Category Archives: Price Movements

Did retail rents really dip in Q1?

The Urban Redevelopment Authority (URA) has released, for the first time, what is said to be a more comprehensive set of data on retail space. But its rental index, showing rentals at retail malls in the Central Region dipping slightly in the first quarter, drew disbelief from retailers. Retailers and food & beverage (F&B) operators told BT that the marginal 0.3 per cent decline in the rental index from a quarter ago is puzzling, given that they have seen a steady rise in rents in their rental renewals with the landlords.

URA’s rental index is flat from a year ago and rose 1.1 per cent over the past three years. The Central Region covers the core downtown area and city fringe areas such as Paya Lebar and Holland.

For the first time, URA’s data includes non-shop space such as food and beverage, entertainment and health and fitness – which is applauded by analysts for factoring in a shift in leasing activity towards these sectors. But retailers felt that these figures still do not reflect what is truly happening on the ground.

“For every three years that our rents are being reviewed, rentals are going up steadily,” said John Yek, managing director of RE&S Enterprises, which owns several Japanese restaurants islandwide. “For sure, they are not flat if I compare to three years ago.”

Elim Chew, founder of fashion retailer 77th Street, said that rentals have soared over the past three years, prompting the company to close some outlets. The median rents may not take into account the component that tenants pay as a percentage of their sales.

Meanwhile, URA’s retail price index for the Central Region showed a 3.2 per cent rise in the first quarter from a year ago and is unchanged from a quarter ago.

The discrepancy between the indices and ground sentiments could be due to the fact that the data looks at rentals and prices in the Central Region and excludes suburban malls in areas such as Jurong East, Tampines and Bedok, property consultants say.

More detailed information, however, is made available on commercial properties for free on URA’s website. Office and retail rents can be searched by street name and includes far-flung areas where new malls have sprung up.

Retailers hold a different view, however. R Dhinakaran, managing director of Jay Gee Melwani Group, a retailer of international names in lifestyle and apparel, said that shop rentals have increased for the group islandwide. Rentals account for more than half of the group’s overheads and its margins are squeezed, he said.

To cope with rising rentals, Ms Chew of 77th Street said that the company has moved into wholesale distribution, e-commerce and consultancy work for overseas brands. According to her, local retailers may be paying much higher rents on a per square foot basis in some malls than the international brands, which are more sought after by the landlords.

Kurt Wee, president of the Association of Small and Medium Enterprises, noted that retailers and F&B players “have no bargaining power” and regulation is required to protect them from unreasonable tenant clauses.

URA data shows that there are 928,000 sq m of new gross retail space in the first quarter, of which 634,000 sq m is under construction. Some 256,000 sq m of gross retail space is expected to be completed by the end of this year.

Source: Business Times – 26 April 2014

Private housing rental market seen being squeezed by 3 factors

The private rental housing market is set to come under pressure on the back of record private home completions, a tighter inflow of expat tenants into Singapore and a stricter property tax regime.

Latest official statistics show that private residential rents slipped for the second consecutive quarter – easing 0.7 per cent quarter on quarter in Q1 2014. This was a slightly bigger drop than the 0.5 per cent dip in Q4 last year.

The vacancy rate for completed private homes (excluding executive condominiums or ECs) increased to 6.6 per cent at end-Q1 2014, from 6.2 per cent at end-Q4 last year.

Based on estimates provided by developers to the Urban Redevelopment Authority (URA), private housing completions are projected to hit 17,138 units this year, including the 4,114 units completed in Q1. This will be higher than the 13,150 units completed last year and 10,329 units in 2012. The pace of completions is projected to accelerate further – to 21,738 units in 2015 and 26,252 units in 2016.

Due to the step-up in Government Land Sales in the past few years in response to the heated residential segment, the number of units under construction has snowballed to 67,507 in Q1, double that of four years ago.

The latest 1.3 per cent Q1 drop in URA’s private home price index was steeper than the 0.9 per cent decline in the previous quarter.

Giving a breakdown of non-landed private home prices by region, URA said the sub-index for Core Central Region (CCR) slipped 1.1 per cent in Q1 – half the 2.1 per cent drop in the previous quarter.

Prices in Rest of Central Region (RCR) – which includes places such as Bukit Merah, Bishan and Geylang – eased 3.3 per cent in Q1, against a 0.4 per cent gain previously. In Outside Central Region (OCR) – home of mass-market condos – prices dipped 0.1 per cent in Q1 following a one per cent decline.

For both RCR and CCR, first-quarter prices of uncompleted units fell at a faster clip compared with completed properties. However, uncompleted homes in OCR rose 1.4 per cent, while completed unit prices fell 3.5 per cent.

URA’s office price index rose 0.5 per cent in Q1, matching the increase in the previous quarter. Its office rental index appreciated at a stronger pace of 2.4 per cent, compared with the 0.5 per cent rise previously. Net new demand for office space decreased to 64,583 sq ft in Q1 from 322,917 sq ft in Q4, which sent the vacancy rate inching up to 10 per cent from 9.9 per cent.

Source: Business Times – 26 April 2014

Developers sold 480 private homes in March: URA

Developers sold 480 private homes in March, down from 739 units in February and 2,793 units in March last year.

This brings the first quarter’s tally to 1,791 private homes sold, down from 2,568 units in Q4 2013 and 5,412 units in Q1 2013, Urban Redevelopment Authority (URA) data shows.

The muted sales were partly due to the low launch volume in the first quarter. Only two new projects were launched in March: The Santorini in Tampines and Ascent@456 at Balestier Road – 724 units in all.

This brings the total launch volume in Q1 2014 to 1,964 units.

Although The Santorini sold only 76, or 13 per cent, of its 597 units in March, it became the top-selling project. Median prices for its sold units average $1,100 per sq ft.

Amid the bleak data, some consultants saw a silver lining in the rest of central region (RCR) and core central region (CCR). Sales in the city fringes and city area improved 44.3 per cent and 1.9 per cent respectively in March – due to homebuyers picking up units from earlier launched projects.

In the RCR, Eight Riversuites sold 44 units, Guillemard Suites 14 units, and Bartley Ridge 12 units; in the CCR, Hallmark Residences sold 13 units, Liv on Wilkie nine units and Goodwood Residences eight units.

Analysts are expecting buying activity to improve in April, with sales volume likely to climb to 500 to 800 units, going by healthy interest in new projects Commonwealth Towers and Lakeville in Jurong.

Other projects in the pipeline include The Crest and Highline Residences at Tiong Bahru, and The Sorrento at West Coast Road.

The figures exclude executive condos (ECs), a private-public housing hybrid. Including ECs, developers moved 535 units in March, lower than the 787 units in February this year and 3,072 units last March.

URA will release the final Q1 2014 figures on April 25.

Source: Business Times – 16 April 2014

Resale condos mark higher prices, volumes in March

Resale prices of non-landed private homes inched up 0.2 per cent in March, led by an increase in transaction prices in the Rest of Central Region (RCR).

This marked a slight recovery from a 3.1 per cent decline in resale prices in February, flash estimates by the Singapore Real Estate Exchange (SRX) show.

Resale transactions increased significantly in March with 451 transactions registered – the highest resale volume since October. This is 82.6 per cent higher than a month ago but 22.5 per cent lower than in March last year.

Market watchers note that the improved numbers suggest pent-up demand in March after the festive months of January and February. But they say it is too early to cheer as the latest data merely reflects a stabilising market since the cooling measures late last year.

Resale prices in Core Central Region (CCR) and the RCR improved during March, climbing 0.3 per cent and 1.3 per cent respectively. But resale prices in Outside Central Region (OCR) continued to soften last month with a 0.1 per cent decline.

ERA Realty key executive officer Eugene Lim noted that OCR is most affected by new supply from more projects obtaining the temporary occupation permit (TOP). “In addition, the slew of cooling measures collectively affects the typical purchaser of suburban properties as they may not be as financially mobile as higher-end purchasers.”

Rental prices also came down last month even though rental volumes increased. An estimated 3,087 units were rented in March, 27.8 per cent more than in February, but rental prices came down by 0.9 per cent month on month.

While rental price declines were observed islandwide, they were most pronounced in the RCR, where rental prices fell 1.4 per cent month on month.

Leasing competition is expected to heat up as newly completed private homes are put up for rent, property consultants say. More than 17,000 private residential units are expected to be completed this year, which will be the highest number since the Urban Redevelopment Authority started keeping these records in 1996. This will also be 75 per cent higher than the long-term average in the last 18 years.

Mr Lim noted that there was still demand for rental but landlords have to be more realistic to compete for tenants. “It is now a tenant’s market and location is all the more important. Those properties that are near MRT are highly preferred due to convenience,” he said. “In addition, new apartments are preferred compared to older ones.”

SRX’s new forward looking indicator – TOX or median transaction over X-value – ended at a negative $13,112 in March after fluctuating in the negative territory. This suggests that median transacted price was lower than the X-value, which is the estimated value of the unit based on past transacted prices.

There may be subsequent months where resale transactions include newly completed units that are smaller and have higher per-square-foot pricing.

Source: Business Times – 10 April 2014

Completed condo prices slip in February

Prices of completed non-landed private homes continued their slide last month, going by the flash estimates of the Singapore Residential Price Index, dragged by prices of both large and small units and across regions.

The overall index, which tracks a basket of completed residential units, dipped 0.4 per cent in February. Values of these units are marked-to-market based on transacted prices over the month.

Prices for the shoebox units of 500 sq ft or less marked the biggest fall of one per cent, compared to a 0.5 per cent dip in January.

Excluding the small units, home prices in the central region still edged down by 0.6 per cent month-on-month, while home prices in the non-central region slid 0.2 per cent.

The central region, as defined in the data, refers to districts 1 to 4 (including the financial district and Sentosa Cove), and the traditional prime districts of 9 to 11.

The latest changes in the price indices created by the National University of Singapore reflect waning demand for resale private homes, which is more pronounced in the central region where there is more unsold stock, analysts say.

Again, the total debt servicing ratio framework that caps loan limit at 60 per cent of gross monthly income is said to be the cause of the reduced demand for resale units. Meanwhile, many HDB upgraders are waiting to snap up suburban condominiums at more attractive prices, analysts observed.

“There could still be a mismatch of expectations of both buyers and sellers in the resale market,” said ERA Realty key executive officer Eugene Lim, adding that the falling trend may continue as low sentiments play out for now.

As for shoebox units, prices may continue to come under pressure as more such units reach completion amid weaker rental demand, said Mr Lim of ERA.

According to URA data, the vacancy rate of all completed non-landed residential properties has increased to 7.1 per cent in the fourth quarter of last year, up from 6.1 per cent a year ago, and nearing the 7.3 per cent level seen in the third quarter of 2009.

Another 17,540 non-landed residential units are expected to receive the temporary occupation permit this year, up from 13,150 units last year.

Source: Business Times – 29 March 2014