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The chain reaction sparked
off by the sub-prime crisis in the United States in mid-2007
resulted in a deepening of the credit crunch problem worldwide
and leading to a global economic crisis in 2008. The Singapore
economy was not left unscathed and entered into its first
technical recession since 2002, when real gross domestic
product (GDP) contracted by 0.2% and 3.7% in third and fourth
quarters of 2008 respectively. For the year 2008 as a whole,
the Ministry of Trade and Industry (MTI) reported the growth
of the Singapore economy as 1.1%, a stark contrast to 2007’s
7.7% growth.
2008 was similarly a challenging
year for the private residential market, which experienced
downward pressure on both sales activity and transacted
prices after 2007’s blistering performance. Data released
by the Urban Redevelopment Authority’s (URA) showed
a modest take-up of 4,264 private residential units in 2008,
a decline of approximately 71% year-on-year. In 2008, prices
of private residential properties fell by 4.7%, compared
with the 31.2% increase in 2007.
Contrary to improved capital
values in 2007, prices of private apartments in 2008 dropped
by 5.6% in Core Central Region (CCR), 4.7% in Rest of Central
Region (RCR) and 2.9% in Outside Central Region (OCR). CCR
comprises the prime districts (9, 10, 11, Downtown Core
and Sentosa Cove), while RCR refers to the area within the
Central Region that is outside CCR.
Notwithstanding the moderated
overall performance, several new private residential project
launches in 2008 were well received. Livia, a mass market
private residential project jointly developed by CDL, Hong
Realty (Private) Limited and Hong Leong Holdings Limited
attracted more than 3,000 visitors to its show suite during
the soft launch weekend, and buyers snapped up 80% of the
200 units released during Phase 1.
In 2009, the residential
property market is expected to be challenging in light of
the economic growth forecast of -5.0% to -2.0%. Recognising
the weak economic outlook for 2009, the Government has taken
steps to curb the supply of land for private homes by not
adding new sites under the Government Land Sales Programme
for the first half of 2009. Singapore is expected to ride
through the financial storm, buoyed by the momentum from
significant projects such as the recent FORMULA 1TM
Singapore Grand Prix and the upcoming Integrated Resorts;
along with the country’s sound financial system, and
competitive and well-diversified economy. Given the transparency
and stability of Singapore’s political and legal systems,
high standards in corporate governance, low interest rate
environment as well as continuous efforts by the Government
in remaking Singapore’s economy with new and sustainable
growth engines to attract foreign investment, Singapore’s
residential property market is well-positioned to recover
quickly.
Rental growth in 2008 was
2.0% and leasing activity in 2009 is expected to be supported
by renewals and relocation to better, newer or cheaper premises
amidst softening of rents.
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Soaring
high at 245 metres tall, the newly-completed The
Sail @ Marina Bay has dramatically transformed Singapore’s
skyline. |
Despite rental growth rates
beginning to show signs of weakening, the office market
enjoyed high occupancy rates in the first three quarters
of 2008. However, with the dramatic turn of events in the
global financial markets which witnessed the collapse of
Lehman Brothers in September 2008 followed by a series of
worldwide government bail-out announcements in fourth quarter
of 2008, many firms began to shelve their business expansion
plans or downsize their workforce and workspace. As a result,
the office market rental came under downward pressure in
the last quarter of 2008.
URA data showed that prices
of office space fell by 7% while rentals increased by 5.8%
in 2008, with island-wide vacancy rate of 8.8% in Q4 2008
and Grade A office vacancy hovering at 0.9%. According to
a CB Richard Ellis market report, Grade A office space rents
fell 12.5% year-on-year to average $15.00 per square foot
per month in Q4 2008. In a swift response to the global
credit crunch and financial crisis, the Singapore Government
has undertaken several measures to build confidence, including
the guarantee on deposits as well as offering numerous government
financing schemes with lower and fixed interest rates to
businesses through SPRING Singapore. These measures are
aimed at reducing the risk of depositors shifting deposits
out of Singapore banks, ensuring financial institutions
in Singapore remain competitive, and access to credit is
available for financing of economic activities, as well
as lowering costs of businesses. Incidentally, such measures
will help support demand for office space as financial institutions
and other businesses can continue to sustain or expand their
operations in Singapore viably.
According to a Cushman &
Wakefield Research report, new supply for office space from
2009 to 2013 will average 2.1 million square feet per annum.
With the current economic conditions, landlords of new office
buildings are likely to face more competition in securing
committed leases, and robust lease negotiations are expected
to take place in 2009. In the Central Business District
(CBD) alone, four new office developments are slated for
completion in 2009: MapleTree Anson, 20 Anson Road, 71 Robinson
Road and Straits Trading Building.
It was a mixed year for the
retail industry in 2008. Retailers and landlords were generally
upbeat about the outlook for retail sector in the first
half of the year, given the higher tourism figures projected,
a booming economy then as well as a series of initiatives
and events such as the revamping of Orchard Road, Great
Singapore Sale and the inaugural 2008 FORMULA 1TM
Singapore Grand Prix. However, the escalation of the global
financial crisis in second half of 2008 led to a turnabout
of events, with consumers tightening their belts in anticipation
of more challenging times ahead.
The year 2008 saw the completion
of 854,466 square feet of retail floor space with the introduction
of new retail malls including the Jurong Point Shopping
Centre extension at Jurong West Central, West Coast Plaza
at West Coast Road and Northpoint 2 in Yishun.
According to URA statistics,
vacancy rate islandwide was at 6.2% as at end of fourth
quarter 2008 and overall rentals for shop space have declined
by 1.9% year-on-year, with median rental for retail space
in Orchard Planning Area reaching $10.90 per square foot
per month. A separate report by Colliers International,
indicated that the average monthly gross rents for prime
retail space in Orchard was about $42.63 per square foot
by end of 2008.
Come 2009, shoppers can look
forward to many new and exciting concept stores, flagship
stores and new entrants to the retail market as approximately
3 million square feet of retail space including ION Orchard
(663,000 square feet), Orchard Central at Somerset (250,000
square feet), 313@Somerset (294,000 square feet), CDL’s
City Square Mall at Kitchener Road (450,000 sqaure feet),
and Marina Bay Shoppes in the upcoming Marina Bay Sands
Integrated Resort (800,000 square feet) are scheduled for
completion. Demand will continue to be underpinned by long
term sustainable economic growth where retailers will continue
to invest in new outlets if the right location comes along
and if rents are affordable.
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City
Square Mall, CDL’s flagship retail complex
and Singapore’s first Eco-Mall, will add 450,000
square feet of retail space when it opens in late
2009. With a gross floor area of 700,000 square
feet, the Mall will be amongst Singapore’s
largest. |
Despite the impact of the
global economic slowdown in the second half of 2008, a record
performance was announced by the Singapore Tourism Board
(STB) as a new high of $14.8 billion in tourism receipts
were generated by the Singapore tourism sector in 2008,
representing a growth of 5% over 2007. In terms of visitor
arrivals, Singapore welcomed 10.1 million visitors in 2008,
a decline of 2% against 2007.
2008 saw the success of inaugural
milestones events such as Singapore Airshow, Singapore International
Water Week and the 2008 FORMULA 1TM
Singapore Grand Prix. On the back of buoyant demand, STB
statistics reflected an all-time record high of $248 (23.5%
increase over 2007) for the average daily room rate, despite
the average occupancy rate falling 5.7% to reach 82% in
2008.
The outlook for the hotel
industry in 2009 remains difficult. A projection by the
World Tourism Organisation (UNWTO) indicates that global
tourism growth would be flat or marginal in 2009, with travelers
becoming more cost-conscious and preferring short-haul,
value-for-money destinations that offer favourable exchange
rates. Despite this, the mid- to long-term potential for
hotel and tourism industry in Asian economies, including
Singapore, remains bright. Upcoming events such as 2009
FORMULA 1TM Singapore Grand Prix, completion of upgrading
works for Orchard Road, the planned opening of new shopping
malls and opening of Marina Bay Sands, the first of Singapore’s
two integrated resorts, will help Singapore remain an exciting
destination.
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