Wing Tai's Boss on Property Market

Suburban-urban price gap narrows because of MRT, amenities

Business Times: Thu, Jun 07
SINGAPORE'S MRT network, along with a lethargic high-end market, has led to a narrowing price gap between suburban condos near MRT stations and those in the CBD/prime districts. One way for the authorities to cool the mass segment of the private housing market would be to release more sites further away from MRT stations, reckons Wing Tai chairman Cheng Wai Keung. He also notes that the network of MRT stations around the island has also reduced price differentiation between various suburban locations. "The MRT transport network is so good that what is important now is not how far a property is from the centre or CBD; it (the price) is now more defined by how close you are to the MRT station. "Two MRT stations, three stations, although you may think that it's far but in actual travelling time, it's not so much difference." Besides MRT stations, the government has done a good job providing amenities. "Today, living in a place like Sengkang is not so unbearable. There's an MRT station, a mall, library, everything." In some locations, there are also office buildings "so you don't have to come to town to work". In short, shopping malls and other amenities that were in the past offered only in urban locations are now duplicated in suburban areas. "This convenience has narrowed the price difference between urban and suburban areas, and also between the different suburban centres," Mr Cheng says. SLP International managing director Peter Ow estimates that average launch prices for new suburban condos near MRT stations, excluding small units, are around $1,000 per square foot (psf). Some market watchers have also commented that there was hardly a price gap between Sky Habitat in Bishan, which sold at a median price of $1,583 psf in April, and d'Leedon in the Farrer Road location, with a median price of $1,603 psf in April based on developer sales data lodged with the Urban Redevelopment Authority. Both are 99-year leasehold condos. Mr Cheng, however, does not believe that the price gap will continue to narrow between suburban and prime locations such as Orchard because of the "perceived prestige . . . snob value". "High-end locations still have a certain brand value." One solution for the government to tackle the rise in property prices in the suburbs would be to release more land that is not next to MRT stations. Land and property values for such sites are lower than those next to MRT stations. While Mr Cheng acknowledges the motivation for government to tender out plots closer to MRT stations, to intensify land use near major transport nodes, he highlights some of the benefits of selling more land further away from MRT stations. "You bring down the price . . . psychologically (when) you don't see at every tender, prices continuing to move up, with 15 developers going in to fight for a choice site. This will reduce the anxiety of people . . . and help to moderate the urge to quickly want to buy (a property) before price goes up." Secondly, by selling land that is further from an MRT station, "you allow people a choice to have cheaper housing". In exchange for this, they may be willing to give up the convenience of living closer to the MRT station. "They can walk (longer), take a transfer bus to the MRT station." From the state's perspective too, it makes economic sense to release not-so-conveniently located sites in a hot market rather than in a dull market. "At the end of the day, you have to release that site anyway, but if you release it in a dull market, the price will be even more depressed . . . or nobody may want it." In the current market, there will still be some takers for such plots. "So you also safeguard a certain value of the land. It's a good time to release more of not-so-choice sites in a hot market," Mr Cheng says. Source: Business Times
» Housing oversupply on the horizon, says Wing Tai boss	Business Times: Thu, Jun 07
[SINGAPORE] Just as pent-up demand saw housing prices shoot up over the past few years, a reverse situation could be at play now, says Wing Tai chairman Cheng Wai Keung. People are bringing forward their decision to buy property as they fear prices may rise. As a result, demand in subsequent years may be lower than what is projected based on current demand. This could worsen an oversupply situation. "On top of that if the economy is not so good at that time, it will compound the problem," says Mr Cheng in an interview. "The current housing cycle has lasted longer than I expected," he adds. "The effects of five rounds of property cooling measures have been short-lived. And despite the fact that the government has increased supply for so many years, the property market has not subsided. This means the pent-up demand is more than I expected." He attributes this to a cocktail of past undersupply, Singapore's population growth and liquidity. "In 2003, 2004, 2005, when the economy was not so good, only people who really needed property would go out and buy. The people who were concerned about whether their jobs are secure tended to delay their purchase and that was why after the global financial crisis, all of a sudden, demand shot up in 2009, 2010 and 2011. "Now, it's the reverse. Because of liquidity, people feel more secure, and even though the government continues to say that the economy is not doing well, apparently Singaporeans are still confident in general. Now some people may be bringing forward their buying (decision), thinking: 'I'd better buy now because prices are going up'. "But my argument is that there is a danger of people bringing forward their demand, so subsequent years' demand may be lower than what they call average demand every year (based on current demand statistics). "This will create an even bigger supply and demand inequilibrium; it will create an oversupply more than we think." Analysts have also attributed strong property demand since 2009 to investors' distrust of financial instruments following Lehman's collapse. Strong liquidity and low interest rates and the onset of inflation have made property investment all the more alluring. In addition, developers have also taken to minting small apartments to keep lumpsum investment size affordable, to draw a wider buying catchment. Mr Cheng also acknowledges that global liquidity is a problem. "This is speculative flow of money, which is no good in the long run but we as a country have no way of preventing that. We are just a follower of the global liquidity. Nowadays, all countries are all for themselves. They don't care for other people. So whether this printing of money will affect other countries, nobody cares. They want to save themselves first. We as a small country, can't prevent that." Mr Cheng says that he understood the government's measures to cool the property market but has a suggestion. "Government policies, especially tactical policies, must have a sunset clause because they are enacted to deal with certain dislocation of market forces. "It's a temporary phenomenon, and if you don't remove the policy as fast as possible when the problem no longer exists, you're creating a distortion yourself, the other way." He also says that because Singapore's economy is now more complex than when he arrived in Singapore nearly four decades ago, any policy introduced today may have unintended consequences. He cites the example of the introduction last December of the 10 per cent additional buyer's stamp duty on foreigners buying any residential property here. "So where do the foreigners go to now? They go to strata industrial, office, shops and shophouses. So when you fill up the hole on one side, a new hole pops up on the other side!" Source: Business Times
Shoebox glut will distort planning, hit infrastructure	Business Times: Thu, Jun 07
CHENG Wai Keung thinks building too many shoebox apartments will distort planning and put a strain on surrounding roads and other infrastructure. He also urges buyers to beware this housing format, since it is still not widely tested. "If you build too many shoebox units, you create a distortion in the market, because now all of a sudden you have a lot more people living in a place than the (planning) forecast . . ." the chairman of Wing Tai Holdings said in a recent interview with BT. He suggests that the government, when it sells residential sites, could stipulate a minimum unit size for the development. Alternatively, the maximum number of units could be stated. Leaving too much flexibility to the market may not be a desirable outcome for the planning process as it could throw the whole forecast off track. "So from that perspective, the government should (state) a minimum unit size so as not to distort the planning too much in terms of population in that precinct." Assuming developers who mint shoebox units end up building more units in a project than envisaged by the planning authority, this would translate to a higher car population in the development and hence potentially strain roads in the area, argues Mr Cheng. Mr Cheng sounded a note of caution to those thinking of buying shoebox apartments. Even after changes to the Housing Developers (Control & Licensing) Act - requiring showflats to depict the actual units accurately - take effect later this year, stepping into a showflat for a shoebox unit will be "nowhere as the same feeling when you go into the actual building". Secondly, while rental returns for completed shoebox apartments seem to make sense now amid the current buoyant property market, things may change in a downmarket. "When the market is bad . . . these are the ones that will be more affected than normal-sized apartments," according to Mr Cheng, though he qualifies that his view is not tested since the stock of completed shoebox apartments is still low. Urban Redevelopment Authority data released in April shows that the stock of completed small apartments (below 50 sq metres) on the island is set to increase from about 2,400 at end-2011 to 8,200 units by end-2015. These estimates are based on the pipeline supply of such units that have been sold by developers as at end-2011; so the actual shoebox stock in future years could be larger since URA's estimates do not include shoebox units that had yet to be sold as at end-2011. "Of course, people may say: "You're sour grapes because you didn't see the (shoebox) trend.' I'm not passing judgment. I'm just saying the buyer better beware. This is a new product; it's not been widely tested." Last month, CapitaLand Group CEO Liew Mun Leong said Singapore should curb the trend of shoebox apartments because they are "almost inhuman". Source: Business Times
A price gap that escapes Wing Tai boss	Business Times: Thu, Jun 07
WING Tai's head honcho has questioned why a wide gap exists in high-end home prices between Singapore and other cities such as Hong Kong and London, despite the Republic becoming a lot more vibrant and cosmopolitan in recent years. Historically, London and Hong Kong have always had a premium in upmarket home prices over Singapore because they were perceived as being a lot more cosmopolitan. "But this gap has narrowed a lot in the past few years due to government policies that have made the city a lot more vibrant. So why are high-end property prices here (priced at) only half of London?" Wing Tai chairman Cheng Wai Keung said in an interview with BT. Based on Knight Frank's Prime International Residential Index, the average prime apartment price in Q4 2011 was US$2,400 per square foot here, compared with US$2,600 psf for Hong Kong. Prime London apartments and houses averaged US$4,500 psf. Mr Cheng, a Singaporean hailing from Hong Kong and whose family is involved in the Hong Kong, China, Singapore and Malaysia property markets, estimates that high-end homes in Singapore are priced at about S$3,000 psf and above, while those in Hong Kong are at the equivalent of around S$6,000 psf and above. "The (Singapore) government has spent so much money and we have been so successful in the last few years; not only have we caught up but in fact we're better than some of the first-tier cities in terms of entertainment, culture, arts . . . Why are we - at the expense of creating a social problem - having casinos? Because it is part and parcel of the total package that has created a buzz that is necessary for a first-tier city. We are also attracting good business into Singapore . . . (and) very high-paying jobs that create economic value. "So why has the price gap instead of narrowing become wider?" Some market watchers wonder if there has been a shift in the Singapore government's thinking such that it may prefer to attract high net worth individuals (HNWIs) who come here and generate economic activity rather than having too many HNWIs who buy a holiday home in Singapore that they live in for just a few weeks in a year. International Property Advisor CEO Ku Swee Yong notes that Singapore was a much more open market during the previous high-end residential property boom in 2006-2007. "Now the 10 per cent ABSD (additional buyer's stamp duty) on foreign buyers has been deterring some from entering the local market," he says. "In this segment, we don't have to worry that it is Singaporeans' hard-earned money that will be caught up in a property bubble. If a foreigner gets his fingers burnt investing in a luxury condo, he can probably stomach it; he would have been advised by his wealth managers." Mr Cheng suggests that the big difference in high-end home prices between Singapore and other cities such as Hong Kong and London, despite Singapore being more vibrant today, implies that luxury homes here are undervalued. "Given the attractiveness of living in Singapore, we are underpriced." Wing Tai is developing Le Nouvel Ardmore and Nouvel 18 (both in the posh Ardmore Park area), Ascentia Sky near Redhill MRT Station and Foresque Residences at Petir Road in the Upper Bukit Timah area. Its past developments include mass-market projects such as Kovan Melody and Casa Merah. Source: Business Times