http://www.businesstimes.com.sg/arch...p-gas-20121030
Published October 30, 2012
Industrial property prices step on the gas
URA index rises 8.8% in Q3 for 12th quarterly gain but rental growth is losing steam
By Mindy Tan
[SINGAPORE] While cooling measures kept home prices in check, the industrial property market kept racing away and registered a hike for the 12th consecutive quarter.
According to data released by the Urban Redevelopment Authority (URA), the industrial property price index rose 8.8 per cent in Q3, to 183.3, comfortably surpassing the previous historic peak seen in Q1 1997.
This brings total price growth for the first nine months of the year to 26.7 per cent, which is only slightly below the full year price gain of 27.2 per cent recorded in 2011, said Chia Siew Chuin, director of research and advisory at Colliers International.
"Comparatively, as of Q3 2012, the industrial property price index has also recovered by a whopping 102.8 per cent from its most recent trough in Q3 2009, and has surpassed its most recent peak in Q3 2008 by 59.4 per cent," she said.
The unabated growth in prices comes as no surprise, given the spillover in demand from the residential market. In addition, industrialists continue to look to purchasing their own premises to have better control and certainty over their real estate costs in the face of rising rents.
"This has upped the price expectations of sellers and developers, and allowed them to call for higher prices," said Ms Chia.
Specifically, the price index for multiple-user factory space increased by 10.1 per cent in Q3, compared with a rise of 8.3 per cent the previous quarter.
Said Jones Lang LaSalle's national director, research and consultancy, Ong Teck Hui: "This is due to the strong demand for strata factory units. For example, units in AZ @ Paya Lebar have been fetching prices above $1,000 psf.
"The volume of strata transactions (based on caveats lodged) has also been picking up. For the first three quarters, 2,591 factory units were transacted. This is already 95 per cent of the 2,723 units sold in 2011."
The price index for multiple-user warehouses on the other hand increased by 2.3 per cent in Q3, from 8.6 per cent previously.
Rental growth also lost some momentum, rising by 1.2 per cent in Q3, from 2.8 per cent the previous quarter.
This brought the overall rental increase in the first nine months of 2012 to 6 per cent, substantially lower than the full year rental increase of 15.5 per cent recorded in 2011. This could suggest that end-users have started resisting continuing rental growth, said Colliers's Ms Chia.
Also, the electronics clusters has been slowing down while the biomedical (pharmaceutical) cluster remains volatile - and both clusters are typically large space occupiers, said Png Poh Soon, head of research at Knight Frank Singapore.
Going forward, Colliers's Ms Chia said she expects prices to grow at a slower pace of around 5-6 per cent in Q4, but that the industrial property price index will likely exceed 2011's gain of 27.2 per cent. The rental index, on the other hand, will probably see an overall gain of less than 10 per cent.
Nicholas Mak, executive director, research and consultancy, at SLP International expects industrial property capital values to grow by 33-37 per cent, with rentals increasing by 7-10 per cent year-on-year.
However, if prices of industrial space continue to expand at an annual rate of more than 20 per cent, it is likely that the government could intervene, he cautioned.
Mr Mak said he does not expect price growth to remain as robust going into 2013, due to local manufacturing activity potentially facing more headwinds and a strong supply of industrial space in the next two years.
Meanwhile, prices of private residential properties increased by 0.6 per cent in the third quarter, compared with 0.4 per cent the previous quarter.
This was largely supported by prices in the landed housing segment increasing 1.1 per cent in Q3, after rising 0.4 per cent in Q2. Detached home prices rebounded the most, by 2 per cent quarter-on-quarter.
According to research by Knight Frank, the highest transaction volume for landed properties was recorded in the Serangoon Planning Area, with 156 transactions logged, up 33 per cent from 117 houses in Q2.
Prices of detached homes in the Serangoon area increased from $918 psf on average in Q2 to $1,080 psf on average in Q3.
Despite reaching a new record high, the rise in the residential price index in Q3 reflects a stabilisation of the market as the price increase was much flatter, noted Mohd Ismail, chief executive of PropNex Realty.
"The rise in Q3 reflected a stabilisation of the market as prices were much flatter, rising only by a tame 0.9 per cent for the first three quarters of 2012.
"Comparatively, the price index was increasing at a much sharper rate of 13.8 per cent in Q3 2010, and 5.5 per cent in Q3 2011," he said.
Prices of non-landed homes in the Outside Central Region grew 1.0 per cent in Q3, versus 0.5 per cent in Q2.
In the Rest of Central Region the price index was up 0.8 per cent in Q3, versus 0.4 per cent in Q2. The index for Core Central Region edged up 0.1 per cent in Q3, compared to 0.6 per cent the previous quarter.
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