New project info: The Meyerise

Hong Leong Holdings will be holding previews for a new freehold residential project in the East Coast area called The Meyerise in September, with prices starting from $1,400psf.

Located at Meyer Road, The Meyerise will have 239 units spread across two 31-storey blocks. There will be two, three, four and four-plus-one bedroom apartments, with sizes ranging from around 880sqft to 2,055sqft.

Most of them, or 120 units, will be three-bedders. Two-bedders make up the next biggest category with 60 units. The project is expected to achieve temporary occupation permit in October 2016.

The Meyerise is near East Coast Park and Playground@Big Splash. It is also in the vicinity of retail spots such as Parkway Parade and 112 Katong.

There are several schools nearby, including Tao Nan Primary School. Chung Cheng High School, Dunman High School, Victoria School and Victoria Junior College.

The Meyerise will be a “lifestyle enclave that allows residents to forget the stresses of city living while embracing the finer things in life”, said Hong Leong Holdings head of sales and marketing Betsy Chng.

The East area is popular with home seekers who aspire to seaside living and several new residential developments are coming up. At one of them, Silversea, units changed hands for $1,547-2,205psf in July and August, according to caveats lodged.

Source: The Business Times

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Slower growth for resale home prices in July

Overall prices of resale non-landed homes crept up marginally last month, largely fuelled by a stronger rise in prices of so-called shoebox units.

But even prices of these tiny homes, typically about 500sqft or less, rose at a more subdued pace of 1.4%, compared with 2.4% in June.

Flash estimates for the Singapore Residential Price Index (SRPI), which monitors transactions of non-landed completed projects, indicated overall price growth of just 0.2%, lower than the 0.7% recorded in June.

Ms Petra Blazkova, head of Singapore and South East Asia research at CB Research Ellis, said she has observed a dip in demand for small homes.

But she added that this fall in interest might be a blip caused by uncertainties brought on by the economic crises in the United States and Europe.

“In the long term, we will continue to see more interest, possibly until 2012. The supply of such homes remains steady and smaller units are seen as a more affordable class of property for those who are interested in putting their money in property,” said Ms Blazkova.

Knight Frank’s research head, Mr Png Poh Soon, agreed. He said property buyers may also be banking on the long-term potential of such homes, especially if they are in good locations, such as the upcoming commercial hub in Paya Lebar.

Prices of suburban homes were fairly stable, moving up 1.2%, unchanged from the previous month, while prices of homes in central districts declined by 1.3%.

While the figures indicate that buyers are still keen on resale suburban properties, analysts anticipate that revisions to the income limits set for public housing will dampen that demand.

The higher income ceiling will allow more home hunters to buy HDB flats.

Many industry experts say the true effects of this policy change will probably be felt when newer public housing projects are rolled out.

They said that in the next few months, prices of resale homes could reflect a shift to public housing from buyers who would have otherwise chosen to purchase private property.

Market watchers say the latest 0.2% rise in resale prices is a good sign, and indicates that the market is finding some balance despite the uncertainties clouding buyer sentiment.

Some buyers are more cautious about what their next move will be.

However, Mr Png said he has observed another group of home purchasers who are taking advantage of what they deem to be a good investment opportunity.

“(This) group is made up of people who still believe that with interest rates remaining low, property is a less volatile investment than putting money into the stock market.”

“Even if prices drop, these people will hold on and rent their apartments out.”

Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-East Asia, expects slower growth of prices in line with doubts over global economic conditions.

Although he expects the resale market to face some fluctuations, he said it is likely prices for this segment will stabilise throughout the rest of the year.

Dr Chua said prices for both new and resale property might appreciate between 1.5 and 2% in the remaining quarters, growing 7% for the whole of 2011.

Source: The Straits Times

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Project Spotlight: Kovan Residences

The newly completed Kovan Residences saw an increase in transactions from Aug 1 to 8, with three units at the suburban condominium changing hands in that period. Prices achieved were in the range of $1,085 to $1,267psf.

The fully sold 512-unit Kovan Residences was developed jointly by Centurion Properties, the majority stakeholder, in collaboration with construction group Lian Beng, which held a 19% stake. The 99-year leasehold Kovan Residences is located across the street from Kovan MRT station on the North East Line. Nearby amenities include the Heartland Mall shopping centre, the Chomp Chomp Food Centre, as well as primary schools Paya Lebar Methodist Girls and Xinghua Primary. International schools such as The Australian International School amd The French School are also within a short driving distance.

There is a mix of unit sizes within the project, with the smallest being two-bedroom apartments of 883sqft, three-bedroom apartments from 1,259sqft, four-bedroom units from 1,173sqft (* we believe this is a typo and should be 1,713sqft) and penthouses from 2,400sqft. At its launch, more than 50 units were sold at a private preview at average prices of $870 to $900psf, while penthouses fetched quantum prices of $2 million to $3 million.

Matthew Chan, associate branch director at Propnex Realty, says Kovan Residences’ convenient location, large units and proximity to schools attract mostly families with children. “It’s also in a landed housing enclave, hence some of the high-floor units enjoy unobstructed views, “says Chan. “Another convenience for residents is NEX mall, which is just one MRT stop away.”

As such, 80% of buyers of units at Kovan Residences are said to be Singaporeans, while the remainder are made up of Indonesians, Malaysians and mainland Chinese. The project attracts mainly owner-occupiers, observes Chan, who brokered the sale of seven units in the development.

The property is also popular among French and Australian expatriates, given the proximity to their respective international schools, adds Chan. According to listings on propertyguru.com.sg, rental rates of three-bedroom units are hitting $4,300 per month, while the larger four-bedroom units can command as much as $7,000 a month. Based on current transaction prices and rental rates, gross yields are estimated at an average of 4%, says Chan.

He reckons Kovan Residences’ larger units compared with neighbouring condos offer better value for money for buyers. As the latest condo to be completed in the immediate neighbourhood, Kovan Residences will also likely generate greater interest. The neighbouring condo, Kovan Melody, was completed five years ago.

The 778 unit, 99-year leasehold Kovan Melody was launched back in 2004 at an average of $520psf. Based on the latest resale transactions captured by URA Realis, units changed hands at record highs for the project, hitting $1,148psf last month.

Based on the latest transactions recorded in early August for Kovan Residences, a 947sqft, sixth-floor, two-bedroom unit changed hands for $1.2 million ($1,267psf). The seller had purchased the unit in July 2008, when the project was first launched for close to $807,000 ($852psf). The seller enjoyed a 48.7% capital gain in three years.

Meanwhile, a 1,442sqft, three-bedroom plus study unit on the ninth floor was recently sold for $1.62 million ($1,123psf). The seller had purchased it in May 2009 for $981,000 ($680psf). Hence, the seller enjoyed a 65% appreciation in two years.

A third unit, an eighth-floor apartment measuring 1,862sqft and with four bedrooms, was recently transacted at $2.02 million ($1,085psf).

Source: THEEDGE SINGAPORE

The wife and I had seen Kovan Residences twice thus far, once during its initial launch back in 2008 and then again in early-2010. While we really liked the layout of the 3- and 4-bedders, we were put off by the numerous bay windows and large balcony/planter spaces within the units. Even the bathroom toilets have bay windows!

And for those who are interested, below are the latest transacted prices for both Kovan Residences and Kovan Melody. 
Kovan Residences & Kovan Melody - Transacted Prices

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Update on Singapore property market: August 2011

Here is the latest report courtesy of Citigold and Mr. Nicholas Mak.

SGP Mkt Update - Aug 2011

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Did someone ask about Suites de Laurel?

The wife and I were travelling along Jalan Anak Bukit this morning and managed to snap this picture of the Suites de Laurel site.

The project has very little frontage to speak of, while the outer stacks are definitely waaaay too close to the main road/flyover for our liking. So we maintain our initial view that many of the units will be noisy.

We apologize for the awkward photo angle - we were trying to capture as much of the project as we can from the inside of our car while sitting in traffic.

Click on below link to check out our previous review of Suites de Laurel:
http://sgproptalk.blogspot.com/2010/07/suites-de-laurel-review.html

Have a great weekend and vote wisely!

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Project Spotlight: Latitude

Latitude, a high-end condominium located on Jalan Mutiara in the prime River Valley area, has seen a spike in transactions since late July. The 127-unit freehold condo by giant listed developer CapitaLand was completed late last year. Caveat data downloaded from URA for the period from July 26 to Aug 2 saw four caveats lodged for the sale of four 4-bedroom units sized at 2,766 to 2,928sqft. The quantum prices achieved ranged from $5.84 million to $6.15 million, or an average of $1,944 to $2,224psf.

Latitude comprises three towers, with a 22-storey tower and two 23-storey towers. Units comprise a mix of two- to four-bedroom apartments and four-bedroom penthouses. Two-bedroom units measure 1,324sqft, and penthouses measure 5,317sqft. The property is in the prestigious District 10, just five minutes' drive from the Orchard Road shopping belt.

In 4Q2007, CapitaLand sold 10 units at Latitude in the first phase of release. Prices achieved then, which in hindsight was the peak of the property boom, ranged from $2,500 to $2,800psf. With the spectre of the US subprime crisis and credit crunch affecting stock markets, market sentiment changed in early 2008, and many developers held back the launches of their high-end projects. According to caveats lodged with URA Realis, only one unit at Latitude was sold in 2008 - to a buyer with an HDB address. It was the sale of an eighth-floor, two-bedroom unit for $3.29 million ($2,487psf).

In 2009, in the aftermath of the global financial crisis and as home buying demand picked up, 48 units at the Latitude were sold, marking the largest number of units sold in a year since its launch. Prices of units sold ranged from $1,640psf for a two-bedroom unit to $2,305psf for a four-bedroom apartment. In 2010, there was a mix of new sales and sub-sales, with prices ranging from $1,738psf for a three-bedroom unit to $2,318psf for a penthouse unit.

Transactions achieved so far this year ranged from $2,504 to $2,239psf, according to caveats lodged with URA Realis. Marketing agents focusing on high-end condos in the prime districts of 9, 10 and 11 consider Latitude an attractive choice among investors and owner-occupiers. Four-bedroom units at Latitude command rental rates of about $15,000 a month, says Vivienne Koo, associate director of Tristar Properties. Thus, investors can achieve rental yields of 3%, which is higher than the average 2% to 2.3% for luxury properties in the prime districts, she adds.

"The Grange, for example, commands similar rents of about $15,000 a month for a four-bedroom unit, but its quantum price is also much higher," says Koo. According to listings on PropertyGuru.com.sg, a four-bedroom unit at The Grange, located off Grange Road, is priced at $6 million, or $2,800psf.

Another attraction for most potential home-owners and investors is the size of the four-bedroom apartments at Latitude. While most new luxury properties have four-bedroom apartments of about 2,300sqft, those at Latitude are close to 2,700sqft. " You can't really find such large sizes in the prime districts anymore, as many of the condominiums built in the old days that feature such large sizes have been sold en bloc, torn down and rebuilt into smaller units," says Koo.

The units have quality furnishing, spacious kitchens and good layouts, observes Koo. As such, more than half the buyers at Latitude are own-occupiers, and investors make up the rest. Most of the buyers are foreigners, with the project being especially among Indonesians and mainland Chinese. Some of these buyers, especially Indonesians, have purchased two or three apartments to be amalgamated into one large unit to accommodate their extended families. " This is something that you don't usually find in condominiums here in Singapore," she says.

Source: THEEDGE SINGAPORE

The wife and I understand that about 80% of units in Latitude have been sold thus far. So CapitaLand have already made their millions on this project and should be in no hurry to sell off the remaining units. And given the uncertain economic climate and bloodshed seen at the stock markets recently, we will be very surprised if unit at Latitude crosses the $2,200psf mark again in the next couple of months (at least)...
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Build (more) and they will buy...?

A study by Savills Singapore has put some hard numbers to the big lure of small apartments. Developers have been squeezing out more units on sites bought at state land tenders in recent years than was initially estimated.

The study was based on 51 private housing sites including seven executive condo (EC) plots sold under the 2006-2010 Government Land Sale (GLS) Programme and took in projects launched up to Aug 10 this year.

The total number of private homes actually generated on these sites will exceed the GLS Programme estimates by about 11%. Excluding EC sites, the surplus supply is slightly higher at 12%.

Urban Redevelopment Authority’s spokesperson said: “The estimated number of residential units in the GLS announcement is intended to serve as a guide only.”

Once developers that have bought sites at state tenders receive planning approvals, URA uses actual supply numbers for estimating pipeline supply.

Savills’ study shows that the supply from projects on each of the 8 sites exceeds the supply estimate in the GLS Programme by more than 40%. Savills found that a substantial portion of units in these developments are below 800sqft, and in some cases, even under 500sqft.

While shoebox units have fuelled the trend of developers minting more units in their projects, this was mitigated by ECs where units are larger. The government began selling EC land in 2010 after a five-year hiatus.

Another finding in the study is that the trend of producing “surplus” units over the GLS Programme supply estimate gathered momentum after 2007. Private residential sites tendered under the 2007 GLS Programme generated just about 3% more units than estimated in the Programme. This surplus increased to 9% for sites sold in the 2008 GLS slate, 14% for 2009 plots and – if EC sites are included – 15% for 2010 GLS sites. If EC sites are excluded, the last figure would be 19%.

Savills highlighted that projects with more than 40% “surplus units” generally have a substantial portion of small units. And 5 projects on sites sold under the 2006 -2010 state land sales programmes will yield at least 50% more units than the state’s estimates for these sites indicated in the respective Government Land sale (GLS) Programmes.

Source: The Business Times

Given the huge disparity between actual and estimated number of units generated, one should not be too surprised by the rising figure for unsold new private homes in the supply pipeline...

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Seastrand (Review)

Project Name:   Seastrand
Tenure:   99-year leasehold w.e.f 3rd Jan 2011
Location:   Pasir Ris Link
District:   18
Site Area:   215,281sqft
TOP (estimated):   31st Dec 2016
Total Units:   473 apartments + 2 commercial shop units
No. of Blocks/Storey:   10 (7 Block of 11-Storey and 3 Blocks of 12-Storey)
Car Park Lots:   473
Developer:   Far East Organization/Fraser Centrepoint Homes

The wife and I visited the sales gallery of Seastrand over the weekend. This is the latest project jointly developed by Far East/Fraser Centrepoint located in Pasir Ris. The two developers are also responsible for the “Waterfront Collections” along Bedok Reservoir Road.

Seastrand is located on a huge plot of land of about 215,000sqft at the intersection between Pasir Ris Drive 3 and Pasir Ris Drive 4. The main entrance, however, will be on Pasir Ris Link – this is a new road that will be built specially for the project.

The 99-year leasehold project has a total of 473 apartments spread across 10 blocks. It offers a mix of 1 – 4 Bedroom unit types:
• 1-Bedroom (159 units):   581 – 663sqft
• 2-Bedroom (113 units):   914/1001sqft
• 3-Bedroom Compact (98 units):   1133 – 1241sqft
• 3-Bedroom (83 units):   1195 – 1300sqft
• 4-Bedroom Compact (20 units):   1321sqft

A unique feature of Seastrand is that there are no penthouses, while the 4-bedder compacts are effectively 3+Study units.

Facility wise, Seastrand offers everything that one will come to expect from a full-facility condo (tennis court inclusive) and then some. The facilities are spread over the ground level as well as on the 3rd floor, i.e. the rooftop of the multi-storey carpark that wraps around the project. Of particular note are the Water and Strand Villas alongside the Strand Pool – these are outdoor function areas that come with their own Jacuzzis.

Parking lots are available within the 3 levels (basement, 1st and 2nd) of multi-storey parking, which forms an u-shape around Towers A – H. This allows residents to access their vehicles directly from their blocks, which is especially helpful during rainy days. The only exception is Tower J, which is not connected to the multi-storey carpark. Residents here will probably have to make do with “open air” surface parking that is located below their block.

There are three showflats in the sales gallery, showcasing the 1-, 2- and 3-bedroom units. We shall focus on the 1195sqft, 3-bedroom apartment (Type C1b).

However, do note that the floor plan below is NOT that of Type C1b – we were unable to obtain the floor plan for this unit type during our visit. We have included the floor plan for Type Cc1b instead, which is actually the 3-Bedroom Compact with the same layout as Type C1b. The only differences are that for Type Cc1b, Bedroom 3 is smaller and there is no bathroom in the yard area.

As you enter the main door, the dry/wet kitchen is on your left. A dining table that sits 6 (barely) is incorporated into the dry kitchen area, which is actually quite a good idea as it frees up space in the living area.

The wet kitchen (more like the typical kitchen to us, since the so-called “dry kitchen” is not exactly a kitchen per se) is L-shaped and comes with nice solid surfaced worktop, full set (top/bottom) of kitchen cabinets and even a dish drying rack. The developers have also thrown in Delizia hood/hob, Ariston Oven and Microwave and Samsung fridge for good measures.

The yard has barely enough space for laundry, but we quite like the idea of having a wash basin here – this will come in handy for items that need “hand washing”. The washing machine cum dryer (provided) is tucked nicely beneath the kitchen worktop, which frees up space in the yard. A large window provides ample natural lighting and ventilation to the yard area, which also houses the home shelter and a bathroom.

And speaking of home shelter, this is a small rectangular strip of an area, which means that you probably need to customize the bed if you intend to use this as the maid’s room. Another option is a “pull down” bed as illustrated in the showflat. The home shelter is fully enclosed so your maid will have to leave the door open to avoid suffocation while sleeping.

The living/dining area is rectangular shaped and of decent size (relative to the apartment size). It comes with 2.9m ceiling height (3.15m for ground floor units) and for flooring, you have a choice of “warm” theme (60cm x 30cm marble slabs in darker beige colour) or “cool” theme (60cm x 60cm porcelain tiles in lighter beige colour).

The balcony is also rectangular in shape and rather sizable (we reckon 100sqft). Some will probably like the idea of a huge balcony area but we felt it’s a tad… extravagant, considering that the whole apartment is not even 1,200sqft.

The two common bedrooms come with timber-strip floors and full-height (ground to ceiling) windows. The absence of bay windows is a definite plus. We were told that both the bedrooms are of similar size but Bedroom 3 somehow looked smaller than Bedroom 2.

The common bathroom is good size and actually has marble floors/walls, which is a pleasant surprise (considering the “norm” these days with ceramic tiles). It also comes with Newform (Italian) bathroom and Vera (origin unknown) toilet fittings.

The surprise package of the apartment must surely be the master bedroom. The room is huge – we were told that the bed inside the showflat is an "European King", which is actually bigger than the typical King-sized bed. And yet the room still felt quite spacious even with the bigger bed. We also like the layout of the wardrobe in the master bedroom – you get a L-shaped wardrobe that separates the bedroom area from the attached bathroom, with a “walk-in wardrobe” feel.

The master bathroom is again quite spacious and almost an exact replica of the common bathroom in terms of look and feel. But it comes with a “sunken” bath and rain-shower. We were told that buyers can have the option of either solid or glass-partition walls for this bathroom.

Seastrand has started selling for about 2 months now and we understand that more than 50% of the units have been sold. Units in Towers C, E and G are fully sold and if you are looking at the 3-bedders, only 3 units (Tower B) are left amongst the units that have been launched. The good news is that there will be more 3-bedder (Tower J) and 3-bedroom compact (Towers D1 & D2) units launching soon, but supposedly at slightly higher psf. Then again, with the market circumstances as it is, it remains to be seen if the developers will actually increase prices for subsequent releases.

Price wise, the price for the remaining 3-bedders are about $990psf. The unit on the 4th floor of Tower B (#04-06) costs $1,413,260 after discount. In addition, developers are also giving away a further discount of 1% in furniture vouchers for selected “Star Buy” units. But the vouchers will only be given upon TOP of the project.

Monthly maintenance charges for the 3- and 4-bedders are about $320, which we feel is at the higher end of the scale for a supposed mass-market project.

What we like:
• The quality of furnishing and fittings are definitely more appealing compared to some of the other “mass market” condos that we have seen recently, and is more akin to those that we have come to expect with Far East projects.

• Seastrand is located fairly close to neighbourhood amenities (think minmarts, coffee shops etc) located within the HDB estate across the road, and yet it is not “surrounded” by HDB flats so to speak. It is also within walking distance to Downtown East, where you find a NTUC and all kinds of F&B outlets.

• For those who enjoy greeneries and the sea, Seastrand is about a 7- 10 minutes’ walk to Pasir Ris Park and the beach.

• Parents who need to put their kids into primary schools will be pleased to know that there are several to choose from that's within 1-km of Seastrand – Casuarina Primary, Loyang Primary, Pasir Ris Primary and Coral Primary (maybe?).

What we dislike:
• Seastrand is supposedly 2 bus-stops (or 3-mins drive) from Pasir Ris MRT station and bus terminal at White Sands Mall. But should you decide to walk it, you may find that it is actually quite some distance away. Consolation is that for the first two years at least, there will be dedicated shuttle-buses from the condo to White Sands & Ikea/Carrefour.

• We reckon that the main road (Pasir Ris Drive 3) leading out to the ECP/PIE will be rather congested especially during the rush hours.

• The plot of land next to Seastrand was recently acquired by MCL Land and will be developed into another private condo project in due course. In addition, the plot of land directly across from Seastrand (where the sales gallery currently stands) is probably slated to be sold for private housing development as well. So depending on how soon building works of these future projects get underway, buyers of Seastrand may have to be prepared to live near a multiple construction sites for awhile.

Our Verdict: The wife and I have nothing really negative to say about Seastrand, except probably the location (too far, which is again subjective). You are certainly getting value for money in the “quality” department, as compared to, say, Woodshaven. It is definitely a project we will consider, should we decide to move to Pasir Ris.

Having say that, a quick check on recent transacted prices at nearby Eastvale – a 13-year-old EC built by CapitaLand that is now fully privatised – reveal that units of 1,100 – 1,200sqft were sold at less than $750psf. And the wife and I actually think that Eastvale is the better located of the two projects (and much nearer to the MRT too!).

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Enbloc News: Hong Leong Garden Shopping Centre

Hong Leong Garden Shopping Centre at West Coast Way has been launched for sale by tender with an indicative price of between $160 million and $170 million.

This works out to be a land rate of approximately $752 to $794psf ppr for redevelopment up to a gross plot ratio of 1.6, after factoring in the estimated land premium for the potential of acquiring the adjoining state land parcel and a development charge.

Marketed by Credo Real Estate, Hong Leong Garden currently comprises 72 apartments and 66 shop units. The site has an area of more than 150,000sqft with a lease term of 956 years.

Credo said that the Singapore Land Authority (SLA) has also granted an approval to enlarge the site area by combining the adjoining state land parcel of nearly 13,500sqft.

Under its 2008 Master Plan, the site is zoned "Residential with commercial at 1st Storey" with a gross plot ratio of 1.6 and an allowable height of up to 12 storeys.

Deputy Managing Director at Credo Real Estate, Tan Hong Boon, said the site may be transformed into a condominium development with a self-contained hub that offers dining options and amenities to residents in the development and neighbouring housing estates.

Source: Channel News Asia

Brave move indeed, considering the current market circumstances. Be interesting to see if there's any takers when the tender closes, although there was no mention of the tender dateline...

Update (The Business Times 23/08):
The tender closes at 2.30pm on Sept 19.

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Private home sales continue to rise in Q2 2011

Sales of private home rose 21.6% quarter on quarter in Q2 2011 and the number of units bought by mainland Chinese buyers hit a new high, according to a new report from DTZ.

The property firm, which analysed caveats lodged for both new and secondary sales, said that the number of transactions rose to 8,458 in the second quarter of this year from 6,958 deals in Q1.

Mainland Chinese buyers continued to be the top non-Singaporean purchasers of residential properties in Singapore for the second consecutive quarter. In absolute terms, purchases by mainland Chinese buyers accounted for 640 units of all private residential transactions – which is a new high and more than the 527 units purchased in Q1 2011.

The total proportion of private homes bought by all foreigners stayed at a record high of 16% in the second quarter of 2011 – the same ratio as in the first three months of the year and the highest quarterly percentage recorded since data was made available for analysis in Q1 1995.

“The bulk of private residential purchases by foreigners continued to be in the high-end market segment,” said DTZ’s head of South-east Asia research Chua Chor Hoon. Of the total private residential purchases by foreigners, 43.3% cost $1.5 million or more.

DTZ, which downloaded the caveats from URA Realis on August 5, also found that the ratio of buyers with HDB addresses has been inching up over the last three quarters.

Such buyers bought 38.7% of all private homes in Q2 2011, up from 37% in Q1 2011 and the 34.6% in Q4 2010.

And in a reversal from past trends in 2010 and Q1 2011, more purchasers with HDB addresses bought units of sizes below 1,000sqft as compared to purchasers with private addresses.

DTZ found that 50.3% of buyers who picked up units below 1,000sqft in Q2 2011 had HDB addresses, which is an increase over the 47.5% in Q1.

A separate analysis of caveats by Knight Frank similarly found that more HDB upgraders bought small, or “shoebox”, units in Q2.

Some 16.4% of home buyers with HDB addresses bought shoebox units (which Knight Frank defined as units with sizes up to 550sqft) in Q 2 2011, higher than the 14.6% in Q1 2011 and significantly higher than the 8.6% in Q2 2010, Knight Frank said. The firm downloaded caveats on August 16. “A significant group of HDB buyers may be investors looking for rental yields in a low interest rate environment,” said Knight Frank research head Png Poh Soon.

“Based on their budget, shoebox units with a lower price quantum appeal to these buyers.”

Looking ahead, analysts noted that concerns over the US and Europe debt problems and the slowing economy have led to more cautious sentiments in the private residential market.

Said OCBC Investment Research analyst Eli Lee in a recent report: “We expect developers and buyers alike to remain cautious for the remainder of H2 2011 and sales volume to soften going forward”

In Singapore, purchase demand for private homes will still be supported by economic growth and the low-interest rate environment in Singapore, DTZ’s Ms Chua said.

Source: The Business Times

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MAS says: Current (monetary) policy settings appropriate

The Monetary Authority of Singapore (MAS) said its current policy settings are appropriate, and domestic money markets are functioning in "an orderly manner".

The central bank added it has had "no need to undertake any extraordinary measures".

The MAS was responding to media queries on recent market movements in the Singdollar Swap Offer Rate (SOR).

The SOR went negative a week ago.

SOR is an interest rate against which many corporate and mortgage loans are benchmarked.

Part of the downward pressure on the SOR has come from higher capital inflows.

The MAS said it also reflects "market expectations of the exchange rate".

The MAS noted that some investors had sought the safety of short term cash deposits because of the turmoil in global markets.

The MAS said its policy stance remains as that announced in its April 2011 statement. In April, the central bank effectively allowed the Singapore dollar to appreciate against a basket of currencies by re-centering the currency's band upwards.

The next MAS policy statement is due in mid-October.

Analysts said the negative SOR reading may mean banks will have to alter the way they are lending money.

Song Seng Wun, regional economist at CIMB Research, said: "....the banks are going to say 'oh look, what we used to price mortgage loans is now not applicable, we may have to switch to an alternative rate'....based on the Singapore Inter Bank Offer Rate (SIBOR), for instance, which is much more practical, because at least it is still in positive territory although it is still rather low at this point."

Source: Channel News Asia

Short of sounding like a broken record, the wife and I will much rather the banks "calling a spade a spade" on the switchover to SIBOR, rather than taking the supposed moral grounds such as:

• "Meeting customers’ demand for a less volatile reference rate" - So SOR is only considered "more volatile" after it had gone negative?

• "Due to their inherent volatility and the long-term nature of mortgage loans, SOR-pegged products are deemed unsuitable for borrowers who buy residential property for owner occupation" - If this is the case, shouldn't the bank not offer such loan packages to private home buyers in the first place?

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News flash: More HDB upgraders turning to private properties

39% of new private home purchasers in 2Q 2011 have HDB addresses, up from 35% and 37% respectively from the previous two quarters. This is according to data from DTZ and reported in the Channel 5 news tonight.

With the increase in income ceiling for both new and resale HDB flats as well as Executive Condominiums (ECs), the wife and I wonder if we will see a drop in the % in 3Q 2011...

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And while we are on Sengkang....

The June edition of Kim Eng Research's "The Real Deals" had featured ECs and condo projects in Buangkok/Sengkang. It also provided the average monthly selling prices (from June 2009 to May 2011) of three projects around the area, i.e. The Rivervale & Park Green (ECs) and The Quartz (condo).

The report is slightly more than 2 months old, but it still make for some interesting read.

The Real Deals (June 2011)
http://www.scribd.com/fullscreen/62555717?access_key=key-128gli8dqa5wwjora4dx


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Project spotlight: Compass Heights

There was a spike in interest and transactions at nine-year-old Compass Heights in mid-July, which property agents attribute to the upcoming launch of Keppel Land’s Sengkang Square condominium called The Luxurie.

Keppel Land has announced last month that it is likely to launch the Sengkang Square condo development by year-end. The developer had purchased the 99-year leasehold, 194,000sqft site in March for $286.8 million and is planning to build a 622-unit condo. Property agents are speculating that it is likely to be launched at the end of this month or in September.

The Luxurie is adjacent to Compass Heights and just metre away from the Sengkang MRT station and Compass Point shopping mall. The launch could lead to a revaluation of properties in the vicinity, say property agents. Homebuyers may have snapped up units in Compass Heights in anticipation of future price increases, says Vincent Lim, division director at ERA Realty Network.

Property agents estimate The Luxurie’s selling price to be above $1,000psf, given its location next to the MRT station. This is because the selling price at Compass Heights, which was completed in 2002, is at an average of $860psf currently.

Meanwhile, H2O Residences by City Developments Ltd, located in Sengkang West and next to the Layar LRT station, was launched in March, with units currently selling at an average of $950psf. The 521-unit development is three LRT stops from the Sengkang MRT station, compared with The Luxurie, which is just across the road from it. Therefore, property agents such as ERA’s Lim think The Luxurie should fetch a higher selling price, in the region of $1,000psf.

The 536-unit Compass Heights, developed by Frasers Centrepoint Homes and built a decade ago, was considered the first condo in Singapore to be part of an integrated development linked to a shopping mall (Compass Point) and an MRT station (Sengkang MRT station).

According to URA Realis, from July 15 to 22, four units above 1,000sqft at Compass Heights were transacted at prices ranging from $763 to $886psf, or at a quantum of $935,000 to $1.09 million each. About 60% of buyers at the 99-year leasehold condo have HDB addresses, an indication of strong upgrader demand.

On July 18, a three-bedroom, 1,324sqft unit on the 4th floor was sold for $1.01 million ($763psf). This is the second time the unit has changed hands in the secondary market. The last time was three years ago, at $700,000 ($529psf). The original buyer purchased the unit in March 2001 for just $553,350 ($418psf).

Another unit, a 1,055sqft, 13th floor apartment, changed hands for $935,000 ($886psf). The seller had purchased the two-bedroom unit in April 2001 for $514,250 ($487psf). This represents a price appreciation of 82% over the last 10 years.

A 1,292sqft unit on the 10th floor was sold for $1.05 million ($813psf). The seller had purchased the three-bedroom unit in March 2001 for $638,350 ($494psf), hence seeing a capital appreciation of 64.5%.

And on July 21, another 1,292sqft unit on the 7th floor was sold for $1.09 million ($840psf). It had changed hands in May 2009 for $700,000 ($542psf). The original owner had purchased the unit in March 2001 for $624,000 ($487psf) and sold it in July 2004 for $580,000 ($449psf).

Compass Heights is popular with HDB upgraders from the Sengkang area, as well as young couples who have been priced out of the HDB market, says ERA’s Lim. “Many HDB flats in Sengkang were purchased in 2005, when prices were relatively low. As such, the HDB upgraders would have enjoyed a hefty price appreciation over the last few years. And since they are already familiar with Sengkang, they want to continue staying in the area.”

Compass Heights also has a full range of facilities, comprising a large swimming pool, tennis court, fitness station, gym and barbecue pits. Besides its location next to the Sengkang MRT station and Compass Point, the condo is also near well-known educational institutions such as Nan Chiau Primary School and Nan Chiau High School, which makes it popular with young families, says Lim.

Source: THEEDGE SINGAPORE

The wife and I must admit that we do not know much about the Sengkang area, as there was little in terms of personal motivation to do. Matter of fact, neither of us has ever visited Compass Point! But now that we have started our blog, we probably should pay more attention to new launches in this (North-Eastern) part of Singapore. So The Luxurie to start, perhaps?

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Even Sibor is now at record low!

One of the main benchmark interest rates here fell by nearly 20% to a record low of 0.36% last week, after hovering around 0.44 for a year.

The three-month Singapore inter-bank offered rate (Sibor) or interbank rate is a widely used reference point for loans such as mortgages.

Local interest rates have plunged to all-time lows, following the US long-term debt rating downgrade, as well as a pledge by the US Federal Reserve to keep US rates at rock bottom levels till mid-2013.

This has led to fund inflows from investors looking to havens such as Singapore.

In another first, the other commonly used benchmark, the swap offer rate (SOR), fell below zero last week. Yesterday, it was at -0.0981, slightly up from its record low of -0.69870 last Thursday. While this may give borrowers more reason to cheer, analysts caution that such low interest rates may not be good for the economy in the long run.

UBS chief investment strategist for Singapore Kelvin Tay said cheap loans may mean the property market is too buoyant.

HSBC chief economist Leif Eskersen said he does not think that rates are likely to rise in the near future. OCBC economist Selena Ling agreed, saying that she expected short-term Sibor to remain low.

Local banks have not declared any plans to increase spreads – the gap between the cost of funds and the rate at which they are lent to customers. A DBS Bank spokesman said the bank has not increased the spread on Sibor loans, and would “continue to price loans based on the tenure and size of the loan, as well as the credit risk rating of our corporate customers”.

Maybank consumer banking head Helen Neo said spreads for Sibor loans had not gone up. The bank uses Sibor mainly for home loans.

HSBC’s head of retail banking and wealth management, Mr Paul Arrowsmith, agreed, saying: “HSBC is monitoring the market situation closely to ensure that our package remains competitive.” Currently, the bank only offers Sibor-pegged loans.

However, analysts do not think the low interest rates and moderating loan growths will substantially affect the local banks’ net interest incomes in the third quarter.

Source: The Straits Times

The falling Sibor rates is good news indeed, especially to the wife and I who have recently taken up a home loan pegged to Sibor (and were red in envy when SOR went negative!).

However, we cannot help but wonder if our banks will start pulling back on Sibor-linked home loans if such rates are to go negative too (unlikely scenerio but will you bet against it happening?), much like what they have done with their SOR packages.

So back to the good old days of fixed-interest loans, maybe...?
 

More on the July private home sales figure

The number of private homes sold by developers rebounded in July after falling for the preceding two months, but the outlook remains tingled with uncertainty about the state of the financial markets and the economy.

The jury is also out on the extent to which the increase in income ceiling for buyers of new HDB flats and exec condo (EC) projects will siphon off demand for mass-market private condos.

Urban Redevelopment Authority’s figures show that developers sold 1,386 private homes (excluding ECs) in July, up 17.3% from 1,182 units in June.

Developers sold 583 ECs last month, up from 212 units in June and the best showing since a five-year hiatus in new EC project launches ended in October last year. This was buoyed by the release of two projects in July – Riverparc Residences in Punggol and Blossom Residences in Segar Road. Including ECs, developers’sales surged 40.2% month on month to 1,954 units in July.

Other than ECs, which are a hybrid public and private housing, chart-topping projects in July included new projects with attractive location attributes – Skyline Residences near Telok Blangah MRT Station and with views of Keppel Golf Links and the sea (167 units sold at a median price of $1,902psf); The Miltonia Residences, with a view of the Orchard Golf Course and Lower Seletar Reservoir (124 units); Thomson Grand, boasting views of Island Golf Course and Lower Pierce Reservoir (108 units) and Seastrand in Pasir Ris (116 units), notes CBRE Research.

The rebound was helped by low home loan rates, the return of home buyers after the June school holidays and possibly some buyers speeding up their decisions to avoid buying during the Hungry Ghosts Month, which started on July 31.

“The Government’s earlier announcements on increased public housing supply and income ceiling revision have not impacted on the market significantly so far, as evidenced by the rebound in buying activity in July,” said Credo Real Estate executive director Ong Teck Hui. “However, it’s harder to gauge their impact on the private housing market over the longer term,” he added.

In the first seven months of this year, developers sold 9,425 private homes (excluding ECs) – close to the 9,966 units they sold in the same year-ago period. Some market watchers say this point to robust demand.

However, Nomura Singapore analyst Sai Min Chow points out that the latest July sales number (excluding ECs) was down 10.8% year on year. He also highlighted that the inventory of launched but unsold units has risen from 3,480 units in July 2010 to 5,010 units in July 2011 and reiterated his warning that “inventory build-up in the primary market in Q3 2011 to Q4 2012 is likely to fast track a price correction”.

CBRE noted that interest in upmarket projects remained selective in July – a unit at The Orchard Residences was sold at $4,299psf. On Cairnhill Circle, two units at Hilltops fetched $3,319psf and $3,528psf and a couple of units were transacted at Helios Residences for $3,084psf and $3,488psf.

After July’s strong sales, most market watchers expect a slowdown again this month due to the Ghosts Month as well as greater caution among buyers in the face of turmoil in financial markets and weak sentiment on the global economic front. Jones Lang LaSalle is predicting 900 – 970 unit sales in August. Colliers too forecasts the figure could slip below the 1,000-unit mark. Credo’s figure is 800 – 1,100 units.

Many analysts reckon that some of the demand for new mass-market private condos could be siphoned off into new EC projects, as the household income ceiling for new EC buyers has just been raised from $10,000 to $12,000. However, Knight Frank chairman Tan Tiong Cheng suggests this may not happen if developers are nimble with pricing.

“Seeing the writing on the wall, developers who have already bought land for mass market private condos and who have sufficient margin, could elect to lower their price expectations a little if they wish to move units.

“Some potential buyers who were previously stretched by developers’ pricing strategy for new private condo launches may then be wooed back.

Colliers’ consultant (research and advisory) Tay Huey Ying points to two potential bright spots for the private home sales market – low interest rates and a potential influx of another round of hot money from troubled western nations.

DTZ Southeast Asia chief operating officer Ong Choon Fah offers some advice to those trying to find their ways in murky waters: “To each his own, and potential buyers have to do their homework and know how much risk they can afford to take.”

Source: The Business Times

To expect the July sales numbers to be impacted by the government’s earlier announcements is somewhat unrealistic, since the stock market was still booming for much of the month while all the talks about increased public housing supply and income ceiling revision were well… just talks.

But now that the Prime Minister has made the announcement during his NDP Rally speech last Sunday, the August sales figure is likely to be hit with a triple whammy of revised regulations for public housing/EC purchases, the financial market turmoil amid global economic uncertainties and the typical lacklustre purchasing sentiments during the Hungry Ghosts Month. So the wife and I will not be too surprised if the August figure (excluding ECs) drops to between 800 – 900 units.

And speaking of ECs, we believe that this is now a more attractive option (given the raised income ceiling to $12,000) for upgraders or new home buyers compared to neighbouring mass-market projects. Most ECs these days have facility offerings and quality of finishing that are comparable to their private condo counterparts. ECs are also

• Built closer to HDB estates (imagine: wet markets, supermarkets, HDB neighbourhood shops and malls = amenities galore that’s within walking distances)

• Fully convertable to private status after 10 years

• Can be resold to locals after 5 years.

Given the $300 – 400psf price difference between new EC (median price for Blossom Residences: $702psf) and new private condo (average price for Foresque Residences: $1,100psf) and with the new SSD (Sellers’ Stamp Duty) in play, the wife and I will definitely be looking to buy a EC rather than the condo next-door if we are moving to Punggol or Bukit Panjang. This is assuming we qualify, of course…

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Private home sales up 17% in July

Singapore private home sales jumped 17% in July from the previous month, to 1,386 units.

The Urban Redevelopment Authority (URA) said suburban area sales accounted for 754 units, or 54% of the total sold.

The city fringe accounted for 510 units, or 37%, while 9% of those sold were central area units.

Including Executive Condominiums (ECs), the total sales in July would have been higher, at 1,954.

Chalking up the best sales was Skyline Residences at Telok Blangah Road, which sold 167 units at a median price of $1,902psf.

The best selling EC was Riverparc Residence at Punggol Drive, which sold 322 units at a median price of $694psf.

The most expensive property sold in July was The Orchard Residences at Orchard Boulevard, where a unit was sold at a median price of $4,299psf.

Source: Channel News Asia

After dropping to its lowest level since Feb 2011, the wife and I are not overly surprised by the slight rebound in priivate home sales in July. However, it will interesting to see what the August figure is like, given the financial turmoil caused by the US credit rating downgrade.

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So what does Mr Kwek Leng Beng thinks?

Kwek Leng Beng, executive chairman of major property player City Development, has a thing or two to say about price trends in the Singapore market.

Over the next six months, he said, developers may adjust downwards launch prices of private housing projects that are not located near MRT stations by about 5% if they wish to move units, amid greater buyer caution.

However, developers of projects that are well located, close to MRT stations, should be able to hold prices or even marginally increase them by 1 – 3 %, he said.

“I believe the market will not crash unless of course the worldwide scenario is so bad…”

Besides how acutely the economic situation in the US and Europe pans out and its impact on Singapore, price movements for private homes will also depend on local competition. “If in the vicinity, there are three or four developers selling at the same price, you will definitely have to consider reducing the price if you want to get out earlier.”

Asked about the impact of a potential recession here triggered by events in the US and Europe on Singapore condo prices, Mr Kwek said: “I do not believe that it will impact a lot unless interest rates go through the roof… At the moment, the market is full of liquidity, interest rates are so low, and there is a lack of alternative investments.”

He also said he does not envisage an oversupply in 2013-2014 as predicted by some analysts, as “I don’t think (the government) will come up with new measures to destabilise the market” given the uncertain environment, following Standard & Poor’s downgrade of US credit rating and the worsening of Europe’s sovereign debt crisis.

“I think the government is more concerned about public housing and the new (National Development) Minister has taken positive action,” Mr Kwek added.

He said global cooperation among governments as seen during the Lehman debacle can once again help to stabilise markets – although “this time I believe it will take a little bit longer … it is a little bit harder”.

“Everything is overblown. That is human nature. Just like property, the higher property prices go up, the more you want to buy, I guarantee you. The lower it goes, the more scared you are,” he quipped.

Source: The Business Times

The wife and I was watching an episode of the latest season of “Covert Affairs” last night and after hearing what Mr Kwek has to say about the state of our private home market going forward, a quote from the episode came instantly to mind: “when you listen to people speak, you learn to interpret what they mean, not what they say”.

So is it just us or beneath all the guarded optimisms, there lies a genuine concern that Singapore home prices will come under increased pressure as governments around the world find it more difficult to tackle the current problems arising from the US economy and Eurozone and thus will take a longer time to stabilize the markets? If our memories served us right, the US sub-prime crisis (which eventually led to the Lehman collapse) took more than a year to turn itself around, while the Singapore residential property market tumbled during that period.

And contrary to Mr Kwek’s take on the psychology of home buyers, we always subscribe to the notion of “when everyone is falling over themselves trying to get into the market, it’s time to get out”. And that notion has worked out rather well for us so far. *fingers crossed*

Then again, he is executive chairman of CDL while we still have an outstanding mortgage on the ONE property we currently hold…
   

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Say goodbye to SOR-pegged home loans soon?

A number of mortgage brokers have received word from two banks to stop offering home loans pegged to Swap Offer Rates (SORs), BT has learnt. Another bank, too, has introduced a new clause into offer letters setting a floor for the SOR used in its home loans.

All these are taking place at a time when SORs for certain time periods have turned negative. The three-month SOR reached a new low yesterday, dropping to -0.6987 from -0.0119 on Wednesday. The six-month SOR also fell further to -0.99258 from -0.06622.

The SOR represents the synthetic cost of borrowing Singapore dollars, by borrowing US dollars for the same maturity and swapping these in return for Sing dollars.

Unusual market conditions have forced SORs into negative territory. Economists attributed this to fund inflows – investors have flocked to safe havens such as Singapore especially after the United States lost its triple-A rating. The expected appreciation of the Sing dollar against the greenback has also pushed SORs down, they said.

Negative SORs put banks which offer SOR-linked home loans in a difficult position. Banks typically set mortgage rates at a spread above the three-month SOR. The lower the SOR, the less they earn.

“I think the banks will shift away from SOR-plus mortgages given the increased volatility that’s been seen,” said Bank of America Merrill Lynch economist Chua Hak Bin.

Some mortgage brokers told BT yesterday that they received notifications from DBS Group and Maybank to stop offering SOR packages from the banks, with immediate effect.

DBS did not confirm this, but a spokesman said: “SOR-pegged loans are not part of our standard offerings. In view of their inherent volatility and the long-term nature of mortgage loans, such products are deemed unsuitable for retail customers who buy residential property for owner occupation.

“As such, they form a very small part of our portfolio and are usually offered upon customer’s request. Our terms and conditions do allow the bank to introduce a minimum or floor rate for such benchmarks.”

The bank also said that its floating home loans are mainly tied to the Singapore Interbank Offered Rate (Sibor).

As for Maybank Singapore, its consumer banking head Helen Neo said: “We currently do not offer SOR-pegged loans.”

Just a few months ago in April, Maybank has introduced a new package called the ceiling-rate home loan that is pegged to the three-month SOR.

The bank launched it together with another product called the hybrid-rate home loan, which is pegged to either the Sibor or a fixed rate in different years. Ms Neo said yesterday that the hybrid-rate home loan is now the bank’s most popular one.

Some banks had moved earlier to withdraw SOR-pegged home laons from the market.

According to a United Overseas Bank spokesman, the bank stopped selling SOR-pegged packages with effect from Aug 1 and introduced Sibor-pegged packages to meet customers’ demand for a less volatile reference rate”.

On the other side of the fence is Australia and New Zealand Banking Group (ANZ), which will continue to offer SOR-linked home loans. However, it added a new clause to offer letters issued from yesterday, setting a floor of 0.1% for the SOR used. This is to “ensure greater clarity on our pricing structure”, said ANZ Singapore head of retail banking and wealth management Philip Lim.

ANZ’s home loans are either pegged to the three-month Sibor or SOR. The rates are based on those fixed on the first business day of the month, so the recent negative SORs have not affected home loan rates, Mr Lim said.

“We are currently comfortable to continue offering SOR-pegged home loan packages,” Mr Lim added.

Source: The Business Times

When the wife and I said yesterday that we are unconvinced about the sustainability of the depressed SOR rate, we certainly did not expect it would come in the form of our banks pulling the plug on SOR-pegged home loans.

While we can barely appreciate the need for banks to set a floor for the SOR used (although we reckon it has more to do with protecting the banks’ bottom-line rather than “ensuring greater clarity on the pricing system”), we are absolutely astounded by the reasons given by banks that have stopped offering SOR packages.

If banks have stopped selling SOR-pegged packages because they are listening to customers’ demand for a less volatile reference rate, why was the decision to terminate made only when SOR started to plummet and eventually gone negative?

And if SOR-pegged loans are indeed unsuitable for property buyers who buy residential property for owner occupation (supposedly due to their inherent volatility and the long term nature of mortgage loans), maybe the Monetary Authority of Singapore should consider outlawing banks from offering such packages for residential home loans?

We recall a time not that long ago (when the USA was still triple-A rated and SOR was positive) whereby some banks will only offer home loan packages linked to SOR. And if you ask for other non-SOR packages, it will be met with great reluctance and at much higher interest rates.

After the dust is settled and SOR starts to climb again, it will be interesting to hear the kind of “justifications” that banks will come up with to restart their SOR-pegged home loan packages again…

Watch this space!

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Have you heard about the woman who bought an entire tower at Reflections?

The Strait Times today reported that an investor paid $226,472,460 for a whole tower block (i.e. Tower 1A consisting of 83 units) at Reflections at Keppel Bay in 2007.

This certain madam Lily Lai, in her 50s, was born in Taiwan but is now a Singapore citizen. She is said to be a low-profile real estate investor who is interested in long-term developments.

It is understood that she first caught sight of the development while she was returning from a trip to Batam. She decided to invest in an entire tower block because a Buddhist shifu, or master, told her that the condo, which is “backed by a mountain and faces water”, has good fengshui, said a close friend of Madam Lai. The friend, who did not want to be named, told The Straits Times: “We had just driven past a banner advertising the property and decided to take a look. After bringing shifu there, we decided that it was a good investment.”

Madam Lai’s friend said the units will be marketed and sold by Leadway Properties, which also operates from and owns an 18th floor office space at The Central Mall. According to the friend, Madam Lai spends most of her time overseas.

It must have been quite an interesting conversation between madam Lai and the marketing agent that served her, which might have sounded something like this:

Madam Lai: I want to buy Tower 1A
Agent: Excellent choice, madam. So how many bedrooms are you looking for and which floor do you like?
Madam Lai: No, Tower 1A
Agent: Yes, yes…I understand. But there are many different unit types in Tower 1A. So which type are you looking to buy? And do you want high or low floor??
Madam Lai: All of them
Agent: All of them…as in one whole floor?
Madam Lai: No… whole block.
Agent: *stunned* Er... er...

But seriously, only time will tell if madam Lai's investment is really sound, good fengshui notwithstanding. This is especially when the project is only about 70% sold since its launch in 2007…

The wife and I wish her luck and success nonetheless.

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SOR has gone negative...but for how long?

Borrowers cheered yesterday as the swap offer rate (SOR), a benchmark interest rate that mortgage rates are commonly pegged to, fell below zero for the first time.

In a historic moment for Singapore’s banking industry, the three-month SOR plunged to -0.0119%.

The SOR, which is fixed by the Association of Banks in Singapore daily, represents the average cost of funds that banks in Singapore use for commercial lending. It also factors in exchange rate movements.

Traditionally, the SOR is more volatile than the Singapore inter-bank offered rate (Sibor), which is the other benchmark interest rate in Singapore.

A negative rate is startling because in economic theory, it implies that banks are so flush with cash that they now charge a “fee”- as opposed to paying interest – for accepting deposits.

Bankers said yesterday that this is happening because investors are switching out of the US dollar, and there are increased cash flows into Singapore.

The Singdollar to US dollar exchange rate also affects the SOR. With a weakening greenback, the SOR will continue to fall.

Banks here typically peg their loan packages to the Sibor or SOR, plus a profit margin.

But don’t expect banks to end up paying their customers to borrow from them.

OCBC Bank and UOB, which have loans packages pegged to the SOR, have said that there are clauses to “floor” the rates at zero, even if the SOR is negative.

Still, Mr Vinod Nair, chief executive of website Smartloans.sg, which offers home loan comparisons, said: “I think now is a great time to refinance home loans, and I don’t expect the SOR to rebound in the next few years, so there should not be an issue with volatility.”

Home owners taking up new Sibor-pegged property loans pay between 1% and 1.33%, while loans pegged to the SOR may end up paying between zero and 0.6% with the new SOR rates, he noted.

Indeed, some economists believe that SOR rates are likely to remain low for a while yet.

UOB economist Chow Penn Nee said some factors that will keep interest rates low include the United States Federal Reserve’s announcement that interest rates will be kept low until mid-2013.

Also, with the Monetary Authority of Singapore’s current monetary policy stance of a Singdollar appreciation, the US dollar is likely to fall against the Singdollar.

This will mean even more funds flowing into Singapore, which still has a triple-A rating and is considered an alternative to the US dollar.

Mr Saktiandi Supaat, Maybank’s head of forex research, said: “we may see a rebound if there is some intervention by the MAS or if the forward rate changes due to market developments. But given the already low SOR rates we are seeing over the past year or so at around 0.2%, the rebound may not be so soon.”

Barclays Capital economist Leong Wai Ho, on the other hand, does not think that the depressed SOR will persist.

He said: “This is not considered equilibrium, and can’t last too long. It counters the macro-prudentials that have been put in place to lighten property speculation.”

“I think this may be an MAS move to discourage fund flows into Singapore. It may last for two weeks, until we get over the phase of our lives that we are worried about the US downgrade.”

Source: the Straits Times

Unfortunately, the home loan that the wife and I took up recently is pegged to Sibor. And without sounding like sour grapes here, we tend to agree with Mr Leong about the sustainability of such depressed SOR rates. However, it does provide some cheers at least to consumers and probably a temporary respite to some home owners. This is especially after the slew of bad news we have been hit with recently - the continual “bloodshed” seen in the stock markets and technical recession looming for the Singapore economy.  

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euHabitat: 37 more units sold

Far East has sold 37 more units at euHabitat at Jalan Eunos between Wednesday and Sunday, taking total sales to 218 units. The property giant has released 346 of the 748 units in the project. Prices start from $541,000 for a 538sqft one-bedroom suite.

Source: The Business Times

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New project sales status: Boathouse Residences & SeaStrand

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Boathouse Residences
Boathouse Residences, a 99-year leasehold private condo at Upper Serangoon View which was released last Friday by Frasers Centrepoint, Sekisui House and Far East Organization, saw about 90 units sold by yesterday. About 80% of the units were bought by Singaporeans, with the rest taken up by permanent residents and other foreigners.

The average price is $880psf. The cheapest unit is a 624sqft one-bedder on the second floor, at $570,000. The developers have released 200 of the total 493 apartments in the project.

As a comparison, when Frasers and Far East released Eight Courtyards in Yishun in April, they sold about 202 units in the first four days - Friday to Monday. The 99-year leasehold homes were priced at an average of $795psf.

However, Frasers Centrepoint Homes CEO Cheang Kok Kheong says the sales result for Boathouse Residences is not too far off another project the group released more recently - Seastrand condo in Pasir Ris, with 103 units sold in four days during its preview in June.

Mr Cheang said that while the turnout at the Boathouse Residences showflat was " very good", buyers are now taking a longer time to make a decision.

"Four months ago, during our Eight Courtyards launch, buyers took about 45 minutes to make a decision. Now, they probably require 60 - 90 minutes," he added. " With more uncertainty and cautiousness, they're thinking twice, maybe three times, to relook the whole thing - their finances and their needs. Those who were previously looking at purchasing a four-bedroom apartment may now settle for a three-bedder, for instance."

Boathouse Residences comprises one and two-bedroom SOHO-concept apartments housed in two 15-storey blocks and two, three and four-bedroom apartments in four 18-storey blocks.

The SOHO-style apartments have a higher-than-usual floor-to-ceiling height of 3.35 metres, allowing residents to enjoy a bigger volume of space. They come with a furniture platform that may serve as a library, storage area or cosy corner. The one and two-bedders are priced from $880psf to $1,040psf, while the three- and four-bedroom apartments cost about $800-930psf.

Seastrand
And speaking of Seastrand, Far East and Frasers Centrepoint found buyers for nine more units last week, taking total sales for the 99-year leasehold project in Pasir Ris to 239 units. To date, 269 units have been released in the 475-unit condo. Seastrand's average price has risen from $877psf when the development was initially released in June to $924psf currently.

Source: The Business Times

The wife and I reckon that Singapore must be one of only a handful of countries around the world whereby home buyers take only hours to make purchasing decisions that will cost them in excess of half a million dollars. Maybe we are procrastinators, as it took us more than a week just to decide on buying that new laptop which costed $2,000.

However, we wonder if the recent "blood bath" seen in the worldwide stock markets (the DOW just dropped a whopping 600 points last night!) will put paid to such phenomenon... at least for the short to middle term.

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