Straits Times: Tue, Aug 07
THE rising number of investors flipping their industrial units for a profit has caught the eye of the Government.
It has warned that fresh measures might be introduced if prices do not moderate.
A Ministry of Trade and Industry spokesman told The Straits Times it has observed a "rising incidence of short-term flipping in the industrial property market in tandem with rising prices".
The once-unglamorous industrial segment has hogged headlines in recent months as prices and rents continued to defy gravity, raising concerns that the sector is getting a bit too frothy.
Prices of factory and warehouse space have rocketed about 16 per cent in the first half of this year while rents for these properties are up by about 5 per cent.
This has been partly attributed to the investors diverted into the industrial segment on the back of residential cooling measures introduced since September 2009.
MTI noted that owners reselling industrial units over a short period - taken as a proxy for speculative investment - has risen.
As an indication, 15 per cent of all transactions in the multiple-user factory segment since the start of last year were inked by owners who had held their property for less than two years.
"This is significantly higher than in earlier years, and could indicate an increase in speculative interest in multiple-user factories," the MTI spokesman added.
"Nonetheless, with a slowing economy, we expect demand for industrial space to be more subdued in the near future," he said.
The ministry said that it will study the situation closely, continue to monitor the market and, if necessary, introduce additional measures to moderate prices.
As an example of the price gains, an 88 sq m unit at Primz Bizhub at Woodlands was sold for $355,902 in March this year. A month later, it was resold at $422,000, reaping the investor a handsome profit of $66,100 or nearly 20 per cent of its capital.
Another 177 sq m strata-titled unit at Harvest @ Woodlands was sold for $423,000 in February last year and changed hands at $590,000 in June this year - a gain of $167,000 in 16 months.
Experts say that the sharp increase in industrial prices has enticed some retail investors - who had bought new uncompleted units - to realise their profits instead of waiting for rental yields.
But Mr Nicholas Mak, head of research for SLP International, cautioned that as prices rise, so do downside risks, especially in times of economic uncertainty.
"There are some agents in the market who are also using the fact that there is no seller's stamp duty for industrial units to market them to investors as well."
Industrial investor Charles Pang, who purchased two strata-titled industrial units in Yishun a year ago, said he is a long-term investor and does not flip his units for short-termgain.
"For now, I plan to rent out the industrial units when they are completed but if an attractive enough offer comes along, I can consider selling them instead."
There have been some government attempts to rein in prices.
The latest move came last month, when lease terms for industrial sites under the government land sales programme to be sold from now to December were capped at 30 years.
More smaller sites with shorter tenure will be released to meet the demand of industrialists who might prefer to build their own facilities rather than rent.
A bumper supply of industrial sites has also been pushed out.
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