Tag Archives: Cooling measures

Profit slump for some agencies

Posted on 11 Oct 2014 | Comments Off on Profit slump for some agencies

The profits of some of Singapore’s biggest property agencies have nose-dived by as much as 20 to 50 percent due to weak transaction volumes in the private housing market following several rounds of cooling measures, according to media reports.

As a result, more than half of Singapore’s 1,425 registered agencies could suffer losses, revealed some top names at these agencies. Moreover, many of their agents failed to clinch any sales, or became inactive last year.

“I would not be surprised that many small and mid-size agencies and even the larger agencies, if they are not nimble enough, will face challenges and many will end up in losses,” said PropNex CEO Mohamed Ismail.

Although the firm’s sales in the residential market only declined by three percent this year, profits saw a larger drop of 20 percent as overall transaction value fell alongside property prices.

ERA Realty’s Chief Executive Jack Chua also admitted that profits of major agencies have fallen by 20 to 50 percent.

In 2013, net profit for its agency business ERA Realty Network slumped by 43.5 percent to $10.4 million given the 12 percent drop in sales, based on filings submitted to the Accounting and Corporate Regulatory Authority (ACRA).

As for HSR, it suffered a net loss of $5.42 million in 2013 from a net profit of $3.45 million in the previous year, according to documents submitted to the regulatory watchdog.

However, the situation could get worse. Developers’ sales, which make up about 66 percent of all private non-landed transactions, declined to 4,409 units in H1 2014. This means the year-end total will be a far cry from the 14,948 units seen last year and the 22,197 units in 2012.

Records from the Council for Estate Agencies (CEA) shows 67 licensed property agencies closed their doors last year with 1,425 agencies still remaining as of 1 January 2014.

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Sliding flat values in tale of two markets

Posted on 11 Oct 2014 | Comments Off on Sliding flat values in tale of two markets

SINKING property prices seem to be the order of the day, so another quarter of tumbling prices came as no surprise.

More notable is an emerging trend that private home prices appear more resilient now than those of HDB resale flats. Since the third quarter of 2013, prices of HDB resale flats have fallen more than those of private homes.

Cooling measures sent private home prices down by 3.8 per cent in the past year, flash estimates indicated yesterday. Housing Board flat values tumbled a steeper 6 per cent in the same period.

Over the year, experts predict that private homes prices will ease 5 to 6 per cent while HDB resale prices slide by 5 to 8 per cent.

This reverses the usual pattern.

Rises or falls in private home prices mostly outpace changes in the HDB market, especially during a global or economic crisis, said Ms Chia Siew Chuin, director of research and advisory at Colliers International.

She cited the 1997 Asian financial crisis when private property prices dived 44.9 per cent as HDB resale prices shed 20.4 per cent. “HDB flats are a basic housing provision… the public segment tends to be insulated from external shocks during those times.”

A shortage of new flats had also forced buyers to look to resale flats, propping up prices, said Mr Ong Teck Hui, JLL national director of research and consultancy.

But the rug seems to have been pulled from under the feet of the HDB market, as demand shifted from resale flats to new flats.

The market is now flush with new HDB flats after the Government ramped up its building programme to meet first-time buyer demand. About 25,000 new flats were launched last year, with 22,000 more due this year.

A mortgage servicing ratio limiting monthly housing payments at 30 per cent of the buyer’s gross monthly income hit many. And newly minted permanent residents can buy an HDB flat only after three years.

Private home buyers have been hurt by tough mortgage lending guidelines and higher stamp duties but one key difference is that high land prices paid by developers act as a limit on discounting.

“They’re floating on thin margins,” as Mr Alan Cheong, research head at Savills Singapore, noted.

Also, private property owners would have gained from the 60 per cent surge in private home prices during the most recent market upswing. They are unlikely to lower their selling expectations.

Still, the private home market could be hit by an external shock, much like the Asian financial crisis, or internal issues, like rising vacancies owing to an oversupply of new homes.

The market will soon abound with completed condo units – many of which have been bought for investments – in the face of a shrinking pool of foreign tenants.

“If loan servicing is affected by reduced rental income, there could be selling pressure resulting in price declines,” said Mr Ong.

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Posted in Loan / Mortgage / Finance, Property Market / Real Estate

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