Wednesday, 3 September, 2014 RESIDENTIAL MARKET Suburban shoebox units: Bottom falling out of sector? Shoebox apartments outside the city centre could lose their cachet once the flood of new homes hits the market next year. Experts note that tenants are enjoying greater choice, and that will only get better as the pool of available real estate deepens. That trend spells bad news for suburban shoebox homes, which have a limited appeal given their location and relatively cramped living space. Of the 53,900 new condo units expected to come on the market in the next 30 months, the experts point out, most will be small or shoebox apartments - with a floor area of up to 506 sq ft. Landlords of such flats in less accessible locations will likely find it challenging to let out their units. Since 2009, when shoebox units became popular, the bulk of transactions in this category has been outside the city centre. Of the 12,097 shoebox units sold since 2009, about 47 per cent were in city fringe areas and around 37 per cent in the suburbs. Owners of such units for investment would not be as successful at getting the kind of rentals they want going forward. There will be pressure on vacancies, as they will be facing competition from the broader market too. There are no official figures on the number of shoebox units on the market, but the Urban Redevelopment Authority (URA) in September 2012 projected that there were about 2,400 completed units as at 2011, with the figure rising to 11,000 by the end of next year. These small homes featured heavily at newly launched projects from 2009 to 2012, including the 293-unit Alexis in Alexandra Road, the 138-home Parc Imperial in Pasir Panjang Road and the 72-unit Suites@Guillemard in Lim Ah Woo Road. Though they tend to have a higher price per sq ft (psf) due to their small size, investors find the total quantum more palatable, especially amid tightened financing. Rental yields of shoebox units typically range from 3 to 4 per cent, trumping the 2 to 3 per cent yields for residential developments islandwide. While the quantum price may seem attractive, investors looking to buy shoebox apartments should bear in mind that rents are expected to soften in line with the flood of newly completed condos, experts said. Room for capital appreciation for shoebox units appears limited as median prices - on a psf basis - have risen by about 24 per cent in the four years since the second quarter of 2009, against the 50 per cent gain for condos islandwide. After tighter property financing rules were imposed in the second quarter of last year, median prices of shoebox units fell by 5 per cent against a 2 per cent decline for non-landed homes. Despite this, there were 710 shoebox units sold in the first half of the year, according to caveats lodged with URA. Shoebox units will continue to appeal to singles and couples without children, as well as expats on local employment terms or with smaller housing budgets. Source: The Straits Times – 1 September 2014 Margins halved for new condo launches Developers profit margins for new condominium launches have halved from a year ago. Looking at condominium launches on 99-year leasehold sites acquired through the government land sales (GLS) programme, it is estimated that new launches this year could have seen margins dive to 5-10.3 per cent. This came on the back of a slew of government cooling measures that have subdued an otherwise hot market last year when record prices allowed developers to churn margins of 15.6-22.5 per cent for new launches. A total of 24 project launches on GLS sites was studied, but excluded freehold sites. Of these projects, four condominium projects were launched this year, 12 last year, and eight in 2012. They are all located outside the core central region (CCR). The average take-up rate in condominium launches has also fallen to 32.3 per cent this year, down from 67.2 per cent in 2013 and 96.9 per cent in 2012, based on the study. Further margins compressions could occur if the selling prices at these new launches are further reduced to boost sales amid rising construction and financing costs. Offering attractive deals such as setting more palatable price quantum for various unit sizes, combined with unique design innovation, could be the current strategy for developers to quickly clear their units, before further competition sets in with upcoming project launches. Moving forward, we are likely to see limited margin compression for the rest of 2014 and 2015, particularly for sites purchased after the implementation of the total debt servicing ratio (TDSR), as developers would have taken the impact of the TDSR into consideration. The margins estimates assumed a range of construction costs depending on the condominium type, full gross development value for each project, and an average transacted price for all units in each project based on caveats lodged till end-July. Only GLS sites are examined as they are the most competitively sought after and offer price transparency. The development costs for GLS sites are also more predictable than sites bought through private treaty, which will involve costs such as brokerage fees, development charge and legal liabilities. The Panorama is among the four projects launched this year on GLS sites - the others being The Santorini at Tampines, Lakeville in Jurong and Waterfront@Faber at Sungei Ulu Pandan. After Wheelock cut prices for the Ang Mo Kio project by as much as 10 per cent during its re-launch in May, units moved at a median S$1,240 per square foot (psf), down from the earlier median price of S$1,342.5 psf. There are still some 496 unsold units for the 698-unit project as at end-June. Meanwhile, developers are split over the strategy of price-cutting to move sales. Tuan Sing group chief financial officer Chong Chou Yuen said that while the group is not under pressure to cut prices, it can be more flexible in pricing for genuine buyers who are buying to stay. There are some 31 units left unsold in Sennett Residence, 35 units at Cluny Park Residence and 13 units in Seletar Park Residence as at end-June. Mr Chong said there is sufficient margin buffer given that the land sites were acquired three to four years ago when the prices were not as high as now. Roxy-Pacific executive chairman Teo Hong Lim said the group has yet to decide on whether to trim prices for its freehold project Trilive in Kovan, which so far moved only 19 units. The 222-unit project sits on the former Yi Mei Garden that was bought in a collective sale last year. But Roxy is refreshing the showflat. Mr Teo felt that there are other ways to differentiate the project, such as a freehold versus a leasehold status. Roxys new condominium launches this year have seen gross margins hovering around 13-14 per cent. As at end-June, there are some 28,436 unsold private homes. They include 1,412 in completed projects and 27,024 in uncompleted projects, of which 20,713 units are not launched for sale yet, according to Knight Frank. Source: Business Times – 3 September 2014 Sales of Highline seen starting on September 13 Keppel Land is expected to begin sales of its Highline Residences condo, diagonally opposite Tiong Bahru MRT Station and Tiong Bahru Plaza mall, on Sept 13. Market watchers note this will be the same day the showflat for Marina One Residences is expected to open for viewing. Keppel Lands spokeswoman could not confirm the date when sales will begin for Highline Residences but said: We have given a market guide price of S$2,000 psf (on average) and response has been good. The guide price is before an undisclosed special preview discount that will be given for purchases by registered prospects. Prospective buyers were invited to a preview of the project last weekend. Another session will be held this weekend. Market watchers guessed that after discounts, the average price could be around S$1,800-S$1,900 per square foot (psf). They noted that sales at The Crest along Prince Charles Crescent have been sluggish. As at end-July, only 39 of the condos 469 units had been sold, based on government data on developer sales. The project was released in June this year, with 35 units sold at a median price of S$1,682 psf in that month. The Crest, being developed by a Wing Tai-led consortium, is a stones throw from Jervois Road and the Chatsworth Park Good Class Bungalow Area. It is about 450 metres from Redhill MRT station and features spacious units. Closer to Redhill station, Alex Residences was released last November, with 171 units sold at the S$1,706 psf median price in that month. As at end-July, 208 of the projects 429 units had been picked up. Next to Queenstown MRT Station, Commonwealth Towers was released by the Hong Leong Group in May, with 275 units sold in that month at S$1,626 psf median price. Location-wise, Highline Residences is deemed the most attractive of the four projects, given its proximity to Tiong Bahru MRT Station, which is closest to town. Redhill station is one stop away, and Queenstown station, two stops. The Tiong Bahru location also has more amenities, including a mall and eateries. All four projects will be on 99-year leasehold sites sold at state tenders. The Crest site fetched S$960 psf per plot ratio (psf ppr) at a state tender that closed in September 2012. The Alex Residences site was transacted at S$970 psf ppr in December 2012, Commonwealth Towers site S$883 psf ppr in February 2013, and Highline Residences, S$1,163 psf ppr in April 2013. Highline Residences will comprise 500 units housed in two 36-storey towers, a 22-storey tower and four low-rise blocks. Unit sizes range from 506 sq ft for one-bedders to 1,227 sq ft for four-bedroom dual key units. Highline Residences will have six penthouses (2,174 sq ft to 2,260 sq ft). The project is designed by Mok Wei Wei of W Architects. The development will feature a rooftop communal garden facility to encourage urban farming and healthy lifestyles. Residents may tap concierge services such as limousines and housekeeping, in addition to enjoying complimentary golfing at Keppel Lands Ria Bintan Golf Club. M+S, the developer of Marina One Residences, has indicated an asking price of S$2,600 psf on average. The development will have 1,042 residences. A seasoned market watcher commented: Generally affordability has been dented by TDSR (total debt servicing ratio framework). But even for those who can afford, they may not be motivated to purchase given the official indication that prices will have to come down further before any cooling measures are relaxed. Source: Business Times – 3 September 2014 COMMERCIAL MARKET Tanjong Katong conservation shophouse valued at S$5m up for sale A two-storey conservation shophouse along Tanjong Katong Road has been put up for sale through expression of interest. The latest valuation conducted this year puts the propertys worth at S$5 million, which works out to S$2,017 per square foot for its gross floor area. The freehold plot at 370/370A Tanjong Katong Road has a land area of about 1,484 sq ft; the current gross floor area is 2,478 sq ft. Boutique shophouses have seen keen interest among buyers who are looking to create an iconic building of their own through alteration and addition works. At an attractive price quantum, we expect strong interest for the property from an extended pool of buyers. The property is zoned residential with commercial on the first storey; the 2014 Master Plan puts its gross plot ratio at 3.0. This is a rare opportunity that is being offered to the market on a vacant-possession basis, giving vast flexibility to the buyer, who can explore various options for the property, whether for owner occupation or investment. The freehold status of this asset will also enhance its appeal to the market. With the Eastern Region MRT Line to come, the neighbourhood is poised for continued rejuvenation; the property itself is within a five-minute walk of the proposed Amber station. The expression-of-interest exercise ends at 3pm on Oct 7.
Posted on: Fri, 05 Sep 2014 08:40:21 +0000
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