Arguments for fairness in the property trade
DEVELOPERS’ profit margins have thinned considerably over the years, from up to a fat 50 per cent in the “super bull” run of 2007-2008 to margins in the low teens today. Recent macroeconomic chills from inflation and higher interest rates have added to demand dampeners from various iterations of market cooling measures.
There is also one largely unseen component of developers’ costs - the land betterment charge paid to the government in return for enhanced land use in building up a site.
Since 2007, the formula used for calculating the charge creams off 70 per cent of the potential appreciation in land value. The higher charge, up from 50 per cent previously, was meant to achieve a “more equitable sharing of gains between landowners and the state”, the government said. At the time, Singapore’s property market was firmly bullish, with an en bloc sale party pumping.
This time is different. Kalpana Rashiwala argues that the government needs to leave more on the table to reward developers sufficiently for the risks of undertaking redevelopment projects today. Read her Hock Lock Siew column here.
In another case for improving equity, Leslie Yee takes a look at the Raffles Town Club site that will eventually make way for housing. The prime Bukit Timah plot will place new homes close to two primary schools where spots are keenly coveted. It sits in a neighbourhood full of private condos and landed housing, where prices have climbed past S$3,000 per square foot. There is no doubt that new properties there will be desirable.
If land should be put to optimal use in land-scarce Singapore, could the best use for the prime RTC site be public housing?
The sale of the site for private housing could fetch close to half a billion dollars in proceeds which would go into Singapore’s reserves. But, as Leslie argues, earmarking the RTC site for new HDB homes - and opening up prime districts for public housing - would support efforts to manage inequality and build a more cohesive society.
The government has already made a move on improving access to elite schools with its much-lauded decision to relocate one popular primary school to an upcoming new town being built in the outer suburbs in Tengah. To walk the talk on equality and equity, building HDB flats in Bukit Timah could really move the needle.
In the longer term, plans are underway for a massive land reclamation project that will create a “Long Island” twice the size of Marina Bay along the east coast. The plan is to provide more land for Singapore’s future needs, including coastal protection against rising sea levels, more room for housing, and a new water reservoir.
WeStillWork, but landlords are getting antsy
WeWork’s bankruptcy filing sent some jitters through overseas markets that the US giant operates in. The company said it would be renegotiating leases and terminating contracts at its properties Stateside. The Singapore operations, a local spokesperson said, would not be affected.
But BT learnt that some of WeWork’s landlords in the Asia-Pacific have already reached out to other coworking operators such as The Executive Centre. Samuel Oh talks to industry players as they eye more share in a market where growth has slowed and building owners may also be treading more carefully.
Market watch
Latest available data on the condo resale market showed overall prices were still on an uptrend in October, buoyed by demand in the city fringe and suburban regions. But resale prices in the prime Core Central Region fell. Volume on the whole remained low, and prices are 7.5 per cent higher year-on-year.
Singapore households will need to adjust to higher-for-longer interest rates, and some may be vulnerable to income and rate shocks, the Monetary Authority of Singapore (MAS) said in its annual Financial Stability Review. While overall household debt is low, a small proportion of households are highly leveraged and may face challenges in servicing their debt.
City Developments Ltd (CDL) posted higher Q3 sales of S$325 million, on the back of the launch of its Upper Bukit Timah project The Myst. The group expects private home sales to be “measured” as the market takes a “temporary breather” to digest July’s batch of new launches. CDL’s next launch will be its Bukit Batok executive condominium project, to be rolled out in Q1 of 2024. The company also announced it would shell out S$25.8 million to buy back 33.1 million preference shares.
LHN Group saw net profit grow 56 per cent to S$21.3 million for its second half, although its full-year net was dragged down by fair value losses on investment properties. The company is placing its bets on its co-living business.
PropertyGuru posted earnings of S$312,000 for its Q3, swinging from a net loss of S$7.4 million in the year-ago quarter. Revenue for the latest quarter was driven by higher contributions from Singapore, which more than offset lower revenue in Vietnam. But difficulties in its Malaysian and Vietnamese markets led the company to cut its full-year revenue projections.
The China picture
Chinese property stocks and bonds rallied this week, on signs that the government may push out some of its most sweeping measures yet to support the real estate sector. Banks may be asked to offer eligible companies unsecured loans for the first time.
For the story so far on China’s property meltdown, read this wrap.
