Wednesday, December 31, 2008

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.

In the third quarter, the URA’s price data registered a fall of 2.3 per cent from the second quarter, after rising about 4 per cent in the first half of the year. This means prices in September were still higher than in January.

Anecdotally, analysts estimate that prices in the fourth quarter fell by up to 20 per cent in some developments. But prices jumped so much in the recent upturn - 31 per cent last year alone - that even if the URA’s index does log an unlikely 20 per cent drop this quarter, prices at year-end would still be higher than at the start of last year, and far above the pre-boom levels in 2005.

Not all developers can cut prices for their projects without incurring big losses, especially those who bought plots at the peak of the boom last year. But developers who were canny enough to pick up land at the trough of the market have plenty of room to manoeuvre.

One example is CapitaLand’s Latitude condominium at Jalan Mutiara. The developer bought the site for about $500 per sq ft (psf) in 2005 and sold units up to last month at $2,400 to $2,500 psf.

But down the road, Mutiara View is going for under $1,200 psf, while across the street, the new boutique condo RV Suites has been sold for $1,300 to $1,400 psf. According to agents, CapitaLand has quietly lowered prices recently to $2,000 to $2,100 psf.

Hong Leong’s Aalto along Meyer Road is another example. The site was bought for about $410 psf in 2005, but units were sold for well over $2,000 psf last year and this year. No new units have been sold since May, according to URA data.

To be sure, there are valid reasons for developers not to cut prices.

For one thing, selling homes at lower prices could result in a fall in the valuations of their properties, which could in turn hurt their balance sheets and make it more difficult for them to raise funds in an already tight credit market. And some argue that slashing prices could also set off a price war.

But there are also compelling reasons to start lowering prices. Key among them is that the see-who-blinks-first game is clearly turning in favour of buyers. 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.

Developers have said for months that they will maintain prices and ride out the storm. But the situation is set to worsen sharply for sellers as the economy contracts sharply. Even developers who can hold out are likely to find their property valuations hit anyway as prices come down throughout the market.

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.

More positive news like this is exactly what is needed to restore sentiment in the market.

As for the threat of price wars, there is little basis in the argument. Prices are going to fall in any case, with or without a price war. The suggestion here is not for steep price cuts, just ‘realistic’ prices that will tempt buyers back into the market.

City Developments took some flak from its rivals after it priced its mass market condo Livia in Pasir Ris at an attractive $650 psf on average. But the launch was a huge success - and it has not caused a downward spiral.

Industry players have suggested that the Government step in with demand-boosting measures such as waiving, discounting or deferring stamp duty; resurrecting a fine-tuned version of the deferred payment scheme; and tweaking CPF rules to allow buyers more financing leeway.

Developers themselves have already started absorbing stamp duty and interest for selected projects, and rolled out gimmicks such as renovation allowances and vouchers for electrical appliances.

These measures might help make the buying environment more conducive, but nothing would speak more persuasively to potential buyers than a discount.

In a year when everything is going to go on sale, property developers should consider joining the crowd.

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 flats are being offered under the build-to-order scheme where construction begins once a certain number of sales has been achieved.

A total of 7,793 flats has now been offered under the scheme this year, with demand generally robust despite flat sales in the broader property market.

One of the latest projects is Sunshine Court on Choa Chu Kang Avenue 3, opposite the Sunshine Place neighbourhood centre, which houses a supermarket, foodcourt and shops.

It offers standard flats of 164 studios, 117 three-room and 171 four-room units, costing between $58,000 and $236,000 each.

This is the first time 30-year lease studio apartments - meant for Singaporeans over 55 - have been offered for sale in Choa Chu Kang, said the HDB.

The studios will have elderly-friendly features such as grab bars and non-slip flooring, as well as built-in wardrobes, kitchen cabinets and cooking facilities.

PropNex chief executive Mohamed Ismail said the flats are attractively priced at less than $250 per sq ft, for three-roomers of roughly 700 sq ft, and 970 sq ft four-room homes.

Prices provided by HDB indicate that the flats are $60,000 to $80,000 cheaper than comparable resale flats in the area.

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.

It added that the prices mean the average household would not need to fork out more than 25 per cent of their monthly income to service their loans.

Mr Ismail anticipates strong demand for three- and four-roomers at Choa Chu Kang, as the project is in a mature estate.

At the HDB’s last sales launch - Dew Spring @ Yishun - earlier this month, such flats proved very popular, attracting many more applicants than the number of available units.

So far, 487 applications have been lodged for the project’s 216 three-room units and 1,452 for the 504 four-room flats; only 152 bids have been received for the 144 two-room flats.

Smaller flats are now making a comeback, as the HDB is providing a steady supply of such homes for lower-income families and those homeowners who need to downgrade during the economic slowdown.

The HDB has said it will ramp up supply to around 4,000 units over the next two years to meet surging demand.

It will also continue to build up critical mass of new homes in Punggol.

Applications can be made on the HDB website www.hdb.gov.sg until Jan 12.

Source : Straits Times - 31 Dec 2008


Bank lending turns cold in November

Loans to businesses slide, economists warn of more trouble ahead

Bank lending fell over the month in November, for the first time in nearly two years, as loans to businesses declined and more companies went bust, an early sign of the damage that the financial crisis is inflicting on the economy here.

Total Singapore-dollar bank loans at the end of November stood at $273.2 billion, down one per cent from the end of October - the first monthly slide in bank lending since December 2006, the latest figures from the Monetary Authority of Singapore show.

Over the year, overall bank lending was still up by 20.7 per cent, but that’s the slowest pace of growth since January.

‘It is a reflection that the global economic crisis has hit domestic shores,’ said OCBC economist Selena Ling.

Loans to businesses slid 2.2 per cent over the month to $159.6 billion at the end of November, the first monthly drop since April last year. The biggest decline was in loans to the transport, storage and communications sector, which fell 19.8 per cent over the month to $9.1 billion at end-November.

But the slowdown in lending growth was evident across most business and consumer loan segments.

Housing and bridging loans - the biggest category of consumer lending - grew just 0.5 per cent over the month. Compared to a year earlier, the growth was 8.5 per cent - the slowest since July 2007. Car loans and credit-card borrowing also grew over the month to end-November, but loans for share financing plummeted to their lowest level since June 2006.

Economists here expect bank lending growth to slow sharply in 2009, as the property sector cools, banks tighten credit standards and businesses and people cut back on borrowing.

Analysts at Standard Chartered Bank warned earlier this month that overall bank lending here could even contract slightly in 2009 compared to this year as business and consumer sentiment worsens, though others suggested that slow, but still positive year-on-year growth is more likely.

Song Seng Wun, senior economist and head of research at CIMB, said that while lending to some sectors could shrink, overall loans growth will likely be supported by continued drawdowns of existing property-related loans - by far the biggest chunk of bank lending here.

‘We’ll probably see mid to high single-digit growth,’ he said.

OCBC’s Ms Ling said that the slowdown in bank lending has been visible ‘for a couple of months’.

‘We are expecting loans growth to continue to decelerate. Although loans growth tends to be a lagging indicator, the whole Singapore economy is in a technical recession.’

The advance estimate of fourth-quarter economic growth to be released this Friday ‘will probably reflect a contraction in growth again, both in year-on-year and quarter-on-quarter terms’, she added.

Already, more businesses have folded in the first 11 months of this year than in the whole of 2007, data from the Insolvency and Public Trustee’s Office (IPTO) show. From January to November, 123 firms were forcibly wound up, compared to 106 for the whole of 2007 and 130 in 2006. But the numbers are still far below those seen in the wake of the Asian financial crisis, when the number of companies in compulsory liquidation soared to 370 in 1999.

‘I think the crunch will come probably in January, whether it’s personal or corporate bankruptcies,’ Ms Ling said. ‘These things take a couple of months to reach IPTO and if you count back to September, which was when Lehman Brothers blew up . . . you will probably see the numbers start to spike from January onwards.’

CIMB’s Mr Song said that more company failures are ‘inevitable’ in the months ahead, given the pressures faced by local businesses. ‘External demand has fallen off so much.’

Goh Chong Theng, Rabobank International’s Singapore general manager, told BT earlier this month that the bank had become ‘much more cautious and conservative in approving new loans’.

‘There will be many corporate failures - SMEs and large companies - due to the global recession and credit tightening,’ he said, when asked about the likely impact of the financial crisis in Singapore.

Source : Business Times - 31 Dec 2008

Bank unfair to existing home loan clients

WHEN I signed up for a home loan from DBS Bank in May 2005, my rate was pegged to the Special Mortgage Rate.

The Special Mortgage Rate has increased from 4.25 per cent in May 2006 to the current 5.5 per cent. The increase was due to the hike in interest rates during those periods.

Since last year, although the Singapore Inter-Bank Offered Rate (Sibor) and fixed deposit rates have decreased significantly, the Special Mortgage Rate has yet to decrease. The fixed deposit rates and Sibor are now lower than when I first took the loan.

DBS is not being fair to existing customers who took the loan earlier. As my loan has not been drawn down due to the deferred payment scheme and is locked in, I am not entitled to the low interest rate currently available in the market.

When queried, the explanation was that DBS no longer uses the board rate and its new loan packages now follow the Sibor, so it will not revise the Special Mortgage Rate. DBS said my package has a cash rebate component, which warrants the higher interest rate. That I understand, as when I signed for the package with DBS, the rate was actually higher than in other packages available. However, after careful calculation, I decided to sign with DBS because the package was still more attractive. The difference of interest rate was not more than 2 per cent from the market rate which it is currently.

I must add that DBS did offer me a repriced package based on the Sibor, in which the terms and conditions are worse than in my original package. In addition, I will lose the cash rebate.

The fair practice would be for DBS to decrease the Special Mortgage Rate to a reasonable range of between 4 and 4.5 per cent. This would benefit all customers and not only those who contacted the bank.

I have sent DBS an e-mail message, asking if it plans to revise its Special Mortgage Rate upwards in future, once interest rates start to increase but I have yet to receive a reply. If it does revise the Special Mortgage Rate upwards, there is indeed a major flaw in its argument against revising the Special Mortgage Rate downwards.

It would be even worse if DBS revises the Special Mortgage Rate upwards, even before current interest rates reach the high of more than 3 per cent for fixed deposit rates.

Last but not least, I hope the Consumers Association of Singapore or the relevant authorities will comment and look at whether banks in Singapore have been fair to their customers.

Khor Eng Hao

Source : Straits Times - 31 Dec 2008

Size does matter

While the focus has been shifted to 2-room flats, the 4-room is still most popular

AS the Housing Board launched its last Build-To-Order (BTO) exercise for the year, offering 1,181 units in Punggol and Choa Chu Kang, applications for its Dew Spring @ Yishun, which draw to a close today, reflect an interesting trend.

While just 864 flats are up for grabs at Dew Spring, 2,091 applications had been received as of 5pm yesterday not surprising, given the trend of oversubscription for BTO projects, and the robust public housing market despite the downturn.

But the 2-room flats have not proved as popular as bigger units. Just last month, National Development Minister Mah Bow Tan said the HDB would focus on building more smaller flats, so more low-income families can own their homes.

For the 144 2-room units up for grabs at Dew Spring, there were 152 applications. This compares to 487 applications for 216 3-room and 1,452 applications for 504 4-room flats.

Are Singaporeans just not ready for a smaller living space, as some analysts contend?

A HDB spokesperson revealed that the response to the 2-room units at Dew Spring was, in fact, “good compared to past BTO exercises, where the subscription rate was generally less than 50 per cent”.

“From our experience, 2-room flat buyers are usually applicants wishing to monetise their existing bigger flats and move to smaller flats,” she said. “They generally prefer flats which are ready for immediate occupation. Hence, the demand for 2-room flats usually improves when the flats are nearing completion.”

PropNex CEO Mohamed Ismail pointed to a general mentality that “a basic home for any young family is ideally 3- or 4-rooms”, to cater to children. Two-room flats would appeal mainly to retirees or those on a tight budget.

Chesterton Suntec International research director Colin Tan suggested that Singaporeans are not yet ready to live in a tight space like Hong Kongers, and the depressed demand for small flats could indicate a threshold: The 2-room units at Dew Spring are about 48 sqm, compared to 67-sqm for a 3-room and 93-sqm for a 4-room flat.

In addition, Mr Mohamed Ismail noted that those buying direct from the HDB a second time, like downgraders, would have to fork out a resale levy. Given the difference in prices at Dew Spring -$76,000 to $90,000 for a 2-room and $120,000 to $146,000 for a 3-room buyers would likely opt for the bigger unit.

Nevertheless, the HDB will continue to forge ahead with building more small flats, which present an option for older Singaporeans wanting to monetise their assets for their retirement needs.

“We expect that smaller flats will be in greater demand given the increasing ageing population, and demographic changes that Singapore is undergoing,” said the spokesperson.

More studio, bigger flats on offer

By contrast, 4-room flats have always been hugely popular in BTO exercises this year, the average subscription rate was 300 per cent, said HDB.

And more will come online with the launch of the Punggol Regalia and Sunshine Court projects yesterday.

As of 5pm yesterday, already, there were 117 applications put in for 546 4-room units (priced between $250,000 - $312,000) at Punggol Regalia, and 46 applications for 183 5-room units ($342,000 - $428,000). The project, located near the future Punggol Town Centre, offers premium flats with better finishes.

As for Sunshine Court along Choa Chu Kang Avenue 3, studio apartments on offer will be fitted with elderly-friendly features like grab bars and non-slip flooring. There were 29 applications for 164 such units ($58,000 - $66,000 for 35-sqm, and $72,000 - $80,000 for 45-sqm) as of last night.

But again, it was the 4-room units that proved hottest: 158 applications for 171 units ($202,000 - $236,000).

In light of the recent debate on new flat prices, the housing board said the units are priced affordably, with average households forking out about 20 per cent of their monthly income to service their mortgage, which can be fully paid using CPF funds.

Source : Today - 31 Dec 2008

US home prices fall a record 18% as recession continues

Prices of single-family homes in October plunged a record 18 per cent from a year earlier, according to the Standard & Poor’s/ Case-Shiller Home Price Indices released yesterday that indicated a US housing market in the throes of a deep recession.

The battered housing market is critical to the economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture.

After hurting economic growth for multiple quarters, a continued deterioration could delay a turnaround for the world’s largest economy, which has been in a recession since late last year.

The composite index of 20 metropolitan areas fell 2.2 per cent in October from September. The price drops, both on a year-over-year and month-over- month basis, came in worse than expectations based on a Reuters survey of economists.

‘The bear market continues; home prices are back to their March 2004 levels,’ Mr David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.

As of October, the 10-City Composite Home Price Index is down 25 per cent from its mid-2006 peak, and the 20-City Composite Home Price Index is down 23.4 per cent, he said.

The United States housing market is in the worst downturn since the Great Depression, as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.

Economists believe the US housing market will not begin to recover until home prices fall far enough to stimulate demand, which has dropped off precipitously as potential buyers stay sidelined.

Separately, consumer confidence fell to a record low this month as the worst job market in 16 years hammered sentiment, the Conference Board said yesterday.

The business research company said its Consumer Confidence Index fell to 38 this month from a slightly downwardly revised 44.7 last month.

The median forecast of economists polled by Reuters was for a reading of 45. Their 62 forecasts ranged from 40 to 51.1.

At the same time, business activity in the Midwest continued to shrink this month but at a less severe rate than expected, and input prices fell sharply, a report showed yesterday.

‘The further erosion of the Consumer Confidence Index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008,’ said Ms Lynn Franco, director of the Conference Board’s Consumer Research Centre.

‘The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half.’

Chief among consumers’ woes has been spiralling job losses in recent months.

US employers axed 533,000 jobs from payrolls last month alone, the most in 34 years, according to Labour Department data released earlier this month.

Meanwhile, the Institute for Supply Management-Chicago business barometer rose to 34.1 from 33.8 last month. Economists had forecast the index at 33. A reading above 50 indicates expansion while a reading below 50 indicates contraction.

Source : Straits Times - 31 Dec 2008

Tuesday, December 30, 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

HDB launches 2 new BTO projects in Choa Chu Kang, Punggol

The Housing and Development Board (HDB) launched two new housing projects in Choa Chu Kang and Punggol on Tuesday in its last sales exercise of the year.

It will offer a total of 1,181 flats, from studio apartments to 5-room units, under the Build-To-Order (BTO) system - where flats will be built only after most of the units in a specific site have been booked. This brings the total number of flats launched for 2008 to 7,793.

The first project is called Sunshine Court, where 164 studio apartments, 117 3-room flats and 171 4-room flats will be built and sold at between S$58,000 and S$236,000.

Located along Choa Chu Kang Avenue 3, the estate will be situated opposite a neighbourhood centre, which has amenities such as a supermarket and food court.

This is the first time that studio apartments are being offered in Choa Chu Kang and they will be fitted with elderly friendly features like grab bars and non-slip flooring.

The second project, Punggol Regalia, which will be located near the future Punggol Town Centre, offers premium flats with better finishes. There will be 546 4-room and 183 5-room flats, costing between S$252,000 and S$428,000.

In light of the recent debate on new HDB flat prices, the Board said the units are priced affordably, with average households forking out about 20 per cent of their monthly income to service their mortgage, which can be fully paid using CPF funds.

For example, a family with a household income of S$2,200 will end up paying a monthly mortgage of about S$460, after factoring in the Additional CPF Housing Grant (AHG) of S$20,000, for a typical 3-room unit at Sunshine Court that is priced at S$135,000.

Applications for the new flats can be submitted online from December 30 to January 12 at www.hdb.gov.sg.

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.

This follows two consecutive quarters of declines of around 4.5 per cent each.

The prime districts include District 9, 10 and 11.

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.

Freehold non-landed homes outside the prime districts fell in Q408 but at a lower rate of 9.3 per cent qoq or 10.5 per cent yoy.

Landed housing prices also fell 5.7 per cent qoq, or 2.9 per cent yoy, islandwide in Q408.

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.

On the upside, the percentage of HDB upgraders continued to grow. In 2008, a higher proportion of purchasers with HDB addresses was registered with 37 per cent of all buyers expected to be HDB upgraders in 2008 compared to 22 per cent in 2007.

Based on available caveats in URA’s REALIS, the number of buyers with HDB addresses in Q408 is 582. While this is a preliminary number, it represents 43 per cent of total caveats lodged so far in the fourth quarter. DTZ noted that this is higher than the 41 per cent in Q308, 36 per cent in Q208, and 28 per cent in Q108.

‘HDB upgraders buy mainly for owner occupation, so falling private home prices is a good opportunity for them to upgrade with greater affordability,’ said DTZ senior director (research), Chua Chor Hoon.

But DTZ said that the downturn in the economy will deter buyers from committing to property purchases and sales are expected to continue to remain low in 2009.

Lower rental returns will not help either.

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.

OCBC analysts also believe that high-end property prices could decline by 15-20 per cent in 2009 due to weak sentiment, unsold inventories and potential risks of buyers’ default and fire-sales.

OCBC expects mass market property prices to remain resilient, supported by the stability in HDB prices. For the mid-market properties, it expects prices to fall further in 2009, with a projected decline of 5-10 per cent.

Source : Business Times - 30 Dec 2008

JTC to bulk up space at Jurong business park

Area to be increased by 20%; some parts to see plot ratios raised

The economy may be slowing but the government has already set its sights on riding the recovery. To meet future demand for space, JTC Corporation plans to expand the International Business Park (IBP) in Jurong by 20 per cent and will raise plot ratios for some areas in the park.

Property consultants generally welcomed the news and believe that the new supply, which will enter the market only in the mid to long term, will have little impact on the weakening property market.

First established in 1992, the IBP now consists of 21 land parcels spanning 25 hectares, and JTC has fully allocated these plots. The park is home to several global technology firms such as Creative Technology, Acer and Dell.

‘We are expecting a surge in demand for business park land in this area in the next economic upturn, which land intensification on existing IBP land alone would not be able to address,’ said a JTC spokesman yesterday.

To prepare ‘land supply in advance to meet investors’ needs, we are planning to develop land parcels adjacent to the IBP for its expansion’.

JTC will be adding five parcels or around five hectares of land along the IBP’s southern boundary. With a plot ratio of 2.5, this will generate some 125,000 square metres of new business park space.

JTC has also been receiving requests from existing IBP lessees to intensify land use. The overall occupancy rate for multi-tenanted buildings at the park has been high, at around 90 per cent.

To meet these needs, plot ratios for around 14.8 hectares of land will be increased from 1.4 to 2.5.

In line with the redevelopment, the government is looking to improve the area’s road network by creating two road linkages to direct traffic from the IBP to the Ayer Rajah Expressway and the Pan Island Expressway.

It could take another 3-4 years for the IBP’s revamp to be completed, estimates JTC. The redevelopment will complement the Urban Redevelopment Authority’s (URA) 2008 Master Plan to create a suburban commercial hub in Jurong.

‘There is potential to create synergy between the IBP and the proposed developments in Jurong Gateway, the commercial precinct of the Jurong Lake District,’ said the JTC spokesman.

JTC’s announcement comes amid a cooling economy and a softening property market - consultants are predicting a fall in demand for industrial space and rents in the coming year. But some whom BT spoke to remain sanguine about prospects for the extra IBP space coming up.

‘Business park space is still a good alternative for those looking at office space outside the Central Business District (CBD). As long as rentals in the CBD are considered high, interest in business parks will be healthy,’ said Knight Frank’s head of industrial business space, Lim Kien Kim. ‘I don’t think this new supply will significantly affect rents for business parks in general.’

According to its website, JTC charges a land rent of around $60.57 per square metre (psm) per annum, or a land price of $913 psm on a 30-year lease for IBP sites with a plot ratio of 2.5.

DTZ’s executive director Ong Choon Fah also believes that the new IBP supply will not pose a big concern. ‘This is long-term . . . There will always be market cycles, so we must not lose sight of the long- term goals . . . Announcing this now also allows market players to be aware of what is happening in the future, so they can start to plan.’

Cushman & Wakefield Singapore managing director Donald Han says that the new IBP plots could also be put on the reserve list if they are released in a subdued market. Reserve list sites are launched for tender only upon successful application by a developer with an undertaking of a minimum bid acceptable to the state.

‘I don’t think (the government) will force feed the market,’ he said.

Alongside JTC’s redevelopment plans for the IBP, URA also released other updates to its 2008 Master Plan for the Jurong Lake District yesterday. They include the rejuvenation of Teban Gardens and Pandan Gardens, and road improvement works for Faber Terrace and Faber Hills.

Source : Business Times - 30 Dec 2008

Rejuvenation for Jurong residential areas

Better connectivity and more housing choices are on the cards

MORE residential areas in Jurong are to be rejuvenated as part of the Urban Redevelopment Authority’s (URA) 2008 Master Plan to develop commercial hubs outside the Central Business District.

Supporting the growth of the Jurong Lake District, Faber Terrace, Faber Hills, Teban Gardens and Pandan Gardens will soon enjoy better connectivity and more housing choices.

Various infrastructure plans in the region will proceed ‘notwithstanding the current economic downturn’, said URA in a release yesterday.

The government will be enhancing roads at Faber Terrace and Faber Hills. Not only will this improve the area’s traffic situation, it will also allow more low and medium-density housing fronting Sungei Ulu Pandan to be built in future, said URA.

Noting that traffic along the Ayer Rajah Expressway in the area can be heavy, DTZ’s executive director Ong Choon Fah agreed with the plans. ‘If you build up the Jurong Lake District, you will also need to find an accessible way to get there,’ she said.

According to URA, new residences at Faber Terrace and Faber Hills will be private and could include landed property as well as low- and medium-density condominiums. The area could be suitable for cluster housing, said Cushman & Wakefield Singapore managing director Donald Han.

Teban and Pandan Gardens will also undergo rejuvenation. Two public housing sites at Teban Gardens are already under the selective en-bloc redevelopment scheme, and PUB’s ABC Waters programme for the Pandan Reservoir will further enhance waterfront living in the area.

There are also plans to improve Teban and Pandan Gardens’ connectivity with the Jurong Lake District.

The district - comprising a commercial centre at Jurong Gateway and a leisure hotspot at Lakeside - could attract more large and global companies and the redevelopment of the International Business Park would further support this. As JTC Corporation also said yesterday, it plans to add another five hectares of land and raise plot ratios for some areas in the park.

Knight Frank director of research and consultancy Nicholas Mak pointed out that multinational corporations do pay attention to where the workforce is when they pick a site for their headquarters or factories. ‘To know that (workers) are all living around is good, there is a ready pool of labour,’ he said.

The announcements are also ‘a signal to potential developers and investors that there is still land around the Jurong Lake area available,’ he added.

URA also provided more updates on the development of Jurong Lake District yesterday.

For instance, dredging works to deepen the Jurong Lake for more water-based activities are already underway.

Source : Business Times - 30 Dec 2008

Rejuvenation for Jurong residential areas

Better connectivity and more housing choices are on the cards

MORE residential areas in Jurong are to be rejuvenated as part of the Urban Redevelopment Authority’s (URA) 2008 Master Plan to develop commercial hubs outside the Central Business District.

Supporting the growth of the Jurong Lake District, Faber Terrace, Faber Hills, Teban Gardens and Pandan Gardens will soon enjoy better connectivity and more housing choices.

Various infrastructure plans in the region will proceed ‘notwithstanding the current economic downturn’, said URA in a release yesterday.

The government will be enhancing roads at Faber Terrace and Faber Hills. Not only will this improve the area’s traffic situation, it will also allow more low and medium-density housing fronting Sungei Ulu Pandan to be built in future, said URA.

Noting that traffic along the Ayer Rajah Expressway in the area can be heavy, DTZ’s executive director Ong Choon Fah agreed with the plans. ‘If you build up the Jurong Lake District, you will also need to find an accessible way to get there,’ she said.

According to URA, new residences at Faber Terrace and Faber Hills will be private and could include landed property as well as low- and medium-density condominiums. The area could be suitable for cluster housing, said Cushman & Wakefield Singapore managing director Donald Han.

Teban and Pandan Gardens will also undergo rejuvenation. Two public housing sites at Teban Gardens are already under the selective en-bloc redevelopment scheme, and PUB’s ABC Waters programme for the Pandan Reservoir will further enhance waterfront living in the area.

There are also plans to improve Teban and Pandan Gardens’ connectivity with the Jurong Lake District.

The district - comprising a commercial centre at Jurong Gateway and a leisure hotspot at Lakeside - could attract more large and global companies and the redevelopment of the International Business Park would further support this. As JTC Corporation also said yesterday, it plans to add another five hectares of land and raise plot ratios for some areas in the park.

Knight Frank director of research and consultancy Nicholas Mak pointed out that multinational corporations do pay attention to where the workforce is when they pick a site for their headquarters or factories. ‘To know that (workers) are all living around is good, there is a ready pool of labour,’ he said.

The announcements are also ‘a signal to potential developers and investors that there is still land around the Jurong Lake area available,’ he added.

URA also provided more updates on the development of Jurong Lake District yesterday.

For instance, dredging works to deepen the Jurong Lake for more water-based activities are already underway.

Source : Business Times - 30 Dec 2008

Wider variety of housing in the west

RESIDENTS in the west can look forward to having a wider variety of homes to choose from in the next few years.

The Urban Redevelopment Authority (URA) yesterday announced detailed plans to rejuvenate estates such as Teban and Pandan Gardens, and Faber Terrace and Faber Hills - part of a bigger makeover for the Jurong district.

As the existing International Business Park expands, infrastructure upgrading works will also be carried out at surrounding housing estates by national water agency PUB and the Housing Board.

Dredging works by the PUB to deepen Jurong Lake to allow for more recreational water activities, for example, have already begun.

Under its Active, Beautiful, Clean (ABC) Waters Programme which aims to convert canals and reservoirs into a scenic network of waterways, PUB plans to build a new waterfront promenade with boardwalks, bridges and wetlands at Jurong Lake.

At Teban and Pandan Gardens, the HDB has been rejuvenating these estates through various upgrading programmes and its Selective En-bloc Redevelopment Scheme (Sers). Sers involves the relocation of residents in public housing that is about 30 years old to newly developed high-density projects located nearby.

Road improvement works at Faber Terrace and Faber Hills will also allow more quality low- and medium-density housing fronting Sungei Ulu Pandan to be built to support the growth of the Jurong Lake District, said URA.

A 1.9ha private residential and commercial site next to Jurong East MRT was also put on URA’s reserve list last month.

Knight Frank’s director of research and consultancy Nicholas Mak does not expect the plans to have any immediate significant impact on the market.

But Colliers International’s research and advisory director Tay Huey Ying said the plans to enhance residential estates ‘will add variety to housing options…and help entice home purchasers’.

‘This can help to boost population in this area - a critical ingredient if the Jurong Gateway is to be a success.’

Source : Straits Times - 30 Dec 2008

Jurong to get more business space

Expansion of business park will position Singapore for recovery

THE economic outlook is all gloom but the Government is already positioning Singapore for the next upturn by unveiling plans to beef up the supply of business park space in Jurong.

Its ambitious move comes even as demand in the property sector has fallen dramatically in recent months while office rents have dipped.

Industrial landlord JTC Corporation said yesterday it will develop 5ha south of the existing International Business Park. This will yield 125,000 sq m, or about 1.35 million sq ft, of rentable space.

The development will help JTC ’secure investments and anchor key companies’ in an effort to better place the economy for the next upturn, it said.

Site surveys will start next month and infrastructure work, including improvements to the park’s road networks, will begin in March. Two new road linkages to the Ayer Rajah Expressway and Pan-Island Expressway will be created.

Companies can lease space in the business park from 2011, said JTC.

Market watchers told The Straits Times that the Government is stimulating economic activity with the development while also seeking to avoid the kind of office space crunch that has hit businesses in recent years.

The economic boom that preceded the financial crisis saw prime office rents double to almost $19 per sq ft last year. This sparked a scramble to build more office space, including government moves to release transitional office sites to relieve pent-up demand.

While this has now led to concerns that Singapore could face an office space glut over the next two years, some analysts feel that early preparation of sites enables the market to respond faster when the economy does pick up.

Colliers International’s research and advisory director, Ms Tay Huey Ying, said she did not think there would be a glut, and that this ‘will help in ensuring a U-shape recovery instead of a V-shape one when the global economy recovers’.

CIMB-GK economist Song Seng Wun said government investment in public infrastructure like Jurong Island or Changi Airport during downturns has traditionally ‘worked well for Singapore’.

Even though the impact on economic output ‘will not be massive’, such work will benefit local firms, added Mr Song.

The International Business Park - 21 land parcels of about 25ha - is Singapore’s first such park. Established in 1992, it has drawn renowned tech firms such as Dell and Acer to set up shop.

JTC said a review of the park’s masterplan was timely as the Urban Redevelopment Authority had recently announced a dramatic makeover for Jurong in its 2008 Masterplan.

The industrial town is to be redeveloped into Jurong Lake District - a 360ha mini metropolis of homes, hotels, shops, eateries and offices linked to the MRT via walkways and waterways.

It will consist of Jurong Gateway, the up-and-coming commercial hub of the West, and Lakeside, which is being developed as a destination for young families, with tourist attractions and parks complemented by water activities.

JTC said ‘there is potential’ for synergy between the expanded business park and the rejuvenated Jurong Gateway.

Collier’s Ms Tay agreed that more business park space will add critical mass and ‘aid in the realisation of the Government’s vision for the Jurong Lake District’.

To complement the commercial developments, the surrounding housing estates will be rejuvenated by various statutory boards. This will mean upgrades to Teban and Pandan Gardens and the Faber Terrace areas in the next few years.

Source : Straits Times - 30 Dec 2008

Home sales ‘to stay weak next year’

Job insecurity will deter buyers, says DTZ, as economic gloom prevails

AMID difficult economic conditions, home sales are expected to remain weak next year, said real estate firm DTZ in a research report yesterday.

Job insecurity and further weakness in the market will deter buyers from committing to property purchases, it added.

This will weigh on consumer spending and create a ‘contagion effect on the property market’.

Already, residential sales in the past two months have been ‘dismal’, said DTZ, adding that only 112 units were sold in October. This was the lowest figure since the Urban Redevelopment Authority (URA) started releasing monthly sales data in June last year.

Last month was slightly better with 192 units sold, but it was still a dramatic drop from the monthly average of 444 units sold in the first nine months of the year.

URA data showed that while 38,100 units were sold last year, only a third or so of this figure changed hands this year.

DTZ called these results a ‘complete reversal of the trend in the private residential market’, and said the fall in home prices gathered pace in the fourth quarter ‘on the back of worsening sentiment’.

Non-landed properties were hit hardest, as prices of non-landed freehold private homes in the prime districts fell by 14 per cent in the fourth quarter from the quarter before. This was after the sector had already fallen by 4.5 per cent in each of the previous two quarters.

Overall, average prices fell 21.6 per cent from the year before, to $1,160 per sqft - a level not seen since the second quarter of last year.

Even landed housing prices, which had held firm up to the third quarter, ’succumbed to the weak conditions’ and fell in the fourth quarter, said DTZ.

However, these did not fall as drastically as other sectors, with freehold prices slipping between 3.8 and 5.7per cent from the third quarter.

Rents have also been dropping.

DTZ said rents of non-landed private residential properties, which first corrected in the third quarter, ‘continued to head southwards as more expatriates are being repatriated’.

It added that tenants, possessing lower housing budgets, are increasingly moving from prime locations to the suburbs, or downgrading to smaller units.

Average monthly rents of prime non-landed homes fell 9.4per cent from the previous quarter to $4.36 per sqft.

There is, however, a silver lining amid the gloom, observed DTZ.

Ms Margaret Thean, the firm’s executive director, said: ‘Housing loan rates are low despite more cautious lending from banks, and there are investors waiting to enter the market when prices have fallen to attractive levels.’

Source : Straits Times - 30 Dec 2008

From factories… …to Fusionopolis

JTC Corp talks about how it has come this far since its birth in 1968

MUCH was at stake when Jurong Town Corporation (JTC) workers started hacking away at the uninhabited jungles and marshlands of the Jurong area in 1968.

The fate of not only the future industrial hub of Jurong, but also Singapore itself, might have been in the balance.

‘If JTC had failed, Singapore might have failed,’ said Mr Ong Geok Soo, assistant chief executive of the body now known as JTC Corp, in a recent interview.

He has been at JTC through almost all of its 40 years, and remembers well the early challenges.

‘We seeded the whole process. We developed Jurong town,’ said Mr Ong. ‘In the early days, JTC built roads, drains, sewers and worked with the Public Utilities Board to bring in power.’

Fortunately, the pioneers at JTC were a gung-ho bunch. There were some ‘daredevils’ who went all out to get the project done.

Back then, JTC was an all-round developer, building not only factories but even flats and gardens. It practically carved out Jurong town, and also built some of the flats in the area, which were later transferred to the Housing Board.

Although few entrepreneurs were initially willing to invest in Jurong, it eventually attracted huge foreign investment.

‘In the early days, we had to build confidence and trust as we had to show investors we were credible. Customers were not yet at our door,’ said Mr Ong.

Slowly, more and more customers came. Then began JTC’s evolution, from its founding purpose to develop the Jurong Industrial Estate, to a much wider role in Singapore’s development.

It began to build more no-frills low-rise factories elsewhere across the island in the 1970s.

Then it moved on to building multi-storey factories and high-tech business parks. ‘Customers became more sophisticated. They wanted labs, showrooms, warehouse space.’

Gradually, the private sector was also able to provide and manage the same sort of space that JTC had been providing.

That meant JTC had to do more. It then reclaimed land that was eventually offered to business clusters in need of space. Chemical firms were housed on Jurong Island and pharmaceutical players at Tuas Biomedical Park, for instance.

Then, plans were laid out for the $15 billion one-north - a 200-ha self-contained research hub in Buona Vista promoting a ‘work, live, learn and play’ lifestyle. It is to be built over 15 to 20 years.

JTC has played a key role in Singapore’s move into research and development and product design, helping the nation keep up with the times by offering innovative products to attract investors.

Since 2001, JTC has gone on to build Biopolis and then Fusionopolis at one-north. Media Park will follow.

These clusters of intelligent, cutting-edge ‘factories’ are striking examples of how far JTC has come since 1968. The high-rise buildings boast green features and combine work with leisure.

Apart from work spaces, the first phase of Fusionopolis, a $560 million two-tower-cum-podium development, has serviced apartments, shops and 13 public sky gardens, for instance. It even has a state-of-the art experimental theatre, which boasts a unique $380,000 timber beads-acoustic wall padding.

Construction of the 30-ha Fusionopolis, which will stretch over at least six phases, started in 2003 when the Sars outbreak was taking its toll on the economy. ‘We were prepared to put our money into it but nobody trusted us,’ said Mr Philip Su, JTC’s assistant chief executive.

Market confidence was then at a low ebb so JTC wasn’t sure if there would be takers for the space. Nevertheless, it forged ahead with the project, believing in its long-term potential. ‘Now I’ve got a problem. I don’t have enough space. Now, we have to launch phase 4,’ said Mr Su.

Due to a lack of space, JTC is also going underground to create more usable space for Singapore. It is building an underground oil storage facility called Jurong Rock Cavern, which will feature over 2.7 million cubic metres of storage space when completed.

There are plans for an underground science city catering to research and development and an underground warehouse.

Among its other new ideas is one which looks at housing business clusters in a high-rise complex. For instance, a car mart can be combined with warehousing and logistics facilities.

These projects, which the private sector finds too big, complex and risky to handle, will be the focus of JTC in future.

It recently sold $1.71 billion worth of its ready-built facilities to Mapletree Investments as it shifts focus to such strategic projects that will help take Singapore into the future.

‘In the early days, we had more flexibility as we had plenty of land,’ said Mr Ong. ‘Now, we are short of land so there’s more planning, more thinking… We are less visible because Singapore is more developed now.’

Nevertheless, there is always a place for JTC in Singapore, said Mr Ong.

‘Private developers won’t be holding a lot of land and pumping money into, say, Seletar Air Base, at the start,’ he said. ‘They will want to see some seeding in place first.’ JTC is turning Seletar into a business aviation hub.

Source : Straits Times - 30 Dec 2008

A likely fall of 21.6%

Non-landed prime districtproperties to bear the brunt: DTZ

THE fallout from the financial crisis is hitting the private home market hard, with one estimate putting the drop in private home prices at 21.6 per cent this year, a plunge not seen since the 1997 Asian financial crisis.

DTZ’s dramatic estimate is based on caveats lodged on Urban Redevelopment Authority’s (URA) REALIS portal. However, other analysts were not as pessimistic.

The segment that was worst hit was non-landed properties located in the prime district area.

“After posting two consecutive quarters of around 4.5 per cent decline each, prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter in Q4 2008,” said DTZ in a press release yesterday.

Activity in the private residential market was also much lower compared with last year. DTZ’s preliminary estimate for the number of private property transactions was around 13,300, about 35 per cent of last year’s 38,100 units.

Ms Chua Chor Hoon, senior director of research at DTZ, said that based on her data, this level of activity harks back to 2002, when around 12,000 transactions were recorded. The number of properties then plunged to 10,004 in 2003, when the Severe Acute Respiratory Syndrome epidemic broke out, before recovering the following year.

Chesterton Suntec International research director, Colin Tan was less gloomy about private home prices this year.

“We saw that the prices of private residential units rose in the first two quarters of the year, before coming down in the third quarter due to a change in economic environment,” he said. “Rentals, which are the precursor to prices, have already come down by 15 to 25 per cent, and we might just see prices for this year decline by a maximum of 15 per cent.”

Mr Nicholas Mak, director of research and consultancy of Knight Frank, expects a “single-digit fall” for private homes this year, thanks to the rise in prices in the first two quarters.

Mr Mak thinks that price changes for the whole year could range between zero and -3 per cent.

He also noted that these estimates may differ from analyst to analyst because of different methods used.

Flash estimates for fourth-quarter prices are due to be released by the URA on Jan 2. Prices rose 31.2 per cent in the whole of last year.

DTZ also said that rentals continued to head southwards in the fourth quarter as more expatriates are being repatriated. It said average monthly rents of prime non-landed homes fell 9.2 per cent year on year.

In contrast, rentals of those properties outside prime districts saw an increase of 2 per cent year on year. DTZ said smaller housing budgets are causing tenants to move to the suburbs or downgrade to smaller units upon lease expiry.

Looking ahead, DTZ executive director Ong Choon Fah said the market will continue to “reflect the challenging environment” and only real home occupiers will enter the market. She expects investors to stay out of the market for the next 6 to 12 months and also expects the prices to trend downwards.

Mr Mak expects a drop of 10 to20 per cent for private property prices next year if economic conditions do not improve.

He said: “When the job markets are hit, we expect … the purchasing power of homebuyers will decline.

“The banks will be more stringent in granting loans and all these lead to weaker housing demand, and from this we can expect prices to drop further.”

Source : Today - 30 Dec 2008

The ‘Lake District’ just gets bigger…

IN APRIL, they learnt how nearby Jurong would be transformed into a “lake district” and Singapore’s largest commercial hub outside the city centre.

Yesterday, residents of three estates located a stone’s throw away - including one that made history by being the first to reject upgrading - found out they would be part of the rejuvenation, too.

The 30-year-old public housing neighbourhoods of Teban and Pandan Gardens, according to the Urban Redevelopment Authority, can expect “attractive waterfront housing”, a feature that has been given top billing elsewhere, such as in Punggol.

With Pandan Reservoir and Sungei Ulu Pandan in the vicinity and water-based activities expected, space for private housing fronting the river has also been set aside at nearby Faber Terrace and Faber Hills.

And to top off the effect of the Jurong Lake District, which promises leisure infrastructure and should be fully developed by 2020, it was announced yesterday the authorities would expand the nearby International Business Park (IBP) so that more jobs and homes go hand-in-hand in the former swampland-turned-industrial town.

JTC Corporation (JTC), which manages the 25-hectare IBP, will add five hectares or 125,000 sq m of business space to the area, which, in its current size, had been fully allocated by the middle of this year.

There is potential to “create synergy” between IBP and the proposed developments in the Jurong Gateway, the 70-hectare commercial precinct (500,000 square metres of office space) of the Jurong Lake District, said JTC.

“We’re expecting a surge in demand for Business Park land in this area in the next economic upturn, which land intensification on existing IBP land alone would not be able to address,” said a JTC spokeswoman.

Tenants of the IBP engage broadly in data centre, engineering, software R&D, info-comm and telecommunication (ICT) activities. It is too early to say if rent at IBP will increase, which would depend on the market, the spokeswoman added. Expansion will start with a site survey next month and site preparation works in March, which will include two road linkages to direct traffic to the Ayer Rajah and Pan-Island Expressways. The targeted completion date is within three to four years.

Across the AYE, road improvement works will also be carried out at Faber Terrace and Faber Hills to support future growth in low- and medium-intensity density housing while more housing choices will be provided in Teban and Pandan Gardens through the Selective En-Bloc Redevelopment Scheme (Sers). The latter estate rejected upgrading works in 2003.

But this time, residents Today spoke to said they were pleased to hear about the coming developments, which in the case of Teban Gardens, already includes two Sers sites. More details will be made known at a later stage, but residents such as clinical nurse Farida Abdul Talib, 46, has her wishlist ready.

She said: “(There’s) not much variety now. I would definitely like to see more shops to liven up the place.”

Source : Today - 30 Dec 2008

Old Vic to get $180m makeover

SINGAPORE’S grand old lady is getting her most expensive makeover yet. Victoria Theatre and Concert Hall will be refurbished and reconfigured to add more space for arts groups.

The price tag: $180 million, almost a third of what it cost to build the Esplanade.

This sum is on top of the $115 million set aside for the next five years to grow Singapore into a global arts city. The premises will close in 2010 and reopen three years later.

News of the makeover came as a surprise to the arts community, who had worried that cuts would be made in government funding in the light of the economic downturn.

But Senior Minister of State for Information, Communications and the Arts Lui Tuck Yew assured them otherwise as he gave more details yesterday of the masterplan to guide Singapore’s arts and cultural development.

‘I can assure stakeholders that the Government remains fully committed to this sector…We’ll work with them to help them weather the storm,’ he said.

The refurbishment of the two venues is part of a broader plan to develop and promote cultural institutions around Empress Place. One recent project announced: the construction of the National Art Gallery, reported to cost $320 million, at the former Supreme Court and City Hall. It is expected to open in 2013.

The imposing Victoria Theatre and Concert Hall was gazetted as a national monument in 1992. The theatre is 148 years old while the concert hall is 103 years old

In 1995, the concert hall, which was then home to the Singapore Symphony Orchestra, had its interior repainted and the air-conditioning system improved to the tune of $700,000.

The next year, $6 million was spent renovating the theatre, including installing an orchestra pit and fire curtains for the stage. In 2002, $250,000 went to maintenance and repair works for the theatre.

The Ministry of Information, Communications and the Arts said the latest refurbishment will include improving the acoustics, seating and backstage facilities.

The space will also be reconfigured to accommodate rehearsal needs and commercial pre- and post-performance activities.

The theatre and concert hall will continue to operate until renovation commences.

Mr Yan Yin Wing, music director of the Braddell Heights Symphony Orchestra, which has been performing at the concert hall since 1986, welcomed the plans.

He said: ‘The concert hall is getting a little bit old compared to other modern venues such as the Esplanade.’

His 70-member orchestra has begun looking for a new concert venue but will continue to play there next year.

Rear-Admiral (NS) Lui also announced plans to review the Arts Housing Scheme. It will be extended beyond providing work space for professional artists and arts groups to include private arts businesses and specialised services such as art conservation.

In 2010, when the School of the Arts, Singapore moves from its temporary premises at Goodman Road to Kirk Terrace in the Bras Basah Road area, the vacated premises will be converted into an additional 15,000 sq m of arts housing space.

The National Arts Council will also be launching a scheme next year to support Singaporean artists’ residencies abroad, as well as foreign artists’ residencies here.

Source : Straits Times - 30 Dec 2008

First Reit’s portfolio value remains steady

FIRST Real Estate Investment Trust (First Reit) yesterday said that there was no significant change in the total value of its eight properties as compared with a year ago. The trust made the announcement after it revalued all of the properties on Dec 26.

The eight properties - four in Singapore and four in Indonesia - were collectively revalued at $324.9 million. By comparison, the properties had a book value of $325.6 million in First Reit’s balance sheet as at Dec 31, 2007.

The revaluation will be reflected in the financial statements of First Reit for the fourth quarter ending Dec 31, 2008, the healthcare investment trust said.

Of the eight properties revalued, five - including three in Singapore - were valued at amounts slightly lower than they were a year ago. The properties in Singapore were valued by Colliers International, while those in Indonesia were valued by Knight Frank and PT Willson Properti Advisindo.

The trust said in September this year that it is buying its ninth property, a healthcare logistics and distribution centre in Tuas, for $42 million. The proposed acquisition is slated to be completed in end-2009.

First Reit said then that once the acquisition is complete, it will lift the value of First Reit’s assets under management by 13 per cent to $368 million and diversify the portfolio further by raising income contribution from its Singapore assets from 14 per cent to 21 per cent.

First Reit shares closed unchanged at 40 cents yesterday. The stock has lost 48.1 per cent so far this year.

Source : Business Times - 30 Dec 2008

London residential prices slide 10.1%

Prices seen to fall a further 10% in 2009, 3% more in 2010

London house prices fell more than in any other UK region this year and probably will decline further in 2009 as the economy sinks deeper into a recession, Hometrack Ltd said.

Residential property prices dropped 10.1 per cent in the capital, more than the 8.7 per cent average across the country, the property researcher said in a report yesterday. London house prices fell one per cent in December alone, compared with a 0.9 per cent drop across Britain.

‘The onset of recession and the prospect of rising unemployment over 2009 will continue to damp confidence and in turn demand, which will inevitably lead to further house price falls over the next 12 months,’ Richard Donnell, Hometrack’s director of research, said in a statement.

Banks are rationing credit as they rebuild their balance sheets and brace for the recession, hurting the ability of consumers to afford moving.

Prime Minister Gordon Brown’s government will announce new measures next month to revive lending after institutions failed to pass on the full impact of Bank of England interest rate reductions.

Hometrack, which surveyed 1,809 real estate agents and surveyors, said that many homeowners are choosing not to move as unemployment rises and companies including Woolworths Group plc and MFI Group Ltd tip into bankruptcy. Consumer spending shrank in the third quarter, triggering the biggest contraction in economic growth since 1990.

British consumers stepped up repayments on loans made against their homes in the third quarter, retiring &pound5.7 billion pounds (S$12.2 billion) of so-called housing equity withdrawal debt in the three months to September.

That compares with £2 billion in the quarter ending at the end of June, which was the first time in a decade that repayments exceeded new borrowing, the central bank said yesterday.

Bank of England policymakers have indicated that they may cut the benchmark rate further after trimming it to the lowest level since 1951. The key rate, now at 2 per cent, has declined by 3.75 percentage points in the past year.

House prices in London fell more sharply than the 9.5 per cent decline in East Anglia and 9.2 per cent in the south-east, the report showed.

Hometrack expects prices to fall a further 10 per cent next year and 3 per cent more in 2010, the researcher said on Dec 22. Rightmove plc and the Royal Institution of Chartered Surveyors have also forecast a 10 per cent decline for 2009.

The number of home sales fell 45 per cent this year and will probably drop another 12 per cent in 2009, the Hometrack report said. On average, homeowners will move once every 31 years in 2009, double the rate during the last decade.

Home loan approvals plunged 61 per cent to 17,773 in November from a year earlier, the British Bankers’ Association said last week.

Source : Business Times - 30 Dec 2008

UK housing market gets record equity injection

Britons injected more equity into the housing market in the third quarter of this year than at any time since records began in 1970, Bank of England figures showed yesterday.

The figures highlight the extent to which credit is being restricted and will put further downward pressure on consumer spending.

Households injected a net £5.695 billion (S$11.97 billion) into the housing market between July and September, the equivalent of 2.4 per cent of post-tax income, after injecting £1.951 billion in the previous three months.

Housing equity withdrawal has provided a significant prop to consumer spending in recent years as rising house prices encouraged Britons to refinance home loans to free up cash for other purposes.

In the third quarter of last year, housing equity withdrawal totalled more than £11 billion, or 4.8 per cent of post-tax income.

‘With the taps now turned off on mortgage equity withdrawal, the emphasis of consumer spending is going to rely more heavily on take-home pay growth,’ said Alan Clarke, an economist at BNP Paribas. ‘Unfortunately, with unemployment likely to shoot higher and earnings growth likely to slow, disposable income isn’t going to look that great.’

With house price falls showing no sign of abating and interest rates at historically low levels, housing equity withdrawal is unlikely to pick up for some time.

House prices in Britain have fallen about 15 per cent over the past year and leading property analysts are forecasting a double-digit decline in 2009 as well.

‘Sharply falling house prices have made housing equity withdrawal increasingly unattractive, while very tight credit conditions have made it more difficult to do,’ said Howard Archer at Global Insight.

‘In addition, increasingly lower savings rates have made it relatively more attractive for many people to use any spare funds that they have to reduce their mortgages,’ he said.

Source : Business Times - 30 Dec 2008

HK mortgage lending falls for a fourth month

38% plunge in Nov comes as home prices slide a quarter from five-year high

Hong Kong mortgage loans fell for a fourth month in November as banks tightened lending amid the economic slowdown and as property prices slumped.

Banks in Hong Kong approved HK$8.5 billion (S$1.57 billion) of new mortgage loans last month, 69 per cent less than a year earlier, figures from the Hong Kong Monetary Authority (HKMA) show. Loans fell 38 per cent from October, the HKMA said yesterday.

House prices in the city have slumped almost a quarter from a five-year high in March as the global credit crisis drives up unemployment and threatens more loan defaults. Existing home sales for the full year may fall almost 18 per cent to 75,160 units, according to a Dec 20 report by Centaline, one of the city’s biggest real estate agencies.

‘Banks are not willing to take on this business as margins don’t amount to much and housing prices will adjust in this climate,’ Yuk Kei Lee, a Hong Kong- based analyst at Core Pacific-Yamaichi International, said before the HKMA’s announcement.

The outlook for mortgage lending will likely worsen as unemployment rises and banks raise interest rates on home loans. HSBC Holdings plc, which has the biggest bank network in the city, earlier this month raised mortgage rates as much as 75 basis points to maintain loan profitability.

The proportion of new loans approved at more than 2.5 per cent below the best lending rate fell to 15 per cent in November, from 90.9 per cent a year earlier and 51.7 per cent in October, HKMA figures show.

Hong Kong lending in October posted the first month-on-month decline since December 2007, the HKMA said. Total lending climbed 7 per cent to HK$3.41 trillion, the slowest growth since May 2007, from HK$3.19 trillion a year earlier, figures from the HKMA showed last month.

Hong Kong Chief Executive Donald Tsang said on Dec 8 a recession in 2009 is ‘inevitable’ because of the global financial crisis, and forecast the economy will recover in 2010.

The city’s economy last month entered its first recession since the outbreak of the deadly Sars epidemic in 2003. The seasonally adjusted unemployment rate in the city of seven million people rose to 3.5 per cent in the three months ended Oct 31, the highest level in almost a year.

The number of homeowners with apartments worth less than the mortgages they borrowed - negative equity - almost doubled in the third quarter to an estimated 2,568 cases worth HK$6 billion, the HKMA said on Nov 21.

Source : Business Times - 30 Dec 2008

New Shanghai measures to boost property market

Shanghai, China’s financial hub, has issued new measures to make it easier for people to buy their second homes in a bid to help its ailing property market.

Shanghai citizens will now be allowed to buy second homes on the same preferential mortgage terms enjoyed by those buying their first homes, the city government said in an announcement posted on its official website (www.shanghai.gov.cn) on Sunday.

It did not place any restrictions on what kind of families can enjoy the favourable terms - a further relaxation from a State Council announcement earlier this month, which said that the lower rates would be given only to families whose per capita living area is smaller than the local average.

Just last year, China had made it more costly for homebuyers to obtain mortgages for their second homes, worried about then-rocketing property prices swelling into a bubble.

But with the real estate market losing steam quickly, China has shifted gears and is now attempting to prop it up.

Shanghai is the first city to further loosen rules after the State Council announcement, which cut property transaction taxes and encouraged banks to lend more to developers for acquisitions.

The Shanghai government also said that families could borrow up to 600,000 yuan (S$127,200) from the local housing fund to buy a second home - an increase from the 200,000 yuan previously allowed.

China has unveiled a slew of measures in recent months to stimulate domestic housing demand as part of its campaign to support economic growth amid the global financial crisis.

Source : Business Times - 30 Dec 2008

Monday, December 29, 2008

Govt to proceed with Jurong Lake District development

Source : Channel NewsAsia - 29 Dec 2008

The Singapore government is proceeding to put in the infrastructure to facilitate the growth of Jurong Lake District. This follows the unveiling of the area’s development blueprint in April this year.

Giving an update on Monday, both the Urban Redevelopment Authority (URA) and JTC said the measures include constructing a new spinal road, expanding the Jurong East MRT station and redeveloping the bus interchange.

There will also be upcoming developments at the International Business Park (IBP), Teban and Pandan Gardens.

The existing business cluster in the IBP will be expanded to maximise its potential in the next economic upturn.

Given IBP’s proximity to industrial estates in the west and to the major commercial hub at Jurong Gateway, it remains an attractive location for many industrialists to site their headquarter operations.

JTC envisaged that this strong demand for business park space in IBP will continue into the next economic upturn.

It is planning to develop the land parcels along the business park’s southern boundary, generating about 5 hectares of land and 125,000 square metres of business park space.

There will also be improvements to the road network in the IBP which was the first business park established in Singapore in 1992.

Teban and Pandan Gardens will be rejuvenated as well to provide attractive waterfront housing and to enhance their connectivity.

On top of that, there will be road improvement works at Faber Terrace and Faber Hills. This will improve current traffic situation in the area and allow more quality low and medium density housing fronting Sungei Ulu Pandan.

All these are part of Master Plan 2008 to develop new growth areas outside the city centre.


Singapore’s private home sales, prices & rents fall sharply in Q4

Source : Channel NewsAsia - 29 Dec 2008

Private home sales in Singapore have taken a sharp fall in the fourth quarter of this year.

According to a report released Monday by property consultant DTZ, only 112 private homes were sold in the primary market in October, and 192 units sold in November.

This, compared to the monthly average of 444 units sold in the first nine months of the year.

The October sales volume is the lowest since the release of official monthly sales data by the Urban Redevelopment Authority (URA) in June 2007.

For the full year, DTZ estimated that the number of home sales in the primary and secondary markets will only make up about 35 per cent of last year’s sales, which saw some 38,100 units sold.

The figure is based on caveats lodged with the URA so far.

At the same time, the fall in private home prices have started to gather pace in the fourth quarter, with prime non-landed properties the hardest hit.

Prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter in the three months ended December, according to DTZ Research.

Overall, average private home prices have fallen 21.6 per cent year-on-year to S$1,160 per square feet, below the level of S$1,200 per sq ft in the second quarter of 2007.

Meanwhile, average monthly rents of prime non-landed homes have fallen 9.2 per cent to S$4.36 per square feet.

DTZ expects home sales to remain low next year as the recession takes its toll and homebuyers are concerned over job security.


Depa of Dubai wins US$32m Sentosa IR deal

Depa Ltd, the United Arab Emirates-based interiors contractor fitting out the world’s tallest tower in Dubai, won a 118 million-dirham (US$32 million) contract at a holiday resort in Singapore.

Depa and its partner DDS Contracts & Interior Solutions Pte Ltd will fit out an entertainment venue at Resorts World, a resort on the Sentosa island in Singapore, the companies said on Monday in a joint emailed statement.

DDS, in which Depa holds 55 per cent and Singapore-listed Design Studio 45 per cent, targets interior contracts in the hospitality & commercial segments within Singapore, Malaysia, Thailand, Indonesia and Vietnam.

This contract is expected to contribute positively to Design Studio’s and Depa’s financial performance for FY2009/2010.

Source : Business Times - 29 Dec 2008

Sunday, December 28, 2008

New small flats to have features for aged, disabled

Source : Sunday Times - 28 Dec 2008

Two-room HDB units to be built mainly in non-mature estates

The two-room flats that the Housing Board is building again will mainly be in non-mature estates and will come with elderly- and disabled-friendly features.

These 45 sq m units will have ramps at the main entrance and the toilets, and have wider toilet doors for easier wheelchair access.

The eye-viewer at the front door will be larger than current ones while switches and electricity outlet points will be placed higher so the elderly do not have to stoop to reach them.

Lifts will stop at every floor and larger fonts will be used in signs around the blocks.

Moving across blocks will also be easier as ramps and wider walkways will be installed for the wheelchair-bound.

These features are not found in existing smaller HDB flats.

The HDB gave these details to The Sunday Times in response to queries about recent news that the board will be ramping up the supply of three-room and smaller flats to around 4,000 over the next two years.

The HDB had stopped building two- and three-room flats in the 1980s as Singaporeans had wanted bigger flats. But these cosy units made a comeback in 2004 because of renewed demand.

National Development Minister Mah Bow Tan told Parliament last month that more of such small flats will be built next year. They will help more low-income families own homes and also enable those who need to downgrade because of financial difficulties to do so, he said.

Noting that the smaller flats cater mainly to lower-income families, the HDB spokesman said: ‘To ensure that they remain affordable to the lower income, they would mainly be offered in non-mature estates where the selling prices are lower.

‘The smaller flats would be offered in a variety of estates so as to offer buyers a wider choice.’

A gauge of the demand for smaller flats can be seen in recent sales launches.

Under the HDB’s quarterly sale exercises in July and October this year, the take-up rates for three-room and smaller flats were 100 per cent and 97 per cent respectively. There are currently about 6,000 two-room and 210,000 three-room units in the open market. They cost between $77,000 and $275,000 each.

Besides catering to the lower income, small flats will meet the needs of an ageing population too. With the first batch of baby boomers due to hit 65 by 2012, the HDB expects the number of elderly folk to increase rapidly.

‘The smaller flats will provide an avenue for the increasing elderly population to monetise their existing larger flat by downgrading to smaller flats,’ the spokesman said.

It is thus timely for HDB to start stocking up on smaller flats now, considering it will take a few years for the flats to be built, she added.

This is good news for housewife Doris Leong, 57, who lives with her husband in a five-room flat in Hougang. Their three daughters have moved out after getting married.

Mrs Leong, who suffers from arthritis and has problems climbing stairs, said moving to a small unit is an option and welcomed elderly-friendly features like lifts that stop at every floor.

‘We don’t need a big flat for two people,’ she said. ‘With the extra money from the sale of our flat, we can live comfortably and maybe even make trips overseas.’

SPECIAL FEATURES FOR 2-ROOMERS

~ Ramps at the main entrance and toilets
~ Wider toilet doors for easier wheelchair access
~ Switches and electricity outlet points will be placed higher so the elderly do not have to stoop to reach them
~ Lifts will stop at every floor
~ Signs around the blocks will be in larger point sizes
~ Ramps and wider walkways to make moving across blocks easier for the wheelchair-bound


Prices of private homes falling

Source : Sunday Times - 28 Dec 2008

Developers offer soft discounts, for example, by absorbing legal fees

Private home prices are falling - and they will fall even more next year.

Property developers may disagree, but there is no question about it, if you ask industry observers.

The economy has slowed considerably and there have been retrenchments and wage cuts.

Sales volume of new homes looks set to reach an 18-year low this year, while supply is far from lacking.

‘In every bear market, no matter what the developers say, it will happen,’ Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, said of the price falls.

The only unknown, he added, is the extent of the fall.

Manpower Ministry data already shows that average monthly real earnings - pay minus the effect of inflation - fell by 17 per cent from $3,982 in the first quarter to $3,307 in the third quarter.

Also, on an annualised quarter-on-quarter basis, gross domestic product growth in the third quarter declined by 6.8 per cent, continuing the 5.3 per cent contraction experienced in the second quarter.

‘All these will filter through to the property market,’ said Mr Leong.

Right now, most buyers are remaining on the sidelines. New launches are few, and there are not many desperate sellers out there yet.

‘Most are not feeling any pain from the recession yet. In the secondary market, many sellers are still hoping to do sub-sale at a profit,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

The result? There are no major price reductions yet, he said.

Going forward, though, there could be more speculators desperate to get rid of their properties because they do not want to be saddled with huge loans, experts say.

These are people who bought properties when the market was booming under the deferred payment scheme, which means they will have to pay the full sum for the property upon completion.

The Government has said some 10,450 units of private homes sold under the deferred payment scheme have yet to be completed. Some 2,540 units - largely bought during last year’s boom - will be completed in 2010.

In the new homes market, there will be more new property launches or re-launches after Chinese New Year late next month, consultants say.

Frasers Centrepoint, for one, has plans to release Caspian, its 700-unit condo near the Lakeside MRT station.

‘The smaller projects or those in less attractive locations will likely need to offer more discount,’ said Mr Mak.

‘Others may offer soft discount, so that the prices reflected in the caveats will not be reduced.’

Soft discounts can take the form of furniture vouchers or the absorption of legal fees or stamp duty.

There could be price cuts in some mid-tier or prime developments where prices are ‘fairly toppish’, Mr Mak said. ‘They would, thus, have to adjust their prices to a more reasonable level.’

Novelty Group, for one, last month cut its price for the 75-unit Luma at River Valley Grove from $2,800 per sq ft (psf) to $1,450 psf.

Recently, City Developments adjusted its price for the 77-unit Shelford Suites in Shelford Road to $1,400 psf from a preview price of $1,600 psf on average in June. The price then was already lower than expected, as two units were sold in March at $1,869 psf and $1,905 psf.

Those seeking information on new launches can check out the Urban Redevelopment Authority’s (URA’s) website, which offers monthly sales and price data on the 15th of every month.

It shows the number of units sold in the past month, as well as the median, lowest and highest prices done.

The URA website also has information on individual caveats lodged for properties sold, so you can find out the prices done at a particular condo.

The problem here is that the information is not very up-to- date because deals take time to complete and caveats take time to lodge.

The price data can easily be two to three months old, which can be a long time in today’s fast-moving market.

Potential buyers should check with their agents to ascertain the previous price levels done or check classified advertisements for the latest asking prices, experts say.

They should also try to get a bank valuation on the property they are eyeing, said HSR Property Group executive director Eric Cheng.

Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 per cent to 8 per cent below asking levels, said Mr Cheng.

Also, buyers should look for tenanted resale properties that can offer a 4 per cent to 5 per cent rental yield for at least the next year, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

‘In today’s market, it is wise to buy something that you can see and profit from immediately,’ he said.

The risk with new projects is that they could be delayed or their prices could fall from today’s levels, he said.

But, be prudent and patient, warned Mr Cheng. ‘Don’t buy on impulse.’

Buying opportunity

Those who want to buy a resale property now can bid below individual sellers’ asking prices. They could aim for 5 to 8 per cent below asking levels, said HSR Property Group executive director Eric Cheng.


Saturday, December 27, 2008

M’sian property market can weather slump

Analysts expect a slowdown but no major correction as there is still room to grow

THE Malaysian property market, which is expected to enter the down cycle next year, will still be resilient enough to survive the onslaught of a softening global economy.

The government’s RM7 billion (S$2.9 billion) stimulus package, including the reduction of Employees’ Provident Fund contributions from 11 per cent to 8 per cent coupled with lower interest rate and inflation, would provide the bright spark to the market.

The market still has ample liquidity as banks continue to give out financing despite worries about an increasing credit crunch in the US.

Association of Valuers and Property Consultants in Private Practice Malaysia (PEPS) president, James Wong Kwong Onn, said that although the property market was expected to see a slowdown in the take-up rate, there would not be a major correction as there was still room to grow.

He said that Malaysia was in a better position compared to Singapore, Hong Kong and Thailand which were more exposed to the US sub-prime crisis. ‘Prices in these three countries have shot up tremendously by 50-100 per cent but in Malaysia, the increase was gradual,’ he said.

Mr Wong, however, said that the association did not expect the market to burst as there would be a moderate reduction in property prices. He added that the property market, especially for residential and commercial, has been ‘red hot’ for three years up to the third quarter of this year but the softening economy has put a pressure on it.

According to Real Estate and Housing Developers’ Association president, Ng Seing Liong, the property market would see a slowdown of between 5 and 15 per cent in 2009. He attributed the economic slowdown as a dampener to the enthusiasm of buyers.

Mr Ng said that sales generally would be ongoing but in small volumes as most purchasers adopted a wait-and-see attitude while most developers downsized their new property launches for next year. ‘Prices are likely to moderate by 5-10 per cent from the first quarter 2009,’ he said.

An analyst from Aseambankers Malaysia Bhd said that buyers were holding back their investments until the economic environment was stable. He, however, anticipated home buyers to return to the market in the second half of 2009.

‘The ‘hot’ property items, especially luxury condominiums in the prime locations, such as in the Kuala Lumpur city centre and Mont Kiara, would continue to be a focus as demand remains positive. Iskandar Malaysia is in the limelight. The most prominent developments are in Nusajaya and Danga Bay, which have attracted buyers from all over the world,’ he said.

An analyst from OSK Research, who also shared his view, said that given a huge supply expected to hit the market, especially in the high-end condominiums segment commencing late this year, 2009 would prove to be a year of reckoning for the Klang Valley’s luxury condos.

‘As the market having to digest the massive supply of high-end condos that will flood the market to at least 2010, this supports the belief that the next property boom cycle will potentially be led by high-end landed properties,’ he said. He added that the next phase of the property upcycle could only commence in early 2010 or 2011.

Source : Business Times - 27 Dec 2008

Don’t be in a hurry to reinstate DPS

Uncertainty in the market being caused now by the scheme should not be treated lightly. By Kalpana Rashiwala

THE deferred payment scheme (DPS) was scrapped over a year ago but it has left a lingering uncertainty in the market that may not clear for some time yet - a fact that should not be taken lightly in examining the merits of reviving the scheme, as some developers are urging the authorities to.

Developers say bringing back DPS will stimulate property demand and point out the scheme did help genuine home buyers tide over temporary cashflow issues.

However, DPS has also been blamed for creating excesses during the recent property bull run. It fuelled speculative buying, since buyers needed to pay only 10-20 per cent of a property’s purchase price to the developer, with the rest only upon the project’s completion.

Amidst the current property slump, DPS has also created a ‘time bomb’ that is ticking away as projects sold on the scheme near completion, which is when buyers have to pay the chunk of their purchase price to the developer. Buyers who have not secured a housing loan yet may find it difficult to get one, with the current tight lending regime being practised by financial institutions.

Without a housing loan, these buyers may not be able to meet their payment to the developer to complete their purchase. This will have consequences.

The government recently revealed that 10,450 private homes sold in uncompleted projects were under DPS as at Nov 30, 2008 and has even given a breakdown of this figure by location and expected year of completion. Of course, not all DPS buyers are speculators. Nevertheless, the debate continues to rage on how big an impact there will be on Singapore’s property market from buyers failing to complete their purchase when projects receive Temporary Occupation Permit (TOP).

Predicting the size of the blast from the DPS ‘time bomb’ is tricky.

For one thing, no one knows how many of these buyers who purchased on DPS have already secured a housing loan. For those who have, paying that big instalment to the developer at TOP may not be an issue. Those without a loan may start to panic.

Other factors affecting the magnitude of the problem created by DPS include: how buyers are affected by the ongoing recession, prospects for their jobs or businesses, the economic and property market outlook at the time, and whether banks relent on their current tight lending policy.

So the impact of DPS is unclear. And the fate of buyers and developers remains uncertain.

Much has been said about DPS buyers defaulting on their purchases by walking away and returning units to developers. The reality is not so simple. The right to repudiate the sale-and-purchase agreement lies with the developer, not the buyer. Even so, some foreign buyers may get away with absconding from the deal and limiting their damage to the 10 or 20 per cent deposit paid.

However, local buyers who fail to complete their purchase risk being sued by developers to either complete the transaction or to compensate the developer for the shortfall between the original contracted purchase price and what the developer manages to sell the unit for later.

On the other hand, if buyers try to offload their units in a weak market, this may accelerate the tailspin in property prices. Another point to note is that those who sell their units at a loss in the subsale or secondary market will still have to cough up the difference and pay the developer.

For instance, if a buyer had picked up a $1 million property on DPS, has paid the developer a 20 per cent or $200,000 deposit and manages to sell his property to another buyer for say, $700,000 in the downmarket, the first buyer has to pay the developer the $100,000 shortfall before it agrees to transfer the title to the second buyer.

Developers too will have to count the cost of this whole episode, including the damage to their image if they drag financially strapped buyers to court.

The global financial crash has already dealt a big blow to sentiment in the Singapore property market. This is being exacerbated by the uncertainty over the likely fallout from DPS.

Defusing the time bomb

What can be done to defuse this time bomb? If buyers say they can’t secure housing loans or sufficient loan quantums from banks to complete their purchase of properties bought on DPS, some of the stronger developers may be game to provide second mortgages for buyers - if the authorities allow that.

Alternatively, developers could record the outstanding payments from problem DPS buyers as debt owed to them. So these buyers become debtors to the developers, who may charge them interest on the unpaid amount until the sum is settled by buyers, as allowed under the sale-and-purchase agreement. Developers may, however, be deluged with buyers taking refuge in such arrangements. And these arrangements can only be made with the support of the developers’ banks. Already, many mid-sized and smaller developers are highly geared.

Whichever way you look at it, somebody will have to pay the price for the problems created by DPS - be it buyers having to sell their units at a loss or being sued by the developer, or developers ending up financing buyers to help them complete their purchase.

Sentiment is so weak now that reviving DPS alone probably won’t do the trick in jumpstarting private home sales.

Banks are tight-fisted now, but it is a matter of time before they have to relax on home mortgages. The business of financing will then be best left to them. In the months gone by, some banks had even devised novel schemes like zero instalment and interest absorption that mimicked DPS - and served the needs of genuine home buyers with temporary cashflow problems, just as well as DPS did.

The good thing about this approach is that banks will have to do checks on borrowers to ensure they are credit worthy - to minimise the risk of non-performing loans manifesting later from giving loans to poor-quality borrowers dabbling in properties beyond their means.

Developers, on the other hand, are not in the business of assessing the creditworthiness of potential buyers. Their business is to sell homes - to as many people as possible and at as high a price as possible. If developers are again allowed to offer DPS in its old form to home buyers, it may once more draw speculators with weak credit standing and create another round of excesses.

Some have suggested ways to temper DPS. For example, buyers could be required to pay an additional 10 per cent - say 18 months after they have paid the initial 20 per cent to the developer. The idea is that buyers would need to apply for and draw down a housing loan, bringing banks into the picture earlier. That may help to sift out financially weaker speculators.

DPS helps HDB upgraders to buy private property, as they don’t have to sell their existing HDB flats immediately to make progress payments on their new home. But the problems being caused by DPS should not be treated lightly amidst calls to reinstate the scheme.

The Singapore property market will eventually recover after the dust from the global financial crash settles and the Remaking Singapore Story takes centre stage once again. In future, high-net worth individuals from overseas and other investors looking for places to park their monies may develop a distate for places brimming with excesses. After all, buying a property is a long-term commitment, best made within one’s means.

Source : Business Times - 27 Dec 2008