RESIDENTIAL MARKET
Residential property buys via SPV may not escape ABSD
Corporate entities seeking to avoid paying the additional buyers' stamp duty (ABSD) by buying shares in special purpose vehicles that own properties could come under the scrutiny of the tax authorities.
The Inland Revenue Authority of Singapore (IRAS), in a letter responding to a Business Times article on such deals, said: "When the company buys a residential property, it will be subject to ABSD, and at the highest ABSD rate of 15 per cent. Under the Stamp Duties Act, the Commissioner of Stamp Duties may disregard or vary any arrangement to counteract any reduction in or avoidance of duty payable by that person.
"The Inland Revenue of Authority of Singapore audits stamp duty transactions to detect transactions that are conducted for tax avoidance purposes."
Transaction of real estate through SPVs is not a new phenomenon; funds in particular are known to do it. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more attractive for companies to consider this route.
This is because the ABSD applies only when investors buy the units of a development directly, but it does not apply when the transaction is through the sale of shares in companies - even if they own real estate.
Experts had said therefore that this would be especially attractive for corporate entities, especially those looking to purchase luxury residential property.
Source: Business Times –26 January 2013
URA Q4 stats show signs of speculative buys
The Urban Redevelopment Authority's (URA) fourth-quarter real estate statistics show evidence of the investment and speculative activity that drove various segments of the Singapore property market last year and led to the latest cooling measures.
Home buyers in the private housing market, for instance, picked up far more homes from developers last year (22,197 units) than in the previous year (15,904 units). However, fewer homes changed hands in the resale market, which covers secondary market deals involving completed properties, last year (12,811 units) than in 2011 (14,046 units).
To deter speculation in residential properties, the government introduced a punitive SSD regime in early 2011, where SSD rates of 16, 12, 8 and 4 per cent were slapped on those who bought private homes on or after Jan 14, 2011, and sold them in the first, second, third or fourth year respectively of purchase.
As for non-residential properties, a disparity in performance of the URA's price and rental indices last year points to speculative demand.
Prices of offices and shops increased in 2012, albeit by a smaller magnitude than in 2011, despite falls in rents.
The URA's All Industrial price index shot up by 25.8 per cent last year, outstripping a 10.1 per cent increase in rentals.
The URA's office price index rose 1.4 per cent while the rental index dipped 1.3 per cent last year. Its shop price index gained 2 per cent while rents slipped 0.3 per cent. The same trend applied to the private housing segment, with the 2.8 per cent gain in the overall private home price index in 2012 outperforming a 2.1 per cent rise in the rental index .
Earlier this month, the government imposed SSD for industrial properties, with the rates set at 15, 10 and 5 per cent on properties bought on or after Jan 12 and sold in the first, second and third year respectively of purchase.
The number of caveats lodged for subsales of strata factory units jumped from 70 in 2011 to 189 last year.
In particular, subsales picked up substantially in the fourth quarter of last year, with 80 caveats, higher than the 64 units in Q3, 29 in Q2 and 16 in the first quarter of last year.
For shops, subsales climbed from 11 deals in 2011 to 45 deals last year. However, for offices, there were only three subsale transactions each in 2011 and 2012.
The strata shops market on the whole (primary and secondary markets) was buoyant in 2012, with 1,295 caveats lodged (amounting to $1.59 billion in transaction value), double the 636 caveats ($0.69 billion) in 2011.
On the 2.7 per cent Q-o-Q drop in the URA index for multiple-user factory space in Q4 last year, after the index rose 10.1 per cent in Q3. New project sales are higher in value than secondary market deals and help to lift the index. In Q3, nearly half of the sales volume was from new projects, whereas in the fourth quarter, the proportion dropped to 35 per cent.
Source: Business Times –26 January 2013
OCR completed condos fared better
In the private residential segment, the prices of completed, non-landed private homes in the Outside Central Region (OCR) led fourth-quarter gains, rising 5.6 per cent quarter-on-quarter in the fourth quarter last year.
In the price indices compiled by the Urban Redevelopment Authority (URA), the index for uncompleted homes in the OCR inched up at less than half the pace: 2.4 per cent.
The OCR covers suburbs such as Punggol, Woodlands and Jurong, where mass-market condominiums are located.
This pattern - where the rise in price was higher for resale, non-landed homes than for uncompleted ones - was generally replicated across the island in 2012.
Prices in the OCR for completed homes climbed 8.8 per cent last year, double the 4.4 per cent appreciation for uncompleted properties. This also happened in 2011, when a 10 per cent surge in completed home prices was double the 5.1 per cent rise posted for uncompleted homes.
In the Core Central Region - which includes the prime districts 9, 10 and 11, the financial district and Sentosa - URA's completed non-landed home price index rose 1.5 per cent quarter-on-quarter in Q4 2012. For uncompleted homes, the figure dipped 0.4 per cent.
For the full year 2012, completed home prices gained 3.2 per cent, against a 1.7 per cent decline for uncompleted properties.
In the Rest of Central Region, which covers city-fringe locations, prices for both completed and uncompleted homes rose an identical one per cent q-on-q in Q4. Yet, for full-year 2012 and 2011, the prices of completed non-landed properties in the region still rose more than for uncompleted ones.
URA's overall private home price index - covering both completed and uncompleted as well as landed and non-landed homes across the island - rose 1.8 per cent in Q4.
This was a bigger gain than Q3's increase of 0.6 per cent. Full-year 2012, the index appreciated 2.8 per cent, half the 5.9 per cent rise in 2011.
Source: Business Times –26 January 2013
HDB resale prices seen remaining stable
Even as prices of resale flats hit new peaks in the fourth quarter of 2012, consultants say that prices should remain stable in the coming year, following the seventh round of cooling measures.
The Housing & Development Board's (HDB) Resale Price Index rose 2.5 per cent over the previous quarter to breach the 200-point price-index mark to hit 202.9 in the fourth quarter, resulting in a 6.6 per cent increase in resale flat prices for the whole of 2012.
According to HDB's data, Bukit Merah had the highest median resale price for a five-room flat at $765,000; Queenstown fetched the highest median price for a four-room flat at $710,000.
While this drives resale prices to a fresh peak, the price hike seen last year is lower than the 14.1 per cent rise seen in 2010 and the 10.7 per cent hike in 2011, said HDB.
Consultants concur that the seventh round of cooling measures - which include permanent residents (PRs) having to raise an additional 5-7 per cent for ABSD, restrictions on the Mortgage Servicing Ratios (MSR), not allowing PRs to sublet their whole flat and requiring PRs to sell their flat after purchasing a private residential property in Singapore - will put a lid on price increases.
Eugene Lim, key executive officer at ERA Realty Network, said he expects prices to remain stable for now, and that prices will moderate once cash-over-valuation (COV) transactions moderate.
According to ERA Research, overall median COV rose 11.67 per cent quarter on quarter to hit $33,500 in the fourth quarter. The median COV for a five-room flat was $38,000, up 15.15 per cent from the previous quarter, while COV for a four-room flat rose 16.67 per cent to $35,000.
Resale transactions in the fourth quarter fell by about 14 per cent, from 6,560 cases in the third quarter to 5,631. For the full year of 2012, the total number of resale transactions was 25,094, a slight increase of about 2 per cent over 2011.
HDB said the cooling measures announced by the government on Jan 11 will help to moderate demand for HDB flats and stabilise resale prices.
In addition, some 110,000 new flats will also be completed in the coming years.
"HDB has ramped up its Build-To-Order (BTO) supply significantly over the past few years and we will keep up the pace of new flat supply into 2013. Coupled with the new cooling measures, this will help keep public housing affordable for Singaporeans," said HDB in a statement.
It plans to launch at least 23,000 BTO flats this year. The first batch of 3,346 BTO flats in Ang Mo Kio, Choa Chu Kang, Hougang, Kallang/Whampoa, Tampines and Yishun will be offered for sale later this month.
Source: Business Times –26 January 2013
Mixed-use developments draw homebuyers
Mixed-use developments integrating residential and retail components have become an attractive proposition for homebuyers, notably couples and young professionals, according to Far East Organization.
Chia Boon Kuah, chief operating officer for property sales, said this after a recent offering, the 99-year-leasehold The Hillier, sold its last residential units last weekend.
The homes at the 528-unit SOHO development at Hillview Avenue 2 commanded an average price of $1,474 per square foot and should be ready by 2016, after launching for sale in January last year.
The Hillier comes with an adjoining two-storey mall known as HillV2, which was over 60 per cent leased as at yesterday.
The success of The Hillier follows a trend for other similar mixed-use residential projects over the last few years from Far East.
Its Tennery SOHO development at Woodlands Road, integrated with the Junction 10 Mall, sold all 338 homes within a year of its launch in December 2010.
Close to all the 319 units at the Greenwich in Seletar, as well as the 992-unit Watertown in Punggol have also been transacted since their launches in August 2010 and January 2012, respectively. Both projects come with a retail component.
"Many of these buyers are couples or young professionals who are seeking not just a roof over their heads, but a home that resonates with their desired lifestyle, allowing the merging of live-work-play spaces," Mr Chia said. He noted that Far East developments are appealing to a new breed of buyers who want a combination of a more spacious location that can be outside of the city centre but remains close to retail amenities and major transportation networks.
Accordingly, "we plan our developments and create residential concepts based on the site's locational attributes and features as well as our understanding of homebuyers' aspirations", Mr Chia said.
For example, the HillV2 mall joined to The Hillier will feature an assortment of lifestyle outlets, from Market Place by Cold Storage to cafe Dean & DeLuca and Wine Connection Bistro, when it is completed next year. The development is also near the future Hillview MRT station and two expressways.
Within The Hillier itself, residents can expect usual condo facilities, such as a pool, a jacuzzi and a tennis court.
Familiarity plays a part too. Sizeable demand for these mixed residential-retail developments came from people who already knew the area well.
Despite the latest round of property-cooling measures - many of which target the residential market - Far East is still upbeat about its prospects.
"As the market adjusts to the new measures, we remain confident that the strong economic fundamentals and growth prospects of Singapore will continue to support a sustainable property market," Mr Chia said.
Source: Business Times –26 January 2013
Cooling measures not a concern, says foreign developer of luxury condo
The latest property cooling measures may be targeting foreign buyers, but at least one property firm believes that the steps will not curb foreign appetite for Singapore properties.
China Sonangol Land plans to continue expanding in Singapore and is not too bothered by the latest cooling measures.
Mr Alain Fanaie, chief executive officer of the developer's parent company, China Sonangol Group, said he was "not really concerned" about the impact of the recent cooling measures.
He expects buying activity to return in about six months' time.
The latest cooling measures rolled out on Jan12 include raising the additional buyer's stamp duty (ABSD) for foreigners from 10 per cent to 15 per cent.
At its maiden project TwentyOne Angullia Park, a high-end freehold condominium in Orchard Road, five out of the 54 units have been sold since its soft launch in April last year.
All five buyers are foreigners - mostly Indonesians - and the change in ABSD "doesn't make a substantial difference for them", Mr Fanaie said.
Also, they bought the units to live in, rather than as investments.
"For high-end properties, it's mainly for foreigners and the motivation for them is very different. It's not their main residence and they are coming to Singapore for other reasons."
The appeal of Singapore lies in its strong infrastructure, and foreigners believe property prices will still rise in the long term, he said.
He added that since none of the buyers took out loans to finance their purchases, they were not hit by reductions in loan-to-value (LTV) ratios.
Units at the 36-storey project are priced at between $4,000 and $5,000 per sq ft, and cost at least $4.7 million each. The smallest is a 1,163 sq ft two-bedroom unit and the largest is a 7,718 sq ft penthouse.
The development sits on a 49,113.6 sq ft land plot, the site of the former The Parisian condominium, and was unveiled to the public last Saturday.
Construction is already under way and the project is expected to be completed by June 2014.
China Sonangol Land, set up in 2008, is a unit of China Sonangol Group, which is headquartered in Hong Kong.
It is planning to develop another freehold condominium in East Coast this year, the 109-unit Amber Skye, which it is jointly developing with OKP Holdings.
Amber Skye will be launched in the second half of this year.
Mr Fanaie said Singapore will be a growing part of China Sonangol Land's portfolio, which includes commercial properties in Jakarta.
The developer plans to focus on residential properties in Singapore, but is also considering developing offices.
Source: The Straits Times –28 January 2013
Rentals keep up with rise in home prices
Rentals have kept pace with the rise in private home prices, but not across the board.
"Rental yields remain at 3.7 per cent islandwide," Maybank Kim Eng said in a report that compared 2011 and 2012 rentals at projects with more than 10 rental contracts.
The minimal change in the figure indicates condominium rental rates have generally kept up with the increase in prices last year.
However, not all districts fared equally. The worst showings were in Newton and Sentosa, with yields compressing to just 2.2 per cent last year.
Median rentals fell by 15 cents per sq ft (psf) in Newton and 12 cents psf in Sentosa last year, which Maybank Kim Eng said was likely due to the rise in completed supply in those areas.
Condos in Newton that received their temporary occupation permit last year include the 30-storey freehold condo Trilight, which has 205 units.
Maybank Kim Eng estimated that net yields could be as low as 1.8 per cent in Sentosa.
The chart-toppers were Woodlands, Jurong and Choa Chu Kang, which offered rental yields of 4.4 per cent last year.
Sengkang, a former favourite with rental yields of 4.4 per cent in 2011, has seen its yields decline to 4.2 per cent last year, Maybank Kim Eng said.
The research house noted that yield compression last year was most apparent in the city fringe.
Newton and Bukit Timah rental yields fell by between 0.25 and 0.31 percentage point, reflecting a greater appreciation of resale values relative to rental rates, Maybank Kim Eng said.
The Urban Redevelopment Authority (URA) said yesterday that private residential prices increased 2.8 per cent year-on-year last year, a slowdown from the segment's 5.9 per cent price rise in 2011 from the preceding year.
At the same time, rents for private residential properties grew 2.1 per cent last year from those of 2011, a slower pace than the 3.8 per cent rise in 2011, URA said.
But property consultants said they are already seeing signs of moderation in rental rates.
"Rentals have started to slow as (a greater) supply of complete units appears in the market," said ERA Realty key executive officer Eugene Lim.
Source: The Straits Times –26 January 2013
COMMERCIAL MARKET
Alexandra Central units put up for quick resale
Some investors are already trying to flip the shop units they bought just days ago at the yet-to-be-completed Alexandra Central, a sign that they had invested in the project hoping to make a quick buck.
A Business Times check showed that at least 19 of the 114 retail units that were sold by the developer last Monday, appeared to be on the market again by Saturday. Only one unit of each size was included in this tally.
On website Commercialguru, agents had, on Saturday, put up listings to sell more than 15 shop units that buyers had previously snapped up. Some of these agents re-posted the listings yesterday.
Property agents have also been sending text messages marketing these units, while at least two advertisements appeared in the Classifieds section of The Straits Times on Saturday.
Prices listed ranged from about $3,720.93 per square foot for a 24 square metre (258 sq ft) unit, to as high as $8,600 psf for a 10 sq m (107.6 sq ft) unit.
Said one property agent: "There are many units at Alexandra Central now on the market, you just have to let me know your budget and my guys will find one for you."
One 15 sq m (161.5 sq ft) retail unit on the third floor, which was bought on Monday at $710,000, was being marketed for sale at $850,000 on Saturday.
Another 18 sq m shop (193.8 sq ft), which was purchased from the developer at $833,000, had agents trying to sell it for $1.02 million.
Late last week, the Urban Redevelopment Authority (URA) indicated that it may extend cooling measures to the commercial property sector if transactions rise above what it deems to be the comfort level.
It said in response to queries from The Business Times: "We are monitoring the various segments of the property market closely, including the commercial sector. We will introduce measures if required to moderate investment demand and prevent over-heating in the property market."
The launch of 99-year leasehold Alexandra Central last Monday featured a packed showroom. All but two of the 116 strata shop units available were sold.
It was estimated that at least 20 buyers on average were competing for each unit, while a shop space on the third storey had as many as 155 interested buyers.
The project's popularity came amid expectations among market watchers that commercial properties are likely to see higher interest following the recent round of cooling measures that hit the residential and industrial markets about two weeks ago.
Shop space went for $4,000 psf to over $7,000 psf at the launch. Alexandra Central consists largely of small shops, with units ranging in size from 10 sq m (107.6 sq ft) to 667 sq m (7179.5 sq ft).
What remained unsold by the developer last Monday was a 102 sq m (1,097 sq ft) food and beverage unit on the second floor of the project, and the largest, 667 sq m unit on the third floor that was not launched for sale - though agents were trying to gather interest in the unit.
Agents were still trying to sell both units yesterday.
When completed, Alexandra Central will be located next to Ikea and on the site of the former Safra building in Alexandra Road. The overall development includes a 450-room hotel managed by Park Hotel Group. Construction is expected to be completed by June 2016. It is developed by Chip Eng Seng.
Source: Business Times –26 January 2013
Commercial property in Changi up for tender
A freehold commercial property at the corner of Changi Road and Lorong 105 Changi has been put up for sale by tender.
No 160 Changi is offered for sale on a vacant possession basis. This came after its owner, AIA Singapore, shifted operations that used to be housed there up until late last year to its other properties in Singapore.
No 160 Changi is currently a 4-storey building with two basement levels that include 23 carpark lots. It sits on a site area of about 18,000 square feet (sq ft) about 300 metres away from Eunos MRT station and has a permissible gross plot ratio of 3.0.
No development charge is payable on the property.
A hotel could also be considered for the site, subject to approval by the relevant authorities, due to its commercial zoning.
This is the first significant freehold commercial property with potential for redevelopment to be launched this year, and the buyer will benefit from recent property cooling measures, which have largely spared commercial properties.
Furthermore, the buyer can gain from the upcoming Paya Lebar commercial hub nearby, which has 12 hectares of space available for development.
Recent projects in the vicinity prior to that, including the Icon@Changi, Wis@Changi and Centropod@Changi, were able to fetch prices from about $2,300 per square foot (psf) to $4,300 psf.
The tender will close on March 8 at 4pm.
Source: Business Times –28 January 2013
INDUSTRIAL MARKET
First drop in industrial property prices in three years
Industrial property prices fell unexpectedly in the last quarter of 2012 - the first decline in three years and a sign that caution is taking hold among investors.
Prices dipped 0.7 per cent in the period compared with the previous three months after climbing for 12 straight quarters, according to the Urban Redevelopment Authority (URA) yesterday.
Overall, the URA industrial property price index rose 25.8 per cent last year from the preceding year, lower than the 27.2 per cent year-on-year increase in 2011.
The index is now 14per cent above its previous historic peak in the first quarter of 1997.
Analysts said industrial prices could moderate this year due to the seller's stamp duty imposed on the sector two weeks ago.
The overall price decline in the fourth quarter surprised experts, as values for multi-user warehouses shot up 9.4 per cent over the same period from the preceding three months.
The rise in warehouse values was outweighed by a surprise 2.7 per cent sequential decline in prices of multi-user factories after they rose a sharp 10.1 per cent from the second quarter to the third.
Analysts said factory demand could have softened due to a weaker economic outlook.
Manufacturing output has fallen sequentially for the past three quarters and anticipated factory orders have shrunk every month since July.
Stiffer competition due to a spate of new industrial launches also led developers and sellers to lower their price expectations.
But while industrial prices fell, rents rose 3.9 per cent in the fourth quarter from the preceding quarter, outstripping the 1.2 per cent quarter-on-quarter rise in July through September.
Analysts said they expect industrial prices to moderate or flatten in the short term, due partly to the seller's stamp duty.
Analysts also flagged a possible oversupply this year and in 2014.
They pointed to the URA's quarterly report yesterday which said that 31.2 million sq ft of new supply will come onstream this year and 15.6 million sq ft next year.
Source: The Straits Times –26 January 2013