New peak in Singapore private home prices expected by the end of 2018

The Business Times - 3 July

Private home prices rose 3.4 per cent in the second quarter, keeping pace with the 3.9 per cent increase in the first quarter, flash estimates from the Urban Redevelopment Authority (URA) shows.

The quarter-on-quarter increase in the second quarter was led by a 3.8 per cent rise in the prices of landed homes, followed by a 3.3 per cent increase for non-landed homes.

In the non-landed segment, prices in the city-fringe or Rest of Central Region (RCR) jumped the most - by 5.7 per cent during the second quarter, followed by a 2.9 per cent rise in the suburban or Outside Central Region (OCR), and a 1.4 per cent increase in the Core Central Region (CCR).

Tricia Song, Head of Research:

Private home prices continued their steady ascent in Q2 2018, rising by 3.4% after climbing 3.9% in Q1, according to flash estimates from the Urban Redevelopment Authority. This marked four straight quarters of rising streak, reflecting a sustained trend of price growth that is supported by the rosier economic outlook, relatively healthy housing demand, and rising market confidence. 

With this increase, private residential prices were up by a cumulative 7.4% in the first six months of 2018. Home values are now 3.6% down from a peak in Q3 2013. In fact, non-landed private residential prices are just 1.7% below a Q3 2013 peak. Landed home prices are still 9.6% below Q3 2013 peak. 

Generally, home values gained firmer footing in Q2 due to several new condo projects being launched at 13-25% higher prices, and possibly helped by en bloc sale beneficiaries dipping into the resale market for replacement homes.  

With the two strong quarters of price increase, we are now raising our private home price forecast for the full 2018 to 12% from 8%. This means H2 2018 could see a further 4-5% rise from here. Read the full analysis here.

Govt keeps H2 GLS housing supply on par with H1

The Business Times - June 28
The government is seen taking a balanced approach in ensuring adequate residential land supply in the second half of this year to meet homebuyers' demand without exacerbating a potential supply glut, consultants say.

It has kept residential land supply in the second half of 2018 under the government land sales (GLS) programme on par with that in the first half of this year, again preferring to keep the majority (66 per cent) of total residential land supply under the Reserve List to be triggered for sale only by market forces.

Six sites on the Confirmed List for H2 2018 comprise four private residential sites, including one executive condominium (EC) plot, one "white" site and one hotel site. They can collectively yield 2,705 private residential units (including 695 executive condominium or EC units), 42,200 square metres of gross commercial space and 390 hotel rooms.

A "white" site is a land parcel where developers are free to decide on the mix of uses and the respective quantum of floor space of each use as long as the total permissible gross floor area (GFA) is maintained for the whole development.

Govinda Singh, Executive Director of Valuation & Advisory: 

We believe the policy makers have been pragmatic in their approach towards the sale of hotel sites via GLS, holding off new site launches for a decade to allow the relatively large number of rooms in the market to be absorbed. Now that concerns of an oversupply in hotel rooms have largely receded, the Government has stepped forth to provide land options for the hotel sector. 

Tourist arrivals were up by 6.2% year-on-year (YOY) in 2017, and the momentum has carried over to this year. Visitor arrivals between January and April already rose by 6.7% YOY and this does not even include the expected boost from the Trump-Kim Summit that took place in Singapore on June 12, which brought in thousands of journalists from around the world and government officials from the US and North Korea.

Given the bright tourism prospects ahead, we believe the hoteliers would be very keen on the hotel offerings on both the Confirmed List and Reserve List. The Club Street plot sits within a high demand – both corporate and leisure - area in Chinatown and plugs well into the rejuvenation of the Tanjong Pagar district nearby. The Marine View White Site also presents good opportunities being in the prime downtown, which has been earmarked as an exciting waterfront destination in the future.

Tricia Song, Head of Research: 

The slate of sites offered in the GLS programme for H2 2018 continues to demonstrate the Government’s measured yet responsive approach to the sale of public land. It reflects that policy makers are keeping their finger on the pulse of the market, providing adequate land supply to meet varying real estate needs in Singapore. 

Particularly eye-catching is the provision of a hotel site which can yield an estimated 390 rooms in Club Street under the Confirmed List. We think several residential sites offered in GLS H2 2018 are very attractive – including the plum site in Kampong Java Road - and would appeal to both local and foreign developers judging by the strong response to the sale of prime sites on the collective sale market as well as recent GLS site tenders, such as in Fourth Avenue, Jiak Kim Street, Handy Road, and Cuscaden Road. 

The other sites that stood out for us in the upcoming land sales programme are the Middle Road plot and the one in Tan Quee Lan Street on the Confirmed List and Reserve List respectively. Located near the Beach Road White Site tendered in end-2016, both sites are likely to supplement the housing demand in the up-and-coming Beach Road commercial enclave. Nearby DUO Residences has sold 652 units of its 660 units since its launch in 2013, achieving an average selling price of SGD2,039psf. We expect a top bid of SGD1,400-1,500 psf ppr for each site or about SGD500 million for Middle Road and SGD800 million for the Tan Quee Lan Street plot. Read the full analysis here

CapitaLand Commercial Trust sells Twenty Anson for S$516m

The Business Times - 29 June

Capitaland Commercial Trust (CCT) has agreed to sell Twenty Anson, a 20-storey office building in Tanjong Pagar, to an unrelated third party for S$516 million, its manager announced on Friday.

The sale price, arrived at through a bidding process, works out to S$2,503 per square foot of the building’s net lettable area of approximately 206,000 sq ft. The price is also 19.2 per cent above the property's valuation of S$433.0 million done on Dec 31, 2017,  and 20 per cent higher than CCT’s purchase price of S$430.0 million in 2012.

The transaction is expected to be completed in the third quarter of this year.

Duncan White, Head of Office Services: 

The Tanjong Pagar micro market has recently climbed the attraction ladder with regards to occupier interest as high quality Grade-A developments start to populate the area as a standard.
Initiated by Guoco Tower, completed in Q3 2016(Sept), the development was a prominent success in securing high occupancy rates (80%) when Temporary Occupation Permit (TOP) was obtained and continued demand for smaller back-fill spaces. Frasers Tower has been potentially even more successful, achieving 83% pre-lease levels at TOP in Q2 2018(June). The rental rates have scaled to well into double-digits and the last floors should be signed within the next quarter. 

With the imminent arrival in mid-2020 of 79 Robinson Road (ASB Tower), the redevelopment of the former CPF Building undertaken by a joint venture between Ascendas-Singbridge Group, Mitsui & Co and Tokyo Tatemono Co., we expect to see similar positive pre-lease activity as the demand levels in Singapore continue to rise. 
With all this new stock and high-profile occupier activity, there will certainly be increased demand for nearby quality grade developments such as Twenty Anson. With multinational corporations such as Total, Microsoft, The Straits Trading Company, Asics, Agoda, ING, Itochu, Fonterra and Pacific Life moving to the rejuvenated Tanjong Pagar micro-market, there will be an increased requirement by service providers and professional service support organisations to follow the crowd and consider mid-tier developments for their premises, close to their clients. It can be expected that there will be an uplift in ‘everyday’ rental rates at Twenty Anson with the new Tanjong Pagar region’s increased relevance and popularity in the core CBD.

Tricia Song, Head of Research:

The price of SGD2,503 psf per NLA for this prime building in the Shenton Way/Tanjong Pagar area and relatively low net property yield of 2.7% perhaps point to the increasing attractiveness of this older CBD which has historically traded shades lower than the newer Raffles Place/ Marina Bay.  We expect Shenton Way/ Tanjong Pagar to rise in prominence with continued rejuvenation and redevelopments, towards the vision of the Great Southern Waterfront. 
Despite concerns over a global trade war and heightened equity market volatility, Singapore remains attractive as a safe haven for physical assets for investors. We have seen keen interest from local and foreign investors, and expect more commercial property transactions to materialize over the second half of the year, supported by a strengthening leasing market.