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Amy Choong
Associate Division Director
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Market Updates


An Update by ERA Research

2 June 2015


Resale prices of condos and apartments down in April: NUS index

Resale prices of Singapore's completed, non-landed private homes slipped by 0.1 per cent in April over March, a flash estimate released by the National University of Singapore (NUS) said on Thursday.

The sub-index for Central Region, excluding small units of up to 506 square feet, also slipped 0.1 per cent during the same period, while the sub-index for suburban units (again excluding small units) was flat.

Central Region is defined by the university's Institute of Real Estate Studies (IRES) as districts 1-4, including the financial district and Sentosa Cove, plus the traditional prime districts 9, 10 and 11.

The sub-index for Islandwide prices of small apartment and condo units rose by 0.4 per cent.

IRES also published revised index values for March, which showed overall prices rising 0.3 per cent from February.

Adapted from: The Straits Times, 28 May 2015

Proximity to MRT stations not essential for high rental yields: study

Projects in close proximity to MRT stations do not necessarily command high rental yields, according to a study by a real estate agency.

Twenty of 34 projects identified to have high rental yields are not within walking distance - defined as 400 metres or less - of an MRT station.

According to the report, tenants would be willing to pay a premium for convenient locations. However, there may be differences in rental and sale premiums. This would explain why projects that are relatively inaccessible are still able to command high rental yields."

A majority (56 per cent) of identified projects with high rental yields - of 4 per cent or more - are in the Outside Central Region (OCR), also known as the suburbs.

Meanwhile, projects in the Core Central Region (CCR) and Rest of Central Region (RCR) - or prime central areas and areas in the city fringe - make up 12 per cent and 32 per cent respectively of the projects identified to have high rental yields.

The report notes that rental yields for suburban projects may be higher as prices, a main determinant of rental yield, are lower in the suburbs compared to the central region.

Six of the 34 identified projects are located in the Queenstown planning area, which enjoys "good rental demand due to its ideal location attributes".

A short drive from Orchard Road and the Central Business District (CBD), the planning area is home to One North - Singapore's main research and development (R&D) and high technology cluster - and the National University of Singapore.

Its proximity to major job centres and education clusters has also contributed to the healthy rental demand in the area, said the report.

Of the projects identified, 56 per cent are more than 10 years old, while 29 per cent are between five and 10 years of age. Fifteen per cent of the identified projects are less than five years old.

Twenty-nine of the 34 projects are 99-year leasehold developments.

Leasehold properties are considered to be the most attractive when comparing rental yields as tenants are generally not concerned about the tenure of the property. A 99-year leasehold also has a lower relative price per square foot upon purchase compared to freehold property.

The report also cautioned that rental yield is just one part of the equation with regard to total investment return. While investing in real estate, one should also look at the capital growth potential. Looking at rental yields is one way of filtering out mispricing in the market, and may sometimes reveal undervalued properties.

Adapted from: The Business Times, 27 May 2015


Strata offices starting to run out of fizz?

The strata office sales market could be starting to run out of fizz - due to toppish prices and concerns about a future office oversupply and rising interest rates. The total debt servicing ratio also continues to clip appetites of mom and pop investors.

At the much-hyped GSH Plaza, sales have pretty much stagnated at 60-plus office units - around the level announced six weeks ago by the consortium that is doing a major revamp of the building.

The project was launched following a VVIP party on April 8.

Talk in the market is that the commission rate for agents to find buyers in the strata project has been doubled to 3 per cent by the owner in a bid to drum up sales.

A consortium led by GSH Corporation last year paid S$550 million for the 28-storey building, which was known as Equity Plaza at the time, and is undertaking an extensive refurbishment estimated to cost S$118 million (or S$400 per square foot based on the 295,000 sq ft gross saleable area).

When contacted on Thursday, a spokesman for the consortium, Plaza Ventures Pte Ltd, confirmed that there had been not much change in the sales status because they are now focused on negotiating whole-floor sales.

On average, there will be 10 strata office units per floor in the project. In all there will be 259 strata office units on Levels 3-28 of the building. Units range from 480-1,700 sq ft. Buyers have the option to buy entire floors (10,000 to 12,000 sq ft), thus enjoying additional discounts and floor space utilisation, according to promotional material on the development.

The spokesman declined to comment on market talk that some of the consortium members or their related parties/associates might have bought a chunk of the 60-plus units that have been sold. Besides GSH, which controls 51 per cent of the consortium, Plaza Ventures' other shareholders are TYJ Group, a private investment vehicle of GSH chairman Sam Goi (with a 14 per cent stake) and Vibrant DB2 (35 per cent stake). Vibrant DB2 is a 51:49 partnership between listed Vibrant Group and niche property developer DB2.

GSH Plaza's attractions include its prime Raffles Place location and the bite-sized investment it offers individual investors with units as small as 480 sq ft, said observers.

So far, four caveats have been lodged based on URA Realis data. The units range from around 480 sq ft to 807 sq ft and are priced between S$1.57 million and S$2.49 million. The prices of the four units translate to S$3,009 psf to S$3,257 psf.

In early March, Plaza Ventures had said prices for the office units will range from S$2,850-3,500 psf, depending on the size of the unit and the floor it is on.

It is understood that most potential buyers found the average price of S$3,000-3,100 psf too demanding for a project with a balance lease term of only 73 years.  One party felt that a price of S$2,700-2,800 psf would have been more reasonable.

Moreover, the total debt servicing ratio framework continues to make it hard for individual investors to secure big loan quantums for property purchases.

Plaza Ventures is expected to retain the first two levels, which will have 21 retail units.

At Crown at Robinson - a brand new freehold strata office project coming up on the former Chow House site at 140 Robinson Road - sales are also said to have been slow. Prices of office units in the development range from S$3,348 psf to S$3,634 psf based on the seven caveats reflected in URA Realis so far.

As early as next month, SEB could begin strata sales at Anson House. The 13-storey building is on a site with a balance lease term of 81 years. Word on the street is that SEB is awaiting approval for strata subdivision from the authorities. The strata units are expected to mirror existing tenancies with the minimum size exceeding 1,000 sq ft. Full-floor units will be 7,600-plus sq ft. Asking prices are S$2,900 psf and above. The offices are located on Levels 5 to 13. Car park lots fill Levels 2, 3 and 4. On the first level are three retail units, which will also be made available for sale at prices exceeding S$4,000 psf.

Adapted from: The Business Times, 29 May 2015

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