Month: October 2023

Rent growth is expected in the Central Area to slow down in the following quarters due to an interest rate regime that will likely be higher for longer and economic uncertainty.

JLL estimates that the islandwide completion of office space will be at a seven year high by 2024. In the CBD alone, close to 1.9 million square feet of Grade A office space will be completed.
This is mainly due to two projects: IOI Central Boulevard Towers (1.33 million sq ft), and Keppel South Central (0.60 million sq ft).

JLL estimates there were still 1.1 million square feet of uncommitted space as of the 3Q2023.

URA’s headline index of office property rentals jumped sharply by 4.9% from 3Q2023, doubling the growth rate from the prior quarter, which was 2.3%.

URA’s Real Estate Statistics showed, however, that median rents declined for the first quarter in five for Category 1, office space. URA defines these buildings as being in the Core Business District which includes the Downtown Core and Orchard Planning Area. They were down 2.3% year-over-year.

Wong stated that the financial and professional service sectors remained the major demand drivers for office space within the CBD. These services made up 58% new leases during the first 9 months of 2023 compared to 26% of all 2022.

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Tricia Sing, CBRE’s head of Singapore and Southeast Asia research, says more diversified demand has made up for slack from the slowdown seen in the tech sector.
Private wealth, consumer goods and asset management were among the most active industries in 3Q2023.

Occupancy rates have increased from 89.2% at the end of 2Q2023, to 90% by 3Q2023. This is due to tighter market conditions, resulting from project redevelopments.

URA data indicates that about 0.45 million square feet was removed in 3Q2023, and this could be attributed the redevelopments of Faber House Central Square and Central Mall.

In 3Q2023, median rents for Category 2 (which URA defines is all other office spaces outside of category 1) fell for the very first time in 8 quarters. They were down 4.5% from one quarter to another.

JLL found that CBD Grade-A rents fell in the 3Q2023, putting an end to nine consecutive quarters of growth. JLL tracked the average gross-effective rents of CBD Grade A office space in 3Q2023, and they fell 0.3% on a quarterly basis to $11.29 PSF per month (pm), down from $11.32 PSF pm in 2Q2023.

Wong Xian Yang is the Cushman & Wakefield research head for Singapore and Southeast Asia. He says that the Downtown Core accounted for the majority of the net office demand in 3Q2023.
This was the largest qoq increase in net demand that Cushman & Wakefield has seen since 1Q2020.

In the Central Region during 3Q2023, the number of office strata transactions was only 57, the lowest level since the 3Q2020 period, when there had only been 47 transactions.

CBRE Research projects that the Grade-A office rental rates in the Core CBD are expected to increase by between 1.5% and 2.5% for the entire year.

The growth is higher than the projected GDP, but lower than the 8.3% growth rate in 2022.

A freehold shophouse in 255 Jalan Besar, with a guide price as low as $22 million, is currently up for public auction. The three-storey house occupies a plot measuring 3,145 square feet and has a total gross floor area of 7,750 square feet.

The property has an untapped area of 1,685 sq. ft. under the Use Group A (Commercial) and the buyer will be able to maximize the plot ratio without having to pay additional land improvement charges, provided the relevant authorities approve.

The price guide for the shophouse is $2.838 psf, based either on the GFA or on the maximum allowed floor area, which is 9,435 square feet.

This property, located in Jalan Besar Secondary Conservation Zone, is zoned commercial with a plot ratio of 3 under the Master Plan 2019.

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Joshua Giam, associate Director of Capital Markets, Singapore at CBRE, explains that a new owner can maximize the plot by building an extension to the rear or expanding the existing floor plate. The shophouse, subject to the approval of authorities, could be converted into F&Bs, clinics or serviced apartments.

Giam says, “These initiatives allow the new owner of the property to maximize the rental value and capital value.”

Michael Tay of CBRE, Singapore’s head for capital markets, says: “Given its exceptional attributes like freehold tenure and wide frontage as well as potential for naming or signage rights, investors and owner-occupiers are likely to be interested.”

He says that demand for shops in the city fringe has grown in the last year. Notable transactions included 203, 207 and 301 Jalan Besar being sold earlier this year for $38.5 million.

The closing date for the tender of 255 Jalan Besar is November 30, 12 noon.

For the first time since the Federal Reserve started raising interest rates, all aspects of the market for housing is poised to worsen.

The selling of resales has been declining since the beginning of 2022, as prospective sellers sit on their homes rather than give up the low rates of mortgage. The new homes offered relief to buyers. Now, no more. The recent increase in mortgage rates up to 8 percent has proved too much for builders of homes. They are likely to reduce construction in the coming months since profit margins are falling. Construction of apartments has also been rolling over in recent months as developers are hit with a combination of sluggish rent growth and high financing costs.

The discontent of potential buyers is well known. What are the macroeconomic implications? Given the importance of housing in the overall economy and the importance of residential construction, a slowing pace in construction will limit how fast the economy will grow, though not enough to cause recession in the next couple of quarters. To the extent that the brutal sell-off in Treasuries has been in response to hotter-than-hoped-for economic data, a paralysed housing sector will offer some respite.

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The housing market is responding in a different way to the recent run-up in mortgage rates in comparison to 2022. Then, the strike by homeowners boosted the demand for newly constructed houses. The only bright spot on the market were the home builders. The lack of inventory held costs high, allowing businesses to make use of their profits to lower mortgage rates and make it more affordable for prospective buyers. This doesn’t seem to be the case any more. The process of reducing home loan rates to 5.5 per cent – the ideal rate for potential buyers – is a lot more straightforward at 7 percent than around 8 per cent. Builders’ confidence is going like their stocks and profit margins. The National Association of Home Builders/Wells Fargo gauge of sentiment dropped to its lowest since the beginning of January. We should expect builders to cut back on their production plans in the coming months.

In the beginning of the year, the first multi-family homes were steady, whereas units under construction grew as delays in supply chains delayed projects. Over the last two months, there’s been a noticeable decrease in the number of housing starts. The numbers for September were 31.5 percent lower than last year and the number of units under construction fell for two straight months. This suggests that we are likely past this cycle’s peak. The rental market is expected to be a drag on the economy until 2024 as less units are being constructed and less are being constructed.

From an investor’s perspective, this all matters in a period of high consumption and lofty expectations for third-quarter real gross domestic product growth have driven a stunning sell-off in Treasuries. JPMorgan Chase. JPMorgan Chase believes that the economy expanded at a a rate of over 4 percent during the quarter. Part of that boost is due to housing, which is expected to boost GDP for the first time since 2021’s early years because of the recent increase in single-family home starts. This trend is not likely to persist into the following quarter, or perhaps 2024, until interest rates decrease.

The restart of student loan repayments as well as the United Auto Workers’ strike and the union representing actors on radio and television are all possible factors to affect consumption.

This confluence may finally offer investors some relief from the flurry of hot economic data, which has been weighing on both bonds and stocks as it bolsters the prospects of further tightening of monetary policy. If this doesn’t turn out to be the case, it will suggest that the labour market and the consumer market have more momentum than appreciated – an uncomfortable scenario when the highest costs for borrowing since mid-2000 have caused a market to be shattered.

The rising geopolitical tensions around the world and the potential consequences of the recent conflict in the Middle East may also dampen the spirits in the real estate market.

Analysts expect that the future is likely to be a slow one for buyers and developers because of the rising interest rates and macroeconomic uncertainty.

The ECs were the sole bright spot, with 118 units sold last month. The demand for ECs has been extremely strong because price-sensitive buyers are looking for alternatives to private homes. Eligible buyers of ECs can also qualify to get ABSD upfront Remission.

In September ECs 335 units were sold and 68 units launched. In August, 649 units were sold and 950 were launched.

Of the 118 EC units, around 100 came from Altura located in Bukit Batok, the sole EC project to be launched this year. This brought overall sales at the project to 88 per cent. Altura was also the top-selling project for the second consecutive month, with units being sold for a median of S$1,473 per square foot (psf) in September.

Due to the wide range of products available in the marketplace, consumers have become more selective in their selections.

According to data published by the Urban Redevelopment Authority (URA) on Monday (Oct 16), developers sold a total of 217 private homes in September, a decrease of 44.9 percent from 394 units that were sold in August.

The cooling measures that were implemented in April contributed to the “cloudy” and “slightly chilly” buyer sentiment.

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The sales of property in the OCR dropped 64 percent month over month, to 70 units. In the Rest of Central Region, it dropped 33 percent between the months.

Market watchers are predicting that the number of private home sales without ECs, will range between 6,000 and 7,000 this year – a tad less than the 7,099 units sold last year.

It’s not too surprising that home sales fell following the Hungry Ghost Festival, which was over in mid-September.

Just one new project was launched in September which was a 999-year leasehold The Shorefront at Jalan Loyang Besar in the Outside Central Region (OCR) and had three units sold at a median price of S$1,902 per square foot.

The most recent September sales figures that excludes executive condominiums (ECs) are less than a quarter of 987 units that were sold in the same month in 2022. It is also the month that has the lowest number of sales in the year thus far, in addition to the month of December 2022 when developers sold 170 units.

The quantity of private home sales declined in September due to the absence of any new projects that were launched in the unfortunate Hungry Ghost Festival.

Last month, Altura set a new benchmark price for the EC market as selling 980 square feet of space for S$1.6 million, or S$1,585 per sq ft, he added. This eclipses the previous psf price high held by Copen Grand, which stood at a price of S$1,499 psf.

The freehold Pullman Residences Newton was a distant second, with 21 units sold for an average price of S$3,258 psf. In the three segments of the market that were available, the Core Central Region (CCR) held up “relatively better” than the two other segments. The 76 units in CCR comprised 35 percent of condo and private apartment sales during September.

Buyers are weighing the increased Additional Buyer’s Stamp Duty (ABSD) against borrowing costs as well as widespread inflation, uncertainty about the economy, and an increasing number of public housing options in the form of Build-To-Order launches in good areas.

Developers will have to be sensitive in pricing for these coming projects to help increase the volume of sales. There won’t be significant price reductions as the developers are already committed to capital expenses.

Developers may choose to delay launches until 2024, when rates stabilize and sentiment increases, due to lower sentiment and the still high interest rates and because of the December holiday season.

This brings the number of primary home sales for the first nine months of 2023 at 5,407 units, which is 15.6 per cent lower than the 6,409 units transacted during the same time the previous year. This is the lowest level since 2016, when 5,656 homes were sold.

In the days leading up to the festival, old belief systems have some buyers staying away from home purchases. Developers may also avoid making announcements about new ventures during this time.

The OCR will be the main focus of most major project launches in the near future. The 265-unit Lentoria as well as the 474-unit Hillock Green are both part of the newly constructed Lentor Hills Estate. In Jurong, the J’den Condo, located on the former JCube Mall, will feature 368 units. The 440-unit Sora condominium, located at Yuan Ching Road, will also be constructed. The 341-unit Hillhaven is located in Hillview Rise.

Two of CDL’s executive condominium (EC) developments were recognized as the best projects in their respective categories. Piermont Grand received the award for the Best Executive Condominium in the category Completed (Non Central) while Copen Grand was awarded the award for the Best Executive Condominium in the category Uncompleted.

Piermont Grand is also certified with the Universal Design Mark Goldplus and Green Mark Platinum by the Building and Construction Authority. Sustainability features include an intelligent-energy-and-water-monitoring-system with water leak-detection algorithms for tracking and managing power and water consumption in the common areas. The energy- and water efficient features could help reduce the CO2 emissions by over 572 tonnes each year.

Copen Grand is Singapore’s very first Green Mark Platinum super low energy EC. It integrates smart technology, green design and luxury living. Photovoltaic solar systems are used to provide energy for the clubhouse and function rooms, as well as the swimming pool, gym, and swimming pool.

Read also: The M Middle Road

ECs is a unique public housing project that is developed by private developers and sold to Singaporean households who qualify. ECs fill a niche in the housing market, providing condo amenities at affordable prices. CDL has been able to do this at Piermont Grand, Copen Grand.

CDL is not immune to the challenges of the market, such as a series of cooling measures for property over the last few years, high interest rates, and a cautious macroeconomic outlook in Singapore and globally.

CDL’s innovative plans are centered around digitalisation. The company will integrate CDL Home Sales – its proprietary electronic system – which provides homebuyers with a transparent and efficient purchasing experience – with other digital solutions in its wider in-house ecosystem, such as the My CDL Home app. The app will allow home buyers to receive monthly updates about the progress of construction in their project, including an estimated TOP and specific information for their unit. Home buyers can also view their payment schedules and billing schedules and make an appointment to collect keys after TOP.

Market watchers will also be looking out for CDL’s upcoming project in Woodlands, Champions Way. Last month, the developer won the site after submitting a winning bid of $294 million. This equates to a land rate per square foot of $904

After the government announced a series of cooling measures for property in April of this year, the company decided to delay the preview of Newport Residences. This 246-unit residential project is located on Anson Road, in Tanjong Pagar. These measures included the doubling of foreign buyers’ additional stamp duty to 60%, from 30%. Newport Residences was developed from the former FujiXerox Towers.

The Whistle Grand, a 716-unit development recently completed at West Coast Vale, won top awards for Top Development, Landscape Excellence and Design Excellence in addition to Innovation Excellence. Whistler was first offered for sale in November 2018, and it was sold out by October 2021. Its temporary occupation permit was obtained in April 2018.

City Developments Ltd. (CDL) has had a memorable year. The property group celebrated their diamond jubilee in October and won the Top Developer Award for the seventh time at EdgeProp Singapore Excellence Awards 2023 (EPEA).

The EPEA jury recognized several CDL residential projects that were completed or uncompleted and demonstrated excellence in design, landscape, sustainability and innovation. The award-winning CDL projects of this year were designed to cater to a wide range homeowners and buyers from Singapore.