News Update for October

Weakening Property Market squeezes Rental
The leasing market has become the latest casualty of Singapore’s weakening property market, with both residential and office rents posting their first declines since 2004 in the third quarter of this year. According to Urban Redevelopment Authority figures released yesterday, rentals of private residential properties fell 0.9 per cent in the third quarter, compared to a 2.5 per cent rise in the second quarter. Office rents declined 0.8 per cent, swinging from a 6.3 per cent rise in the previous quarter.

Most analysts attributed falling residential rents to the double whammy of increased supply and weakening demand as the financial sector deals with the severe crisis. “Instead of increasing headcount, most multinationals are holding back and waiting, so fewer expatriates are coming in,” said ERA Asia Pacific’s assistant vice-president, Mr Eugene Lim. At the same time, developers are holding off developments of their enbloc sites due to the credit crunch and rising construction costs. They are instead renting out these units, resulting in a sudden surge in supply, added Mr Lim.

Additional supply from completed projects will accelerate rental declines in the coming quarters, said Mr Colin Tan, Chesterton Suntec International’s research head. But this may not necessarily be a bad thing for Singapore. “On a country level, Singapore will now be more competitive, since rentals had started off on the high side,” he said.

Meanwhile, HDB prices continued to show resilience amid the downturn, posting a 4.2-per-cent rise. That was a slight moderation from the 4.5-per-cent increase in the previous quarter, which PropNex chief Mohamed Ismail attributed to the overall drop in median cash-over-valuation (COV) to $19,000.

“It’s interesting to note that the bigger drops in median COV were for five-room flats and executive flats. This is evidence of buyers resisting paying out larger COV for larger properties in this bleak economy,” he said. Still, Chesterton’s Mr Tan finds the 4.2-per-cent hike “extremely disturbing” as it bucks the trend amid deteriorating fundamentals. “It must mean that there is a real shortage of resale flats. This can happen when there are more downgraders than anticipated and secondly, few sellers are upgrading to the private market, because of its affordability.”

Prices in the private residential property market fell 2.4 per cent, worse than the earlier flash estimates of 1.8 per cent. ERA’s Mr Lim noted that some investors hit by the recent stock market plunge have started to offload their properties in “fire sales” to raise cash, although any major price declines going forward depends on the extent of such scenarios and whether developers also start to lower prices. Overall, Knight Frank’s research head Nicholas Mak expects private residential prices this year to contract up to 3 per cent.
Source : Today - 25 Apr 2008


Capitaland holds back investment during Global Credit crisis
Capitaland, Singapore’s largest real-estate developer by assets, will hold back on investments until the global credit crisis shows signs of bottoming, said chief executive officer Liew Mun Leong. CapitaLand is evaluating opportunities to invest about $4 billion of cash and will wait for signs that the rout in financial markets is nearing an end, Mr Liew said. The developer has invested about half of the $9 billion it earned from asset sales over the last two years, he said.
“There are plenty of opportunities floating in front of us,” Mr Liew said. “As I see it now, it’s still not bottoming. You may think it’s cheap but tomorrow, it’ll be cheaper.”

The slowdown has weighed on Singapore housing prices, which fell in the third quarter for the first time in more than four years. “If the current financial crisis is prolonged, smaller companies may actually run into cash flow problems and it may make sense for them to form partnerships or be bought over by companies with stronger balance sheets,” said Mr Wilson Liew, an analyst at Kim Eng Securities, which has a “hold” rating on CapitaLand. “That could present some opportunities and CapitaLand has made some savvy investments in the past.”
Source : Today - 25 Apr 2008

Private properties price index drop 2.4% compared to Q2
The official private home price index slipped 2.4 per cent cent in the third quarter compared with the preceding quarter, according to latest data by Urban Redevelopment Authority (URA) on Friday. ‘Prices of private residential, office, and shop properties decreased by 2.4 per cent, 3.9 per cent and 0.3 per cent respectively in the Q3 2008 while the prices of industrial properties increased slightly by 0.9 per cent in the same period,’ URA said.

‘Rentals of private residential, office and shop properties decreased by 0.9 per cent, 0.8 per cent, and 0.6 per cent respectively in the 3rd Quarter 2008, while the rentals for industrial properties increased slightly by 0.1 per cent in the same period,’ URA said.

In the public housing segment, Housing & Development Board’s resale flat price index rose 4.2 per cent in Q3 over the preceding quarter, lower than the 4.5 per cent quarter-on-quarter gain seen in Q2. The total number of HDB resale applications registered rose by 4.5 per cent, from 7,763 cases in Q2 to 8,112 cases in Q3. The median Cash-Over-Valuation (COV) amount of all resale transactions in Q3 was $19,000 (US$12,646) - slightly lower than the $20,000 COV in Q2. Cases requiring COV constituted 89 per cent of all resale transactions in Q3, with 11 per cent of resale transactions conducted at or below valuation.

Overall median sublet rents for HDB flats rose slightly in Q3. However, subletting transactions fell about 4 per cent from about 4,120 cases in Q2 to about 3,960 cases in Q3. The total number of HDB flats approved for subletting rose to about 21,400 units, compared to about 20,200 units in Q2.
Source : Business Times - 24 Oct 2008

HDB price increases 4.2% as compared to Q2
Singapore’s Housing and Development Board (HDB) released data on Friday that showed prices of resale flats rising by 4.2 per cent in the third quarter, as compared to the previous quarter.
This was in line with estimates released earlier this month.

Sales volume also went up by about four per cent from 7,760 to 8,110 transactions.
HDB said the median Cash-Over-Valuation (COV) amount for all resale transactions for the quarter was S$19,000. This was S$1,000 lower than the median COV in the second quarter.
COV refers to the sum of cash that needs to be paid by a buyer over and above the market valuation of a flat.

HDB said 89 per cent of sales in the open market required COV, while 11 per cent of transactions were conducted at or below valuation.
Source : Channel NewsAsia - 24 Oct 2008

UN awarded Singapore top marks amongst World's cities!
The United Nations (UN) gave Singapore top marks in its latest report on the state of the world’s cities, and has said it is keen to deepen its collaboration with Singapore as a knowledge hub. The UN also called on cities to take on pro-growth policies that support the poor and strengthen infrastructure. It said all these can make a difference when it comes to sustainable living.

The UN said people’s consumption and lifestyle patterns, and not urbanization, are to blame for climate change. To solve the problem, cities need to use less fossil fuel, maximise recycling and have a well-planned transport network. Singapore, which set up an inter-ministerial committee on sustainable development in February, has been highlighted for its low per capita car ownership.

With its greening policy, Singapore has also been singled out as a country that absorbs more carbon dioxide than it emits. Another achievement is that Singapore is the only country with no slums. Director of Monitoring and Research at UN-HABITAT, Banji Oyelaran-Oyeyinka, said: “Obviously, (the) government has taken pro-active steps over a long period of time because it has to be sustained. “One of the problems you find in most countries is they actually start well, but you need constant investment, sustained effort (and) visionary leadership to sustain those kinds of actions.”

The latest UN report by UN-HABITAT, the agency working to boost the liveability of cities, studied 245 cities. The report is a lead-up to the UN World Urban Forum in Nanjing, China in November. It noted another worrying concern of rising sea levels, and Southeast Asia in particular is at the highest risk due to its low elevation.

Singapore has said in parliament in September that it has taken measures in terms of building requirements on reclaimed land and drainage infrastructure. A two-year study to understand the specific implications of climate change, including rising sea levels, is also expected to be ready in 2009.

Director of Centre for Liveable Cities, Andrew Tan, said: “Moving forward, I would say that having achieved the level of environmental quality we have in Singapore, there is still a need for us to maintain these efforts. “It’s necessary for Singaporeans to be proud of what they have achieved, but at the same time, to know that sustained efforts is required.”

The UN has lauded the 43-year-old city state as a model city. However, experts cautioned that as all cities progress, they will no longer be measured just by their level of economic, social and environmental progress. Cities like Singapore will also have to look at its inclusiveness and its quality of life. Related to this, the report said cultural assets too should be protected to nurture the soul of the city.
Source : Channel NewsAsia - 24 Oct 2008

Prime Retail rental prices dropping!
Retail landlords are headed for a rough patch as consumer spending weakens amid the economic downturn and with 3.4 million sq ft of new retail space scheduled for completion next year, property consultants say. Knight Frank’s head of retail Sherene Sng predicts that average rents for prime retail space in Orchard Road and at suburban malls could slip 5-15 per cent in 2009. ‘For super-prime retail space on Orchard Road, the decline, if any, will be capped at around 5-10 per cent at most, because there’s not that much super-prime space around and most of it is in malls that are very well managed,’ she said.

For full-year 2008, Ms Sng expects retail rents island-wide to be pretty much flat, increasing no more than 5 per cent. CB Richard Ellis said yesterday retail rents stagnated in the third quarter of this year, and trimmed its full-year 2008 forecast for prime Orchard Road rents.

It now expects Orchard Road rents to edge up 2-3 per cent in 2008, lower than a 3-5 per cent increase it predicted earlier this year. However, CBRE is maintaining its 3-5 per cent increase forecast for prime suburban mall rents in 2008, due to the captive market of HDB heartland shoppers these malls can count on, as well as limited new supply of retail space in the suburbs.
Some 41 per cent of the 3.4 million sq ft of new retail space slated for completion next year will be in the Orchard Road belt - coming from developments like ION Orchard, Orchard Central, 313@Somerset and Mandarin Gallery.

‘This will bump up total private Orchard Road retail stock some 36 per cent in just 2009 alone and undoubtedly raise concerns about space absorption, despite the fact that retail take-up tended to be somewhat supply-led in the past,’ CBRE said. The biggest contributor to new retail space on the island next year will be The Marina Bay Shoppes at Marina Bay Sands, with 800,000 sq ft of net lettable space, according to CB Richard Ellis. The Downtown Core region, where the development is located, will account for 24 per cent of new retail space being completed here next year.

Knight Frank’s Ms Sng says the big factor affecting retail rents next year will be not so much the completion of 3 million-plus sq ft of new space but a slowdown in sales as people tighten their belts and cut spending due to the economic downturn. ‘This will cause retailers to become more cautious and adopt a watch-and-wait attitude and hold back business plans,’ she said. ‘Some smaller retailers operating as sole proprietorships or partnerships may also be affected by the stockmarket crash. Of course, there will be some retailers that are still doing well - but they too will use the weaker economic climate to secure more attractive rents from landlords when they renew leases or open new stores.’

CBRE’s data shows that in Q3 2008, the average monthly prime retail rent in Orchard Road was $36.80 per sq ft, while the average super-prime rent there was $54.40 psf. The average prime retail rent in the suburbs was $29.30 psf. All three numbers were unchanged from Q2. CBRE’s director (retail services) Letty Lee declined to forecast retail rents going ahead. ‘A number of factors will determine the rate of rental change for the rest of this year and the next,’ she said.
‘The full impact of the financial meltdown on the job market is still unknown. In the meantime, consumers will remain cautious and may cut spending as a result.

‘The financial turmoil will also affect tourism, which will in turn affect consumer spending. Landlords may be pressured to reduce rents as a result. We are still assessing the situation and it is difficult to make a projection at this stage.’ Colliers International said in a report yesterday that while year-end festivities may provide some relief for retailers, consumer spending is likely to remain subdued given the poor economic outlook and the drop in foreign visitors.

Any retail rental growth is therefore expected to be minimal in the last quarter of the year. ‘As such, rents are projected to increase by up to 5 per cent for the whole of 2008,’ Colliers said.
Source : Business Times - 24 Oct 2008

Singapore GIC to invest in Australian GPT Group
The Government of Singapore Investment Corporation (GIC), through its real estate arm, will invest up to A$700 million (S$705 million) in Australian property trust GPT Group. While GPT Group is one of Australia’s largest and most established diversified listed property groups, it has been been hit hard by the current global financial crisis due to foreign currency exposure and the recent decline of the Australian dollar.

Reuters earlier reported that the group had been trying to sell almost a third of its A$14 billion in assets. It added that GPT Group struggled to sell off its Voyages Lodges chain of eco resorts and its US seniors housing business to shore up its balance sheet. In a statement released yesterday, GIC Real Estate president Seek Ngee Huat said: ‘We have always believed in the fundamentals of the Australian economy and its property sector. We see this partnership with GPT as a good fit, and an important part of our investment strategy in Australia.’

GIC RE already has a 2.2 per cent shareholding in GPT Group. GPT Group, which has seen its share price fall over 70 per cent this year, also released a statement yesterday saying that it is making an entitlement offer to raise a minimum of A$1.3 billion. It added that GIC RE would take up its pro rata entitlement as well as be issued with A$250 million in perpetual, exchangeable securities.

GIC RE also agreed to sub-underwrite 504 million securities of the retail entitlement offer. GPT Group will place additional securities to GIC RE such that GIC RE receives a minimum of 250 million securities through its sub-underwriting of the retail entitlement offer. In all, GIC RE is expected to invest between A$450 million and A$700 million in GPT Group and have a shareholding of between 12 and 18 per cent. GPT Group has said that the net proceeds from the entitlement offer will be used to repay debts and deleverage its balance sheet, with its business plan and debt maturities fully funded through January 2010.

The Sydney Morning Herald also reported yesterday that shareholders of the company were intending to launch a class action suit, alleging that GPT Group’s board provided misleading and deceptive earnings guidance - centring around statements made by GPT Group in July, when it released a statement to the Australian Stock Exchange, in which its forecast earnings for the 2008 calendar year were cut by 27 per cent.

Asked if GIC RE was concerned that GPT Group will require more recapitalisation, a spokeswoman for GIC RE said: ‘We believe that GPT has made a realistic assessment and its move for a recapitalisation will be able to strengthen its balance sheet.’ She added: ‘Moreover, our structure of convertible perpetual preferred securities and rights issue participation will provide sufficient downside protection and opportunities for upside in capital appreciation. There is also a reset provision should there be further dilution.’
Source : Business Times - 24 Oct 2008

Chief Justice: Lawyers shouldn't hold on to Client's money
Everyone should join Chief Justice Chan Sek Keong in applauding the Law Society’s agreeing that lawyers should discontinue the practice of holding clients’ money. In a speech made at a recent Law Society event, CJ Chan pointed to the overriding public interest that needed protecting. As ethical standards decline amid financial temptation, questions will persist and, if unanswered, will hasten erosion of public confidence in an essential class of professionals. Client losses, the majority relating to property transactions, have been scandalous enough for the society’s council, in CJ Chan’s words, to ‘have seen the light’. Six lawyers have fled with some $29 million in the last five years. Clients have found it difficult if not impossible to recover their money. Grants from the society’s compensation fund are an inadequate consolation.

The society has since 2004 inspected clients’ accounts and told small firms to submit accountants’ reports. Since July last year, the Legal Profession (Solicitors’ Accounts) Rules have required a second signatory for any withdrawal from a client’s account exceeding $30,000. The case of a lawyer who went missing with $6 million last November made a mockery of those safeguards. Neither has threat of punitive action against those caught stealing clients’ money, nor difficulty for those so disbarred to gain professional reinstatement, proved to be adequate deterrence. Similarly, fraud insurance presents problems, not least of which is the question of premiums. Who should pay: lawyers or clients and, anyway, wouldn’t that imply how untrustworthy lawyers are? So, eliminating the temptation has become a last resort, unfairly pejorative though the implications still may be for the vast majority who uphold professional ethics. It is as watertight a prophylactic measure as there can be, and promises to be much more effective than the piecemeal self-policing the profession has adopted.

As they take shape, details of the arrangement should ensure that clients incur neither more inconvenience nor higher service fees. Indeed, third-party fund custody should make it unequivocally justifiable for them to recover interest accrued on what is held. Small firms should stop citing practicality as an excuse for wanting to hang on to current practice. A secure Internet bank transfer from any account takes only a couple of days and mouse clicks to complete. Instead of increasing book-keeping costs, they should fall, if not disappear, if a third party takes over not only custodial but accounting responsibility. Lawyers will take a big step in reinforcing confidence as they embrace not only the principle but the mechanics of the new measure.
Source : Straits Times - 24 Oct 2008

Property stocks are cheap now!
Wheelock Properties (Singapore) CEO David Lawrence, in his private capacity, is currently investing in Singapore property counters. Although Wheelock is in the business of selling apartments, Mr Lawrence reckons that next year may be a better time to buy condos. Instead, his advice to investors looking for value is to buy property counters at the moment ‘because they are so cheap and can give you great returns over the next couple of years’, he said in a recent interview with BT.

‘The indirect market - which is property counters - is completely out of line with the physical market. So the real value at the moment - and it won’t be there for long - is the indirect market. Some of these shares have come down so much. They’re good companies. ‘It’s an arbitrage opportunity, because they’ve come down so much they bear no relationship to property prices. What’s probably going to happen is that stock prices will go up, property prices will come down a little. They will meet eventually but at the moment there is a big arbitrage opportunity for people,’ he added.

He acknowledged that it will be a tough couple of years for the local property market. ‘But then Singapore is going to be the big beneficiary of this crash, crisis, credit crunch, whatever you call it. Because there aren’t many places like this left to go. I have a lot of international friends - from Europe, India, China, USA - with lots of money who will be retiring or moving to Singapore.
‘When you look around, where else can you get good security, drug-free culture, government investing heavily in new businesses, a reasonable balance between financial services and manufacturing?’

Most importantly, Singapore has integrity in government and the banking and corporate sectors, as well as security. ‘If ever Singapore loses that integrity and security, then it’s finished. But I don’t think it will. It’s ingrained,’ says the 62-year-old, who became a Singapore citizen two years ago.

Singapore will also stand out in the race among global property investment destinations because of the strength of its judicial system, he argues. ‘For me, property investment is all about judiciary. There’s no point going into countries where they are very happy for you to lose money. As soon as you start making money, they want to cut it up. You get sued. It goes to a corrupt judiciary. You don’t make money. I am not interested. Now I think there’s lot of opportunity to invest in financial centres with good judiciaries.’

He takes issue with investment guru Marc Faber who suggests buying property in the countryside, not financial centres. ‘I totally disagree with that. If you buy in financial centres and you buy good-quality products from good developers, you will always be able to let the property. When markets get really bad, and property starts emptying out, people upgrade to the best, and Ardmore Park is a perfect example. . . And long-term, quality property is a good hedge against inflation.’ Ardmore Park is a condo Wheelock launched in 1996, around the height of the property bull run.

Given the current global financial crash, Mr Lawrence acknowledges that Singapore home prices will see a correction, without specifying the quantum of price declines. He does not think the slump will be as bad as the one during the 1997/98 Asian crisis. ‘I don’t think things will be that bad, particularly for good products, because fortunately we have a strong banking system here,’ says Mr Lawrence. ‘We have the Monetary Authority of Singapore and strong banks. They never allowed this crazy lending like they did in other countries. Most people can service their loans.’

Other plus points this time round are low interest rates and huge liquidity in the system, he adds. ‘There will be job losses. Some people might not be able to make their mortgage payments. I think most will, if they have not been speculating in too many properties.’ Wheelock recently collected 25 per cent of sales proceeds for The Cosmopolitan, its fully sold condo at River Valley/Kim Seng roads, when the project received Temporary Occupation Permit. ‘We had a 100 per cent payment on time. No problems,’ he reveals.

Mr Lawrence acknowledges that in the short term, some developers - new players and underfunded ones - will have to cut prices. ‘But the strong boys like (Kwek) Leng Beng and Ng Teng Fong (chairmen of Hong Leong Group and Far East Organization, respectively), these people are not going to cut prices. They’ve been here before. They’ll hold it through to the next cycle, which will come.’ For the Singapore office market, prime Grade A rents may ease about 10 per cent in the next 12 months, Mr Lawrence predicts. But this is ‘OK and reasonable’ given that rents had been getting out of hand previously. ‘But long term, the government has plenty of land to expand. I think as government policy, it’s very important to have reasonably priced office accommodation to expand the Singapore economy in the same way as the government always had reasonably priced industrial land and space to expand the industrial economy.’
Source : Business Times - 23 Oct 2008

Third-quarter showing of Sub-sales still strong but market will soften soon: Experts
Private home prices may have slid in the third quarter but the sub-sale market was still going strong. 96% of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore. These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.

Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said. This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.

Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay. Excluding this sale, the average gain was $301,784 - almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.

Still, ‘to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable’, said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore. But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.

‘The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,’ said Mr Nicholas Mak, director of research and consultancy at Knight Frank. ‘These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.’

Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006. Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills’ data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.

If they had sold the unit in the first half of the year, however, they would probably have doubled their gain. The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences. On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.

All the losses were for units that had been bought last year or this year, according to Savills’ data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most. ‘In any case, there are always desperate sale cases even during good times,’ Mr Ku noted. The Sail @ Marina Bay had the largest number of sub-sales in the quarter - 19 - with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.

Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade. But the profits were not just confined to developments in the prime districts. At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.
Source : Straits Times - 22 Oct 2008

Developers may have to write down their assets and make provisions
Hurt by slowing sales, increasing difficulty in obtaining credit and under pressure to cut home prices, most developers here are expected to announce lower earnings during the current reporting season. Analysts do not have high hopes for the property sector. ‘We can expect to see some drop-off (in earnings) as the rate of launches has fallen off compared to 12 months ago,’ said Kim Eng Research analyst Wilson Liew. Keppel Land will report its earnings today.

On Friday last week, GuocoLand, which has been dogged by negative news all year, reported a net loss of $2.8 million for its first quarter ended Sept 30, compared with a net profit of $27.7 million a year earlier. It attributed the poor result mainly to an unrealised mark-to-market foreign exchange loss. The chief concern now is that tighter credit and declining capital values in all sectors may force companies to write down their assets and make provisions for land acquired at high prices. This happened during the crises of 1998 and 2001.

DBS Vickers analyst Adrian Chua, who recently downgraded six property stocks including CapitaLand, City Developments and Ho Bee Investment, said asset devaluation is a concern.
Deutsche Bank analysts Gregory Lui and Elaine Khoo similarly expect continued earnings downgrades on weak sales and average selling prices (ASPs) and the risk of provisions. ‘We believe CapitaLand and Allgreen face greater risk of land bank provisions this time around, followed by Wing Tai and City Developments,’ the analysts said. ‘Keppel Land has not bought anything in Singapore over the past two years, but offshore investments might be riskier.’
All developers except City Developments, which reflects investment properties at cost, also face the risk of revaluation losses against investment properties, analysts have said.

Another area of concern is overseas exposure, which could affect top lines. At GuocoLand, for example, group revenue fell 20 per cent to $153.1 million from a year ago due mainly to lower revenue recognised from development projects in China. Analysts are split on the effect of weak property markets abroad. Some say this will lead to falls in revenue, while others believe fundamentally sound developers are now being punished by investors for going overseas.
In an Oct 16 report, Goldman Sachs acknowledged that the real estate market outlook is deteriorating at home and overseas - in markets such as China and Vietnam - for Singapore developers. ‘However, we think the market has been too punitive on well-capitalised players with strong overseas operational track records such as CapitaLand and Keppel Land,’ said analysts Leslie Yee and Paul Lian.
Source : Business Times - 22 Oct 2008

FOR sale: Luxurious multi-million-dollar apartments with as much as 20 per cent discount.
Stock market losses have forced some property owners to resort to ‘fire sales’ for a quick return to liquidity. Units for The Sail which were going for $2,000 psf are now offered for $1,450 psf. And because the property market is almost flat, they have had to let go of their property at huge discounts. Property agent Henry Neo receives one SMS a day from different clients asking him to sell their homes. Mr Neo, who has been a property agent for close to 20 years, said: ‘The Asian financial crisis of 1997 and this crisis are real challenges. ‘It’s a tsunami of the stock market.’ Two or three of the 50 clients he is servicing now are what he calls ‘desperados’ - people who had their fingers burnt so badly in the stock market they need to sell their houses.

The situation is worse for those who opted for deferred payment schemes, said Mr Neo, because some are no longer eligible for loans, and cannot meet payments once the developers issue the Temporary Occupation Permit (TOP). ‘They have to get rid of their properties before TOP, so they would be giving even more discounts.’ Noting that the high-end property market seems to be hit the hardest, Mr Neo said: ‘My colleagues who specialise in high-end properties are not doing well. They do not have any transactions at all.’

Mr David Cheang, senior vice-president of the Resale Division at HSR Property Group, noted that two out of every 10 clients are affected by the stock market crash, and are selling their property investments to ‘get more liquidity’. A property agent who declined to give his full name said one of his clients had made such losses on the stock market that he was selling his 27th floor freehold apartment at the Twin Regency for a mere $1.05 million, though its market price is $1.3 million.

Last year, he had sold another unit, on the 29th floor of the same condominium, for $1.4 million.
It is the same story for Mr Felix Young, 35, a property agent specialising in high-end condominiums. Some of his clients are prepared to go as low as 20 per cent below their offer price. He had taken out an advertisement for five properties, all high-end condominium units in the city. Apartments at The Sail at Marina Bay, which were going for $2,000 psf are now being offered for sale at $1,450 psf, said Mr Young.

But even such a huge discount is failing to entice buyers, who are asking for $1,100 psf. That is because even with such discounts, the two-room apartment costs about $1.3 million. In the current climate, not many people would be able to shell out that kind of money because they could be sitting on huge paper losses in the stock market. Mr Young said: ‘Buyers have the sentiment that the property market will cool even more, and prices will drop further.’

And because of this, said Mr Young, there has been a significant drop in transactions - up to 70 per cent for high-end properties that people buy for investments. Most buyers also know developers’ launch price for the condominiums and are holding out until they can get a unit at that price. He said: ‘These days, when buyers call me, they ask me if I have any owners who are ‘bleeding’.’ Bleeding is a term that is used to describe owners who over-committed themselves financially and need to sell their properties in a hurry. Mr Young said: ‘Many of my clients’ bank loans are kicking in soon, so they need to release the properties quickly, before TOP. ‘They are stuck because they can neither sell their property, nor rent it out to cover their mortgages, as the rental market has slowed down a lot.’
Source : New Paper - 19 Oct 2008