Private residential purchases by ‘Company’ moderates in 2011
The story of moderation was even more discouraging if purchases by en bloc collective sale buyers were taken out of the equation.
According to R’ST Research, the number of non-landed private residential units purchased by Company in the first three quarters of the year went down to 1,153 from last year’s the same period of 1,181 units.
Essentially, ‘Company’ buyers will be non-individuals, such as companies which purchased residential properties through en bloc collective sale (for redevelopment) or some local buyers who form companies to purchase residential properties, or simply companies with on-going business activity. which purchases
At face value, the number appears insignificant at as it was just marginally lower by 2% but quarterly figures hint a slowdown in buying momentum moving forward. On a quarterly basis, while 437 units were purchased by Company in 1Q 2011 and 496 units in 2Q 2011, only 220 units were purchased by Company in 3Q 2011.
Moreover, excluding en bloc sales, non-landed residential purchases by Company totaled 427 units in the first 3 quarters of 2011. This was significantly lower than that in 2010. In 2010, ‘Company’ buyers of non-landed residential properties (excluding en bloc buyers) totaled 1,017 units and 660 of such units were transacted in 1Q-3Q 2010.
In 2010, a total of 1,712 units were transacted but the prospect of outdoing the figure now appears dim as uncertainty in the global economy lingers and several property cooling measures discourage ‘Company’ buyers, says R’ST Research.
Here’s from the research firm’s director Ong Kah Seng:
| The fall in non-landed residential purchases by Company, essentially those which are not collective sale buyers (developers), is in sync with a moderation in private residential sentiments in 2011 following January’s implementation of the private residential cooling measures, and particularly an economic slowdown which is currently confronted by US and EU economic challenges. ‘Company’ investors in private residential properties are also re-thinking about private residential investments in light of the record high costs for many private residential properties and also the sellers’ stamp duty implemented in January, which is more severe than the previous rounds. As the overall economic conditions have created more uncertainty for businesses, the overall business outlook is indeed cautious. While property investments can potentially diversify business portfolio and risks, companies need to look after their cashflow and plan ahead for liquidity and hence have to be prudent in the type of investments. The most crucial aspects discouraging private residential purchases by Company is that the property cooling measures in January included lowering of the loan to property value ratio to only 50% for non individual homebuyers, down from 70% previously. 50% of property price’s borrowing rate can seem to be less attractive for Company purchasers which need to have an outlay of at least 50% of a property price. In view of a run up in property prices in the past 2 years, it meant that the capital outlay for property investments by ‘company’ purchasers is fairly significant and can weigh down its books. Moreover, there are many other alternatives to residential properties such as strata industrial units and with the market more transparent, ‘Company’ buyers, nornally being more seasoned investors, are open to the opportunities amid the risks involved. |
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