Telok Blangah 4-room BTO flats see overwhelming demand; over 28 first-time applicants for each unit
The Straits Times, 31 May 2021, Mon
By Michelle Ng
Home seekers made a rush for the four-room Build-To-Order (BTO) flats in Telok Blangah, contributing to one of the highest application rates in recent years.
This comes even as these flats are the most expensive units in the Housing Board's sales exercise this month.
Located in the mature estate of Bukit Merah, there were only 70 such flats on offer in the Telok Blangah Beacon project, yet they attracted 3,124 applicants as at 5pm on Monday (May 31).
This means that only one in more than 28 first-time applicants will get a unit.
Second-time applicants face even bleaker prospects, with more than 412 applicants vying for each available unit.
Prices for these Telok Blangah four-room flats, which are located within walking distance of Telok Blangah MRT station, range from $602,000 to $710,000.
The last time a BTO project drew such strong competition was in August last year, when 334 four-room flats in Geylang drew almost 15 applicants for each unit.
The 105 three-room flats in Telok Blangah Beacon were also oversubscribed, although competition was less stiff with slightly under three first-time applicants competing for each unit.
Prices for these three-room flats range from $419,000 to $504,000.
Buyers will also have to wait more than five years for these flats - the longest wait in this launch - as the project is estimated to be completed in the first quarter of 2027.
Before the Covid-19 pandemic, the waiting time for a standard BTO flat was about three to four years.
Mr Lee Sze Teck, director of research at Huttons Asia, said the project's central location in a mature estate is the key draw.
It is also the closest BTO project that has been announced so far to the future Greater Southern Waterfront, he added.
"Even paying $710,000 and a wait of more than five years is no deterrent to buyers who desire the location and the potential upside of the transformation in years to come," he said.
The last time new flats were launched in Bukit Merah was eight years ago.
The other BTO project in a mature estate in this month's sales exercise, which will conclude at 11.59pm on Monday, was also popular, although demand was less competitive.
The 1,010 four-room flats in MacPherson Weave in Geylang attracted four first-time applicants for each unit. The 156 three-room flats attracted fewer than two applicants for each.
In Geylang, 1,382 two-room flexi, three-room and four-room flats are on offer at MacPherson Weave. PHOTO: HDB
In the non-mature estate of Woodlands, the 359 five-room flats in Woodgrove Ascent were the most in demand, drawing close to four first-time applicants for each unit.
Its 411 four-room and 84 three-room units also attracted more than three first-time applicants for each available unit.
Prices start from $185,000 for a three-room flat, $275,000 for a four-room flat and $372,000 for a five-room unit, making them the most affordable in this sales exercise.
In Woodlands, 1,540 two-room flexi, three-room, four-room and five-room flats are on offer at Woodgrove Ascent. PHOTO: HDB
Similarly, the 251 five-room flats in Garden Bloom @ Tengah had more than three first-time applicants each, while the 265 four-room units had three first-time applicants vying for each.
In both Woodlands and Tengah, buyers will have to wait for just under four years for the flats. Both projects are slated to be completed in the third quarter of 2025.
Tengah, Singapore's newest town, has 782 two-room flexi, four-room and five-room flats in Garden Bloom @ Tengah.
PropNex chief executive Ismail Gafoor said the overall rate of 4.3 applicants to each available unit in this launch was down marginally from the 4.6 seen in the February BTO sales exercise.
"A potential reason for the slight moderation may be the increased uncertainty around completion dates and a longer waiting time for flats as a result of construction delays," he said.
However, Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, noted that the overall application rate is considered healthy despite the Government's warnings of construction delays due to Covid-19.
"The rising prices of HDB resale flats and private properties may be a factor. To many people, BTO flats are still considered more affordable and worth the wait," she said.
In August, HDB will launch about 4,900 flats in Queenstown, Kallang/Whampoa, Tampines, Jurong East and Hougang.
Another 3,100 to 3,600 units flats will be offered in Choa Chu Kang, Hougang, Jurong West, Kallang/Whampoa and Tengah in November, with exact site locations to be released in August.
Online survey to gather public views on new housing model for BTO flats in prime areas
The Straits Times, 31 May 2021, Mon
By Michelle Ng
Singapore residents will be able to share their views on the new public housing model for flats located in prime locations by participating in an online survey by the Ministry of National Development (MND) from Monday (May 31).
The model, which is still in the works, aims to keep Build-To-Order (BTO) flats in prime areas - such as the city centre and Greater Southern Waterfront - affordable and inclusive for Singaporeans.
It was first mooted by National Development Minister Desmond Lee in December.
Read more at: https://www.straitstimes.com/singapore/housing/online-survey-to-gather-public-views-on-new-housing-model-for-bto-flats-in-prime
As developers brace for tighter margins, it's time to rethink their traditional business models
The Business Times, 1 Jun 2021, Tue
By Kalpana Rashiwala
THE latest Government Land Sales (GLS) tender closings point to a continuation of thin profit margins in the Singapore residential property development business.
The tenders for a private condo plot along Ang Mo Kio Avenue 1 and the maiden executive condominium (EC) housing plot in the Tengah estate drew intense competition from developers who are running out of land amid healthy home sales.
The top bids for both 99-year leasehold land parcels beat market expectations, with the plot in Tengah Garden Walk setting a record price for EC land. ECs are a public-private housing hybrid.
The private condo site along Ang Mo Kio Avenue 1 received a top bid from a consortium led by UOL Group of nearly S$1,118 per square foot per plot ratio (psf ppr).
No doubt, it is in a nice residential locale, a stone's throw from the Bishan-Ang Mo Kio Park and in the vicinity of highly-sought- after schools including CHIJ St Nicholas Girls' School and Ai Tong School. But the top bid was almost as high as the S$1,129 psf ppr top bid for a city-fringe plot, near Farrer Park MRT Station, at a state tender that closed in April.
That city-fringe site would typically have been accorded a higher valuation, given that it includes a commercial component at the first storey.
The second plot, in the new estate of Tengah in the western part of Singapore and designated for an EC development, drew a top bid of S$603 psf ppr from a tie-up between City Developments and MCL Land.
Having paid such high land prices, the developers of the two sites will probably try to launch their projects at prices that will set fresh record highs in their respective segments.
The final breakeven costs and selling prices of the two projects will depend on many factors, including construction costs and whether there is a roll-out of fresh cooling measures.
For now, some analysts and market watchers are assuming that the top bidders would be looking at pretax profit margins of around 10 per cent.
This seems like a lot of risk to bear vis-a-vis the returns.
What can local property developers do to lift their profitability in the face of such thin profit margins from private housing projects in Singapore?
One traditional solution is to expand overseas. Another is to develop recurring income streams, principally, rental income from holding investment properties such as office, retail and industrial assets or income from operating hospitality assets.
Despite cyclical ups and downs, this was generally a good diversification strategy for developers here. Consequently, developers have generally done well holding investment properties on their books.
However, the Covid-19 pandemic may have changed things. There is little certainty now about when the travel curbs that have been weighing on hotel properties will be lifted.
The pandemic has also accelerated online shopping and e-commerce, pointing to less need for physical retailing space.
As for offices, it remains to be seen to what extent work-from-home and hybrid work models will affect leasing demand.
Opportunities in eldercare
Within the industrial property segment, logistics assets and data centres have been key beneficiaries from the pandemic. Some local developers may want to have some exposure, or greater exposure, to this sector.
Beyond that, there may also be opportunities to cater to the greying population. There will be scope for the private sector to develop assisted living or nursing care facilities to complement what is being done by the public sector.
The path for private-sector participation in this particular field has not always been smooth though.
Back in July 2019, the government launched a tender for a sprawling site along Gibraltar Crescent in the Sembawang area, for a proposed dementia care village. When the tender for the 30-year leasehold site closed in January 2020, it drew just one bid - from a partnership between Perennial Real Estate Holdings and Orpea, a leading European player in global dependancy care.
The authorities found their concept proposal acceptable; nevertheless the site could not be awarded as the bid price of S$15 million was deemed too low.
It probably would not make sense for a private-sector developer or operator of an eldercare facility to pay a high land price if the idea is not to sell units in the facility.
As JLL Singapore senior director Ong Teck Hui said in a feature in BT Weekend in April: "The conventional develop-and-sell model for typical GLS residential sites which is oriented towards profit maximisation and drives up prices, is unlikely to work if the purpose is to provide affordable long-term care facilities to a wider spectrum of the elderly."
Instead, a develop-and-operate model would be a better fit for a venture that relies on long-term revenue.
Hence, what is needed is a different land price payment model that will not saddle the developer of a long-term care facility for seniors, with high upfront land cost.
The BT Weekend feature suggested that the authorities consider the model adopted by JTC Corporation.
When JTC allocates land, industrialists are given a choice of either paying an upfront lump sum land price for, say, a 30-year lease term; or a monthly land rent over that period.
The option of paying land rent - also know as ground rent - helps ease cashflow for businesses.
The authorities could adopt a similar approach when allocating or selling land for private-sector development of eldercare facilities. Having some flexibility on how land price has to be paid could help make this a feasible business.
The result could be some local residential property developers branching out into the development and operation of facilities catering to seniors, based on a recurring income model, unfettered by high upfront land cost.
Developers could tie up with seasoned operators of such facilities overseas, to bid for sites such as the Gibraltar Crescent plot earmarked for a dementia care village.
Beyond finding a new revenue stream, Singapore developers may also find it fulfilling to serve a real and growing need in Singapore's rapidly ageing population scene.
Is Singapore residential development a viable business?
The Business Times, 1 Jun 2021, Tue
By Leslie Yee
DEVELOPERS' profit margins from Singapore private housing development projects have thinned with net margins for some private housing projects estimated to be around 10 per cent or less.
While home prices are buoyant, increases in construction costs, land costs and agent commissions have squeezed margins. In the near term, shortage of construction workers will delay project completions and add to costs.
Developers in Singapore also operate under stringent guidelines. For sites bought on or after July 6, 2018, housing developers are subject to 30 per cent Additional Buyer's Stamp Duty (ABSD) of which 25 per cent may be remitted upfront subject to conditions.
Key conditions include commencing development within two years from the date of acquisition as well as completing development and selling all residential units
Projects affected by disruptions to construction timelines resulting from the Covid-19 pandemic have been granted extension of time for commencement, completion and sales.
Besides facing hefty taxes for failure to meet tight timelines, developers have to deal with the prospect of the government introducing property cooling measures.
At its recent annual general meeting, Kwek Leng Beng, executive chairman of City Developments (CDL), cautioned that if property prices continue to rise, there may be a time that further cooling measures could be introduced to control the prices.
Government intervention can adversely impact selling prices and sales. As such, developers may be wary of aggressively buying land for development.
One may thus wonder: why bother doing residential development in Singapore? Groups such as Ho Bee Land and Hotel Properties are currently inactive in residential development at home, while building homes abroad.
And perhaps lured by the scale of the projects and potential for higher margins, CapitaLand is more active in residential development in China than locally. For Q1 2021, CapitaLand achieved sales of 4.02 billion yuan (S$834 million) in China versus S$138 million in Singapore.
Still, many groups are keen on the residential development business here.
A tie-up between CDL and MCL Land beat nine others with its bid of S$445.89 million and was awarded the state tender in May for a 0.87-hectare land parcel directly connected to Farrer Park MRT Station, which is zoned "residential with commercial at first storey".
In government tenders for two sites which closed last week, a CDL and MCL tie-up was the top bidder for an executive condominium site at Tengah while emerging second in the tender for a residential site along Ang Mo Kio Avenue 1, opposite the Bishan-Ang Mo Kio Park
Fifteen bids were submitted for the Ang Mo Kio site, with a joint venture between UOL Group, Singapore Land Group and Kheng Leong Group putting in the top bid of S$381.38 million or nearly S$1,118 per square foot per plot ratio.
Other participants in these tenders included Wing Tai, Far East Organization, Sim Lian Land, units of Hong Leong Group Singapore, and GuocoLand.
Doing residential projects at home is something that local developers are very familiar with. Groups like CDL and UOL have established track records in building homes here.
Head honchos do not need to travel to inspect the progress of works, possess deep knowledge of buyer preferences, have a strong feel of the micro market, and have built up relationships with various service providers.
The government can be a "foe" of developers as it actively intervenes to cool prices and restricts land banking. But the government is also a friendly force in the private residential market.
It encourages home ownership. Citizens tying the knot receive help in buying HDB flats. Over time, some sell their HDB flats for a profit and use the proceeds to buy private property.
As the government typically delivers infrastructure projects on time, a buyer purchasing a condominium unit off-plan can be reasonably assured that the upcoming MRT station will materialise as scheduled.
The government provides the stability and the pro-business environment that draws foreigners to buy residential units here.
Efforts in attracting high value business activities to Singapore lead to some foreigners working here and create rental demand for homes.
In Singapore, new private homes here are typically sold off-plan and the progress payment schedule is developer-friendly in nature. Buyers pay up to 60 per cent of the final sale price ahead of a project's completion as opposed to around 10 per cent in the United Kingdom.
Land sites bought from government land sales are clean and ready to be worked on once the developer takes over the site. While there are various permits and consents to be obtained, developers can count on transparency and efficiency from relevant government agencies.
The private residential market here is relatively small as 79 per cent of resident households live in HDB dwellings. However, demand is strong for private housing and unlike some other property types, housing is not being disrupted by digitalisation.
Work from home and online learning for students lead to more time being spent at home and possibly more money going after higher quality space in homes.
The financial returns from residential projects may also look fine in a world of abundant liquidity, which results in lowering return on equity everywhere.
With the strong balance sheets of banks here, good name developers can secure competitive funding for residential projects. Banks may fund 70 per cent of project cost at interest rates of around 2 per cent per annum.
Assume a project makes 8 per cent net margin and achieves good sales when selling off-plan. In this scenario, bank loans need not be fully drawn down and some of the capital put in by developers may come back in less than five years.
Such a project can generate an annualised return on equity of about 7 per cent, which represents a decent return as Singapore 10 year government bond yield is around 1.5 per cent.
Developers may gripe about the fat commissions payable to marketing agents. But these agents work hard, strive creatively and cast their nets wide to get people from near and far educated in the merits of investing in Singapore residential property and specific projects.
Through attending property webinars, some people learn that getting on the private residential property ladder can be a means for long-term wealth preservation and creation.
Many in the residential development business here keep a small team, which means fixed costs are low. Work is outsourced to competent architects, contractors and marketing agents.
Private home buyers can be demanding as these are big ticket items.
Developers have to keep abreast of lifestyle changes and deliver high quality end products. They also need to be nimble to secure sites, find good windows to launch projects and work around government intervention.
But, as long as interest rates remain low, residential buying appetite will be strong and developers will find the thin margins of Singapore private housing projects attractive enough for the risks involved.
Portfolio of 29 cloud kitchen units at Lavender Street served up for sale
The Business Times, 1 Jun 2021, Tue
By Lisa Kriwangko
DESIGN and construction firm Chiu Teng Group is understood to be selling its portfolio of 29 ground-floor cloud kitchen units at CT Hub 2 via expression of interest.
Also known as ghost or dark kitchens, cloud kitchens are centralised kitchens where food is prepared primarily to cater to food delivery. In some cases, a small area is set aside for dining-in.
According to sole broker Colliers, the portfolio for sale comprises units ranging from 26 to 42 square metres (sq m), making up a total strata area of 906 sq m.
Located at 114 Lavender Street, the commercial property is approved for food & beverage (F&B) use and fully leased, with Deliveroo Editions as its major tenant. It houses familiar names such as Mos Burger, Da Paolo, Teppei Syokudo, Pho Stop, Kings Cross Bar and Restaurant, Donburi Yo! and FortyThieves. Before Phase 2's heightened restrictions, the kitchens offered both dine-in and pick-up options.
They gained patrons from the nearby industrial district in Bendemeer, as well as residences in the estates at Boon Keng and Kallang.
CT Hub 2 is also a three-minute walk from Bendemeer MRT station, with connections to Lavender Street, Kallang Road, Central Expressway, Kallang Paya Lebar Expressway and Pan Island Expressway. The 99-year leasehold property was completed by Chiu Teng Group in 2015.
Colliers had not disclosed a guide price. However, some three months before, a 312 square foot or 29 sq m cloud kitchen unit located in the same area was listed on Commercial Guru for S$592,800 or S$1,900 per square foot.
On the cloud kitchens, Steven Tan, senior director of investment services at Colliers, said: "This fully leased property is a unique opportunity for investors to generate immediate income with the potential for future rental appreciation."
Despite the expected growth in returns, the site was put up for sale in early May. Lee Nai Jia, the deputy director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, ventured that this might be because the seller is looking to recycle their capital and reinvest into other opportunities.
"There is a strong interest, and they are able to get a better valuation for the properties today compared to the future. The landscape in the future may be more competitive, which may add downward pressure on vacancy and correspondingly yield," said Dr Lee.
Brenda Ong, executive director of Cushman & Wakefield's industrial and logistics business, added that the timing is "opportune", as last year's circuit breaker period piqued interest in cloud kitchens.
This demand is further backed by the limited supply of such assets. Ms Ong noted that before an industrial space can be used as a cloud kitchen, it must first obtain the necessary approvals from the Singapore Food Agency, the Urban Redevelopment Authority, and other related parties. It must also be fitted with adequate water supply, grease traps and exhaust systems.
"Our understanding is that the units are all with F&B status, but not all come with exhaust. Deliveroo is one of the tenants leasing the F&B space with exhaust from the landlord," she said.
At the same time, Singaporeans are also acquiring a taste for food delivery services.
According to Statista's digital market outlook report published in September last year, the online food delivery business in Singapore generated S$342.1 million of revenue in 2019, a 27.6 per cent increase from 2018's S$268 million. It also predicted the industry to grow 6 per cent year on year in 2024 to reach S$698.3 million in revenue.
The digitalisation of F&B businesses, backed with changing consumer habits brought about by the Covid-19 pandemic, has also cooked-up an appetite for cloud kitchens among businesses.
In January and October last year, Grab launched its two cloud kitchens in Singapore located at Hillview and Aljunied respectively. The ride-hailing company said that such centralised food preparation facilities enable merchants to meet the rising demand for food delivery services in cost-effective ways.
Food services company Select Group, which is behind Pho Street and Hong Kong Sheng Kee Dessert, also announced in March that it would channel S$10 million over the next five years to invest in 20 cloud kitchens. This came after the company saw a 200 per cent yoy surge in delivery orders for many of its brands in 2020.
To differentiate itself from other players, Select plans to open the kitchens in densely populated heartland areas such as Clementi and Tampines.
Globally, the cloud kitchen market is expected to grow to US$71.4 billion by 2027, up from US$43.1 billion in 2019, according to estimates from Allied Market Research.
Kishin RK, the son of Singaporean real estate magnate Raj Kumar, told Bloomberg last year about his plans to establish some 1,000 cloud kitchens across the Asia-Pacific, Europe and the United States.
"The investment into cloud kitchens is an opportunity to look at real estate with a different lens and create revenue from a space which may not be as relevant anymore," said Mr Kishin, who founded food tech and digital restaurant company TiffinLabs.
The expression of interest for the cloud kitchen at Lavender will close at 3pm on June 8.