Tag Archives: Chip Eng Seng

Finding value with resale properties in prime districts

Activity has certainly spiked in the prime districts, particularly for condominiums that have been completed over the last year or two, and still have unsold units. The ones that got the ball rolling were Bukit Sembawang Estates and Wheelock Properties.

At end April, Bukit Sembawang Estates launched the remaining 19 units in its 102-unit freehold Paterson Suites with a guaranteed rental scheme of 5% for four years. Units purchased under the rental guarantee were priced around $2,800 psf. Alternatively, those who don’t want the fixed rent scheme can opt for a straight 10% discount for units which will then be priced at $2,500 psf. Most of the buyers were said to be Singaporeans, and opted for the 10% discount. The only unit still unsold in the development is said to be a duplex penthouse.

Real Estate Capital Asia Partners (RECAP), a Singapore-based investment fund which bought 20 units at Paterson Suites from Bukit Sembawang in a bulk deal for $118.6 million in late 2010, has decided to sell its units on the secondary market. Riding on Bukit Sembawang’s success with its guaranteed rental scheme, RECAP is also offering one of its own: a 5% rental guarantee for two years, with prices starting from $2,865 psf. Savills is said to be marketing the units.

Meanwhile, Wheelock Properties sold 10 mid to low floor units at its 30-unit luxury Orchard View at Angullia Park in April at an average price of $2,500 psf, after an 18% discount, according to a DMG report in early June.

Meanwhile, a high-floor unit was recently sold for $7.38 million ($2,910 psf). At the 68-unit Grange Infinite, jointly developed by listed developer Chip Eng Seng and property fund, Citadel, and completed last year, there have also been a number of transactions of late. The units are believed to be part of the portfolio of 53 units owned by private funds known as Pearl Properties, and managed by ARA Asset Management under its ARA Asia Dragon Fund. The units were purchased by the fund in early 2008 for $388 million or at prices ranging from about $2,600 to $2,700 psf. Hence, the fund enjoyed a bulk discount on the purchase price compared with individual buyers who paid $3,000 to $3,200 psf for the units when the project first previewed in 4Q 2007. The highest price psf achieved in the development was in 2009 when a 2,702 sq ft unit on the 25th level of the 36-storey tower was sold for $9.19 million ($3,400 psf). From 2010 to 2011, the private funds under ARA Asia Dragon Fund sold some lower-floor units at around $2,900 psf, and higher floor units at about $3,200 psf. Since March, a number of mid floor units were sold at prices of around $2,500 psf. The most recent transaction was for a 2,562 sq ft unit on the 17th floor that was sold for $6.38 million ($2,490 psf), according to a caveat lodged with URA in June. Prior to that, another similar-sized unit on the 15th level was sold for $6.33 million (2,471 psf), while another 2,702 sq ft unit on the 15th level went for $6.67 million ($2,469 psf).

“We frequently encounter buyers going around hoping to find good deals,” says Phylicia Ang, executive director of residential services at Savills Singapore. “But there is still a disparity between the expectations of sellers and buyers. Sellers are generally quite firm, but there will be some who are looking to divest or liquidate their properties.” The additional buyer’s stamp duty of 10% levied on all foreigners buying residential property introduced last year has also prompted some serious sellers to adjust their asking prices to take into consideration of the higher transaction cost, she notes. “Traditionally, the high-end homes have been driven by foreigners,” she adds. Besides the newly completed condos with unsold units, bargain hunters have also zoomed in on older developments in the prime districts where average prices are even more attractive than some of the new suburban condo launches.

For instance, in the River Valley area, one of the most significant condo developments is the 728-unit Valley Park, developed by Frasers Centrepoint in 1997. There has been a pick-up in transactions at the 999-year leasehold condo in recent months. Most recently, a 797 sq ft studio unit on the second floor was sold for $1.18 million ($1,480 psf), according to a caveat lodged with URA on June 12. Another larger unit, a 1,216 sq ft, two-bedroom unit on the 16th floor changed hands for $1.88 million ($1,546 psf). Meanwhile, just one floor below, a similar-sized unit was sold for $1.68 million ($1,381 psf).

Next door to Valley Park is the freehold 96-unit Frasers Centrepoint. The project was first launched in late 2008, and units at that time were sold at an average price of $1,300 psf. The project, completed last year, has since been fully sold, and the two most recent subsales were done at prices of $970,000 ($1,609 psf) for a 603 sq ft unit and $939,800 ($1,782 psf) for a 527 sq ft unit. Most of the units at RV Suites are in the 500 to 600 sq ft range.

Ang says older properties located within the city fringe offer value owing to their freehold status and reasonable pricing compared with new mass-market condos. “It’s common for buyers to focus on new homes and new launches as the perception is that new is always better,” says Savills’ Ang. “But value hunters who prefer an older apartment because of the larger space and don’t mind renovating it, are finding deals on the secondary market.”

Source: TheEdge – 2012 Jul

Who has been shopping for government land sales sites?

In 1H2011, the Ministry of National Development (MND) has announced a strong supply of private housing for sale to meet demand. 17 sites were placed on the confirmed list which can yield about some 8,100 residential units. The reserved list had 13 sites which can yield some 6,200 residential units. The supply of land includes private properties, executive condominiums and DBSS properties.

Moving forward, MND is slated to announce the 2H2011 Government Land Sales (GLS) programme. We expect a significant supply of private housing (including sites for Executive Condominiums & DBSS) to address the strong demand.

In addition, a review of the HDB income ceiling is expected to be completed within six months which may impact the demand for private homes, especially in the mass-market segment.

This paper examines the profile of buyers of GLS sites (by tender) since 2010 to 1H2011 in terms of the amount of housing stock that each is holding and the amount of exposure to each housing type.

Amount of GLS housing stock under each developer

To ascertain the housing stock under each developer, a review of all the winning tenderers for GLS sites launched from 2010 to 1H2011 was made. Notably, some of these GLS sites had been launched by the developers for sale.

Henceforth, three factors were considered to arrive at the numbers. Firstly, the number of units in each project as announced by the developer. Secondly, the number of units unsold by the developers based on URA data release[1]. Thirdly, for sites where project details are not announced or finalised, the estimated number of units by the authorities in the land sales package are used.

For sites where joint ventures are undertaken, an even apportionment method is used. For example, if there are 2 parties in a winning tender, it is assumed that the available unsold supply in that project will be evenly split between the two. The same applies for three to four parties in a joint tender. Whilst the apportionment may be different in the actual situation, it is difficult to ascertain the actual interest in the project due to confidentiality issues in some instances.

Chart 1 depicts the top 10 developers based on the estimated housing stock from the GLS sites acquired[2] where the bulk of its stock are ECs (situated at Segar Road (estimated 570 units) and Choa Chu Kang Drive (estimated 490 units)).. Sim Lian Group Limited tops the chart with the highest available housing supply. The Group also has the highest exposure to mass market private homes. City Development is second in term of overall residential supply

Chart 1: Top 10 Developers’ GLS Housing Stock by Property Type

Amount of GLS Land Capital Exposure under each developer
In addition to the estimated housing stock, a rudimentary review is also undertaken for developers based on the potential capital exposure for the land. In this instance, the capital exposure is based on the quantum of the awarded land tender price[3].

A simplistic approach is adopted for this analysis where the land capital exposure is proportionately reduced when the project is launched and sold progressively. The study had not taken into consideration the circumstance where developers break even after achieving a certain sales target which effectively reduces or remove their risk exposure from the capital expended.

The level of debt taken is not considered as the internal leverage policies differ from developers to developers. Henceforth, the total capital exposure is based on the total tender price from the land awarded.

Similar to the earlier section, sites where joint ventures are undertaken, an even apportionment method is used. The amount of capital exposure will be shared among partners where joint ventures are concerned. The amount may differ from actual situation depending on the terms of agreement.

Chart 2 exhibits the top 10 developers with the greatest GLS residential exposure. Not surprising, Sim Lian Group tops the ranking attributed by the high capital exposure from the recent purchase of three condominium sites which collectively accounted for $825 million in land value. City Development fell to the fifth position as their EC sites had a smaller quantum as compared to some other condominium sites. CapitaLand leapfrogged from the ninth position to the third arising from the purchase of the GLS site at Bishan St 14 at $550.1 million.

Chart 2: Top 10 Developers’ GLS Housing Capital Exposure by Property Type

Outlook for mass market residential homes

Regulatory risks to tame the mass market residential market have increased following the post election government statements. If more cooling measures are implemented coupled with any changes to the current HDB income ceiling, demand for private homes, in particular the mass-market segment will be affected.

We expect a significant new supply of private housing for the 2H2011 GLS programme to meet demand. We may expect more new ECs sites to be released arising from the strong take-up for recent EC projects such as Esparina Residences, Prive and The Canopy.

Developers with sizeable mass market homes in their land bank are likely to be more selective. Some may choose to off load their existing land bank before acquiring new sites creating a window of opportunity for others.

In the absence of any new cooling measures, residential sales are expected to remain strong as developers are expected to launch new projects in the coming few months. In April, developers sold 1,788 residential units, the highest monthly volume since November 2010.

[1] Table 1 in appendix 1 depicts the list of GLS sites sold to developers, its subsequent project name, the number of units sold and the remaining stock.
[2] Actual Numbers and Further details in Appendix 2
[3] Actual Numbers and Further details in Appendix 3

Source: Knight Frank Research – 1 Jun 2011