Finding gems in prime private homes and HDB resale flats

Feb 28, 2023

Leslie Yee

AS PRIVATE homes in Singapore are expensive, where should savvy home buyers look?

Maybe focus on homes in the prime districts. The value proposition of Core Central Region (CCR) homes looks attractive, notes Cushman & Wakefield Singapore.

The price premium for private non-landed homes in CCR, which comprises prime districts 9, 10, 11, the Downtown Core and Sentosa, over the city fringe and suburbs has narrowed in recent years.

High-end homes in CCR draw wealthy foreigners. A Chinese buyer paid S$27.5 million for a duplex penthouse at Klimt Cairnhill. The price works out to nearly S$4,645 per square foot (psf) for the 5,920 square foot unit, which has about 800 square feet of void.

Potential luxury home buyers may want to come to grips with trends in luxury condos and study the new launches coming up as highlighted by JLL Singapore.

Possibly, home buyers can zero in on the CCR homes, which form the bulk of the 1,400 unsold homes, in projects closing in on their Additional Buyer’s Stamp Duty deadline.

Sharing a positive view on CCR homes was PropNex Realty’s chief executive officer Ismail Gafoor who spoke at a panel discussion at a BT event, which I helped to moderate on Feb 18.

At the event, a young participant sought advice on buying a home. Perhaps he and his partner may fancy a resale Housing and Development Board (HDB) flat.

In Budget 2023, the housing grant for eligible first-timer families buying HDB resale flats rose - up S$30,000 for four-room and smaller units, and S$10,000 for five-room and larger units. Some parliamentarians have expressed concern that the giving of higher grants will lead to the spiralling upwards of HDB resale prices.

Are there gems to be found in the HDB resale market? PropNex notes that this year, more than 15,000 HDB resale flats are estimated to reach their five-year minimum occupation period, making them eligible to be resold on the open market. Of these, the agency sees Cheng San Court in Ang Mo Kio and Toa Payoh Apex as likely to be among the more sought-after projects.

At the apex of the HDB resale market are premier flats with attributes such as central locations, spaciousness, good views. Some HDB resale homes sell for over a million Singapore dollars each.

I discuss this phenomenon and delve into whether there are good reasons to pay princely sums for HDB homes with various contributors in the PropertyBT podcast.

While many segments of the local property market have done well, high interest rates pose a major headwind. According to flash estimates from SRX and 99.co, condo resale prices in January dropped for the first time in 28 months, as prices slipped in the city fringe and suburban areas.

A new private residential launch - Terra Hill at Pasir Panjang - saw about 38 per cent of units sold at an average price of S$2,650 psf, through its booking exercise on Feb 24 and 25. Such a sales rate, while healthy, pales compared to sales rates of over 80 per cent achieved during the initial launches of some private homes in 2022.

Meanwhile, HDB has launched 4,428 Build-To-Order (BTO) flats for sale in its first BTO exercise for 2023. The flats are spread across five projects in both mature and non-mature estates Kallang Whampoa, Queenstown, Jurong West and Tengah. The projects have a median waiting time of about 4.4 years.

Higher interest rates make funding a home loan to buy a dream home much more difficult and eat into returns on big ticket purchases of commercial properties.

In The Level Ground, I opined that yields of just over 3 per cent on prime office buildings here may not make sense given where borrowing costs are today. Perhaps, yields need to expand and valuations adjust downwards.

Commercial landlords here have other worries too, such as businesses giving up space. Google Asia-Pacific will give up part of the space it leases at Frasers Logistics and Commerical Trust’s Alexandra Technopark from Feb 20, 2024. As tech firms cut costs, expect them to closely scrutinise their real estate needs.

For investors who like the long-term prospects of real estate here, I think one may get better value from buying proxies to physical real estate, such as listed property trusts and property groups, instead of physical property.

Recently, three property groups that are members of the Straits Times Index posted decent full year results.

Real estate investment manager CapitaLand Investment (CLI) saw net profit fall 36 per cent year on year to S$861 million for 2022 mainly due to the absence of significant divestments in China and lower fair value gains from revaluation of investment properties.

But CLI surprised shareholders with a special dividend-in-specie of 0.057 CapitaLand Ascott Trust units per share valued at 5.9 Singapore cents, in addition to the final dividend of 12 Singapore cents. In a piece in the BT last month, I noted there is scope for CLI to distribute to shareholders some units that it holds in its various listed property trusts.

Helped by the strong performance of its property development and hotel operations, UOL Group saw its net profit for 2022 rise 60 per cent to S$492 million. UOL’s board of directors has proposed a special dividend, on top of the first and final dividend.

The outstanding performer was City Developments Limited. Net profit for 2022 was S$1.3 billion versus S$85 million for 2021. The group reaped gains from the sale of Millennium Hilton Seoul, the collective sales of Tanglin Shopping Centre and Golden Mile Complex, as well as the deconsolidation of CDL Hospitality Trusts.

Looking beyond Singapore, I wonder if Hong Kong’s lowering of the tax rate for first-time home buyers will be effective in helping people climb the housing ladder. Building more homes is probably key to solving the housing crunch in this city, where shortage of homes has been a persistent problem. I sincerely hope Hong Kong can improve its housing situation.

https://www.businesstimes.com.sg/pro...b-resale-flats