http://www.straitstimes.com/archive/...e-hit-20130525

Rents for Keppel Bay condo take a hit

Reflections faces challenge with launch of Corals, but units have held value

Published on May 25, 2013

By Cheryl Ong


LANDLORDS battling lacklustre rental yields at Reflections at Keppel Bay face a new challenge with the Corals project piling 366 units into an already overcrowded market.

The Keppel Corp development was launched last week with 100 units released in the initial phase.

A CIMB Securities report noted that owners at Reflections, which is across the water from the Corals at Keppel Bay, slashed rents to as low as $4 per sq ft (psf) when their development was completed last year.

This sent gross rental yields to 2.4 per cent, although they have since recovered.

Median rentals are now $5.85 psf with gross rental yields at 3.5 per cent.

CIMB Securities senior vice-president Donald Chua said: "Agents said they had faced great difficulty in renting out units at Reflections last year, given the tide of supply in the area."

Yields at the Caribbean at Keppel Bay, another Keppel Corp project, have held up at 4.3 per cent.

Singapore Real Estate Exchange (SRX) data shows that there were only 69 units rented out at Reflections in the four months to April 30, a drop of 65 per cent from the 197 leased units in the same period a year ago.

The Caribbean had 97 units which were tenanted in that time, 17 per cent down from 117 units leased out a year earlier.

"Almost five months into 2013, we do observe a sharp drop in rental volume at Reflections this year, as compared with the volume in Caribbean," said SRX analyst Jason Chen.

Reflections has 1,129 units while Caribbean has 969.

While 150 units at Reflections have been set aside for corporate leasing, CIMB noted that many of the sold units have been left vacant but this could simply mean that investors have strong holding power.

"It could actually be a result of owners who are very financially strong and do not have to rely on the passive rental income stream," noted R'ST Research director Ong Kah Seng.

"These will be common in completed high-end developments where buyers are not entirely investors or investor-occupiers, but are even property 'investor-collectors'.

"Investor-occupiers are those who bought (units) to rent out, but may change their mind and stay in it for sentimental reasons or if rents are not that attractive."

While rents have taken a battering, units at Reflections have held their value.

Resale prices are around $2,000 to $2,100 psf, while median resale prices in District 4 were $1,711 psf, said the SRX.

More than 80 of the 100 units released at Corals at Keppel Bay last week have been snapped up, with three-bedders being the most popular.

However, based on current market rents of $5.77 psf, implied gross rental yields for Corals are expected to remain at a low 3.2 per cent, noted Mr Chua.

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