Singapore Property News Upfront 5

Enbloc shows the ugly side of greed

As more and more Singaporeans are discovering first-hand, this is the world of en-bloc sales — where neighbours become millionaires or bitter enemies overnight, and a pot of gold awaits, literally, at the cost of your home. What began as a contagion two years back, as property analysts reckon it, has reached fever pitch. As of mid-March, 17 en- bloc sales have been sealed this year, a record $2.43 billion in transactions, according to Jones Lang LaSalle’s preliminary data.

That’s nearly twice the $1.3 billion generated in the first three months of last year, and more than the $2.41 billion for the whole of 1999, the last boom period for en-bloc sales. With a typical deal today netting home-owners a million dollars more than if they had sold their unit on the open market, it’s no wonder Singaporeans are rushing impulsively to cash in. After eight years of watching the property market chug along sluggishly, who can blame them?

“Quite frankly, no one — consultants, property agents or the Government — expected this boom,” said Dr S K Phang, a lawyer experienced in handling collective sales. Yet not everyone succeeds in cashing in. Last year, 25 to 35 per cent of more than 100 en-bloc attempts reportedly fell through, or are still on the market after failing to hit reserve prices.

The neighbourly squabbles begin when residents refuse to give up their home for any price, or will not settle for less than what they think it’s worth. At Farrer Court, a point-block unit bought for $500,000 in 1993 could now fetch a cool $2 million in a proposed collective sale. But Ms Lucy Chong, a retiree in her 50s, is doing everything she can to stop it. “Even if I get the money, can you find me a place as good as this, in an area as good as this?” she asked.
Her neighbour, an 84-year-old Eurasian living on her own, is “frightened” by the hassle of looking for a new place should the majority back the sale.

But a 72-year-old resident at Clementi Park — a 26-year-old estate where an en- bloc attempt is also underway -— sees it differently. “We should grab this chance. If you don’t sell now, you will find that as the estate deteriorates, you won’t get such good prices.” Help is on the way. It’s an issue that naturally polarises emotions and people, but some feel the insufficient guidelines and procedures for en-bloc sales aggravate the problems.

This has not gone unnoticed by the Government, which is planning to amend the law on en-bloc sales. It began a public consultation process this month on four proposed changes aimed at bringing greater equity and fairness to the process. Currently, a sale can proceed if there is approval from owners controlling at least 80 per cent of share values in estates 10 years or older, or 90 per cent in younger estates. With the change, majority consent will be defined in terms of the number of units owned as well.

The Strata Titles Board will be given the powers to step in and increase sale proceeds for minority owners with valid objections. It will be empowered to issue guidelines on the evaluation of claims for financial loss. In addition, sales committees — which are currently formed freely among residents — can only be elected at extraordinary general meetings (EOGM) convened by management corporations.

Are these changes enough? Dr Phang felt a distinction should be made between investors who own the units and actual owner-occupiers. While the owners might make a tidy profit in absolute terms, the huge sums that developers pay them would drive property prices up as a whole — and these displaced owners have to fork out big money for their new homes too. Said Dr Phang: “A bona fide home owner should be offered an exchange… if you want me to get out of my home, I want a unit back with the same comparable size (after redevelopment).”

Clementi Park resident Dr Patricia Wong argued that it would be “difficult” to garner the 25 per cent support for the EOGM to take place. But many owners embroiled in en bloc “wars” certainly want to see more legislation in place of the Government’s largely “hands-off” approach. The Management Corporation’s (MC) role in an en bloc attempt is one bone of contention. At Clementi Park, the MC has been a stumbling block to the pro-tem sales committee, said committee member Mr K C Lim. The appointed property agent has been stopped from going door-to-door, and is hindered in reaching out to residents, he added.

But at Farrer Court, the MC’s endorsement of the en bloc process has proved a thorny issue with residents like Ms Chong. “The involvement of the MC in any collective sales proposal and the pro tem sales committee’s obligations to the residents must be clearly spelt out. There must be more transparency,” she said. Some residents also feel that sales committee should include those not keen on the sale, to ensure this group is not cut off from the process. But others, like Dr Phang, said it would only lead to deadlock for the committee, which has to work within a set timeframe.

He added: “At the end of the day, the Strata Titles Board can reject a sale if it the process was improper.” Overall, Chesterton International’s research director Colin Tan thought the amendments would address a fundamental flaw in the current approach. “What the Strata Titles Board is doing now, is to come in at the start and address the concerns of the minority owner – rather than wait till the end and after much unhappiness.”

For example, there are the owners who have recently spent huge amounts on renovating their homes. Currently, the majority owners determine the distribution of sale proceeds and renovation expenditures are not taken into account as a financial loss incurred. To add insult to injury, minority owners say, they are forced to bear the lawyer and agent fees for the collective sale.

Boom today, gone… when? While the booming property market — buoyed by a rush of foreign funds — shows no sign of abating, the en bloc rush could ironically be head for a slowdown, as more residents hold out for higher payouts. Said ERA property consultant Stanley Koo: “They track similar developments and look at other areas, but they don’t take into account their own location. The property boom will go on for at least one or two more years, and if owners are more realistic, the en bloc frenzy can still gain momentum.”

Dr Phang agreed that the boom would last a while yet, with the economy doing well. “For example, the civil service just got a pay rise. All this money will flow into the market. But when times get bad, things will spiral downward very quickly.” Yet it is precisely the notion that “the good times will not last” that feeds the en bloc frenzy. As Clementi Park’s Mr Lim puts it: “If we miss out on this property boom, we don’t know when the next one will come around.”

Source: WeekendToday, 14 April 2007
Posted by Property Wizkid

12% discount on Casa Merah encourages sales

NTUC Choice Homes and Wing Tai began selling their Casa Merah condo near Tanah Merah MRT Station yesterday at a net average price of $588 per square foot, after a 12 per cent discount. Yesterday’s preview was open to union members, business associates of the developers and members of the public who registered interest in the 99-year leasehold project. CB Richard Ellis is marketing the property.

The property is being developed through a joint venture that is 70:30 owned by NTUC Choice Homes and listed Wing Tai. It comprises two-bedders, three-bedders, three bedroom-with study and four-bedroom apartments. The cheapest two-bedder on the ground floor costs $533,000, while prices of three-bedroom apartments start from $720,000. Both prices are after discount.

Source: The Business Times, 14 April 2007
Posted by Property Wizkid

IMF says property prices in Asia-Pacific intact

The rapid run-up in housing prices across the Asia-Pacific of late may continue for some time yet, but by and large, prices have not gone grossly out of line with economic fundamentals, according to an International Monetary Fund (IMF) study.Housing price data in 12 regional economies does point to pockets of ‘potential concerns’, but elsewhere the price rises are broadly in line with income gains, says a chapter on housing prices in the IMF regional economic outlook for Asia and the Pacific.

‘While housing prices have been rising more rapidly than inflation, most countries in Asia are not experiencing unusually rapid housing price hikes,’ the report says. ‘For the 12 economies for which data are available, real housing price increases averaged 4.5 per cent during 2002-06, but the median was substantially lower, at just over 3 per cent.’ Three countries - China, India and New Zealand - saw real annual price rises of more than 8 per cent over the period, it notes. And in some cases - Hong Kong, Taiwan and Thailand - recent housing price increases follow extended periods of declines. ‘In such cases, it is plausible that any rise in housing prices may be a welcome signal for increased investment in the sector.’

The study also found that housing prices have outstripped income gains in about half the cases, but have done so to a significant degree only in Australia and New Zealand. And housing prices have been relatively tame compared with other asset prices, the report says, adding that apart from Australia and New Zealand, annual housing price hikes have been dwarfed by domestic stock market gains during 1999-2006. ‘Of course, this alone does not prove that housing price gains are not problematic, since many equity markets have been quite buoyant.’

Across the region, Australia and New Zealand are the clearest cases where housing price hikes appear large, not just in real terms but also relative to rents or household incomes, it says. In several economies - notably China, Hong Kong, India and Korea - localised indicators point to significant price increases. Asia’s housing markets will likely remain on policy-makers’ radar screens for some time, the IMF says.

‘Housing prices have been rising more rapidly than inflation, and this may continue for some time as regional incomes grow and financial markets deepen. ‘Moreover, as global liquidity remains abundant, the potential for large run-ups in credit and asset prices to affect overall inflation or financial or macroeconomic stability cannot be ignored.’
But at the same time, it is important to distinguish between potentially problematic housing price rises and those that are more localised or can be explained by real supply and demand factors, the report adds.

Source: The Business Times, 14 April 2007
Posted by Property Wizkid

Hong Leong wrap up One Meyer Rd

Hong Leong Group is said to have wrapped up a deal to buy only one of the adjacent Meyer Road properties owned by Della Suantio Lee of Lee Foundation, instead of both properties as indicated under an earlier conditional deal. Hong Leong is said to be paying about $200 million for the freehold property, which has a land area of about 115,300 sq ft. The price works out to about $760 psf of potential gross floor area, including development charges (DC), according to industry observers.

This is a new record for land in the Meyer Road location - surpassing the previous record set in early 2000 when Viewpoint Condo was sold to Keppel Land for $598 psf per plot ratio (psf ppr) including DC. A couple of months before that, in November 1999, DBS Land bought First Mansion and Meyer Tower nearby for about $580 psf ppr.
The site that Hong Leong has bought is zoned for residential use with a 2.8 plot ratio - the ratio of potential maximum gross floor area to land - and a maximum height of 36 storeys.

Hong Leong could redevelop the site into a plush condo boasting sea views, with about 220 units assuming an average unit size of around 1,500 sq ft. Assuming a land price of about $760 psf ppr, Hong Leong’s breakeven cost could be about $1,200 to $1,300 psf. Industry observers say a new condo in the choicest stretch of Meyer Road should be able to sell for about $1,800 psf on a project-average basis.

Savills Singapore is believed to have brokered the sale of the site by Dr Lee, who is the wife of Lee Seng Gee, the eldest son of the late China-born philanthropist Lee Kong Chian. Her move to sell only one of their two Meyer Road sites means the couple are keeping the bungalow they have lived in for many years. The next-door site being sold to Hong Leong has another house now standing on it, but the new owner will tear this down for redevelopment. The two sites have a combined land area of about 212,300 sq ft.

Hong Leong Group is experienced in the Meyer Road area. It developed The Atria at Meyer and The Makena during the 1990s property bull run. In September 2005 it bought Eastern Mansion farther up Meyer Road, closer to Amber Road, and an adjoining site at a combined unit land price of about $410 psf ppr.

Source: The Business Times, 14 April 2007
Posted by Property Wizkid

Finally, UIC buys up UIC Bldg

United Industrial Corporation (UIC) yesterday announced it had inked a deal to buy UIC Building at Shenton Way under a collective sale that prices the property at $600 million, or $870 per square foot of potential gross floor area inclusive of development charge and differential premium to top up the site’s lease to 99 years.

The mainboard-listed company said subsidiary proprietors of the building who own at least 80 per cent of share values have accepted UIC’s offer to purchase the property yesterday. The subsidiary proprietors include UIC and its fully owned unit, UIC Development (Pte) Ltd, which together hold 78.8 per cent of share values in the property.

Analysts note the net real acquisition cost to UIC for purchasing the 21.2 per cent of the property that it does not already own works out to about $127 million. CB Richard Ellis brokered the deal. The collective sale is subject to approval from the Strata Titles Board and the obtaining of a Qualifying Certificate from the Controller of Residential Property, if applicable.

UIC is said to be planning a twin-tower residential development on the site. ‘But looking at the way office values are shooting up, I wouldn’t be surprised if they changed their minds and redeveloped the site into a new office development instead,’ said a market watcher. According to a BT report earlier this week which said UIC was poised to buy the rest of the building that it does not already own, the building had attracted three bids - from UIC, City Developments and Wing Tai in an expression of interest exercise which closed on Feb 8.

Analysts reckon that UIC would be in a better position to pay a higher price to the other owners as, unlike rival developers, its outlay will be lower since it already owns 78.8 per cent of the building. Under Master Plan 2003, the 72,960 sq ft site is zoned for commercial use with an 11.2+ plot ratio and qualifies for a 10 per cent bonus plot ratio. The plot has a 35-storey height limit.

The maximum potential gross floor area of the site works out to 898,867 sq ft inclusive of the bonus plot ratio.
A full-residential redevelopment scheme could result in about 600 units averaging 1,500 sq ft being built on the site, or 750 apartments assuming a smaller average unit size of 1,200 sq ft. Of course, any redevelopment scheme will have to be approved by the authorities.

Source: The Business Times, 14 April 2007
Posted by Property Wizkid

Bishops Walk worth $130m

The tender for the collective sale of Bishops Walk, a freehold development of 25 townhouses in the Bishopswalk/Bishopsgate area, is said to have drawn a top bid from a Kajima Overseas Asia unit.
The bid is believed to be more than $130 million or $1,500 per sq ft of potential gross floor area including an estimated $15.6 million development charge.

The 69,189 sq ft site is zoned for residential use with a 1.4 plot ratio and a height limit of five storeys.
As Kajima is in the construction business, it should achieve a more economical breakeven cost for the new project it will develop, market watchers reckon. Their breakeven estimates for a five-storey condo range from about $1,900 to $2,000 psf.

The District 10 site - in the prestigious Bishopsgate and Chatsworth Good Class Bungalow area - is close to the Indonesian and Egyptian embassies. It is not known if Kajima will tie up with a partner for the project.
The tender for Bishops Walk, conducted by CB Richard Ellis, is said to have drawn seven or eight bids. Industry sources say that besides Kajima, contenders included Napier Properties, which bought Eng Lok Mansions last year, and BS Capital.

Source: The Business Times, 13 April 2007
Posted by Property Wizkid

Malaysia boost property sector

Prime Minister Abdullah Ahmad Badawi on Friday unveiled measures aimed at reducing bureaucracy for housing construction in a bid to boost investment in Malaysia’s sluggish property sector. Key among the measures was a move to speed up approvals by local councils for development applications from the present three to five years, to just six months. ‘Shortening the timeframe will have a positive impact on the construction industry, investors and business people, who have long waited for less bureaucracy and the lowering of hidden costs in Malaysia,’ said Mr Abdullah. ‘Today’s initiatives will also contribute to improving the performance of the property and construction sectors,’ he added.

The approval time will be further reduced to four months for certain projects such as those involving foreign investment, and government projects, he said. Mr Abdullah said the initiatives would see an improvement in the performance of civil servants, often accused of being inefficient and slow. ‘If the services that are provided can be sped at the local council level, more than 70 per cent of the complaints and grouses from investors, businessmen, consumers and the public concerning the public sector will be answered,’ he said.

Other measures are aimed at encouraging developers to adopt a ‘build and sell’ strategy, where properties are only sold once completed, in order to protect investors from developers who run out of funds before construction is finished. Malaysia in recent months has announced measures to boost investment in the property sector, which collapsed during the 1998 Asian financial crisis and has seen a lacklustre recovery.

On April 1, the government removed capital gains tax on property, while in December, it relaxed property ownership rules to allow foreign nationals to buy high-end residential properties without government approval.

Source: The Business Times, 13 April 2007
Posted by Property Wizkid