Private home sales down in January but more units launched

Private home sales further slowed in January, according to the latest Urban Redevelopment Authority (URA) figures. Some 107 deals were completed last month, compared to 131 in December. Property agents said this was the lowest level recorded in the last two years - even lower than last October when global stock markets slumped. Even so, developers placed more projects on the market, with 204 units released in January. This was slightly higher than the 157 private homes released a month earlier, which had been the lowest level since June 2007. Despite these gloomy numbers, real estate agency Propnex Realty expects a brighter February. The firm said this is because there has been good take-up from some recent launches this month. For instance, the new developments Alexis and Caspian had enjoyed strong take-up with over 750 units sold. CEO of PropNex Realty, Mohamed Ismail, said: "February has been a good month and is likely to post a record number of transactions, far exceeding the peak of last year - close to 800 over units." This will be about eight times the number sold in January. According to property consultant Colliers, potential buyers would have been waiting for the Budget announcement before making any purchase, and were also occupied with preparing for the Lunar New Year. But while sales were seen picking up, analysts said one trend would likely persist throughout the year. Director of consultancy and research at Knight Frank, Nicholas Mak, said: "Most units launched and sold by developers last month were in the suburban areas. Launch and sales activities by developers in the prime district almost came to a halt. Less than 10 units were transacted." Mohamed Ismail said: "The appetite for many consumers today is when the property price, the overall quantum is less than S$800,000. There are many people willing to buy. "Not only from the perspective of consumers, even financial institutions and the banks are very comfortable to lend to people for property that are below a million because the risk and spread for the bank is so much better." Thus analysts expect most upcoming launches to fall under this category. They said developers may ride the new wave of sales and launch more units in the second half of February. They said as many as 1,000 units may be launched next month, a level not seen since July 2008. And to support sales, analysts said that going forward, developers are likely to work with banks on financing schemes. For example, two recent developments launched - Alexis and Caspian - have interest-absorption schemes. -

Source - CNA Feb 16 2009

Getting the ‘real’ in real estate

New interest-absorption schemes offered by developers through banks are attracting the smart money
JUDGING by the response to the recently launched Caspian and Alexis, real estate remains a key element of the typical Singaporean’s wealth-management strategy.
While cash is still king, real estate - like gold - is something tangible to hang on to. And recent downward price adjustments are making it an increasingly attractive asset class. What is making new launches even more enticing is that investors are cottoning on to the fact that new interest absorption schemes (IAS) offered by developers through banks are very much like the former deferred payment scheme (DPS).
At the recent launch of Alexis, units were not only offered with IAS but did not come at higher prices, typically 3 per cent more. Buyers, said mostly to be Singaporean investors, homed in. The project was almost fully sold in less than a week. Considering the depth of the economic downturn, this would seem to defy logic. So, could real estate be where the smart money is migrating to now?
Looking at yields from stocks, bonds and even fixed deposits, and comparing these with IAS, which is essentially an interest-free loan on almost all new property, the argument for putting your money, or at least some of it, into real estate is compelling - especially if you subscribe to the notion that real estate values always rise in the long run.
This last point is what differentiates property buyers now from those who bought in the run-up to peak prices in 2007 - they are more realistic.
Certainly, few buyers today would be hoping to make a fast buck. Indeed, prices may actually have some way to go before they hit bottom.
Reality appears to have set in, with investment horizons now longer than the time it takes to flip a property. The only danger is that if the recent surge in sales has more to do with IAS and less with the fundamentals of the market, recent experience is just another round of speculation, albeit a tiny one.
Does IAS encourage speculation? Some believe that unlike DPS, IAS is much more stringent insofar as terms go. A purchaser who is offered the IAS has to take out a loan with a bank, which will carry out credit checks before granting the loan. In addition, the purchaser has to make progress payments, part of which may be disbursed from the bank loan, to the developer. This amounts to 60 per cent of the purchase price of the property before the temporary occupation permit (TOP) is granted, including 20 per cent at the downpayment stage.
With DPS, as little as 10 per cent of the purchase price was payable by the purchaser before TOP.
Given that a buyer has to commit to a loan and make progress payments, the authorities do not believe IAS encourages speculation.
Hopefully, then, what the market is experiencing now is the realisation that real estate is fundamentally a safe asset class - not a flash in the pan brought on by speculation.
Source : Business Times - 14 Feb 2009

Global property investment expected to slide further

(EDINBURGH) Global real estate spending on office buildings, stores and apartments may fall another 5.3 per cent this year to US$412 billion as lenders keep a tight rein on credit, property broker Cushman & Wakefield Inc said.
Lack of credit pushed commercial property acquisitions down 59 per cent to US$435 billion last year, the lowest since 2004, New York-based Cushman said.
'Although virtually all global markets had a decline in investment, it's been the mature markets which have suffered most,' David Hutchings, Cushman's London-based head of research for Europe, the Middle East and Africa, said in a statement yesterday. 'Emerging markets now account for 22 per cent of global investment when as recently as 2006 they only accounted for 9 per cent.'
Banks have been reluctant to lend or refinance real estate loans as they try to conserve cash after losses and write-downs totalling US$1.1 trillion. Recessions in the US and some European countries have crimped demand for office and retail space, causing values to drop because landlords cannot command as much in rent.
Commercial property values have fallen most in Europe, where yields rose 111 basis points, compared with an average 31 basis point increase in North America, Cushman said. The yield on property moves inversely to prices. One basis point is 0.01 percentage point.

'Pricing in many countries at the market peak was aggressive and became divorced from the reality of underlying growth and income,' Mr Hutchings said. 'Pricing may now be becoming too conservative in some markets.' - Bloomberg