Real Estate Sentiment Index

Fourth Quarter 2012

January/February 2013

REDAS Research & Education

Real Estate Sentiment Index About RESI

REDAS-NUS Real Estate 3Q11 The Real Estate Sentiment Index (RESI) is jointly developed by the RealSentiment EstateIndex Developers Association The Real Estate Sentiment Index (RESI) is jointly developed by the Real Estate Developers Association of REDAS-NUS Real Estate Sentiment Index 3Q11 of Singapore (REDAS) and the Department of Real Estate (DRE), National University of Singapore. The Singapore (REDAS) and the Department of Real Estate (DRE), National University of Singapore. The quarterly quarterly structured questionnaire survey is conducted among senior executives of REDAS member firms. structured questionnaire survey is conducted among senior executives of REDAS member firms. RESI RESI measures the perceptions and expectations of real estate development and market conditions in measures the perceptions and expectations of real estate development and market conditions in Singapore. Singapore. RESI comprises a Current Sentiment Index and a Future Sentiment Index, tracking changes RESI comprises a Current Sentiment Index and a Future Sentiment Index, tracking changes in sentiments over in sentiments over the past and the next 6 months respectively, and a Composite Sentiment Index which the past and the next 6 months respectively, and a Composite Sentiment Index which is the derived indicator is the derived indicator for the current overall market sentiment. RESI scores range from 0 to 10, for the current overall market sentiment. RESI scores range from 0 to 10, reflecting the extent of pessimism or reflecting the extent of pessimism or optimism of the survey respondents. A net balance percentage optimism of the survey respondents. A net balance percentage approach is adopted to derive the scores for approach is adopted to derive the scores for key determinants of the real estate market sentiment. 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 respondents market outlooks turned pessimistic, after a new round of cooling measures has been introduced in January 2013. The current and future net balance scores declined across different real estate sectors. Prime and suburban residential 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 more important than housing attributes and specifications in differentiating ECs from private condominiums

Chart 1 : Overall Real Estate Sentiment Index

Main Findings
Current Sentiment Index: The index stood at 4.6, down from 5.1 in 3Q12. The score indicates a dampening market sentiment compared to six months ago. Future Sentiment Index: The score fell to 4.0 from 4.7 in 3Q12. Respondents were more pessimistic on the market outlooks over the next six months. Composite Sentiment Index: The overall sentiment dropped to 4.3 in 4Q12. The score captured the impact of the comprehensive set of cooling measures introduced in January 2013.

January / February 2013

Real Estate Sentiment Index

Chart 2: Overall Real Estate Market Performance* The current and future net balance scores declined across different real estate sectors. Prime residential sector showed the sharpest decline in 4Q12 with a current net balance of 27% and a future net balance of -49%, compared to the current and future net balances of -8% and +2%, respectively in 3Q12. The current net balance of suburban residential sector remained positive at +10% in 4Q12, while the future net balance dropped significantly from +6% in 3Q12 to -28% in 4Q12. Suburban retail and hotel/serviced apartment are the two best performing sectors with the current and future net balances of +14% and +9%, respectively in 4Q12.

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

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

Chart 3: Primary Residential Market Expectations

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

Overall, developers surveyed in 4Q12 plan to launch lesser units compared to 3Q12. Only 10% of the developers indicate that they will launch substantially more units, down from 23% in the last quarter. 43% of them expect moderately more launches, down from 48% in 3Q12. 28% of them expect the launches to hold at the same level, unchanged from the figure in the last quarter. Notably, 20% of them expect lesser units of new launches, up from 4% in the last quarter. In assessing the price change, 28% of them anticipate a moderate price 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 the near term, up from 10% in the last quarter

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

January / February 2013

Real Estate Sentiment Index

Chart 4: Level of Interest in Land Sales*

Only 10% of the developers surveyed express moderately greater interest in GLS, down from 32% in 3Q12. 38% of them indicate moderately lesser interest, a big jump from 7% in last quarter. The interest in En-bloc is also relatively lackluster. 35% of the developers express the same level of interest, down from 61% in the last quarter. 45% of them anticipate moderately less interest in En-bloc sales, up by threefold from 15% in 3Q12.

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.

. 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

Chart 5: Development Cost Labour cost continues to be the major concern indicated by 59% of the developers in 4Q12, up from 55% in 3Q12. One third of the developers surveyed (33%) note their concern in land cost, whereas a quarter of them (25%) express concern on building materials cost. Cost on financing (11%) and professional services (3%) are of the least concerns among the developers.

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

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

January / February 2013

Real Estate Sentiment Index

Chart 6: Executive Condominiums (ECs)

The majority of the respondents note that the eligibility criteria (78%) and sale restriction on EC (76%) are two key differentiating factors of Ecs relative to private condominiums. Half of them (52%) rate pricing as a key differentiating factor for these two housing types. Interestingly, the respondents attach low scores on housing attributes and specifications (i.e. location, amenities and facilities, architectural design and themes, interior finishes and layouts) as important factors differentiating ECs from private condominiums.
Note: Percentages do not add up to 100 due to rounding.

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 market cooling measures introduced on 12 January 201. The current sentiment index dropped from 5.2 to 4.6 while the future sentiment index declined from 4.9 to 4.0, after adjusting for the impact of the new cooling measures in January 2013. The post-measures composite sentiment index has also been revised downward from 5.1 to 4.3.

January / February 2013

Real Estate Sentiment Index

Explanatory Note

The RESI is an objective and comprehensive measurement specifically gauging the confidence of senior executives in the Singapore real estate and development industry. The survey measures respondents perceptions 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 next six months. A standard format questionnaire is mailed out electronically to REDAS members. Respondents include developers, consultants, financial institutions, professional firms and service providers. The survey is thus representative 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 the difference between the proportion of respondents who have selected the positive options (better and increase) and the proportion of respondents who have selected the negative options (worse and decease). A + sign in the scores denotes a net positive sentiment (optimism) and a -sign indicates a net negative sentiment (pessimism). The derived net balance scores are not weighted by the size of the respondents business.

About REDAS The Real Estate Developers' Association of Singapore (REDAS), established in 1959, is Singapores premier business association 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 the growth 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 international business missions. To uphold the quality of products of members, REDAS also provide conciliation panel services for purchasers of residential property.

About NUS DRE The NUS Department of Real Estate (DRE), first established as the Department of Building and Estate Management in 1969, 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 the mission to develop leaders and advance knowledge for the global real estate industry. The Department has a strong reputation 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 strong links with the local real estate industry through collaborations in research and executive training. For enquiries, please contact: REDAS: Chong Kah Hsiung, Tel: 6336 6655, E-mail: kahhsiung@redas.com NUS DRE: Associate Professor Sing Tien Foo, Tel: 6516 4553, E-mail: rststf@nus.edu.sg

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 no factual errors. No part of this report may be reproduced in any form without prior permission of Real Estate Developers Association of Singapore (REDAS).