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The proportion of strata retail units changing hands within three years in the resale market is on the rise – pointing to increased speculation in the sector.
Similarly, the proportion of resale deals involving strata retail units bought less than a year earlier is also up, according to DTZ’s analysis of URA Realis caveats data. Correspondingly, the average holding period in resale transactions in strata retail units has fallen.
DTZ found a total of 3,315 caveats of strata retail units (excluding collective and bulk sales) between 2008 and the first quarter of this year – across both primary and secondary markets. Out of this pool, 2,045 caveats were for resale transactions (secondary-market deals of completed properties) – of which the property consultancy could trace previous caveats for 1,127.
From analysing these 1,127 matched strata retail unit transactions, DTZ found that the proportion of resale transactions that were carried out within three years of the units being previously transacted has increased from 27 per cent in 2010 to 33 per cent in 2011, rising again to 42 per cent last year. In the first three months of this year, the proportion of strata retail units climbed further to around 55 per cent.
Similarly, the proportion of resale strata retail deals which involved units bought less than a year earlier has risen – from 10 per cent in 2010 to 15 per cent in 2011, 16 per cent last year and 25 per cent in Q1 this year.
Conversely, the average holding period in resale strata retail unit deals has contracted steadily – from 6.5 years in 2010 to 6.1 years in 2011, 5.8 years in 2012 and 4.7 years in Q1 2013.
In January, the government had stepped in to cool speculation in industrial property. It was then revealed that 15 per cent of all transactions of multiple-user factory space in 2011 and 18 per cent in the first 11 months of 2012 involved resale deals carried out within three years of purchase.
In comparison, strata retail units changing hands within three years in the resale market accounted for 13 per cent of all retail unit transactions in 2011 and 9 per cent in 2012.
“However, we note that the proportion… has increased to 17 per cent in Q1 2013,” notes Lee Lay Keng, head of Singapore research at DTZ.
Resales refer to secondary-market transactions in projects that have received a Certificate of Statutory Completion (CSC) and where property titles for units sold have been transferred to the buyers. Secondary-market deals in projects for which CSCs and titles have yet to be issued are known as subsales.
Increasing Strata Retail Units Subsale
DTZ found caveats for 54 subsale transactions of strata retail units (which it could match against previous sales records) among new projects launched from 2010 to Q1 2013. While the 54 subsales make up a relatively small 4.7 per cent of the total 1,148 new strata retail units sold by developers in projects launched over the same period, DTZ highlighted that more than 80 per cent, or 45 of the 54 subsales, involved units that had been purchased less than a year earlier from their respective developers.
Market watchers say that many strata retail units at the freehold Pavilion Square in Geylang Road, which were sold by its developer like hot cakes barely a fortnight ago at between $2,000 psf and $10,879 psf, are now being offered by their new owners for sale at higher prices.
Says DTZ’s Ms Lee: “Transactions with a holding period of under one year are likely to be of a speculative nature. If speculation increases, driving up prices of strata retail units and increasing business costs for genuine end-users, we do not rule out cooling measures for retail property similar to the seller’s stamp duty implemented in January for industrial property.”
Savills Singapore research head Alan Cheong said: “It is less of a political hot-potato if the authorities were to clamp down on speculation of retail units as it affects a small segment of society.
“However, the authorities must be objective in what they want to achieve because once any measures are enacted, it is more difficult to reverse them without losing credibility.”
Of the 45 strata retail units subsold within a year of being bought from the developer, 27 were flipped within two quarters, which in turn included 21 units that changed hands within a quarter.
For instance, a second-floor unit at Oxley Tower was bought from the developer in May last year for around $1.028 million and divested four days later at $1.065 million.
In Balestier, a first-storey strata retail shop in the mixed development One Dusun Residences was purchased from the developer in September last year for $1.345 million and flipped 17 days later at $1.48 million, resulting in a profit of $135,000 or 10 per cent.
The resale market too saw a few quick flips, though typically these entailed longer holding periods. A second-floor strata retail property at Peninsula Shopping Centre in Coleman Street acquired last December for $980,000 was resold in early March this year at $1.1 million, reflecting a $120,000 or 12 per cent gain.
THE huge Spring Grove condominium in plush Grange Road could hit the market at a reserve price of $1.045 billion, now that complex ownership issues have finally been ironed out.
The 325-unit estate is on the site of the former residence of the American ambassador and has been tipped for a collective sale since owners were asked to consider forming a sales committee in February last year.
But the tricky nature of the estate’s ownership threw up hurdles. The Spring Grove site has a 99-year lease, which started in 1991 and reverts back to the United States government at the end of the tenure as freehold land.
This threw up a number of legal issues but The Straits Times understands that these have been sorted out, with the US government working together with home owners in a collective sale bid.
If the $1.045 billion – or $1,888 per sq ft (psf) per plot ratio – land price is met, $924 million will be earmarked for Spring Grove owners.
The remaining $121 million will go to the US government for it to top up the lease to a new 99-year one, according to the draft collective sale agreement obtained by The Straits Times.
City Developments bought the 24,481 sq m plot from the US government in 1991 and built the 325-unit Spring Grove on it.
With the ownership issue resolved, the next step occurs on Sunday when the Spring Grove sale committee will ask owners at an extraordinary general meeting to give the green light for the collective sale to proceed under these terms. An 80 per cent consensus is required to mount a sale attempt.
The reserve price of $924 million for the Spring Grove home owners works out to a 21 per cent premium, compared with its current market value of about $727 million, the sale documents stated.
Owners of two- to four-bedroom units and penthouses of Spring Grove can expect a reserve price of between $2.19 million and $5.6 million for each apartment or average psf prices of $2,100.
Spring Grove’s resale prices of 14 units sold since the start of last year averaged $1,610 psf.
Sales committee chairman Joseph Chia said the collective sale presents a window of opportunity as the US government is willing to explore a top-up of the lease after negotiations with the sales committee over the past year.
“Some owners are happy while others are undecided because they like the place and are unsure if they can get something comparable if they sell.”
Mr Chia added that the site will be marketed globally.
But experts say a sale is likely to be an uphill task as the premium of 20 per cent might be insufficient to entice owners to part with their Spring Grove homes.
Even if the development makes it to the market, the lacklustre high-end segment, the pressures of the additional buyer’s stamp duty and the risk of more cooling measures have also affected developers’ sentiment, they add.
Mr Lee Liat Yeang, a partner at Rodyk & Davidson’s real estate practice group, said average premiums for collective sale sites ranged from 30 to 50 per cent over the past two years.
They were higher during the en-bloc boom in 2006 and 2007 but have moderated as home values surged.
“Developers’ appetite for large value en-bloc sites is unlikely to be big in the real estate market today in view of the challenges such as rising construction costs and the recent cooling measures,” he said.
“No collective sale deal has been done past that billion-dollar level since Farrer Court in 2007.”
OXLEY Holdings, fresh from its purchase of McDonald’s Place, has snapped up Hougang Plaza for $119.1 million from CapitaMall Trust (CMT).
In a statement issued to the Singapore Exchange yesterday, CMT said that it has sold the three-storey shopping mall (Hougang Plaza) located in Hougang Central to Oxley Bloom, a fully-owned subsidiary of Oxley Holdings. Oxley Bloom will pay for the acquisition in cash, which it said will come through a combination of internal resources and external borrowings.
Oxley Holdings said it intends to enter into a formal agreement with Lian Beng Land which will see the latter become a joint venture partner in redeveloping Hougang Plaza. Lian Beng will do so by taking up a 50 per cent stake in Oxley Bloom.
The acquisition price of Hougang Plaza is more than three times the market valuation of the property, which was put at $34 million as at Dec 31, 2011, by Knight Frank. The book value of the property is also $34 million.
When contacted, Oxley Holdings said that it plans to turn the current shopping mall (Hougang Plaza) – which currently has a net lettable area of 75,353 square feet, and a land area of approximately 57,047 square feet – into a mixed residential cum commercial development. This is subject to approval from the Urban Redevelopment Authority.
Hougang Plaza has a leasehold tenure of 99 years, with effect from March 1, 1991.
In April, Oxley Holdings bought the iconic McDonald’s Place at King Albert Park for $150 million. The freehold, 5,534.8 square metre site that the two-storey commercial building sits on is zoned for commercial and residential use.
Ashish Manchharam, head of investments in South East Asia at Jones Lang LaSalle, which acted as property consultant to CMT for the Hougang Plaza deal, said: “Hougang Plaza received strong interest from the market. A new development on the site is expected to be well received given the location, which is walking distance to the Hougang MRT station and within proximity to amenities.”
CMT expects to realise a net gain of about $83.3 million from the sale of Hougang Plaza, after taking into account the divestment fee and divestment-related expenses.
“The net sale proceeds of approximately $117.8 million will provide CMT with greater financial flexibility to pursue possible acquisition opportunities and/or to repay debt,” it said in a statement.
CMT added that the sale of Hougang Plaza is not expected to have any material effect on the net asset value and distribution per unit for FY2011.
Oxley Holdings said its purchase of Hougang Plaza is not expected to have a material impact on the earnings per share or net tangible assets per share of the company for the current financial year ending June 2012.
A TENDER for a commercial site in Jurong East, at Venture Avenue that drew nine bids outstripped market expectations.
Experts said the keen response to the Jurong East commercial site could signal that developers are responding to potential demand from investors looking for alternatives to residential property.
Colliers International director of research and advisory Chia Siew Chuin added: “The commercial sector has not yet been affected by the Government’s property measures, although the planning authority is likely to be monitoring the unit sizes of planned commercial developments.
“As a result, interest from both investors and end-users is expected to be robust.”
Sim Lian JV (Vision) lodged the top bid of $701.1 million – or $1,009 per square foot – which was nine per cent above the $643 million offered by Capitaland unit Victory One for the commercial site in Jurong East.
Sim Lian’s $1,009 psf bid for the commercial site in Jurong East easily exceeded market expectations of $800 psf ppr, said CBRE research associate director Desmond Sim.
The Sim Lian offer makes the expected breakeven price of the commercial property in Jurong East to be about $1,700 to $1,750 psf, said Mr Nicholas Mak, head of research at SLP International.
Jones Lang LaSalle national director of research and consultancy Ong Teck Hui also noted that the highest bid exceeded the top offer for Paya Lebar Square at $872 psf ppr in April, 2011.
“Since the Paya Lebar Square tender, demand for strata offices has surged tremendously resulting in optimistic bidding in today’s tender,” he said.
Jurong East is seen as a key commercial hub in the west, and includes existing and upcoming retail and lifestyle offerings like JCube, JEM and Westgate, said Mr Sim.
Ms Chia added: “With the prospects of growth for the entire Jurong East area as a regional commercial hub, a new project on the subject site would enjoy steady demand for its office units when completed.”
To make the tax system more progressive, the Government is raising property tax rates for high-end residential properties in Singapore Budget 2013, with the largest increases applying to investment properties that are not occupied by their owners.
The majority of owner-occupied homes will have lower tax rates in Singapore Budget 2013.
“This is fair,” said Minister of Finance Tharman Shanmugaratnam in his Singapore Budget 2013 speech on Monday.
“The property tax is a wealth tax and is applied irrespective of whether lived in, vacant or rented out. Those who live in the most expensive homes should pay more property taxes than others.”
Owner-occupied residential properties
Source: Ministry of Finance
The new property tax schedule for owner-occupied homes will ensure that most retirees will end up paying lower property taxes, he added.
The number of households that do not have to pay property tax will rise. Currently, only those whose houses have an annual value of $6,000 or less do not have to pay property tax. This will now include those whose properties have an annual value of $8,000 or less, which will enable 950,000 owner-occupied homes to enjoy tax savings.
After this Singapore Budget 2013, all one- and two-room HDB flats will continue to pay no property tax. Homes with annual values of $12,000, such as a five-room flat, will experience tax savings of $80 or 33 per cent of their current property tax bill.
The top 1 per cent of owner-occupied homes, which includes 12,000 homes here, will face increased taxes.
However, the increase will be small, Mr Tharman said, except for those at the very top end. A landed property in the central area with an annual value of $150,000 will have to pay 15 per cent tax in 2014, or an increase of $5,120 per year, up from 10 per cent now.
There will be more significant hikes to the tax rates for high-end investment properties. Currently before Singapore budget 2013, residential properties that are not occupied by their owners have a flat tax rate of 10 per cent. There will be new marginal tax rates of 12 to 20 per cent for these investment properties.
This will mean an increase in property taxes paid for non-owner-occupied homes with annual values of above $30,000. These properties belong to the top one-third of all non-owner-occupied homes.
Non-owner-occupied residential properties
Source: Ministry of Finance
Again, the increase will only be significant for investment properties at the high end. Most suburban condominiums will see a small increase in property tax of about $100 to $300 a year.
With Singapore Budget 2013, a high-end property, such as a landed home in the central area with an annual value of $150,000, will see an increase in property tax of $9,000 a year.
This revised property tax structure will be phased in over two years, from Jan 1, 2014.
The revised rates will take full effect from Jan 1, 2015.
Property tax rates for non-residential properties remain unchanged at a flat 10 per cent for Singapore Budget 2013.
SINGAPORE retail and property player Link (THM) Holdings will pump about RM300 million (S$120 million) into developing a mega integrated project in Johor’s Iskandar region.
This is the first time a Singapore privately owned firm has embarked by itself on a large-scale property development project in Medini Iskandar, part of the wider Iskandar development area.
The Media Village project – to be built over four phases on almost 6ha of land – will comprise more than 2,000 small office, home office (Soho) apartments and business suites.
Retail space comprising 1.1 million sq ft will also be 70 per cent filled with food and beverage outlets. The site is next to Pinewood Studios, a 10-minute drive from the Tuas checkpoint.
The total development value of the project is estimated to be RM2.5 billion, Link founder and group chief executive Kenny Tan said, with the land cost coming in at about RM100 million.
He said he approached the investment cautiously at first when the opportunity came up 2 1/2 years ago. But he is now confident about the Iskandar development region in Johor Baru as the government there has shown that it can deliver, with the opening of Legoland in September last year and Pinewood Studios later this year.
And while there are general concerns about the security and sustainability of Malaysian projects, “the infrastructure is very different in Medini and you will be convinced… if you visit”, he said.
Some firms have approached Link to be partners in the project but Mr Tan said the firm “is still very comfortable with our own cash flow and we are very confident that we will be able to pull this off ourselves”.
However, he is open to working with partners who can bring on board new ideas and expertise.
Some foreign institutional funds have also expressed interest in early acquisition of the residential and business suite segments of Media Village, he said. This interest from funds and private investors is a vote of confidence in the project and reduces the firm’s risk, Mr Tan added.
The apartments and business suites are expected to be launched for sale by the end of this year, which will help fund the construction of the project.
Home prices are about RM750 per sq ft (psf) now for non-landed homes in the area and the firm “will not be asking above the market”, he added.
Mr Tan said the project will be launched internationally in countries such as China and the United States as well.
The retail segment will be split into seven cultural themes: Japan, India, Korea, China, Europe, the United States and a Malay kampung.
Each area will be done up to reflect its theme. The US-themed retail area, for example, will have a miniature Rodeo Drive. This will make the project stand out among its competition and make it “sustainable”, with shoppers returning to experience the different themes, Mr Tan said.
The spillover from Singapore’s healthy tourism arrivals is expected to boost Iskandar’s visitor numbers – and, in turn, visitors to Media Village, which will be fully completed in 2018.
Mr Tan estimates that 50 per cent of tourists in Singapore might stop over in Iskandar down the track.
He also revealed that the firm has started talks with bankers and could possibly list on the Singapore Exchange within the next two years.
SHARPLY rising land costs, strong developer balance sheets and low interest rates should all combine to make 2013 another halcyon year for the property industry, an expert said.
Overall private home prices are likely to keep climbing on the back of rising land costs, increasing by up to 10 per cent next year, Savills Singapore research head Alan Cheong said in a report released yesterday.
Non-landed mass market homes are expected to see the steepest rise of 10 to 15 per cent, while the luxury market may also enjoy a 3 to 5 per cent price gain, surpassing its previous peak in 2007.
This is because astute buyers will continue to seek good buys in the luxury segment, as prices here are still lower than in Hong Kong, Mr Cheong added.
The property market has enjoyed a banner year, with a record-breaking 19,792 new homes sold in the first 10 months of the year, surpassing the previous high of 16,292 for the whole of 2010.
Executive condominiums (ECs) have also enjoyed a spectacular run, with more than 4,000 units expected to be sold by the end of the year – another record.
Only 3,935 EC units were sold in 2010 and last year combined.
“Due to a significant run-up in private condo prices, ECs will remain an attractive long-term investment asset, with demand probably surpassing that of 2012,” the report noted.
But tiny shoebox homes of 500 sq ft or less seem to have fallen out of favour with home buyers.
The proportion of shoebox homes sold, out of all new condo sales, has fallen from a three-year peak of 21 per cent in the third quarter of last year to a low of just 7 per cent in the fourth quarter of this year.
This is also well down from the three-year average of 14 per cent, Savills’ noted.
“The downtrend could be due to fewer shoebox units being built. There has also been an increase in demand for larger-sized units in tandem with the growth in wealth here,” the report said.
But the overall property market remains resilient and now has “too strong a momentum to stop”, Mr Cheong added.
Quantitative easing in the United States should see liquidity flowing into Asian economies like Singapore in search of a safe haven and currency appreciation.
Coupled with rock-bottom interest rates that are likely to remain low next year, some fresh external demand could be anticipated, he said.
However, this may be offset by local buying fatigue from the many new launches over the past years and increasing home completions.
Barring further property measures, total primary sales may hover between 16,000 and 18,000 units next year, less than this year’s likely record of 23,000 to 24,000 units, the report noted.
IT would take an interest rate shock, poor GDP growth, or both, to bring down private property prices here noticeably over the next five years, a study said.
The Credit Suisse report noted that analysts are anticipating that prices will fall as a record supply of land comes on stream and as the US Federal Reserve tightens monetary policy.
But it forecast that prices will rise by about 8 per cent by the end of 2017, based on the central scenario from its modelling. The report also said that not all of the government’s cooling measures have been effective in bringing down prices, even if they have dampened transactions temporarily.
“Contrary to the view of many, our analysis shows that prices will only correct marginally by 2017, if the government pushes out the supply of property as aggressively as it has over the last three years through its Government Land Sales programme,” said Michael Wan, the analyst at Credit Suisse behind the report.
If government land releases stay at the same “rapid pace” of around 16,000 units each year, prices will come down around one per cent by 2017, the report said, which indicates that an oversupply is unlikely.
“However, if this scenario coincides with a meaningful GDP or interest rate shock, prices would obviously fall much more,” the report said.
Credit Suisse defines a GDP shock as a scenario where output expands by a total of 5 per cent over the next five years, and assuming that loans and the Straits Times Index grow at the same pace.
Property prices will drop 16 per cent under this scenario.
Describing such a development as “unlikely” but “not impossible”, Credit Suisse said the bank had predicted that GDP will shrink by more than 9 per cent in the scenario of a full-blown eurozone break-up.
But if nominal output can grow by 7 per cent each year, with the same assumptions, prices will surge 23 per cent by 2017.
As for interest rates, Credit Suisse expects prices to fall a cumulative 14 per cent between 2013 and 2017 if the Singapore Interbank Offered Rate rises to 7 per cent in that time.
It said rates have not reached that level since the 1998 Asian financial crisis, and there has to be a very strong growth or a sharp pick-up in inflation in the US economy to see such a high rate returning, due to the close links between the US and Singapore economies.
The Government has identified Defu Industrial Estate for redevelopment as part of HDB’s ongoing Industrial Redevelopment Programme (IRP). Under the Defu Master Plan, the area will be transformed along the vision of ” A Green and Sustainable Industrial Park of Tomorrow”, and be renamed Defu Industrial Park.
Over the next 15 to 20 years, existing factories in Defu Industrial Estate will be progressively replaced with new and modern industrial complexes. The estate will be revitalised into a modern industrial park, complete with landscaped greenery and environmentally sustainable features.
The redevelopment of Defu Industrial Estate will be carried out in three phases. Phase 1, targeted for completion in mid-2017, will involve 219 out of the existing 1,046 factories. These include 87 land-based factories which are on 30-year leases, along with 42 land-based factories and 90 Terrace Workshops on Fixed- Term Tenancies.
HDB will build a new Bedok Food City at Bedok North Avenue 4 to rehouse the factories in the food industry. Factories in the general industries will be relocated to the new Defu Industrial City, which is located at the former Kim Chuan Water Reclamation Plant.
The estimated timeline for the 2 projects are as follows:
Activity Estimated Time Period
a) Design Consultancy 2013 to 2014
b) Construction 2015 to 2017
Industrialists in Defu Industrial Estate will be consulted on the design of the new complexes through a series of focus group discussions. HDB will actively involve them in the redevelopment through the Defu Manufacturers’ Association (DMA).
Eligible industrialists will continue to operate in their existing premises until the new complexes are completed in mid-2017. They will also be given relocation benefits such as rent concession, rent-free fitting up period, and ex-gratia payment.
Defu Industrial Estate is located in the North-Eastern sector of Singapore. It is bounded by Tampines Road, Hougang Avenue 3, Airport Road, and the Kallang-Paya Lebar Expressway (KPE).
The estate was built in the 1970s to house relocated small and medium local industrial enterprises from areas such a Jalan Lobak, Jalan Anggerek, and Jalan Pemimpin.
With the completion of Marina Reservoir and Punggol & Serangoon Reservoirs in 2010 and 2011 respectively, Defu is now located within the water catchment areas.
There is a need to redevelop this 30-year old estate to optimise the use of scarce land resources, and to contain the pollution caused by the existing industries.
With optimisation of land use, the total amount of factory floor space of the new Defu Industrial Park will be increased by five-folds to 2.1 million sqm. of industrial space, which will help meet Singapore’s future industrial need.
Defu Industrial Park will eventually house three key zones. The Northern and Central zones will be safeguarded for strategic industries such as logistics, precision engineering, infocommunications and media, electronics, clean energy and biomedical. The Southern zone will be set aside for new modern industrial complexes to house the existing industrialists.
HDB will take into account the feedback from Phase 1 before embarking on future phases of development under the Defu Master Plan.
HDB will also develop a new Defu City Centre, which will be the focal point of commercial activities. Located just beside Defu Industrial City, it will provide a range of amenities such as F&B outlets, convenience stores, medical clinics and childcare centres. Construction will take place after 2017 when the site is available for development.