Citigold Property Insights Q42012

7/29/2019 Citigold Property Insights Q42012

1/7

PROPERTYINSIGHTS

Government measures to curtail demand

Singapore Quarter 4, 2012

Market Overview

The Singapore economy grew 1.1% year-on-year

(y-o-y) in Q4, bringing full-year growth to 1.2%. This was

much lower than the 4.9% growth in 2011 and also lower

than the Ministry of Trade and Industry (MTI)s forecast

of 1.5% in November 2012. For 2013, MTI expected

the Singapore economy to grow by 1-3% as external

pressures remain even as regional demand remains

resilient.

Private housing prices continued to increase in 2012but at a more muted pace compared to 2011. However,

the price increase accelerated in Q4, leading to a new

round of cooling measures on 11 January 2013. The higher

stamp duties and cash outlay as well as more restrictive

financing requirements are expected to reduce sales

volume and impact on prices in 2013.

Retail rents were unchanged in Q4, except for rents

in other city areas which declined slightly. For 2012 as

a whole, only rents in the suburban areas saw a small

positive growth while those in Orchard/Scotts Road and

other city areas fell, as retailers were cautious about

taking on more space. Against the backdrop of labour

shortages which will hamper retailers expansion plans

and the bulk of pipeline supply in 2013 located in the

suburban areas, retail rents are likely to ease slightly in

2013, even in the suburban areas where retailer demand

is strong.

Office rental performance was uneven in Q4 and in2012, with rents in the Central Business District (CBD)

falling while generally holding firm at the fringe.

Office rents will face supply-side pressure in 2013

with a higher-than-average pipeline supply. Downward

pressure on office rents will however be mitigated by

continued demand from the non-financial sectors and

CBD office rents are forecast to bottom sometime in

2013.


2/7

Cautious economic outlook for 2013

According to advance estimates by MTI, the

Singapore economy grew by 1.8% in Q4 on a quarter-

on-quarter (q-o-q) seasonally adjusted basis, up from

a 6.3% contraction in the previous quarter (Figure

1). On a y-o-y basis, the Singapore economy grew by

only 1.1% in Q4 after staying flat in Q3. This brought

full-year economic growth to 1.2%, lower than MTIs

growth forecast of around 1.5% in November.

The slowdown in economic growth for 2012

was mainly due to a 0.2% y-o-y contraction in the

manufacturing sector with weakness especially in

the electronics manufacturing cluster. This anaemic

growth is expected to persist as the sector continues

to face challenges such as higher labour costs and

weak external demand. The Singapore Purchasing

Managers Index (PMI) fell for the sixth consecutive

month to 48.6 in December due to further decline in

new orders, new export orders and production output,

indicating that the manufacturing economy remained

in a declining mode (Figure 2). Non-oil domestic

exports (NODX) contracted 2.5% y-o-y in November,

in contrast to the 7.9% y-o-y growth in October.

Given weak external demand, the MTI expects the

Singapore economy to grow by 1-3% in 2013 even as

domestic demand in Asia remains resilient. However

if the fiscal cutback in the US or the debt crisis in the

Eurozone worsens, the forecast economic growth

could be lower.

Inflation moderates further

Amid anaemic economic growth, inflationary

pressures continued to ease. The Consumer Price

Index (CPI) rose 3.6% y-o-y in November, down from

the 4.0% and 4.7% y-o-y increases in October and

September respectively (Figure 3). Similarly, the core

inflation rate (excluding costs of accommodation and

private road transport) fell to 2.0% in November, lower

than the 2.2% and 2.4% in October and September

respectively. The Monetary Authority of Singapore

(MAS) expected the CPI to rise slightly above 4.5% in

2012 and to come in at 3.5-4.5% in 2013.

Trends & Updates

Economic Overview

Figure 1

GDP growth rates

Source:MTI

-20%

-10%

0%

10%

20%

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

GDP growth (y-o-y) GDP growth (q-o-q)

Figure 2Singapore PMI and NODX

Source:SIPMM, IE Singapore*NODX and PMI figures for Dec 12 are not available.

-40%

-20%

0%

20%

40%

46

48

50

52

54

D

ec-11

Jan-12

Feb-12

M

ar-12

Apr-12

M

ay-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

N

ov-12

D

ec-12

PMI (LHS) NODX growth (y-o-y) (RHS)

Figure 3Ination, interest rate and unemployment rate

Source:MTI, MAS, MOM*CPI figures for Q4 12 are based on Oct and Nov. Unemployment figures for Q4 12 are not available.

0%

1%

2%

3%

4%

5%

6%

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

CP I change (y-o- y) 3 -month SIBOR Ove rall une mployme nt rate


3/7

Government intervention to be a new normal

In January 2013, the government introduced

the seventh round of cooling measures to cool the

residential market and also imposed for the first

time a Sellers Stamp Duty on industrial properties.

This follows after record high transaction volumes in

the private residential market as purchase demand

continues to be driven by the low interest rate

environment. Liquidity was also deflected to the

commercial and industrial property markets as they

were not affected by any cooling measures, resulting

in large price increases. We expect the government to

continue to monitor the property market very closely

and implement new measures aggressively if it findssales volume and prices rising above fundamentals.

Prices rose at a slower pace in 2012

Although private housing prices rose at a slower

pace for the whole of 2012 compared to 2011, the

slowdown was mainly in H1 2012. The pace of growth

picked up in Q3 and accelerated in Q4 for most

segments. 2012 also saw a record high of 22,289

units sold for the year, mainly due to supply from

the Government Land Sales (GLS) programme

(Figure 4 and Table 1).

Similar to 2011, the landed segment led the price

growth in 2012 due to limited stock and pipeline

supply. Resale prices of freehold landed homes in

the prime districts of 9, 10 and 11 increased 7.3%

y-o-y in 2012 with almost half of the growth in Q4

(3.9% q-o-q). Resale prices of leasehold terrace

homes in the suburban areas rose by 2.5% q-o-q in

Q4 and 9.7% y-o-y in 2012 which was lower than the

13.8% increase in 2011.

Within the non-landed segment, resale prices

of leasehold condominiums in the suburban areas

increased the most by 3.4% y-o-y in 2012 which

was less than half of the 8.4% y-o-y increase in

2011 (Figure 5). This was largely driven by a 2.0%

q-o-q growth in Q4 2012, the strongest quarterly

growth since Q4 2011. Resale prices of freehold

apartments/condominiums in the prime districts

of 9, 10 and 11 increased by a smaller 2.3% y-o-y in

2012, after rising by 4.9% in 2011. Most of the price

growth was in H2 with Q4 registering the strongest

q-o-q growth of 1.4%.

Figure 4 Primary and secondary home sales (excluding executive

condominiums), units

Source:URA REALIS, 31 December, DTZ Research

0

1,000

2,000

3,000

4,000

5,000

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec12

P rimary s ale s Se condary s ale s Units launc he d

Table 1

Selected new launches in Q4 2012

Development TenurePrice range

($ per sq ft)

Skies Miltonia 99 yrs 729 1,336

Eden Residences Capitol 99 yrs 2,780 3,060

Eco Sanctuary 99 yrs 740 1,290

Sky Green FH 1,202 1,733

Aura 83 FH 980 1,619

Source:URA, DTZ Research

Figure 5 Resale residential price indices

Source:DTZ Research

80

90

100

110

120

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Luxury freehold condominiums

Prime freehold condominiumsSuburban leasehold condominiums

(Q1 2011=100)


4/7

Luxury home prices stabilised in H2 2012

Following the imposition of the Additional

Buyers Stamp Duty (ABSD) in December 2011,

resale prices in the luxury segment declined by

1.3% y-o-y in 2012 after posting a 1.0% growth in

2011. However, the fall was mainly in H1 2012 and

prices have stabilised in H2 as buyers returned to

the market to look for value. There are also signs

of Chinese interest returning to the luxury segment

as the Chinese economy has improved. The number

of Chinese buyers who bought private non-landed

homes which cost more than $5m has increased

significantly from 14 in H1 2012 to 13 in Q3 and 20 in

Q4 based on preliminary data.

Near-term shock to sales volume

The government announced on 11 January 2013

the seventh round of cooling measures, which

included raising the ABSD, lowering the Loan-to-

Value (LTV) limits and increasing the minimum cash

downpayment. The higher upfront costs higher

stamp duties and cash outlay as well as stricter

financing requirements are expected to reduce

sales volume and impact on prices in 2013.

Retail

Divergent movements in rents and prices

Rental values of prime retail space in Orchard/

Scotts Road and the suburban areas remained

unchanged in Q4, except for those in the other city

areas which declined slightly. For the entire year of

2012, only rents in suburban areas posted positive

growth of 0.2% while those in Orchard/Scotts

Road and other city areas fell by 0.2% and 1.5%

respectively (Figure 6).

In contrast, prices continued to rise as interest

in retail property assets remained strong due to

low interest rates. The average capital value of

prime resale retail units in Orchard/Scotts Road

and the suburban areas rose 1.7% and 3.6% q-o-q

respectively in Q4. For the whole of 2012, the average

capital value of prime resale retail units in Orchard/

Scotts Road and the suburban areas rose 11.2% and

9.6% respectively. As a result, the average yield of

prime retail space in Orchard/Scotts Road fell to a

historical low of 4.5% in Q4 2012 from 5.0% in Q4

2011.

Labour costs a major strain on retailers

expansion plans

According to the latest Economic Survey ofSingapore, the overall unit labour cost shot up by

6.1% y-o-y in Q3, following the 3.8% and 4.0%

y-o-y increases in Q1 and Q2 respectively. The retail

sector is expected to continue to grapple with

labour crunch and higher operating costs as the

government focuses on restructuring and reducing

the countrys dependence on foreign labour. With

the difficulty in recruiting staff and the strong

Singapore dollar, retailers are increasingly finding

Singapore a less cost-effective place to set up

presence in the region. Some of them have begun

exploring options to expand operations in other

countries which offer cheaper labour and rents, and

a huge domestic demand base.

Figure 6 Average prime retail gross rental index in Orchard/Scotts

Road

Source:DTZ Research

85

90

95

100

105

110

115

Q404

Q405

Q406

Q407

Q408

Q409

Q410

Q411

Q412

Q413

Q414

(Q1 2011=100)


5/7

Bulk of pipeline supply in 2013

The average annual pipeline supply of 0.8

million sq ft (NLA) in the next five years is less

than the annual net supply of around 1.5 million sq

ft (NLA) in the past five years (Figure 7). However,

the pipeline is not evenly spread; the bulk of the

pipeline supply is expected to be completed in

2013 and 2014. In addition, almost 80% of the new

supply in 2013 will be in the suburban areas. Major

shopping centres expected to be completed in 2013

are orchardgateway, Westgate and Bedok Mall

(Table 2). We expect retail rents in the Orchard/

Scotts Road and suburban areas to ease slightly in

2013 as some cannibalisation of retailer demand is

envisaged in the face of labour shortages which will

curtail expansion plans.

Table 2

Upcoming major retail projects

Name ofdevelopment

Area Est NLA(sq ft)

Est TOPYear

Westgate Suburban areas 426,000 2013

JEM Suburban areas 331,000 2013

Bedok Mall Suburban areas 220,000 2013

Paya Lebar Square Suburban areas 95,000 2014

orchardgateway Orchard/Scots

Road

180,000 2013

Redevelopment of

former Yen San

Building

Orchard/Scots

Road

124,000 2014

Asia Square Tower 2 Other city areas 27,000 2013

Sports Hub Other city areas 250,000 2014


Dichotomy in office rents

The office sector performed better than expected

in 2012, particularly outside the CBD as demand from

non-financial sectors was strong. This saw average

rents falling in the CBD but holding firm at the fringe

areas.

Within the CBD, average gross face rents in

Marina Bay which consists of only premium-grade

buildings declined by 2.3% q-o-q to $10.50 per sq ft

per month in Q4. On a y-o-y basis, rents in Marina

Bay fell the most by 12.5%. In Raffles Place, average

gross face rents registered a smaller fall of 0.5%

q-o-q and 4.8% y-o-y in Q4 to $9.33 per sq ft per

month, supported by renewal activity or tenants

expanding within the same building. Elsewhere in

the CBD, average gross face rents in Shenton Way/

Robinson Road/Cecil Street were unchanged q-o-q

but registered a decline of 6.5% y-o-y to $7.25 per

sq ft per month in Q4 (Figure 8).

Offices

Figure 8Oce rental indices

Source:DTZ Research

0

40

80

120

160

200

240

Q402

Q403

Q404

Q405

Q406

Q407

Q408

Q409

Q410

Q411

Q412

Q413

Q414

Raffles Place Shenton Way/Robinson Rd/Ceci l St

(Q1 2011=100)

Figure 7 Retail development pipeline including projects on awarded

GLS sites, sq ft (million)


0.0

0.5

1.0

1.5

2.0

2013 2014 2015 2016 2017

Orchard/Scots Rd Other city areas Suburban areas


6/7

The rental decline in Marina Bay was higher

than other parts of the CBD due to the continuous

completion of new buildings. The completion of MBFC

Tower 3 in 2012 added 1.3 million sq ft of office space,

resulting in Marina Bay having the lowest average

occupancy rate of 88.5% amongst all areas. This

was exacerbated by lower demand from financial and

insurance firms, as they were more cautious about

taking on more space in light of the global economic

slowdown.

In contrast to the CBD, rents at the fringe were

more resilient in 2012, largely supported by a more

diversified tenant profile, high occupancy rates and

the lack of new supply. With the exception of Marina

Centre and Orchard Road where rents fell by 1.1%

y-o-y, average gross face rents in other CBD fringe

areas such as Beach Road/North Bridge Road, Bras

Basah Road/Selegie Road and Anson Road/Tanjong

Pagar held firm in 2012.

2012 demand higher than past six-year annual

average

Apart from Marina Bay, average office occupancy

levels elsewhere were above 90% as demand held

up better than expected in 2012. Net absorption for

the whole of 2012 was an estimated 1.6 million sq

ft, higher than the past six-year annual average of

1.5 million sq ft. While this was lower than 2011s net

absorption of 2.2 million sq ft, it was more than the

increase in supply of about 1.0 million sq ft in 2012.

The increase in supply was the lowest since 2008,

as an estimated 807,000 sq ft of office space was

terminated. Office buildings which were removed

from the stock in 2012 for redevelopment included

UIC Building, Marina House and Midlink Plaza.

Going forward, an estimated 9.3 million sq ft of

office space is expected to be completed between

2013 and 2017, translating to an average of 1 .9 million

sq ft per annum (Figure 9). The pipeline supply is not

even however and about 26%, or 2.5 million sq ft,

is expected to come on-stream in 2013. Besides Asia

Square Tower 2 in the CBD, other major offices due

to be completed in 2013 include The Metropolis and

Jem in the decentralised areas.

Office rents to bottom sometime this year

Rents in the CBD will continue to face downward

pressure due to the high level of pipeline supply.

However, this will be mitigated by the nascent

recovery in the Chinese, US and regional economics

and continued demand from the non-financial

sectors. Therefore, average CBD office rents are

expected to bottom sometime in 2013.

Figure 9Oce development pipeline including projects on

awarded GLS sites, sq ft (million)


-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2013 2014 2015 2016 2017

CBD CBD Fringe Decentralised Terminaton


7/7

GENERAL DISCLOSURE

Disclaimer - DTZ Research

This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional

advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of

any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced

or referred to without prior approval. Any such reproduction should be credited to DTZ.

DTZ January 2013

Disclaimer - Citibank

The market data and information herein contained (Information) is the product or service of a third party not affiliated to

Citibank NA, Citigroup Inc or Its Affiliates. None of the Information represent the opinion of, counsel from, recommendation or

endorsement by Citibank NA, Citigroup Inc or Its Affiliates, Officers, Employees or Agents.

You may not use the Information for any unlawful purpose or any purpose not expressly permitted hereby. Reproduction of the

Information in any form is prohibited.

NO WARRANTY

The Information is provided as is, without warranty of any kind, it has not been independently verified by Citibank NA, Citigroup

Inc or Its Affiliates, Officers, Employees or Agents and use of the Information is at your sole risk. Citibank NA, Citigroup Inc or Its

Affiliates, Officers, Employees or Agents shall not be liable and expressly disclaim liability for any error or omission in the content

of the Information, or for any actions taken by you or any third party, in reliance thereon. The Information is not guaranteed to

be error-free, or to be relied upon for investment purposes, and Citibank NA, Citigroup Inc or Its Affiliates, Officers, Employees or

Agents make no representation or warranty as to the accuracy, truth, adequacy, timeliness or completeness, fitness for purpose,

title, non infringement of third party rights or continued availability of the Information.

LIMITATION OF LIABILITY

IN NO EVENT SHALL CITIBANK NA, CITIGROUP INC OR ITS AFFILIATES, OFFICERS, EMPLOYEES OR AGENTS, BE LIABLE FOR ANY

LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION, ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR

INDIRECT DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, BUSINESS INTERRUPTION, AND ANY AND ALL FORMS OF LOSS OR DAMAGE,

REGARDLESS OF THE FORM OF ACTION OR THE BASIS OF THE CLAIM, WHETHER OR NOT FORESEEABLE ) ARISING OUT OF THE USE

OF THE INFORMATION (PROVIDED IN ANY MEDIUM), EVEN IF ANY OF CITIBANK NA, CITIGROUP INC OR ITS AFFILIATES, OFFICERS,

EMPLOYEES OR AGENTS, HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE.

2013 CITIBANK

CITIBANK IS A REGISTERED SERVICE MARK OF CITIGROUP INC. OR CITIBANK, N.A.

CITIBANK SINGAPORE LIMITED. CO REG. NO. 200309485K

Citigold Property Insights Q42012

Documents

Transcript of Citigold Property Insights Q42012