Housing prices set to rise, but govt committed to affordable homes

Housing prices set to rise, but govt committed to affordable homes

By Joanne Chan,

SINGAPORE : It has been a roller coaster ride for the Singapore property market this year, dipping in the first quarter before registering a sharp rebound.

Market watchers have said housing prices will continue to rise next year, spurred by a recovering economy and the opening of the integrated resorts (IRs).

The robust turnaround in the property sector was something no one would have predicted.

Singapore entered the year in the midst of a recession, and the outlook was bleak.

But as the stock market rallied in March, sentiments improved.

Market watchers said pent-up demand over the last year and a “herd instinct” led to a buying frenzy.

Speaking to MediaCorp, National Development Minister Mah Bow Tan acknowledged it has been an exceptional period.

He said: “Nobody, no matter how prescient, no matter how clever, would have been able to predict that this is what is going to happen this year. All of us were caught off-guard…I did not expect the prices to go up. But the point is, are we able to respond to this change. And the answer is yes.”

Fears of a property bubble forming saw the government introducing measures such as removing easy financing schemes to cool the private homes sector.

The measures included removing the interest absorption scheme and interest only loan to temper the exuberance of the market.

Public housing supply was also ramped up, to signal that there are enough flats and there is no need to panic.

Eugene Lim, associate director, ERA Asia Pacific, said: “The market will probably stabilise for now. But I would say that when the IR opens, and when more international investors do come into Singapore, we may expect another run. Especially now, in the recent one, two months, we have noticed a pick up in high-end properties priced above S$2,000 per square foot.”

Although housing prices are set to rise next year, Mr Mah said the government is closely monitoring the situation and will take action, if necessary. For example, Mr Mah said more land will be released to developers if needed. He also promised first-time buyers that HDB will have more Build-To-Order exercises, if there is demand.”

But Mr Mah said calls for the government to artificially dampen prices is not the solution to affordability.

He said: “The whole question is, do we peg HDB flats to the market, or whether we follow another system. And that other system is what some countries use.

“In other words, I sell you a flat at fixed price, when you sell the flat, you have to sell it back to me also at a fixed price. In other words, you are not allowed to profit from the flat. There you can keep flat prices fixed.”

Mr Mah said a flat is not just a roof over one’s head, but also an asset that will increase with time. - CNA/ms

Source : Channel NewsAsia - 30 December 2009

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103-year lease on freehold land

103-year lease on freehold land

Units will fetch lower prices but developer will retain interest in the site

By Joyce Teo

An artist’s impression of The Shore Residences, Far East Organization’s new project in Katong. — PHOTO: FAR EAST ORGANIZATION

FLATS at Far East Organization’s new project are being sold with a 103-year lease even though the project in Katong sits on freehold land.

The rare step means Far East will have to settle for lower prices for the units, but it will retain an interest in the site and reap further benefits when the neighbourhood is further transformed.

Sales at the 408-unit The Shore Residences, which is opposite Katong Shopping Centre, start on Friday, New Year’s Day, but previews in recent weeks have already reaped contracts.

Far East’s executive director and chief operating officer of property sales, Mr Chia Boon Kuah, pointed out that the project sits on land with huge redevelopment potential.

‘The area has transformed and the pace of transformation is speeding up.’

An MRT station has been earmarked for nearby Marine Parade. There is also the Parkway Parade shopping centre, plenty of eating places in the area and the yet-to-be revamped Katong Mall.

Mr Chia also referred to the ‘bigger picture’ - Marina Bay, which will be only a 10-minute drive away.

While Far East cannot realise the full potential of the site now, by retaining the freehold title it will have the chance to participate eventually, he said.

Knight Frank chairman Tan Tiong Cheng told The Straits Times: ‘Far East is a privately owned firm, so this move does allow the family to hold on to the site for the benefit of their future generations.’

Selling a lease term instead of the entire freehold tenure is relatively rare, although Far East has done it before.

It launched two cluster housing projects - Cabana and The Greenwood - on freehold land with 103-year leases.

The 119-unit Cabana is in Sunrise Terrace, near Yio Chu Kang MRT station, while the 54-unit The Greenwood is in Greenwood Avenue.

The 99-year leasehold Spring Grove condo, which sits on the former Grange Road residence of the American ambassador, is a similar case.

The United States government bought the land in 1950 on a freehold lease but sold it on a 99-year lease to City Developments in 1991. The plot reverts to the US government at the end of this century.

Not many developers are keen on the strategy for the simple reason that 99 years is a long wait and they would not be around to enjoy the fruits of their efforts, say property experts.

Far East could charge more for The Shore if it were sold as a freehold project but it is giving that premium up in exchange for the reversionary interest in the land, experts say.

Another expert said: ‘There’ll be en-bloc sale potential if the market is good but the trump card is held by Far East, instead of the Government.’

Far East can either grant a lease top-up, buy back the land, sell the freehold tenure or not act.

‘When the owners want to do a collective sale in two or three decades’ time, they will have to refer to the holder of the freehold title, which is Far East,’ said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

‘A lot will then depend on the top-up premium that Far East will ask for.’

The project’s en-bloc potential is not an issue at the moment. Far East said it has sold ‘more than 70 units’ since it started previews about two weeks ago.

Most sales have been one-bedders from 592 to 732 sq ft and priced from $658,000 or $1,100 per sq ft (psf).

Prices for two-bedders, which are on higher floors, start from $1.1 million or $1,180 psf. The project also has three- and four-bedroom units. Prices will rise about 2 per cent at Friday’s launch.

Mr Chia said the demand for the one- and two-bedders may be due to a lack of smaller flats in the area, as well as the rejuvenation of the Katong neighbourhood.

Far East bought the former Rose Garden site, which is where The Shore is, in 2006 for $169.8 million, or $423 psf of potential gross floor area.

Source : Straits Times - 30 December 2009

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Market analysts sniff for headwinds beyond the V

Market analysts sniff for headwinds beyond the V

Low volume, earnings and economic uncertainties are a worry, but most rule out any major disruption

By OH BOON PING

(SINGAPORE) Things are looking pretty solid in equities. Stock markets have posted a V-shape rebound, and some research houses even expect indices to hit fresh highs in the year ahead.

But analysts also see some major headwinds next year that could derail any recovery in stock markets.

In a report, David Rosenberg, chief market strategist at investment firm Gluskin Sheff, points out that although the Dow Jones Index has chalked up decent gains in US dollar terms, it has actually fallen off its peak on Aug 27, when measured in gold.

BT did a check on Bloomberg and found a similar story painted across other indices.

When priced in gold, the S&P 500 has lost more than 6 per cent from its peak on Aug 27, while the Nasdaq has dropped 3.5 per cent from its half-year high.

In Asia, the gold-denominated Hang Seng Index has fallen 12.5 per cent from its half-year peak on Aug 11, while the re-based Straits Times Index (STI) has dropped 6 per cent since August.

According to a hedge fund manager, these figures not only show that stock markets have underperformed gold but, more importantly, the rise in stock prices could simply be because there is more money in the system, rather than improved fundamentals.

‘So the question is: did the stock markets really recover or not?’ he said.

Indeed, a sign of softening demand is the sharp drop in daily traded volume here - an indication that retail investors are staying away.

Most recently, daily traded volume on the STI fell to as low as 147 million shares on Dec 23, from an average of 230 million shares in October, although the benchmark continued its upswing, driven by a handful of blue chips.

If Robert Farrell, former chief market strategist at Merrill Lynch, is right, this is a bearish indicator since ‘markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names’.

Already in the US, investors have taken US$14 billion out of stock funds since Oct 21, according to The Wall Street Journal.

And many pension funds there are cutting back on stock holdings, leading some to conclude that market gains are being powered by fast-money investors such as hedge funds and proprietary trading desks of big brokerage firms.

But besides retail investors taking a break for the festive season, there could be a more fundamental factor at play here.

According to analysts, stocks punched to fresh peaks on hopes of a strong economic recovery next year.

But as 2010 approaches, there is a nagging fear whether the bullish expectations can be met.

‘If they do not materialise, it could result in earnings disappointment and potential downside risks,’ said Carmen Lee, head of OCBC Investment Research.

And the likelihood of that happening is rising, given that ’share prices have already priced in most of the positive news’.

‘A look at the STI showed the index is up more than 90 per cent from this year’s low, versus gains of 45 per cent to 108 per cent for the other US and regional indices, while earnings have definitely not doubled from the lows seen in March 2009,’ she said.

What analysts are watching out for are possible headwinds next year including the pace and withdrawal of the economic stimulus packages and the impact of these exit strategies, possible higher interest rates and the pace of corporate earnings recovery.

‘For the STI to advance further, upward movements will need to be supported by good earnings growth, and Q1 and Q2 2010 earnings will be watched closely for indications and guidance,’ Ms Lee said.

‘There is a good chance of the STI testing the 3,000 level, but beyond that, earnings growth will need to come in to support share price gains.’

Terence Wong, co-head of research at DMG Securities, concedes that market conditions are still fragile but says Asian corporations have generally seen a genuine pick-up in orders and ‘consumer spending should recover in 2010.

‘That is certainly a cause for optimism, especially in the stock markets.’

Some analysts track the Investors Intelligence poll, which now shows the bull camp at 52.2 per cent and the bear camp at a record low of 16.7 per cent.

That bear share is down to a multi-year low, while complacency appears to have taken hold in the market - the Volatility Index closed at 19.93 on Monday - a 49 per cent plunge since the start of the year.

For the contrarians - those who believe the crowd typically is too late - the rising optimism is a reason to bet that the stock rally is nearing its end.

However, most observers here doubt the market will face serious disruption, and some brokers are hopeful that a January rally will lure retail investors back.

Although DMG’s Mr Wong agrees the indicators point to a possible short-term correction for equities, ‘the prospects of a major downturn are fairly remote for now’, he said.

‘I would think that the slower momentum tells us that we are very late in the bull market, but that doesn’t mean it is a bear market - at least not yet.’

Source : Business Times - 30 December 2009

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