Tag Archives: REDAS

5 tips when navigating Singapore’s property market in 2016

Developers are bracing for a tougher market ahead as many unsold units remain, while tenants are calling the shots amid a weakening rental market.

By Khalil Adis

The Singapore property market faces a lacklustre year ahead as the various cooling measures, interest rate hikes and more unsold units continue to put pressure on rentals, while developers are faced with hefty extension fines.

According to fourth quarter data from the Urban Redevelopment Authority (URA), prices of condominiums in the Rest of Central Region (RCR) declined the most by 0.3 percent, followed by those in the Core Central Region (CCR) by 0.2 percent.

Meanwhile, the Outside Central Region (OCR) remains unaffected.

The government has so far made no indications on whether it will remove the cooling measures, which include the Additional Buyer’s Stamp Duty (ABSD), Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR), which have had a significant impact on local and foreign property investors.

As a result, developers may have to pay $238 million for unsold units this year, up from the $90 million incurred in 2015.

Since 2014, the Real Estate Developers’ Association of Singapore (Redas) has been calling on the government to lift the cooling measures which have severely impacted sales of new units.

According to the URA, as of the fourth quarter, 23,271 private housing units remain unsold out of the total supply of 55,638 units.

Including executive condominiums (ECs), the total supply in the pipeline is 67,765 units.

Of this, 6,744 EC units remain unsold.

So what does this mean for you as a consumer? We give you the lowdown.

Tip 1: Good time for prospective tenants to look for rental bargains

According to the URA, the stock of completed private residential units (excluding ECs) increased by 5,299 units in the fourth quarter.

Meanwhile, the vacancy rate rose to 8.1 percent in the same period, up from the 7.8 percent in the third quarter.

Figures from the URA show that rental declines were observed across all segments of the private residential market.

The rental market is currently facing three challenges – the tightening of foreign worker quotas and expatriates looking to secure employment passes (EPs), restrictions on the granting of permanent residencies (PRs), and an oversupply of private units.

With landlords outnumbering rental seekers, tenants are calling the shots in an already weak rental market.

Condominiums located in the OCR experienced the steepest decline of 1.8 percent, followed by the RCR and CCR at 1.6 percent and 0.4 percent respectively.

For tenants, this is an opportune time to dictate their terms and conditions and to negotiate for better prices amid the slowdown.

Tip 2: It’s a buyers’ market – bargain hunt for prime properties

New launches and take-up rates remained weak in the fourth quarter with fewer units launched.

According to the URA, 1,333 condominium units were launched in Q4 compared to the 2,435 units in the previous quarter.

Take-up rates also fell sharply, with 1,603 units sold in the fourth quarter compared to the 2,410 units in the previous quarter.

In view of the large supply coming onstream, sellers must be realistic in their asking prices and may have to sell at a loss, especially for those who had purchased properties in prime areas.

For buyers, this presents a good time to start their property hunt in the secondary market.

Tip 3: Buyers/tenants spoilt for choice in the HDB market

In November 2015, the HDB launched 12,000 new flats to meet the housing needs of Singaporeans.

This has taken some pressure off from the resale market as many buyers opt to buy directly from the HDB as it is significantly cheaper.

Still, transactions in the resale HDB market increased by two percent in the fourth quarter to 4,992 transactions, up from 4,893 transactions previously.

For the whole of 2015, the number of resale transactions reached 19,306 units. This was an increase of 11.5 percent compared to 2014.

Woodlands recorded the lowest median quantum price for three-room resale flat transactions at $273,000, while the central area (Queenstown, Redhill and Tanjong Pagar) recorded a median price of $425,000.

Moving forward, the HDB plans to launch four Build-To-Order (BTO) exercises in 2016 that will bring the total supply to about 18,000 flats. The February BTO exercise saw 4,170 flats offered in Bidadari, Bukit Batok and Sengkang.

This presents good news for buyers as they will be spoilt for choice with significant cost savings when they buy directly from the HDB, inclusive of the various grants that they could be eligible for.

For buyers who cannot wait, this means they will be able to purchase their flats at a good price from the resale market.

Tenants will rule the HDB market in 2016.

Tip 4: HDB sellers must be more realistic in their asking prices

The public housing market recorded an increase in the Resale Price Index (RPI) in the last three months of 2015, up 0.1 percent from 134.6 points in the quarter before.

In comparison, the RPI registered a decline of 0.3 percent in the previous quarter.

For sellers, the new supply coming onstream in 2016 on top of the BTO launches announced by the HDB means they need to be more realistic in their asking prices.

Buyers are now spoilt for choice and will have the upper hand.

Tip 5: HDB landlords – be prepared to drop asking prices

Landlords will need to drop their asking prices in view of the higher number of units coming onstream this year.

As mentioned, the HDB plans to launch four BTO exercises in 2016 that will bring the total supply to about 18,000 flats.

This upcoming supply of new and existing HDB flats will weaken demand in the rental market.

This article was first published on khaliladis.com.

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Developers call for cooling measures review amid hefty $100m charges

Real Estate Developers’ Association of Singapore (Redas) President Augustine Tan has urged the government to review the property cooling measures as developers face potential charges of $100 million for unsold private residential units, reported TODAYonline.

“The real estate market is reeling from the compounding effects of an oversupply situation, rising vacancy rates, weak demand and increasing interest rates,” said Tan at the association’s Spring Festival Lunch.

“There is therefore an urgent need for action to bring stability and ensure a soft landing to prevent further damage to the fragile economy,” he added, citing turmoil in financial markets, Singapore’s own restructuring journey and weak global growth as risks to the economy.

As at end-2015, there is a supply of more than 60,000 units in the pipeline and a record 25,000 vacant units, noted Tan, who also serves as Far East Organization’s Executive Director for Property Sales.

Aside from the mounting supply, developers also face pressures from measures like the Qualifying Certificate (QC) and Additional Buyer’s Stamp Duty (ABSD).

First introduced in 2011 and revised in 2013, the ABSD is a tax imposed on both developers and individual property buyers.

The amount paid by individuals depends on the number of properties they own and residency status, while developers have to pay 10 to 15 percent of the land cost unless they complete and sell all the units within five years from the date of land acquisition.

Developers with foreign holdings will also have to meet the QC rules, in which they are required to complete the project in five years of acquiring the land and sell all units within the next two years. Those who need more time to meet the requirements can pay extension charges that are pro-rated according to the proportion of unsold units. Land sold on Sentosa Cove and through the Government Land Sales (GLS) Programme do not need QC.

In 2016, Tan estimates that around 700 unsold residential units across 13 developments will be affected by the QC, with charges amounting to almost $100 million.

Moreover, the ABSD remission clawback for projects with unsold units will kick in by end-2016, putting further pressure on prices. He revealed that around 6,000 unsold units in 33 developments will be affected by the ABSD remission clawback in 2017 and 2018.

As a result, several developers have been lobbying for the removal of the ABSD, arguing that the Total Debt Servicing Ratio (TDSR) framework will help ensure that buyers stay prudent with their acquisitions even without the ABSD.

“Since 2009, the successive introduction of the government’s property measures has cooled the market, bringing down transactions and prices. With safeguards in place such as the continuation of the prudent TDSR measures together with the current economic situation, property prices will be kept in check,” said Tan.

“It is therefore timely to consider a calibration of the cooling measures.”