Real Estate Sentiment Index

Fourth Quarter 2012

January/February 2013

REDAS Research & Education

Singapore. January / February 2013 Real Estate Sentiment Index 1 . A “net balance percentage” approach is adopted to derive the scores for approach is adopted to derive the scores for key determinants of the real estate market sentiment. down from 5. RESI scores range from 0 to 10. Composite Sentiment Index: The overall sentiment dropped to 4. after a new round of cooling measures has been introduced in January 2013.7 in 3Q12.6.3 in 4Q12.3 in 4Q12. reflecting the extent of pessimism or reflecting the extent of pessimism or optimism of the survey respondents. structured questionnaire survey is conducted among senior executives of REDAS member firms. down from 4. The quarterly quarterly structured questionnaire survey is conducted among senior executives of REDAS member firms.0 from 4. tracking changes in sentiments over in sentiments over the past and the next 6 months respectively. Executive Summary •The Composite Sentiment Index stood at 4. RESI comprises a Current Sentiment Index and a Future Sentiment Index. RESI scores range from 0 to 10. •Developers’ interests in GLS Programme and En-bloc sales were subdued compared to the last quarter. National University of Singapore.9 in 3Q12. •Developers plan to launch lesser residential units and they expect unit price to moderate in the near term. and a Composite Sentiment Index which is the derived indicator is the derived indicator for the current overall market sentiment. RESI RESI measures the perceptions and expectations of real estate development and market conditions in measures the perceptions and expectations of real estate development and market conditions in Singapore. The Singapore (REDAS) and the Department of Real Estate (DRE). Future Sentiment Index: The score fell to 4. for the current overall market sentiment. The score captured the impact of the comprehensive set of cooling measures introduced in January 2013.Real Estate Sentiment Index About RESI REDAS-NUS Real Estate 3Q11 The Real Estate Sentiment Index (RESI) is jointly developed by the RealSentiment EstateIndex Developers’ Association The Real Estate Sentiment Index (RESI) is jointly developed by the Real Estate Developers’ Association of REDAS-NUS Real Estate Sentiment Index 3Q11 of Singapore (REDAS) and the Department of Real Estate (DRE). •The eligibility criteria and sale restriction imposed on Executive Condominiums (EC) buyers are more important than housing attributes and specifications in differentiating ECs from private condominiums Chart 1 : Overall Real Estate Sentiment Index Main Findings Current Sentiment Index: The index stood at 4. key determinants of the real estate market sentiment. The score indicates a dampening market sentiment compared to six months ago. Prime and suburban residential sectors are expected to underperform over the next six months. A “net balance percentage” optimism of the survey respondents. The survey respondents’ market outlooks turned pessimistic. National University of Singapore. Respondents were more pessimistic on the market outlooks over the next six months. •The current and future net balance scores declined across different real estate sectors. and a Composite Sentiment Index which the past and the next 6 months respectively. tracking changes RESI comprises a Current Sentiment Index and a Future Sentiment Index.1 in 3Q12.

respectively in 3Q12. 28% of them anticipate a moderate price increase. 43% of them expect moderately more launches. In assessing the price change. a significant drop from the 58% recorded in the last quarter. developers may not wish to lower pricing for fear of affecting subsequent launches. Note: (*) Figures in Chart 2 are all “net balance percentages”.“ . down from 23% in the last quarter.Comment by a survey respondent January / February 2013 Real Estate Sentiment Index 2 . yet are unable to increase pricing due to choices available to buyers.Comment by a survey respondent Chart 3: Primary Residential Market Expectations Note: Percentages do not add up to 100 due to rounding. Suburban retail and hotel/serviced apartment are the two best performing sectors with the current and future net balances of +14% and +9%. please see explanatory note for details. 28% of them expect the launches to hold at the same level.”-. 25% of them expect price to hold. respectively in 4Q12. compared to the current and future net balances of -8% and +2%. 20% of them expect lesser units of new launches. The current net balance of suburban residential sector remained positive at +10% in 4Q12. up from 4% in the last quarter. while the future net balance dropped significantly from +6% in 3Q12 to -28% in 4Q12. Only 10% of the developers indicate that they will launch substantially more units. unchanged from the figure in the last quarter.Comment by a survey respondent “Developments targeting a larger percentage of foreign buyers may have to lower prices to neutralize the increase in the buyers’ stamp duty payable now in order to move sales“ -. up from 10% in the last quarter “Given the increase in land banks. the demand for business parks and hi-tech space will face stiff competition . developers surveyed in 4Q12 plan to launch lesser units compared to 3Q12. down from 48% in 3Q12. Prime residential sector showed the sharpest decline in 4Q12 with a current net balance of 27% and a future net balance of -49%.” -. Overall. “The outlook in the next 6 months should be bleak for the residential sector . Notably. 48% of them expect moderately lower price in the near term.Chart 2: Overall Real Estate Market Performance* The current and future net balance scores declined across different real estate sectors.Comment by a survey respondent “As office rents continue to decline. down from 33% in 3Q12.

“En-bloc sites that require a higher capital commitment or quantum would be more difficult to move given the damper on foreign purchasers . labour and building materials are more likely to fluctuate over the next 6 months as compared to a significant increase in professional services fees.” -.Comment by a survey respondent “Cost of financing and raw materials – land .Chart 4: Level of Interest in Land Sales* Only 10% of the developers surveyed express moderately greater interest in GLS.” --Comment by a survey respondent “Government has already announced the GLS programme for 1H2013 which is providing a relatively large crop for potential bidders. Note: (*) GLS and En-Bloc Sales are adopted as proxies to gauge the industry’s level of interest in land sales. The interest in En-bloc is also relatively lackluster. up from 55% in 3Q12. “Shortage and rising labour costs is posing significant issues to developers in terms of both costs and project duration. Percentages do not add up to 100 due to rounding. down from 32% in 3Q12.” --Comment by a survey respondent Chart 5: Development Cost Labour cost continues to be the major concern indicated by 59% of the developers in 4Q12. such improvements will take time to gain traction. 35% of the developers express the same level of interest. up by threefold from 15% in 3Q12. . 38% of them indicate moderately lesser interest. down from 61% in the last quarter. 45% of them anticipate moderately less interest in En-bloc sales. One third of the developers surveyed (33%) note their concern in land cost.” -. a big jump from 7% in last quarter. Cost on financing (11%) and professional services (3%) are of the least concerns among the developers. While the argument for enhancing productivity should address some of these issues. whereas a quarter of them (25%) express concern on building materials cost. Note: Percentages do not add up to 100 due to rounding.Comment by a survey respondent January / February 2013 Real Estate Sentiment Index 3 .

location. and depending on their budgets. the respondents attach low scores on housing attributes and specifications (i. Note: Percentages do not add up to 100 due to rounding.0.Chart 6: Executive Condominiums (ECs) The majority of the respondents note that the eligibility criteria (78%) and sale restriction on EC (76%) are two key differentiating factors of Ecs relative to private condominiums. Interestingly. Half of them (52%) rate pricing as a key differentiating factor for these two housing types.e. amenities and facilities. some potential EC buyers may switch to buying a mass market private condominium instead.6 while the future sentiment index declined from 4.2 to 4. interior finishes and layouts) as important factors differentiating ECs from private condominiums. January / February 2013 Real Estate Sentiment Index 4 .9 to 4.1 to 4.” -.Comment by a survey respondent Chart 7: Comparison of Pre-measures and Post-measures Sentiment Index Pre-measures Sentiment Index Post-measures Sentiment Index The survey respondents were asked to reassess the market sentiment following a new round of market cooling measures introduced on 12 January 201. The post-measures composite sentiment index has also been revised downward from 5. architectural design and themes. “If EC prices continue to increase. The current sentiment index dropped from 5.3. the price gap between ECs and mass market private condominiums could close. after adjusting for the impact of the new cooling measures in January 2013.

The Association actively engages regulators.Explanatory Note The RESI is an objective and comprehensive measurement specifically gauging the confidence of senior executives in the Singapore real estate and development industry. REITs and fund managers. policy makers and private sector partners to promote best practices and to support the growth of a vibrant and progressive industry for the creation of quality real estate in Singapore. is part of the School of Design and Environment (which also includes the Department of Architecture and the Department of Building). E-mail: kahhsiung@redas. June. in March. The derived net balance scores are not weighted by the size of the respondents’ business. . real estate consultancies and allied professionals. urban planning and economics. established in 1959. Tel: 6516 4553. finance. consultants. Tel: 6336 6655.com NUS DRE: Associate Professor Sing Tien Foo. professional firms and service providers. we cannot offer any warranty that it contains no factual errors. About NUS DRE The NUS Department of Real Estate (DRE). To uphold the quality of products of members. The survey is conducted quarterly. About REDAS The Real Estate Developers' Association of Singapore (REDAS). The Department has a strong reputation in real estate research. charity golf tournaments and international business missions. No part of this report may be reproduced in any form without prior permission of Real Estate Developers’ Association of Singapore (REDAS). The survey measures respondents’ perceptions and expectations of current and future real estate market conditions. A standard format questionnaire is mailed out electronically to REDAS members. This is the difference between the proportion of respondents who have selected the positive options (“better” and “increase”) and the proportion of respondents who have selected the negative options (“worse” and “decease”). seminars. E-mail: rststf@nus. DRE aims to be the leading centre for real estate education and research in Asia with the mission to develop leaders and advance knowledge for the global real estate industry. is Singapore’s premier business association in the real estate and development industry. Whilst every effort has been made to ensure its accuracy.edu. REDAS also provide conciliation panel services for purchasers of residential property. please contact: REDAS: Chong Kah Hsiung. September and December. first established as the Department of Building and Estate Management in 1969. Real Estate Developers’ Association of Singapore (REDAS) All rights reserved. builders.sg © 2013. Respondents assess relative market conditions between now and in the past six months. DRE has partnerships with leading global universities for research and other academic exchange. bankers. Respondents include developers. especially in the areas of investment. financial institutions. For enquiries. as well as their expectations for the next six months. A “+” sign in the scores denotes a net positive sentiment (optimism) and a “-“sign indicates a net negative sentiment (pessimism). REDAS regularly organizes activities such as networking sessions. A “net balance percentage” is used to indicate the overall direction of change in sentiment. The survey is thus representative of the overall Singapore real estate industry. REDAS represents some 300 members comprising developers. It also has strong links with the local real estate industry through collaborations in research and executive training.