Landed-home deals on road to recovery?

/ The Edge Property |

July 2, 2015 9:00 AM SGT

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Three years ago, William Wong, managing director of Realstar Premier Group, a landed property specialist firm, had envisioned a “first-of-its-kind” landed- housing gallery. That led to the decision to purchase a corner conservation shophouse with prominent frontage on Bukit Timah Road for $5.5 million in October 2012.

The opening of the gallery was delayed until last month, owing to the market slowdown, especially following the implementation of the total debt servicing ratio (TDSR) at the end of June 2013. “It wasn’t even easy for us to close 10 transactions a month, and transaction volume had halved,” says Wong. “ In good times, we used to average 20 landed-property transactions a month.”

Since February, there has been a noticeable pickup in transaction activity of landed properties.

In the months of April and May, Realstar’s agents closed an average of 15 landed-housing deals each month, according to Jasmine Ong, Realstar’s business development manager. The transactions included terraced houses, semi-detached and detached houses in the central, north and eastern regions. In just the first two days of June alone, three landed-housing deals were brokered by Realstar agents. However, the options have yet to be exercised.

“So, we’re almost back to the peak levels in terms of transactions, although prices are still about 20% below the peak,” says Wong. “But we think this will be a good year for the landed- housing market. And it is proving to be correct.”

The Realstar landed-property gallery was officially opened on June 2. About $150,000 was spent on renovating and fitting out the gallery. “If you were to drive past [the shophouse] at night, you won’t miss it because of the lighted panel on the façade,” Wong says.

The investment in the shophouse has been worthwhile. Over the past three weekends since it opened its doors, Wong estimates that out of 10 prospective buyers invited, “four to five” have shown up.

Rise in transactions Realstar agents even closed two Good Class Bungalow deals this year. GCBs are the most luxurious of bungalows, and there are only about 2,400 units in 39 areas gazetted by URA. One of the GCBs transacted by Realstar was on Swettenham Road and sits on a 21,905 sq ft freehold site. It was sold for $30.5 million ($1,392 psf). The other was the most recent recorded transaction, and it was for a GCB at Bishopsgate that sits on a 15,070 sq ft freehold site. The GCB was sold for $33 million ($2,190 psf), making it the highest psf price for a GCB sold in 2015 to date.

The buyer of the GCB at Bishopsgate is believed to be a mainland Chinese national- turned-Singapore citizen, and this latest transaction marks the return of interest from this segment of homebuyers that had fuelled the bungalow market three years ago. “Those who have been looking to buy for the past two to three years have come to a point where they think prices are quite attractive now, even for brand-new houses,” says Wong.

The highest-priced property that Realstar is currently marketing is a GCB on Leedon Road. The property sits on a 43,928 sq ft freehold site, and can be subdivided into two GCBs of 20,000 to 21,000 sq ft each. According to Wong, there is already a buyer for half the plot, and negotiations are underway for the other half.

Samuel Eyo, managing director of Singapore Christie’s Homes, see demand from local Singaporean buyers returning to the GCB market as well. “There has been a pickup in the number of viewings,” he says.

Whether the increase in the number of viewings and negotiations taking place translates into deals depends on matching the price expectations of buyers and sellers, says Douglas Wong, director of luxury homes at CBRE Realty Associates. “Most of the buyers now are end-users, and it will take a longer time for them to make a decision on a purchase as a result. The sellers, who are also mostly end-users, are in no hurry to sell, and prefer to wait for a price that matches their expectations.”

Based on caveats lodged, there were five GCB transactions in the first five months of this year, according to CBRE Research. This means the volume of transactions has halved compared with the same period in 2014, which saw 10 GCB deals (see table).

The transactions in 2015 to date do not include the sale of the GCB on Ridout Road sitting on 73,277 sq ft of land that was reportedly sold for $90 million ($1,228 psf), as the caveat has yet to be lodged. “The GCB stock is limited and the number of large plots for sale fewer still,” says CBRE’s Wong.

Buying in anticipation Even in the category of small bungalows, selling prices have corrected. For example, in the Bukit Timah neighbourhood, a new bungalow sitting on a 5,000 sq ft freehold site used to sell for $12 million to $13 million pre-TDSR. Today, the selling price is at most $11 million, estimates Realstar’s Wong. The price difference is $1 million to $2 million, or 7.7% to 16.7% lower than the peak. “I don’t think prices will fall much further from here,” he says. “And that is why I think it’s about time [transactions] moved up again.”

While individual homeowners make up 70% of Realstar’s clientele, a good 30% are developers. Realstar’s Wong sees developers starting to buy land in anticipation of the possibility that the government may relax some of the property-cooling measures before yearend. Some of the purchases include redevelopment land on Robin Road, Hillcrest Road and Oriole Crescent. Most of these purchases are of old bungalows sitting on relatively big land parcels that can be redeveloped into two or more smaller bungalows or several semi-detached houses, Wong notes.

From a developer’s point of view, buying a piece of land now makes sense, he explains. “By the time the house is built — which will be a year or two from now — the ABSD [additional buyer’s stamp duty] might be removed or tweaked, and buyers could return.”

He subscribes to the view that the ABSD for Singaporeans buying a second or subsequent property should be adjusted. “There’s a general feeling [among] locals that they are being penalised for investing in a second property in Singapore, and lately there has been a lot of news about overseas investments that have gone bad,” he says. “If the ABSD were to be relaxed, local investors can buy a second property in Singapore instead of buying overseas.”

There is also a likelihood of a spillover from the prime condominium segment to the landed- property market as transactions start to pick up. As more property funds and high-net-worth investors return to the luxury-condo scene, more owners of penthouses and other large condo units looking to sell will be able to divest. “They may then want to upgrade to a landed property,” notes Realstar’s Wong.

This article appeared in the City & Country of Issue 680 (June 8) of The Edge Singapore.

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