A shot in the arm for market sentiment

/ The Edge Property |

March 17, 2017 5:00 PM SGT

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Over the past three years, the government has repeatedly said that it is “too early” or “premature” for the property cooling measures to be lifted. This was despite increasingly strident calls by property developers and other industry players for some of the more punitive measures to be tweaked.

It therefore came as a surprise when the government announced a recalibration in policy that included a reduction in the seller’s stamp duty (SSD); a relaxation of the total debt servicing ratio (TDSR) for mortgage equity withdrawal loans with loan-to-value ratios of 50% or less; and additional conveyance duty (ACD) on the transfer of equity interest in property-holding entities.

“While the adjustments to the SSD and TDSR may not have a significant impact on the market, it is the signal that they are sending that is expected to have a positive impact,” says Ong Teck Hui, JLL national director of research. He adds that the policy relaxation is likely to be viewed as “the beginning of the unwinding of cooling measures”. And this could lead to more buyers coming back to the market.

On the flip side, with the expectation that more measures could be unwound, some buyers may adopt a wait-and-see attitude. However, Ong reckons buyers perceive that the market is bottoming and are hopeful of a price recovery. “Transaction volume, which has been increasing in the last two years, is likely to pick up further and some upside to prices can be expected,” he says.

‘Priced to sell’

Riding on the momentum, CapitaLand officially launched Marine Blue on March 18 and 19. The 124-unit freehold project is located on Marine Parade Road, adjacent to the Grand Mercure Roxy Hotel and opposite the Parkway Parade shopping centre. Construction for the upcoming Marine Parade MRT station at Marine Blue’s doorstep is underway. The project is also in the vicinity of top schools such as CHIJ (Katong) Primary School, Tao Nan School, Chung Cheng High School and Victoria Junior College.

The showflat of a strata pool terrace unit at Marine Blue with double-volume ceiling height in the living and dining area and en suite lap pool. Priced from $4.87 million, it is available to foreigners as well.

Of the 124 units at Marine Blue, 93.5% are one-bedroom-plus-study units, two-bedroom units and one-bedroom-plus-study loft suites. There are 74 one-bedroom-plus-study units of 635 to 980 sq ft. Two-bedders of 1,044 to 1,141 sq ft account for 14 units, while one-bedroom-plus- study loft suites with 6m ceiling height make up 28 units. The loft suites have sizes of 1,270 to 1,593 sq ft.

Marine Blue had its soft launch in January 2015 and 38 units have been sold so far, at an average price of $1,781 psf, based on caveats lodged with URA Realis. In fact, all the two-bedroom units have been snapped up. Only 86 units are still available, of which over 90% are one-bedroom-plus-study units and loft suites, which are priced from $1.13 million to $1.67 million.

According to Wen Khai Meng, CEO of CapitaLand Singapore, Marine Blue is “priced to sell”, with more than 60% of the units pegged below $1.4 million and 90% below $1.7 million.

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Confidence has already returned

CBRE executive director Joseph Tan believes market confidence has already returned. “As long as the majority of the units are priced below $1.5 million — which is the affordability level of most people — and if the project is in a good location, with an MRT station at the doorstep, people will buy,” he says.

The main target audience at Marine Blue is young professionals who appreciate the convenience of the project’s location and its proximity to the East Coast Park with its various recreational activities, says CapitaLand’s Wen. The project is also expected to attract Katong/ East Coast fans, especially those who have lived in the area for many years and are looking to downsize from a landed home to an apartment. Young families who want to live near the good schools will also find the location ideal.

The show suite of a 1,593 sq ft loft unit with one bedroom and a study

Catering to larger families or those who desire more space are four-bedroom penthouses of 3,025 to 3,261 sq ft. One of the four penthouses at Marine Blue has already been sold, with the remainder priced from $4.11 million to $4.47 million. Within the development are four strata terraced houses located between the two high-rise blocks, with direct frontage of the 50m swimming pool. Each of these strata terraced houses has three en suite bedrooms, a private lap pool and a roof terrace. They have built-up areas of 3,670 to 3,993 sq ft. Priced from $4.87 million to $5.24 million, these units are also available to foreign buyers.

While the recent rollback in some of the property cooling measures is a “small, incremental step in the right direction”, CapitaLand’s Wen reckons that the government should reconsider the time frame for the additional buyer’s stamp duty (ABSD) remission period and the Qualifying Certificate (QC) period next.

Developers have to complete and sell all the units in a residential project within five years in order to get an ABSD remission. Meanwhile, developers with even one foreign director or shareholder have to apply for a QC when buying private residential development land. One of the conditions of the QC is that the developer has to sell all the units within two years of obtaining Temporary Occupation Permit (TOP). Failure to do so will incur extension charges of 8%, 16% and 24% for the first to third year after the QC period, pro-rated according to the number of unsold units in the project.

“I don’t think it is in the interest of the government to see any abrupt changes or instability in the market,” says Wen. He believes extending the sales period for developers by another two years, for example, will allow the market to “find its equilibrium and result in a soft landing”.

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Bulk sales not an option now

As Marine Blue is subject to QC, CapitaLand will need to sell all the units by October 2018, two years after obtaining its TOP last October. Wen reckons CapitaLand need not take the bulk sale route at Marine Blue, given that there are only 86 units and they are attractively priced. Marine Blue’s average sale price is just above $1,700 psf, says Wen, adding that it is a freehold project in District 15, a prime district in the East.

The show suite of a one-bedroom-plus-study unit, which is from 650 to 980 sq ft, and priced from $1.13 million

For developers or funds with significant unsold inventory and that are subject to either QC or ABSD charges, the new ACD means there is little opportunity for bulk sales without having to offer a significant discount, says Tricia Song, Colliers International head of research, in a report on March 15. Previously, one option for developers to avoid paying QC extension charges was to structure bulk sales via sale of shares in the holding company to Singaporean investors, who can save on the 18% stamp duty, says Song.

From March 11, sellers who conduct bulk sales of residential units via the transfer of property-holding entities will have to pay a 12% ACD on the market value of the underlying residential property. The ACD will apply within a holding period of three years. Meanwhile, the ACD for buyers will be a 3% levy (which mirrors the buyer’s stamp duty) and a 15% flat rate (which is similar to the ABSD) on the total market value of the underlying residential property, says Song.

Amber Skye, like Marine Blue, is also subject to the QC rule. The freehold 109-unit luxury condo is located at the corner of Amber Road and Tanjong Katong Road and jointly developed by China Sonangol Land and OKP Holdings. Scheduled for completion in June, the project is also near the upcoming Tanjong Katong MRT station on the Thomson-East Coast Line.

About 14 units have been sold since Amber Skye previewed in June 2014, according to caveats lodged with URA Realis. The average transacted price in the freehold development is $1,800 psf.

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Return of investors

Seasoned investors have started to re-enter the residential property market and have been making selective purchases since March last year. “Even foreign investors don’t mind paying the higher ABSD as they feel prices have fallen to an attractive level,” says Samuel Eyo, managing director of Singapore Christie’s International Real Estate.

One such buyer is a retired Singaporean businessman and avid property investor who declined to be named. He purchased two units at Amber Skye six months ago. Both are 1,335 sq ft, three-bedroom units. He paid $2.42 million ($1,813 psf) for a unit on the 11th floor and $2.49 million ($1,866 psf) for a unit on the 18th floor, according to two caveats lodged last Sept 19.

Things are certainly looking interesting in the eastern region of Singapore. While Marine Blue and Amber Skye are in an established residential area in Marine Parade-Tanjong Katong, Park Place Residences at Paya Lebar Quarter is within a regeneration zone in a city-fringe area, notes Tay Kah Poh, executive director of residential agency at Knight Frank. It is also part of an integrated development and linked to the Paya Lebar MRT interchange station, a shopping mall and three office towers with about one million sq ft of Grade-A office space. “There will be a ready corporate tenant base of about 10,000 people,” he estimates.

At Park Place Residences, 81.8% of the units are one- and two-bedroom units. The one-bedroom units are 480 to 580 sq ft, with prices starting from $780,000. The two-bedroom units range from 650 to 900 sq ft, with prices starting from $1 million. There are 78 three-bedroom units of 1,080 to 1,350 sq ft, priced upward of $1.6 million. The 99-year leasehold project is scheduled for completion in 2H2020.

Completed versus under construction

Marine Blue is a good option for those who want a property they can move into immediately, says CBRE’s Tan. However, as it is a completed project, the mortgage drawdown will begin immediately. For projects under construction, after the initial 20% deposit, the drawdown will be more progressive, with the next mortgage payment six to 12 months later, upon completion of the foundation works.

Investors can lease out their units at Marine Blue right away. Alan Cheong, Savills Singapore head of research, reckons the one- and two-bedroom units at Marine Blue can command monthly rents of $4.50 to $5 psf. Based on the starting price of $1.13 million for a 650 sq ft, one-bedroom-plus-study unit, the rent translates into a gross yield of 3% to 3.4%.

Another upcoming launch in the east is Seaside Residences, an 841-unit private condo jointly developed by Frasers Centrepoint and Keong Hong Holdings. The 99-year leasehold project is located on Siglap Road, adjacent to Victoria School. The project is scheduled for preview on April 8.

Market indication is that units at Seaside Residences — which are a mix of one- to five-bedroom units, penthouses and dual-key units — are likely to be priced from $1,550 to $1,650 psf. Interest has been strong, according to marketing agents, as there has not been a new project launch in the neighbourhood in 17 years. Additionally, the project boasts unobstructed sea views from high-floor units and proximity to the upcoming Siglap MRT station on the Thomson-East Coast Line.

Had the residential market been more ebullient, Marine Blue could have been priced at $2,000 psf. “In good times, prices at Silversea, which is 99-year leasehold, were said to have crossed $2,000 psf,” says Wen. The 383-unit project, a redevelopment of the former Amberville HUDC estate, was completed in 2014 and is fully sold. The project is by Far East Organization and had its preview in September 2008. Many units were sold at prices above $2,000 psf in 2010 and 2011, with the highest achieved in 2014, when a 4,338 sq ft penthouse was sold for $12 million ($2,766 psf), a record for the project in terms of absolute and psf price.

The most recent transaction at Silversea was for a 1,528 sq ft, three-bedroom unit that changed hands last month for $2.1 million ($1,374 psf). The unit on the fifth floor was last purchased for $1.87 million ($1,226 psf) in August 2009, according to a caveat lodged then.

CapitaLand’s Wen is therefore pricing Marine Blue very competitively at an average price of just above $1,700 psf. Upping the ante, the developer will also offer buyers a two-year waiver on conservancy charges, which is upward of $700 a month for the smallest unit. This translates into savings of at least $16,800 over the next two years.

This article appeared in The Edge Property Pullout, Issue 771 (Mar 20, 2017) of The Edge Singapore.

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