Some developers have been quietly oiling their launch machinery in the past few weeks as they get ready for previews and launches after the Hungry Ghosts Month.

With the property outlook expected to worsen before it gets better, there may just be an incentive for some to launch their projects sooner - or wait it out till late-2009/2010.

Another consultant, Knight Frank executive director Peter Ow, said: ‘Whatever name you call it - preview, private invitation, etc, the aim is for developers to test the market. If the response is sufficient at the price they want, they’ll begin sales. If the response isn’t up to what they want, they won’t sell. As a developer, you don’t want to risk launching a project, selling a few units and getting stuck.’

A critical factor affecting developers’ launch decisions is pricing, given the bearish sentiment.

‘Pricing will be more realistic for fresh launches, but for projects released earlier, it would be difficult for established developers to trim prices without upsetting earlier buyers, especially VIPs,’ a seasoned property consultant said.

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Average occupancy cost of prime office space in Raffles Place grew only 1.1% quarter-on-quarter to $19 per square foot per month (psf pm) in the second quarter of 2008.

Apart from Raffles Place, Shenton Way/ Robinson Road/Cecil Street and decentralised areas, growth in occupancy costs in other areas like Marina Centre and Orchard Road was flat in 2Q 2008.

This is by far the most convincing sign that office occupancy costs in Singapore may have peaked.

As more new supply comes on stream, office occupancy is likely to ease, thus thwarting growth in occupancy costs in the CBD for the rest of 2008.

Besides, the cautious business outlook, the current market trend of companies gravitating towards cheaper premises like decentralised office buildings, industrial properties, business parks and disused state properties is also putting a downward pressure on office occupancies.

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The collective sale of five small estates near Thomson Road seems to have reached an impasse due to a public road. But the owners of 88 units set to keep the $12 million deposit even if the deal is botched.

The deal was inked in November 2007, when a unit of listed developer KSH Holdings signed up to buy Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui for $120 million.

The deal however hit a snag when the firm tried to buy a 1,000sq m section of a road from the Singapore Land Authority (SLA). The land is needed so that the five estates can be combined to form a larger plot for economy of scale.

However, the authorities had priced the land at $16 million – double what KSH and industry experts had earlier estimated. The property firm has appealed to the SLA to review the price.

If no consensus is reached, the deal will be off, but the flat owners will keep the $12 million deposit as per the sale contract. That works out to about $136,000 on average for each of the 88 units. If the deal goes through, on the other hand, each unit stands to receive between $906,856 and $1,908,491.

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From 1 Oct 2008, Fannie Mae will raise the fee that it charges lenders to buy their mortgages or guarantees home-loan securities to 0.5% percentage point.

The move, seen by analysts as an attempt by the mortgage giant to boost its revenue, will only make borrowings more expensive, and thus, housing prices will slump even further.

Fannie Mae said that the change is necessary to align pricing with credit risks and to mitigate losses. With its new rate, a lender selling a US$300,000 mortgage to the company will forfeit US$1,500, up from US$750.

And that’s not all. It, along with other mortgage banks such as Freddie Mac, will tighten qualification standards for its loans, which will also lead to more expensive borrowings.

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Maison Royale, a freehold residential site in Newton, has been put up for collective sale. Owners of the 20-unit project are asking at least $50 million. Including an estimated $300,000 development charge (DC) and taking into account a plot ratio of 2.8, the price works out to $1,273 per square foot per plot ratio (psf ppr).

In contrast, nearby Lincoln Lodge was sold for $243 million, or $1,449 psf ppr including an estimated DC of $413,000 in June last year at the height of the en bloc frenzy. The comparatively lower price for Maison Royale is in line with current weaker market sentiment.

Analysts said that if the site is sold for $1,265 psf ppr, the breakeven cost will be around $1,665 psf. The successful developer could launch the apartments in the new development at around $1,915 psf.

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Morgan Stanley is said to have frozen some of its clients’ home equity credit lines especially those whose properties have lost their values. The current housing crisis and credit squeeze have caused lenders such as Morgan Stanley to tighten its credit to protect itself from further losses due to loan defaults.

Consumers fell behind on home equity credit lines at the fastest pace in two decades in the first quarter.

Morgan Stanley has already taken about US$14.4 billion of losses related to leveraged loans and collateralised debt obligations (CDOs).

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The recently launched Design, Build and Sell Scheme (DBSS) project Park Central @ AMK received over 2,300 applications - or four times the 578 units on offer. The average selling price for units in Park Central @ AMK is $490-$500 per square foot (psf).

However, some market watchers said that this over-subscription will not necessarily mean that the project will eventually be fully sold. For instance, the previous DBSS project City View @ Boon Keng, some 3,500 applicants vied for 714 flats, but only 460 homes were sold after the first round.

But regardless, Park Central will fare better than City View as the pricing is more attractive. The majority of the flats at City View @ Boon Keng were priced higher than $600,000, which some potential buyers considered high.

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According to the latest JTC data, the occupancy level for ready-built facilities (RBF) rose to a record 94.9% in Q2 2008. Out of this increase, a hefty 51% was contributed by the business park segment.

The biggest contribution has come from newly built spaces such as Fusionpolis. While stack-up factory space contributed 31% to RBF net allocation.

However demand for flatted factory space fell by 1% quarter-on-quarter (qoq) to 1.22 million sq m in Q2 2008 due to termination by the electronics sector.

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A Singapore based property investor has cautioned that Asian real estate prices may fall further and prime office values decline 10 per cent before year’s end.

‘Most markets are peaking over the next 12 months, or even trending downwards,’ said Frank Vaessen, president of fund management at Pacific Star, which manages US$3 billion of assets globally. ‘Broadly speaking, the bottom could come sometime in late 2009 or early 2010.’ Faltering economic growth and the global credit contraction may ease demand for office and retail space in Asia. Rising inflation and falling equity markets may also dampen sales of homes in the region.

The price declines will bring valuations to a more ‘normal’ level after markets rose rapidly the past year, Mr Vaessen said yesterday.

Japan and South Korea’s office markets are expected to have the best performance in Asia as they benefit from a supply shortage, Mr Vaessen said. Both markets are set to offer property investors returns of as much as 13 per cent over the next five to seven years, he said.

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World sales of major commercial properties fell 49 per cent to US$306 billion in the first six months of 2008 from the same period last year, as sales in developed countries were hit hard by the credit crisis and slowing economies, a report released on Friday said.

Real Capital Analytics said dramatic shifts in the capital flows for commercial property became evident in the first half of 2008 as Tokyo overtook London and New York as the most active sales market and investors began favouring Asian markets.

Sales activity fell sharply in many developed Western economies while Brazil, Russia, India and China, and most other emerging markets posted gains.

Emerging markets accounted for 25 per cent of all property sales in the first half of 2008, up from 10 per cent in the same period a year ago, according to the report that tracks transactions worth at least US$10 million.

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