Straits Times: Sat, Mar 24
PROPERTY firms and agents are tapping other avenues to remain in business now that Singapore's once-booming resale market - for HDB flats and private homes - has taken a big hit from the Government's cooling measures.
Fresh estimates from agency bosses show the number of resale deals in both markets for the first quarter dropping significantly compared to sales done last year.
But the slowdown in these markets has fuelled activity in others. Sales are soaring at launches of mass-market condominiums. Buyers snapped up a record 3,138 new private homes last month, including executive condo units.
To get a slice of the action, property agencies such as PropNex and ERA are increasingly looking for direct deals with property developers to market new launches, which also offer their agents an alternative revenue stream.
Agents are also counting on the buoyant commercial and industrial sector, which is not affected by the recent cooling measures. Many of them have diversified into selling such units to make up for lost income from the dampened interest in the residential sector.
Some have also gone into subletting HDB flats to those - many of them foreigners - who would rather rent than buy now.
The Government, in its latest round of cooling measures last December, slapped a 10 per cent additional buyer's stamp duty on all foreigners buying homes, effectively killing a significant source of demand in the private property market, especially for high-end homes.
The Housing Board has also offered a record number of more than 50,000 flats in two years, and raised the monthly household income ceiling to $10,000 to allow more to bid for new flats instead of turning to the resale market.
Data from property agencies OrangeTee and ERA Realty put the number of HDB resale deals at 4,000 to 4,500 for January to mid-March.
This is almost 30 per cent lower than the 6,228 deals in the first three months of last year, and 24 per cent less than the 5,921 in the fourth quarter of last year.
OrangeTee's research and consultancy head Tan Kok Keong said the large number of new flats and recent moves by the HDB to set aside a larger number of flats for second-time buyers have reduced demand in the HDB resale market.
As a result, the cash premium paid above a flat's valuation, known as COV or cash-over-valuation, has also dipped.
ERA and PropNex said, based on their transactions this month, that the median COV across all flat types and towns was about $25,000 - lower than the $35,000 in the fourth quarter of last year.
ERA key executive officer Eugene Lim said, however, that the drop in COV has lured some buyers back into the market, with more units being sold this month compared to January.
Over in the private property market, ERA has spotted a 30 per cent dip in resale transactions for the first three months to date, compared to the fourth quarter last year.
'There's a mismatch of expectations between buyers, who expect prices to come down and hence make low offers, and sellers who have no urgency to cut prices,' said Mr Lim.
PropNex chief executive Mohamed Ismail pointed out that buyers may also opt for new units because they need to fork out only the initial downpayment - 20 per cent of the purchase price, or higher if the buyer already has an existing home loan.
The buyer can take the next two to three years to shop around for a loan while the project is being completed. Buying a resale unit means having to take a hefty loan immediately.
Sales in the commercial and industrial sector have heated up. Mr Ku Swee Yong, chief executive of International Property Advisor, said such investments are attractive as interest rates are still low and these units do not come with the tight restrictions imposed on homes.
PropNex real estate agent Casey Ng, 46, who has been brokering home deals for the past 10 years, diversified into selling commercial and industrial units at the start of this year.
He took up a course on the commercial market recently, and in the past week alone sold two properties in an industrial park in Woodlands Avenue 12.
'It's a different ball game as buyers are not as emotional about a place as compared to residential units,' said Mr Ng.
Smaller agencies, which have also felt the brunt of the slowdown in the resale residential market, are changing course too.
Mr David Huan, key executive officer of Rainbow Cottage, said his 60 agents now focus on the HDB rental market, where the number of units approved for subletting per year shot up from about 15,000 in 2009 to 26,000 last year.
He attributes this to the relaxation of subletting rules in recent years and the reduction of the minimum occupancy period, meaning more flats will qualify to be rented out.
'There might not be enough for us to sustain in the resale market, so we have to concentrate on where the possible business avenues might be,' he added.
Increased activity in:
REASON FOR DECLINE
'There's a mismatch of expectations between buyers, who expect prices to come down and hence make low offers, and sellers who have no urgency to cut prices.'
ERA key executive officer Eugene Lim, on the dip in resale transactions for the private property market
Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.
» Estate agents switch focus to commercial, industrial sites
Straits Times: Sat, Mar 24
JUST a year ago, estate agent Jonathan Kong was spending most of his time dealing with properties for home buyers.
But now he is dealing increasingly with commercial and industrial spaces instead, and last month he sold a $2.88 million property in East Coast, his largest deal this year.
For the past nine years, the 42-year-old has concentrated mainly on the HDB resale market, while dabbling occasionally in private properties.
Now that both markets have slowed, Mr Kong has turned his focus to other sectors, with almost immediate results.
His biggest deal this year came this month when he handled the $2.88 million transaction for a freehold 1,800 sq ft shophouse at 32 Siglap Drive. He pocketed more than $10,000 in commission - not bad for a week's work.
'The market trends have shifted, and agents are going to where the business is,' he said.
While in the past, almost all his working hours were spent dealing with the HDB resale market, he now spends about 70 per cent of his time scouting for prospective commercial and industrial properties, although he admits the market is smaller.
The change in scope means Mr Kong has also had to learn new things. He recently attended a seminar on marketing such properties organised by his company, PropNex.
'Sellers and buyers are getting more savvy, and we need to be able to field their questions,' he said.
Savvy investors such as Mr Sameer Aswani are also concentrating on this sector, lured by higher profit margins.
The 36-year-old is director of SJ Land, SJ Properties and ASA Global, which own a mix of office, warehouse, residential and retail properties in areas such as Marina Bay, MacPherson and Tanjong Pagar. He has picked up seven units at Pantech Business Hub in Pandan Loop over the past two years.
He said such units can yield up to 8 per cent in annual returns, compared with non-landed residential units, which yield about 3 per cent to 4 per cent in returns. In his experience, returns for landed units are much lower, averaging about 1 per cent to 2 per cent.
'And if interest rates go up, you will see your profits vanish,' he said.
He added: 'If you rent a residential property, residents can just move out because of the abundance of supply, but for business-related rentals, especially those that have established a brand name or spent a considerable amount of money doing up their office space, they would be reluctant to move.'
RIDING THE TREND
'The market trends have shifted, and agents are going to where the business is.'
Estate agent Jonathan Kong (standing in front of the East Coast shophouse that he recently sold) used to spend most of his time dealing with properties for home buyers. Now he deals increasingly with commercial and industrial spacesSource: The Straits Times