ERA Daily Research - 19 August

PropNex, ERA dominate in HDB resale and leasing transactions

The Business Times, 19 Aug 2021, Thu 5:50 am

By Fiona Lam

PROPERTY agents from PropNex Realty and ERA Realty Network have brokered about 70 per cent of resale transactions of Housing and Development Board (HDB) flats every year since 2017.

In the residential leasing segment, both agencies - Singapore's largest two based on the number of salespersons - likewise accounted for the bulk of the deals, going by data from the Council for Estate Agencies (CEA).

The Institute of Real Estate and Urban Studies (IREUS) noted that PropNex's and ERA's pole positions in the HDB resale brokerage business also generate ample leads for new private home sales, enabling them to gain an advantage there as well.

"The two agencies have leveraged their hegemony in the public housing resale market, to secure a head start for their project marketing teams, especially in the upgrader market in the Outside Central Region," said Lee Nai Jia, deputy director of IREUS at the National University of Singapore.

In the first half of 2021, PropNex agents were involved in 39 per cent of the HDB resale transactions recorded by CEA, while ERA agents brokered nearly 30 per cent. Their respective shares of the market had stayed largely consistent from 2017 to 2020.

Meanwhile, salespersons from the third to fifth largest agencies facilitated a combined 19 per cent of the HDB resale volume on average each year, over the same period. Beyond the top 10 rankings, each agency captured only a minuscule proportion, ranging from zero to 0.4 per cent.

PropNex and ERA housed more than half of the 30,399 real estate agents in Singapore as at Jan 1, 2021.

For prospective buyers and sellers of HDB resale flats, the two firms' dominance could translate into well-trained and experienced agents who are able to market properties effectively, Dr Lee said.

Competition among individual agents, even within the same agency, will also reduce the chances of commissions creeping up. "However, buyers and sellers may find salespersons from the two agencies sharing similar narratives, making it harder for consumers to obtain a second opinion," he noted.

Both firms have been able to build "significant informational advantages" over their competitors, Dr Lee said.

For instance, their access to a large number of deals and massive networks of prospective buyers and sellers have produced timely market intelligence.

"While HDB offers sales data after each transaction is done, these agencies can gauge consumer sentiment even as their associates are negotiating deals," he explained.

What may help level the playing field are platforms such as OneMap, the URA Space map portal and property listing websites, which offer substantial information and networking resources.

But despite such data democratisation, the top two agencies have maintained their leadership in the HDB resale market, owing to competitive commissions and their strong track records that in turn reinforce their branding, Dr Lee said.

"For smaller players, the cost to break into this market will be high, and without economies of scale, commission revenue from brokering resale flats may not be sufficient for them to break even," he added. "Therefore, some of the other agencies may find it more worthwhile to focus on other real estate segments."

When it comes to the leasing of HDB flats and non-landed private residential properties, a similar skew can be seen, albeit with a tad more competition. The five biggest agencies dominate in these rental markets.

Last year, PropNex and ERA brokered a combined 59 per cent of the 30,869 leasing transactions of HDB flats that were facilitated by agents. OrangeTee & Tie ranked third with 18 per cent, followed by SRI and Huttons Asia with 3 per cent each.

For non-landed private homes, including executive condominiums, ERA facilitated the most leasing transactions, bringing in nearly 31 per cent of 2020's total volume. OrangeTee & Tie took second place with 25 per cent; SRI and Huttons came next, with about 5 per cent each, followed by PropNex at 4 per cent.

In the landed housing segment, ERA, PropNex and OrangeTee & Tie brokered a combined 65 per cent of the number of leasing deals last year.

Dr Lee said that the agency scene tends to be more competitive for homes that fetch higher rents, as those work out to higher commission amounts.

The cost to put up listings on platforms are the same for all types of residential properties, while the time and effort expended are also similar. "Given this, smaller agencies are likely to gravitate towards higher-end properties, as the costs to break into the mass market will be prohibitive without sufficient scale," Dr Lee pointed out.

Source: https://www.businesstimes.com.sg/real-estate/propnex-era-dominate-in-hdb-resale-and-leasing-transactions

Land availability a sound basis to determine mature, non-mature status of HDB towns: Experts

The Straits Times, 18 Aug 2021, Wed 6:41 pm

By Michelle Ng

The classification of Housing Board towns into mature and non-mature estates based on the availability of land, instead of the age of existing flats, is a sound metric that is commonly used in urban planning, say analysts.

It also gives buyers a sense of the pricing and amenities expected, they added.

In a Build-To-Order (BTO) sales exercise that concluded on Tuesday (Aug 17), Hougang and Jurong East - both with HDB flats close to 30 years old - were classified as non-mature estates.

ERA Realty head of research and consultancy Nicholas Mak said it is more useful to use availability of land as the metric from a policy and land planning perspective as the age of existing flats can be a "moving target".

"How do we judge the age of a town when some parts may be older and more built up than another part? Do we use the average age of the blocks in the whole town?" he said.

"Hougang may be seen as an old town in terms of age, but in terms of land that can be redeveloped for future housing, it may not yet hit the threshold for a mature town," said Mr Mak, citing the area around Defu industrial estate as an example.

"The classification is an additional tool to derive information when making policies, such as directing more young couples to certain towns to balance out an ageing population," he added.

In 2017, the Ministry of National Development said that the availability of land in each town is used in the mature and non-mature classification, although it did not give more details.

"Non-mature towns refer to those where there is more land available for public housing development, whereas mature towns are usually those with limited land for public housing development," said MND.

During BTO and Sale of Balance Flats exercises, the estate classifications of the flats on offer are stated in the sales brochures, added MND.

Read more at: https://www.straitstimes.com/singapore/housing/land-availability-a-sound-basis-to-determine-mature-non-mature-status-of-hdb-towns

Kampung Admiralty, Punggol town win global awards for excellent land use

The Straits Times, 18 Aug 2021, Wed 7:29 pm

By Tay Hong Yi

The Housing Board has won two of the nine top awards given out by the non-profit Urban Land Institute for excellent land use.

Two HDB projects - Kampung Admiralty and Punggol town - received the institute's highest accolade, the Global Award for Excellence.

The awards recognise excellence in innovation, having a meaningful impact on the community as well as replicability on a global level, HDB said on Wednesday (Aug 18).

The Urban Land Institute's award citation for Kampung Admiralty said the development integrated senior housing, medical care, retail, and food and beverage facilities on a compact 0.9ha site, resulting in affordable, for-sale apartments that combine livability and accessible open space.

Punggol town was lauded for, among other things, the use of urban environment modelling technology to simulate the impact of environmental factors such as sunlight, humidity and wind on its design.

Said HDB: "The awards also pay tribute to the full spectrum capabilities of developers in overseeing the development process of winning projects, which includes planning, design, construction, sustainability and economic viability."

Earlier in 2021, both projects won the Asia Pacific Award of Excellence from the Urban Land Institute, which has offices in the United States, Britain and Hong Kong, qualifying them for the global awards. 

The winning projects were selected from 45 global finalists by an international jury consisting of developers, architects and urban designers, including Ms Siew Leng Fun, chief urban designer at the Urban Redevelopment Authority.

The last time the HDB won a global award for excellence from the Urban Land Institute, which promotes real estate and land use best practices globally, was for Pinnacle @ Duxton back in 2011.

HDB chief executive officer Tan Meng Dui said it was a special bonus to win global awards for two projects this time, after a break of 10 years.

"These awards affirm the collective efforts of Team HDB in driving towards excellence in all that we do," he said.

Read more at: https://www.straitstimes.com/singapore/housing/kampung-admiralty-punggol-town-win-global-awards-for-excellent-land-use

A real estate wealth tax and Singapore's property cooling measures

The Business Times, 18 Aug 2021, Wed 7:29 pm

By Alan Cheong

THE chatter on wealth taxes has been increasing in intensity over the past year. The reason propounded for an implementation is to promote an inclusive society by finding additional sources of government revenue to fund various altruistic schemes. The shift away from taxing income to that of wealth is perhaps a way, but not the only means to achieve that objective.

From public forums, the form that the wealth taxes being considered here appears to be focused on the taxation of property gains and/or inheritance.

We shall examine whether a wealth tax on private residential property is ideal, discuss some alternatives and if such a tax is to be levied on residential property, a suggested form it should take.

The analysis will look back 20 years in time to the periods H1/2001, H1/2011 and H1/2021. To begin, we studied how the Lorenz curve for private residential transaction values had evolved over time. (The Lorenz curve is a graphical representation of income or wealth inequality.) From this, we can calculate the Gini coefficient for the transaction market.

The interpretation of this Gini coefficient is slightly different from that used to describe household income. Here, the seller of the property receives cash in the form of equity and/or any profit from the transaction. The larger the Gini coefficient, the bigger the disparity in sales proceeds - and the buyer's corresponding buying power - in the transaction value curve vis-à-vis a uniformly priced private housing market.

Optically, the Lorenz curves for the three periods do not appear to have varied too much.

We looked at the Gini coefficients for the private residential transaction value market and national household income. For private residential transaction values, it had ranged between 0.255 and 0.304, lower than the 0.375 to 0.433 range for household income for these three periods in the last 20 years. The ratio of the two shows that private residential transaction value inequality varied from 0.61 to 0.77 for these three periods.

The data hints that our private house values are closer to the ideal uniformity when compared against income levels.

Looking at the average household income levels for those who lived in non-landed and landed private residential homes, we find that the upper income groups have seen their numbers increase at the three periods.

The highest income sub-group has increased, and there has been a sharp increase in the number of households in the highest income bracket in the first half of this year. However, the swelling in the highest income subgroup numbers has not elastically translated into rising private residential property prices.

Private residential prices have been increasing at a very modest compounded growth rate for the past 10 years.

For non-landed prices in the luxury segment, they have instead fallen. From 2010 to 2020, median household income rose at a compound annual growth rate (CAGR) of 3.8 per cent, while nominal gross domestic product (GDP) grew at a CAGR of 3.7 per cent. That has outpaced private property price increases at a CAGR of 1.2 per cent.

We now turn to those in the top income bracket. Using the land price for Good Class Bungalows (GCBs) as a proxy for their housing choice, we find that it is negatively correlated to the national income Gini Coefficient.

A negative correlation is good because it means that although the rich are reaping capital gains - as GCB land prices rose at a CAGR of 3.8 per cent from 2010 to 2020 - income disparity in general has also been narrowing.

While there may be many ways to interpret this, including one that simply says that this is a spurious correlation, we believe it gives some hint that the ultra-high net worth class here has generally been contributing to the welfare of society while not being penalised - as reflected by the value of their GCBs - for doing that.

The slower price increase for island-wide private properties and a negative growth rate for the luxury segment is likely attributed to the slew of cooling measures that were implemented in the last decade.

This then poses the question of whether a wealth tax on real estate is justified. We list down some of our thoughts.

  • We believe that there is already a form of wealth tax levied on private residential properties. That comes in the form of the Additional Buyer's Stamp Duty (ABSD) that is levied on those who can afford to buy more than one home. There is also a form of capital gains tax that is labelled as the Seller's Stamp Duty (SSD).
  • If a wealth tax is imposed on private residential real estate, then the ABSD and/or the SSD may have to be recalibrated to offset the tax. The reason? Imposing a wealth tax on top of the two would unduly yoke the market and may inflect it to a dis- or deflationary performance in the long run.
  • If a wealth tax is imposed on the highest valued private residential properties - for example, on GCBs - the question is how much would the overall amount be? In 2020, about S$2.5 billion worth of GCBs were transacted. As a comparison, the nominal GDP for the services industry in 2020 amounted to S$313.7 billion. A tax on the top level of the housing food chain would not add much to government revenue.
  • As our population ages, we also find that more of them are living in private residential properties. Given the subdued private home price increase in the last 10 years, due consideration should be made as to whether a wealth tax on private residential properties may reduce the cash to be unlocked. The aged may wish to downgrade to cheaper housing to free up cash for consumption or medical expenses.
  • Technology is a two-edged sword. While it brings about untold benefits, it can also easily make many jobs redundant and skill sets irrelevant. Aside from functioning as a roof over one's head, the home doubles up as an investment that one can draw down on when life's fortunes are vectored in the wrong direction. At a time where technology increasingly takes to the economic and social centre stage, structural unemployment may come earlier for many. A housing downgrade may be needed. The equity and profit released in such a move could be a lifesaver for some and, ideally, should not be taxed.

Intuitively, wealth taxes on private residential properties look like a form of low-hanging fruit that can add more sources to government revenue. It is attractive because prima facie, it appears to achieve the objective of transferring wealth from the upper spectrum of society to help those at the lower end.

However, when given a more complete picture of the private housing market, the idea of imposing a tax in a direct form needs to be much more seriously discussed.

Analysts have often cited one downside of technology as accelerating job redundancies. For those in the middle to upper middle-income classes whose careers may be torpedoed by technology or crises, their best help is a housing downgrade.

If the finality is such that a wealth tax must be implemented, then some of the slew of cooling measures may have to be rolled back to give the market slack to return to an even keel.

Source: https://www.businesstimes.com.sg/real-estate/is-a-wealth-tax-on-property-values-justified

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