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Archive for January 3rd, 2009

When a price fall isn’t a price fall

Posted by luxuryasiahome on January 3, 2009

SISV Services is fixing problem with caveats lodged for some subsale deals.

PRIVATE home prices have fallen but in some cases, the drop may not be as much as suggested by SISV Services’ Realink database.

SEEING DOUBLE Savills Singapore has spotted more than 60 instances of ‘duplicate caveats’ listed at different prices for the same transaction on Realink — STOCK.XCHNG

Savills Singapore has spotted more than 60 instances of ‘duplicate caveats’ listed at different prices for the same transaction and which give the impression of a unit changing hands within a span of a few months at a significantly lower price, when in fact it hadn’t.

The common thread running through these cases is that they involved subsale deals transacted in the past six months for projects which either received Temporary Occupation Permit in 2008 or are nearing TOP.

For example, Realink shows a caveat for a 47th floor unit at The Sail @ Marina Bay sold in the subsale market in September for $508,024 or $858 psf, when actually the unit was sold for $1.45 million or $2,450 psf and which was caveated three months earlier (and also shown in Realink). The lower price was the price at which the developer first sold the unit back in 2005.

In another instance, Realink shows a caveat for a unit at Park Infinia at Wee Nam in November for $1.16 million or $868 psf, one-third lower than the $1.77 million or $1,325 psf caveat lodged for the same unit two months earlier. Actually, both caveats were lodged by the same buyer, who paid the higher price.

Rodyk & Davidson LLP partner Tang Woon Ee told BT that it was ‘good practice’ to advise clients who buy in the subsale market to lodge two caveats. The first is when the buyer exercises his subsale option and has to fully pay up the initial 5 per cent deposit; this caveat will reflect the actual transacted price.

Then, two or three months later, when this subsale transaction is completed and the buyer enters into a fresh sale and purchase agreement (SPA) with the developer, the buyer should lodge another caveat to protect his interest in the unit. This fresh SPA will reflect the original price at which the developer sold the unit, since this is the price it is entitled to collect.

‘So if the developer originally sold the unit to Buyer 1 for $1 million and Buyer 1 later sells to Buyer 2 in the subsale market for $1.2 million, the fresh SPA issued by the developer to Buyer 2 will still reflect the $1 million price; the profit (or loss) made by Buyer 1 from his subsale transaction is not relevant to the developer,’ Ms Tang explained.

As a result, the original sale price of the unit gets reflected in the second caveat lodged by the purchaser in the latest subsale deal. In this instance, two caveats will be lodged by Buyer 2 for the same transaction – the first at $1.2 million followed by another a few months later at $1 million.

SISV’s Realink database, by listing both caveats, gives the impression that the price of the unit has fallen about 17 per cent in the past three months.

Said Ms Tang: ‘A caveat is a legal claim against a property. When the developer issues a fresh SPA to a buyer who picked up his unit in the subsale market, it establishes a relationship between the buyer and the developer – that’s a caveatable interest.’

SISV Services is in the midst of rectifying the problem, which has been caused by the service provider not eliminating ‘duplicate caveats’ lodged for subsale transactions which show the original price at which the developer sold the unit a few years ago (and which is listed in the fresh Sale & Purchase Agreement issued by the developer to the latest subsale buyer).

An SISV Services spokesman attributes the problem in Realink to an increase in subsale cases involving projects originally sold on deferred payment schemes (DPS) as the original buyers who may have picked up their units from developers a few years ago are now feeling the pinch from the economic downturn and facing difficulty getting bank loans.

This has led to an increase in subsales being registered and duplicate caveats showing up, according to him.

To fix the problem, SISV Services has added a ‘history’ button, next to transactions with two or more caveats lodged, for the professional version of Realink. ‘Users can view the caveats’ history and if they see the latest price is identical to the initial transaction in the primary market say a couple of years ago, they can disregard the latest caveat as being a ‘duplicate’,’ the spokesman said.

‘For the free version of Realink available to the public, we are in the process of devising a computer programme to help us identify the duplicates, so we may remove them.

‘We didn’t remove the duplicate caveats earlier because we could not determine readily that they were ‘duplicates’ as we do not have the buyers’ names in the raw caveats data that we buy from SLA (Singapore Land Authority).’

Savills Singapore compiled a list of over 60 subsale transactions covering projects like The Sail, Cosmopolitan, The Esta, Park Infinia at Wee Nam, The Sea View, The Azure, Watermark, The Calrose and Parc Emily where Realink’s database showed latest caveats at significantly lower prices than caveats lodged for the same units just a few months earlier. Typically, the latest caveated price was also the original transacted price for the unit a few years ago.

Savills did individual searches for a few of these cases using Singapore Land Authority’s Inlis system and, in each instance, found two caveats being lodged for the property by the same buyer, just a few months apart – and with the second caveat at a lower price than the first.

Raw caveats data that SISV Services purchases from SLA does not contain information on the buyers’ or sellers’ identities to protect privacy. SLA confirmed that it provides identical data to both SISV Services and the Urban Redevelopment Authority.

Interestingly, URA’s Realis system does not list these ‘duplicate caveats’ that do not reflect the latest transacted prices.

When asked how it sifts out caveats lodged when developers issue a fresh SPA based on original sale price, a URA spokeswoman said: ‘If a caveat is lodged against a developer, we will ascertain whether it is a new sale or a fresh agreement arising from a subsale.

‘We do this by checking whether a caveat for the same unit has been lodged against the sub-seller, whether a previous caveat has been lodged for the unit when it was originally sold and also against our database on new sales compiled from monthly surveys of developers. If the caveat is lodged against a developer arising from a sub-sale, we will not show the record in Realis.’

On the duplicate caveats in SISV Services’ Realink database, Savills Singapore director for investment sales and prestige homes Steven Ming said: ‘Analysts who do not distil the information carefully can come to very wrong conclusions of the market, thus further aggravating the already weak market conditions.

‘Had end-users, investors and property owners relied on such data without first seeking a professional opinion, they can easily be making a misinformed decision as a result.’

There may also be a minority of rogue agents who may use such erroneous low-priced caveats to their advantage in convincing less savvy owners to close on low offers given market conditions, he added.

Source : Business Times – 3 Jan 2009

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Q4 private home price slide is worst in decade

Posted by luxuryasiahome on January 3, 2009

Some consultants notice yawning bid-ask gaps leading to distressed transacted prices

IN its worst showing since Q4 1998, the official private home price index slid 5.7 per cent in Q4 last year over the preceding quarter. For full-year 2008, the index fell 4.3 per cent, reversing a 31.2 per cent jump in 2007.

Property consultants are predicting a further decline of 10-20 per cent this year in the benchmark index, with upmarket homes continuing to be the worst hit, as in 2008. This sector was the most overheated during the run-up in 2006 and 2007.

‘The bid-ask gap is very high; any buyer that comes in now wants to make sure he’s buying at very attractive prices to cushion against future risk. As a result, most transacted prices are quite distressed,’ said DTZ executive director Ong Choon Fah.

BT understands buyers are looking at prices at least 20 per cent below Q3 2008 levels before they are willing to commit.

URA’s non-landed private home price index for Core Central Region (CCR) fell 6.3 per cent quarter-on-quarter in Q4, or a full-year drop of 5.5 per cent. CCR includes the prime districts, financial district and Sentosa Cove. In the Rest of Central Region, the price drop was 5.5 per cent for Q4, and 4 per cent for the full year. Outside Central Region, a proxy for suburban mass-market locations, suffered the smallest declines, of 4.7 per cent in Q4 and 1.6 per cent for the whole year.

The declines in URA’s indices were far smaller than the price drops estimated by property consultants. CB Richard Ellis said that last year, average prices of new luxury homes under construction fell 30 to 35 per cent for prime districts 9 and 10, while those in Marina Bay and Sentosa Cove eased 10-13 per cent.

URA’s price indices are weighted according to the moving average mix of transactions for the preceding 12 quarters, and this tends to make changes in the indices more muted during sharp market swings.

For this year, JP Morgan analyst Chris Gee said: ‘The critical factor that will affect private home prices in 2009 – probably more importantly than the economy and jobs market – will be banks’ financing of property. Banks seem happy to lend to the right type of buyers, but they’re more conservative on valuations and tighter on loan-to-value.’

As for developers, smaller players have already started to chop prices. ‘Among bigger developers, some are restructuring their portfolios and re-evaluating their risk positions,’ DTZ’s Mrs Ong noted.

A seasoned developer pointed to a diversity of strategies among developers, according to their financial strength, profit margin for each project and their view of when the recovery will take place. ‘Some will cut and sell; some will package things that effectively give more discounts; some will lease instead of selling; some will just sit it out and wait for better times.

‘Projects will be slowed down or delayed, stretching out the supply coming into the market, which in itself is a regulating mechanism,’ he said.

In the public housing segment, the Housing & Development Board’s (HDB) resale flat price index still inched up 1.5 per cent quarter-on-quarter in Q4 to scale a new peak. But this was slower than the 4.2 per cent rise posted in Q3.

ERA Asia Pacific associate director Eugene Lim said: ‘We’ve been seeing more transactions with decreasing cash-over-valuations (COVs). The days of transactions with above $50,000 COVs are over.’

He is predicting a sub-1 per cent rise in the HDB resale flat price index for each of Q1 and Q2 this year. ‘If the recovery takes longer, we may see the price index flatten in H2 2009 before decreasing, if the situation worsens.’

Knight Frank director Nicholas Mak predicted a 5 to 10 per cent correction in HDB resale flat prices this year, as the weakening economic conditions filter into the HDB market.

ERA’s Mr Lim noted that ‘in uncertain times, home buyers go for the ’safer’ option of HDB flats to ease their financial burden’. He estimated 30,000 to 31,000 HDB resale transactions were done in 2008 – surpassing the 29,436 in 2007.

As for the private housing sector, CBRE predicted developers may sell 5,000-6,000 units in 2009, as falling prices boost take-up. It put the figure for last year at 4,300 to 4,400 units – just 30 per cent of 2007’s record volume. Sales also slowed in the secondary market. CBRE estimated about 7,400 to 7,600 resale deals were done last year – against nearly 21,000 transactions in 2007. The 1,600 to 1,650 subsale deals it estimated for 2008 were also a far cry from the 2007’s figure of 4,863.

Source : Business Times – 3 Jan 2009

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HDB resale prices could dip soon

Posted by luxuryasiahome on January 3, 2009

Economic slowdown expected to lead to people downgrading later in year

PRICES of HDB resale flats have continued to rise even as the economic downturn takes its toll on jobs, wages and private home prices.

But analysts warn this recent steady rise may not last long.

According to flash estimates of HDB’s Resale Price Index released yesterday, prices of flats in the fourth quarter of last year rose 1.5 per cent over the preceding quarter.

This figure is considerably lower than the 4.2 per cent increase in the third quarter, and it is the first time that growth has dipped below 3 per cent in six months, said real estate agency PropNex.

But while average prices of HDB resale flats are now at an all-time high, property analysts say that they are likely to dip some time this year.

‘Sentiment is pretty soft as many people are taking a wait-and-see approach,’ said Mr Eric Cheng, executive director of HSR Property Group. ‘If prices dip, they will do so in the second and third quarters of this year.’

Mr Eugene Lim, associate director of ERA Asia Pacific, said: ‘With the economy likely to contract further and more layoffs expected in the months ahead, home buyers have become very practical.

‘In uncertain times, home buyers go for a ’safer’ option – HDB flats – to lessen the financial burden. This is especially so for the ’sandwiched’ class that may find private housing a little too stretched for their comfort.’

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said: ‘Buyers are increasingly cautious and prefer to purchase HDB flats instead of private homes to limit their exposure to the uncertain market. A number of homeseekers are re-aligning housing requirements from aspirations to functional needs.’

He expects prices to remain flat in the current first quarter, and overall prices to drop 5 to 10 per cent in the full year.

‘At the moment, there are still people who need homes. But the economic slowdown and job losses will eventually cause some people to downgrade from larger flats to smaller ones, and only by the second quarter will we start to see a pronounced rate of decline,’ he added.

PropNex chief executive Mohamed Ismail is slightly more optimistic.

‘If the economy does not improve… there will be more downgraders and cautious home buyers in the wake of retrenchments and tighter budgeting. If more people shy away from the bigger flats above the $500,000 mark, it’s just a matter of time before prices dip.’

‘Clarity will come in the second half of the year. But we should still see overall average growth of between 3 and 5 per cent in 2009.’

What seems certain to decline, however, are cash-over-valuations (COVs).

‘The days of transactions with above $50,000 COV are over. Remote exceptions are well-renovated flats with unobstructed, panoramic views,’ said ERA’s Mr Lim.

Mr Ismail agreed: ‘Today, the bigger flats that are valued at $500,000 and above on the resale market can sit without a buyer for two to three months. The en bloc frenzy of last year has already dwindled, affecting the demand for the bigger flats.’

Added Mr Lim: ‘We are thus likely to see the COV statistics continue to decline in the coming quarters.’

Source : Straits Times – 3 Jan 2009

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HDB resale price index up 1.5% in Q4

Posted by luxuryasiahome on January 3, 2009

PUBLIC housing resale prices have stubbornly continued to climb even as private home prices are accelerating downhill and pundits are betting on flat prices still holding firm this year if not seeing a modest single-digit growth, then staying level for the most part.

Flash estimates from the Housing and Development Board (HDB) showed that its resale price index grew by 1.5 per cent in the fourth quarter, after six quarters of robust growth of at least 3 per cent per quarter.

On the heels of this slower growth, ERA which has a 45-per-cent market share of the resale flat market predicts a “sub-1-per-cent increase” in resale prices in the first two quarters this year.

“If the (economic) recovery takes longer, we may see the price index flatten in the second half before decreasing if the situation worsens,” said ERA Asia Pacific associate director Eugene Lim.

PropNex chief executive Mohamed Ismail was even more bullish, expecting 3- to 8-per-cent growth this year. This would be slower than last year’s estimated 13.9 per cent overall increase in prices, but there would still be growth as demand exceeds supply, predicted Mr Ismail.

But one analyst found a certain “perversity” in the buoyancy of the resale market. Calling the 1.5-per-cent growth in the last quarter “alarming”, in light of the recession and gloomy outlook, Chesterton Suntec International research director Colin Tan asked “Why are people buying? Why are they paying a higher price despite the fact that their incomes may be affected in the future?”

As the market’s resale prices are factored into HDB’s pricing of new flats, the overall rise in the prices of public housing coupled with more expected job losses ahead could work out adversely for prospective buyers, he said.

Nonetheless, prices should be tightly reined in by an almost zealous reluctance by buyers now to fork out cash above valuation (COV). “The days of transactions with above $50,000 COV are over,” said Mr Lim.

With further economic contraction expected, buyers have become “very practical”, he said “Most start by making offers below valuation, and invariably, most deals today are closed at valuation, or at most $5,000 to $30,000 over.”

What most of the property players Today spoke to agree on, is that smaller flats three- and four-room units will benefit from strong demand.

Mr Ismail expects prices of three- and four-room flats to grow by 5 to 8 per cent, and larger flats to post increases of 1 to 3 per cent. “There will be more downgraders and cautious home buyers in the wake of retrenchments and tighter budgeting,” he said.

Mr Victor Ong, 29, of Huttons RealEstate Group, said foreigners, too, were eyeing smaller units.

The resale price index for the full quarter, as well as more detailed public housing data and upcoming new flat supply, will be announced at the month’s end.

Source : Today – 3 Jan 2009

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Dismal home sales stats not seen since ‘98

Posted by luxuryasiahome on January 3, 2009

THE comparison rings with foreboding the last time private home prices took a bigger dive than this, it was exactly a decade ago, in the midst of the Asian financial crisis.

In the last three months of 2008, the private resident property price index dropped 5.7 per cent, more than double the rate of decrease a quarter ago, according to flash estimates. The final tally due for unveiling in four weeks’ time which would include dismal sales data from the last two weeks of December could be even more depressing.

And in the year ahead, with the worst yet to come for the economy, analysts are warning that prices could decline by 10 per cent at best, and more than 25 per cent at worst.

For some private home-owners, this brings back dark echoes of 1998, when prices tumbled by one-third.

The biggest plunge of 13.2 per cent came in the third quarter, followed by a 8.7 per cent slide before prices finally rebounded.

Already, the last three months’ drop in private residential property prices is more than what some analysts had expected, which was a 3- to 4-per-cent dip. But does this herald a repeat or worse of the market’s performance in 1998?

Property experts Today spoke to would not commit to saying so, but it was clear the usually upbeat lot was taking a subdued view of the future.

“This (current drop) could mean that there’s some sort of breakthrough,” said Chesterton Suntec International research director Colin Tan.

“There has been a stalemate all this time in the market, but we can tell for certain that the prices are coming down now.”

Investors vs buyers: Who will out wait the other?

Overall, prices of private homes dipped a modest4.3 per cent year on year. How far prices will come down this year would depend on property investors rather than developers, said analysts.

Unlike 10 years ago, when developers were giving discounts on their surplus properties, this time it is individuals who bought during the “unusual” property boom in recent times who are now setting the prices.

In the current climate, it’s often about how long they can hold on to their properties before selling it at a loss, or whether they can hold out for the next upswing. Indeed, the last quarter’s decline in prices could be due to the “overly-invested” looking to raise quick cash or make a quick exit, said ERA Asia Pacific’s associate director Eugene Lim.

For now, those investors with enough fortitude are holding out for as long as they can.

“Sellers are not willing to let go at fire sale prices. And a lot of agents are optimistic that things will pick up; the overall feeling is better than in the last financial crisis,” said property agent Angeline Chong, 35.

But, by and large, buyers have the definite upper hand. Most, especially in the high-end segment, says Mr Lim, are waiting in anticipation of price decreases, and astute ones are shopping around for value buys.

Agent Peter Yu, 40, who has seen the ups and downs of the market since 1988, said: “1997 was a crazy time, and so was last year, but people are still buying … It’s all about price, it’s a buyer’s market.”
Developers have muscle to hold on

Meanwhile, developers are likely to hold off new property launches for now, and focus on clearing unsold units in currently marketed projects.

According to CB Richard Ellis, six major mass-market projects launched this year had sold just20 to 46 per cent of units as of end-2008.

This year and the next will also see more than 7,000 units bought under the Deferred Payment Scheme completed. With the financial crunch and banks tightening credit lines, it is a question of how many may be returned to developers should buyers fail to find the needed financing.

Still, price cuts by developers are unlikely as “many of them have done well over the last two years” and have the financial muscle to wait out the downturn, said ERA’s Mr Lim.

The one segment that has seen the greatest dive in prices last year: Luxury homes.

According to CBRE, new projects under construction in districts 9 and 10 saw a 30- to 35-per-cent fall in prices; those in the much touted Sentosa Cove and Marina Bay experienced a 10- to 13-per-cent dip.

But overall, adds CBRE: “The fall in prices may encourage sales and push take-up volume to 5,000 to 6,000 units for the entire year.”

Source : Today – 3 Jan 2009

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Private homes continue freefall; HDB prices hold up

Posted by luxuryasiahome on January 3, 2009

The fourth quarter’s 5.7 per cent drop is the sharpest in a decade

THE deepening economic crisis sent private home prices plunging 5.7 per cent in the fourth quarter of 2008 – the steepest drop in a decade.

The dramatic fall has effectively brought an end to Singapore’s four-year property rally as prices had already dived 2.4 per cent in the previous quarter as jittery buyers flee the market.

Prices for 2008 overall are down 4.3 per cent compared with 2007, according to flash estimates from the Urban Redevelopment Authority (URA) yesterday.

This is a striking turnaround from the 31.2 per cent spike in private home prices in 2007, the peak of the boom.

But Housing Board (HDB) flats continue to buck the trend, climbing 1.5 per cent in the fourth quarter following a 4.2 per cent increase in the third.

This means HDB resale flat prices have reached a new peak since the 1996 high.

Prices rose 13.9 per cent in 2008, building on the 16.6 per cent increase in 2007.

Analysts say the gloomy economic outlook has turned home-buyers even more cautious, leading to a fall in demand even as developers begin to soften prices of new launches. Potential buyers are waiting on the sidelines in anticipation of further price cuts, said CBRE Research executive director Li Hiaw Ho.

Prices for apartments in the core central area suffered the most – down 6.3 per cent in the three months to Dec 31, while those in the rest of the central area slipped 5.5 per cent. This follows declines of 2.7 per cent and 2.4 per cent respectively in those areas in the third quarter.

But the falls in some prime projects were even more severe. CBRE’s Mr Li said the luxury segment has taken a hammering with projects under construction falling 30 to 35 per cent in prime districts 9 and 10, while those in Marina Bay and Sentosa Cove fell 10 to 13 per cent.

The URA’s website showed home prices at Ardmore Park, for example, declining around 30 per cent, from an average of almost $3,000 psf in February to March, to around $2,115 psf in December.

Prices of suburban homes fared better. They were down 4.7 per cent in the fourth quarter, following a 1.5 per cent drop in the previous three months.

ERA Asia Pacific associate director Eugene Lim said prices of such homes have already dipped to ‘very reasonable levels, due to recent launches where developers were sensitive to the poor economy’.

Mr Lim also felt that the drop in private home prices – the largest since the last quarter of 1998 – proves that ‘fire sales’ have started as sellers look to bail out and raise cash amid the recession.

Knight Frank’s director of research and consultancy, Mr Nicholas Mak, said the decline of median prices of sub-sales – 10.6 per cent in the third quarter and 7.5 per cent in fourth quarter – confirms this theory, based on his firm’s analysis.

Take Sentosa’s The Azure. The median subsale price in the fourth quarter was $1,200 psf, down from around $1,700 psf in the previous two quarters, said Mr Mak. That means a 1,300 sq ft flat that cost $2.21 million might now go for just $1.56 million.

The URA recently revealed that about 10,450 unfinished homes were sold under deferred payment, which allows buyers to postpone payments until projects are completed. This has raised concerns that such homes are at risk of default or distressed sales if prices fall more.

The URA and HDB flash estimates were based on transactions in the first 10 weeks of the fourth quarter. They will be updated in four weeks.

The head of research and consultancy at Chesterton Suntec International, Mr Colin Tan, said December’s transactions could render the final figure two to three percentage points worse than the estimate.

CB Richard Ellis predicts prices will fall 10 to 15 per cent this year and Knight Frank tips falls of 13 to 20 per cent.

Meanwhile, analysts say that most developers can hold off launches over the short to medium term if necessary.

Yet the market is not short of buyers and investors out for bargains, said ERA’s Mr Lim. ‘While the immediate future may be bumpy, we are confident there is light at the end of the tunnel.’

Source : Straits Times – 3 Jan 2009

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