Singapore Property: Showflat Visits, including Ascentia Sky, Vista Residences.... etc

Local buyers continue to drive demand. Mass market residential projects continue to draw strong demand. Our weekend visits to a handful of mid and mass projects revealed that sentiments on the ground remain positive, with showflat turnouts at healthy levels. This is despite the earlier confusion pertaining to the government proposed income tax change. While take-up for prime projects has receded (Sophia Residences: ~ 20+ sold out of 38 launched; Ferrell Residences: 8 @ Woodleigh, a 330-unit mass market project in district 13 by Frasers Centrepoint, was fully sold within 2 weeks at an average price of S$780 psf. With the onset of Hungry Ghost Festival, developers launches should accelerate over the next couple of weeks.

The Ascentia Sky official launch on Saturday saw sizeable turnout of ~ 200+ people, with the makeshift carpark more than 75% filled at any one point. Buyer profile was mainly Singaporeans from late 20s to early 50s. We believe the project is one of the first (if not the first) to have showflats of all available sizes, which offer customers a good feel of what they are buying into. ~ 20 units were sold on Saturday, putting the total transacted units at 55, which translate to a 50.5% take-up out of the 109 launched units (11 storeys only). More units were launched on Sunday, with total transacted units YTD at 69. We hear this excludes some units which Wing Tai could have sold to its business associates and/or directors. Most units sold were 2-bedders, reflecting that more buyers bought it for investment purposes. Buyers also preferred the tower facing the Tanglin / Orchard Road as compared to the Sentosa view. Transacted prices ranged from S$1,100 to 1,300 psf. Despite the slight premium over neighbouring projects, the healthy take-up suggests buyers see untapped potential due to Ascentia Sky unique design of multiple sky gardens, brand-name developer status and stellar location (3-min drive to Orchard Road and 8-min train ride to CBD). Further, our analysis revealed that during the last property upcycle, projects could yield diverse capital values despite their close proximity, i.e. Tanglin View S$1,261 psf vs. Tanglin Regency S$998 psf. For comparison and insights into its view, prospective buyers were seen visiting The Metropolitan nearby.

In the mid-market segment, Vista Residences, a district 12 project by Far East Organisation, had also seen strong take-up for the initial units launched. Our check with property agents suggest that local buyers are still driving the demand for private properties but there is a rising proportion of buyers who are buying properties for investments rather than for own stay. At Vista Residences, we understand that prices start from ~S$1,050 psf onwards and 90% of the initial release of the units up to the 12th storey had been taken up during the private preview, with more floors subsequently released for sale.

In comparison to The Arte, a development by City Developments that sits next to Vista Residences, which was launched at an average price of S$880 psf, it seems that prices have risen sharply in recent months but in fact, the difference in pricing is attributable to the difference in unit sizes and floor plans. Vista Residences offer smaller size units that command higher psf pricing and also smaller balcony space than The Arte. As such, we caution that the strong buying momentum at higher psf pricing for the new launch should not be viewed as a new uptrend for property prices.

Mass market projects that are expected to be launched in the coming weeks include Oasis @ Elias (a 388-unit, 99-yr LH project at Elias Road by Chip Eng Seng) and The Gale (a 329-unit, freehold project at Flora Road by Tripartite Developers). A price increase that is actually not a true increase.

Too early to call for a recovery. We remain unconvinced by the recent 'recovery' in the physical property market as we believe that the buying strength over the recent weeks could have been driven by the spillover effect from the earlier pent-up demand that had drawn cash-rich local investors back into the property market. In our view, potential catalyst for price increase will have to come from the inflow of foreign funds into the property market as well as a pick up in employment opportunities. Foreign funds had been the driving force of the property boom in 2007 and we have not yet seen them coming back in a strong way. As such, we think that it may be still early to call for a recovery in the property market.


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No tightening of income tax policy for poerpoerty transactions

Ministry of Finance wishes to clarify that the proposed change in the Income Tax public consultation document involves no tightening of the current income tax policy for individuals who sell their properties.

The only change proposed involves a relaxation of income tax treatment aimed at giving certainty of non-taxation to individuals who do not sell properties frequently. This has been in response to public feedback over the years as under existing practice, such certainty of non-taxation has not been provided.

The proposed change is therefore not an anti-speculation measure. It does not mean that individuals who have sold more than one property within a four year period will automatically be subject to income tax. There is no change to the current and long-standing income tax treatment in this regard. Whether individuals who sell properties more frequently are subject to income tax depends on the facts and circumstances of each case. IRAS has in the past brought to tax a small number of individuals -- who regularly transact in property, and whose gain from the disposals is assessed to be income.

Singapore does not have a capital gains tax, unlike many countries. Its income tax rules are merely aimed at taxing persons who make an income out of their property transactions. This income tax policy is common among tax authorities internationally, and our local practices are not unique.

There is no requirement that individuals must report to IRAS for income tax purpose every time they sell their properties ? this will also continue to apply going forward. IRAS has always conducted its own audits of property transactions for possible cases of assessable income.

The only change being proposed in the Income Tax (Amendment) Bill 2009 is to provide certainty of non-taxation for individual owners who do not sell properties frequently. Specifically, when individuals sell their properties, they will be certain that the gains made from selling their properties will not be subject to income tax if they have not sold any properties in the preceding four years. The lack of certainty in the current rules presently for individuals who sell their properties had led to public feedback for more clarity of income tax treatment. In response to such public feedback, Ministry of Finance is proposing this improvement, as part of its regular review of the Income Tax Act.

More details of the Income Tax public consultation can be found at http://www.mof.gov.sg/consultation_current/2009_public_con_income_tax_bill_amendment.html


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Wing Tai launched Ascentia Sky despite the income tax amendments for property gains

Impact of the income tax amendments for property gains still uncertain. It is still early days to determine the impact on the mkt and expect further clarification from the govt in the coming weeks. Wing Tai's upcoming launch of Ascentia Sky (map below) is proceed as planned.

Sales volumes to remain firm; luxury demand recovering but still weak. CBRE expects >10,000 units of new home sales for 2009 (vs the 4,264 units sold in 2008) with firm buying interest for mass to mid-tier projects supported by upgrader and pent-up demand. Nonetheless, appetite for luxury projects priced >S$2,000psf remains weak with relatively low foreign investor participation. Wing Tai has seen interest pick up in its high-end project Belle Vue with around 70 units sold (40% of total) at avg price of S$1,800psf (>80% local buyers). The Ardmore sites will likely be launched no sooner than 2010.

Rental market still stable; en bloc market to remain quiet. There is an ongoing shift in the composition of the expatriate community with the outflow of banking & finance-related expats partially offset by growth in expatriates from the O&G and petrochemical industries. This has helped stabilize the rental mkt and the panel does not foresee significant decline in rents when physical supply returns to the market.


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