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News Release


JLL’s perspective: URA 4th quarter 2014


Residential property prices in steady decline

The private residential property index fell 1.1 per cent in 4Q14, bringing the full year decline to 4 per cent. In 2014, prices for non-landed private homes in the Core Central Region (CCR) declined by 4.1 per cent, Rest of Central Region (RCR) by 5.3 per cent and Outside Central Region (OCR) by 2.2 per cent. The resilience of OCR is due to this market segment being supported by HDB upgraders and more affordable homes being available to buyers.

Landed property prices softened by 5.3 per cent in 2014 as these higher price assets become less affordable to buyers constrained by the TDSR. Within the landed market, the more expensive detached houses suffered the biggest decline in prices, falling 7.9 per cent in 2014. While landed homes are limited in supply, they are vulnerable to demand shrinkage in a falling market.

Sharp increase in completed units, higher vacancy rates and declining rents

In 4Q14, 6,366 private residential units were completed, a 40 per cent jump from the 4,559 units completed in 3Q14. The year ended with 19,941 units completed which is 52 per cent more than the 13,150 completed in 2013. Some of the large projects completed in 4Q14 include d’Leedon (1715 units), Seastrand (473 units), Parc Vera (452 units), Terrasse (414 units) and The Miltonia (410 units).

Overall vacancy rate in 4Q14 rose to 7.8 per cent from 7.1 per cent in the previous quarter and is now significantly higher than the low of 5.2 per cent recorded in 1Q13. As the bulk of new completions are in the non-landed segment, its vacancy rate rose sharply from 8.2 per cent in 3Q14 to 9.1 per cent in the fourth quarter. If it trends towards 10 per cent, it would reach the high vacancies recorded during the 2004/05 period when rents were depressed.

The increased supply of completed units is exacerbating the softening in the leasing market, with the rental index falling by 1 per cent in 4Q14 and by 3 per cent for the whole year. Rents in CCR have fallen by 3.7 per cent in 2014, more than the other segments as the higher rents in CCR become less affordable to tenants with tighter housing budgets.

Rising rents and prices

The office sector remains optimistic with steady growth in rents and prices. Rents have been strengthening on the back of limited supply as seen in the 10.9 per cent increase in the rental index for central area in 2014. Prices of office property in the central area also increased, by a more moderate 4.5 per cent during the year. The lag in price increase could be due to an anticipation of rising yields in tandem with interest rate increases. Since end-2009 to end-2014, central area office prices rose 53 per cent, much higher than the rental increase of 35 per cent, as investment fervour led to prices over-shooting rents, leading to compressed yields.

In 4Q14, several major office developments were completed including CapitaGreen, Westgate Tower and Paya Lebar Square, which collectively added 167,600 sq m (1.8 million sq ft) GFA to total office stock.


Stable Retail Property Market

Mild increases in 4Q14 were recorded for both rents and prices of retail space in the central region but over the year the trend has been fairly flat, with a marginal 0.9 per cent increase for both rents and prices. Retailers have been affected by rising business costs and manpower constraints due to the labour tightening policies, which would impact on their demand for space and rental growth.

The more significant retail projects completed in 4Q14 include Big Box, The Seletar Mall and the retail component at Paya Lebar Square, which collectively added 68,100 sq m (733,000 sq ft) GFA to total retail stock.

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