Singapore property measures to cap rising home prices

2 measures directed at private residential and public housing markets dampened market sentiment and sales activity.

Residential market activity in the third quarter moved at a steady pace until it hit a snag in September when the government introduced the latest set of property measures. Market sentiment was dampened and sales activity slowed down as industry players took time to digest the implications of the measures, according to a CRBE Research report.

On 30 August 2010, the government introduced two sets of measures to cool the property market. The first set of measures, directed at the private residential market, included stretching the holding period for seller's stamp duty from one to three years and increasing the minimum cash payment to 10.0% from 5.0% as well as lowering the loan- to- valuation ratio to 70.0% from 80.0% previously. The second set of measures was targeted at the public housing (HDB) market. These included allowing the sandwich class (households earning a monthly income between $8,000 and $10,000) to buy new Design Build & Sell Scheme flats with a $30,000 CPF housing grant; increasing the supply of HDB flats from 16,000 in 2010 to 22,000 in 2011; shortening the completion time of Build To Order (BTO) flats; increasing the Minimum Occupation Period (MOP) for non- subsidised flats to five years from three years; and disallowing concurrent ownership of both HDB flats and private properties (include properties overseas) within the MOP.

The thrust of the first set of measures is to discourage property investors from overextending themselves or landing themselves in financial problems should the economy or interest- rate environment turn unfavourable. The second set of measures underscores the government’s stand that HDB homes are primarily for owner- occupation and not for profiteering. They are meant to facilitate first-time buyers to secure their homes. All in, the measures were introduced to prevent the residential market from over-heating.

Some 3,300- 3,500 new homes were sold in the third quarter, a strong volume although considerably lower than the 4,033 and 4,380 units sold in the second and first quarters respectively. Projects with strong location attributes and projects with small- format units continued to be the star- performers. Condominium projects which were fully sold included 368 Thomson (157 units), The Scala (468 units), Terrene (172 units) and small- format projects Haig 162 (99 units), Dorsett Residences (68 units), Centra Suites (62 units), Central Studios (51 units) and Leicester Suites (47 units). Suburban 99- year condominiums, The Greenwich at Seletar Road sold 230 of its 319 units and NV Residences at Pasir Ris Grove sold 300 of its 642 units, establishing new price benchmarks of $1,095 psf and $830 psf in their respective locations.

During the third quarter, buying interest in high- end projects went beyond high- net- worth individuals to institutional investors. Some 35 units of Twin Peaks at Leonie were sold at an average of $2,870 psf on a fully- furnished basis. Nine units of Tomlinson Heights (former Beverly Mai) were sold between $2,940 psf and $3,130 psf. Another nine units in The Laurels were sold between $3,110 psf and $3,240 psf. Arch Capital bought all 34 units in Royal Oak (former Anderson Green) for around $200.0 million or $2,337 psf. Alpha Investment Partners bought 23 units in Draycott Eight from Morgan Stanley. It paid $157.0 million or $2,300 psf for the units, most of which were leased out.

Developers acquired more than 10 sites from the private sector in this quarter. The more prominent deals included the purchase of Goodrich Park and Meng Garden. BBR Holdings bought the 97,703- sf Goodrich Park for $86.0 million or $629 psf/plot ratio. The site could be redeveloped into a 5- storey condominium of over 130 units. Meng Garden, a prime site in district 9, was bought by TG Development for $137.0 million or $1,380 psf/plot ratio. The site could yield over 90 new homes when redeveloped. Two commercial buildings, Starhub Centre at Cuppage Road and Chow House at Robinson Road were reportedly sold with the intention to convert them to residential use. A total of six residential and one commercial- residential site were bought from the government. Far East Organization bought a 444,136- sf site at Jalan Eunos for $257.8 million or $415 psf/plot ratio while Hoi Hup and Sunny Developments bought a 290,047- sf site at Miltonia Close for $165.0 million or $406 psf/plot ratio. Both parcels are for low- rise residential developments. The mixed- use site is located at New Upper Changi Road/Bedok North Drive. CapitaLand Residential Singapore and CapitaMalls Asia bought the site for $788.9 million or 841 psf/plot ratio. They plan to build a three- storey shopping mall with 500 to 550 apartments on the site.

CBRE Research expects the residential market to mellow in the fourth quarter of 2010. Developers will continue to look for development sites but will likely be less bullish in their bids. New projects that are primed for launch include Vacanza @ East and two executive condominiums, Esparina Residences and The Canopy. New homes sales volume in the fourth quarter is expected to be lower, around 2,000 units.