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January/February 2013

Real Estate Sentiment Index Fourth Quarter 2012

REDASResearch & Education

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About RESI

January / February 20131

REDAS-NUS Real Estate Sentiment Index 3Q11

REDAS-NUS Real Estate Sentiment Index 3Q11The Real Estate Sentiment Index (RESI) is jointly developed by the Real Estate Developers Associationof Singapore (REDAS) and the Department of Real Estate (DRE), National University of Singapore. The

quarterly structured questionnaire survey is conducted among senior executives of REDAS member firms.RESI measures the perceptions and expectations of real estate development and market conditions inSingapore. RESI comprises a Current Sentiment Index and a Future Sentiment Index, tracking changesin sentiments over the past and the next 6 months respectively, and a Composite Sentiment Index whichis the derived indicator for the current overall market sentiment. RESI scores range from 0 to 10,reflecting the extent of pessimism or optimism of the survey respondents. A net balance percentageapproach is adopted to derive the scores for key determinants of the real estate market sentiment.

Executive Summary

The Composite Sentiment Index stood at 4.3 in 4Q12, down from 4.9 in 3Q12. The survey respondentsmarket outlooks turned pessimistic, after a new round of cooling measures has been introduced in January2013.

The current and future net balance scores declined across different real estate sectors. Prime and suburbanresidential sectors are expected to underperform over the next six months.

Developers plan to launch lesser residential units and they expect unit price to moderate in the near term.

Developers interests in GLS Programme and En-bloc sales were subdued compared to the last quarter.

The eligibility criteria and sale restriction imposed on Executive Condominiums (EC) buyers are moreimportant than housing attributes and specifications in differentiating ECs from private condominiums

Real Estate Sentiment Index


The Real Estate Sentiment Index (RESI) is jointly developed by the Real Estate Developers Association ofSingapore (REDAS) and the Department of Real Estate (DRE), National University of Singapore. The quarterlystructured questionnaire survey is conducted among senior executives of REDAS member firms. RESImeasures the perceptions and expectations of real estate development and market conditions in Singapore.RESI comprises a Current Sentiment Index and a Future Sentiment Index, tracking changes in sentiments overthe past and the next 6 months respectively, and a Composite Sentiment Index which is the derived indicatorfor the current overall market sentiment. RESI scores range from 0 to 10, reflecting the extent of pessimism oroptimism of the survey respondents. A net balance percentage approach is adopted to derive the scores forkey determinants of the real estate market sentiment.

Chart 1 : Overall Real Estate Sentiment Index

Current Sentiment Index: The index stood at4.6, down from 5.1 in 3Q12. The scoreindicates a dampening market sentimentcompared to six months ago.

Future Sentiment Index: The score fell to 4.0from 4.7 in 3Q12. Respondents were morepessimistic on the market outlooks over thenext six months.

Composite Sentiment Index: The overallsentiment dropped to 4.3 in 4Q12. The scorecaptured the impact of the comprehensive setof cooling measures introduced in January2013.

Main Findings

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Chart 2: Overall Real Estate Market Performance*

Chart 3: Primary Residential Market Expectations

Note: (*) Figures in Chart 2 are all net balance percentages,please see explanatory note for details.

Given the increase in land banks, developers may not wish to lower pricing for fear of affecting subsequent launches, yet are unable to increase pricing due to choices available to buyers. -- 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 -- Comment by a survey respondent


Note: Percentages do not add up to 100 due to rounding.

The outlook in the next 6 months should be bleak for the residential sector .-- Comment by a survey respondent

As office rents continue to decline, the demand for business parks and hi-tech space will face stiff competition . - Comment by a survey respondent


The current and future net balance scoresdeclined across different real estate sectors.Prime residential sector showed the sharpestdecline in 4Q12 with a current net balance of -27% and a future net balance of -49%,compared to the current and future netbalances of -8% and +2%, respectively in3Q12. The current net balance of suburbanresidential sector remained positive at +10% in4Q12, while the future net balance droppedsignificantly from +6% in 3Q12 to -28% in4Q12. Suburban retail and hotel/servicedapartment are the two best performing sectorswith the current and future net balances of+14% and +9%, respectively in 4Q12.

Overall, developers surveyed in 4Q12 plan tolaunch lesser units compared to 3Q12. Only

10% of the developers indicate that they willlaunch substantially more units, down from23% in the last quarter. 43% of them expectmoderately more launches, down from 48% in3Q12. 28% of them expect the launches tohold at the same level, unchanged from thefigure in the last quarter. Notably, 20% of themexpect lesser units of new launches, up from4% in the last quarter. In assessing the pricechange, 28% of them anticipate a moderateprice increase, down from 33% in 3Q12. 25%of them expect price to hold, a significant drop

from the 58% recorded in the last quarter. 48%of them expect moderately lower price in thenear term, up from 10% in the last quarter

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Chart 4: Level of Interest in Land Sales*

Chart 5: Development Cost

Only 10% of the developers surveyed expressmoderately greater interest in GLS, down from32% in 3Q12. 38% of them indicatemoderately lesser interest, a big jump from 7%in last quarter. The interest in En-bloc is alsorelatively lackluster. 35% of the developersexpress the same level of interest, down from61% in the last quarter. 45% of them anticipatemoderately less interest in En-bloc sales, upby threefold from 15% in 3Q12.

Labour cost continues to be the major concernindicated by 59% of the developers in 4Q12,up from 55% in 3Q12. One third of the

developers surveyed (33%) note their concernin land cost, whereas a quarter of them (25%)express concern on building materials cost.Cost on financing (11%) and professionalservices (3%) are of the least concerns amongthe developers.

Shortage and rising labour costs is posing significant issues to developers in terms of both costs and

project duration. While the argument for enhancing productivity should address some of these issues, such improvements will take time to gain traction. -- Comment by a survey respondent

Cost of financing and raw materials land , 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


Note: (*) GLS and En-Bloc Sales are adopted as proxies to gauge the industrys level of interest in land sales.Percentages do not add up to 100 due to rounding.

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En-bloc sites that require a higher capital commitment or quantum would be more difficult to move given the damper on foreign purchasers . --Comment by a survey respondent

Government has already announced the GLS programme for 1H2013 which is providing a relatively large crop for potential bidders. --Comment by a survey respondent



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Chart 6: Executive Condominiums (ECs)

The majority of the respondents note that theeligibility criteria (78%) and sale restriction onEC (76%) are two key differentiating factors of

Ecs relative to private condominiums. Half ofthem (52%) rate pricing as a key differentiatingfactor for these two housing types.Interestingly, the respondents attach lowscores on housing attributes and specifications(i.e. location, amenities and facilities,architectural design and themes, interiorfinishes and layouts) as important factorsdifferentiating ECs from private condominiums.

If EC prices continue to increase, the price gap between ECs and mass market private condominiums could close, and depending on their budgets, some potential EC buyers may switch to buying a mass

market private condominium instead. -- 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 marketcooling measures introduced on 12 January 201. The current sentiment index dropped from 5.2 to 4.6 whilethe future sentiment index declined from 4.9 to 4.0, after adjusting for the impact of the new cooling measuresin January 2013. The post-measures composite sentiment index has also been revised downward from 5.1 to

4.3.

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For enquiries, please contact:

REDAS: Chong Kah Hsiung, Tel: 6336 6655, E-mail: [email protected]

NUS DRE: Associate Professor Sing Tien Foo, Tel: 6516 4553, E-mail: [email protected]

About REDAS

The Real Estate Developers' Association of Singapore (REDAS), established in 1959, is Singapores premier businessassociation in the real estate and development industry. REDAS represents some 300 members comprising developers,builders, real estate consultancies and allied professionals, bankers, REITs and fund managers. The Association

actively engages regulators, policy makers and private sector partners to promote best practices and to support thegrowth of a vibrant and progressive industry for the creation of quality real estate in Singapore.

REDAS regularly organizes activities such as networking sessions, seminars, charity golf tournaments and internationalbusiness missions. To uphold the quality of products of members, REDAS also provide conciliation panel services forpurchasers of residential property.

2013, Real Estate Developers Association of Singapore (REDAS)

All rights reserved. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains nofactual errors. No part of this report may be reproduced in any form without prior permission of Real Estate DevelopersAssociation of Singapore (REDAS).

About NUS DRE

The NUS Department of Real Estate (DRE), first established as the Department of Building and Estate Management in1969, is part of the School of Design and Environment (which also includes the Department of Architecture and the

Department of Building). DRE aims to be the leading centre for real estate education and research in Asia with themission to develop leaders and advance knowledge for the global real estate industry. The Department has a strongreputation in real estate research, especially in the areas of investment, finance, urban planning and economics.DRE has partnerships with leading global universities for research and other academic exchange. It also has stronglinks with the local real estate industry through collaborations in research and executive training.

Explanatory Note

The RESI is an objective and comprehensive measurement specifically gauging the confidence of seniorexecutives in the Singapore real estate and development industry. The survey measures respondentsperceptions and expectations of current and future real estate market conditions. Respondents assess

relative market conditions between now and in the past six months, as well as their expectations for the nextsix months.

A standard format questionnaire is mailed out electronically to REDAS members. Respondents includedevelopers, consultants, financial institutions, professional firms and service providers. The survey is thusrepresentative of the overall Singapore real estate industry. The survey is conducted quarterly, in March, June,September and December.

A net balance percentage is used to indicate the overall direction of change in sentiment. This is thedifference between the proportion of respondents who have selected the positive options (better andincrease) and the proportion of respondents who have selected the negative options (worse anddecease).

A + sign in the scores denotes a net positive sentiment (optimism) and a -sign indicates a net negativesentiment (pessimism). The derived net balance scores are not weighted by the size of the respondentsbusiness.

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