Time to lower home prices
Property developers should consider this step to lure back buyers
WHEN a property boom here ends, the first casualty is usually home supply. Sure enough, the Government put a stop to new land sales early this month, as it did in the last two downturns, making it as good an indicator as any that a property slump had arrived. Developers have also been cutting supply throughout the year, pushing back en bloc redevelopments and putting some launches on hold indefinitely.
But though reducing supply is necessary to prevent the market from collapsing, it is clearly inadequate as a cure at this point. No land plots have changed hands for months, new launches have slowed to a trickle - and yet buyers are still not biting. Property ads have dried up and showflats are starting to resemble ghost towns. When sales came to a standstill this year, developers blamed the financial crisis and government policy actions, such as the removal of the deferred payment scheme. But house hunters pointed to just one reason: Home prices are still too high.
The economy has shrunk for the first time since 2001, mass retrenchments are on the cards, and monthly sales of new homes have plummeted so much that experts warn total sales this year could reach an 18-year low. Yet private home prices - at least according to the Urban Redevelopment Authority’s (URA) price index - have not dropped by much. Prices are already falling, pushed down by smaller developers squeezed for cash and individual home sellers anxious to offload their units.
A boutique condominium in the Novena area reportedly gave significant discounts - from over $1,300 psf down to just under $1,000 psf - after the financial crisis hit hard in October. At soon-to-be-completed developments such as City Square Residences in Kitchener Road, prices have fallen from a high of over $1,000 psf last year to less than $800 psf for some units in recent months. Lowering prices will bring buyers back into the market. Many have been waiting on the sidelines since early last year, when prices starting shooting up beyond their means. Evania, a 35-unit condo in Upper Paya Lebar, moved 15 units last month after dropping prices from nearly $900 psf in March to just above $600 psf. That’s a whopping 30% discount!
Source : Straits Times - 31 Dec 2008
For sale: 1,181 new HDB flats of all sizes
Flats in Choa Chu Kang, Punggol will be offered under built-to-order plan
THE Housing Board is bringing down the curtains on a busy year with one more sales exercise - this time for 1,181 flats in Choa Chu Kang and Punggol. It is offering everything from studio apartments to five-room flats, with prices ranging from $58,000 to $428,000.
The second project - Punggol Regalia - is at the junction of Punggol Field and Punggol Place and near the future Punggol Town Centre. It offers premium flats with 546 four-room and 183 five-room units, priced from $252,000 to $428,000 each. They are around $33,000 to $86,000 cheaper than similar resale flats nearby of about six years old, said the HDB. The HDB has said it will ramp up supply to around 4,000 units over the next two years to meet surging demand. Source : Straits Times - 31 Dec 2008
Medium- to long-term prospects for S’pore property sector still strong
Singapore’s commercial and residential property sectors will remain attractive to investors in the medium to long term. Property watchers told Channel NewsAsia that is because of Singapore’s status as an international financial hub.
2009 looks set to be a difficult year by all accounts, but market watchers said property investment fundamentals here remain strong. As global financial institutions cut costs, they are likely to move operations out of expensive cities in the US and Europe to Asian countries such as Singapore, where the cost of doing business is cheaper. For example, Singapore’s corporate tax rate is 18 per cent, compared to 29 per cent in the UK and 40 per cent in the US. And this could spur demand for office space in financial centres like Singapore, presenting investment opportunities for the commercial property sector.
Christopher Fossick, managing director, Southeast Asia, Jones Lang LaSalle, said: “Financial institutions are growing, in many cases from hundreds to thousands of jobs here in Singapore. The bigger these institutions become, the more real estate they need.” But there are opportunities in the residential market as well. The closing gap between debt servicing and rentals, as well as falling valuations in 2009, could see many investors looking for a good deal.
Eugene Lim, associate director, ERA Asia Pacific, said: “For example, those in district 9, 10, and 11, they tend to be more elastic, the prices. So when the economy is not doing too well, the prices come down quite a lot, especially amongst those who have, for example, bought from the developer and then now need to sell to raise cash flow. They are prepared to cut losses.” Observers said Singapore’s property market will offer rich pickings to investors who have their eyes on long-term returns.
Source : Channel NewsAsia - 30 Dec 2008
DTZ expects 2009 to echo property price plunge of 2008
Prime district property prices fall by 20%; similar decline seen in 2009
Prices of condominiums and apartments in the prime districts have fallen by more than 20 per cent in 2008 on a year-on-year basis, says DTZ. DTZ is also forecasting a further decline of 15-20 per cent for this segment of the market in 2009. Based on its preliminary analysis of official data, DTZ said that prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter (qoq) in the fourth quarter of 2008.
Overall average prime prices fell 21.6 per cent year-on-year (yoy) to $1,160 per square foot (psf), below the level of $1,200 psf registered in Q207. The fall in prices follows dismal developer sales in October and November with only 112 and 192 units sold in the primary market respectively, compared to the monthly average of 444 units sold in the first nine months of the year. DTZ said that based on caveats lodged, preliminary data from URA’s REALIS showed that the number of transactions in the year is only about 35 per cent of last year’s 38,100 units.
DTZ said that average monthly rents of prime non-landed homes decreased in Q408 by 9.4 per cent QoQ or 9.2 per cent yoy to $4.36 psf. Outside the prime districts, rents held up better with an increase of 2 per cent yoy, despite a fall of 1.2 per cent qoq.
The extent of price corrections is still uncertain but Nomura has already adjusted its forecasts. In March, it forecast average prices in the luxury sector to fall by 32.3 per cent from the 2007 peak over 2008-2010 - 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010. It now expects luxury prices to fall 43.8 per cent from the peak, and mass residential prices to fall 32.1 per cent as yields move out by an additional 25-50 basis-points.
Source : Business Times - 30 Dec 2008
Retail rents expected to fall in 2009
Retailers likely to be cautious in expansion, rents may undergo corrections to reflect the gloomy outlook
RENTS for prime retail space in Orchard Road could fall by as much as 13 per cent in 2009, while rentals at suburban malls are expected to ease by about 3 per cent, property analysts here said. Cuts in consumer spending will be the key threat to rental rates. But rents will also come under pressure from the 3.2 million square feet of new retail space expected to come onstream next year - close to half of which will be along Orchard Road.
Source : Business Times - 27 Dec 2008
Private properties looking attractive
What to look out for when hunting for that perfect condo or house
THE recession has resulted in a 25-per-cent fall in private- property prices from their market peak, and with prices expected to dip further next year, there may be opportunities to pick up some bargains. Here are 10 tips to keep firmly in mind.
1 CONSIDER LANDED
The executive director of HSR Property Group, Mr Eric Cheng, feels that if buyers are willing to fork out $1.2 million to $1.3million for a condominium, they should consider buying landed property instead. Due to land scarcity in Singapore, there is always more demand than supply for landed property, which is not the case with condos, said Mr Cheng.
2 INSTALMENT RESERVE
Mr Cheng said it is important to invest within your means. Have a reserve of at least one year’s worth of instalments in case of shocks, like a loss of income.
3 LEASING OR LIVING?
Mr Arvin Sylvester Lim, division director of Century 21 SHL Realty, said it is important to be sure if you plan to live in the property or rent it out. If you are making it your home, the equation is simple: Find something that you like and can afford. If you are looking to invest and rent out, do your research to see if there is good demand in an area, and if the rent will be enough to cover the instalment payment and still allow a profit.
4 DON’T WAIT TOO LONG
While one should hold back until one finds something ideal, Mr Lim does not encourage overspeculating on trends. “Buying a house is not like buying a car. The moment you drive the car…the value drops, but with property the value can go up or down,” he said. Even though prices are expected to fall further, “a home is a must”, Mr Lim said. He advises against pegging buying one to unpredictable market movements.
5 MAKE OFFERS FAST
Buyers who bought too many properties or can’t afford to keep up with payments, given the weak economy, will be selling off their investments now, said Mr Shannan Govindarajoo, marketing manager at ERA. He suggests you start looking and making reasonable offers as he thinks more buyers will be entering the market, which could mean prices for these “must-sell” properties may rise.
6 CHECK MASTER PLAN
Look at the Urban Redevelopment Authority’s master plan and invest where the Government is pumping in money, said Mr Govindarajoo. For instance, he thinks those interested in the Marina area should strike now, as prices are down by 40 per cent, compared to last year’s. Mr Lim said investing in property in that area will reap great returns when the integrated resort is ready as “a lot of the management staff will be living there, so rentals will be high”.
7 SHOP FOR A LOAN
Banks are now becoming more cautious with making home loans and how much they are willing to lend, said Mr Govindarajoo. He advised shopping around for a good home loan first, so that you do not commit yourself to a seller before knowing how much you have to work with.
8 PRICE VS VALUATION
Check the valuations of the property you are considering at different banks to make sure you’re getting a good deal, said Mr Govindarajoo.
9 OLDER CONDOS
Mr Parthiban Sadagopal, a Prop- Nex realtor, suggests buying a condo “between seven and 10 years old in the outskirts”, like Pasir Ris or Tampines. Judging from the trend seen after the 2003 recession, such condos are good buys for living in and investment, as you could hope to buy one at $400,000 to $500,000 now and sell it for up to $800,000 when the economy picks up. Renting it out could fetch $3,000 a month as well.
10 DISTRICT 15
Keep your sights on the East Coast area of District 15, said Mr Cheng, as prices there are unlikely to dip drastically. Good schools, malls and eateries add value, making it a good option for those who feel prime locations are too expensive. Meyer Road, Ceylon Road, Telok Kurau and Crane Road are some of the best places to buy a house, according to him. Mr Govindarajoo agrees, saying District 15 is “evergreen”.
Source : AsiaOne - 26 Dec 2009
Property market now shows classic signs of downturn
Analysis of Q3 caveats by DTZ points to new trends relating to subsales, foreign buying, HDB upgraders
THREE classic signs of a Singapore property downturn have emerged in the third quarter - a slide in subsales and foreign buying, but a bigger share of HDB upgraders in the private home buying pie.
Property consultancy DTZ’s analysis of caveats for private home purchases shows that total subsales of non-landed private homes fell 8 per cent to 473 units in Q3 from the previous quarter. The number of subsale purchases involving units priced at least $1,000 psf fell 24.2 per cent quarter-on-quarter to only 213 transactions, accounting for 45 per cent of overall subsales of non-landed private homes in Q3, against 54 per cent in Q2 2008.
The number of foreign buyers (including permanent residents) of private homes (both landed and non-landed) slid 6 per cent quarter-on-quarter to 903 in Q3. Also, these buyers made up 22 per cent of total private home deals in the quarter, down from 25 per cent in Q2.
DTZ senior director (research) Chua Chor Hoon said: ‘A large proportion of foreigners buy for investment. Hence when prices are falling, there is less interest. Furthermore, with economies and property markets slowing down all over the world, many of the foreigners have been affected back home and they may pull out their overseas investments.’
HDB dwellers tend to make up a bigger proportion of private home buyers during a property downturn. ‘Many of them are buying for owner occupation. Some may be sitting pretty on gains on their existing HDB flats which they bought directly from the HDB some years ago.
Source : Business Times - 2 Dec 2008
Property no longer a safe asset
Real estate used to be the ultimate all- weather asset class, with low correlation to volatile stocks and unexciting bonds. But in today’s debt-starved market, property is not the safe haven it once was.
Trusted property market tenets have been deformed by an acute shortage of debt and a worldwide souring in economic fundamentals, leaving the sector in a deep rut - awash with equity and rich with discounts but bereft of buyers. Before, property rental income could rise even if values fell and as one regional market sagged, another flourished. But now, property market misery is universal and many of the world’s biggest investors are standing on the sidelines.
‘Things are going to be a difficult for quite a while,’ Robert Houston, chairman and chief executive of of ING Real Estate Investment Management, told Reuters. ‘Everyone wants to know when the bottom of the market is. I have a good record at calling these things and all I’m prepared to say is that we haven’t reached it yet.’ Like the majority of its peers, ING has slowed the pace of its real estate investments in recent months, refusing to gamble capital when the only thing it feels sure of is that property prices worldwide will continue to fall.
Source : Business Times - 2 Dec 2008
Half of Marina Bay Sands retail space taken up
Singapore’s Marina Bay Sands integrated resort will unveil details of plans for its retail space after the Chinese New Year in January next year. Recent reports said its parent company, Las Vegas Sands, is facing financial difficulties. But the Singapore firm remains confident about prospects for its retail business. The S$5.4-billion Marina Bay Sands project is still being built. When completed, it will have 800,000 square feet of retail space which can house about 300 stores.
The resort said half of that space has already been taken up, and will feature over 30 brands that are new to Singapore. David Sylvester, vice president, Retail Development Asia, Las Vegas Sands, said: “We will have a lot of leading-edge retail… It will be a mixture of European, some American brands, some Japanese, some Korean.” Marina Bay Sands said it would start marketing campaigns to attract more retailers to lease shops at the resort from February next year. These efforts will include trade shows and talks in Europe.
However, there are currently no plans to adjust rentals to match the slowing economy, and Sands remains positive about the future. “Obviously, there have been a lot of concerns about the economic environment globally, but everybody has been very positive on the Marina Bay Sands because by the time we open, we are talking about end of 2009. We’ve got to think that things will turn around by then,” said Mr Sylvester.
Source : Channel NewsAsia - 4 Dec 2008
Life after DPS won’t be crippling for developers
Study shows they can weather even 20% default rate by buyers under scheme
A NEW report, which looks at the potential impact if buyers who bought homes under the deferred payment scheme (DPS) choose to walk away from their deals, concludes that developers are not likely to be too badly hit even under a 20 per cent default scenario. The report by DBS Group Research captured the impact of defaults in projects expected to get their Temporary Occupation Permit (TOP) in 2009 on developers’ earnings, operating cash flow, net gearing and interest cover. For this analysis, analyst Adrian Chua covered two default scenarios: 10 per cent and 20 per cent of all DPS units defaulting. Both scenarios assume the developers do not resell the default units within the year.
But among the developers, the smaller players would be more impacted in terms of proportional decline in earnings and interest cover, the report concludes. It investigated the impact of defaults on six developers - CapitaLand, City Developments, Ho Bee Investment, Keppel Land, UOL Group and Wing Tai. Developers dispute this view. Developers DBS Research spoke to have maintained the likelihood of default risk is low, given that speculation in 2006-07 did not reach the property bubble levels of 1995-96, the firm said in the note. The research note concluded that while a 20 per cent default is not likely to hurt developers too much, the effect of DPS defaults is just one of a few challenges facing the developers in 2009.
Source : Business Times - 4 Dec 2008
Waiting for the storm to hit…
Going by past recessions, it could take nine more months before prices fall
FOR first-time flat seekers like Mr Neo Tze Siang, the economic downturn was meant to provide some respite from HDB prices pushed skyhigh by the property boom last year. But despite the raft of job cuts and the gloomy economic forecasts trotted out, HDB prices are showing few signs of sliding. “We hear about private property prices falling substantially but the current prices of new HDB flats do not seem to reflect the market realities. When the tide goes down, you would expect all ships to move down. But it seems that new HDB flats are not part of the ocean,” lamented Mr Neo, a 28-year-old salesman.
According to industry players, the wait could be at least another nine months - if prices do come down at all - no thanks to the slew of foreigners and private property downgraders eyeing the HDB rental and resale markets respectively, which indirectly pushes up the prices of new HDB flats. Said Dennis Wee Group director Chris Koh: “Whenever you have a recession, the first to be hit would be the private property market. So, a lot of people will start downgrading from private homes to HDB flats.”
And in the first nine months of the year, HDB’s resale price index rose 12.4 per cent, rising by 4.2 per cent in the third quarter. Reiterating how HDB “followed the market and moved prices downwards” in the aftermath of the Asian financial crisis a decade ago, a HDB spokesperson reiterated that the Government “remains committed to ensure that HDB flats are affordable to the vast majority of our citizen families, especially young married couples and the lower-income households”. Source : Today - 4 Dec 2008
Eyes on demand as govt keeps land supply in check
Analysts hope for measures to boost buying, such as stamp duty rebates
THE government yesterday kept the lid on the supply of state land for development. All eyes in the market now are on what measures the state will come up with to stimulate property demand.
The Ministry of National Development (MND) has decided not to add any new sites to the Government Land Sales (GLS) Programme for first-half 2009. The slate for the first six months of next year - comprising entirely reserve list sites, as previously announced - consists of a total 38 sites. These 38 land parcels can potentially yield about 7,920 private homes, 512,000 sq metres gross floor area (GFA) of commercial space and 5,160 hotel rooms.
Giving an update on land supply in January-June 2009 from government agencies, outside the GLS Programme, MND said there will be no new supply of private homes and a reduced supply of commercial space. Welcoming the latest announcement from MND, a spokesman for the Real Estate Developers Association of Singapore said: ‘This further confirms to the market the authorities are mindful of market conditions at the moment and (we) do not need to add further uncertainties.’
JP Morgan analyst Chris Gee said: ‘It’s less of a supply side situation right now. The issue is what can be done to help stimulate demand. All eyes are turning to the Budget statement in January.’ He reckons temporary exemptions on stamp duty and property taxes could be possible measures.
Source : Business Times - 5 Dec 2008
Costs up, but S’pore far cheaper than rivals
WITH inflation and fluctuating exchange rates, Singapore has leapt 27 places up the global rankings of the world’s most expensive cities to live in. The consolation for the Republic is, its regional rivals have seen costs balloon far more astronomically. Will all this make Singapore a more attractive option for expatriates and international companies setting up base here?
Singapore International Chamber of Commerce chief executive Phillip Overmyer said multinational companies were now “trying to understand what would happen after the economic crisis”, and how to serve emerging markets after the turmoil dies down. “With the lower cost of living in Singapore, it will encourage companies to put its analysts here, such as market researchers and R&D personnel,” he said. “It would support companies to use Singapore as regional headquarters for Asia.”
The Singapore expat community, said Mr Overmyer, is different than it was ten years ago, when the expats held top positions in companies. “Increasingly, the expats tend to be here for the learning experience and in mid-level positions with less generous packages,” he said. “But if Singapore remains relatively less expensive, we would still be more attractive.”
Source : Today - 5 Dec 2008
URA plan draws strong interest
THE Master Plan 2008 - an ambitious blueprint setting out Singapore’s physical development for the next 10 to 15 years - has attracted plenty of attention from the public. Its exhibition received more than 200,000 visitors over the past six months, and about 300 submissions have been made - 80 per cent of them online - according to the Urban Redevelopment Authority (URA) yesterday.
It contains ambitious schemes to transform Jurong East, Kallang and Paya Lebar into sub-metropolitan hubs of offices, hotels, education and entertainment centres, parks and homes. Some of the feedback included calls for the allocation of space for activities in Paya Lebar Central. The Station Plaza in front of the Paya Lebar MRT station and the plaza space next to the civic centre at Geylang Serai were cited as possible venues.
Feedback on the Leisure Plan was generally positive, including comments from members of the public that they were excited about the 150km round-island route, added the URA. Suggestions were also made on ways to enhance Jurong Lake District to improve transport with people movers and river taxis.
Source : Straits Times - 6 Dec 2008
Best Asia-Pac property bets
TOKYO, Singapore and Hong Kong have emerged tops in the Asia-Pacific in a recent ranking of cities with the best property investment prospects for 2009. They were placed first, second and third respectively as investors shifted their attention from emerging cities to mature markets, the survey by America’s Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) showed. Shanghai, which was ranked first in last year’s survey, fell to fifth place this time around. Beijing fell from sixth to 12th place and Ho Chi Minh City from eighth to 13th. Survey respondents said 2009 is the time to be ‘picky about markets and partners’, ULI and PwC said in the report, which was released here yesterday.
In recent years, many investors who had been elbowed out of deals in major Asian cities by core funds or highly leveraged private equity players sought refuge in secondary locations or products in an effort to find value. In today’s environment, however, investors are again focusing on prime assets in major locations. At the same time, projects in secondary markets or even in less well-positioned prime areas are more likely to run into problems, especially as slowing growth lowers demand for commercial properties. Respondents were also asked to rate cities according to their riskiness. Tokyo, Singapore and Sydney were the three markets seen as least risky.
In Singapore, the strongest buy and hold recommendations were for the hotel sector - 65 per cent of respondents advised holding, 24 per cent recommended buying and only 9 per cent suggested selling. The residential rental sector was also a strong ‘hold’ (65 per cent). But 23 per cent recommended selling and only 11 per cent advised buying. Singapore’s office sector was rated a ‘hold’ by 54 per cent of respondents, while 23 per cent advised buying and 21 per cent recommended selling. For the industrial/distribution property sector, 52 per cent of respondents gave ‘hold’ recommendations, 34 per cent advised buying and 13 per cent said ’sell’.
The survey, based on 180 respondents ranging from global investors, property developers and brokers, looked at the investment and development prospects of 20 metropolitan markets in the Asia-Pacific region. ‘Asia shares the same liquidity crisis that the rest of the world is facing,’ said Stephen Blank, ULI’s senior resident fellow for finance. ‘Financial institutions - whether international or national, regional or local - are reluctant to extend credit as deleveraging reduces balance sheet lending capacity.’ And for Singapore, besides the credit squeeze, another problem is the seemingly generous pipeline of development projects which may be completed during a period of sagging interest from foreign business investors, said PwC tax partner David Sandison.
Source : Business Times - 6 Dec 2008
More than 70% of Park Central @ AMK sold
Mainboard-listed United Engineers has sold more than 70 per cent of its first public housing project, Park Central @ AMK, which is being developed by its subsidiary Greatearth Developments. All four-bedroom and penthouse units are sold out. The developer received more than 2,300 applications or four times the number of units available for sale when submissions closed in August. The 578-unit estate is the third Design, Build and Sell Scheme (DBSS) project in Singapore.
Source : Channel NewsAsia - 11 Dec 2008
S’pore expected to be first Southeast Asian country to recover
Singapore may be the worse-hit Southeast Asian country in the current economic crisis, but it could well be the first economy in the region to rebound, according to economic forecaster Thierry Apoteker. A jump in US consumer confidence in November is just one of the indicators that could signal signs of a global recovery next year. Consumer confidence index rose in November to 44.9, up from 38.8 in October which was the lowest on record. Coupled with signs of liquidity tensions loosening up, it is suggested that banks may start lending to corporations soon which could put the US on a recovery path.
“We have the initial tentative signs that this is taking place. The spreads between money market rates and the fed rates have declined substantially. Not yet to the normal zone but substantial, compared to the rates of 300 basis points that we have seen after the Lehman collapse,” said Dr Apoteker.
Increased spending in the US and Eurozone would translate to an increase in demand for exports from Asia. And while global trade numbers may pick up, Dr Apoteker expects a slower growth rate of between 4 and 5 per cent, as opposed to the almost 10 per cent growth in 2006. He added that he expects the US and Eurozone to see signs of recovery in the second quarter of 2009, with Asia following suit in the third quarter.
And although Singapore will be hit by slowing trade, its strong asset base and robust financial sector will boost its economic recovery. “What’s very interesting is that the other transmission mechanism – both on the asset market and the financing mechanism in Singapore – is pretty strong, much stronger than most. “We’ve done an exercise of mapping the banking systems of all the Asian countries to look at where the strengths and the weaknesses are, and you might be interested to know it is rated 1 to 64 in binary ranking. “Singapore is the only country, apart from Japan and Korea, to have a number one ranking. The financial background is very strong, so as a trading outpost you will be very badly affected, but you will be the first to recover after that.”
Source : Channel NewsAsia - 11 Dec 2008
High-end projects take a knock, suburban condos edge higher
High-end prices fall 12-28%, while mass market projects climb 1-7%: study
Fresh data on home transactions compiled by Credo Real Estate confirms that prices of high-end housing projects have fared far worse than suburban condo prices between second-half 2007 and second-half 2008. Credo’s study shows that average prices of high-end projects generally posted declines, ranging from 12 to 28 per cent during the period. In contrast, the average prices of units in selected projects in the mass market generally rose 1 to 7 per cent.
This is partly due to differing buyer profiles in the two segments. ‘Suburban condo buyers usually make their purchases for their own use and less as a tool for investment or speculation, unlike buyers in the high-end segment,’ Mr Singh says. ‘Prices are not a perfect science at the high-end due to the profile of the rich and foreign buyers who make up a good proportion of demand. They’re less price sensitive and the products are less homogeneous; if there’s something they like, even if it is priced at a premium, they’re quite happy to buy it,’ Mr Singh says.
Credo’s sample looked at Four Seasons Park condo, Ardmore Park and Cairnhill Crest in the Orchard Road belt, which showed average transacted prices fell 27, 12 and 17 per cent respectively in H2 2008 over H2 2007.
At Sentosa Cove, Credo’s sample basket comprised The Azure, The Berth and The Oceanfront condos. The declines were 22 per cent for The Azure and 28 per cent for The Oceanfront. In the city centre, the average price at Marina Bay Residences fell 17 per cent to $1,985 psf in H2 2008 with five deals done. At The Sail @ Marina Bay, the average price slipped 14 per cent to $1,811 psf, with 42 deals in H2 2008. In the mid-priced segment - defined as the low-$1,000 psf price range - One Amber, Sky@Eleven and The Tessarina - saw average transacted prices fall 19, 21 and 17 per cent respectively.
However, suburban Singapore demonstrated greater price resilience. Average transacted prices of eight of nine projects studied in the west, east and north posted 1 to 7 per cent gains in H2 2008 over H2 2007.
Source : Business Times - 11 Dec 2008
4-room flat sold for record $495,000
NEWSPAPER vendor Goh Wee Kiat, 48, refused to budge on his price when he put his four-room Housing Board (HDB) flat up for sale six months ago despite the softening property market. His persistence reaped dividends when the flat, in Marine Parade, was sold for a staggering $495,000 in late October. That is $65,000 above valuation. It was a record price paid for such a four-room flat in the area, and it came as a surprise to industry watchers, considering the quiet property market and bleak economic climate.
In September, another four-room flat in that same ‘lucky’ block located at Marine Terrace was sold for a then-high of $490,000. Both flats are about 33 years old. ‘I know that flat prices here are good because of the view and location. That was why I was quite stubborn about my price. And I dared to ask for a high price because my unit is also on a high floor.’These buyers are willing to pay a forward price, where they pay a premium, because they think the price of the flat will appreciate in the future.’
Source : The New Paper - 12 Dec 2008
Private residential launches on the up…
… as prices of high-end private properties move down
PRIVATE home launches and sales were up last month after a dismal October. The number of private residential units launched more than doubled from October’s 159 to 382, and units sold increased from 118 to 192, according to the data released by the Urban Redevelopment Authority (URA) yesterday. Analysts said the jump in units launched reflects developers clearing stock and testing sentiment.
“I wouldn’t jump to the conclusion that the holding power of developers is beginning to wane,” said Mr Karamjit Singh, managing director of Credo Real EstateGiven that financial markets were less volatile last month, he said developers could be launching units to “test the waters”, and to see how receptive the buyers are right now. “In the next three to four months, if banks are more eager to lend and developers lower their prices psf, this combination could spur the buyers back into the market,” said Mr Ku Swee Yong, director of marketing and business development from Savills Singapore.
Source : Today - 16 Dec 2008
Tuesday, January 27, 2009
Property News Upfront - Nov 08
Launches of private homes in Oct drops almost 80% on month
Only 159 private homes were launched in October this year - the lowest in more than a year.
The slide of almost 80 per cent from the 767 units launched in September is due to poor economic conditions, and the technical recession that has hit Singapore. About 194 units launched in August 2008, during the traditionally slow market in the seventh lunar month.
The central region made up almost half the new launches in October, at 74 units. The number of
new homes sold in October also fell to 112 units from 373 a month ago.
Homebuyers stayed out of the market in October as confidence was shaken by financial turmoil and news of job cuts. And buyers were only willing to spend on properties that offered value for money. “Price is a factor in today’s market. Projects priced well in very good locations have a strong take up,” said the head of research and consultancy at Jones Lang LaSalle, Chua Yang Liang.
Analysts expect the housing market to stay weak. Dr Chua said: “This pendulum effect we see in
supply and demand will continue going into next few months as developers try to ascertain what the demand is. Buyers being sensitive to market news will continue to fluctuate in their behaviour.” Analysts also say new home sales could hit lows not seen since the 1997 Asian financial crisis. Source : Channel NewsAsia - 17 Nov 2008
Home loans harder to get as prices fall
Check if bank can meet unit’s valuation to avoid overpaying for the property. A couple of telling anecdotes illustrate the unexpected glitches that home buyers can face as property prices start to fall. A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash.
The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan. Another buyer had to cancel his purchase recently after he learnt that banks’ valuation of the property was less than what he was supposed to pay.
Amid poor demand and falling prices, banks are sticking to lower property valuations in
anticipation of further price falls. ‘OCBC Bank engages independent, third-party valuers to determine the open market value of properties and there has been evidence of a fairly strong downward trend in property valuation,’ said its head of consumer secured lending Gregory Chan. Source : Sunday Times - 16 Nov 2008
About 50 homebuyers walked away from deals in October
But trend not likely to escalate as it was a month when bourses tanked
THE number of private homes returned to developers shot up last month on the back of a sharp dive in confidence due to the stockmarket crash.
Homebuyers returned 50-odd units to developers in October, compared with 10-plus units each in the preceding month and in October last year. The figures were estimated by BT from statistics on developers’ sales released by the Urban Redevelopment Authority (URA) yesterday. The figures exclude executive condos.
October also saw developers launching and selling the lowest number of private homes since URA started making monthly housing sales data available in June last year. Developers sold 112 private homes in October, down about 70 per cent from 376 units in the preceding month and 80 per cent below the 566 units sold in October last year. The 159 private homes developers launched last month was also 79 per cent lower than September and 75 per cent below that in the same year-ago period. Source : Business Times - 18 Nov 2008
Long term measures to help HDB mortgage defaulters
The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments. It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.
As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They
make up less than 8 per cent of the 420,000 households with outstanding HDB loans. Giving this
update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad
Maliki Osman said home owners should buy within their means.
But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit. More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats. Source : Channel NewsAsia - 18 Nov 2008
Retail rents flattens as consumer spending slows
The dip in consumer spending due to the economic downturn has caused concerns among many
retailers who are paying top dollar for retail space. Market watchers said they do not expect any
rental growth in the 4th quarter, but some retailers may be holding out for concessions.
Orchard Road, Singapore’s prime shopping district, is set to welcome four new malls next year -
ION Orchard, 313@Somerset, Orchard Central and The Mandarin Gallery.
The four-storey Mandarin Gallery will have 130,000 square feet of retail space, with rental rates ranging from S$12 to S$60 per square foot. About half of the space has been leased.
The landlord said it will find ways to help tenants cope with the tougher business climate, but it said cutting rents may not be best thing to do. OUE said it will try to woo shoppers to the mall with brands that are new to the Singapore market.
Many tenants along the shopping belt are locked in to their rental rates for up to three years, with the option to negotiate new deals thereafter. Analysts said high-end retailers tend to have the upper hand during such negotiations compared to mass market retailers.
“If the landlord feels that this tenant is important, if it’s a part of the mall’s image that he is trying to build up, he may be a bit more flexible in the rental negotiations. And it’s not just rentals, it could be other terms or incentives like rent-free periods,” said Nicholas Mak, director of Consultancy & Research at Knight Frank. Tan Huey Ying, director of Research & Advisory at Colliers International said: “It depends on when the economy is going to recover. But if the two integrated resorts were to proceed and open as scheduled, then I think there is some likelihood that the market may see a revival in the second half of 2010 or the first half of 2011.”
Source : Channel NewsAsia - 19 Nov 2008
Funds waiting to grab cheap Asian properties
They are raising funds for direct property investments in the region as values slide
AS property values in Asia slide, hedge funds, private equity funds and pension funds are waiting in the wings to swoop in on good buys, according to KPMG’s global head of real estate, Jonathan Thompson. ‘We’re aware that some (hedge funds and private equity funds) have been raising money for distressed situations,’ Mr Thompson told BT.
Investors have been on the lookout. Just last month, Merrill Lynch completed fundraising for its
Asian Real Estate Opportunity Fund, collecting some US$2.65 billion to invest in real estate assets and companies.
Reuters also reported on Wednesday that AMP Capital Investors is trying to raise up to S$2.9
billion for direct property investments in Asia. The Australian fund manager hopes to purchase
Japanese shopping malls at a bargain as falling sales hit retailers and credit tightening squeezes
landlords. Industrial buildings and offices beyond the main financial district in Singapore are other potential targets.
Pension funds are also showing more interest in Asian real estate, said Mr Thompson. According to him, these investors are drawn to growing economies with a structural shortage of properties. The economies would also have to be politically stable, with transparent and sound regulatory systems. ‘(Singapore and Australia) are the easiest countries to invest in,’ he said. Across Asia, Mr Thompson believed that ‘the fundamentals for real estate are better than they are in Europe or America’. But because of the global economic slowdown and tighter credit, property values in Asia will continue to fall. Source : Business Times - 22 Nov 2008
Private home rents may fall 15%
Selling prices of top-end units could drop by up to 22% in months ahead
PRIVATE home rents in Singapore are set to drop by up to 15 per cent next year, as the reality of a slowing economy hits home. Property consultants say landlords are expected to become more flexible, given factors such as ongoing job cuts. ‘The quarters ahead should, however, see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,’ said the report.
Given that the full force of the financial crisis erupted in mid-September, the rental property market has yet to feel the full impact, Savills Singapore said. In terms of top-of-the-market rents, known as prime rents, it expects a fall of 7 to 13 per cent next year. Another consultancy, Knight Frank, is projecting a bigger fall of 10 to 15 per cent in average islandwide rents next year. ‘Some landlords are already cutting rents to retain tenants. We may see more aggressive cuts by landlords if more multinational companies cut their headcounts,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. Next year, landlords in prime areas will have to contend with even more competition as more condos are completed. ‘Those who have advertised for a few months are willing to lower their asking rents but many others continue to hold on to the same asking levels.’
A renovated 1,650 sq ft unit at Pinewood Gardens at Balmoral Park is now available at $6,000 a
month or $3.64 per sq ft - already lower than most other done deals at the development - but a
potential tenant is willing to take it at only $5,000 a month or $3.03 psf, she said.
Source : Straits Times 21 Nov 2008
Savills sees over 20% drop in luxury home prices
Announced forecast for period ending 2009 grimmest yet by any consultancy
Savills Singapore is predicting price drops of more than 20 per cent in the next five quarters for
high-end and super-luxury private homes. This would follow declines of 14.3 per cent and 12 per
cent respectively for these two segments in the first nine months of 2008 from the peak in Q4 last year.
The forecast is probably the grimmest announced by a property consultancy here - although some rival firms BT spoke to yesterday said that privately, they have similar estimates. Research analysts at stockbroking houses/banks have already been making downbeat pronouncements, predicting declines of about 30 per cent or more for luxury home prices byl end-2009.
In its report yesterday, Savills said that the high-end and super luxury segments are more vulnerable to the deteriorating global investment climate. The average capital value for high-end (non-landed) residential homes fell to $2,065 per square foot in Q3 2008, 4.6 per cent lower than the preceding quarter and 14.3 per cent below the Q4 2007 peak of $2,410 psf.
In the super luxury league, the average capital value slipped to $3,240.40 psf in Q3, down 5.2 per cent from the preceding quarter and 12 per cent lower than the Q4 2007 figure.
The fundamentals of the mid-tier and mass-market segments are stronger today than during the Asian Crisis downturn, partly due to Singapore’s more open immigration policy, Savills said.
However, Savills expects rental demand drivers to weaken in coming quarters. Savills’ residential leasing head Patrick Lai says: ‘The inflow of expats is expected to slow down, although we’re still seeing an influx of foreign talent into Singapore, particularly in the healthcare, pharmaceutical, R&D and logistics industries.’
Source : Business Times - 21 Nov 2008
REAL ESTATE AGENTS: Downgraders, bargain hunters are
main clients
THE real estate industry is keeping its head above water as a result of bargain hunters attracted to the falling prices and home owners downgrading to smaller, cheaper properties.
The higher number of sales transactions has translated to better pickings for property agents. Major agencies contacted say they have had better sales for lower-end housing in the last three months.
PropNex’s stable of 5,000 agents sold more than 400 condominium units in the price range of
$1,000 per sq ft or less in that period, up a quarter from the preceding three months.
Sales of HDB flats and low-end landed houses have also jumped 10 per cent.
HSR Property Group, the largest agency here with 8,500 agents, is selling about 2,500 flats and
low-end condo units a month - 5 per cent more than three months ago.
At Dennis Wee Properties, sales - particularly of three and four-room flats - are ‘going strong’.
Two recent launches from the housing board also saw brisk activity, with applicants outnumbering the number of available flats by more than 10 times.
The rise in number of transactions for lower-end units more than makes up for the fall in that for high-end properties, said industry experts, who cite an average 7 per cent drop for that sector.
The downturn has made for good times for agents.
The executive director of HSR Property Group Eric Cheng said in good times, new agents join the industry because they think it is easy to make a quick buck. The pie is split among more people. ‘But in a downturn, the number of agents falls and each tends to earn more,’ he added.
Mr Ryan Tan, 40, for example, has sold 12 properties this month, up from five last month. His
clients are moving from prime areas to the suburbs, with many saying they need the extra cash.
His clients would know what it is like to be in the shoes of teacher C.Y. Leow, 51, who sold her
five-room private apartment in Somerset two months ago after losing $150,000 in Minibond
investments - money that was to be her retirement nest egg. She and her family will move into a
five-room Bishan flat next month- a move that nets her about $750,000.
PropNex chief executive Mohamed Ismail said the business seems recession proof. ‘At the end of
the day, everyone needs a roof over their heads. An agent will always have a job in any market.’
Source : Straits Times - 24 Nov 2008
S’pore govt will not implement measures to stimulate property
sector
The Singapore government will not introduce measures to stimulate demand or prop up prices
artificially in the property sector.Speaking at an industry event on Wednesday, National
Development Minister Mah Bow Tan said such efforts are not sustainable.
Developers are feeling the heat from the economic downturn, credit crunch and poor consumer
confidence, and many new project launches have been shelved. To boost property demand, some
developers hope the government could relax some of its policies, such as reviving the Deferred
Payment Scheme, reducing the development charge rate and introducing property tax exemptions. Source : Channel NewsAsia - 26 Nov 2008
Buyers paying less cash for HDB resale flats
Some deals may be done at valuation but no drop in prices; big flats moving slowly
THE private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away. Yet, the HDB resale flat market remains active and prices are still fairly strong. However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown. ‘In view of the current sentiment, HDB resale flat valuations should stay flat going forward,’ said Mr Lim. ‘So if COV is coming down, prices will eventually come down.’
Prices, however, will not plunge as there is a large base of potential buyers, he said.
Within the HDB market, the segment for small flats will likely be busier than the one for bigger
flats. Already, property experts say the market for bigger flats - five-room flats and executive flats - have started to slow down. ‘In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option’ than private homes, according to a recent ERA study.
It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis
began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units. ‘Many people were downgrading from private properties to HDB flats,’ explained Mr Lim. - MR EUGENE LIM, associate director of ERA Asia Pacific
Source : Sunday Times - 30 Nov 2008
Only 159 private homes were launched in October this year - the lowest in more than a year.
The slide of almost 80 per cent from the 767 units launched in September is due to poor economic conditions, and the technical recession that has hit Singapore. About 194 units launched in August 2008, during the traditionally slow market in the seventh lunar month.
The central region made up almost half the new launches in October, at 74 units. The number of
new homes sold in October also fell to 112 units from 373 a month ago.
Homebuyers stayed out of the market in October as confidence was shaken by financial turmoil and news of job cuts. And buyers were only willing to spend on properties that offered value for money. “Price is a factor in today’s market. Projects priced well in very good locations have a strong take up,” said the head of research and consultancy at Jones Lang LaSalle, Chua Yang Liang.
Analysts expect the housing market to stay weak. Dr Chua said: “This pendulum effect we see in
supply and demand will continue going into next few months as developers try to ascertain what the demand is. Buyers being sensitive to market news will continue to fluctuate in their behaviour.” Analysts also say new home sales could hit lows not seen since the 1997 Asian financial crisis. Source : Channel NewsAsia - 17 Nov 2008
Home loans harder to get as prices fall
Check if bank can meet unit’s valuation to avoid overpaying for the property. A couple of telling anecdotes illustrate the unexpected glitches that home buyers can face as property prices start to fall. A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash.
The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan. Another buyer had to cancel his purchase recently after he learnt that banks’ valuation of the property was less than what he was supposed to pay.
Amid poor demand and falling prices, banks are sticking to lower property valuations in
anticipation of further price falls. ‘OCBC Bank engages independent, third-party valuers to determine the open market value of properties and there has been evidence of a fairly strong downward trend in property valuation,’ said its head of consumer secured lending Gregory Chan. Source : Sunday Times - 16 Nov 2008
About 50 homebuyers walked away from deals in October
But trend not likely to escalate as it was a month when bourses tanked
THE number of private homes returned to developers shot up last month on the back of a sharp dive in confidence due to the stockmarket crash.
Homebuyers returned 50-odd units to developers in October, compared with 10-plus units each in the preceding month and in October last year. The figures were estimated by BT from statistics on developers’ sales released by the Urban Redevelopment Authority (URA) yesterday. The figures exclude executive condos.
October also saw developers launching and selling the lowest number of private homes since URA started making monthly housing sales data available in June last year. Developers sold 112 private homes in October, down about 70 per cent from 376 units in the preceding month and 80 per cent below the 566 units sold in October last year. The 159 private homes developers launched last month was also 79 per cent lower than September and 75 per cent below that in the same year-ago period. Source : Business Times - 18 Nov 2008
Long term measures to help HDB mortgage defaulters
The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments. It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.
As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They
make up less than 8 per cent of the 420,000 households with outstanding HDB loans. Giving this
update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad
Maliki Osman said home owners should buy within their means.
But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit. More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats. Source : Channel NewsAsia - 18 Nov 2008
Retail rents flattens as consumer spending slows
The dip in consumer spending due to the economic downturn has caused concerns among many
retailers who are paying top dollar for retail space. Market watchers said they do not expect any
rental growth in the 4th quarter, but some retailers may be holding out for concessions.
Orchard Road, Singapore’s prime shopping district, is set to welcome four new malls next year -
ION Orchard, 313@Somerset, Orchard Central and The Mandarin Gallery.
The four-storey Mandarin Gallery will have 130,000 square feet of retail space, with rental rates ranging from S$12 to S$60 per square foot. About half of the space has been leased.
The landlord said it will find ways to help tenants cope with the tougher business climate, but it said cutting rents may not be best thing to do. OUE said it will try to woo shoppers to the mall with brands that are new to the Singapore market.
Many tenants along the shopping belt are locked in to their rental rates for up to three years, with the option to negotiate new deals thereafter. Analysts said high-end retailers tend to have the upper hand during such negotiations compared to mass market retailers.
“If the landlord feels that this tenant is important, if it’s a part of the mall’s image that he is trying to build up, he may be a bit more flexible in the rental negotiations. And it’s not just rentals, it could be other terms or incentives like rent-free periods,” said Nicholas Mak, director of Consultancy & Research at Knight Frank. Tan Huey Ying, director of Research & Advisory at Colliers International said: “It depends on when the economy is going to recover. But if the two integrated resorts were to proceed and open as scheduled, then I think there is some likelihood that the market may see a revival in the second half of 2010 or the first half of 2011.”
Source : Channel NewsAsia - 19 Nov 2008
Funds waiting to grab cheap Asian properties
They are raising funds for direct property investments in the region as values slide
AS property values in Asia slide, hedge funds, private equity funds and pension funds are waiting in the wings to swoop in on good buys, according to KPMG’s global head of real estate, Jonathan Thompson. ‘We’re aware that some (hedge funds and private equity funds) have been raising money for distressed situations,’ Mr Thompson told BT.
Investors have been on the lookout. Just last month, Merrill Lynch completed fundraising for its
Asian Real Estate Opportunity Fund, collecting some US$2.65 billion to invest in real estate assets and companies.
Reuters also reported on Wednesday that AMP Capital Investors is trying to raise up to S$2.9
billion for direct property investments in Asia. The Australian fund manager hopes to purchase
Japanese shopping malls at a bargain as falling sales hit retailers and credit tightening squeezes
landlords. Industrial buildings and offices beyond the main financial district in Singapore are other potential targets.
Pension funds are also showing more interest in Asian real estate, said Mr Thompson. According to him, these investors are drawn to growing economies with a structural shortage of properties. The economies would also have to be politically stable, with transparent and sound regulatory systems. ‘(Singapore and Australia) are the easiest countries to invest in,’ he said. Across Asia, Mr Thompson believed that ‘the fundamentals for real estate are better than they are in Europe or America’. But because of the global economic slowdown and tighter credit, property values in Asia will continue to fall. Source : Business Times - 22 Nov 2008
Private home rents may fall 15%
Selling prices of top-end units could drop by up to 22% in months ahead
PRIVATE home rents in Singapore are set to drop by up to 15 per cent next year, as the reality of a slowing economy hits home. Property consultants say landlords are expected to become more flexible, given factors such as ongoing job cuts. ‘The quarters ahead should, however, see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,’ said the report.
Given that the full force of the financial crisis erupted in mid-September, the rental property market has yet to feel the full impact, Savills Singapore said. In terms of top-of-the-market rents, known as prime rents, it expects a fall of 7 to 13 per cent next year. Another consultancy, Knight Frank, is projecting a bigger fall of 10 to 15 per cent in average islandwide rents next year. ‘Some landlords are already cutting rents to retain tenants. We may see more aggressive cuts by landlords if more multinational companies cut their headcounts,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. Next year, landlords in prime areas will have to contend with even more competition as more condos are completed. ‘Those who have advertised for a few months are willing to lower their asking rents but many others continue to hold on to the same asking levels.’
A renovated 1,650 sq ft unit at Pinewood Gardens at Balmoral Park is now available at $6,000 a
month or $3.64 per sq ft - already lower than most other done deals at the development - but a
potential tenant is willing to take it at only $5,000 a month or $3.03 psf, she said.
Source : Straits Times 21 Nov 2008
Savills sees over 20% drop in luxury home prices
Announced forecast for period ending 2009 grimmest yet by any consultancy
Savills Singapore is predicting price drops of more than 20 per cent in the next five quarters for
high-end and super-luxury private homes. This would follow declines of 14.3 per cent and 12 per
cent respectively for these two segments in the first nine months of 2008 from the peak in Q4 last year.
The forecast is probably the grimmest announced by a property consultancy here - although some rival firms BT spoke to yesterday said that privately, they have similar estimates. Research analysts at stockbroking houses/banks have already been making downbeat pronouncements, predicting declines of about 30 per cent or more for luxury home prices byl end-2009.
In its report yesterday, Savills said that the high-end and super luxury segments are more vulnerable to the deteriorating global investment climate. The average capital value for high-end (non-landed) residential homes fell to $2,065 per square foot in Q3 2008, 4.6 per cent lower than the preceding quarter and 14.3 per cent below the Q4 2007 peak of $2,410 psf.
In the super luxury league, the average capital value slipped to $3,240.40 psf in Q3, down 5.2 per cent from the preceding quarter and 12 per cent lower than the Q4 2007 figure.
The fundamentals of the mid-tier and mass-market segments are stronger today than during the Asian Crisis downturn, partly due to Singapore’s more open immigration policy, Savills said.
However, Savills expects rental demand drivers to weaken in coming quarters. Savills’ residential leasing head Patrick Lai says: ‘The inflow of expats is expected to slow down, although we’re still seeing an influx of foreign talent into Singapore, particularly in the healthcare, pharmaceutical, R&D and logistics industries.’
Source : Business Times - 21 Nov 2008
REAL ESTATE AGENTS: Downgraders, bargain hunters are
main clients
THE real estate industry is keeping its head above water as a result of bargain hunters attracted to the falling prices and home owners downgrading to smaller, cheaper properties.
The higher number of sales transactions has translated to better pickings for property agents. Major agencies contacted say they have had better sales for lower-end housing in the last three months.
PropNex’s stable of 5,000 agents sold more than 400 condominium units in the price range of
$1,000 per sq ft or less in that period, up a quarter from the preceding three months.
Sales of HDB flats and low-end landed houses have also jumped 10 per cent.
HSR Property Group, the largest agency here with 8,500 agents, is selling about 2,500 flats and
low-end condo units a month - 5 per cent more than three months ago.
At Dennis Wee Properties, sales - particularly of three and four-room flats - are ‘going strong’.
Two recent launches from the housing board also saw brisk activity, with applicants outnumbering the number of available flats by more than 10 times.
The rise in number of transactions for lower-end units more than makes up for the fall in that for high-end properties, said industry experts, who cite an average 7 per cent drop for that sector.
The downturn has made for good times for agents.
The executive director of HSR Property Group Eric Cheng said in good times, new agents join the industry because they think it is easy to make a quick buck. The pie is split among more people. ‘But in a downturn, the number of agents falls and each tends to earn more,’ he added.
Mr Ryan Tan, 40, for example, has sold 12 properties this month, up from five last month. His
clients are moving from prime areas to the suburbs, with many saying they need the extra cash.
His clients would know what it is like to be in the shoes of teacher C.Y. Leow, 51, who sold her
five-room private apartment in Somerset two months ago after losing $150,000 in Minibond
investments - money that was to be her retirement nest egg. She and her family will move into a
five-room Bishan flat next month- a move that nets her about $750,000.
PropNex chief executive Mohamed Ismail said the business seems recession proof. ‘At the end of
the day, everyone needs a roof over their heads. An agent will always have a job in any market.’
Source : Straits Times - 24 Nov 2008
S’pore govt will not implement measures to stimulate property
sector
The Singapore government will not introduce measures to stimulate demand or prop up prices
artificially in the property sector.Speaking at an industry event on Wednesday, National
Development Minister Mah Bow Tan said such efforts are not sustainable.
Developers are feeling the heat from the economic downturn, credit crunch and poor consumer
confidence, and many new project launches have been shelved. To boost property demand, some
developers hope the government could relax some of its policies, such as reviving the Deferred
Payment Scheme, reducing the development charge rate and introducing property tax exemptions. Source : Channel NewsAsia - 26 Nov 2008
Buyers paying less cash for HDB resale flats
Some deals may be done at valuation but no drop in prices; big flats moving slowly
THE private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away. Yet, the HDB resale flat market remains active and prices are still fairly strong. However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown. ‘In view of the current sentiment, HDB resale flat valuations should stay flat going forward,’ said Mr Lim. ‘So if COV is coming down, prices will eventually come down.’
Prices, however, will not plunge as there is a large base of potential buyers, he said.
Within the HDB market, the segment for small flats will likely be busier than the one for bigger
flats. Already, property experts say the market for bigger flats - five-room flats and executive flats - have started to slow down. ‘In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option’ than private homes, according to a recent ERA study.
It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis
began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units. ‘Many people were downgrading from private properties to HDB flats,’ explained Mr Lim. - MR EUGENE LIM, associate director of ERA Asia Pacific
Source : Sunday Times - 30 Nov 2008
Friday, October 24, 2008
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
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
Monday, May 5, 2008
Property News Weekly #2
Credit Crisis over?
That's what Warren Buffet said in the Annual Meeting of his company but sees more pain for people with individual mortgages. The CEO of Berkshire Hathaway said the global credit crunch has eased for bankers, and the Federal Reserve probably averted more failures by helping to rescue Bear Stearns.
The worst of the crisis in Wall Street is over,’ he said last Saturday on Bloomberg Television. The billionaire was interviewed before the annual meeting of the company, which is based in Omaha, Nebraska. Listed as the world’s richest man by Forbes magazine, Warren said the Fed acted properly when it arranged a US$2.4 billion (S$3.3 billion) buyout in March of New York-based Bear Stearns by JPMorgan Chase.
He said he turned down the opportunity to buy the troubled investment bank because he lacked enough capital and time to craft a solution. More failures and wider panic may have resulted if the regulators had not halted the run on Bear Stearns, he added. ‘The worry was that there would be contagion; it was a very real worry,’ he said. ‘If Bear Stearns had gone, the next day, somebody else would have gone. It could’ve been a very, very, very chaotic situation.’
Mr Buffett said he was contacted in March before JPMorgan, the third-biggest United States bank by assets, agreed to buy Bear Stearns. The person calling him, whom he would not identify, was ’someone responsible’ and was not from the Fed or the Treasury. ‘As I understand it, Bear Stearns had US$65 billion due on Monday and I didn’t have US$65 billion,’ Mr Buffett said. ‘I couldn’t get my mind around that situation in the required time.’ New York-based JPMorgan was the right buyer for Bear Stearns, he added.
JPMorgan agreed in mid-March to acquire Bear Stearns, once the fifth-biggest US securities firm, after customers grew concerned about the company’s health and pulled out their money, leaving Bear Stearns short on cash. JPMorgan, which received financial support from the Fed, raised the purchase price a week later to US$10 a share from US$2 to mollify Bear Stearns shareholders who said they were not getting enough.In a question-and-answer session at the shareholder meeting, Mr Buffett said that from a risk perspective, some banks got ‘too big to manage’. Berkshire’s own investment in derivative contracts has recovered US$500 million to US$600 million of lost value since end-March.
Middle Eastern investors still "strong" on South-East Asia real estate market?
That's what Standard Chartered (Stanchart) Bank’s group head for origination and client coverage, Mr V. Shankar thinks so. Stanchart is well-positioned to become a leading player in this area. In the past year, it has advised on more than 40 per cent of the deal flow from Middle East to this region, which totalled US$8 billion (S$10.9 billion).
The figure was up from the US$987 million in the 12 months preceding, and Mr Shankar believes it will continue to rise in the years ahead.
‘The financial ties between the Middle East and Asia are strengthening by the day and we are seeing more East-East relationships being formed,’ he said in a recent interview. Oil and natural gas from the Middle East are vital for China, Japan and all the fast-growing markets in the Asia-Pacific region, which are fast ramping up their infrastructure. And the oil-generated capital and liquidity in the Middle East are fuelling a search for investments with high returns.’
Mr Shankar added that a recent report by McKinsey estimated that Gulf countries would have US$9 trillion to invest by 2020. Stanchart began boosting its presence in the Middle East three years ago and now has a team of 50 corporate advisers there. Mr Shankar, who is also a member of Stanchart’s group management committee, said this put the bank in an enviable position as Singapore’s business with the Gulf looks set to soar. ‘Between 2004 and 2006, total trade between Singapore and the Middle East shot up from US$20.9 billion to US$30.8 billion, an increase of 47 per cent. Currently, Singapore companies are working on more than $6 billion worth of projects in the Middle East.’
Looking ahead, Mr Shankar said the bank would leverage on its experience and capabilities in the region to shore up its position as a major player. ‘Stanchart is well-placed to seize future opportunities, thanks to our growing geographical reach and the scale and breadth of our products and capabilities. We have an established history in Singapore, having been in the market for 150 years, and we have been operating in the Middle East for more than 50 years. We feel we can act as a strong local bank in all the different markets for our clients.’
Small developers may feel the impact of the Credit Crunch
Given the current turmoil in the financial market, some of these small developers might face financing problems as they move to finalise deals, reports BNP Paribas. In fact, some may be forced to cancel the deals and walk away, it warned. The report by the French bank said that most of the collective sales done in the second half of last year were by small private developers, contractor- cum-developers and non-core developers.
They included Soilbuild, Hiap Hoe, Lian Beng, KSH Holdings, Koh Brothers, Popular Holdings, Aspial Corporation and Eastern Holdings. ‘In the near future, we are concerned that some smaller players that have secured big and expensive en bloc sites may walk away from the deals as securing financing is not easy at this time, especially for non-core developers,’ said the recent report.
Already, a small private firm, Bravo Building Construction, said to be backed by a one-time big property player, has bailed out of three collective sale deals. In all three deals, it has had to give up its deposit, which ranged from 1 per cent to 10 per cent of the sale price. The biggest of the three deals was the $516 million purchase of Tulip Garden, for which Bravo had to forfeit its $25.8 million deposit.
Is Government doing enough for Enbloc regulations?
Regardless of regulations and structured conditions, the current laws under the Building Maintenance and Strata Management Act and the Land Titles (Strata) Act (Amendment) are insufficient to patch all loopholes. How can anyone stop creativity in the name of monetary returns?
On April 27, Bayshore Park and Mandarin Gardens both held annual general meetings. These two estates, with more than 1,000 units each, sit on 1 million sq ft of land next to the sea. Both have got a collective sale initiative off the ground, with sale committees elected. With the support of pro-sale residents, voting powers are then used to control the rest of the estate, even though the votes represent only a minority of residents.
In Bayshore Park, the pro-sale group outvoted other residents on crucial issues and in selection of council members. Averaging 60 per cent of votes cast at the AGM, this roughly 20 per cent of residents (as only 30 per cent of owners were represented at the AGM) voted down a proposed increase in maintenance charges in line with current inflation, voted for a lower increase in the sinking fund, voted down crucial replacement of copper pipes in the common corridors and voted down any exploration of corridor upgrading. In addition, they voted for a reduction in council seats to nine, making sure four sale committee members were voted into the council, and ensured that four of the five previous council members retained had exhibited pro-sale inclinations. They made sure two previous council members who did not favour sale were not re-elected. I was one of the two.
At Mandarin Gardens, in a similar vein, the pro-sale camp mustered enough proxy forms to control 65 per cent of the votes in the AGM. They defeated a motion to reduce water ponding of walkways and lift lobbies to improve safety, and passed a resolution to reduce management council (MC) expenditure limits from $300,000 to $50,000 making it almost impossible for the MC to function. Consequently, the incumbent council refused to stand for re-election. Even more devastating, the pro-sale camp fielded no candidates for council. Hence, no council was elected. The law was not broken at either AGM. Just a creative twist to the ending.
Mapletree - Singapore's Temasek property asset management sets to grow even bigger
Mapletree Investments’ total asset size, comprising assets under management as well as on its own balance sheet, has nearly doubled to around $10.5 billion - inclusive of the recently announced acquisition of a $1.7 billion portfolio from JTC Corp - from $5.6 billion a year ago. In a year’s time, it could grow further to $15 billion-$20 billion, Mapletree Investments CEO Hiew Yoon Khong told BT in a recent interview.
The increase will come largely from new private funds the fully-owned unit of Temasek Holdings is starting, including the US$1.5 billion-US$2.0 billion Mapletree India-China Fund (MICF) focusing on development and opportunistic redevelopment of real estate in the two mega markets. ‘This fund will invest in office, retail and residential property,’ Mr Hiew said. The first closing, which has just been completed, has raised US$600 million, contributed equally by Mapletree and an international institutional investor that has declined to be named.
The fund’s second closing, slated for July, will also see Mapletree and the investor putting in US$200 million each, with another US$500 million to US$1 billion to be subscribed by third-party investors. MICF has secured two seed investments in China. One is a residential and retail development named Future City in Xi’an’s Beilin District. The project has a total development value of $196 million and will span almost 1.56 million sq ft in gross floor area. Future City will have four residential towers and a nearly 400,000 sq ft mall to be named VivoCity Xi’an. Construction began in March last year and the development is slated for completion by July 2010. The targeted opening date for the mall is October 2010.
The second seed investment for MICF is an existing office block in Beijing’s Central Business District with a gross floor area of around 400,000 sq ft and an investment value of about $165 million. Upon completion of the acquisition in June 2008, an anchor tenant will lease 35 per cent of net lettable area. ‘We expect to seal a third investment in China soon for MICF - a retail and serviced apartment development in Guangzhou,’ said the 46-year-old former investment banker. As for India, the fund has identified two investments in Bangalore - an office and residential project, and a pure office development.
Over the next 12 months, Mapletree also expects to start sequel funds to the Malaysia-focused CIMB Mapletree Real Estate Fund (CMREF) and the Mapletree Industrial Fund (MIF). The latter has so far bought some $300 million of non-warehouse industrial properties in Singapore, Malaysia and China. ‘For CMREF 2, we are targeting to raise about RM1 billion (S$430 million); CMREF 1’s RM500 million is almost fully invested,’ Mr Hiew said. The group has held back plans to float more real estate investment trusts or Reits in Singapore because of unfavourable financial market conditions. One of these is the Mapletree Commercial Trust, which will hold about $3 billion of Mapletree’s Singapore assets in the HarbourFront and Alexandra Road areas. ‘With the deferment, we’ve been focusing on growing the net income of the initial assets planned for the commercial trust and working on building a strong pipeline of assets for possible acquisition by the trust,’ Mr Hiew said. ‘We’ll launch the trust when the market stabilises, hopefully before the end of the year,’ he added.
The centrepiece of the trust will be VivoCity, valued at about $2 billion. Other assets are likely to include nightspot St James Power Station, HarbourFront Centre, PSA Building and Merrill Lynch HarbourFront, which is slated for completion in the third quarter of this year. The future acquisition pipeline for the trust includes two projects currently under construction - Mapletree Anson, a 19-storey Grade A building at Anson Road/Enggor Street slated for completion in Q3 2009, and Mapletree Business City, which which is expected to be ready in the second half of 2010.
The latter project is being built on the site of the former Alexandra Distripark (Blocks 1-3) and on an adjacent plot at Alexandra Terrace. ‘This will be a modern business campus with about 1.7 million sq ft net lettable area (NLA) comprising an office block and three business park blocks with amenities like a 350-seat auditorium, big function rooms. We’ll have a foyer for cocktails, gym with lap pool, even a childcare centre and convenience store, plus roughly 1,100 carpark lots,’ Mr Hiew said. The development will also have a foodcourt and al fresco-style restaurants.
So far, two tenants, including a financial institution, have leased a total of about 200,000 sq ft. Mapletree Business City will be integrated with Mapletree’s adjacent properties - The Comtech and PSA Building - to form the group’s Alexandra Precinct assets. PSA Building will be directly connected to Labrador MRT Station under the Circle Line opening in 2010.
As for Mapletree Anson, with about 325,000 sq ft NLA, about 40,000 sq ft has been leased so far. ‘The building’s completion in Q3 2009 will be ahead of the completion of the first phase of Marina Bay Financial Centre,’ Mr Hiew noted. Plans to float Embassy Reit here - in partnership with India’s Embassy Group - have also been put on the backburner as structuring issues relating to changes in Indian laws on foreign funding and consequential tax issues are being ironed out first. The proposed Reit will hold business parks in Bangalore.
That's what Warren Buffet said in the Annual Meeting of his company but sees more pain for people with individual mortgages. The CEO of Berkshire Hathaway said the global credit crunch has eased for bankers, and the Federal Reserve probably averted more failures by helping to rescue Bear Stearns.
The worst of the crisis in Wall Street is over,’ he said last Saturday on Bloomberg Television. The billionaire was interviewed before the annual meeting of the company, which is based in Omaha, Nebraska. Listed as the world’s richest man by Forbes magazine, Warren said the Fed acted properly when it arranged a US$2.4 billion (S$3.3 billion) buyout in March of New York-based Bear Stearns by JPMorgan Chase.
He said he turned down the opportunity to buy the troubled investment bank because he lacked enough capital and time to craft a solution. More failures and wider panic may have resulted if the regulators had not halted the run on Bear Stearns, he added. ‘The worry was that there would be contagion; it was a very real worry,’ he said. ‘If Bear Stearns had gone, the next day, somebody else would have gone. It could’ve been a very, very, very chaotic situation.’
Mr Buffett said he was contacted in March before JPMorgan, the third-biggest United States bank by assets, agreed to buy Bear Stearns. The person calling him, whom he would not identify, was ’someone responsible’ and was not from the Fed or the Treasury. ‘As I understand it, Bear Stearns had US$65 billion due on Monday and I didn’t have US$65 billion,’ Mr Buffett said. ‘I couldn’t get my mind around that situation in the required time.’ New York-based JPMorgan was the right buyer for Bear Stearns, he added.
JPMorgan agreed in mid-March to acquire Bear Stearns, once the fifth-biggest US securities firm, after customers grew concerned about the company’s health and pulled out their money, leaving Bear Stearns short on cash. JPMorgan, which received financial support from the Fed, raised the purchase price a week later to US$10 a share from US$2 to mollify Bear Stearns shareholders who said they were not getting enough.In a question-and-answer session at the shareholder meeting, Mr Buffett said that from a risk perspective, some banks got ‘too big to manage’. Berkshire’s own investment in derivative contracts has recovered US$500 million to US$600 million of lost value since end-March.
Middle Eastern investors still "strong" on South-East Asia real estate market?
That's what Standard Chartered (Stanchart) Bank’s group head for origination and client coverage, Mr V. Shankar thinks so. Stanchart is well-positioned to become a leading player in this area. In the past year, it has advised on more than 40 per cent of the deal flow from Middle East to this region, which totalled US$8 billion (S$10.9 billion).
The figure was up from the US$987 million in the 12 months preceding, and Mr Shankar believes it will continue to rise in the years ahead.
‘The financial ties between the Middle East and Asia are strengthening by the day and we are seeing more East-East relationships being formed,’ he said in a recent interview. Oil and natural gas from the Middle East are vital for China, Japan and all the fast-growing markets in the Asia-Pacific region, which are fast ramping up their infrastructure. And the oil-generated capital and liquidity in the Middle East are fuelling a search for investments with high returns.’
Mr Shankar added that a recent report by McKinsey estimated that Gulf countries would have US$9 trillion to invest by 2020. Stanchart began boosting its presence in the Middle East three years ago and now has a team of 50 corporate advisers there. Mr Shankar, who is also a member of Stanchart’s group management committee, said this put the bank in an enviable position as Singapore’s business with the Gulf looks set to soar. ‘Between 2004 and 2006, total trade between Singapore and the Middle East shot up from US$20.9 billion to US$30.8 billion, an increase of 47 per cent. Currently, Singapore companies are working on more than $6 billion worth of projects in the Middle East.’
Looking ahead, Mr Shankar said the bank would leverage on its experience and capabilities in the region to shore up its position as a major player. ‘Stanchart is well-placed to seize future opportunities, thanks to our growing geographical reach and the scale and breadth of our products and capabilities. We have an established history in Singapore, having been in the market for 150 years, and we have been operating in the Middle East for more than 50 years. We feel we can act as a strong local bank in all the different markets for our clients.’
Small developers may feel the impact of the Credit Crunch
Given the current turmoil in the financial market, some of these small developers might face financing problems as they move to finalise deals, reports BNP Paribas. In fact, some may be forced to cancel the deals and walk away, it warned. The report by the French bank said that most of the collective sales done in the second half of last year were by small private developers, contractor- cum-developers and non-core developers.
They included Soilbuild, Hiap Hoe, Lian Beng, KSH Holdings, Koh Brothers, Popular Holdings, Aspial Corporation and Eastern Holdings. ‘In the near future, we are concerned that some smaller players that have secured big and expensive en bloc sites may walk away from the deals as securing financing is not easy at this time, especially for non-core developers,’ said the recent report.
Already, a small private firm, Bravo Building Construction, said to be backed by a one-time big property player, has bailed out of three collective sale deals. In all three deals, it has had to give up its deposit, which ranged from 1 per cent to 10 per cent of the sale price. The biggest of the three deals was the $516 million purchase of Tulip Garden, for which Bravo had to forfeit its $25.8 million deposit.
Is Government doing enough for Enbloc regulations?
Regardless of regulations and structured conditions, the current laws under the Building Maintenance and Strata Management Act and the Land Titles (Strata) Act (Amendment) are insufficient to patch all loopholes. How can anyone stop creativity in the name of monetary returns?
On April 27, Bayshore Park and Mandarin Gardens both held annual general meetings. These two estates, with more than 1,000 units each, sit on 1 million sq ft of land next to the sea. Both have got a collective sale initiative off the ground, with sale committees elected. With the support of pro-sale residents, voting powers are then used to control the rest of the estate, even though the votes represent only a minority of residents.
In Bayshore Park, the pro-sale group outvoted other residents on crucial issues and in selection of council members. Averaging 60 per cent of votes cast at the AGM, this roughly 20 per cent of residents (as only 30 per cent of owners were represented at the AGM) voted down a proposed increase in maintenance charges in line with current inflation, voted for a lower increase in the sinking fund, voted down crucial replacement of copper pipes in the common corridors and voted down any exploration of corridor upgrading. In addition, they voted for a reduction in council seats to nine, making sure four sale committee members were voted into the council, and ensured that four of the five previous council members retained had exhibited pro-sale inclinations. They made sure two previous council members who did not favour sale were not re-elected. I was one of the two.
At Mandarin Gardens, in a similar vein, the pro-sale camp mustered enough proxy forms to control 65 per cent of the votes in the AGM. They defeated a motion to reduce water ponding of walkways and lift lobbies to improve safety, and passed a resolution to reduce management council (MC) expenditure limits from $300,000 to $50,000 making it almost impossible for the MC to function. Consequently, the incumbent council refused to stand for re-election. Even more devastating, the pro-sale camp fielded no candidates for council. Hence, no council was elected. The law was not broken at either AGM. Just a creative twist to the ending.
Mapletree - Singapore's Temasek property asset management sets to grow even bigger
Mapletree Investments’ total asset size, comprising assets under management as well as on its own balance sheet, has nearly doubled to around $10.5 billion - inclusive of the recently announced acquisition of a $1.7 billion portfolio from JTC Corp - from $5.6 billion a year ago. In a year’s time, it could grow further to $15 billion-$20 billion, Mapletree Investments CEO Hiew Yoon Khong told BT in a recent interview.
The increase will come largely from new private funds the fully-owned unit of Temasek Holdings is starting, including the US$1.5 billion-US$2.0 billion Mapletree India-China Fund (MICF) focusing on development and opportunistic redevelopment of real estate in the two mega markets. ‘This fund will invest in office, retail and residential property,’ Mr Hiew said. The first closing, which has just been completed, has raised US$600 million, contributed equally by Mapletree and an international institutional investor that has declined to be named.
The fund’s second closing, slated for July, will also see Mapletree and the investor putting in US$200 million each, with another US$500 million to US$1 billion to be subscribed by third-party investors. MICF has secured two seed investments in China. One is a residential and retail development named Future City in Xi’an’s Beilin District. The project has a total development value of $196 million and will span almost 1.56 million sq ft in gross floor area. Future City will have four residential towers and a nearly 400,000 sq ft mall to be named VivoCity Xi’an. Construction began in March last year and the development is slated for completion by July 2010. The targeted opening date for the mall is October 2010.
The second seed investment for MICF is an existing office block in Beijing’s Central Business District with a gross floor area of around 400,000 sq ft and an investment value of about $165 million. Upon completion of the acquisition in June 2008, an anchor tenant will lease 35 per cent of net lettable area. ‘We expect to seal a third investment in China soon for MICF - a retail and serviced apartment development in Guangzhou,’ said the 46-year-old former investment banker. As for India, the fund has identified two investments in Bangalore - an office and residential project, and a pure office development.
Over the next 12 months, Mapletree also expects to start sequel funds to the Malaysia-focused CIMB Mapletree Real Estate Fund (CMREF) and the Mapletree Industrial Fund (MIF). The latter has so far bought some $300 million of non-warehouse industrial properties in Singapore, Malaysia and China. ‘For CMREF 2, we are targeting to raise about RM1 billion (S$430 million); CMREF 1’s RM500 million is almost fully invested,’ Mr Hiew said. The group has held back plans to float more real estate investment trusts or Reits in Singapore because of unfavourable financial market conditions. One of these is the Mapletree Commercial Trust, which will hold about $3 billion of Mapletree’s Singapore assets in the HarbourFront and Alexandra Road areas. ‘With the deferment, we’ve been focusing on growing the net income of the initial assets planned for the commercial trust and working on building a strong pipeline of assets for possible acquisition by the trust,’ Mr Hiew said. ‘We’ll launch the trust when the market stabilises, hopefully before the end of the year,’ he added.
The centrepiece of the trust will be VivoCity, valued at about $2 billion. Other assets are likely to include nightspot St James Power Station, HarbourFront Centre, PSA Building and Merrill Lynch HarbourFront, which is slated for completion in the third quarter of this year. The future acquisition pipeline for the trust includes two projects currently under construction - Mapletree Anson, a 19-storey Grade A building at Anson Road/Enggor Street slated for completion in Q3 2009, and Mapletree Business City, which which is expected to be ready in the second half of 2010.
The latter project is being built on the site of the former Alexandra Distripark (Blocks 1-3) and on an adjacent plot at Alexandra Terrace. ‘This will be a modern business campus with about 1.7 million sq ft net lettable area (NLA) comprising an office block and three business park blocks with amenities like a 350-seat auditorium, big function rooms. We’ll have a foyer for cocktails, gym with lap pool, even a childcare centre and convenience store, plus roughly 1,100 carpark lots,’ Mr Hiew said. The development will also have a foodcourt and al fresco-style restaurants.
So far, two tenants, including a financial institution, have leased a total of about 200,000 sq ft. Mapletree Business City will be integrated with Mapletree’s adjacent properties - The Comtech and PSA Building - to form the group’s Alexandra Precinct assets. PSA Building will be directly connected to Labrador MRT Station under the Circle Line opening in 2010.
As for Mapletree Anson, with about 325,000 sq ft NLA, about 40,000 sq ft has been leased so far. ‘The building’s completion in Q3 2009 will be ahead of the completion of the first phase of Marina Bay Financial Centre,’ Mr Hiew noted. Plans to float Embassy Reit here - in partnership with India’s Embassy Group - have also been put on the backburner as structuring issues relating to changes in Indian laws on foreign funding and consequential tax issues are being ironed out first. The proposed Reit will hold business parks in Bangalore.
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