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online at http://www.businesstimes.com.sg

THE BUSINESS TIMES

CO REGN NO 198402868E MICA (P) 197/08/2008

Thursday, July 23, 2009

Housing market shows classic recovery signs

Subsales and foreigner purchases up in Q2; HDB upgraders share falls
By KALPANA RASHIWALA
[SINGAPORE] Three classic signs of a recovery have emerged in the Singapore housing market. Subsales and foreign buying have accelerated while the share of HDB upgraders in the private home buying pie has declined. The number of subsale deals for private homes has more than doubled from 414 in Q1 this year to 1,041 in Q2 and the median subsale price has also risen 18.1 per cent over the same period to $959 psf, based on Jones Lang LaSalles analysis of caveats lodged for private homes captured by URAs Realis system as at July 17. HDB upgraders share of total caveats, which had been increasing for six consecutive quarters since Q4 2007, slipped in Q2 this year as purchases by those with private addresses rose at a faster clip. This could be because Q2 saw more mid and mid-upper projects launched, compared with predominantly mass-market launches catering to upgraders in Q1, says Knight Frank chairman Tan Tiong Cheng. The number of caveats for private homes lodged by foreigners, including PRs, nearly tripled from 496 in Q1 to 1,418 in Q2. The increase outpaced a 103.9 per cent rise in Singaporean buying. As a result, foreigners share of private home buying rose from 15.5 per cent in Q1 to 20.5 per cent in Q2. The most popular districts among these buyers were Districts 9, 10 and 15 while the more sought-after projects included Rivergate and Martin Place Residences (district 9), The Arte (district 11), The Lakeshore in Jurong and Mi Casa in Choa Chu Kang. Singapore properties are more affordable today than they were during the peak. Foreigners, like local buyers, are finding value in the local property market and looking at the upside potential, says JLLs head of South-east Asia and Singapore research Chua Yang Liang, adding that the posi-

The stakes are too high, so pare them down

Bursa Msia chief wants govt to cut its stakes in GLCs to improve trading
By PAULINE NG in Kuala Lumpur
THE Malaysian stock exchange does not have enough large companies and the problem is compounded by the governments huge shareholding in many of these entities. Reducing the governments stake in these firms would improve trading liquidity and velocity, said Bursa Malaysia chief executive Yusli Mohamed Yusoff. The bourse has a mid-term goal of achieving an average velocity of 60 per cent from just over 30 per cent at present. The reality is a lot of small to medium companies are trading at very high velocity. What is dragging our average down is the low velocity in the bigger companies, he told BT. Given that government-linked corporations (GLCs) account for about a third of the exchanges market capitalisation, their performance has a marked effect on the market. Former prime minister Abdullah Ahmad Badawi had announced plans to reduce the governments stake in GLCs but there has been little change. The state holds huge stakes in GLCs as much as 70 per cent in the case of national utility Tenaga Nasional. Bursa Malaysia wants to raise the bar on higher free floats, liquidity and governance for the exchange, which has 1,000-odd companies. In many instances, it begins with the board of directors, Mr Yusli said. We need the board to take ownership because the board really sets the tone. He believes the reluctance to sell down has to do with control but pointed out there are many other ways the government can exert its influence. If the government says it is going to sell down, then what is the board doing about it? The right people should be appointed to the board, which should be given the necessary powers to run the company, he said. If it has to then report to another level of authority, why have the board in the first place? The board cannot run the company just for the interests of a certain

Tell-tale numbers
Number of caveats lodged for private homes
10,000 8,000 6,000 4,000 2,000 0

Singaporeans Total foreigners (PR +non-PR)

Q1

Q2 Q3 2005

Q4 Q1

Q2 Q3 2006

Q4 Q1

Q2 Q3 2007

Q4 Q1

Q2 Q3 2008

Q4

Q1 Q2 2009

Subsale caveats lodged for private homes

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Source: URA Realis, July 17, Jones Lang LaSalle Research

1,745

1,868

1,041 808

Going ahead, foreign buying is expected to gain momentum, if the property recovery and regional economic upturn continue.
tive economic growth in China, India and Indonesia had nudged their citizens into investing here. He also observed a rise in purchases by Myanmar buyers. Malaysians were the top buyers of homes in Singapore in Q2, making up 29.3 per cent of total caveats lodged by foreigners, followed by Indonesians (20.3 per cent share), mainland Chinese (14.9 per cent) and Indians (12.1 per cent). Foreigners were drawn to prime district projects like Martin Place Residences in the primary market and Rivergate and Seaview in the secondary market in Q2, said CB Richard Ellis executive director (residential) Joseph Tan. JLLs head of residential Jacqueline Wong has seen more high networth individuals from India, Hong Kong and China looking to make their maiden property investments here. They are not PRs and are looking at apartments 3,000 sq ft and above in the Orchard Road belt. Theyre drawn by value; prices in the luxury sector are today about 15 to 25 per cent below the 2007 peak levels, she said. Going ahead, foreign buying is expected to gain momentum, if the property recovery and regional economic upturn continue. In the subsale market, the most popular projects transacted in Q2 were Rivergate (95 units), The Centris (46 units) and City Square Residences (45 units). Rivergate and Phase 2 of City Square Residences obtained Temporary Occupation Permit (TOP) in March, and Centris, this month. The median subsale price in Rivergate has risen from $1,200 psf in Q1 to $1,400 psf in Q2 and that for The Centris increased from $587.50 psf to $625 psf. City Square Residences median subsale price

rose from $791 psf to $893 psf and that for The Sail @ Marina Bay, from $1,321 to $1,623 psf. Subsales are secondary market deals in projects that have yet to obtain Certificate of Statutory Completion. This could be three to 12 months after the project gets TOP. Market watchers note that theres typically more sales activity around the time that projects receive TOP. There are buyers who like to have the finished product because its ready for immediate occupation or renting out, says Knight Frank chairman Tan Tiong Cheng. Sellers who bought for investment, especially on Deferred Payment Scheme, can also cash out. Analysts reckon that with a significant number of private homes heading for completion in the next 18 months, more subsale transactions can be expected. Buyers with HDB addresses accounted for 44 per cent of total caveats lodged for private homes in Q2, down from the 56 per cent share in the preceding quarter. The fall in proportion of purchases by HDB ugpraders was due to a bigger Q-on-Q jump of 174 per cent in Q2 in caveats lodged by those with private addresses, compared with a 70.8 per cent increase in caveats lodged by those with HDB addresses. The most popular projects among HDB upgraders in Q2 were Mi Casa, with 145 caveats at a median price of $630 psf, followed by Double Bay Residences (106 units changed hands at a median price of $665 psf) and The Arte, (87 units transacted at $899 psf median price). The share of HDB upgraders may slip further in coming months as the proportion of mass-market developments among project launches lessens as developers release more upper-end condos.

FILE PHOTO

Mr Yusli: What is dragging down the average trading value is the low velocity in the bigger companies group of shareholders. They represent all shareholders. Owned 20 per cent by the Ministry of Finance and an equal amount by the Capital Market Development Fund (a public fund), Bursa Malaysias free float is about 60 per cent. Mr Yusli agrees there is excessive government ownership in the market. Perhaps it was necessary in the past, but it should be eased now for reinvestment in new economic activities. Recent attempts by Malaysia to liberalise its economy by easing equity ownership rules notwithstanding, Mr Yusli concedes that competition is ferocious. In the early days, we had a very high weightage on these (emerging market) indices because there was no China, India or Brazil. We have lost a lot of ground because these are much bigger economies. We have to fight on the basis of quality as we can never win on size. More synergistic mergers and acquisitions to boost entity size such as Sime Darby, the worlds biggest palm oil planter, are also necessary. Attracting new listings is another challenge. Bursa clinched its first foreign listing in the form of Xingquan International Sports Holdings, but the Chinese shoemakers initial public offering was small, raising just RM200 million (S$42.3 million). There are some more in the pipeline including one from the Middle East, according to news reports but Mr Yusli knows multinationals will often put international financial centres first. Even Malaysian companies and local investors can opt for more dynamic markets. Thats the challenge for us: to make sure we can retain investors as well as attract new investors. That less developed rival bourses are catching up is evident. Although still smaller in market capitalisation, Indonesias average daily value has been steadily growing to some US$465 million or RM1.65 billion. In comparison, Bursas is about RM1 billion currently. In the bullish year of 2007, Bursas average daily trading value was RM2.7 billion. Singaporean participation was significant, accounting for about a fifth of the total foreign trade value of RM84.6 billion. In percentage terms, Singaporean participation was bigger in 2005, reaching 37 per cent or RM55 billion. Up to June this year, it amounted to RM12 billion or 16 per cent of the total foreign trade value. Mr Yusli said the bourse wants more direct participation from Singapore retail investors but acknowledges it will have to be based on good fundamentals as people have choices.