Property NEWS... Good or Bad

[Scb11980]

HIgh end, completed, leased out

 

28 March 2012

Straits Times

A SIGNIFICANT number of recently built new homes, many of them luxury units, are languishing unsold, as wealthy potential buyers watch nervously as global economic confidence ebbs and flows.

 

Ever pragmatic, developers have turned to a logical solution to keep the cash coming in: They are leasing out unsold apartments at projects that have been completed.

 

This way, the developers earn some income until buying confidence returns to this elite part of the market.

 

About 25 projects have at least 10 units unsold, and a large number are upscale projects in the prime districts of 9, 10 and 11, which include the Orchard, River Valley, Bukit Timah and Tanglin areas.

 

The figures were released by property consultancy Savills Singapore, and were based on an analysis of the Urban Redevelopment Authority's fourth-quarter data.

 

Projects with units remaining unsold include Reflections at Keppel Bay, with 290 units unsold; Hilltops in Cairnhill Circle, with 208 units; Scotts Square in Scotts Road, with 74 units; and The Clift in McCallum Street, with 63 units available as at the end of last month.

 

While upmarket homes were very popular with buyers with the means to buy them during the boom of 2007, the segment has been quiet in recent years, with prices languishing below their peaks and sales slowing to a trickle.

 

City Developments Limited (CDL) is one developer that has chosen the leasing option. It said that last year it stopped active marketing for its 228-unit The Residences at W Singapore Sentosa Cove and diverted its efforts towards leasing instead. The project has 207 unsold units.

 

A spokesman said CDL is awaiting the completion of the 240-room W Singapore Sentosa Cove Hotel and the retail component of the Quayside Isle Promenade in August before ramping up its publicity campaigns for The Residences at W.

 

'When completed, the Quayside Isle will be home to trendy cafes, fine dining restaurants, speciality shops and entertainment spots and bars,' he added.

 

Keppel Land also said last week that 154 unsold units at Reflections will be set aside as corporate residences while the remaining 136 will be open to buyers.

 

The average rent for these fully furnished units is about $9,500 a month.

 

But Keppel said that the decision to set aside units for corporate leasing at Reflections followed a similar move at its previous project, the 969-unit Caribbean at Keppel Bay completed in 2004, where about 170 units were earmarked for lease.

 

More than 200 units were still unsold when the project was completed.

 

These units were sold many years after completion at a higher price, as the market moved up, benefiting the company.

 

However, not all developers are jumping on the leasing bandwagon.

 

KOP Properties chief executive Leny Suparman said the company has no plans to lease out the remaining units at its 58-unit The Ritz-Carlton Residences in Cairnhill Road, with 39 units unsold.

 

'The project has been completed for less than six months, and we are continuing to receive much interest from buyers. Therefore, we are not considering leasing at this point,' she added.

 

Experts add that some developers prefer to keep their unsold apartments empty, as some wealthy buyers prefer purchasing brand-new units.

 

But Mr Ong Kah Seng, director at consultancy R'ST Research, said the leasing out of unsold units is 'feasible', especially in a weakened market where the rental income can partially defray holding costs or delays in developer sales proceeds.

 

This is typically an option if the developer expects market sentiment for the segment to remain cool for more than six to nine months. A lease of less than one year can then be considered, he added.

 

Mr Alan Cheong, director of research and consultancy at Savills, said that if a developer had already recovered its costs but saw further sales to be challenging, it may consider leasing instead to maintain a good cash flow. 'Developers can't cut prices,

 

[Scb11980]

Business Times - 28 Mar 2012

 

Profitable deals set new subsales market record

 

Over 98% of 2011's subsales in the black, mainly because half of the properties were bought in 2009

 

By KALPANA RASHIWALA

 

(SINGAPORE) An up to 16 per cent seller's stamp duty (SSD) introduced in January 2011 may have caused a slowdown in subsales of private apartments and condos and generally lengthened the holding period for subsale transactions last year.

 

However, a record 98.1 per cent of 2011's subsales were still profitable even after counting the SSD where applicable as the overwhelming majority of the 2,337 units subsold last year had been purchased prior to the punitive SSD regime taking effect for units bought on or after Jan 14, 2011.

 

The average gain per unit for 2011 subsales was at a three-year high, according to a caveat analysis by Savills Singapore. Subsales refer to secondary market transactions in projects that have yet to receive a Certificate of Statutory Completion. Such deals are often seen as a gauge of the level of speculative activity in the property market.

 

The SSD - which is steepest for private homes bought on or after Jan 14, 2011 and sold within a year - along with more moderate price growth for apartments and condos probably kept a lid on subsales in 2011 involving properties which had been bought in the same year to just 11. Instead, half of last year's subsales involved properties that had been picked up in 2009, which marked a low for the Singapore private residential property market following the global financial crisis. This helped to produce strong gains on average for last year's subsale transactions.

 

Of the 2,619 private apartments and condos sold in the subsale market last year as captured by URA Realis, Savills found caveats of previous transactions for 2,337 of them. Based on these matches, 98.1 per cent of the 2,337 subsales were in the black, the highest figure in the four-year study period (since 2008). The profit or loss was calculated as the difference between sale and purchase prices, taking into account the SSD. However, the standard buyer's stamp duty, agent fees and other expenses were not factored in.

 

Among the 2,292 profitable subsale matches in 2011, the average profit per unit was $309,455, up 8.3 per cent from $285,718 in 2010 and a three-year high. This was on the back of buoyant private home prices in general over the past few years, say market watchers.

 

In percentage terms, the average profit per unit for 2011's profitable subsales was 25.4 per cent, also the highest in three years. Giving a quarterly split for 2011, Savills Singapore research head Alan Cheong said that the average percentage gain ranged from 23.9 per cent in Q1 to 27.9 per cent for Q4. 'If the equity downpayment was 40 per cent, the return on equity would have been 59.7 per cent to 69.7 per cent. This is a remarkable return from an investment holding period of just 2.34 years,' he added.

 

Nearly half or 1,164 of the 2,337 subsale matches for 2011 involved properties that had been previously transacted in 2009 and all but two of these transactions resulted in a profit. Market watchers said that this was not surprising given the substantial appreciation in prices of private homes post-GFC. Likewise, units bought in most other years - 2005 to 2010 - predominantly made a gain when subsold last year. The only exception was 2011.

 

Savills' analysis revealed that there were six cases of non-landed private homes bought after the latest SSD regime took effect on Jan 14, 2011 and subsold in the same year, and these six transactions posted an average loss per unit of $129,739 after SSD.

 

'The SSD collected from these six units averaged $198,731, which, if it had not been imposed, could easily have turned those transactions profitable, though by a lesser quantum than those purchased before the Jan 2011 SSD measures,' Mr Cheong said.

 

'Those who sold in 2011 after purchasing on or after Jan 14, 2011 and thus made a loss were likely to be hard-pressed to offload for whatever reasons.'

 

The average holding period based on 2011's 2,337 subsale matches was 2.34 years, longer than the 2.16 years in 2010, 2.13 years in 2009 and 1.89 years in 2008. Analysts point to the punitive SSD rates which deter short-term trading. Those who buy a private home on or after Jan 14, 2011 and sell it within a year have to pay a 16 per cent SSD; the SSD rate is lower at 12, 8 and 4 per cent for those who sell the property in the second, third, and fourth year of purchase respectively.

 

Another factor could be the moderation in the rate of property price increase last year compared with previous years, which could have led investors or speculators to hold on longer to eke out a better return, suggests Mr Cheong. 'If 2011 had seen very strong price increases, the subsale holding period might have been shorter.'

 

Market watchers say these two factors could have caused a 22.2 per cent drop in the number of non-landed private homes which changed hands in the subsale market to 2,619 last year.

 

URA's price index for non-landed private homes rose 4.6 per cent in 2011, slower than the 14 per cent hike in 2010. 'The 4.6 per cent price gain is less than the 16 per cent SSD which one has to pay on the selling price. Hypothetically, if non-landed property prices rose by say 30 per cent in 2011, there may be a high chance that subsale activity would be significantly higher . . .' said Mr Cheong.

 

He attributes the weaker price growth last year to an interplay of global and domestic macroeconomic concerns with the SSD.

 

The government announced SSD in three rounds in 2010 and 2011 to deter short-term trading of private homes.

 

Mr Cheong reckons that the level of activity in the subsale market is likely to stay muted this year because the rate of property price increase is set to remain moderate due to a plethora of choices for buyers from new launches. 'Also, buyers are likely to get handsome rebates buying directly from developers. It is unlikely that subsellers would offer similar rebates structured into their sale and purchase agreements.'

 

Credo Real Estate executive director Ong Teck Hui also expects subsale deals to decline further this year due to the high SSD rates. 'With the Jan 2011 measures in place, anyone that has since bought or will buy in new project launches will not have a mind to flip in the near term, especially in the first two years when the SSD rates are 16 and 12 per cent respectively.

 

'Properties picked up in 2010 or earlier are likely to dominate subsales this year.'

 

 

[Scb11980]

Fewer advisers moonlight as property agents now

 

28 March 2012

Straits Times

FINANCIAL advisers (FAs) often used to double as property agents, as a way to maximise their income, but not so much nowadays, industry experts say.

 

They were responding to concerns raised on Monday by the Monetary Authority of Singapore (MAS) that some FA representatives were looking to more than one source of income.

 

The experts say the problem of FAs moonlighting as property agents is now receding.

 

Consumers are now more savvy about financial issues and prefer the professionals who handle their money-related affairs to specialise in one field, they note.

 

It is also much tougher for one person to take on both jobs, given the higher entry requirements that have been introduced in these fields in recent years.

 

In a speech to the Life Insurance Association on Monday, MAS managing director Ravi Menon said that the giving of financial advice should be a dedicated, professional vocation.

 

MAS has 'noticed a worrying trend of FA representatives conducting or wanting to conduct other activities alongside providing financial advice', he said.

 

For example, he said, some FA representatives had applied to the Casino Regulatory Authority for a junket promoter licence. Others had used their positions to market questionable schemes in gold bullion.

 

MAS has come across insurance agents who wanted to be real estate agents, he added.

 

Finexis Advisory chief executive Warren Lim said this is becoming less common nowadays. 'The new requirements for both industries have caused people to give up one or the other.'

 

Financial advisory firm SingCapital's chief executive, Mr Alfred Chia, agreed. He said the number of people who straddle the two roles has 'fallen a lot'.

 

'In the past, maybe because there were no licensing requirements to be a real estate agent, it was easy. Now, to be a real estate agent, you have to undergo a 16-session course and pass an exam,' he said.

 

This, on top of the five to 10 exams that one would have to pass to become a financial adviser, would be strenuous for most people, he noted.

 

SingCapital is a unit of P&N Holdings, which also owns property agency PropNex Realty. P&N chief executive Mohamed Ismail said the company has a strict policy barring its financial advisers from taking up a property agent licence and vice versa.

 

'In fact, each SingCapital adviser is attached to 30 to 40 PropNex agents whose clients he has to advise. So if that SingCapital adviser were to double as a property agent, he would in fact be competing with the PropNex agent, and that agent would not want to work with him,' he said.

 

Financial adviser Rauzan Hussain, 44, said customers are now more savvy as many have been burnt by their experiences dealing with FA representatives doubling as insurance agents in the past. They now prefer to have their money managed by dedicated specialists instead.

 

'These agents would want to earn as much commission as possible, so they might convince you to buy a bigger house even though as a financial adviser they should be concerned about whether or not you can keep up with the payments.

 

'I have clients who have had bad experiences because of such agents, and ended up having to fork out a lot of cash to maintain their homes.'

 

 

[Mockngbrd]

meh .

[Jrage]

Article 1 : High end, completed, leased out

>> Bad for owners that are looking at leasing out their unit for anything more than 4k. Def, rental income will be affected.

 

Article 2 : Profitable deals set new subsales market record

>> Good luck to those that bought uncomplete properties for investment... in 2015-2017.. will see the real cruch when project completed , rental is low and everyone other person is trying to cut lose.

 

Article 3 : Fewer advisers moonlight as property agents now

>> neutral.

[Meanmachine]

report are made for your reading pleasure, no report does not equate to poor sentiment buying, only poor judgement

 

In reality, many will still go and buy pty here, unlike in others countries whereby the nation nvr sleep a day w/o property news/ juicy gripes.

 

one would be deemed an idiot if he/she does not wrangle in property stocks/ shares or liquidity.

 

One can run and hide but not forever, as prices fall like autumn leaves, they will come out and buy again, S'porean nvr sick of property unlike car/s.

[Anshng]

i forsee a lot of people is going to be in trouble

 

Look at the news article in the BT about the new launches that are likely to be priced lower than the older launches

[KARTer]

Holding unsold units till prices are right (high) before releasing them back to the market makes good sense for the developers, but how different is this from hoarding? Of course its a free market, everyone has the right to manage his 'merchandise' to maximise their profits.

[SimonTan]

This is normal as long as the developers are able to maintain their income.

The buyers are just pawns in the developers game of profit and loss.

If there is a demand from rental for these unsold units, then all is well.

The reporter should report back in 6months time, how many units are rented out of those unsold.

If good take up rate, then property market still stable.

Else then the developers will just have to sell future units at higher price to silly buyers.

 

[2009k]

Developers have the fund to sustain, this is a very different landscape as compared to 97 when they had little liquidity and are at the Mercy of banks.