The South-East Asian island has seen a number of distinctive developments come to fruition over the past few years as the country further establishes itself.
The landscape has changed considerably as two key integrated resorts opened and the initial phase for the new Financial Centre progresses. The mixed-use Marina Bay Sands, which opened in April 2010, has all bases covered – from a casino, shopping mall, 2,560 room hotel, to theatres and even a museum. While key attractions within the Resorts World Sentosa include a Universal Studios theme park, Marine Life Park and a further four hotels. Another key development will be the Marina Bay Financial Centre (MBFC) – an office development located in the city’s new downtown. Once completed, it will comprise 2.96 million sq ft of quality office space.
The city’s latest plans further highlight why Singapore has been ranked the fourth most livable city in Asia according to a survey conducted by the Economic Intelligence Unit in 2011. This accolade is testament to the country’s urban planners and architects – many country leaders study the island’s concepts and strategies.
Although Singapore enjoys a favorable reputation, there are issues within the island’s real estate sector and the main concern for many residents and the government is affordable housing.
Residential
Since recovering from the recent global financial crisis, Singapore’s drive to continue positioning itself as a global city, has motivated many to own or invest in real estate. It is seen as an attractive investment option and a good hedge against inflation, according to a spokesman from Colliers International.
“The strong buying demand has therefore underpinned the steep escalation of private residential property prices by 49.4% between the recent market trough in 1Q 2009 and 1Q 2011, according to the private residential price index from the Urban Redevelopment Authority. As of 1Q 2011, private residential property prices have also surpassed the previous peak in 2Q 2008 by 12.2%,” a statement by Colliers International said.
The property advisors also highlighted the fact that although the steep rise in property prices may not affect the affluent in Singapore, every small change impacts the middle and lower stratums and this has raised concerns about affordability amongst many and about a property bubble forming.
“In a move to weed out speculation and to cool the market, the Government has introduced four rounds of market cooling measures since September 2009. The most recent round of measures imposed on 14 January 2011 involved upping the holding period for Seller’s Stamp Duty (SSD), raising the SSD rates and lowering the loan-to-value (LTV) limit,” a spokesman for Colliers International said.
But, despite the cooling measures, new private homes sales were still strong. An average of 1,690 new units were sold per month in April and May 2011, higher than the monthly average of 1,198 transactions in Q1 2011 and the average of 1,358 units per month in 2010.
Prices have also continued to trend upwards, albeit at a moderated pace on a quarter-on-quarter (QoQ) basis. The sustained strong demand has now created some level of uncertainty and anticipation in the market of possible housing market policy changes from the Government, according to Colliers.
Research carried out by CB Richard Ellis, Singapore, revealed the year got off to a strong start with an estimated 4,000 new homes expected to have been sold in Q2 2011. Compared to the previous quarter, these figures would make it 11.3 per cent higher than the 3,595 new homes sold in Q1 2011 and close to the 4,241 units sold in Q4 2010. CBRE Singapore, named the top five projects which have contributed to the primary sales volume so far as: Eight Courtyards (467 units sold), Hedges Park (289 units sold), Foresque Residences (141 units sold),
Terrasse (184 units sold) and Foresta @ Mount Faber (111 units sold). With the exception of Foresta, the other four projects were priced between $790-$1,200 per sq ft to cater to first timers and upgraders.
Caveat data to date from the The Urban Redevelopment Authority (URA) shows a median price of about $1 million for new homes sold in the first half of this year, down from around $1.2 million a year ago during the same period.
Joseph Tan, executive director, residential, at CBRE Singapore, said: “The threshold for buyers seems to be $1 million for new projects. One reason could be the awareness of rising costs and increased home prices, which may be prompting home buyers to look to smaller sized units.”
The median size for units sold in Q1-Q2 2011 was below 900 sq ft while those sold in Q1-Q2 2010 was below 1,200 sq ft. This translates to a median price of just around $1 million for the units sold in 1H 2011 while those in 1H 2010 recorded a median price of about $1.2 million. Another reason could be the 60 per cent loan-to-value ratio for home buyers with an existing loan. It is probable that a majority of them are able to service their debt
comfortably for a residential property up to $1 million.
Mr Tan added: “With the government’s plan to release land for another 8,115 new private homes in 2H 2011 via its confirmed land sales schedule and to release 25,000 HDB flats for sale for the whole year, there is some degree of apprehension as to how it will impact the mass market segment. We expect the take-up of new homes in 3Q 2011 to be lower than the numbers in 2Q 2011.”
Some of the new launches expected to be launched include Leedon Residence, Thomson Grand and two other mass-market projects located at Sengkang Square and Serangoon View as well as an executive condominium project at Segar Road.
Office market
Colliers International notes the office market is currently on the up-cycle following the recovery from the global financial crisis. Nevertheless, occupiers’ initial exuberance for office space in response to Singapore’s strong economic turnaround from the crisis has subsided according to Colliers International and leasing activities returned to a more moderate level in 2Q 2011.
“With the line-up of new office projects in the market, flight to quality continued. However, this was taking place at a slower pace, which is in line with the stabilisation of expansion and consolidation plans of major large space users,” a spokesman for Colliers International said.
“Meanwhile, the gradual completion of new office outfits, the availability of secondary office space that re-entered the market when tenants relocate to their pre-committed new premises as well as the rise of new business park developments, which offers office-like specifications at comparatively lower rents has widened the option for qualifying office tenants and consequently, adds to the supply of space in the market. This has resulted in the overall average occupancy rate for Grade A office space dipping to 93.6% in 2Q 2011, from 94.15% in 1Q 2011, the first correction in seven quarters,” a spokesman for Colliers International said.
Competition for tenants – given the normalisation of demand amid rising supply of space – has in turn, continued to help to keep the rental growth of Grade A office space in check. Overall, the average monthly gross rent of islandwide Grade A office space recorded the third consecutive quarter of moderation in QoQ growth to 6% in 2Q 2011.
As of 2Q 2011, the monthly gross rent for islandwide Grade A office space averaged S$8.19 per sq ft. At this level, rents have recovered by 42.6% from the trough in 3Q 2009 but are still 35.5% below the peak in 3Q 2008, according to Colliers International.
Research revealed by CB Richard Ellis, named corporate expansion as the major demand driver for prime office space in Asia Pacific during Q1 2011, with occupiers particularly active in absorbing space in the leading cities of China and India as well as in Singapore. According to CBRE, ‘the upward pressure on prime rents across the region continued to gather momentum in the first quarter.’
Following the quick revival witnessed during 2010, the Singapore office market recorded a more measured start to 2011 as occupiers digested the significant expansion space taken up last year. Although prime office rents continued to trend upwards, CBRE noted the pace of rental growth moderated to 3.6 per cent QoQ from 12.2 per cent in the fourth quarter of 2010. Average prime rents stood at $8.60 psf/month in Q1 2011. Forecast completions for 2012 have been lowered from 2.1 million sq. ft. to 1.4 million sq. ft. as several developers rescheduled the launch of new projects.
Forthcoming relocations to new buildings will increase the volume of secondary space, a trend which will exert pressure on rents in older buildings.
CBRE Singapore predicts key emerging markets will continue to grow at a brisk rate with companies expecting to take on new staff. United Overseas Bank, RHB Islamic Bank, CIMB and BNP Paribas have announced plans to grow their headcount in Singapore. ANZ Bank has hired some 500 staff and are planning to increase headcount further.
Office markets in other parts of the region are expected to continue to be driven by internal growth and the expansion of multinational corporations amidst brisk economic growth.