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The Lion’s Share
Cooling measures and crises in Europe put Singapore temporarily on the defensive
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
Singapore, with its ample sunshine, strong infrastructure, welcoming business posture and pristine environment (for a bustling urban centre) has long been a destination of choice for investors and multinationals looking to open Asian offices and foreign nationals trying to escape Hong Kong’s smog. And judging from the robust home sales figures for the first part of 2010, that’s not likely to change any time soon.
Big business has been the Lion City’s bread and butter for decades, but the city has seen a boom in manufacturing and exports that’s stimulating recovery from the dreadful 2009. In addition a raft of newly opened leisure and cultural super-facilities — like the massive Resorts World Sentosa and Marina Bay Sands Casino — have upped its “destination” status and dulled its stuffy image; Singapore is quickly making everyone forget about its mythic chewing gum laws.
Singapore boasts as vibrant a property market as Hong Kong or many cities in Mainland China, and as such the government there was compelled to introduce some cooling measures in order to stave off a feared bubble. Those measures — introduced in September 2009 and February 2010 — included the re-introduction of Confirmed List Land sales and the elimination of the Interest Absorption Scheme (IAS).
The measures have indeed had something of an impact claims Joseph Tan, Executive Director, Residential for CB Richard Ellis. “The government’s cooling measures … have taken the froth of the top of the market and the pace of sales transactions has moderated to more steady and sustainable levels,” he explains. Economic growth, which Tan expects will meet the government’s target of 7 to 9 percent, and an ample supply of private homes becoming available (because of the government’s aggressive land sales programme) will ensure prices continue to rise, even if volume falls. “The combination of these factors should regulate the exuberance seen in the residential market in the past year,” Tan theorises.
The mid-market (SG$830-$1,150 per square foot, approximately HK$4,600-6,400) in Singapore is strong, as evidenced by brisk sales of new projects like the Tree House, The Minton, Dakota Crescent and Waterbank properties. “A lot of the residential properties sold in the past year have been in the mass- or mid-markets, which are typically for owner occupation or medium-term investment,” Tan says, adding that the stability or strengthening of the economy, the current tendency for banks to be conservative in their lending, and regulations that allow local residents to use CPF funds for partial down payments and mortgage instalments means, “it is unlikely that a sub-prime crisis would occur in Singapore.”
In the luxury market things are a little more sedate. According to research by CBRE that is largely due to the drop-off in foreign investment stemming from weakening foreign currencies — chiefly the euro as it gets dragged down by Greece’s debt crisis. Sales across the board were affected by May’s turmoil in the European Union. Nonetheless a few notable sales did occur: Phase 2 of the Marina Bay Suites and Guoco Land’s Goodwood Residence combined for a total of 73 units sold at an average of SG$2,600 (HK$14,500) and $2,480 (HK$13,800) per square foot. The tony Nassim district also saw movement, with Hong Leong’s Sage condominiums and the joint UOL/Orix/Kheng Leong Nassim Park Residences each selling properties for well over SG$3,000 per square foot. In 2009 at the height of the recession, Singapore GCBs (good class bungalows) surpassed market expectations and chalked up nearly SG$2 billion worth of transactions.
Like most major urban centres, Singapore has its hotspots and for the second quarter of 2010 that was the OCR — the Outside Central Region, away from the glitz of the downtown core. “According to Urban Redevelopment Authority, prices of non-landed private homes in the OCR showed the highest growth of 5.7 percent in 2Q 2010. This could be attributed to the price points set by new launches such as Tree House and The Minton as well as rising prices of resale transactions in locations where several sites from the government land sales programme had been sold in the past six to nine months,” Tan clarifies. But that can’t beat the price jump of slightly over 7 percent in the first quarter elsewhere. “The Core Central Region (CCR) and the Rest of Central Region (RCR) showed a slightly lower quarter-on-quarter price increase of 5.1 percent and 4.5 percent respectively. [But] back in 1Q 2010, it was the price index for the RCR that showed the highest increase of 7.2 percent.”
However, for the long term, Tan expects to see prices rise as global economies recover and Singapore rides that wave and space for new construction remains constant. “Going forward, the ample supply of residential land by the government through its land sales programme will ensure a more stable supply … As sales momentum becomes less frenzied, home prices will stabilise. It is likely that home prices will rise by a total of 12 to15 percent for the whole of 2010.”
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