region to the Singapore property market in the longer term.
Chinese buying of homes holding up
Drop in number of units is smallest in percentage terms
Private home purchases here by non-Singaporeans fell nearly 35 per cent last year. And the biggest drop, in percentage terms, among the top four nationalities came from the Indians while the smallest was from the mainland Chinese -
'Singapore will continue to be attractive to people from China - it's stable, liveable . . . Often, they use Singapore as a first stop before moving on to the West. So Singapore tends to be "a hotel" rather than a home . . .'
- DTZ's Ong Choon Fah
[SINGAPORE] Private home purchases here by non-Singaporeans fell nearly 35 per cent last year. And the biggest drop, in percentage terms, among the top four nationalities came from the Indians while the smallest was from the mainland Chinese.
According to a caveats analysis by DTZ, the Indians picked up 460 homes, down 52.5 per cent from 968 in 2012. The mainland Chinese bought 1,479, or just 16.9 per cent fewer than the 1,780 in 2012.
This was smaller than the 36 per cent slide in purchases by the Malaysians, whose tally came to 1,303 compared with 2,037 in 2012. As a result, the mainland Chinese overtook the Malaysians last year to once again be the top group of non-Singaporean buyers of private homes.
The Indonesians, meanwhile, bought 41.7 per cent fewer homes last year - 880 units against 1,510 in 2012.
DTZ combined Singapore permanent residents (PRs) and foreigners in its nationality breakdown of overseas buyers.
It found that the bulk, or about 65 per cent, of the 1,479 homes bought by the mainland Chinese were priced below $1.5 million. Around 62 per cent of the total were bought from developers. And more than 80 per cent were outside the traditional prime districts of 9, 10 and 11.
The three most popular planning areas among the mainland Chinese were Pasir Ris (131 units), Bukit Timah (129 units) and Bedok (123 units).
New project launches in Bedok last year include Urban Vista and The Glades. In Pasir Ris, D'Nest, The Inflora and Vue 8 Residence were among the new launches. The Bukit Timah planning area includes CapitaLand's D'Leedon project and Far East Organization's new development, The Siena.
Demand from the mainland Chinese could be more resilient due to a few factors. Buying restrictions back home have led them to look overseas for opportunities, and Singapore is still one of their favourite investment destinations, said Lee Lay Keng, head of Singapore research at DTZ.
"They are attracted by the similarity in the culture with our majority Chinese population, and Singapore continues to offer a stable and secure environment for their investments. Some of them are investing in Singapore as they have business links here or are planning to send their children here for education."
Currency exchange rates may also have been a factor behind the smaller drop in purchases by the mainland Chinese compared with the other key nationalities. While the yuan strengthened against the Singapore dollar last year, the currencies of Malaysia, India and Indonesia weakened against the Sing dollar, making property here more expensive, market watchers say.
In DTZ's analysis, if PRs were excluded, foreigners' share of total private home purchases rose to 9 per cent from 6 per cent in 2012. This is because they posted a smaller percentage drop in units bought in 2013 compared with PRs and Singaporeans.
While purchases of foreigners fell 20 per cent year on year to 1,821, the number for PRs declined nearly 41 per cent to 3,256 units.
The 15,798 units that Singaporeans bought represents an almost 42 per cent slide from 2012.
Ms Lee said: "Although the year-on-year drop in foreign purchases in 2013 was the smallest across the different buyer groups, it should be noted that foreign purchases had already fallen about 60 per cent year on year in 2012, after the ABSD (additional buyer's stamp duty) was first introduced in December 2011.
"The impact of the increased ABSD in January 2013 therefore was felt less among foreign buyers who already had to pay ABSD (on all residential property purchases here), compared to Singaporeans buying their second property and PRs buying their first property, who previously did not have to pay any ABSD."
In 2012, purchases by Singaporeans and PRs rose 26 per cent and 29 per cent, respectively.
Another trend among foreign buyers was that their purchases of homes above $5 million held firm, even as overall purchases of properties in this price range fell 34 per cent. Foreigners bought 106 homes priced over $5 million in 2013 - similar to 2012. In contrast, purchases of such properties by Singaporeans and PRs slipped 44 per cent and 27 per cent respectively.
On the whole, foreign buying is expected to remain subdued this year in the face of the property cooling measures, the strong Singapore dollar and competition from overseas property markets, such as London, New York and Tokyo.
"However, some high-profile projects here - either those being built by foreign developers or marketed aggressively overseas - may draw a higher proportion of foreign buyers," said DTZ's South-east Asia chief operating officer, Ong Choon Fah.
Mainland China buyers are expected to continue outperforming the other three key nationalities of overseas buyers in 2014.
"Singapore will continue to be attractive to people from China - it's stable, liveable, close to China and a great place to learn English," said Mrs Ong. "Often, they use Singapore as a first stop before moving on to the West. So Singapore tends to be 'a hotel' rather than a home for them."
The proposed establishment of the Asean Economic Community by 2015 will draw more buyers from the region to the Singapore property market in the longer term.
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