Thursday, April 11, 2013

Demand for industrial units falls sharply

The Straits Times  |  APRIL 09, 2013
Q1 sales plummet after Govt imposes seller's stamp duty to cool market

Measures designed to curb speculation in industrial property appear to have worked, judging by first-quarter sales.

Demand for multi-user factory units plunged in the January to March period, after the Government imposed a first-ever seller's stamp duty (SSD) on the industrial sector on Jan 12.

Industrial sales tumbled 62.3 per cent to 319 caveats lodged in the first quarter of this year from 847 in the fourth quarter of last year, consultancy Knight Frank said yesterday in a report.

That number was also a stark 26.5 per cent lower than that in the first quarter last year.

New uncompleted factory projects bore the brunt of the greatly weakened demand.

For those projects, new and sub-sale volumes plummeted 71.3 per cent to 138 caveats lodged in the first quarter, from 480 caveats in the October to December period last year.

Sales volume in the secondary resale market fell 50.7 per cent, from 367 caveats lodged in the fourth quarter last year to 181 in the first quarter this year.

Knight Frank Singapore director and head of industrial Lim Kien Kim said the SSD had "deterred speculative demand and reduced overall buying interest for strata-titled factory space".

Chris International director Chris Koh noted that industrial sales volumes fell because many would-be investors likely decided to put their money into commercial property instead.

"If it gets out of control, I would not be surprised if the Government imposed additional measures on the commercial segment," Mr Koh said.

The SSD, part of the seventh round of property cooling measures, applies to industrial property and plots sold within three years of the date of purchase. Property sold within the first year will be levied at 15 per cent; 10 per cent if sold in the second year and 5 per cent in the third year.

The duty is meant to dampen speculative activity in the industrial segment, where prices have doubled over the past three years.

However, Knight Frank said that, despite the plunge in sales volumes, prices for new sale and sub-sale multi-user factories remained "relatively firm" in the first three months of this year.

New sale and sub-sale prices for 30-year, 60-year and 99-year leasehold and freehold strata factories fell 4.2 per cent, 4 per cent, 1.6 per cent and 3.5 per cent respectively from the preceding quarter.

Resale prices for different tenures paint a more mixed picture.

Resale prices for 30-year leasehold industrial units dropped 10.7 per cent quarter-on-quarter. But resale prices for 60-year leasehold and freehold multi-user factories climbed 3.8 per cent and 3.3 per cent respectively.

Mr Lim said the full impact of the measures would probably be seen in the next six months, and price growth for multi-user industrial units was expected to moderate.

Mr Koh said prices were more likely to remain steady in the coming months because industrial property owners would probably hold on to their units instead of selling them.

As for rents, Knight Frank said islandwide industrial gross rents grew 5 per cent to $2.13 psf per month on average in the first quarter from the preceding three months.

Although newer factories such as UE BizHub East and Oxley BizHub command higher rents, an upcoming supply of about 24.12 million sq ft of new factory space this year will cap industrial rent rises, Mr Lim said.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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