PROPERTY INSIGHTS

Purchase sentiment improved

Singapore Quarter 2, 2012

Market Overview

While lingering concerns over the eurozone debt

problems continued to plague occupier sentiment

in Q2 2012, purchase demand was buoyant among

investors and home buyers.

Resale volume of private homes rose in Q2 as

new benchmark prices for suburban launches drove

buyers to the secondary market in search of better

value. As a result, resale prices of private homes

gathered pace across most segments, with landed

home prices increasing faster than that of non-landed

homes (Figure 1). Purchase demand for private homes

is expected to remain healthy due to the low interest

rate and buoyant employment market but the strong

pipeline of developments will intensify competition

for purchasers and tenants and limit price increases,

particularly in the face of slower economic growth.

The limited supply of first-storey retail space

with prime frontage and continued interest from

international retailers saw retail rents in Orchard/

Scotts Road area rising marginally in Q2. Retail rents

are forecast to be largely flat for the rest of the year

as the tight labour market remains a concern for

retailers, with further supply-side pressure from the

potential supply coming on-stream.

Business space rents came under pressure in Q2

with declines in CBD offices, business park and hi-

tech industrial space, with only rents for conventional

industrial space holding firm in the quarter. Business

space rents are forecast to fall in all segments, with office

rents falling more followed by hi-tech industrial rents.

Figure 1

Residential price indices

708090

100110120

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Luxury freehold condominiumsSuburban leasehold condominiumsSuburban leasehold terrace houses

(Q1 2011=100)

Source: DTZ Research

Trends & Updates

Economic OverviewBased on advance estimates by the Ministry of

Trade and Industry (MTI), the economy contracted

by 1.1% on a quarter-on-quarter (q-o-q) seasonally-

adjusted annualised basis in Q2 after expanding 9.4%

in Q1, mainly due to a contraction in the manufacturing

sector (Figure 2). On a year-on-year (y-o-y) basis, the

economy grew 1.9%, slightly higher than the 1.4%

growth in Q1.

Despite the q-o-q contraction in GDP, the

Purchasing Managers’ Index (PMI) remained at 50.4

in June, marginally above the expansionary reading

of 50 (Figure 3). However, sluggish global demand

buffeted by continued concerns over the eurozone

debt problems and slowing growth of the US and

China economies could exert more pressure on

manufacturing activity in the coming months.

Besides a slower growth momentum, inflation

remains another key concern as the Consumer Price

Index (CPI) rose 5.0% y-o-y for the period of January

to May 2012, just slightly below the 5.2% recorded

for the whole of 2011. Inflationary pressures are

exacerbated by rising labour costs amidst a tight job

market. The government continued to tighten the

inflow of foreign labour as well as increase wages

for low-income earners. The unemployment rate

remained low at 2.1% in March (Figure 4).

In a bid to anchor inflation expectations, ensure

medium-term price stability and maintain sustainable

growth, the MAS increased the slope of the SGD NEER

policy band and restored a narrower policy band in its

April review to allow the SGD to appreciate modestly

and gradually.

Liquidity is expected to remain abundant in the

market as the extension of Operation Twist by the

Federal Reserve will continue to keep domestic interest

rates low, and keep the property market buoyant.

Figure 2

GDP growth rates

-20%

-10%

0%

10%

20%

30%

40%

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

*Q2

12

GDP growth (y-o-y) GDP growth (q-o-q) Source: MTI

* Advance estimates

Figure 3

Singapore PMI

46

48

50

52

54

Jan

11Fe

b 11

Mar

11

Apr 1

1M

ay 1

1Ju

n 11

Jul 1

1Au

g 11

Sep

11O

ct 1

1N

ov 1

1D

ec 1

1Ja

n 12

Feb

12M

ar 1

2Ap

r 12

May

12

Jun

12

Source: SIPMM

Figure 4

Inflation, interest rate and unemployment rate

0.0%0.5%1.0%1.5%2.0%2.5%

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

*Q2

12

CPI change (q-o-q) 3-month SIBOROverall unemployment rate

Source: MTI, MAS, MOM

*CPI figures for Q2 12 are based on April and May. Unemployment figures for Q2 12 are not available.

Residential

Resale prices of private homes gathered

pace across most segments as buying sentiment

returned. Demand for landed homes continued to

be strong with prices increasing more than that for

non-landed homes. Resale prices in the suburban

areas continued to rise more than those in the prime

districts of 9, 10 and 11. Resale prices of leasehold

terrace homes and freehold landed homes in the

suburban areas rose 2.0% q-o-q and 1.2% q-o-q

respectively in Q2, compared to Q1’s increase of

1.9% and 1.6%. In comparison, landed homes in the

prime districts of 9, 10 and 11 registered a smaller

q-o-q increase of 1.0%, similar to that in Q1.

In the non-landed segment, where some new

launches in the suburban areas set new benchmark

prices, buyers looked to the secondary market for

better value (Table 1). This led to a pick-up in resale

volume from March after a lacklustre January and

February as buyers adopted a wait-and-see stance

after the implementation of the Additional Buyer’s

Stamp Duty (ABSD) measures in December 2011.

Preliminary estimates based on caveats lodged

for secondary home sales (excluding executive

condominiums) in April – June numbered 3,916

units, already 48% higher than Q1’s 2,648 units

(Figure 5).

As a result, resale prices of freehold

condominiums in the prime districts of 9, 10 and 11

registered a q-o-q increase of 0.5% in Q2, reversing

the fall of 0.7% in Q1. Resale prices of leasehold

condominiums increased at a faster pace of 0.6%

in Q2, compared to 0.3% in Q1 (Figure 6). Similarly,

resale prices of luxury apartments registered a

smaller fall of 0.5% q-o-q in Q2 compared to the

decline of 0.8% in Q1.

Rents of non-landed homes across all segments

also grew more strongly in Q2, due to a seasonal

increase in leasing activity in April and May.

Expatriates relocating to Singapore after the

summer holidays tend to confirm their rental

Table 1

Selected new launches in Q2 2012

Development Tenure Estimated no. of units launched (sold)

Price range ($ per sq ft)

Eight Riversuites 99 yrs 862 (225) 1,056 – 1,670

Hillsta 99 yrs 406 (173) 861 – 1,333

Flo Residence 99 yrs 338 (266) 573 – 969

Katong Regency FH 244 (241) 1,245 – 2,011

Sky Habitat 99 yrs 180 (129) 1,435 – 1,893

Source: URA, DTZ Research

Figure 5

Primary and secondary home sales (excluding executive condominiums), units

0

1,000

2,000

3,000

4,000

5,000

Jun-

10

Aug-

10

Oct

-10

Dec

-10

Feb-

11

Apr-1

1

Jun-

11

Aug-

11

Oct

-11

Dec

-11

Feb-

12

Apr-1

2

*Jun

-12

Primary sales Secondary sales Units launched Source: URA REALIS, 12 July, DTZ Research*Note: June 2012 primary sales and launches data from URA are not available yet.

Figure 6

Residential price indices

60

80

100

120

Q2

09

Q3

09

Q4

09

Q1

10

Q2

10

Q3

10

Q4

10

Q1

11

Q2

11

Q3

11

Q4

11

Q1

12

Q2

12

Luxury freehold condominiumsSuburban leasehold condominiumsSuburban leasehold terrace houses

(Q1 2011=100)

Source: DTZ Research

contracts during this period. Supported by rental

demand in the $3,000-$7,000 per month range from

mid-tier working professionals, rents of suburban

condominiums increased the most by 1.9% q-o-q

in Q2, after increasing 0.6% in Q1. Similarly, rents

of prime condominiums increased in Q2, but by a

smaller 1.5%, following a period of no growth in Q1.

Purchase demand for private homes is expected

to remain healthy due to the low interest rate and

buoyant employment market. However, the strong

pipeline of developments will intensify competition

for purchasers and tenants and limit price increases

particularly in the face of slower economic growth.

RetailRetail rents generally held steady in Q2, with

both Orchard/Scotts Road and suburban areas

seeing a marginal increase while other city areas

saw a slight fall.

The average gross fixed rent of prime retail

space in Orchard/Scotts Road rose 0.1% q-o-q to

$30.33 per sq ft per month. First-storey retail space

with prime frontage remains limited with some of

the prime first-storey space vacated by previous

tenants such as in Wheelock Place and The Heeren

being quickly taken up by other retailers. The prime

retail belt also saw the entry of new international

brands such as Tory Burch and Tommy Bahamas,

reflecting interest from international retailers as

they shift focus to the Asia Pacific which is growing

more strongly than the western economies.

The average gross fixed rent of prime retail

space in suburban areas rose by 0.2% to $28.35 per

sq ft per month as demand in the suburban areas

remained strong with a captive customer base.

International retailers have been venturing into the

suburban areas to tap on the strong local spending

power. The latest foreign retailers with their first

foray in the suburban areas are H&M in JEM and

Franc Franc in JCube.

Retail rents are expected to be largely flat for the

rest of the year due to heightened uncertainties in

the eurozone and the Chinese economic slowdown

(Figure 7). The tight labour market and rise in wages

for low-wage workers could also hamper retailers’

plans to expand, especially those in the F&B sector

which is more labour intensive. Both Orchard/

Figure 7

Retail rental index in Orchard/Scotts Road

Source: DTZ Research

90

95

100

105

110

115

Q4

02

Q4

03

Q4

04

Q4

05

Q4

06

Q4

07

Q4

08

Q4

09

Q4

10

Q4

11

Q4

12

Q4

13

(Q1 2011=100)

Figure 8

Retail development pipeline including projects on awarded GLS sites, sq ft (mil)

0.0

0.5

1.0

1.5

2.0

2012

2013

2014

2015

2016

Orchard/Scotts Rd Other city areasSuburban areas Completed in H1 2012

Source: URA, DTZ Research

Average gross face rents for prime office space

in the CBD declined in Q2, as global economic

uncertainties continued to plague occupier sentiment.

This was despite pockets of demand from occupiers

who saw the current climate as an opportunity to

upgrade to better-quality space. The average gross

face rent for prime office space in Raffles Place

declined by 3.1% q-o-q to $9.50 per sq ft per month

in Q2 while Shenton Way/Robinson Road/Cecil Street

rents declined by 2.6% q-o-q to $7.55 per sq ft per

month (Figure 9).

Although occupancy rates in the CBD remain

healthy at levels above 90%, most landlords are still

prepared to offer competitive terms even if they are

not rushing to lower their rents significantly. Some

landlords are however offering more incentives such

as longer rent holidays to lock in long-term leases in

anticipation of slowing demand and rising vacancies.

The average occupancy rate for office space at

Raffles Place fell 0.7 percentage-point in Q2 to about

92%. In Shenton Way/Robinson Road/Cecil Street,

the removal of Chow House from the stock in Q2

saw occupancy rate rising 1.3 percentage-points to

about 95% in Q2. The average occupancy rate for

office space at Marina Bay increased the most by 4.5

percentage-points to about 72% as occupiers started

to move into Marina Bay Financial Tower 3 which was

completed at the end of the previous quarter.

CBD rents are expected to continue to face

downward pressure as occupiers brace themselves

for the global economic slowdown, notwithstanding

a lower-than-average net increase in supply of 1.1

million sq ft of office space in 2012, after taking into

account existing buildings that have been or will be

removed from the stock (Figure 10). UIC Building

and Prime Centre were removed from the stock in

H1 for redevelopment (Table 3). Other buildings

Offices

Scotts Road and suburban areas are also expected

to face supply-side pressure for the next two years

due to the upcoming pipeline supply which includes

orchardgateway, Westgate and JEM (Figure 8 and

Table 2).

The ample potential supply coming on-stream

has exerted pressure on retail landlords to

constantly renovate or update their tenant mix.

Notwithstanding the competition, most landlords

are selective in offering space to control their tenant

mix. At the same time, retailers are also selective

in committing to rental space as they desire prime

frontage and good shopper traffic. This has resulted

in temporal vacancies in some shopping centres,

especially those in non-prime locations, as landlords

were not able to find the right mix of tenants.

Table 2

Upcoming retail projects

Name of development Est NLA (sq ft) Est TOP year

Redevelopment of Atrium@Orchard

127,000 2012

orchardgateway 180,000 2013

Westgate 426,000 2013

JEM 331,000 2013

Bedok Residences 230,000 2014

Waterway Point 356,000 2015Source: URA, DTZ Research

Figure 9

Office rental indices

Source: DTZ Research

0

70

140

210

Q4

03

Q4

04

Q4

05

Q4

06

Q4

07

Q4

08

Q4

09

Q4

10

Q4

11

Q4

12

Q4

13

Raffles PlaceShenton Way/Robinson Road/Cecil Street

(Q1 2011=100)

expected to be terminated later this year include

Marina Bayfront, where the developer has obtained

planning permission to convert the office building to

retail space.

The low increase in supply will be negated by

existing space that is expected to be vacated. Close

to 610,000 sq ft of existing office space is estimated

to become available in H2 2012 and 2013 as occupiers

such as DBS, Citibank, CISCO and Credit Suisse vacate

their current premises to move to the new buildings

which they have pre-committed to.

This is in addition to the estimated 285,000 sq ft of

shadow space in Q2, which has risen about 32% q-o-q,

with the bulk (48%) in Raffles Place, and is expected

to increase to about 358,000 sq ft by the end of the

year. Shadow space is excess space that companies

have leased but are looking to assign or sublet.

Figure 10

Office development pipeline including projects on awarded GLS sites, sq ft (mil)

-1

0

1

2

3

4

2012

2013

2014

2015

2016

CBD CBD Fringe/Orchard RoadDecentralised TerminationCompleted in H1 12

Source: URA, DTZ Research

Table 3

Office buildings already terminated in 2012

Development Est. NLA (sq ft)

UIC Building 322,000

Prime Centre 72,000

Chow House 32,000Source: URA, DTZ Research

GENERAL DISCLOSURE

Disclaimer - DTZ Research

This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional

advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of

any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced

or referred to without prior approval. Any such reproduction should be credited to DTZ.

© DTZ July 2012

Disclaimer - Citibank

The market data and information herein contained (“Information”) is the product or service of a third party not affiliated to

Citibank NA, Citigroup Inc or Its Affiliates. None of the Information represent the opinion of, counsel from, recommendation or

endorsement by Citibank NA, Citigroup Inc or Its Affiliates, Officers, Employees or Agents.

You may not use the Information for any unlawful purpose or any purpose not expressly permitted hereby. Reproduction of the

Information in any form is prohibited.

NO WARRANTY

The Information is provided “as is”, without warranty of any kind, it has not been independently verified by Citibank NA, Citigroup

Inc or Its Affiliates, Officers, Employees or Agents and use of the Information is at your sole risk. Citibank NA, Citigroup Inc or Its

Affiliates, Officers, Employees or Agents shall not be liable and expressly disclaim liability for any error or omission in the content

of the Information, or for any actions taken by you or any third party, in reliance thereon. The Information is not guaranteed to

be error-free, or to be relied upon for investment purposes, and Citibank NA, Citigroup Inc or Its Affiliates, Officers, Employees or

Agents make no representation or warranty as to the accuracy, truth, adequacy, timeliness or completeness, fitness for purpose,

title, non infringement of third party rights or continued availability of the Information.

LIMITATION OF LIABILITY

IN NO EVENT SHALL CITIBANK NA, CITIGROUP INC OR ITS AFFILIATES, OFFICERS, EMPLOYEES OR AGENTS, BE LIABLE FOR ANY

LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION, ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR

INDIRECT DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, BUSINESS INTERRUPTION, AND ANY AND ALL FORMS OF LOSS OR DAMAGE,

REGARDLESS OF THE FORM OF ACTION OR THE BASIS OF THE CLAIM, WHETHER OR NOT FORESEEABLE ) ARISING OUT OF THE USE

OF THE INFORMATION (PROVIDED IN ANY MEDIUM), EVEN IF ANY OF CITIBANK NA, CITIGROUP INC OR ITS AFFILIATES, OFFICERS,

EMPLOYEES OR AGENTS, HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE.

COUNTRY SPECIFIC

HONG KONG

© 2012 CITIBANK

CITIBANK IS A REGISTERED SERVICE MARK OF CITIGROUP INC.

Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited