Office property market slowing in Q2

Singapore’s office property sector market appears to be cooling a little.

According to property consultant DTZ, the average office occupancy rate for the second quarter of this year saw a dip of 0.2 percentage point.

Office rental prices have also been flat – suggesting that the market is resistant to rising prices.

According to DTZ, the average office occupancy rate in the second quarter dipped to 96.9 per cent.

It said the slide was spurred by tenants seeking cheaper locations when their leases expired.

Chua Chor Hoon, Senior Director, Research, DTZ, said, “Our second quarter figures show that it has eased very slightly, by 0.2 percentage point, which reflects the office occupier’s resistance to the high rentals in the CBD, and also partly (because) of the slower economy. Companies are now more cautious and they are taking a longer time to think about expansion and renewal.”

Despite the overall dip, areas just outside the CDB saw higher occupancy rates – with the Novena and HarbourFront areas hitting 99 per cent.

At the same time, office rentals climbed by 1.1 per cent – with locations like Raffles Place now going for an average of S$19 per square foot a month.

The report showed that businesses have been looking to alternative locations like business parks, and temporary office locations to tide them over until new office locations open up in 2010.

At the moment, business park rentals cost about half, or a third of what can be found in the CBD.

Some companies may find it more cost-effective to stay in these alternative locations, but DTZ believes there will still be demand when the new supply comes on-stream.

Ms Chua said, “There will be new demand to take on the new office space, and even if the economy slows down this year and next year, we are likely to see it coming back in 2010. That’s when it also coincides with a few major events and developments that are going to take place, like the integrated resorts, and the Youth Olympics, and that is going to give the economy a boost.”

The DTZ report also showed that industrial sector demand remained stable – despite a weakening manufacturing sector – due to foreign investment. – CNA/ms

Source : Channel NewsAsia – 30 Jun 2008

Cheung Kong Holdings keen on Singapore

Mr Li Ka Shing’s Cheung Kong Holdings, Asia’s second-largest developer by market value, said it is keen to invest in Hong Kong, China and Singapore as the region’s property market is undergoes a “small consolidation”.

Prime offices and industrial parks offer investment opportunities because of economic “fundamentals” in the region, Cheung Kong’s Executive Director Justin Chiu said at a property conference in Singapore yesterday. He said he doesn’t expect “significant” price declines in the next 18 months.

Added Mr Chiu: “We’re just at the low tide of the economic cycle. When we clear the sub-prime issues, I’m fairly confident Asia will come back.”

Property developers are seeking more investments to meet rising demand in China and India, the two fastest-growing major economies in the world. China’s economy is forecast by the World Bank to expand by 9.8 per cent this year, even though gains in home prices slowed.

“Across all three markets in the world – America, Europe and Asia – the best prospects, in my view, are for Asia right now,” said Mr Sameer Nayar, head of real estate finance at Credit Suisse. “It is just because you are talking about half the world’s population and most of the world’s growth in gross domestic product is coming from Asia.”

Mr Chiu said that residential developments may be riskier because they are more dependent on the domestic economy. Home prices in Singapore are easing after rising to record highs last year as a global credit squeeze damped demand, while Hong Kong’s home sales fell for a second month as prices cooled.

Sales by value of residential units in Hong Kong slumped 31.1 per cent in May from a year earlier to HK$26.3 billion($4.6 billion), the biggest drop in 19 months, after falling 30.1 per cent in April.

China’s home prices rose 9.2 per cent in May, the slowest gain since September 2007. New home prices increased 10.2 per cent last month from a year earlier. – Bloomberg

Source : Today – 25 Jun 2008

Foreign developers remain upbeat about Singapore’s property sector

Foreign developers are upbeat about Singapore’s property market, and despite signs of a slowdown, they see opportunities for growth.

Although the government may be releasing fewer sites for sale under the Confirmed List, one of the largest property developers in Hong Kong is viewing the latest government land sales list with great interest.

Cheung Kong Holdings is interested in the white site at Jurong East Street 13, placed for sale on the government’s land sales programme for the second half of the year.

Justin Chiu, executive director of Cheung Kong, said: “It’s a good location because the environment is good. Jurong could make itself to be one of the major business centres of Singapore.

“I’ve already asked my team in Singapore to study the location and to come up with some recommendations. Definitely we’re looking to expanding into Jurong area.”

He added that the general cooling in the local property market is a necessary price correction given the increases over the past three years.

Mr Chiu said: “If you look at (the) property market as whole in (the) past two, three years, I’d say prices went up too fast. So we expect some correction anyway in two years’ time.

“So I’d say this slight correction is actually a consolidation of (the) market, which will build a much stronger, solid base for future growth.”

Lippo Group also said it will continue to invest in Singapore, on top of its current focus on emerging markets.

“We like emerging markets. (We) put-two thirds of our money in emerging markets, one-third in developed markets like Singapore and Hong Kong,” Lippo Group’s President Stephen Riady revealed during a panel discussion at the 7th Annual Real Estate Investment World Asia 2008 conference.

At the conference, regional property bigwigs discussed the state of Asian realty, but not all were for Asian properties.

Yu Lai Boon, group chief investment officer of Dubai World, said: “Our point of view is that when you have corrections, that’s where a new golden era arises. Instead of emerging markets in Asia, my point of view is the US.”

Despite the current housing slump in the US, he said investors in the Middle East are looking seriously into the American and European market now, for the next golden era. – CNA/ac

Source : Channel NewsAsia – 24 Jun 2008

Dismal private property sales despite lower prices

PRIVATE property sales by developers remained weak last month, with 441 units sold.

That may be up 55 per cent from the 284 units sold in April, but over 3,000 new units remained unsold. That was despite developers cutting their prices for homes in 18 developments last month. Median prices for The Verve along Jalan Rajah, for example, dropped 17 per cent from $1,187 per sq ft (psf) in March to $985 psf in May.

Mr Colin Tan, Chesterton International’s research and consultancy head, said: “Presently, the market is dominated by investors rather than owner-occupiers because current price levels are beyond the affordability of most owner occupiers.

“To nibble at this investors’ market, developers will have to lower prices and have to continue to lower them to sustain sales,” he said. “A one-off price reduction may generate some sales but it will stagnate once that segment with that certain level of risk appetite is secured or captured.”

Some developments still saw fairly good sales last month. DTZ Debenham Tie Leung’s research senior director Chua Chor Hoon named Vutton at Akyab Road and Orchard Scotts as examples, but noted that some developers were holding off from new launches.

Property analysts expect smaller listed developers to lower prices first, as they will be under pressure to boost earnings.

As for leasing, Cushman and Wakefield’s Singapore managing director Donald Han said: “Contrary to the widely held perception that the rental market is still hot, it has already stabilised. The overall vacancy level is slowly rising as more units are completed.”

Source : Today – 17 Jun 2008

Private home sales jump in May

There has been a sharp pick-up in the number of private home sales in May – more than 441 homes changed hands, about 56 per cent higher than the previous month.

Despite the spike, analysts said it is premature to talk about any strong rebound in the property sector.

Colliers International’s director of research and advisory, Tay Huey Ying, said: “I wouldn’t say that this set of May numbers give a positive indication that the market is moving. But I think looking at last six months’ developer launches and sales volume, the market has reached a stable state, with launch volumes at 400-450 range, and sales volumes at 300-350 range.

“The fact that market can reach this consistently, despite prices remaining stubbornly firm, this means that the current price levels are well supported by homebuyers.”

Analysts added that even though May numbers come as a pleasant surprise, this bump upwards is also typical of the yearly property cycle.

Propnex Realty CEO Mohamed Ismail said: “The number has picked up a fair quantity compared to April. Generally speaking, the second quarter usually does better than the first quarter. Things start to pick up, and in the month of April, May, June, July, one can expect (the) numbers to grow.”

Ms Tay pointed out: “Monthly fluctuations in developer sale and launch volume (are) to be expected. But this set of May numbers… is indeed a very pleasant surprise.”

About 61 per cent of homes sold in May were under S$1,000 per square foot, suggesting that purchasers are genuine homebuyers, rather than speculators.

Analysts said a large decline in prices is unlikely going forward, although a marginal dip of one to two per cent may be possible.

“This is, to an extent, a buyer’s market. On the other hand, developers are not bringing the price down drastically. Many (are) holding prices because (the) fundamentals of economy and demand of such properties (are) still there. So I don’t expect prices to slide down,” said Mr Ismail.

Knight Frank and CB Richard Ellis also noted that prices have stayed firm, contrary to market expectations.

Although some analysts called this a buyer’s market, they also noted that sellers are taking a more measured approach.

Colliers said developers are likely to stay off launching luxury and super luxury projects until there is a clearer sign of market recovery. – CNA/ac

Source : Channel NewsAsia – 16 Jun 2008

Singapore private home sales down 40% in Q1

Sentiments in the Singapore residential property market continued to weaken in the first quarter on the back of a possible recession in the United States.

Private home sales dropped by 40 percent in the first quarter of this year compared with the last quarter of 2007, according to a report by DTZ Research.

Transactions of private condominium units, based on caveats lodged, fell 41 percent to 2,500, while sales of landed homes declined 38 percent to 566.

Analysts said the poor sales were due to a stand-off between buyers and sellers’ price expectations.

“A lot of these sellers are still looking for prices at the peak of the market, which is probably in the middle of last year. They are still confident that the market would trend up in the mid term, and that the current slowdown is likely to be temporary,” said Tay Huey Ying, Director of Research & Advisory at Colliers International.

But the slowdown looks set to stay for a while. Developers are launching fewer units. Only 487 private condominium units were released for sale in the first quarter of this year, down 49 percent compared with the previous quarter. This is the lowest since the SARS period in the first three months of 2003.

The number of new properties resold before completion continued to decline, by 40 percent in the first quarter, the lowest in one and a half years.

“I think sub-sales will continue to remain at a very low volume in the coming quarters…..Speculators are likely to continue to stay away from the market at this point because the road ahead is still very uncertain – the uncertainty in the US economy, as well as the global financial market turmoil,” said Tan.

Going forward, analysts expect overall prices in the private residential property market to increase by between 0.5 and 1.5 percent in the second quarter of this year. – CNA /ls

Source : Channel NewsAsia – 12 Jun 2008

Property consultants say muted property market situation is temporary

Investors have been cautious about the property sector amid expectations that the muted residential property market will weaken further.

But some property consultants are taking a slightly more positive stance, saying that this situation is temporary.

Transaction volumes for private homes have been thin with developers holding back launches or cutting prices. And there’s been a recent slew of bearish reports from the likes of JP Morgan and Nomura, which are further dampening sentiment.

They said that private home prices could drop by as much as 35 per cent in the upper-end segments of private residential property prices by 2010, due to excess supply and poor sentiment.

Some also said the middle and low-end segments won’t be spared.

But there are some property consultants who said that while things are slow now, dynamics will change going forward.

Some analysts said that luxury homes may cost 35 per cent less by 2010 as prices are already falling.

They argue that marginal speculative sellers are likely to drive prices lower amid low transaction volumes and higher unsold pre-sale inventories.

Lower rental expectations and a large increase in supply are also seen compounding the situation in the longer term.

While the consensus view is that prices will continue to remain under pressure for the rest of the year and into 2009, other consultants also said that the main reasons for falling prices are external.

Chua Chor Hoon, Senior Director, Research, DTZ Debenham Tie Leung, said: “It’s mainly the external factor because of what’s happening in US so sentiments are really weak now. Partly because prices have gone up quite a lot last year especially after the deferred payment scheme has been removed that made buyers more cautious. It’s a combination of factors but I believe it’s the US economy that has a greater impact.”

She believes that prices will continue falling for the rest of this year and even into the year ahead, but a glimmer of hope exists.

She said:”Prices are likely to fall for the rest of this year and they could continue to fall next year depending on how the US economy pans out. But we have a lot of good things coming up in 2010, Youth Olympics, integrated resorts. So our fundamentals are quite strong. When the US economy picks up, I believe sentiments will follow suit.”

And some point out that the bearish reports are due to an over-estimation of supply numbers.

Ku Swee Yong, Director, Marketing & Business Development, Savills (Singapore), said: “The differences arose because of variance in the interpretation of a very basic set of data – the supply numbers – how many apartments will be completed in next three years. We believe that the supply numbers have been overstated because there have been many projects filed and we know that these projects have been delayed.”

What’s clear though is that shares in property developers have been taking a hit amid concerns over the sector outlook. They were mostly lower on Thursday, with both Keppel Land and CapitaLand closing in the red. – CNA/vm

Source : Channel NewsAsia – 28 May 2008

Ho Chi Minh City overtakes S’pore as having world’s fastest growth in office rentals

Vietnam’s Ho Chi Minh City has overtaken Singapore as having the world’s fastest growth in office occupancy cost.

The cost of renting office space in Ho Chi Minh City grew 94 percent in the last six months, according to a global survey by consultants CB Richard Ellis.

Moscow was second at 93 percent, while Singapore took third spot with 86 percent growth.

Still, Singapore made its debut among the 10 most expensive markets, coming in 9th with office rentals averaging US$139 per square foot per month.

Dubai was another new entrant, taking tenth spot with rents hitting US$128 per square foot per month.

Despite this, CB Richard Ellis says Singapore’s growth in office occupancy cost is not expected to remain as strong in the coming years.

It says the market peak is close at hand and rents could come down with the supply of new office space in the next few years.

London remains the most expensive office market, with rents hitting as high as US$300 per square foot, followed by Moscow at US$232 and Tokyo at US$220. – CNA/ir

Source : Channel NewsAsia – 28 May 2008

Rental rate to fall 25%: Bank

Barclays Capital says market has peaked, rent to drop 5% this year and more in next 2 years

Have home rentals peaked? With a looming rush of new supply, one bank is predicting that they could fall by as much as 25 per cent by 2010.

That is good news for tenants, but not so good news for landlords, who saw private rentals surge an average of 41 per cent last year.

This bold forecast comes in a report from Barclays Capital. Its author, regional economist Leong Wai Ho, expects rentals to fall by 5 per cent this year, with a more severe price correction beginning from next year.

“The market has certainly peaked because vacancy rates are starting to rise and rents are linked to vacancy rates,” he said.

Current vacancy rates for completed flats are not particularly high, at 6.3 per cent in the first quarter of this year, according to Urban Redevelopment Authority figures.

Mr Leong said: “The vacancy rises are not strong this year, but it will be exceptional next year due to the huge supply hitting the market.”

A surge in reconstruction is taking place across town, following the recent flood of en bloc condominium sales. Some big residential developments around the central business district, including The Sail@Marina Bay, are also nearing completion.

Almost 13,000 new homes could be completed next year, rising to 18,000 the year after. All this, at a time when the global economy is slowing.

On the outlook for rents, other property consultants offered mixed views. Chesterton International’s research head Colin Tan believes that the Barclays forecast of a 5-per-cent correction this year is too “conservative”.

He believes the recent spike in rental demand was a “one-off”. As thousands of home owners cashed in and sold their properties en bloc, there was a surge in instant tenants. Mr Tan believes many of them would have now found accommodation and the en bloc scene has since quietened down.

He added: “Supply will also be greater than usual due to the larger proportion of units owned by investors, as opposed to owner-occupiers, who usually put their properties up for rent.” During the recent boom, many people bought second or third homes as rental properties.

Jones Lang La Salle’s research head Chua Yang Liang is more bullish. He expects rents to hold steady as demand from foreign workers remains strong. In fact, he predicts that rents will grow “in the teens” this year before moderating to about 6 to 8 per cent next year. “The hiring of upper management level staff may have reached stable levels, but foreign banks such as Standard Chartered are hiring more employees at the middle-management levels, who also need housing,” he said.

ERA Singapore’s assistant vice-president Eugene Lim said that his company has seen a higher volume of leasing transactions this year and expects rents to rise by another 3 to 4 per cent this year.

Source : Weekend Today – 17 May 2008

Sales in private residential market dip in April

Sales in the private residential market have dipped in April after a mild recovery in March.

According to the numbers of private home sales released by the Urban Redevelopment Authority (URA), only 274 units were sold last month – down from 301 units in March.

Developers were also holding back, with only 271 units launched in April – the lowest number of units since market weakness surfaced in September last year.

Analysts said they expect the market to continue moving gingerly.

Homebuyers in the mass market are keeping the numbers moving along as nine out of every 10 units sold in April were in the suburban areas. This belies the overall cautious stance that homebuyers are taking.

Chua Chor Hoon, Senior Director of Research, DTZ Debenham Tie Leung, said: “Speculation is almost nil. Most buyers we see in the market are probably those buying for owner occupation, with needs for accommodation.”

With buying and selling almost at a standstill, analysts said the ball is now in the developers’ court.

Colin Tan, Director of Research & Consultancy, Chesterton International, said: “Looking forward, you can see that in order to raise their sales, developers will need to price their units more realistically. As you can see from the April figures, those that have done so are being rewarded with higher sales.”

But the URA figures also show that prices remain firm for high-end units and developers for those units are choosing to wait out.

“Developers are still holding back launches, especially for bigger projects and those at higher end range. What we see are mostly launches in suburban areas with units priced below S$1,000 psf,” Mr Chua said.

While the latest data may seem to provide more evidence of a weak housing market, analysts said numbers are very thin and have cautioned against reading too deeply into them as they could be potentially misleading. – CNA/so

Source : Channel NewsAsia – 15 May 2008