Singapore Property News Upfront 25

Kepland sells its stake of One Raffles Quay for close to $1b
Keppel Land, Singapore's third biggest developer, said on Monday that it would sell its stake in office development One Raffles Quay to an affiliated property trust for $941.5 million (US$622 million). The developer owns a third of the 50-storey office building, which is co-owned by Hong Kong's Cheung Kong (Holdings) Holdings and Hongkong Land.

Keppel Land, partly owned by conglomerate Keppel Corp, said it had entered into a conditional sale agreement with K-Reit Asia for the sale, which is subject to shareholders' approval of both parties. Keppel Land has a 40 per cent stake in K-Reit Asia, which has a portfolio of four office buildings in Singapore.
Source: Reuters, 30 July 2007
Posted by Property Wizkid

Suntec Reit post higher gains for Q2, naturally
Suntec Real Estate Investment Trust (Suntec Reit) on Monday announced a distribution income of $30.0 million for its third financial quarter ended June 2007, 22.9 per cent higher than a year ago. Distribution per unit was 2.1 cents for Q3 FY2007, up 11.9 per cent from the previous period, said ARA Trust Management (ARA Suntec), the manager of the Reit.

Commenting on Suntec REIT's performance, Yeo See Kiat, chief executive officer of ARA Suntec, said, 'I'm pleased to report that Suntec Reit has achieved a very good growth for the office portfolio in this quarter. 'In addition, Suntec City Mall has also reached a new high in its committed average passing rent, to $10.23 psf per month as at 30 June 2007.'

Suntec Reit said its office portfolio continues to enjoy strong rental growth. Suntec office leases achieved strong renewal and replacement growth rates for the quarter, with leases secured at rates of between $9.00 - $10.50 psf per month. Park Mall office leases also achieved strong renewal and replacement growth in Q307.

The committed office occupancy at Suntec City and Park Mall increased to 99.4 per cent and 98.5 per cent respectively as at June 30, 2007. Rentals were boosted by asset enhancement projects. Suntec City Mall's new Fashion zone at Galleria achieved an average rent of $24 psf per month compared with $12.27 psf per month previously, with a committed occupancy of 73 per cent to date. This is expected to strengthen further in the next quarter, the Reit said.
Source: The Business Times, 30 July 2007
Posted by Property Wizkid

Higher loans widens Banks' risk
As the property boom chugs full steam ahead, banks' exposure to the sector has been steadily widening and their risks may be deepening, especially as a result of the prevalence of deferred payment schemes. As at end-June, housing and bridging loans as well as loans to the building and construction sector made up nearly half - a high of 47 per cent - of the more than $200 billion loan portfolio of commercial banks here, according to preliminary figures obtained from the Monetary Authority of Singapore (MAS).

This has been a steady increase from the 33 per cent from about a decade ago (end-1996) around the height of the last property boom, and the 42.5 per cent at the start of the current property boom at the end of 2002. In absolute terms, the housing and bridging loans were worth some $64 billion as at end-June, compared to about $63 billion six months ago. Loans to the building and construction sector stood at about $30 billion as at end-June, an increase of 21 per cent from a year ago, said MAS.

Not surprisingly, the run-up in property prices has led to an increase in housing and bridging loans (the consumer loans), but this rise has slowed dramatically from the early years of the current boom. Right after the current property boom started, housing and bridging loans surged 17 per cent between end-2002 and end-2003 to reach $52.2 billion. Since then, the increase has slowed to about 2 per cent for the first six months of the year and from end-2005 to the end of last year, the value of housing and bridging loans increased by only 2.2 per cent.

Housing and bridging loans' share of the total loans of commercial banks - while still the biggest - has also declined over the last couple of years. Their share of total loans, after building up over the years to a peak of 33.8 per cent at end-2005 has dipped over the last one-and-a-half years to about 32 per cent as at end-June this year.

What is perhaps more significant for the financial sector is that the loans to the building and construction sectors including loans made to developers have been expanding much faster over the past few years and have been taking up a bigger share of total loans extended by banks. Loans to developers have an added element of risk because of the deferred payment scheme which allows home buyers to pay only a fraction of the property's price upfront.

Loans to the building and construction industry, after contracting between 2004 to end-2005 as the construction industry went through the doldrums, surged 14.4 per cent to $26.3 billion as at end-2006. The further growth to $30 billion as at end-June this year represents a growth of 21 per cent from end-June 2006. 'As MAS has previously said, the use of the deferred payment scheme by property developers introduces additional risks to the developers, and to the banks which finance these developers, because property purchasers under this scheme are not subject to credit checks by developers. This is unlike property purchasers who apply for housing loans and are subject to credit assessment by banks. MAS expects banks to exercise prudence in their financing to the property developers and be fully cognizant of the additional risks from the use of deferred payment schemes,' a spokesperson from MAS told BT.

Last week, during the release of MAS' annual report, Heng Swee Keat, the authority's managing director had said that MAS is keeping a close eye on developments in the property boom. As Singapore's central bank and the regulator of the financial industry, MAS's concerns with regard to the property boom are how rising prices impact inflation and the risks posed to the stability of the financial system. Mr Heng had noted that the banking sector's exposure to the property and construction sectors is 'significant' and that housing and related loans have grown over the last few quarters. 'So for both of these reasons, we will be watching developments in the market very carefully.'

The Urban Redevelopment Authority (URA) price index for private homes, released on Friday, has risen 13.5 per cent for the first half of this year. URA figures also revealed that developers sold 9,385 uncompleted private home in the first six months of this year, less than a thousand units shy of the record 10,363 units sold through all of last year.
Source: The Business Times, 30 July 2007
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Are Singaporeans in a speculative mood?
The prices are climbing but developers are poised to sell more private homes than ever before. There is also evidence to show that speculative activity has been accelerating by the quarter. The property mania that has gripped Singapore of late has been captured in hard, official numbers.

Developers sold 9,385 uncompleted private homes in the first six months of this year, less than a thousand units shy of the record 10,363 units sold through all of last year, according to latest official figures. Market watchers expect the eventual sales for 2007 to range between 14,000 and 18,000 units, assuming that the US sub-prime mortgage woes do not have a contagion effect here.

As expected, the prices have been rising fast. The Urban Redevelopment Authority's (URA) price index for private homes shot up 8.3 per cent in Q2 over the preceding quarter. This means that the index has risen 13.5 per cent for the first six months of this year. A straw poll of property consultants by BT suggested that the full-year price increase could come in between 23 and 30 per cent. So prices still have between 8 and 15 per cent to climb in the second half.
The downside risk remains from the correction in the US sub-prime market. 'Unless this spreads into global financial markets, the Singapore property market is unlikely to be affected in the immediate term,' Jones Lang LaSalle's head of research (South-east Asia) Chua Yang Liang says. 'Meanwhile, we are watching the market very closely,' he added.
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One aspect that bears watching is the surging speculative activity. Subsales islandwide jumped 67.4 per cent to 1,254 units in Q2. More than half the subsale deals in Q2 were in the Core Central Region (CCR), which includes districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa. Islandwide, subsale deals accounted for 9.7 per cent of the total private housing deals in Q2. During the same period last year, such deals made up just 2.6per cent of the pie. Still, the latest figures are way short of speculative fever that raged in Q21996, when 28 per cent of total private residential transactions involved subsale deals.

Knight Frank director Nicholas Mak reckons that the share of subsale deals will continue to grow gradually but is unlikely to reach the levels seen in 1996. 'Back then, the ease of getting 95 to 100 per cent bank financing for property purchases was a key reason fuelling speculative activity. Nowadays banks are more cautious,' he says. Going forward, subsale activity may find another engine. It may be driven not so much by the prospect of big, instant gains but by those who bought their homes on deferred payments and reach the point where they have to pay the bulk of their purchase price, says DTZ Debenham Tie Leung executive director Ong Choon Fah. 'So rather than fork out more money, they may just sell their units since the market has gone up so much in the last couple of years or so since they bought them,' Mrs Ong reckons.

Subsales involve projects that have yet to receive a Certificate of Statutory Completion, while resales, which are also secondary market transactions, cover completed developments. The total number of resales jumped 40.2 per cent quarter on quarter to 6,514 units in Q2. This brought total secondary market transactions in Q2 to 7,768 units, up 44 per cent from the preceding quarter and, according to Knight Frank, a level not seen before in the private property market.

Also interesting is the breakdown in the price index for non-landed homes by regions. In all three regions - CCR, Rest of Central Region (RCR) and Outside Central Region (OCR) - the price gains in Q2 over Q1 were higher for completed homes than for uncompleted ones, reversing the general trend seen for at least the past couple of years. 'The trend reversal seen this quarter across all markets is reflective of the urgent demand for completed residential properties for immediate occupation by those who have sold their homes through en bloc sales looking for replacement properties,' Colliers International director Tay Huey Ying said.

In tandem with URA's earlier flash estimate, non-landed homes in RCR (including places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) posted the biggest price gains in Q2, with an overall (both uncompleted and completed homes) increase of 8.1 per cent, followed by CCR (up 7.9 per cent ) and OCR - which covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok - rising 7.2 per cent.

Ms Tay argues that the price recovery in this region can be attributed not just to a general filtering-down effect from the higher-priced tiers, but also to investors buying units in older developments with en bloc sale potential such as Neptune Court, Ivory Heights, Lakepoint Condominium and Clementi Park. DTZ's Mrs Ong reckons that the rate of price gains may moderate in the second-half. 'Developers who bought their sites through en bloc sales in 2006 and earlier, before the surge in land prices seen this year, can probably sell their new projects without setting benchmark prices. Developers are likely to be more sensitive in pricing their projects so aggressively until things are clearer.'
Source: The Business Times, 28 July 2007
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HDB struts its stuff and climbs steadily
Shaking off years of stagnation, the HDB market gained momentum in the second quarter of 2007, as it saw a 'filter-down' effect from the red-hot private property market. Data released by the Housing Board yesterday showed that the number of HDB resale transactions in the second quarter climbed to 8,700 - up from the 6,300 in the first three months of the year.

HDB's resale price index also rose at a relatively faster clip from April to June, climbing some 3 per cent - up from 1.3 per cent in the first quarter. The index was boosted by the majority of flats fetching more than their market valuations. As much as 70 per cent of all resale HDB flats fetched more than their valuations in the second quarter, HDB said. The overall median cash-over-valuation (COV) was about $7,000. Analysts said that all the signs are pointing towards a recovery in the HDB market.

'Some 70 per cent of flats are selling above valuation - it seems that the market is seeing an upswing,' said Eugene Lim, ERA assistant vice-president. PropNex chief executive Mohamed Ismail welcomed the 'modest' increase as the HDB market has been lagging behind the private property market for the last few quarters. 'The current price index (108.0 points) is no match for the peak in 1996 (136.9 points), but is good news for most HDB owners,' he said.

Market watchers said that the increase in HDB resale prices was largely expected as the market is seeing a 'filter-down' effect caused by rapidly rising private home prices. 'Home buyers who are priced out of the private property market will be looking at the larger flat types like the 5-room and executive flats,' said ERA's Mr Lim. 'They, in turn, will push those who are priced out of buying larger flats into buying smaller flats like the 4-room units.'

Official data shows that private home prices have climbed 13.5 per cent since the start of the year. Property analysts said that one reason for the heightened demand is the recent slew of en bloc sales in the private property market. En bloc sellers have been snapping up HDB flats as replacement private homes get more expensive.

HDB's data identified Bishan, Bukit Merah, Bukit Timah and Marine Parade as four HDB resale 'hot spots' where buyers are willing to fork out significantly more COV for their flats. These areas, which are closer to town, might be more popular with en bloc sellers used to living near the city centre, analysts said. With the release of the new data yesterday, the Housing Board also upped the ante by giving median rental figures for HDB flats for the first time ever.
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The data was released to counter recent reports that certain flats were being sub-let at very high rents. Such cases, HDB said, were very few and confined to flats with 'special attributes'. While HDB flat rentals have risen, they remain affordable in most cases, data shows. Median rents range from $1,000 to $1,400 for a 4-room flat and $1,100 to $1,500 for a 5-room unit. Executive flats are going for anywhere between $1,100 and $1,900.

More HDB homeowners have jumped on the sub-letting bandwagon. The number of sub-letting approvals climbed to 3,600 in the second quarter, from 2,400 in the first quarter. For the full year, HDB resale prices could climb by 8-10 per cent, analysts said. Resale volume for the whole year is expected to come to 30,000-33,000.
Source: The Business Times, 28 July 2007
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URA offers some insight to the bouyant rental market
Some say that rentals for private homes islandwide have never risen so much from one quarter to another over the past decade. Not surprisingly, it was the Core Central Region (CCR) - which includes prime districts 9, 10, 11, Downtown Core (including Marina Bay) and Sentosa - that posted the biggest increase in rents for condos and private apartments in Q2 over the preceding quarter. They rose 12 per cent.

But the buoyant demand for housing in the prime areas continued to filter down to the rest of the market in Q2, as reflected in a 10 per cent rise in URA's rental increase for the Rest of Central Region (RCR) and a 9.4 per cent hike in the Outside Central Region (OCR). OCR covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok, while RCR includes areas like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong.

Knight Frank said that, based on its research, rentals for properties in the East Coast, Thomson and Bishan areas grew by a strong 10 to 12 per cent quarter-on-quarter in Q2 this year, matching the rental growth seen in the CCR. 'Noticeably, more foreign companies and expatriates are becoming more concerned with rising housing rentals and costs. Nonetheless, their top priority is to be able to enrol their children in international schools here, where the supply of teachers and space for students is far more inelastic when compared to rental properties,' Knight Frank director (research & consultancy) Nicholas Mak said.
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URA's 12 per cent rental index hike for the CCR in Q2 was much higher than a 7.6 per cent gain registered in Q1. CB Richard Ellis executive director Li Hiaw Ho said: 'The slew of en-bloc sales in the past two years being concentrated in the CCR has led to a shortage of apartments for rent in the region, as reflected in this region leading the pack in terms of the increase in the rental index for non-landed properties in Q2. 'This uptrend is expected to continue as developments which have been collectively sold give way to redevelopment. Some of the major en-bloc sales in the prime area in Q2 include Leedon Heights, Himiko Court, Elmira Heights and Fairways Condominium.'

URA's overall rental index for private homes in Q2 was up 10.4 per cent from the preceding quarter, and 31.2 per cent higher year-on-year. 'This is the highest quarter-on-quarter, and year-on-year growth since URA made rental data available to the public. Nonetheless, as of Q2 2007, private residential property rentals are still about 21.4 per cent lower than the all-time high in Q1 1996,' said Knight Frank's Mr Mak.
Source: The Business Times, 28 July 2007
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$2b for Beach Road site
A state tender for the former NCO Club/Beach Road camp grounds yesterday drew seven bids with market watchers estimating bids could have topped the $2 billion mark or $1,250 psf of potential gross floor area. The all-in development cost for the 99-year leasehold project is expected to be in the $3 billion region, analysts estimate.

Urban Redevelopment Authority revealed the bidders, but not their bid prices, under yesterday's two-envelope system tender, where bidders had to submit concept proposals and tender prices separately. The tender attracted big names familiar with the local market such as CapitaLand, City Developments, Pontiac Land, Overseas Union Enterprise (OUE), Keppel Land and Cheung Kong Holdings.

And some of them have teamed up with heavyweight overseas partners like Dubai's Istithmar (part of Dubai World group) and a unit of US-based Elad Properties (these two teamed up with CityDev). Morgan Stanley is believed to have partnered Pontiac. OUE, controlled by Indonesia's Lippo Group and Malaysian tycoon Ananda Krishnan, is expected to rope in partners like Austria's Raiffeisen Zentralbank (RZB).

Billion Rise Ltd (believed to be linked to Li Ka-shing's Cheung Kong Holdings) partnered Keppel Land to put in two bids. OUE is also believed to have placed two bids, one through Beach Development and the other through Nicoll Development. Such a strategy, of placing two bids, presumably gives the bidders an opportunity to present alternative concepts, whether at the same or different prices, and hopefully boost their chances of success.

Under the two-envelope system, the concept proposals will first be evaluated against a set of prestated criteria (including overall design concept, quality of architectural design, adaptive reuse of conservation buildings, and composition and placement of uses). Only proposals that substantially satisfy the evaluation criteria will be shortlisted. At the second stage, the tender price envelopes of these shortlisted bidders will be opened and the site awarded to the highest of these bidders, provided this top bid meets the government's reserve price.

Market watchers reckon the majority of bids at yesterday's tender would be in the $1,000 to $1,200 psf per plot ratio range which works out to around $1.6 billion to $1.9 billion for the 99-year site which can have a maximum gross floor area of nearly 1.6 million sq ft. Construction costs, fees and interest could amount to a further $900 million to $1 billion, bringing the likely all-in investment to about $2.5 billion to $3 billion.

The site can be developed into a project with nearly 1.6 million sq ft gross floor area, of which a minimum 40 per cent is for office use, and at least 30 per cent for hotel rooms. The rest can be for complementary retail and residential use. The development will entail the conservation and restoration of the former NCO Club building and three blocks of the former Beach Road camp. The new towers in the building can be up to 45 storeys high.

Market watchers reckon that some of the schemes could possibly entail a high-rise tower with hotel rooms on the lower floors and apartments on the upper floors, seen in places like New York but novel in Singapore. The release of the Beach Road site is part of the government's strategy to alleviate the shortage of office space.

JP Morgan real estate analyst Chris Gee said: 'The office rental market is the most volatile of all the investment property segments in Singapore.' He noted that even before the close of yesterday's tender, the URA had made known its plans to offer four other sites in the CBD which can be substantially developed into offices - two at Anson Road and two near the One Shenton condo project. The tender for the first of the Anson Road plots closed on Monday and was yesterday awarded to highest bidder Mapletree Investments at $1,021 psf per plot ratio.
The tender for the second Anson Road plot closes next month. The tender for a plot directly behind One Shenton closes in September, while that for the next-door site will be launched by the end of this month.
Source: The Business Times, 26 July 2007
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New York City apartments still climbing despite US housing worries
New York City apartment prices climbed 16 per cent in the second quarter as the country's most expensive urban market sidestepped declines in the rest of the US. The median price of co-operative apartments and condominiums rose to US$525,000 from US$452,000 a year ago, the Real Estate Board of New York said. Manhattan had the highest median at US$790,000. 'While everyone knows the Manhattan market continues to be strong, the boroughs outside Manhattan are bucking the trend in the rest of the country,' said board president Steven Spinola.

New York prices are rising even as the rest of the country posts declines or modest gains. The median price of a US condo fell 0.4 per cent in May to US$228,200 and the median for previously owned homes rose 1.8 per cent to US$223,700, according to the Chicago-based National Association of Realtors. The trade group has cut its 2007 forecast seven times this year and now predicts prices will drop 1.4 per cent in the US this year.

The average price per square foot for co-operative units, which make up about two-thirds of New York City's owner-occupied apartment stock, rose 5.8 per cent to US$708 in the second quarter, the real estate board said. For condos, the average price per foot increased 8.1 per cent to US$877.

In co-ops, residents hold shares in a corporation that owns the building and occupy their apartment under a proprietary lease. Such properties are losing the escalating price war with condominiums, which allow owners to have title to their property and have fewer financial restrictions. Single-family homes and those with two or three apartments such as brownstones and townhouses sold for about US$550,000 in the quarter, a 7 per cent increase. The board represents more than 12,000 commercial and residential property owners, builders, brokers, architects and other real estate professionals.
Source: Bloomberg, 26 July 2007
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Bukit Timah City Towers double its asking price to $450m
City Towers on Bukit Timah Road is for sale by tender with an indicative price of $458.7 million, almost double the price indicated just three months ago. An expression-of-interest exercise was held in April by marketing agents Knight Frank. Senior manager (investment sales) Steven Tan said it drew about five bids.

At the time, only 75 per cent of the owners had agreed to proceed with a collective sale. 'The owners believe the new indicative price is reflective of market prices,' said Mr Tan. The minimum 80 per cent approval from owners to sell has now been obtained. The development is on 104,535 sq ft of freehold land, which is zoned for residential use at a plot ratio of 2.1, with a height restriction of 24 storeys.

Mr Tan says the successful developer can build an estimated 183 units of average 1,200 sq ft each. Together with an estimated development charge of about $2.2 million, the indicative price reflects a land value of $2,100 per square foot per plot ratio. As the current development is close to the maximum gross floor area, the development charge is only slightly more than the estimated $1.7 million it would have been three months ago before the rates were revised.

The break-even price is estimated at $2,870 psf, and Mr Tan expects the new units to sell for at least $3,000 psf. On East Coast Road, Savills Singapore is marketing 48 strata-titled commercial units at EastGate, a 52-unit freehold development, for sale en bloc by expression of interest. 'All 48 units are currently near full occupancy and are generating good cash flows from its rental collections,' said Steven Ming, director (investment sales) of Savills Singapore. The freehold property has an indicative price of $80.3 million or $1,350 psf, based on current net lettable area.

'Investors and buyers have begun to look at opportunities beyond the traditional CBD locations for good commercial buildings that could still present good upside potential in terms of both rental rates and capital value appreciation,' said Mr Ming. Potential average rentals are expected to be $5 psf.
Source: The Business Times, 25 July 2007
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