Investment sales of property reach $28.7b this year

Year could end at $29.5 billion; Savills forecasts cooling in 2013 citing world economy, price gap. -BT

SINGAPORE - Investment sales of property - which refer to transactions of $10 million and above - have fallen to about $6.9 billion so far this quarter (up to Dec 11), from the $9.3 billion in Q3, estimates Savills Singapore.

The slowdown came amid a halving in deals originating from the private sector to $3.7 billion so far in Q4 from $7.2 billion the previous quarter.

"The weak global economy and a still-wide bid-ask gap remained key reasons for the tepid investment activities in the private sector. As well, the year-end holiday season has stretched negotiations and decision-making," Savills said.

Big-ticket deals originating from the public sector - predominantly Government Land Sales (GLS) - climbed to $3.2 billion in the Oct 1-Dec 11 period from $2.2 billion in Q3.

"To replenish their land banks, local and even foreign developers contested aggressively at GLS tenders. In particular, riding on the current buoyant sales market for executive condos (ECs), strata offices, shops and medical suites, record prices were set for some sites slated for such use," it added.

Savills said that including outstanding state tenders, caveats for other transactions which have yet to be lodged and the expected sale of 79 Anson Road, Q4's final tally could hit $7.6 billion.

Year-to-date (up to Dec 11), $28.7 billion of investment sales deals have been transacted, though 2012 could end at around $29.5 billion, it estimated.

That would be slightly shy of the $30.1 billion last year and $32 billion in 2010.

Steven Ming, deputy managing director of Savills Singapore, expects a slight cooling in investment sales next year to $25-$27 billion.

"The world economy is far from being out of the woods, and this in turn will affect investment sentiment. A still wide bid-ask gap will remain, lengthening negotiations."

On a brighter note, he said: "We expect the government to continue to launch a substantial number of sites under the 2013 GLS Programme and this should keep developers actively bidding on the back of strong balance sheets and extremely low interest rates. Overseas property funds are also keen on Asian acquisitions."

The en bloc sale market has been anaemic this year, with 24 deals totalling just under $2 billion, down from 51 transactions at $3.2 billion last year.

Said Jones Lang LaSalle head of investments Karamjit Singh: "The stock of 'en bloc-able' developments within the sweet spot of less than $200 million started to dry up this year. This tighter supply of viable deals led to a drop in en bloc sales in 2012."

"With the gap in residential land prices between the mass-market and mid/upper segments beginning to narrow, we can expect some shifting of investments from state tenders (which supply mostly mass-market sites) towards en bloc sales, which are mostly in mid-prime and prime districts."

Savills' Mr Ming predicts a "marked improvement" in developers' appetite for en bloc sales following a recent fine-tuning of rules to give developers who buy residential en bloc sites more time to meet deadlines to finish developing their sites and selling all the units in the new projects.

The changes factor in the time taken to get a collective sale order from the Strata Titles Board or High Court.

"Going into 2013, with the option of deals from the collective sales market to consider, developers may take their foot off the pedal slightly when bidding for GLS sites, easing the current intense competition," said Mr Ming.

Although Savills defines investment sales as deals of at least $10 million, it includes transactions below this threshold for GLS sites, residential en bloc sites and acquisitions by real estate investment trusts.

Of the $28.7 billion transacted year-to-date, the residential sector continued to make up the lion's share - of about 45 per cent amounting to $13.1 billion.

Including today's tender closing of a Sembawang EC plot and caveats for other residential transactions that will be lodged by Dec 31, the full-year figure could be close to 2011's $13.5 billion.

Commercial (office and retail) property deals have reached $7.5 billion year-to-date, down from $8.2 billion in 2011.

Private-sector office transactions declined from $6.2 billion in 2011 to $4.9 billion so far this year.

Savills attributes this to global economic uncertainty, a moderation in office leasing and the buyer-seller price gap.

DBS' purchase of a 30 per cent stake in Marina Bay Financial Centre Tower 3 at $1.035 billion has been the biggest office deal this year.

Retail property deals in the private sector doubled from $1.1 billion in 2011 to $2.3 billion year-to-date, buoyed by the sale of several shopping centres, including a half stake in nex in Serangoon for $825 million and the $519 million sale of Compass Point.

Investment sales of hospitality assets in private and public (GLS) segments combined jumped from $1.6 billion in 2011 to $3.8 billion so far this year, thanks to the flotation of Far East Hospitality Trust.

This involved the sale of seven hotels and four serviced residences worth $2.1 billion to the trust by its sponsors.

Industrial property deals slipped from $4 billion in 2011 to $3.4 billion year-to-date, amid a decline in the public sector's contribution.

The fall is from a high base in 2011 which saw the second phase of JTC's divestment, along with shorter-tenure GLS sites.

Kalpana Rashiwala

Sat, Dec 15, 2012
The Business Times

Source: AsiaOne

High-end rents seen easing further

This would bring rents of luxury homes to below $5 per square feet (psf) per month. -BT 

High-end rental rates look set to continue their downward trend, with market watchers predicting a price correction of between five and 10 per cent next year stemming from tightened budgets and an increasing supply of completed luxury homes.

This would bring rents of luxury homes to below $5 per square feet (psf) per month.

Rents of top-tier condos tracked by Savills Singapore showed a drop for a sixth consecutive quarter, bringing rents down 7.4 per cent to $4.88 psf per month in Q4, from $5.27 psf per month in the year-earlier period.

As the number of vacant units increase in tandem with the surge in project completions, investors who have bought private homes for rental investment could encounter significant risks in the months ahead, warned Savills Singapore.

The Urban Redevelopment Authority (URA) said that 91,869 new homes will be released to the market over the next five years, more than half of which have been sold.

Some major completions over the past year include Caspian (712 units), Mi Casa (457 units), Reflections (1,129 units) and The Trizon (289 units).

The vacancy rate in the Central region was 7.9 per cent in the third quarter of 2012, above the five-year average of 7.5 per cent.

Vacancy rates in the eastern and western regions of Singapore were 4.5 per cent and 4 per cent in Q3, higher than the 3.5 per cent and 3.6 per cent five-year averages, respectively.

"The emergence of shadow spaces when owners relocate into their new premises may prove to be an additional challenge for both the leasing and sales markets. If demand from population growth does not rise in tandem and interest rates start to rise, a significant rental correction cannot be discounted," Savills said in a report released on wednesday.

But it's not all gloom and doom for the rental market in the coming year.

Demand for mass-market units is rising and is expected to remain buoyant throughout 2013, in line with the tighter rental budgets of the new entrants.

"Constrained rental budgets have led tenants to search for smaller homes, either singularly or sharing, driving up rents on a per-sq-ft basis," said Savills Singapore research head Alan Cheong.

Data released by URA showed that island-wide median rents for condos and apartments (excluding executive condominiums) hit a record $3.75 psf per month in October, up 7 per cent over the previous year.

Median rates for houses, however, slipped 0.4 per cent month-on-month in October to $2.65 psf per month.

According to data compiled by Savills Singapore, the total value of all leasing transactions for the first 10 months of this year hit $208 million, surpassing the yearly totals for the period from 2000 to 2010, and the figure is expected to surpass the $218 million record set in 2011 once contributions from November and December are included.

Zeinab Yusuf Saiwalla

Sat, Dec 15, 2012
The Business Times

Source: AsiaOne

Bright end to the year for property market

Condo resale prices at historic high despite dim rental outlook. -ST

A view of private condominiums and HDB flats in the eastern part of Singapore. While condo resale prices rose overall from the third quarter to $1,222 psf on average for October and November, the rental market recorded a dip, with overall gross rental yield at a six-year low of 3.77 per cent.

SINGAPORE - THE year looks like it is ending with a flourish for the property market, with turnover up and condominium resale prices already at a historic high.

The only weak spot is rentals, which have weakened in the wake of increased supply and job cuts among global firms.

Condo resale prices rose overall to $1,222 per square foot (psf) on average for October and November, according to the Singapore Real Estate Exchange (SRX) on Friday.

This is 5.4 per cent up on the $1,159 psf average recorded during the third quarter this year.

Although data for December is not in, PropNex chief executive Mohamed Ismail expects the figures to have a minimal impact on resale prices for this quarter.

Gains were seen across the island during October and November.

City centre resale prices were 2.8 per cent higher than the average in the third quarter, city fringe condos were up 

3.3 per cent and suburban condo values shot up 4.5 per cent.

But Mr Ismail said "record supply in the pipeline could further help alleviate any pent-up demand" in the suburbs, and so prevent price spikes.

The overall islandwide price growth of 5.4 per cent was higher than the individual increase in each region because condos in the city centre, which are more expensive per square foot than the rest, made up a bigger percentage of transactions in October and November than in the third quarter, the SRX said.

Resale transaction volumes climbed 6 per cent to 2,483 in October and November, from July and August. However, analysts noted that December is typically a quieter month, given the festive break, so overall fourth-quarter transaction volumes may not show a significant increase.

The rental market appears to be heading in the opposite direction to the resale market.

Overall gross rental yield dropped to a six-year low of 3.77 per cent in the first two months of the fourth quarter, the SRX said, citing a double whammy of strong price gains and weaker rents.

Analysts said the rental outlook is likely to be dim.

"As supply comes on-stream and banks continue to freeze headcount or retrench, I think residential vacancies and rentals will slide further," said International Property Advisor chief executive Ku Swee Yong.

"So yields will suffer more. But thanks to low interest rates, strong employment, holding power will remain strong and so we will not expect to see any desperate sales cases."

Average unit monthly rents dipped from $3.88 psf in the third quarter to $3.84 psf in October and November.

The sharpest drop was in the city fringe, where rents moderated after three straight quarters of growth this year, falling 2.5 per cent to an average of $3.91 psf.

Rents for condos in the rest of the island remained relatively stable relative to the third quarter.

City centre rents averaged $4.67 psf in October and November, little changed from the thirdquarter, while suburban rents were virtually flat at $3.06 psf.

The SRX's report also included, for the first time, data for shoebox units, which are apartments smaller than 50 sq m.

Demand was high for rents, with 1,328 contracts having been signed so far this year, but the number of resale transactions was relatively small at 198 units as of Dec 6.

Average unit monthly rentals for shoebox apartments were $6.65 psf in October and November, slightly higher than $6.61 psf in the third quarter.

melissat@sph.com.sg

Melissa Tan

Mon, Dec 10, 2012
The Straits Times

Source: AsiaOne