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Savvy buyers zoomed in on CCR last year, URA data shows
Amid the overall soft property market conditions, savvy private home buyers looking for attractive deals zoomed in on the Core Central Region (CCR) last year. Government data released on Thursday showed the region was 2016's outperformer in terms of percentage increase in transaction volumes, which in turn provided some ballast for prices in the region.
The total number of private homes sold in CCR through both primary and secondary markets surged 48.7 per cent to 2,764 units in 2016 over the preceding year.
This is a faster pace of increase compared with the 27.2 per cent rise in transaction volume in the city fringe or Rest of Central Region (RCR) to 4,868 units and a 3.7 per cent increase in transactions in the suburbs or Outside Central Region (OCR) to 8,746 units last year.
The sparkling increase in CCR sales volumes was accompanied by greater price resilience in the region. URA's price index for non-landed homes in CCR posted a relatively modest drop of 1.2 per cent in 2016 - compared with the price contractions of 2.8 per cent in RCR and 3.4 per cent in OCR.
Industry observers noted that it was the CCR which led price declines during the earlier stages of the current downcycle and that prices are now deemed attractive, especially vis-a-vis other major cities.
There has been heightened interest in the prime market with both local and foreign investors trying to suss out attractive deals.
Buyers took the opportunity to enter the market as many sellers and developers are giving close to 20 per cent discount from the launch or peak prices in CCR.
The attractive deferred payment schemes that some developers have rolled out in their delicensed projects since last year to drum up sales and avoid paying penalties to the state if they do not meet looming deadlines to finish selling their projects have also helped boost volumes.
The average price of new homes in CCR declined to S$2.4 million in 2016 from S$2.5 million in 2014 - a clear indication that the market is being driven by quantum play.
On the leasing front, URA's rental index for non-landed private homes in CCR eased 3.3 per cent last year, a smaller decline than the 3.8 per cent drop in 2015. In RCR, too, the rental decline eased to 1.9 per cent last year after slipping 4.9 per cent in 2015. That said, in the suburbs, the pace of the rental fall widened to 6.7 per cent last year after easing 5.6 per cent in the previous year.
When it came to vacancy rates, the pattern was somewhat different. Going by URA's newly introduced vacancy data for private homes (landed and non-landed combined) by regions, the vacancy rate for CCR and RCR remained high at 9.6 per cent at end-Q4 2016.
These two submarkets are more significantly affected by challenging leasing market conditions where there is a greater mismatch between units available for lease and the limited tenant pool.
In the suburbs, the vacancy rate eased to 7.1 per cent at end-Q4 2016 from 8.3 per cent a quarter earlier.
Owner occupiers moving into their completed units would have contributed to this as well as a 30 per cent fall in the net change in available stock from Q3 2016 in OCR.
Market watchers said the juxtaposition of a high vacancy rate with a relatively small rental drop in CCR may be attributed to the stronger holding power of landlords of luxury properties, who may have the wherewithal to leave their units empty rather than to lease them out at a rental rate that may not be acceptable to them.
Moreover, some ultra high net worth individuals investing in prime properties are not doing so for rental-yield play but more for longer-term capital appreciation. Some also stay in their Singapore properties during their visits here, leaving them empty for most of the year.
On an islandwide basis, the vacancy rate for private homes eased to 8.4 per cent at end-Q4 2016 from 8.7 per cent at end-Q3 2016.
Last year, 20,803 private homes were completed, that is, obtained Temporary Occupation Permit, up from 18,971 units in 2015 and an all-time high. The figure is expected to ease this year to 14,826 units and fall further to 9,521 next year.
URA's overall private home price index eased 0.5 per cent quarter on quarter in Q4 2016, taking the full-year decline to 3.1 per cent - a slower pace of fall than 2015's 3.7 per cent drop. The benchmark index has slipped 11.3 per cent over 13 quarters (from its recent peak in Q3 2013).
Most analysts expect the index to continue its gentle decline this year, citing subdued economic growth and assuming the property cooling measures stay in place. ERA Realty Network key executive officer Eugene Lim puts the drop at 2 to 3 per cent.
During the market downturn of 2000-2004 (the dotcom bubble burst, the US-led invasion of Iraq and the deadly Sars outbreak in Singapore), the price index shed 20 per cent over 14 quarters of declines. It is possible that the current downturn could stretch to 17 quarters or more - but the price correction is likely to be minimal, at less than 20 per cent.
What is expected to prevent a drastic price drop this year is a steady increase in transaction volumes in both primary and secondary markets - supported by the perception that the market is nearing its bottom.
Compared to the residential sales market, the leasing market is behind the curve in recovery. Its downtrend will continue in 2017 with stability expected only in 2018. Difficult business conditions that have resulted in headcount reductions among expats, cuts in housing budgets and policy restrictions in the intake of foreign labour will continue to weigh on leasing demand.
Adapted from: The Business Times, 27 January 2017
Demand for HDB resale flats expected to remain strong this year
The number of resale transactions for public housing flats rose 7.8 per cent to 20,813 cases last year from 19,306 cases in 2015. The latest figure is also the highest in four years.
One factor that boosted the resale volume of Housing & Development Board (HDB) flats last year is that more homebuyers sensed that prices in this segment had stabilised and may not fall significantly if they continued to wait.
Also contributing to the pick-up in transactions could be that as more private and public housing projects are completed, some of the HDB upgraders who bought these new homes are compelled to sell their existing HDB flats in order to take possession and finance their new homes.
Property consultants predict that this year, buying demand for resale flats will come in at 20,000 to 23,000 units.
"Those with housing needs will continue to prop up the market as they cannot postpone their purchase indefinitely," said ERA Realty Network key executive officer Eugene Lim.
Current price points will entice more buyers to enter the market as they are attractive enough for young couples and upgraders.
HDB resale flat prices are currently in consolidation phase, with marginal price movements.
On Thursday, HDB said that its resale flat price index dipped 0.1 per cent in the fourth quarter of 2016 over the preceding quarter. The drop for the whole of last year was also 0.1 per cent.
Mr Lim of ERA argued that despite the slowing economy, HDB resale prices have not been affected as much as private residential properties. "A major reason is the difference in characteristics between HDB resale buyers and private residential property buyers. As a no-frills housing form, HDB flats satisfy a housing need, whereas private condominiums are more of a housing want, with their higher prices and more luxurious facilities. Hence, HDB prices tend to be less correlated to Singapore's economic performance."
Also contributing to the stability of the HDB resale market is HDB's decision to publish daily transaction details online, available for public access. "As this initiative by HDB has been ongoing for some time, we have seen more widespread usage of this information. Negotiations are usually centred on recently transacted prices, and ultimately, the deal will be concluded at a price which does not differ too much from past prices. This is because the buyer wants to ensure that the purchase price can be supported by valuation."
ERA forecasts a +0.5 per cent to -0.5 per cent change in HDB's resale price index this year.
HDB also said that the number of applications approved for subletting of flats fell one per cent to 10,678 cases in the fourth quarter of last year from 10,789 cases in Q3 2016. As at the end of last year, 52,941 HDB flats were sublet, an increase of one per cent over Q3 2016.
ERA expects rental transactions to increase from last year's 44,530 to around 45,000 to 46,000 this year.
"HDB flats are still attractive to tenants who prioritise location over product, as HDB flats offer better value for a prime location. Shorter leases are still commonplace, with most tenants opting for a 12-month lease as they bet on further rental decreases. Hence the HDB rental market in 2017 will see a large portion of tenants renewing their leases. This will be a major contributor to leasing volume in 2017," said Mr Lim.
Moreover, as rents of private apartments and condominiums fall further, HDB rents will also ease correspondingly to remain attractive to prospective tenants, he added.
This year, HDB will offer about 17,000 new flats for sale in Build-To-Order (BTO) exercises. For the first BTO exercise to be launched next month, about 4,100 flats in Clementi, Punggol, Tampines and Woodlands will be offered. More information on these BTO flats are available on the HDB InfoWEB.
Adapted from: The Business Times, 27 January 2017
Commercial rent, price slide worsens in 2016
Rents and prices of commercial space in Singapore fell at a faster clip last year compared to 2015, with office vacancies rising to a near five-year high since Q1 2012 after some large projects were completed.
Latest data from the Urban Redevelopment Authority (URA) released on Thursday showed that rents of office and retail space have fallen more than 8 per cent in 2016, steeper than the 6.5 per cent drop for office rents and 4.1 per cent fall in retail rents in 2015.
The downward pressures are unlikely to go away just yet, given the impending supply and soft demand as the economy stays subdued, analysts say. But prices may be "stickier" as investors buoyed by private capital are still keen to scoop up commercial assets here, particularly offices, amid currently low interest rates.
Office rents fell for the seventh straight quarter, slipping by a further 1.8 per cent during the fourth quarter and fell 8.2 per cent for the whole year.
Retail rents also maintained a declining streak since the start of 2015, sliding 1.2 per cent during the fourth quarter and 8.3 per cent for the whole year.
The full-year price declines of 2.8 per cent and 5.4 per cent for office and retail space respectively were also steeper than the 0.1 per cent and 0.8 per cent dips seen a year ago.
In the office sector, landlords are facing a double-whammy as the financial and business services sector consolidates while the completion of large projects is causing a short-term supply overhang.
The weak external economy has continued to dampen the creation of new businesses here, weighing down on new demand for office space. The result was a weak net demand of about 27,000 square metres islandwide in 2016, similar to that recorded during the Asian Financial Crisis in 1998.
The relatively stronger net demand in the CBD came at the expense of the outlying areas. Some non-CBD occupiers with expiring leases have moved into the CBD to take advantage of the more affordable rents in these newer and more efficient buildings.
An estimated 2.3 million square feet of gross floor area (GFA) in new project completions last year included DUO Tower in Bugis and Guoco Tower in Tanjong Pagar. This year, Marina One will add another 2.24 million sq ft of gross space and 5 Shenton Way (former UIC building) is adding another gross 325,070 sq ft of space.
With the completion of DUO Tower in December, islandwide office stock expanded by 66,000 sq m in Q4 but net demand - going by the change in occupied office space - was only 1,000 sq m.
This is because most companies that have leased space in DUO Tower and Guoco Tower are still fitting out their premises and have yet to move in.
Islandwide vacancy rate thus rose to 11.1 per cent in the fourth quarter from 10.4 per cent in Q3.
But it was a different story for retail where supply is concerned, with the closure of malls such as Park Mall and Funan DigitaLife Mall for redevelopment in the third quarter.
The increase in demand for retail space islandwide - going by change in occupied stock - was 66,000 sq m in Q4, much higher than the increase in retail-space stock by 10,000 sq m; islandwide vacancy rate fell to 7.5 per cent in the fourth quarter from 8.4 per cent in Q3.
There was also a divergence in the way prices of office and retail space moved in the fourth quarter. While office prices dipped 0.6 per cent in Q4 from the preceding quarter, marking a sixth straight quarter of decline, prices for retail space marked a surprise 0.2 per cent rise after a 0.6 per cent drop in the preceding quarter.
This could be due to the transactions of older strata-title units in Orchard/Scotts Road, which saw prices maintaining or even increasing.
Notwithstanding this, the prices for strata-titled retail units in suburban districts remained soft. There were fewer transactions in 2016, as the price gap between buyers and sellers remain wide.
Some international brands are taking advantage of lower rents to reinforce their brand presence here. These include TripleFit, which occupies 23,500 sq ft of space in Millenia Walk, and Victoria Secret, which opened its 12,000 sq ft flagship store in Mandarin Gallery in November.
Chinese brands have also entered the market, including fashion label Urban Revivo, which has opened in Raffles City and Chinese streetwear brand Hotwind, which has opened in 313 Somerset.
Meanwhile, upcoming supply has started to moderate.
URA said on Thursday that there is about 786,000 sq m of gross office space in the pipeline, compared with the 879,000 sq m of gross office space in the previous quarter.
The retail segment's pipeline consists of total supply of 595,000 sq m of gross space, compared with the 652,000 sq m in the previous quarter.
But nearly two million sq ft gross floor area of retail space is slated to complete this year amid heightened caution among retailers.
Seeing a bumpy ride for both retail landlords and retailers this year, average rents in the Central Region are projected to fall by 5 to 8 per cent and vacancy to hover around 8 to 10 per cent.
Adapted from: The Business Times, 27 January 2017
Industrial prices, rents in 7th straight quarterly fall
Industrial prices and rentals continued their decline for a seventh consecutive quarter in the last three months of 2016. Prices fell a further three per cent in the fourth quarter, and rentals by 0.5 per cent, said JTC on Thursday.
For the year, industrial prices retreated 9.1 per cent, and rentals, 6.8 per cent. This was steeper than the 1.7 per cent decline in prices and the 2.1 per cent in rentals in 2015.
But occupancy levels bucked the trend and rose 0.4 percentage point to 89.5 per cent in the quarter; compared to a year ago, they were still down 1.1 percentage point.
The uptick in the occupancy rate could have come from more industrialists moving into their new premises; as new supply had entered the market in the last few quarters.
However, the increase in occupancy in Q4 2016 may not be sustainable as there is still more completed space expected in 2017. Occupancy rate may drop again in 2017.
JTC has been ramping up supply to arrest the surging of prices and rentals in recent years. Last year, it raised the total stock of industrial space by 1.8 million square metres (sq m). This year, about 2.4 million sq m of industrial space, which includes 548,000 sq m of multiple-user factory space, is estimated to come onstream.
The state industrial landlord said this is higher than the average annual supply of around 1.8 million sq m and demand of 1.3 million sq m of the past three years.
Terence Seow, assistant chief executive for corporate, policy and planning group at JTC, said: "The downward price and rental movements were expected in light of the seller's stamp duty imposed in 2013 to reduce speculation, more supply coming into the market as a result of the large number of industrial government land sales sites in 2010 to 2014 and the introduction of new developments by JTC, as well as the slowdown in the economy.
"Such a price and rental decline will lower the business costs for industrialists, in particular SMEs (small and medium-sized enterprises)."
Consultants offered other reasons for the fall in prices and rentals: it could be a result of there being more shorter-tenure strata-titled industrial properties in the market.
Such properties are cheaper, but harder to obtain financing for. Their asset values depreciate more quickly, which means reselling them is more difficult, making them less attractive to investors.
Strata-titled or multi-user properties are increasingly of shorter tenure, but make up only about a fifth of the total industrial market. Single-user factories, which make up more than half the island's supply, have also met with weaker demand due to JTC's stringent requirements for the tenants' value-added and productivity measures.
Analysts expect overall industrial prices to fall by up to 12 per cent this year, and rents to fall by up to 10 per cent by year's end.
But the situation could improve next year; the projected supply of factory space is expected to fall to a more manageable 6.8 million sq ft in 2018.
Adapted from: The Business Times, 27 January 2017
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