The Singapore office market stabilised in the first quarter of this year.

Overall rentals dipped only 1.5 to two per cent compared with the previous three months.

Analysts said they expect rents in the central business district to fall further, as office tenants choose higher quality space.

Market watchers also believe that demand will not keep pace with new supply coming on stream.

Marina Bay Financial Centre and Asia Square will soon be dotting Singapore’s skyline, creating brand new Grade A office space.

Analysts said this will create a flight to quality, where office tenants take advantage of lower leasing rates and the prestige of locating in newer buildings.

Observers said this could affect the Raffles Place district.

“The grade A space market is a very niche market, so the tendency is that the newer landlords in the newer buildings like Marina Bay will have to look to the current Grade A tenants, and so you may see a hollowing out of tenants, Grade A tenants, moving from maybe Raffles Place to the new schemes in Marina Bay,” said Colin Tan, director of Research & Consultancy at Chesterton Suntec International.

Still, for now, demand for prime office space has been holding steady in the first quarter.

According to DTZ Research, the average occupancy rate for Grade A property space islandwide improved to 92.4 per cent, a 0.7 percentage point increase from the previous quarter.

Overall vacancy rates have also stabilised at 12 per cent.

Going forward, analysts said there will be a supply of 2.5 million square feet of office space per annum over the next three years.

“We expect to see demand continuing to grow, but I think it’s not going to be sufficient to match the supply that’s going to come onstream so we expect vacancy rate to go up again and also we forsee that rents are going to fall by about five to 13 per cent in the CBD for this year,” said Chua Chor Hoon, senior director of Research at DTZ.

According to DTZ Research, office rents are expected to bottom sometime in 2011 or by the end of the year, if the economy grows more strongly than expected.

Source : Channel NewsAsia – 1 Apr 2010

The Urban Redevelopment Authority (URA) said a developer has committed to bidding at least S$100 million for a land parcel at the corner of Stamford Road and North Bridge Road.

The site, which has a 99-year lease, includes three historical buildings – the Capitol Theatre, Capitol Building and Stamford House.

The site has been on the reserve list since 2008 and is expected to be launched for sale by tender in two weeks.

There will be some conditions for the successful bidder.

The bidder will have to retain and restore the buildings for adaptive reuse, and must also set aside 25 per cent of the total gross floor area for hotel use.

The land parcel has an area of about 1.43 hectares and will be sold together with a subterranean parcel that connects City Hall MRT and the CityLink Mall with Marina Centre.

URA said a concept and price revenue tender system will be adopted to choose the winning bidder.

Consultants CB Richard Ellis said it expects the site to fetch bids of between S$400 and S$500 per square foot, based on the maximum permissible gross floor area.

This will translate to an estimated bid of between S$220 million and S$270 million.

Source : Channel NewsAsia – 1 Apr 2010

The government’s anti-speculative measures for the property market appear to have worked.

Private home prices grew at a slower pace of 5.1 percent in the first quarter, according to estimates from the Urban Redevelopment Authority (URA).

At this rate, analysts expect prices to return to the 2008 peak levels before the end of this year.

Home prices are rising again with strong take up for new launches like The Vision, The Altez and Cube 8.

The better economic outlook and low interest rates have also helped.

But the increase has moderated to 5.1 per cent in Q1, down from 7.4 per cent the previous quarter.

Analysts said prices may eventually rise six per cent after accounting for deals done in late March.

Overall, they said the cooling measures introduced last September and in February have gained traction.

Desmond Sim, associate director, Research & Consultancy, Jones Lang LaSalle, said: “The core central region has the highest rate of decline, a 2.8 per cent drop. So traditionally the core central region is for speculators. It is a sign that short term speculation has been curbed by these measures.”

Across all segments, prices grew at a slower pace in Q1.

Private homes in the city cost 4.5 per cent more while those in the city fringe went up by 7.2 per cent.

Meanwhile, mass market home prices, which have already hit their peak, grew 3.9 per cent in the first quarter.

Market watchers expect home prices to increase by between 15 and 20 per cent for the whole of 2010 and this growth will be led by the mid-tier and high-end segments.

Experts said higher land prices seen in recent tenders will continue to support price growth.

Tay Huey Ying, director, Research & Advisory, Colliers International, said: “If these predictions were to come true then prices would have surpassed the 2008 peak by up to 14 per cent and that would be for the mass market projects.

“But across all levels it would have hit 2008 peak by around three per cent for high tier and nine per cent for the mid tier projects.”

Property analysts said home prices could breach the peaks set in 2008 and 1996 within the next three to six months.

Property consultancy firm Cushman & Wakefield said the URA price index is now about two per cent off the peak in Q1 of 2008 and four per cent shy of the record in 2Q 1996. And the market could breach these peaks within the next three to six months.

In all, real estate consultancy firm CB Richard Ellis said the residential price index has recovered by a total of 30.7 per cent since it bottomed out in the second quarter of 2009.

Source : Channel NewsAsia – 1 Apr 2010

Prices of HDB resale flats have continued to rise. According to the Housing Development Board’s (HDB’s) flash estimates, prices rose 2.7 per cent in the first quarter of this year, compared to the last quarter of 2009.

The rise was more moderate compared to the almost 4 per cent increase in the fourth quarter of 2009. It is the fourth consecutive quarter of price increase. Resale volume has, however, trended downwards.

The estimated number of resale transactions for the full quarter is about 8,500. This is about 5 per cent lower compared to the fourth quarter of 2009, which registered 8,926 cases.

HDB said the median Cash-Over-Valuation (COV) amount for the first quarter was S$25,000, an increase of S$1,000 over the fourth quarter. HDB said it will ensure an adequate supply of new flats to meet housing demand.

At least 12,000 new Build-To-Order (BTO) flats will be launched this year, with launches scheduled monthly for the next few months. This will be supplemented by flats under the Design, Build and Sell Scheme (DBSS) as well as Executive Condominiums (EC) for the higher income buyers.

If demand remains strong, HDB will launch more BTO projects in the fourth quarter of this year.

Source : Channel NewsAsia – 1 Apr 2010

An executive maisonette in Bishan is on the verge of setting a new record for the most expensive HDB flat ever transacted.

The flat is set to be sold for S$900,000, including an eye-popping cash premium of S$170,000.

However, analysts say that such a sale would be an exception, rather than the norm.

MediaCorp understands the owner had originally asked for S$950,000, but this was brought down to S$900,000 by the buyer.

Chris Koh, an analyst with Dennis Wee Properties, said the valuation price of about S$750,000 is “reasonable” given the flat’s location and size.

However, he noted that a cash-over-valuation of S$170,000 is a record.

Analysts said that this is likely a one-off event.

HDB data shows that similar executive maisonettes in Bishan have sold for much less, with median prices at S$615,000.

Analysts cautioned that before forking out the money, buyers should also consider the unit’s resale potential.

Said David Poh, senior group district director of Propnex Realty: “You probably will want to sell much higher than any other executive maisonettes in Bishan. So that will mean your pool of buyers will shrink, you’ll probably have very limited buyers to choose from, and you probably will face more challenges in reselling it than a normal maisonette in Bishan.”

He said the market for resale flats remained strong, although the popularity of two recently-launched Build-to-Order projects – Sembawang RiverLodge and Fernvale Ridge in Sengkang – suggests that some buyers are turning to new HDB flats instead.

Still, he expects resale prices to go up five to eight per cent on average this year, slightly lower than the 8.2 per cent growth seen in 2009.

Source : Channel NewsAsia – 1 Apr 2010

WITH both public and private property prices continuing to rise in tandem, developer Simon Cheong’s call last week for private property prices to remain unfettered by government intervention seems not only contradictory but perhaps also misguided.

Property developers have long had a constructive relationship with the government.

Indeed, the reserve list system of the government land sales (GLS) programme was largely created in consultation with property developers and the Real Estate Developers’ Association of Singapore, of which Mr Cheong is currently president.

In 2003, the government even suspended the confirmed list of the GLS – which allowed developers to unload their inventory of unsold housing units without additional competition from new sites.

In H1 2004, with the suspension of the confirmed list still in effect, only 2,755 housing units were potentially available through the reserve list. By H2 2004, this number fell to 2,600 units.

The subsequent limited supply of new developments played a part in the run-up to the property price peak in 2007, and certainly helped developers boost sales and profits.

So to say now that the government should be taking a laissez faire approach to the property market is disingenuous. One cannot welcome government intervention to support property prices in bad times, but call for a hands-off approach when property prices are rocketing.

It is true that the government is intervening to control private property prices in the current boom.

For H1 2010, for instance, it has made available land for up to 10,550 housing units through the GLS with sites on both the confirmed list and the reserve list.

Mr Cheong, in an impassioned speech, suggested that not all Singaporeans are entitled to aspire to private housing. After all, he argued, private property only serves about 16.5 per cent of the population, so why does it need to be ‘affordable’?

But the line between the two segments is not so neatly drawn.

For many Singaporeans, including some who live in private property, wealth creation comes from the sale of their public housing flats. So every upgrader who has ever sold a public housing flat for a profit to buy a condominium has had a hand in supporting prices in the private home market. That is why resale public home prices are often seen as the price base for private housing units. And developers have benefited from the aspiration of many Singaporeans to upgrade to private property.

Property consultants DTZ found that in 2009, buyers with public housing addresses accounted for 41 per cent of total buyers, almost double the 22 per cent in 2007 (when higher-end projects were leading the rise in the market).

With private home prices rising, DTZ found that private housing had become less affordable with its housing affordability index rising 13 per cent. This could push up demand and prices for relatively cheaper resale public flats which, in turn, could price other buyers out of that market, with knock-on consequences on demand for new public flats.

The private and public housing sectors are closely interlinked, which is why the government looks at the property market as a whole. Mr Cheong was right only when he said that property prices are a ’sensitive topic’. But for him to suggest that the private property market is ‘exclusive’ (in all senses of the word) is just off the mark.

Source : Business Times – 3 Apr 2010