http://www.businesstimes.com.sg/arch...hammy-20140125

Published January 25, 2014

Private home, industrial space markets feeling squeeze from double whammy

They're sandwiched between rising supply and cooling demand; office rent recovery appears to be in place

By Kalpana Rashiwala [email protected]


OFFICIAL statistics show that the private residential property and factory space markets have turned under the weight of supply on the one hand, and property cooling measures and the total debt servicing ratio (TDSR) framework on the other.

However, a gradual rent recovery appears to be in place for the office market.

Nearly all indicators in the Urban Redevelopment Authority's (URA) fourth-quarter 2013 figures for the private housing market point towards weakening.

The overall private home price index dipped 0.9 per cent in Q4 from the preceding quarter after inching up 0.4 per cent in Q3. With the exception of the subindex for prices of completed non-landed private homes, which remained unchanged in Q4, the other sub-indices fared worse in Q4 than they did in Q3.

It was a similar story for URA's private residential rental indices. The overall rental index dipped 0.5 per cent in Q4, on the back of rising supply and moderating demand - marking the first decline since Q3 2009. Prior to this fall, the index had climbed 27.5 per cent between Q3 2009 and Q3 2013, observed Jones Lang LaSalle national director Ong Teck Hui.

In Q4 last year, 3,631 private homes received a Temporary Occupation Permit (TOP), taking the full-year tally to 13,150 units - the highest level since 14,000-plus units completed in each of 1997 and 1998. The ramp-up in housing completions is expected to continue, with 17,540 units this year, 21,299 next year and 27,321 in 2016.

"While completed new supply has been building up, demand has not kept pace as expat hiring has been more selective. The number of employment passes as at June 2013 has dropped some 2 per cent from December 2011," said Mr Ong.

Some market watchers say that prospects for rental demand are unclear as it is not certain whether tightening in expat hiring will continue. "As Singapore's economy scales up, the demand for skilled labour especially for higher-value services will grow. We may have to take in more expats for these roles," suggested an analyst.

URA figures yesterday showed that developers sold 3,854 private homes in the October to December period last year in both primary and secondary markets - the lowest volume since Q4 2008, when only 1,639 units were transacted during the global financial crisis, noted Mr Ong. Transaction volumes halved from 14,755 units in the first half of last year to 7,873 in the second half after the rollout of the TDSR framework made it difficult for buyers to obtain financing.

In the primary market, developers sold 14,948 private homes last year, one-third below 2012's record volume of 22,197 units.

An interesting trend in Q4 is that across all three regions - Core Central, Rest of Central and Outside Central - prices of uncompleted non-landed private homes fared worse than completed ones, perhaps a reflection of developers trimming prices in their projects to move units. In contrast, individual owners of completed properties may be less inclined to do so.

For the full year, URA's overall private home price index ended 1.1 per cent higher - a smaller gain than 2012's 2.8 per cent.

This year, most market watchers are betting on a price fall, with developers' sales hovering at 10,000-14,500 units.

Savills Singapore research head Alan Cheong, however, continues to believe that barring external shocks, "buying momentum can be regained".

"The unknown factor is how many potential buyers there are out there, with the means to purchase an investment property even with TDSR and the lower loan-to-value limit, but who have held back in the hope of lower prices," he said. "The cauldron could already have been stirred because with the H1 2014 Government Land Sale supply reduced and if prices hold up or even rise, those holding back may be forced to show their hands."

Figures from JTC - which has taken over URA's role on compiling and releasing statistics on industrial properties - showed a 3.3 per cent quarter-on-quarter decline for the All Industrial price index in Q4, compared with a 2.8 per cent rise in Q3. For the full year, the index climbed 3.2 per cent, significantly slower than a 25.8 per cent hike in 2012.

Knight Frank executive director (industrial) Lim Kien Kim noted that the industrial property market has started to turn following the introduction of seller's stamp duty for this sector in January 2013, as well as the TDSR framework in late-June which finally reined in exuberance in this once bubbly market segment. The Industrial Government Land Sales Programme has also been ramped up. Mr Lim predicts an up to 10 per cent fall in strata industrial property prices this year. Rents for industrial space will probably ease 7-10 per cent, he added.

JTC's multi-user factory rent index dipped 1.4 per cent in Q4, against a 4.4 per cent rise in the previous quarter.

URA's office rental index climbed 0.5 per cent in Q4, a slight moderation from the 0.8 per cent increase in Q3.

Colliers International noted that the slower pace of rental growth during the quarter was in line with a moderation of net new demand to 323,000 sq ft in Q4, compared with 495,000 sq ft in Q3.

"Nonetheless, although full-year 2013 net new demand for office space was also lower at 1.3 million sq ft (the lowest annual take-up in four years), compared with the 1.9 million sq ft absorbed in 2012, new space absorption - on the back of improving market conditions and higher asking rents by landlords - provided support for rents to recover 1.3 per cent for the whole of 2013, annulling the 1.3 rental fall in 2012," said Chia Siew Chuin, director of research and advisory at Colliers.

Similar to the islandwide rental trend, URA's data shows that the price growth of office space eased for the third consecutive quarter to 0.5 per cent quarter on quarter in Q4 last year, halving the one per cent growth in Q3 2013. "This is largely due to decelerating transaction activities as a result of the imposition of the TDSR," said Ms Chia.