An HDB terrace in Jalan Bahagia was sold for a record high price of $1.19m.

The resale market for Housing and Development Board (HDB) flats beat expectations with the 18.9% QoQ jump in HDB resale applications to 7,063 units in Q3, OrangeTee & Tie noted. In fact, the total number of resale transactions from Q1 to Q3 hit 17,462 which is a new five-year high.

By end 2018, the total number of HDB resale transactions is expected to surpass 22,000 which will beat the record in 2013, the firm added.

With the rise of resale applications, transactions involving million-dollar HDB units have pumped up as well, with over 52 flats divested from Q1 to Q3. In September, a 237 sqm HDB terrace located in Jalan Bahagia was priced at $1.185m which marks the highest transaction to date.

Also read: VERS and HIP II could shake stagnant outlook of HDB market

Before the said transaction, a 5-room Bishan DBSS unit sold for $1.18b held the record as the priciest HDB unit transacted. Meanwhile, a 5-room DBSS unit at Toa Payoh sold in August for $1.16m placed as the third priciest HDB transaction.

Moreover, HDB resale flats sold from $700,000 and above reached a seven-year high of 1,438 units from Q1 to Q3 despite the general weakness in resale price hike, OrangeTee & Tie also noted.

Despite this, worries arise regarding the value of HDB flats as HDB resale prices have dipped 0.8% in the first three quarters of 2018. Using the HDB resale price index, prices of HDB resale flats slipped marginally by 0.1 QoQ in Q3 2018.

More resale deals in non-matured estates

The research found that more resale deals were recorded in Q3 around non-matured towns. The most resale transactions were in Sengkang with 528 units resold, followed by Woodlands (516 units), Jurong West (505 units), and Punggol (469 units).

“The resale market is more active in the non-matured towns possibly due to more flats reaching their Minimum Occupation Period (MOP) in recent years,” the firm explained.

Also read: Homebuyers turn to HDB rentals as home prices shoot up following cooling measures

In matured estates, almost all towns saw an increased in HDB resale transactions when compared to five years ago. The largest increase of 119.7% was recorded in the Central Area whilst deals in Ang Mo Kio, Bukit Merah, Clementi, Kallang/Whampoa, Marine Parade, Pasir Ris, Queenstown, Serangoon,Tampines and Toa Payoh had between 20 and 35% increases.

“Sales volume rose possibly due to a moderation in prices for some flat types,” OrangeTee & Tie explained. “5-room flats had more YoY price gains than losses whilst 3-room flats experienced more losses than gains in Q1-Q3 2018.”

Six super luxury homes were sold for $10m and above after the cooling measures.

Despite the cooling measures imposed back in July, foreigners and utra-wealthy individuals still flocked to Singapore for their luxury home purchases properties still came cheaper compared to other hot areas such as Hong Kong, OrangeTee & Tie noted.

Data from the firm showed that homes sold for less $3m and above (but less than $5m) in Q3 hit 474, which is higher compared to the four-year average. In addition, six super luxury homes were sold for $10m and above after the property curbs.

Also read: Foreign property buyers on the rise despite hefty ABSD rates

“The robust demand for pricier luxury homes suggests that Singapore remains a top investment destination amongst high net worth individuals (HNWI) and affluent foreigners,” OrangeTee & Tie head of research and consultancy Christine Sun said.

In a previous study by UBS, average forecasted returns in Singapore's property market for 2018 to 2022 are predicted to beat the Eurozone, the US, and even the global average.

"In developed markets such as Japan, Australia and Singapore, the already strong property market fundamentals will be further enhanced by the increased regionalisation of investment and capital flows," the report's authors said.

Meanwhile, OrangeTee & Tie also acknowledged that transactions of luxury condos in the core central region (CCR) crashed 40.5% QoQ to 569 units in Q3. Demand for condos worth $3m and above however remained healthy at 187 units which is higher compared to the five-year average sales of 173 units, the firm explained.

For new luxury condos, both new and resale luxury condos reached a new high of average prices which hit $2,819 psf and $2,063 psf, respectively, the firm found. The highest transaction for the quarter was a 438 sqm resale unit at the Urban Resort Condominium for $13.9m or $2,948 psf.

Aside from the unit in Urban Resort Condominium, other notable transactions are a 273 sqm unit at Bishop Residences sold for $11.5m, a 290 sqm Twentyone Anguillia Park and a 284 sqm unit at 336 River Valley both sold for $11m.

Also read: Luxury home prices jumped 11.5% in H1

In general, Singaporeans still made up the majority (78.2%) of condo buyers in Q3 2018 from 75.4% of buyers in Q3 2017, the firm noted. Moreover, the imposed additional buyer’s stamp duty (ABSD) imposed on foreigners and permanent residents (PRs) did not do so much as foreign purchases only dipped 0.5 ppt QoQ to 6.1% whilst PR buyers fell 1.4 ppt to 15% in Q3.

The study found that Mainland Chinese remained as the top foreign buyer in Q3 2018, followed by Malaysians and Indonesians. The firm noted that a majority of Malaysians (82.4%), Indians (71.2%), and Mainland Chinese (63.1%) buyers prefer to buy homes below $1.5m.

According to Sun, the ongoing US-China trade war may have also spurred some Mainland Chinese to invest in Singapore to hedge against the devaluation of their currency. This may also be the case for Indonesians that may have also transferred their funds to Singapore as a hedge against further depreciation of the rupiah, Sun added.

Buyers may rush to snap up such units, which they can sell at a higher price in the future.

Despite a limited land supply situation, Singapore has made a firm move against shoebox homes in a bid to reduce strain on local infrastructure and provide a more liveable environment for its residents who can enjoy greater freedom from the tight squeeze.

The number of shoebox units or apartments sized 500 sq ft or less are expected to decrease after the Urban Redevelopment Authority (URA) amended the formula that is used to calculate the maximum allowable number of dwelling units (DUs) for all new flats and condominium developments outside Central Area.

Under the revised rules, the maximum number of DUs which was previously derived by dividing the Gross Floor Area (GFA) by 70 sqm has been amended to 85 sqm effective January 17, 2019.

“Whilst URA will always look for innovative ways to maximise the limited land that is suitable for residential use in Singapore, its mandate is to ensure that dwelling units meet a certain standard so that residents can comfortably carry out their daily activities,” Hector Tan, head of marketing and communications at Huttons Real Estate Group told Singapore Business Review.

Paul Ho, chief mortgage consultant at icompareloan similarly lauded the push towards more liveable homes. “No matter how creative you use the space, you cannot have a bedroom that is convertible to a toilet that is convertible to a kitchen that is again convertible to a study, etc. Creative use of space is the devil in the disguise of maximising use of space.”

Also read: Singapore housing market fairly valued: UBS

In areas where new developments could level strain on local infrastructure like Marine Parade, Joo Chiat-Mountbatten, Telok Kurau-Jalan Eunos, Balestier, Stevens-Chancery, Pasir Panjang, Kovan-How Sun, Shelford and Loyang, the URA has set more stringent requirements by prescribing that the maximum number of dwelling units be calculated by dividing the GFA by 100 sqm.

Over time, the policy move encourages a better distribution of the growing population across different areas in the city state, explained Darius Cheung, CEO of property marketplace 99.co. “By maintaining the low-density character of these precincts, the government is also inadvertently creating scarcity value for properties in the area, potentially making them easier to sell or rent out as individual units,” he added. 

If the shoe fits
Demand for shoebox units in Singapore's secondary markets has been steadily growing in the past twelve years, data from real estate agency Orange Tee & Tie Research Consultancy show. Shoebox condo resales as a proportion of total condo resales have expanded from 1.9% in the first three quarters of 2013 to 6.6% in Q1 to Q3 2018 largely in response to residents’ evolving property requirements.

“There is also a growing need for such homes as our demographic profile changes, such as having more singles, married couples with no children, unmarried elderly and rising affluence among graduates/young people who desire to live independently and with the comforts of private housing,” Christine Sun, head of research and consultancy at Orange Tee & Tie said.

In fact, the revised guidelines may potentially spur more shoebox buying as cautious buyers who have been lying in wait to see the full impact of July’s cooling measures may decide to purchase a small unit for themselves which they can sell for a higher price in the future, added Sun. “[S]hoebox units will continue to stay relevant to the market because some may still consider this class of property a good short to mid-tier investment asset,” she added.

Such apartments also play a role in keeping the city's banking sector stable, argued icompareloan’s Ho, as they offer more secure lending prospects for banks who grapple with less risk of buyer default situations. 

“With more and more smaller units being built and sold at ever higher prices, this serves to make the surrounding bigger units prices to hold up better. And with ever stronger land price (on a per square feet basis), banks are essentially printing money as any default of payments is immediately backed by very strong prices as banks will not lose money,” he explained.

Despite its industry merits, tighter regulation of shoebox units is a welcome development for homebuyers especially when liveability is considered.

Against increasing speculative activity in the real estate sector, Ho believes that Singapore could take regulatory action one step further and has been actively pushing for a clear-cut policy limit on housing size. “I want to see a minimum size that a condo unit that must be built, not a blended average minimum size. Too many smaller units will lead to huge over-supply and a degradation of Singapore's liveability,” he argued which will come at the benefit of homeowners and future generations.

With developers, however, it is a different story.

Although the move comes as a boost to Singapore's residents who have the luxury of choosing not to cram in tight spaces unlike their Hong Kong counterparts, the cap deals a heavy blow to embattled property developers whose margins are poised to come under even more intense pressure. Still reeling from higher ABSD rates announced in July, the  limitation on maximum units is poised to make en bloc deals more challenging in the near future, according to 99.co’s Cheung.

Also read: En bloc sales collapsed 90.71% to $353m in Q3

“They will drastically impact developers' future revenue for any given residential piece of land. This is especially the case whereby, post-cooling measures, developers will be wary about raising home prices to make up for the lost profit,” he said.

Overall net gearing ratio of home builders, which measures total debt over total shareholder’s equity, rose by 6 ppt to an average of 58.7% in Q2. Developers have also been bearing the brunt of higher Additional Buyers Stamp Duty (ABSD) as projects have witnessed weak take-up figures as anticipated selling prices weakened in response to souring sentiment. 

Photo of Journey East Loft Collection from 99.co 

For a one-bedroom unit worth $838,000, buyers will get to have an integrated sink and dishwasher that could help slash washing time by 50%, amongst its many smart home features.

With Jadescape's smart home technologies and multi-generational features, more than 9,000 graced its developer’s gallery. Amongst its many smart technologies adoption are its facial recognition scheme to secure the lobby escalator and an integrated sink and dishwasher that could reduce dishwashing time by 50%.

Jadescape in Shunfu Road was launched by Qingjian Realty in September. On its launch weekend, buyers have already snapped 60% or 300 out of its 400 units at an average price of $1,600 psf. 

Based on its psf rate, one-bedroom and two-bedroom units were priced starting at $838,000 and $988,000 respectively. Meanwhile, $1.38m will secure buyers with a three-bedroom unit.

According to a previous report by AT Kearney, the smart home market in Asia is poised to hit US$115b or 30% of the global share by 2030. The report noted that Singapore is expected to see a high penetration of smart homes alongside Taiwan and South Korea given the large proportion of high-income households and the data connectivity in such countries.

Also read: Cautious buyers shunned costly condos in Q2

In Singapore’s case, analysts believe that the emergence of smart homes is fueled by its government’s smart nation initiative which is geared towards using technologies for the improvement of mobility, health, living, and service standards.

“Such smart homes will appeal to all buyers, from singles to families, from the young to the aged, as smart home technologies improve efficiencies and standards of living, and will enhance security all around such as the ability to pay maintenance fees, book classes, unlock home locks, check on car washing bays remotely and more,” Colliers International head of research for Singapore Tricia Song told Singapore Business Review.

Its emphasis on safety and ergonomics makes smart homes attractive to parents, multi-generational families with kids, as well as the elderly, Huttons Group head of marketing and communications Hector Tan said.

Also read: Are buyers eyeing new homes over resale properties?

In Jadescape’s case, some smart security features include a Pan-Tilt-Zoom (PTZ) IP Camera with audio and video function which could help parents monitor their kids and pets in real-time, a smart device to double check if the doors are locked, and a smoke detector which provides real-time instant alert to residents in times of emergency.

In the end however, analysts think that buyers’ preference on buying properties still largely considers location, price, layout, and capital growth.

“Nonetheless, smart home features do play a part in making a unit attractive and serve as the icing on the cake,” Tan explained.

Aside from Jadescape, other developments that are packed with smart home technologies include Kent Ridge Hill Residences where units are armed with digital lockset and smart home system with remote air-conditioning control, WiFi doorbell and smart gateway with camera. Likewise, the newly launched Whistler Grand are installed with camera surveillance, voice assistant controls, digital lockset as some of its smart home technologies.

Also read: Newly-launched projects had ‘encouraging' sales despite property curbs

Looking ahead, the demand for smart homes is likely to grow with people having an increasing desire for automation and technological advancements, OrangeTee & Tie head of research and consultancy Christine Sun said.

“As old developments get removed/enbloc-ed, it can be safe to say that smart home tech will make its way into new developments,” Tan said. “Suffice to say, the adoption of smart home tech can contribute to higher property prices as developers have to account for the integration and maintenance of technology.”

Photo from Jadescape.

Heated demand for storage facilities is hit by the city's limited land supply.

With over 2.5 billion gigabytes of data generated every day, Singapore is making another case for punching above its weight as it zeroes in to capture the opportunity from data centres brought about by the world's growing connectivity. 

Facebook's decision to invest $1.4b for its first Asian data centre in the city state is the latest high-profile example adding to the growing names of tech titans like Google, Alibaba Cloud and Yahoo who have found a supportive environment in Singapore with which to build large-scale storage facilities for their servers.

Hailed as the most robust Asian market in terms of business operations for data centres by Cushman & Wakefield where it ranks ahead of South Korea, Japan and Australia, Singapore's data centre capacity towers over its regional peers at around 370 megawatts (MW) of IT power supply amongst co-location operators.

“Singapore’s location makes it an ideal site for edge networking in the SEA region, allowing lower latency and better user experiences for consumers,” Tom Duncan, executive director, data centres Asia Pacific at CBRE told Singapore Business Review.

To respond to the growing amount of data being generated and exchanged on a daily basis, the Lion City is expected to expand its data centre capacity by another 100 MW over the medium term as the government doubles down to implement its Smart Nation programme to the benefit of local data centre providers ilke Singtel, Keppel Data Centres and ST Telemedia.

Driving the heated demand for data centres is the e-commerce boom as well as the shift towards flexible working arrangements propelled by the likes of WeWork, NakedHub and Regus who are increasingly outsourcing for their growing data requirements, observed Boon Leong Tan, executive director and head of industrial services at Knight Frank Singapore.

“Companies that are used to have their own data rooms, now they will just outsource it to data centres," saidTan.

An outsourced or co-located data centre, as opposed to a captive one built for internal purposes, is a facility where businesses can rent the space and hosting services for their servers whilst the external provider answers to the security, power and cooling needs, according to market research firm Frost & Sullivan.

Corporate clients have been steadily embracing outsourced data centres due to their flexibility and lower upfront costs as the proportion of outsourced data centres in Asia-Pacific surged from 12% in 2013 to 39% in 2018 in line with the same upward trend observed in Western Europe and USA, according to a report from PwC.

In fact, Singapore's outsourced data centre market generated an estimated $1.3b (US$934m) in 2017, according to Canada-based research company Structure Research, with the market poised to grow at a 12% compound annual growth rate (CAGR) of 12% to $2b (US$1.5b) by 2021.

Although banking clients like DBS who contracted Amazon Web Services in 2016 are amongst those driving outsourcing activity, cloud operators have steadily assumed the top spot in the largest occupiers of data centres.

"Whilst the healthcare, banking and financial services sectors tend to treat data centres as a cost function, cloud operators view data centres as revenue-generating. Hence, the expansion of the cloud operators tends to be more aggressive compared to traditional data centre users, as businesses ramp up efforts to transition to cloud by 2020,” added Cushman & Wakefield.

Data drawbacks
Singapore's land shortage problem, however, poses a problem for its data centre dreams which could be the opportunity that emerging tech upstarts may need to move up the global rankings.

“One of the main operational concerns of building a data centre in Singapore has to do with availability of land. The scarcity of large land plots in Singapore means that it will be harder to build large data centres, which provide economies of scale, as seen in the US,” added Duncan.

Although Cushman & Wakefield expects data centre supply in Singapore to grow by as much as 18% by end-2018 with a strong pipeline that will go live in the next two years, cloud operators and data centre players eagerly snapping up limited land supply is poised to push up occupancy rates to 70% by the end of the year. Total data centre space has already hit 2.6 million square feet in 2017, according to data from Structure Research.

Also read: Data centre space in Asia Pacific to grow 38.5% in 2018

“[D]ata centre supply will have to catch up with demand as operators and cloud providers look at alternative options such as increased conversion of existing industrial buildings to data centres and redeveloping data centres which have been underutilised,” added Duncan.

High costs of building and maintaining data centres is also another factor to consider given the large capital investment needed to set up storage servers. Cushman & Wakefield notes that the construction of a new data centre can go for US$100m for a multi-tenanted facility to as much as US$1.5b for a cloud campus that can house several buildings in addition to required preventive and maintenance costs.

“Data centres require intensive capital investment from Day 1, largely due to the significant amount of M&E (mechanical and electrical)) equipment deployed. The majority of the M&E associated with data centres have a life span of 10 – 15 years so replacement costs have to be accounted for,” noted Duncan.

Along with the limited supply comes other requirements dictating locations where data centres can be legally built, added Knight Frank’s Tan. Under Singapore land laws, data centres may only be constructed under B2 zoning rules whereby business uses need to impose nuisance buffer more than 50 meters and within health and safety buffers - in addition, to the requirement of being far away from residential estates.

Other considerations in building a data centre, adds Tan, include the necessity for a reliable power supply and good connectivity. In the case of power supply failure, the industrial area must have a back-up mechanism that will enable it to resume operations almost immediately.

Despite the operational concerns of setting up and maintaining such spaces, there is no denying the booming role of data centre especially with the competitive environment fostered by startups, third-party providers, local players, cloud providers like Amazon, Microsoft and Google who are all racing to handle the wealth of data.

“Data centres are the backbone of the IT sector and remain crucial to the sector’s ongoing development. The sector is currently evolving at an unprecedented rate making any future predictions difficult, however, it is safe to say, that data centres will play a significant on-going role in an ever-changing industry,” added Duncan. 

Photo from URA

Seven operators control 63% of the city’s flexible market, with IWG holding 23.5% market share and WeWork and JustGroup nabbing roughly 12% each.

With only so much space to go around in land-starved Singapore, consolidation has been the name of the game in the city state’s rapidly maturing flexible workspace market as smaller players eager to join the co-working fray run the risk of getting eaten up by operators with global footholds.

The supply of flexible workspaces remain on the rise in Singapore as such set-ups nearly tripled from 1 million sq ft in 2015 to occupy roughly 2.7 million sq ft as of end-2017, data from Colliers show. Despite roughly 113 co-working spaces in operation in the CBD and accounting for 4.5% of the CBD Grade A office market, more supply is expected to come online in the near-term in response to heated demand from startups and multinationals alike.

“We would expect to see the supply continuing to grow as Singapore is still behind the expected levels of Flexible space in the market,” Duncan White, executive director, head of office services at Colliers International told Singapore Business Review. “[T]he flexible workspace footprint in Singapore could rise by 30-35% (or by about 670,000 sq ft) year-on-year for the whole of 2018 and a further 20% in 2019.”

Also read: Check out the largest co-working spaces in Singapore

Larger players with over 50 desks per location and a multi-location portfolio are best placed to ride this wave of growth, Colliers said in a report. This bodes well for seven operators who control around 63.1% of the local flexible workspace market as of end-June with a portfolio equivalent to the land area of 35 soccer fields.

IWG, which manages the Spaces and Regus brands, emerged as the undisputed leader in Singapore’s flexible workspace scene with 23.5% market share and an estimated portfolio size of 650,000 sq ft. New York-based WeWork which earlier acquired Spacemob in August 2017 to boost its regional presence trails behind the London-listed giant along with JustGroup who each hold around 12% and a portfolio over 330,000 sq ft.

On its part, The Great Room, which holds the distinction as the seventh largest Singapore operator with an estimated portfolio size of 76,000 sq ft, banks on its hospitality-level interior and ‘enterprise-level infrastructure’ to continue attracting member companies - regardless of size.

“Unlike many players in the flexible space-as-service category, The Great Room's ambition is to work with the world's most respected companies - whether they are Fortune 500 enterprises or 'Grown-ups' (start-ups that are taking flight) - and serve them better,” said Jaelle Ang, CEO of The Great Room. “Our ambition is to win gateway cities like Singapore, Bangkok, Hong Kong and Shanghai where many of our members, be it in financial services or technology, want to be at.”

Given their large scale on offer, White suggests that MNCs and Enterprise Model occupiers may increasingly turn to global operators, giving them all the more reason to snap up the remaining 110 small to mid-sized operators in an effort to sustain their growth. 

“By consolidating, co-working operators are able to reap economies of scale,” said Constance Leung, director of consulting at Edmund Tie & Company (ET& Co). “One of the unique selling points of co-working spaces is the network that these operators offer. Members prefer a larger network for convenience and networking opportunities.”

Also read: Singapore landlords tap into flexible workspace boom

Against the city’s limited land supply, White estimates that the ideal percentage of co-working space on offer in the market could be around 6-7%. However, the saturation is noticeably more evident in some areas than most.

Colliers notes that the most saturated segment are single-location operators that are managing spaces below 2,000 sq ft and catering largely to small businesses and freelancers. Such small size tames in comparison against the steadily expanding average location size leased by flexible workspace operators which have been growing since 2015.

In three years, the average size of flexible workspace leases from 11,800 sq ft in 2015 more than doubled to 26,600 sq ft in 2018 YTD in response to the booming needs of multinational corporations which typically require hundreds of desks.

New players into the scene, like CoCRE8 which just entered the Orchard Road market in H1 2018, acknowledge the uphill battle against larger operators as they recognise that their limited product selections could be challenging for members seeking to enjoy the flexibility and convenience of travelling between different outlets - an offering that larger players can easily provide.

“With m[an]y big players and established brands, we definitely need to put in more effort in creating awareness within the industry,” Wei Ling Tan, business development manager of CoCRE8 which has a 6,200 sq ft lease at International Building.

However, smaller players are not letting up without a fight as they bank on their differentiated offerings to lure footfall. “With a smaller scale of set up and clients, we are able to customise our services to fit our clients,” said Tan, adding that since its business portfolio owns the hotel next door, Yotel, members and their visitors can get to enjoy preferential rates in addition to support from building management as landlord and developer of the building.

Small- and mid-sized operators could also merge to create scale that could level the playing field. They could also spend resources on differentiating themselves by offering unique concepts and focus on niche clientele like MOX which focuses on the creative community, added ET& Co’s Leung.

“We have always believed that there is a viable position in the market for the smaller or local operators, however they need to focus on the smaller start-up environments, and consider looking at niche offerings, whether in terms of industry or something softer such as working environment, personality and specific offerings that differ to the larger players,” echoed White.

Photo from The Great Room

Mortgage payments may cost up to $9,086 per month.

With the skyrocketing prices of landed properties in Singapore, an average terrace house sold in H1 can only be afforded by buyers with a monthly income of around $34,646 or those who belong to the top 5% earners in Singapore or professionals such as specialist medical practitioners, CFOs, financial directors, and lawyers, a study by ValueChampion revealed.

“If we assume that you are making a downpayment of 25%, you will need $714,590 for the downpayment and will pay about S$9,086 for your monthly mortgage payment given an interest rate of approximately 2%,” ValueChampion junior research analyst Anastassia Evlanova explained.

Also read: Cooling measures to curb demand for landed homes

Based on their research, the firm found that the most expensive properties are Good Class Bungalows (GCBs) which typically cover over 1,400 sq m and are quite rare, with only around 2,700 of them built mainly in District 10 and 11. Their costs falls to more than $10,000 per square foot.

Detached properties came in next with average prices sold for $13.1m which translates to a rate of $9,002 psf on average. Meanwhile, semi-detached properties and terrace houses were sold for $4.12m and $2.86m on average in H1.

“Furthermore, landed properties come with different types of leaseholds which can also change how much a home costs,” Evlanova explained. “Freehold properties are the most expensive, followed by 999-year leaseholds and 99-year leaseholds.”

Also read: Landed home resales jumped 12.7% in Q2

In this case, Evlanova noted that smaller 99-year lease semi-detached landed homes with around 10-30 years left may tend to be cheaper. According to her, a few cost $300,000 to $400,000, making it cheaper than the average price of a 4-room HDB resale flat.

Hua Bee Restaraunt in Tiong Bahru transforms into a Japanese yakitori restaurant Bincho by night.

Running an F&B business in ultra-expensive Singapore is no easy task with skyrocketing costs prompting a growing number of players to share more than just ideas as they also embrace shared commercial spaces in a bid to outwit the city’s high-cost retail environment.

Also read: 1 in 4 Singaporeans dine out everday

Leasing costs for retail properties in the Lion City remain highly expensive despite overall retail rents falling 1.1% in Q2. Prime retail rents in highly-coveted Orchard Road go for $29.90 per square feet whilst those in suburban areas go for $28.80 psf as of Q2, according to real estate consultant Savills.

The shared space concept is therefore nothing new to land-starved Singapore who has borne witness to an explosive proliferation of co-living and co-working concepts in recent years but have since gained greater traction in the F&B landscape, observed Edmund Tie & Company.

Also read: Muted market environment fails to dampen formation of new F&B firms

Although hawker centers and food courts are early examples of how the shared space concept plays out in the local F&B scene, ET&Co notes that a number of complementary eateries have been taking it one step further and operating from the same outlet.

This includes Hua Bee Restaurant in Tiong Bahru which sells traditional noodles in the day but transforms into Japanese yakitori restaurant Bincho by night. One Man Coffee also operates in the same shophouse as Crust Gourmet Pizza Bar at Upper Thomson Road but have different operating hours on weekdays.

“Co-sharing will probably be sought after by complementary food trades, which are able to maximise the usage of the space through different working hours or are able to cross sell to each other, creating a win-win situation,” Christine Li, senior director for research at Cushman & Wakefield told Singapore Business Review.

This bodes well for complementary concepts like bars and food outlets such as those in Lucky Plaza where bars that have yet to open allow diners to eat at their space during the day.

Also read: F&B sales rose 2.9% to $677m in June

Beyond shared spaces to serve food, operators are also embracing communal spaces to prepare food through shared kitchens and cooking facilities, noted ET& Co. In 2016, the government provided assistance to eight Indian restaurants who were able to open a shared central kitchen. Ingredients were processed on separate days ensuring that secret recipes remained secret but the greatest impact of implementing the shared space concept was on productivity - man-hours were reduced from 90 hours to 24 hours.  

Despite the massive potential, greater adoption of sharing facilities brings with it inevitable issues of encroaching which could easily hurt operations on both ends. More than sharing spaces from which tenants could operate and collaborate, tenants would also have to shoulder the same liabilities.

“In a co-share arrangement, the kitchen will be shared, unless 2 different sets of chillers and freezers are employed. If there is a food poisoning outbreak, who does NEA [National Environment Agency] go after? It has to be 1 entity and partners operating 2 different foodfares at the same premise has to be mindful of this,” said Jemme Teo, manager of Fu Lin Bar & Kitchen which operates two different dining concepts for lunch and dinner. 

Work permit quota would also have to given to one entity so partners in a co-share set-up would have to share the quota too, added Teo. 

"If the combined sales receipt of both partners' sales exceed $1million, the entity has to be GST registered. The quarterly returns has to be filed together as 1 entity to IRAS. Likewise for annual corporate returns," she noted .  

Co-share tenants that opt to operate in stand-alone retail spaces like shophouses may also cause unintentioned disruption to the other’s business. "So if the other “co-sharer” suddenly shuts down, the master lessor would have to bear the full rent. This could be disruptive for businesses whose business models are based on lower rents due to co-sharing," added Cushman & Wakefield's Li. 

Despite the operational challenges, ET&Co notes that the co-sharing trend is here to stay as the concept offers more than an alternative to traditional real estate options but also provides fertile ground for players to come up with new ways of doing things. 

“Whilst the older generation has reservations in sharing spaces, the millennials seem to share everything, anything. Concepts and policies need to innovate to catch up with market trends,” Chua Wei Lin, executive director, regional head of business space at ET& Co said in a report.

Photos from Daniel Food Diary, Formula Voyage

Individual resellers could be thinking twice before toning down prices due to a healthy economy and job market.

After home cooling measures were rolled out in July, developer home sales were hit by panic buying and plummeted 63% to 616 units in August from the 1,724 units sold in July.

Analysts believe that the property curbs paired with the Hungry Ghost Festival became a double whammy for developer sales. Even the resale market crashed as sales volume dropped 35.3% MoM to 694 from 1,072.

By September, the worries may have subsided as developer sales bounced back by 51.1% to 932 units from 617 units in August.

“Some buyers may have switched their buying interest to new home sales as prices of resale homes are holding firm,” OrangeTee & Tie head of research and consultancy Christine Sun said. “Individual resellers may have been reluctant to drop prices as the economy and job market is still healthy.”

According to SRX Property, private condo resale prices merely inched down by 0.2% MoM. On a YoY basis, prices in the resale market jumped 10.8% compared to September 2017.

Data from URA, OrangeTee &Tie

Also read: Resale market bears brunt of property curbs

Analysts also believe that an indicator of the market’s recovery is the re-emergence of a number of new launches.

“The 1,169 private homes launched in September is the highest number of monthly launches in 2018, not counting the 2,239 launched in July, which was a distortion due to the hasty launches on 5 July to beat the cooling measures,” JLL national director of research & consultancy Ong Teck Hui said.

Ong thinks that developers are aware that they may be hit with a supply crunch in 2019, prompting them to not delay launches for projects.

“As the return in demand is underpinned by strong economic fundamentals, we foresee that buying activities will pick up further as more launches are on the cards, including The Woodleigh Residences, Parc Esta, Kent Ridge Hill Residences and Whistler Grand that are slated to be launched over the next two months,” Sun noted.

Also read: Will frustrated homebuyers turn to renting properties over costly residential purchases?

Given that there are a number of launches in the pipeline, ERA Realty key executive officer Eugene Lim thinks that buying demand will not inch up significantly as buyers evaluate their housing needs, options and finances. He added that buyers are increasingly becoming selective as they slowly come to terms with the effects of the cooling measures.

“Should developers decide to take competition head-on by launching projects at the same time between October and November, they may need to adjust the pricing strategy accordingly,” Cushman and Wakefield head of research Christine Li said, noting that developers may have to consider holding back their launches to next year, otherwise, when the effects of the cooling measures have settled in.

“Overall, price is still the most important factor, but beyond that, the emphasis is also on the location and product,” Lim commented.

The first major en bloc exercise after the cooling measures ended without a single bid.

Singapore’s property market roared to life in the first half of the year with en bloc sales emerging as the prominent growth driver of real estate activity. 

The en bloc fever which can be traced to late 2016 has seen previous record prices being shattered with the five biggest en bloc sales involving the Pacific Mansion for $980m, Tulip Garden for about $907m, Park West for about $841m, Pearl Bank Apartments for $728m, and Goodluck Garden for $610m.

Whilst the Pacific Mansions’ price tag fell below the historical record of $1.34b set by Farrer Court, the former so far holds the title as the largest collective sale for a freehold site.

The residential market boomed in the first half of 2018, as the en bloc market surpassed $9.9b in transaction value during that six-month period from $8.2b in 2017.

“In the private residential market, it was the collective and en bloc sales of existing residential developments to developers that captured headlines” with $10.5b deals being done in the first half of 2018,” said Alan Cheong, senior director at Savills Singapore.

Collective sales have dominated the Singapore market in 2018, with six of the top 10 deals by transactional size being collective sales, the largest of which was the Pacific Mansions deal, according to data from Real Capital Analytics. Additional preliminary data in the first half of 2018 also showed that the volume of collective sales has nearly hit $7b on track to meet and even breach the full-year record of $8b in 2017.

However in the midst of the strong uptrend, the government’s surprise cooling measures in July dealt a huge blow to bullish en bloc activity with analysts unanimously expecting fewer transactions in the latter half of the year.

Also read: Market barely had time to think after cooling measures announcement

The move was most evident after the tender for Horizon Towers, the first major en bloc exercise to close after the property curbs, ended without a single bid despite the extension of the tender period from August 7 to September 12.

Located in Leonie Hill, the property is composed of 211 units in two towers that has a reflected unit land rate is $1,786 psf ppr.

Following the dismal market response, the property’s sole marketing agent JLL is considering putting the property up for another public tender by early 2019 but is testing the waters first. “We are focusing to see whether new projects will be moving well in the next few weeks,” JLL told Singapore Business Review. 

The weak take-up flags concern for upcoming en bloc candidates as prospective buyers hold back purchases to wait out the full effects of the government’s cooling measures whilst some have turned to the leasing market in the meantime. 

Also read: Were the government's cooling measures premature?

This comes after government raised the Additional Buyers Stamp Duty (ABSD) rates by 5ppt for individuals and 10ppt for entities whilst tightening Loan-to-Value (LTV) limits by 5pt in its ninth round of property cooling initiatives since 2009. The trigger came after private home prices rose 9.1% over the past year and transaction volumes ballooned on the back of heated demand. 

However, housing demand may recover in the near-term as buyers direct their money elsewhere. 

“Underlying demand for homes will continue to be relatively healthy, emanating from homeowners of developments that have been sold collectively, although some of this demand may shift to the Housing Development Board market,” added Ong Choon Fah, CEO of Edmund Tie & Company. 

Corporate buyers made up 65% of sales.

Far East Organization’s integrated commercial development Woods Square is selling like hot cakes with 50% of the 124 office units released since its preview in end July now sold-to-date.

Corporate buyers made up 65% of sales of the development located in the Woodlands Regional Centre, dubbed as the Northern Gateway of Singapore. They are mainly entrepreneurs, business owners and professionals offering services from construction, manufacturing, trading, legal and the creative industries.

Unit prices ranged from $1,700 to $2,230 psf. Listed prices start from $970,000 for a 506 sq ft Small Office Loft Office (SOLO) unit.

Ms Shaw Lay See, Chief Operating Officer for Property Sales Business Group, Far East Organization said: “Most of the buyers are SMEs located within the Woodlands area. They see the benefit of having a separate office close to their manufacturing operations. With Woodlands designated as the next regional centre, these buyers are also confident of the government’s plan to transform Woodlands into a key commercial cluster in the North, similar to Tampines in the East and Jurong in the West, and one that is well-connected to different parts of Singapore and Malaysia.”

When completed in 2021, Far East Organization will be a major occupier at Woods Square taking up 70,000 sq ft of space spread over three and half floors within Tower 2. This will be the first time the Organization’s satellite operations are brought together within one development.


Designed for the modern workplace, Woods Square offers 365 office units in Tower 1 ranging in size from 549 sq ft to 5,339 sq ft. In addition, it will also have two SOLO blocks with 101 units. Both Tower 1 and the SOLO blocks are for sale. Tower 2 has been set aside for lease.

SOLO sizes range from 495 sq ft to 1,808 sq ft with every unit offering a high floor-to-floor height of 5m and platform furniture.  

A so-called ‘Sentosa Cove in the suburbs’ is one thing.

Although the area around Jurong East has been rapidly developed in recent years, with new shopping malls, offices, a hotel and a hospital, this is just the tip of the iceberg.

Eugene Lim, key executive officer of ERA believes that more developments are upcoming, including the KL-Singapore High Speed Rail Terminus, Jurong Region and Cross Island MRT lines. Moreover, being Singapore’s 2nd CBD, it will also be home to many high quality commercial projects.

Christine Li, research director at Cushman & Wakefield (C&W) meanwhile adds that the success of Jurong Lake District as the second CBD will also provide MNCs and local enterprises an alternative if they do not wish to be operating from the more expensive CBD locations.

Li notes that Singapore's CBD is fairly built up with the exception of Marina Bay, but the occupancy cost is also the highest there compared to other parts of the CBD and suburban decentralised locations.

“Given a town as big as Bishan will be developed in Tengah over the next decade or so, along with its next door development of the Jurong Innovation District, Jurong regional centre is envisioned to be not just a centre for economic and administrative activities, but also a centre for culture, sustainability, education, health and recreation, allowing its residents to access professional, educational and recreational facilities at their door step,” she said.

Going forward, Lim believes it is likely that the Jurong Lake District will transform into an even more desirable living destination than it is today in the next 10-15 years.

“Going forward, we can expect more employment opportunities as increasingly more jobs will be created in the years to come. As the area grows in importance, we can expect housing demand to increase as well; and this will enhance property values in Jurong as a whole,” he said.

But in order to realize a better future for Jurong Lake District, C&W’s Li that the success of smart city is essential. “We reckon that the government could expand things like smart mobility, smart taxis, intelligent transport system to make it more friendly to non-drivers. Office buildings could also go towards more campus-like environment with the aid of smart mobility devices,” she said.

Li adds that the success of smart city could further attract technology companies which have already achieved certain sizes and would like to move to cheaper locations for Research and Development (R&D) activities.

“We could possibly see things like Airbnb campus, or Facebook institution sprung up in the vicinity, given the close proximity of the district to the tertiary institutions,” she noted.

Likewise, Li sees a possibility of injecting another business hotel, with a convention centre to capture transit travellers when the HSR terminus is up. Jurong Lake District, she said, could try to incorporate a range of landed and low rise condominiums with smart elements and waterfront views as their selling points, giving rise to perhaps a more affordable “Sentosa Cove in the suburbs”.

“Over the longer term, the diversity of commercial activities and housing options could help to underpin demand for residential housing markets,’ she said.
 

It is one of the best selling new launched projects since 2015.

Solid sales at GEM Residences boosted May numbers. The biggest launch in the month came from Gem Residences, jointly developed by Gamuda , Evia Real Estate Pte and Maxdin Pte Ltd, was the best seller in May with 312 of 578 units. This accounts for30% of May volumes sold. Nearly 300 units were reportedly sold on first day of the launch.

Vijay Natarajan, Investment Analyst at RHB Research Institute Singapore notes that thus has resulted in one of the best take-up rates at 54% among recent new launches since 2015.

Natarajan noted that a lack of recent new launches in the nearby vicinity, contributed to the strong sales.

Jones Lang LaSalle (JLL) concurred while adding that the project’s healthy take-up rate can be attributed to its location near the Braddell MRT station in the mature Toa Payoh housing estate, where there has been a dearth of new launches in recent years.

Other factors, analyst said, include attractive pricing at a median price of SGD1,431psf, smaller unit sizes, and aggressive marketing strategies.

According to JLL, about 89 per cent of units sold in the development are one- and two-bedroom units, with majority priced within an affordable quantum of around $1 million and below per unit.

ERA Key Executive Officer Eugene Lim added that investors were the main driver of healty take-up with 1 and 2 bedroom units at GEM Residences being the most popular amongst buyers.
 

Here's why analysts are still cautious.

Asia Square Tower 1, located in downtown Central Business District has reportedly been sold to Qatar Investment Authority (QIA) for a record price of S$3.4 billion (US$2.45 billion). This translates into a price of approximately S$2,650 -$2,700 psf for the premium office development, which was completed 5 years ago in 2011.

According to DBS analyst Derek Tan, assuming the average rent is S$10-11psf, this implies a net yield of 3.1-3.2% for the tower which comprises of close to 1.2 million sqft of office space and 40,000 sqft of retail area.

Christine Li, Research Director, Cushman & Wakefield (C&W) commented that Asia Square Tower 1 is one of the most sought-after trophy assets by regional and international investors given its premium location in the heart of Marina Bay, Singapore's pre-eminent financial and business district.

According to Li, The successful closing of the deal, with QIA could have been attributed to BlackRock’s willingness to lower the price slightly, as previous negotiations with CapitaLand and ARA Asset management at the S$2,800 psf - S$3,000 psf range ended inconclusively.

"This price is comparable to the transaction of Marina Bay Financial Centre (MBFC) Tower 3 in 2014, where Keppel Land sold 1/3 stake to K-Reit at $2,680psf. However, the price pales in comparison to the recent transaction by Straits Trading building, which was sold to MYP controlled by Indonesian Tycoon Dr Tahir, at $3,520psf as it is a 999-leasehold and 100% fully occupied office building," she explained

According to C&W research, Asia Square Tower 1's current occupancy is around 91%, for both the office and retail portions.

Implications
Sector-wide, Tan notes that that the successful sell out of Asia Square Tower 1 have positive implications on Singapore as an investment destination for global investors.

"QIA is likely to be taking a longer-term view on its investment horizon given that it is acquiring the property with possibility of vacancies rising to c. 20% in the near term given expected tenant relocations. This is a further testament of the attractiveness of Singapore as an investment destination, supported by stable Singapore dollar (SGD) compared to regional currencies," he said.

Tan adds that for patient investors, taking a view that current office weakness in rents is a function of a cyclical oversupply in completions over 2016-2017, the medium-term outlook remains robust given limited completions after 2019, implying a office squeeze once again then.

Li concurred while adding that while office investment volume had come down significantly in the past year, the recent big-ticket transactions of Straits Trading Building and now Asia Square Tower 1 may give the market a shot in the arm and give other long-term investors confidence to venture forth and place bids for their desired properties.

"We believe that the Asia Square transaction could spur investors' interest, particularly those from sovereign wealth funds and insurance companies in the city-state, as Singapore is known for its ability to attract long-term investors looking for wealth preservation given the stable political landscape and strength of the Singapore currency," she said.

Li also noted that the scarcity of the tradable Grade A assets is the reason why investors will have to contend with a low yield and a price premium. Over the last 10 years, the proportion of tradable assets is merely 7%, of which more than 50% is related party transactions, she said.

Nevertheless, Li cautioned that the office leasing market faces challenges in the short term due to weak business conditions, with leasing demand impacted by headwinds in the banking, oil, and commodities sectors.

"The supply overhang of 3.55 million sf scheduled for completion in 2016 will likely lead to the Grade A CBD vacancy rate exceeding double digits by the end of the year. Accordingly, Grade A CBD rents are projected to moderate by a further 10–12% in 2016, but stabilise in subsequent years given the significantly reduced supply pipeline in 2017 and 2018," she explained.
 

Desperate times call for desperate measures.

Things aren't going well in the property market. Private home prices continue their downhill struggle across all segments of the market. Data from the Urban Redevelopment Authority show that prices of non-landed properties fell 1.2%, 1.6%, and 1.6% for the Core Central Region (CCR), the rest of the Central Region (RCR) and Outside Central Region (OCR) respectively in 3Q. These were all greater compared to the declines of 0.6%, 0.6%, and 1.1% respectively in the previous quarter.

At a time like this, property agents are the most affected. Based on the latest annual report from the Council for Estate Agencies (CEA), around 3,000 property agents have quit the industry over 12 months to March 31, 2015, due to the sluggish property market.

Nevertheless, there are still many property agents who are still responding positively and aggressively in the property market by coming up with interesting ideas to boost the property transactions.

Singapore Business Review spoke to some property agents at Singapore's largest real estate agency, ERA, to talk about interesting action plans they do these days to tackle the cooling property market.

We compiled a few interesting campaigns such as free car wash services and masks to lure clients who would rather prefer to stay at home due to the haze.

Here's more:
 

Nomination ends on November 30.

Singapore is expected to see declining home prices in the coming months, especially in the mass market, as a result of the continued after effects from government measures and the looming supply glut. One niche segment, however, has remained fairly strong through it all - the luxury market. CBRE reported that 15 good class bungalows (GCBs) were sold in 1H2015 at an average price of $1,442 psf, marginally higher than the $1,428 psf in 2014.

Singapore Business Review is in search of the Most Successful Real Estate Agents of 2015. We want to know more about the savvy and successful realtors who are making the biggest single-home sales this year from January 2015 to present. Individuals who made the biggest sales will be featured online and on print, where they can talk about the reasons behind their success.

To qualify, the nominee must have sold a luxury home, landed or non-landed, costing at least $5 million.

If you think you deserve to be part of this list or know someone who does, nominate now. This does not require financial obligation. Nomination ends on November 30, 2015.

To nominate, send us the nominee/s profile photo along with the following information:

Name of the Real Estate Agent:
Company Affiliation:
Age:
Selling price and brief description of the major deal/s closed:
Brief personal background and career highlights:
Secret to success:

There is no limit in the number of nominees for each real estate agency.

Contact persons:

Krisana Gallezo-Estaura
[email protected]

Lee Anne Babierra
[email protected]
 

Topping the list is a tenant at NTUC Prinsep House.

Rental recovery continued this quarter, due to moderate demand and limited supply.

Cushman & Wakefield report that the Average overall Grade A rent appreciated by 2.8% on a quarter-on-quarter basis to S$9.28 per square foot per month (psf/mo).

All the five major submarkets registered a rise in average rent.

Raffles Place had a rental growth of 1.3%.

Rents at Marina Bay edged up, but at a lower speed, partially because of the vacant space of Asia Square Tower 2.

The average rent at Shenton Way expanded quarter-on-quarter by around 6.0%.

A small rise of 1.6% compared to the preceding quarter at City Hall was observed.

The delivery of Asia Square Tower 2 to the market this quarter pushed up Marina Bay’s average vacancy rate to 11.2% from 3.6% recorded a quarter ago.

In the rest of the CBD, vacancies fell. Shenton Way saw a declineof almost one percentage point to 4.0% at the end of the third quarter.

Raffles Place’s vacancy dropped to a level below 5.0%. In the fringe area, Orchard Road posted a low vacancy of 0.1%, the lowest reading among the main submarkets.

City Hall’s vacancy reached a below-0.6% rate.

In terms of recent leases, Amazon took up around 30,000 sf in Capital Square at Raffles Place. ERC, a commercial school, rented more than 46,000 sf of space in NTUC Income Prinsep House at Bras Basah/Beach Road/Bugis.

The complete list of significant leasing transactions are as follows: