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Thread: Real estate gets a new gauge of market pulse

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    Default Real estate gets a new gauge of market pulse

    http://www.businesstimes.com.sg/sub/...33540,00.html?

    Published July 29, 2010

    Real estate gets a new gauge of market pulse

    New industry-backed index to measure sentiment shows mood has sobered slightly

    By KALPANA RASHIWALA


    (SINGAPORE) In a historic move, the Real Estate Developers' Association of Singapore has teamed up with the National University of Singapore's Department of Real Estate (DRE) to develop a Real Estate Sentiment Index (RESI), and it shows a lower reading for the second quarter of this year than for the first quarter.

    Developers and industry players continue to express positive sentiments but expect market conditions to be less robust, Redas and DRE said.

    More respondents were still positive (rather than negative) on the overall performance of the prime and suburban private residential markets over the next six months but the consensus as indicated by net balances weakened in the second quarter compared with the first quarter.

    On the other hand, the net balance for offices improved substantially, in tandem with improving sentiment in this segment in April-June.

    The survey also found that 51 per cent of developers polled for Q2 expect price growth for new residential launches, down from 85 per cent in Q1.

    About 68 per cent of developers surveyed in Q2 expect more units to be launched over the next six months, down from 83 per cent in the Jan-March period.

    The findings of the survey will be officially released this morning at the Redas Property Prospects Update 2010 seminar at Orchard Hotel.

    Some market watchers welcomed Redas efforts in coming up with an objective method of gauging the confidence level of senior executives of property developers - and making it public. 'It's good to hear from the horse's mouth,' said DTZ executive director Ong Choon Fah.

    Redas CEO Steven Choo noted that 'while business expectation surveys are available for the manufacturing and service industries, there is currently no indicator specifically tracking sentiment in the fast-paced real estate market of Singapore'.

    Some industry watchers also pointed to the refreshing change at Redas. 'Previously, something like this, showing a slowdown in sentiment, would have been considered extremely sensitive and developers may have tried to hide it. Now they're more open about it,' said an observer.

    Mrs Ong said: 'Releasing the RESI shows just how far Redas has come. It reflects the maturity of the property market and stakeholders. It's important to give the true market signals to all stakeholders - including home buyers and government - if we're going to have a sustainable property market based on sound fundamentals.'

    Redas and DRE developed the quarterly structured-questionnaire survey, which is conducted among senior executives of Redas member firms - mostly developers but also property consultants, architects, quantity surveyors and other professionals.

    Dr Choo, who assumed the post of Redas CEO nearly a year ago, says: 'The partnership between NUS and Redas has ensured academic rigour and added credibility to the new index. We are confident that in time, RESI will become an authoritative index and a highly-valued forward indicator for the property market, as well as an invaluable tool to guide the market and industry players, including investors and policymakers.'

    Redas received about 70 responses for each of the Q1 and Q2 surveys - from largely the same people.

    The survey measures respondents' perceptions of current market conditions/ performance (now, compared with six months ago) and future expectations (over the next six months).

    The RESI comprises three indices. The Current Sentiment Index, where respondents are asked to rate overall Singapore real estate market conditions now compared with six months ago, fell from 7.2 in Q1 to 5.8 in Q2. The Future Sentiment Index, where respondents rate overall property market conditions over the next six months, also slipped from 6.4 to 5.9.

    As a result, the Composite Sentiment Index, which is the average of the two indices, declined from 6.8 in Q1 to 5.9 in Q2.

    The index ranges from 0 to 10, with a score below 5 indicating deteriorating market conditions. A score above 5 shows improving market conditions. The Q2 score shows that developers and industry players continue to express positive sentiments and expect market conditions to remain favourable, but less robust than before.


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    Default NUS estimates confirm private home prices tapered off in June

    http://www.businesstimes.com.sg/sub/...33540,00.html?

    Published July 29, 2010

    NUS estimates confirm private home prices tapered off in June

    By KALPANA RASHIWALA


    (SINGAPORE) Latest flash estimates from National University of Singapore (NUS) confirm what property industry players have already experienced on the ground - a rapid slowdown in the growth of non-landed private home prices in June compared with May.

    NUS's overall price index for non-landed homes for June rose 0.3 per cent month on month, compared with month-on-month gains of 2.4 per cent each for May and April.

    It was the same story for the sub-index for the Central region, which covers a basket of properties in districts 1-4 and 9-11. It increased 0.7 per cent month on month in June, slower than gains of 2.1 per cent in May and 3.4 per cent in April.

    The sub-index for Non-Central region was unchanged in June from the preceding month, after rises of 2.7 per cent in May and 1.7 per cent in April.

    The Singapore Residential Price Index (SRPI), compiled by the NUS Institute of Real Estate Studies, covers only completed properties.

    DTZ executive director (consulting) Ong Choon Fah said: 'The latest indices confirm the slowdown in buying momentum felt on the ground in June - because of the school holidays, World Cup and continued uncertainty in the eurozone economies.

    'People found no reason to rush and buy a home. Developers have also been holding back launches and the projects they did launch were not priced at the top end of their own target range; so developers have also moderated their own price expectation.'

    Since the end of last year, all three NUS indices have appreciated - to the tune of 8.7 per cent for the overall index, 8.2 per cent for Central region and 9.2 per cent for Non-Central region. Based on the latest June flash estimates, NUS's overall SRPI is now 36.3 per cent above the post-financial crisis low in March 2009. Over the same period, the growth for the Central region has been 42.1 per cent and that for the Non-Central region, about 33.3 per cent.

    The June flash estimate for Central region is still 3.5 per cent below the pre-crisis high in November 2007. However, for the Non-Central region, the latest index surpassed its respective pre-crisis peak in January 2008 by 11.2 per cent. As a result, the overall SRPI flash estimate for June is 5.7 above its November 2007 high.

    Looking ahead, Mrs Ong reckoned the overall and Central region indices are likely to remain flat in July, but the index for the Non-Central region could either be flat or post a marginal increase, supported by high cash-over-valuations in the HDB resale market.

    Meanwhile Hong Leong Holdings said yesterday it has sold over 75 per cent of the 468 units available at The Scala, a 99-year condo at Serangoon Avenue 3. The units are sized between 474 and 2,142 sq ft, and sold at an average of $1,150 per square foot. Buyers comprised a good mix of HDB upgraders and investors, with the majority made up of locals.

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    http://www.straitstimes.com/Money/St...ry_559618.html

    Jul 30, 2010

    New index shows property market likely to worsen

    By Joyce Teo


    A NEW index tracking the property market shows that developers and other industry players remain positive but believe conditions will cool down from the bullish levels seen in recent months.

    More developers also believe the slowing global economy and an increased supply of new development land may hit market sentiment over the next six months.

    The Real Estate Sentiment Index, which was launched at a seminar yesterday, also points to rising interest rates and an excessive supply of new property launches as market risks. The index has been jointly developed by the Real Estate Developers Association of Singapore (Redas) and the department of real estate at the National University of Singapore (NUS). It is based on data collected in a quarterly survey of Redas members to get a snapshot of market sentiment. The poll started in the first quarter.

    The reading for the second quarter stood at 5.9, down from 6.8 in the first quarter. This shows that while industry players are still positive, they expect market conditions to worsen.

    With empirical data, it is always about the past, said Dr Yu Shi Ming, head of NUS' department of real estate.

    'With the index, we hope that as soon as a policy is announced, we can get a sense of how the industry feels,' he said.

    Redas chief executive Steven Choo said that apart from its members, policymakers, banks and other firms may find it useful.

    There have been about 70 respondents for the survey each quarter - about 60 per cent are developers and the rest consultants and other industry figures.

    About 51 per cent of developers polled for the second quarter expect prices of new launches to rise, compared with 85 per cent in the first quarter. About 68 per cent expect more new units to be launched over the next six months, compared with 83 per cent in the first quarter.

    About half of the developers polled feel the level of interest for public and private development land will remain unchanged in the near term. Developers are most concerned with rising land prices, followed by the cost of building materials and labour.

    At Redas' seminar yesterday, Rider Levett Bucknall's managing partner, Mr Winston Hauw, said: 'It's good to tender this year as there's more uncertainty next year. We think prices will go up slightly next year.'

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    http://www.straitstimes.com/Review/O...ry_560049.html

    Jul 31, 2010

    Redas' new property index raises the game

    By Kalpana Rashiwala


    THE Real Estate Developers' Association of Singapore (Redas) has made a bold move by launching its Real Estate Sentiment Index (RESI).

    The industry has taken a risk going public with the sentiment index, which it developed jointly with the National University of Singapore's Department of Real Estate.

    As expected, brickbats have surfaced, with sceptics questioning the credibility of developers - the key respondents in the survey for the index - as they have a natural vested bias towards generating positive sentiment, which is good for their business of selling homes.

    Looking at the evidence so far, the RESI for the first and second quarters this year, respondents seem to have been fairly honest on the whole.

    The index is based on a quarterly structured questionnaire survey conducted among senior executives of Redas member-firms - mostly developers. About 70 respondents - largely the same - took part in the Q1 and Q2 surveys.

    RESI comprises three indexes - a current index, which measures perceptions over the past six months; a future index tracking expectations for the next six months; and a composite index, the average of the two other indexes. The indexes range from 0 to 10, with a score of above five showing improving market conditions and of below five indicating deteriorating conditions.

    The composite index fell from 6.8 in Q1 to 5.9 in Q2, which seems to tally with ground experience.

    Sentiment in the local property market was hit in the second quarter by Europe's sovereign debt crisis.

    However, the true test for the RESI and Redas will come with time. Some sceptics are wondering if the index will ever fall significantly below five when things become really bad again.

    Will developers responding to the survey be honest and indicate how dire the situation on the ground is, knowing they risk causing a further downward spiral in sentiment if they do so? Some respondents may come to a consensus about how they'll vote, as they may feel pressured to try to preserve sentiment.

    So the index could be subject to manipulation, goes the argument.

    There may also be a reverse situation where instead of wanting to paint a rosy picture, some respondents may wish to paint a bleak one when that suits them - for example, when developers try to lobby the Government to moderate its land sales programme.

    Frankly, anything's possible. Of course, developers know they will be laughed at if the final index paints a rosy picture when everyone knows things are pretty grim.

    The pressure of preserving their own credibility will serve as a check on developers' responses veering too far from their true views.

    A set of 70 respondents seems small but is actually a decent size for the Singapore property industry. Each respondent represents one company. About 60 per cent of the respondents are from property developers; the rest include property consultants, engineers, quantity surveyors and other professionals.

    What's to be welcomed about the RESI is that it is forward looking, since respondents are polled for future sentiment - complementing the vast body of 'backward-looking' real estate data available from the Urban Redevelopment Authority, property consultants and other organisations such as the NUS' Institute of Real Estate Studies, which produces the Singapore Residential Price Index.

    The RESI will provide another piece of information that stakeholders and players in the property market can take into account in making their decisions. No one's expecting home buyers to read just the RESI and dash off to a developer's showflat. Those who believe developers can't be trusted to express honest views on the market can always choose to ignore the RESI.

    Time will tell if the RESI will prove sustainable.

    The stakes are high for Redas. The best incentive that developers have for ensuring the RESI's authenticity and reliability as a gauge of their sentiment is a need to preserve their own integrity and that of their industry body.

    By going public with the newly minted sentiment index, Redas president Simon Cheong and CEO Steven Choo have raised the game for the 51-year-old organisation to a whole new level.

    This article appeared in Business Times yesterday.

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