Extremes typify Singapore’s property market

WHEN it comes to the best and worst property markets in Asia, Singapore has it covered. Office rents in the city’s central business district jumped 14% last year, the biggest increase in the region, while luxury home prices slumped 6%, the most in Asia, according to property broker and consulting company Jones Lang LaSalle.

The gap is about to widen. Prime office rents in the city, Asia’s most expensive after Hong Kong and Beijing, are projected to extend the gain a further 5% this year with a limited supply, said Chua Yang Liang, Jones Lang LaSalle’s head of research for Singapore and Southeast Asia.

High-end homes may post a decline similar to the drop in 2014 on the government’s housing curbs, he said.

"Singapore has seen quite a polarity in its property market compared to the rest of Asia," Mr Chua said. "As long as the government curbs on housing are in place, we will continue to see this diverging trend."

The city’s prime office rents are set to extend gains this year with a limited number of new commercial properties, said CapitaCommercial Trust CEO Lynette Leong.

The property trust is building the 40-storey CapitaGreen office tower in the city’s financial district and has leased more than two-thirds of the building, she said.

About 1.15-million square feet of new office space will come on stream in 2015, rising to 1.6-million square feet in 2016 and 4.7-million in 2017, according to real estate broker Knight Frank.

Grade-A office rents may climb 11% this year as a dearth of supply until mid-2016 helps boost leases, said Savills director Alan Cheong in Singapore.

"The coast is clear for a rise in office rents," he said, at the same time predicting a drop of as much as 10% for residential values this year.

Singapore’s home prices fell 4% in 2014, the first year-on-year decline since the 2008 global financial crisis, according to government data.

The slump came as Singapore added more measures to its five-year campaign to rein in property values, including capping total debt repayments at 60% of a borrower’s income.

In November, City Developments, Singapore’s second-biggest developer, said the high-end residential segment may face "fire sales" with mortgage defaults as the housing curbs hurt home sales and prices.

The developer reiterated that the housing measures had "adversely impacted" home sales and prices. It is expecting prices to fall further with the measures, tighter credit, supply of new homes and the possibility of higher lending rates.

The company is benefiting from the pickup in office rents with an average occupancy rate of 97.2%, it said. Its 34-storey South Beach joint venture across from the historic Raffles Hotel has already leased 80% of the 46,000m² space in its office tower ahead of its completion in the fourth quarter, anchored by Facebook, it said.

Keppel Land, Singapore’s third-biggest publicly traded residential developer, also said last month the city’s housing market remains "challenging" after new home sales halved in 2014 with falling prices. The company said it has started seeking investments in developed countries such as the US

Home sales may stall in 2015 as growth slows. Singapore’s economy expanded less than estimated in the fourth quarter, after its manufacturing industry weakened with slowing growth in China and an uneven global recovery.

Gross domestic product rose an annualised 1.6% in the quarter to December 31 from the previous quarter, when it expanded 3.1%.

Singapore was ranked the most expensive city in the region to buy a luxury home after Hong Kong, according to a 2014 Knight Frank wealth report.

Source: Bloomberg

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Extremes typify Singapore’s property market

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