S-Reit outlook still negative: Fitch

Source : Business Times – 30 Sep 2009

This despite better share prices and refinanced debt

SINGAPORE-listed real estate investment trusts (S-Reits) have mostly refinanced their maturing debt obligations this year and have benefited from a recent share price recovery, noted Fitch Ratings in a new special report. But questions still remain regarding their financial flexibility and refinancing ability, the ratings agency said.

Fitch is also maintaining its overall negative outlook for the sector, owing to negative asset performance expectations. However, the credit performance of the sector is expected to be driven by the industry sub-sector, hence individual S-Reits may have different outlooks.

The report noted that 12 out of 20 S-Reits, for which information was publicly available, reported a decline in the value of total assets as at end June 2009, from a year ago, largely on the back of falling asset prices and write-downs. Office S-Reits, in particular, reported a 4.2 per cent drop in total assets in the year ended June 2009, compared with an increase of about 54 per cent in the previous year, while retail S-Reits added 1.5 per cent to their total assets in the same period.

S-Reits, like property-related companies globally, have been buffeted by the global financial crisis, Fitch noted.

‘A limited availability of debt financing and stock price corrections have forced S-Reits to restrict their previous aggressive asset acquisition programmes and concentrate on survival and tenant retention in a difficult market,’ noted the report.

But S-Reits responded to the changing market dynamics by sourcing bank loans in advance for their refinancing, and reducing their capex and acquisition plans as well as their development pipelines. Some S-Reits also successfully issued equity. But while these steps are positive from a ratings standpoint, they do not address other aspects of the debt structure and liquidity profile on which Fitch continues to have concerns.

‘In addition to dealing with a worsening asset performance, S-Reits are expected to tread cautiously in terms of their debt maturity profiles and liquidity provisions,’ said the report. ‘S-Reits will also need to improve their liquidity profiles as they come out of the crisis, to meet their debt refinancing requirements in the short to medium term.’

The requirement for S-Reits to distribute a major portion of their earnings affects their liquidity profiles, said Fitch. This, coupled with concentrated debt maturity profiles, can significantly increase the refinancing risk around S-Reits.

Looking ahead, S-Reits are now expected to continue their moderate leverage stance, but shift their focus to enhancing their capital markets reach. ‘They are likely to concentrate more on improving their debt maturity profiles, and expanding their relationships across banks to improve access to the bank loans’ market,’ said Fitch.

one-north cluster for talent growth

Source : Straits Times – 30 Sep 2009

SINGAPORE is setting up a hub for talent development and is seeking business schools, institutions and corporations to form a cluster at one-north, at Buona Vista, to help achieve this goal.

The initiative – called Singapore Link – unveiled by Prime Minister Lee Hsien Loong yesterday is aimed at anchoring Singapore as the regional centre for developing talent and leadership training.

Link, short for Leadership Initiative for building Networks and Knowledge, wants to attract big-name business schools, companies and ‘corporate universities’ to work together on talent development in an Asian context.

Corporate universities refer to multinationals like Citigroup, GE and UBS which have their own corporate schools to train employees for management roles.

The Economic Development Board (EDB), which is driving the Singapore Link initiative, said the Link ‘campus’ – the pool of institutions involved – will be run in a similar way to Biopolis.

Speaking at the two-day Singapore Human Capital Summit, Mr Lee said that ‘this clustering will strengthen the links between research, management and training’. It will also encourage corporations and academia to work together on real world challenges and help in the speedy adoption of best practices, he added.

EDB said the clustering effect will enhance the opportunities for all players to work together more effectively and efficiently. This means sharing of facilities, research and other resources.

Mr Lee also announced that Link will house a new Human Capital Leadership Institute, set up by the Ministry of Manpower (MOM) and the Singapore Management University (SMU).

The institute will conduct pan-Asian research on human resource challenges and offer the best training programmes on leadership and management to local and foreign participants.

One such course, which starts next year, is the Singapore Business Leaders Programme; it targets senior executives expected to take on regional or global responsibilities.

More details will be released at a later date, said MOM yesterday.

Insead Asia Pacific region executive director Maziar Sabet said that the global business school is looking forward to playing a role in the Link initiative, and sees it as complementing Insead’s own leadership programmes.

‘We’re the only business school that committed to a campus here in recognition of Singapore’s unique position as a knowledge and leadership hub,’ he said.

Insead’s campus is located at Buona Vista, near one-north.

Singapore Human Resources Institute executive director David Ang said it was ‘timely that there is an aggregation of HR players’ to share ideas. ‘While this will obviously benefit the large corporates, SMEs will also benefit from the sharing of good HR practices and resources.’

Mr Lee acknowledged that ‘for a small country like Singapore, acquiring and nurturing human talent is a matter of survival’ and that the country has to be an attractive home for talent.

‘Without much of anything else, we rely on human ingenuity and effort to build our economy and society,’ he added.

Mr Lee outlined the characteristics of Singapore’s approach to human capital and talent.

Firstly, that human capital and talent can be nurtured, and this could be from diverse fields. ‘Singapore needs not just engineers and accountants, but also painters and poets, dancers and fashion designers. Together they make ours a more interesting, cool and vibrant city,’ he said.

Also, the way to bring out the best in people is to create a conducive and stimulating environment for them to pursue their interests, said Mr Lee.

In return, they must feel a sense of responsibility to the community and give back to society, he told an 800-strong audience at the conference held at the Raffles City Convention Centre.

Mr Lee noted that Singapore, at the crossroads of Asia, is well-positioned to be a regional hub for research on talent management practices in Asia.

‘If we can help Asian economies to gain talent and grow, we ourselves will in turn grow with them,’ he said.

RBA official warns of housing bubble

Source : Business Times – 30 Sep 2009

His comments fan speculation that monetary policy will be tightened in Nov

A top Australian central banker yesterday warned that housing prices could rise too fast if interest rates were kept low for too long, fanning speculation that monetary policy would be tightened as soon as November.

Anthony Richards, head of economic analysis at the Reserve Bank of Australia (RBA), told a housing forum that mortgage rates were unlikely to stay at their current low levels indefinitely, and that there was a risk that housing prices could rise too fast.

On Monday, governor Glenn Stevens said that rates will be raised in a timely manner, but declined to say when the first hike would be.

He added that keeping rates at record lows for too long would create economic imbalances.

Unlike the US and UK, where house prices have tumbled amid the global downturn, Australian house prices have held up remarkably well, rising 4.2 per cent in the March to June quarter.

‘This is a good thing, because of the macroeconomic difficulties that have accompanied those price falls in some countries,’ Mr Richards said.

‘But, looking forward, the risk is that we might move towards undesirably strong growth in Australian housing prices.’

Record levels of immigration and the highest population growth in 25 years have meant that there were more people looking for homes at a time when construction has been running well below historical norms.

Underlining the strength of the economy, Treasurer Wayne Swan announced that the government’s budget deficit had come in A$5 billion (S$6.1 billion) less than expected at A$27.1 billion in the year to June 30.

The government’s net debt position stood at A$16.1 billion for the year, a hefty A$11.5 billion better than forecast.

‘The budget will move back into surplus by the end of 2012-13, ahead of the government’s previous estimate of the end of 2015-16,’ Citi analyst Joshua Williamson said.

That assumption was based on a government commitment to cap spending at 2.0 per cent a year above inflation.

Expectations of rate hikes had already received a boost after an influential columnist said that it was almost certain that rates would rise to 3.25 per cent in November, and to 3.5 per cent in December.

The RBA’s monetary policy board meets next on Oct 6, and few expect it to lift its 3.0 per cent cash rate at that point.

But based on overnight indexed swaps, investors are pricing in a 64 per cent chance of a 25-basis-point rate hike in November, and are more than fully priced for December.

Investors had seen around an even chance of a November rate hike, but that increased after columnist Terry McCrann wrote that, absent a shock, the RBA was almost certain to raise rates by 25 basis points in both November and December.

Mr McCrann has a mixed track record on rate moves but has been right enough times in the past for investors to suspect that he has inside sources at the RBA, making them sensitive to his calls.

CTC Holidays to open 20 hotels in Asia

Source : Straits Times – 30 Sep 2009

Tour operator Commonwealth Travel Service Corporation (CTC) Holidays is aiming high for its fledgling hotel business with a plan to launch 20 hotels in Asia over the next five years.

Managing director Wee Hee Ling told The Straits Times yesterday, at the grand opening of CTC Holidays’ first @Gallery Suites boutique hotel in Shanghai, that plans were in place for a second @Gallery Suites in the province by April next year.

The local travel group is also set to follow this with another hotel with a similar concept in Taiwan by 2011.

Despite notching up more than $100 million in sales last year, CTC Holidays has been actively looking for new business opportunities in an increasingly saturated global tourism sector.

‘What we achieved last year was quite a remarkable performance in the travel agency business,’ said Ms Wee.

‘But we felt that in order to grow, we needed to move into other areas within tourism and the hotel business was just a natural step for us to take.’

The Singapore-based company recently invested US$5 million (S$7 million) to set up three subsidiaries in China as part of its diversification plans.

One of those wholly owned subsidiaries, Connections Hotel Management Company, operates @Gallery Suites in Shanghai.

The 39-room hotel located in the Xu Hui District – a former French quarter of Shanghai – is housed in a restored heritage building. Since its soft launch in March, the hotel has not only enjoyed near 90 per cent occupancy but also received rave reviews from the hospitality industry.

The boutique hotel – a blend of modern Chinese design and 1930s Shanghai art deco – is the first of 20 similar properties CTC Holidays is hoping to unveil in the major cities of China and in Taiwan, Hong Kong, Thailand and Singapore.

The company’s second @Gallery Suites, to be located in the Jing An District, will provide 100 rooms to travellers in time for World Expo 2010, to be held in Shanghai next May.

Both properties are leased for a period of between 10 and 15 years, with options to extend.

Besides the hotel business, CTC Holidays is setting up an 8,000 sq m entertainment hub in Yu Yuan, a Ming Dynasty garden in Anren Jie and a must-see attraction in Shanghai, which now receives more than 100,000 visitors a day.

Ms Wee reported that travel bookings are picking up after dropping 30 per cent during the middle of the year mainly due to the H1N1 crisis.

‘We won’t better last year’s performance but we do hope to break even this year,’ she added.

Wet markets’ buyout causes upset

Source : Straits Times – 30 Sep 2009

PLANS to shut down five wet markets in Choa Chu Kang, Serangoon North, Bukit Batok West and Bukit Panjang are making two groups of people unhappy.

Residents in these neighbourhoods are upset over what looks to be a loss of lower prices, freshness and variety, and market stallholders are wondering what is to become of their livelihoods. Some have gone to see their Members of Parliament.

The target of their joint ire: supermarket chain Sheng Siong, which bought the markets from boutique property developer Heeton for $25.55 million.

The five markets to cease operations in March next year are in Choa Chu Kang Street 62, Choa Chu Kang Avenue 1, Serangoon North Avenue 3, Bukit Batok West Avenue 8 and Fajar Road.

Sheng Siong plans to convert them into ‘air-conditioned markets’, although it has yet to spell out how the space in these five sites will be used.

Wet market patrons have already equated ‘air-conditioned market’ with ’supermarket’, which they say they do not want or need.

But Sheng Siong is adamant about avoiding the term ’supermarket’. In its still-unconfirmed blueprint, an ‘air-conditioned market’ might well be ‘70 per cent wet market and 30 per cent supermarket’, its spokesman explained.

Figures from the National Environment Agency (NEA) show that the island now has 101 wet markets, of which 82 are government-owned and the rest, private. NEA manages the 82 government-owned ones, but does hygiene checks on all 101.

The affected markets, which look like typical heartland wet markets, are privately owned.

Engineer Alex Ng, 45, who visits Serangoon market thrice weekly, is among those who are upset: ‘If we have a wet market in our neighbourhood, we can compare prices there with big-chain prices. Usually, wet market prices are lower.’

For Madam Nirmala Narayanan, 48, a customer at the Serangoon market for 15 years, it is about variety. The wet market is where she goes for fresh mutton and grated coconut.

It is the same story with residents in the west. Housewife Winnie Tan, 52, spotted at the market in Choa Chu Kang Street 62, said: ‘I don’t need an air-conditioned market. Closing this place will be inconvenient for us. It is our only wet market.’

And then there are the stall operators, who feel blindsided. Those interviewed by The Straits Times said they were handed new contracts to sign a month ago.

Fishmonger Mohd Sabri, 52, whose stall is in the Serangoon market, said: ‘The old contract didn’t have a clause allowing the owners to kick us out in three months. The new one did. I didn’t know better and signed it.’

Mr Mohd Sabri and about 140 other stallholders received a letter a week ago, which said they needed to move out by Dec 16.

He has so far tried unsuccessfully to get a stall at three other wet markets.

After some stallholders met Heeton and Sheng Siong representatives, the move-out date was pushed to March, but it is small comfort to the stallholders.

Mr Kelvin Lim, 47, who runs a vegetable stall in the Fajar Road market, said: ‘We’re not preventing Sheng Siong from taking over the market. We just hope they’ll leave it as it is. They can still earn money from rental.

‘Can’t they empathise? They are such a huge chain, and we are just trying to earn enough to feed ourselves.’

A group of 26 Serangoon market stallholders were anxious enough to approach their MP, Mr Seah Kian Peng, for help.

Acknowledging their fears and noting that the wet market was well patronised, he pointed out that Nex, a mall that will come up behind the market late next year, will already have a supermarket, ’so there certainly will be no shortage of supermarkets in the area’.

But Sheng Siong’s managing director Lim Hock Chee said this was unlikely to be an issue ‘if residents are able to obtain quality daily necessities at reasonable prices, and are spoilt for choice in the neighbourhood’.

Protect the interests of first-time home buyers

Source : Straits Times – 30 Sep 2009

I APPLAUD Miss Tan Hui Yee’s commentary yesterday, “Go back to basics for affordable flats”.

An HDB flat is more than just an asset; to many Singaporeans, especially first-time buyers, flats are their humble abode, their place of security. The convenient call to lower expectations cannot hold if the yardstick for affordability varies between the authorities and buyers.

The steady rise in the standard of living has led to a general increase in household incomes; however, the trend has been balanced out by a corresponding rise in the cost of living.

The recession and higher prices have led to home-seekers being unable to purchase flats, because a home loan would place an additional financial burden on them.

For speculators and investors, public housing has turned into a money-spinning tool – be it in terms of rental or investment. If the authorities sustain or even increase the value of public housing, demand and prices would continue to spiral upwards. Home prices in Singapore have soared in recent months, with transactions hitting record monthly highs. This could lead to a real estate bubble and buyers paying extremely inflated prices for their first homes.

The mentality of home owners to go all out to rake in huge profits should be addressed, and controlled. Remember, public housing was predicated on the belief that every Singaporean deserves an affordable and safe shelter over his head. It is not a monetary tool to be exploited by hungry pragmatists and investors.

Ultimately, the authorities should safeguard the interests of first-time buyers. The predominance of public housing in Singapore underlines the urgency and need for the authorities to introduce measures to strike an equilibrium between helping first-time home buyers and sustaining home values in the long run.

Kwan Jin Yao

Smaller prime district homes lead Q3 surge

Source : Business Times – 30 Sep 2009

Luxury condo prices up 17% from Q1; new peak for prime area landed homes

Latest figures from DTZ show that prices of completed landed and non-landed private homes in various segments continued to recover in the third quarter after bottoming out in the first quarter of this year in the aftermath of the global financial crash.

One of the strongest price gains was reflected in the average price of freehold completed prime district condos, which rose 22.3 per cent from the recent low of $1,120 per square foot in Q1 to $1,370 psf in Q3. ‘As more buyers were drawn to the market, average private home prices continued on the uptrend in Q3 2009, led by smaller homes in the prime districts of 9, 10 and 11,’ DTZ said.

The average capital value for DTZ’s basket of completed luxury freehold condos rose 17 per cent from $1,880 psf in Q1 to $2,200 psf in Q3; however, the latest figure is still 21.4 per cent shy of the all-time high of $2,800 psf in late 2007/early 2008.

The recovery in home buying and prices in Q2 and Q3 this year also rubbed off on the landed housing segment. The average price of completed freehold landed homes in prime districts 9, 10 and 11 appreciated 15.9 per cent from the recent low in Q1 to scale a fresh peak of $1,383 psf of land area in Q3, according to DTZ’s data.

In the 99-year suburban landed market too, the average capital value of $593 psf as at Q3 was up 9.4 per cent from Q1.

DTZ’s landed housing baskets exclude Good Class Bungalows, whose values have also appreciated. And for both landed homes as well as condos, its baskets cover only completed projects.

‘We’ve seen strong interest in landed properties in Q3 – whether it’s bungalows, terrace houses or semi-detached homes. Buyers are mostly owner occupiers,’ says DTZ SE Asia research head Chua Chor Hoon.

‘The general home buying sentiment has spilled over to the landed segment. Landed property prices did not move up as much as condo prices in the 2007 run-up.’

A universal trend for all types of private housing shown in DTZ’s data is that prices have been appreciating since bottoming out in Q1 this year.

However, while the average quarter-on-quarter price gains for suburban condos were higher for Q3 than for Q2, the price appreciation slowed in Q3 for prime district and luxury condos.

The average capital value of freehold suburban condos rose 5.6 per cent in Q3 over the preceding quarter, after posting a 3.1 per cent quarter-on-quarter gain in Q2. For 99-year suburban condos too, the average price increased 6.5 per cent in Q3 to $610 psf, nearly double the 3.2 per cent increase in Q2.

Quarter on quarter, the average capital value for prime district freehold condos surged 11.3 per cent in Q2 and 9.9 per cent in Q3. The average price of luxury freehold condos appreciated 9.6 per cent in Q2 and 6.8 per cent in Q3.

DTZ said rental values found some stability after four consecutive quarters of decline. ‘The average monthly rental value of non-landed homes in prime districts was unchanged at $3.32 psf in Q3 2009 while that of luxurious condos stayed at $4.65 psf.’

Over the next six months, Ms Chua predicts, private home prices are likely to see some level of stabilisation with more moderate increases. While sentiment is still strong at the moment, she pointed to an easing in sales volume from frenzied levels seen in Q3 on the back of fewer projects in the pipeline as well as the market cooling measures announced by the government on Sept 14.

DTZ noted that new private home sales by developers in Q3 are poised to break the previous quarterly record of 5,129 units set in Q2 2007. This was after developers sold a total of 4,471 homes in July and August alone. The full-year figure is also expected to top 2007’s record of 14,811 units.

Nearly 1.2m sq ft of new office space added in Q3, says DTZ

Source : Channel NewsAsia – 30 Sep 2009

An estimated record 1.19 million square feet of new office space was added in the third quarter of this year, according to the latest Singapore Property Market Report by consultant DTZ.

This increased the overall office stock by two per cent. The new supply in the third quarter was more than last year’s total new supply of 1.14 million square feet.

Newly completed offices included Mapletree Anson, 2HR, 71 Robinson Road and two transitional offices at Scotts Road.

The new supply resulted in an islandwide average office occupancy easing by 1.3 percentage points to 91.5 per cent in the third quarter.

The fall in office rents has also moderated in the quarter. Average monthly gross rents of prime offices in Raffles Place fell by 12.4 per cent to S$8.50 per square foot per month in the third quarter. This was a smaller decline than the 19.2 per cent drop recorded in the second quarter.

Private industrial rents also saw their rate of decline easing. Rent for first-storey private conventional industrial space fell just 2.4 per cent to S$2 per square foot per month in contrast to the 6.8 per cent decline in Q2.

Rents in other industrial spaces, including business and science parks, continued to fall but moderated from the previous quarter.

HK property on the fast track to recovery

Source : Business Times – 29 Sep 2009

Home prices 26% up this year, erasing Q4 ‘08 post-Lehman loss

Hedge fund manager Pan Lin Feng and two friends sensed opportunity when Hong Kong property prices plunged 20 per cent last year after Lehman Brothers Holdings Inc collapsed.

In November, they bought a 1,500 square foot apartment, more than double the size of a typical Hong Kong flat, in the affluent Mid-Levels district for HK$9.8 million (S$1.8 million) from an owner shoring up stock and property losses. In July, the trio was offered HK$15 million.

‘It was a good deal,’ Mr Pan, 33, said. ‘It was real luck and everyone has benefited since.’

Hong Kong home prices are up 26 per cent this year, erasing losses posted between the Sept 15, 2008 demise of Lehman Brothers and Dec 31, 2008, according to the weekly Centa-City Leading Index. Mainland Chinese buyers and record mortgage rates lower than London and New York enabled Hong Kong to recover while the other financial centres struggle.

Hong Kong is the world’s fifth-most expensive residential real estate market, after Monte Carlo, Moscow, London and Tokyo, according to Global Property Guide.

The average value of all Manhattan apartments sold in the first six months of 2009 fell 12 per cent from a year earlier, according to figures from Prudential Douglas Elliman Real Estate. Average home prices in London rose 0.3 per cent in the first seven months, according to the UK Land Registry.

Hong Kong property recovered faster because its banks are healthy and residents save money, said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd, which holds US$7 billion in assets, including shares of Hong Kong and China developers.

Banks cut mortgage rates to their lowest in 19 years, with some offering loans with a one per cent interest rate, and the increasing number of customers helped boost property prices.

‘In Manhattan and London, if you see a great deal and you want to borrow from the bank, you’ll find it difficult,’ Mr Do said. ‘In Hong Kong and Singapore, the banks will be happy to lend.’

Cindy Gan, a communications manager, said local banks undercut each other competing for her mortgage for a HK$3.8 million apartment near Causeway Bay in May. ‘They would counter-offer by improving the cash rebate and providing free first-year insurance,’ she said. ‘It was all about sweetening the deal.’

She chose a 15-year loan with ICBC (Asia) Ltd starting with a one per cent rate.

The Hong Kong Monetary Authority (HKMA), the de facto central bank, warned lenders this month that their ‘intense price competition’ on home loans wasn’t sustainable.

Financial services in Hong Kong suffered fewer job losses than in New York or London. The number of people employed on March 31 was 181,860, the Census and Statistics Department said. That’s down 10,840 since 2007.

New York City is projected to lose 68,300 finance jobs in 2008 and 2009 combined, according to the New York State Department of Labor.

In London, those losses will total an estimated 57,000, the Centre for Economics and Business Research said in April.

Luxury homes in Hong Kong outperformed the housing market as tycoons snapped up properties, said Wong Leung-sing, research director at Centaline Property Agency Ltd. Prices of homes worth at least HK$10 million rose 30 per cent this year, he said.

‘It’s reflecting not only a buoyant economy, but also the shortage of new supply in an extremely limited pipeline in the luxury market,’ said Simon Smith, senior director of research at Savills LLC in Hong Kong.

In July, a house in Sky High on the Peak, the city’s most expensive residential area, sold for HK$300 million, making it this year’s most costly at HK$41,500 per square foot, said Benedict Ma, an analyst at CB Richard Ellis Group Inc. Sky High has four homes ranging in size from 540 to 620 square metres.

Sun Hung Kai Properties Ltd, Hong Kong’s biggest developer by market value, raised prices of two penthouses at The Cullinan project by 50 per cent. The 4,000 sq ft apartments are offered for HK$300 million, or HK$75,000 psf, each, said Victor Lui, executive director of the company’s real-estate broker.

That would be the world’s second-most expensive price after a Monaco developer asked for the equivalent of HK$100,000, said Xavier Wong, head of research for Greater China at Knight Frank.

Those amounts signal a price bubble in Hong Kong, said Francis Lun, general manager at Fulbright Securities Ltd.

‘The property developers are charging unconscionable prices and making obscene profit,’ Mr Lun said. ‘Those luxury properties are bought by mainlanders as trophies.’

Luxury home prices may rise another 10 per cent the rest of this year because of low interest rates and improving stock markets, Mr Ma said. The most ever paid psf for a local luxury house is HK$56,000 in June 2008 for Severn 8 at the Peak, another Sun Hung Kai project.

‘It’s hard to put a cap on the luxury end as you can’t use affordability ratio for any tycoon,’ said Buggle Lau of Midland Holdings Ltd, real estate firm.

Prospective buyers lined up outside The Masterpiece, a high-rise across Victoria Harbor from the Central District, for apartments with 180-degree views of the skyline. A mainland Chinese client paid HK$150 million, or about HK$37,000 psf, for a furnished 4,088 sq ft show flat, said Jeff Lau, senior sales and marketing manager for builder New World Development Co.

A local businessman paid HK$24.5 million, or HK$30,025 psf, for a one-bedroom, 816 sq ft apartment there.

The overall home index may rise another 7 percentage points for an annual gain of 30 per cent, Mr Wong said.

Interior designer Andrew Bell moved to Hong Kong two years ago and bought a 40-year-old walk-up apartment in the trendy Soho district. He sold the 400 sq ft unit last year for HK$4.5 million, double what he paid.

He then bought a 260 sq ft unit last month for HK$2 million. He hopes to rent it for HK$25,000 after furnishing it with Qing dynasty antiques.

‘A lot of people think I’m crazy for buying this place,’ Mr Bell, 53, said. ‘But I really have confidence because everybody is really thanking God that the crisis is over.’

Hong Kong home prices rebounded faster than the stock market. The weekly measure by Centaline and the City University of Hong Kong recovered to levels before Lehman’s collapse by June. The Hang Seng Index reached pre-collapse levels about a month later.

Hong Kong’s yearlong recession ended last quarter, when a boost in export demand from China helped the economy grow 3.3 per cent from the previous three months. Sales of all residential apartments in August almost tripled to HK$41 billion from a year ago, Land Registry figures show.

The number of sales agreements on luxury residences more than tripled to 500, the agency said.

The average size of a Hong Kong flat is about 700 sq ft, Knight Frank’s Mr Wong said. An apartment larger than 1,000 sq ft is considered a luxury flat by local industry standards.

Mr Pan and his friends paid about HK$6,533 psf. They rejected the HK$15 million offer for their 27-year-old flat, where the monthly rent triples the mortgage payment.

‘We think there’s more upside if we wait,’ Mr Pan said.

Landlord ‘king’ sells before rate rise ’slaughter’

Source : Business Times – 29 Sep 2009

Fergus Wilson, the ex-mathematics teacher dubbed Britain’s buy-to-let ‘king’, says he is selling 700 rental properties before interest rate rises bring ’slaughter’ to landlords in the UK housing market.

Mr Wilson, who together with his wife Judith rank among the 1,000 wealthiest Britons according to this year’s Sunday Times Rich List, said it was inevitable that interest rates would rise from a historic low, pummelling rental landlords.

‘You’ve got a lot of people who have taken out a mortgage and are right up to their throats’ in debt, said Mr Wilson as he settled into a black armchair at a hotel in Maidstone, south-eastern England. ‘As soon as rates go up, they’re going to be slaughtered.’

Rates are forecast to rise, hurting buy-to-let landlords in particular because they pay more than other mortgage borrowers. The Bank of England base rate, a benchmark for British mortgages, will reach 1.25 per cent by the end of next year from its current 0.5 per cent, according to economist estimates compiled by Bloomberg. Most landlord loans are already much more costly, at 4 per cent or higher, according to personal finance website Money facts.co.uk. The UK has about 1.2 million buy-to-let loans, 11 per cent of the total.

‘There are a huge number of people very sensitive to interest-rate rises, both in buy-to-let and owner-occupied mortgages,’ said David Watts, a London-based analyst at CreditSights Inc.

The Wilsons bought most of their property empire in the decade to 2007, purchasing houses with two or three bedrooms using interest-only mortgages. At their acquisitive peak, they purchased a house a day in Ashford, a commuter town in the south-eastern county of Kent that boomed after the opening of the London-to-Paris high-speed rail link.

The former teachers used rental income to cover mortgage payments and when house prices rose, they used the equity gained to fund more purchases.

That model has now changed, with many lenders leaving the buy-to-let market altogether and others pushing interest rates substantially higher than the Bank of England base rate, said Ed Stansfield, chief property economist at Capital Economics Ltd, the London-based economics consultancy. In addition, many buy-to-let ‘teaser’ rates are now resetting at higher levels, he said. Any rise will particularly hurt the 60 per cent of buy-to-let investors owning fewer than four properties, Mr Stansfield added.

The Wilsons, called ‘The King and Queen of Buy-to-Let’ by newspapers including the Guardian, last week agreed to sell their investment for £180 million (S$407 million) to an asset management company ‘possibly representing Russians’, Mr Wilson said.

He would not identify the potential buyer, citing a confidentiality agreement. The pair stand to make a £90 million profit after taxes and expenses incurred in the sale, he added.

Buy-to-let, also known as landlord loans, grew in popularity in the decade to 2007, as property prices tripled and banks flooded the economy with cheap credit. Lenders such as Bradford & Bingley Plc and WestLB AG’s Basinghall Finance unit offered interest-only mortgages to new landlords. Last year, Bradford & Bingley, the UK’s biggest buy-to-let lender, was nationalised and WestLB received a German government bailout. Basinghall Finance is closed to new business, according to Matt Smith, a company spokesman.

While mortgages more than three months in arrears rose to a 12-year high of 2.43 per cent on June 30, according to Council of Mortgage Lenders figures, Bradford & Bingley says its rate is more than double, at 5.88 per cent. British house prices have declined 19 per cent from the August 2007 peak, according to a house price index produced by Halifax, part of Lloyds Banking Group Plc.

The US may also face problems in any housing market recovery. About 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said last Wednesday.

‘There’s an awful lot of people who have avoided going into arrears simply because interest rates have been so low,’ said Mr Stansfield of Capital Economics, who expects property prices to fall as much as 40 per cent from the 2007 peak. ‘Anyone looking to refinance a buy-to-let mortgage is going to have an enormous problem because lending standards have been tightened more than for any other type of mortgage.’

The number of buy-to-let mortgage products available to borrowers plunged 94 per cent to 209 as at Sept 24, from 3,662 at the end of August 2007, according to Moneyfacts. Buy-to-let borrowers are ‘more susceptible’ to any rise in interest rates because they may not be able to raise rents to cover rising mortgage payments when tenants are threatened by stagnant incomes and rising unemployment, CreditSights’ Mr Watts said.

‘When you’ve got low rates, there’s only one way they can go, and that’s up,’ Mr Wilson said. ‘There’s no better time to sell.’

London luxury home prices rise 4%

Source : Business Times – 29 Sep 2009

Broker attributes surge to shortage of prime properties

Luxury-home prices in central London rose 4 per cent in the third quarter from the previous three months as buyers competed for fewer properties, Savills plc said.

Houses and apartments worth more than £1 million (S$2.3 million) in the most expensive areas fell 4.9 per cent on an annual basis, the property broker said in a statement on Friday.

The biggest quarterly increases were in the districts of Chelsea, Kensington and Belgravia in west London. The annual decline narrowed from 11.5 per cent at the end of the second quarter.

‘There isn’t enough property on the market in prime areas and priced attractively to satisfy demand,’ said Camilla Dell, managing partner of Black Brick Property Solutions LLC, which finds and buys homes for wealthy customers. Her company, which has advised on £45 million of property deals this year, participated in closed-bid auctions for two multimillion-pound homes in London last week, she said.

The number of homes for sale is about 25 per cent less than the average for the past five years, London-based Savills estimates. Demand for luxury properties increased after values fell by about 18 per cent from the market’s peak in September 2007, the broker said. The pound’s weakness also made purchases cheaper for overseas buyers. Sterling slid about 20 per cent against the euro and the dollar since the peak.

The scarcity of prime real estate on the market may not last, according to Yolande Barnes, joint head of residential research at Savills.

The strongest market in two years will probably encourage more homeowners to sell. ‘Prices are expected at best to level out again and may fall back,’ Ms Barnes said. The rate of unemployment and how quickly the economy emerges from recession will be critical, she said.

Knight Frank LLP said in a separate report that luxury-home prices gained 1.3 per cent in September from August. They dropped 8.9 per cent from a year earlier, the smallest annual decline in 12 months.

‘UK buyers have been especially keen to take advantage of low mortgage-rate costs,’ said Liam Bailey, head of residential research at Knight Frank. ‘The real test in the market will come when interest rates rise.’

The UK housing market as a whole may also be stabilising, according to a survey published by the Royal Institution of Chartered Surveyors on Sept 15. The number of respondents saying prices increased in August exceeded those reporting declines by 11 percentage points, the first positive reading since July 2007.

Home prices in England and Wales rose 4.9 per cent from March through July, according to figures compiled by the Land Registry, lifting the average value to £196,338.

A rebound is also beginning for what Savills describes as ultra-prime properties that cost an average of £15 million. Prices for those homes gained 0.9 per cent in the third quarter from the previous three months, Savills said.

Brian D’Arcy Clark, head of Savills’s private office unit, advised the owners of 96 Cheyne Walk in Chelsea a year ago to delay selling the 12,770-square- foot house overlooking the River Thames.

The week, he will start marketing the home, a former residence of painter James Whistler. Parts of it date back to 1670. The asking price – £25 million – includes six bedrooms, separate accommodations for guests or staff, and off- street parking for eight cars. ‘For an estate agent to advise a client not to do a deal is unusual,’ Mr D’Arcy Clark said. The move to sell ‘is an indication of our confidence.’

The biggest price jumps among the city’s prime residential markets occurred in south-west London in the third quarter, according to the broker.

Prices in districts such as Fulham, Clapham, Wandsworth and Richmond, which range from £500,000 to £2 million, climbed 8.4 per cent from the previous three months.

Values in these areas fell almost 26 per cent from the peak of the market to the end of March, triggering purchases from owner-occupiers who don’t require large mortgages, said Lucian Cook, a research director at Savills. Prices rose 6.4 per cent in the second quarter from the previous three months.

Seletar aviation base on track

Source : Business Times – 29 Sep 2009

JTC pushes on with infrastructure and facility development at the 300-hectare site to host aerospace businesses and services.

THE economic downturn may have slowed things down for the aviation industry, but it has yet to stop work at the upcoming Seletar Aero+sPace (SAP). Construction is ongoing at the 300-hectare site to turn it into a premier aviation base. SAP will host aerospace maintenance, repair and overhaul (MRO) services; aircraft system design and manufacturing activities; and business and general aviation. Research and training institutes will also set up shop there.

As the agency spearheading Singapore’s industrial growth, JTC Corporation is developing various infrastructure and facilities to support businesses at SAP.

‘Singapore’s MRO hub is the most comprehensive in Asia and demand remains strong despite the global downturn,’ says Tang Wai Yee, JTC director of aerospace, marine and cleantech cluster, in the agency’s FY2008 annual report.

‘JTC, together with the Civil Aviation Authority of Singapore, will take this opportunity to lay a strong foundation for SAP by investing in infrastructure development so that the park is well poised to take off when the upturn comes.’

Singapore’s aerospace industry employed some 19,000 people and contributed $6.9 billion in output in 2007. SAP could create more than 10,000 jobs and contribute more than $3 billion to the economy annually when it is completed in 2018.

SAP will have a Business Aviation Complex for companies providing a variety of support services – they may be supplying aircraft parts, managing fleets, leasing aircraft or handling aviation insurance. The complex will accommodate existing businesses in the Seletar airbase and also new entrants to the industry.

Construction of the Business Aviation Complex should start by the fourth quarter of the year and the building is expected to receive temporary occupation permit (TOP) by the first quarter of 2011.

JTC reveals that existing companies have committed to 25 per cent of the space, and it believes that the take-up rate will reach 50 per cent by TOP.

Aviation central

JTC is also planning for a 2.6-hectare General Aviation Centre that will offer shared facilities and space for line maintenance and the parking of smaller aircraft. Not only would the centre optimise space usage in SAP, it would also help individual companies cut down on fixed infrastructure investment and save on operational costs in the long run.

JTC has consulted several industry players to find out what their business requirements are, and to come up with an effective model for sharing facilities. It is keen on allocating the site for the centre to general aviation companies by early next year.

SAP will also have a Component Manufacturing & MRO Facility. It aims to offer companies a quick start-up route, by providing ready-built land-based factories for aircraft parts production or MRO services.

JTC hopes to market the three-hectare site early next year through the industrial Government Land Sales programme. Interested developers can bid for the construction of the factories, and the facility should be ready by the second quarter of 2011. The agency is confident that market demand for the facility will be strong.

JTC began the first phase of infrastructure works at SAP in late 2007 and is close to completing it. It has constructed a new sewer network, road network and drainage system, and will commission a 66kV substation in the next six months to supply power to the eastern part of SAP.

A new fuel farm site and the West Camp Road leading to Seletar Airport should be ready by the first quarter of 2010.

JTC also kicked off the second phase of infrastructure works early this year. Some houses made way for new developments, and construction of a dual three-lane arterial road began in May. The third phase of works is likely to start in 2012.

To preserve Seletar’s rustic charm, JTC has conserved 32 black-and-white houses for ‘adaptive reuse’ as food and beverage outlets, training institutions, and avionics simulator centres. It has also retained the Seletar Camp Guard House and post-war lamp posts as historical landmarks.

JTC is also working on keeping SAP lush and green. Developers which remove trees of substantial sizes have to replace them, and their sites have to abide by the agency’s planning design guidelines.

It’s a bird, it’s a plane…

Even the bus stops at SAP will be designed differently. Modelled after a fighter aircraft called Supermarine Spitfire, the bus stops will help to boost the character of SAP as an aviation base.

SAP has attracted several players in the aviation industry. One is ST Aerospace, which has opened new hangars for airframe maintenance and modifications. Another firm is Jet Aviation Asia Pacific, which has service centre authorisations from a wide range of original equipment manufacturers.

Engine makers Rolls Royce and Pratt and Whitney will also be at SAP.

‘Companies at SAP will benefit from synergies in this integrated environment that include economies of scale and increased efficiency,’ JTC says in its annual report.

‘There is also significant scope for new industry collaborations – alliances brought about by the Park’s shared infrastructure, and close proximity to suppliers, customers and partners within the tightly knit aerospace community.’

Weak demand for factory space

Source : Business Times – 29 Sep 2009

Sales of industrial space are at their lowest since 2000, while rents slide, but the worst may be over, says DOMINIC PETERS

WHILE most economic indicators point to an improvement, the industrial property market remains depressed today as the weak business environment is likely to persist, with global demand still subdued. The first eight months of the year saw 436 industrial sale transactions, a drop of more than 45 per cent from the corresponding period last year, according to caveats lodged. This is the lowest volume since 2000.

Weak demand for industrial space continues to weigh on industrial rents and prices this year. The average monthly rents of Savills’ basket of prime flatted factories and warehouses in central Singapore slid lower in Q3. Flatted factories saw rents slip to S$1.35 – S$1.65 per sq ft, from $1.70 – $2.00 psf in Q4 2008. Warehouses saw a slide from $1.70 – $2.10 psf at the end of 2008, to S$1.25 – S$1.55 psf.

High-tech industrial rents are also experiencing downward pressure as relocation of office users to high-tech industrial space slows down. Office users are now less inclined to relocate to high-tech industrial space as asking office rents in the CBD have fallen significantly and office landlords keen to retain their existing tenants are offering extras like rental concessions and fitting out costs. Consequently, average monthly high-tech rents fell from a high of S$2.50 – S$3.80 psf in 2008 to S$2.40 – S$3.20 psf recently. For instance, monthly asking rents of high-tech industrial space in city-fringe areas like Frontech Centre dipped from about S$4 psf in Q1 to S$3.60 per sq ft in August.

Meanwhile, average prices of strata flatted factory space (leasehold) in the central industrial cluster and outside the central cluster declined from their peaks of S$300 per sq ft and S$260 per sq ft in Q2/2008 to S$220 per sq ft and S$210 per sq ft respectively. Similarly, the average price of freehold flatted factories and warehouses declined from a peak of S$350 – S$500 per sq ft in Q2 2008 to S$200 – S$320 per sq ft respectively.

Recently, a number of Reits were able to leverage on the improved market sentiment and raised funds to shore up balance sheets as well as to capitalise any future opportunistic acquisitions. Even so, declining industrial rents and prices mean that deleveraging remains the Reits’ top priority, largely driven by asset devaluation and the ensuing rising gearing ratios. Besides refinancing, the Reits are concerned with retaining their existing tenants to ensure steady cashflow to their unit holders. This is especially so with a sizeable amount of industrial space (31.3 million sq ft) expected to enter the market over the next 18 months.

In addition, it is understood that some head tenants who inked sale and leaseback agreements with the Reits some years ago are not renewing their leases on expiry. Therefore, more industrial space from Reits may be available in the market soon. For example, Ascendas Reit (A-Reit) reported that it had an industrial property located at International Business Park repossessed after the tenant failed to meet its lease obligations. Likewise, a Reit-owned industrial property located in the Tai Seng area is reportedly up for lease after the head tenant opted not to renew the lease.

The macro picture

In terms of investment sales activity, the only notable transaction so far this year was by A-Reit. It acquired a 149,392 sq ft 99-year plot of industrial land in Kim Chuan from SingTel for S$16 million or S$45 per sq ft per plot ratio (ppr). A-Reit will build a nine-storey high-tech building with a gross floor area (GFA) of 353,723 sq ft and lease it back to SingTel for an initial period of 20 years.

This is the first acquisition by a Reit since Q2 2008. The volume is significantly lower than last year which saw S$700 million worth of deals done, albeit with the majority of them concluded in Q1 2008. While the credit crunch has eased, the number of potential acquisitions by Reits is not likely to surge given the still fragile economic outlook.

Singapore continues to position itself as an R&D and biomedical manufacturing hub. Active efforts to attract manufacturing investment into Singapore should bode well for the industrial property market as a whole and the science/biomedical parks in particular.

According to the Economic Development Board, biomedical companies from around the world invested more than US$500 million into Singapore in 2008, while research and development spending exceeded US$760 million. Japanese drug maker Takeda launched its regional headquarters and regional clinical coordination. GlaxoSmithKline opened a S$600 million vaccine plant while Agilent Technologies set up a new life sciences manufacturing facility.

Furthermore, the manufacturing sector is starting to look up after posting several quarters of negative growth. Manufacturing saw its first positive growth of 49.5 per cent in Q2, spurred by a surge in pharmaceutical output and increased inventory restocking in the electronics sector. At the same time, the August reading of the Singapore Purchasing Managers’ Index of 54.4 indicated that the manufacturing sector has expanded for the fourth time after contracting for eight consecutive months. The positive indicators, coupled with the upward revision in the GDP forecast by the Ministry Trade and Industry from between -9 and -6 per cent to -6 and -4 per cent, reinforce the general belief that the worst of Singapore’s recession is over.

The writer is Director, Industrial, Savills Singapore

Going the extra mile pays off handsomely for SLP Int’l

Source : Business Times – 29 Sep 2009

This exemplary property agency does a lot more than merely bring buyer and seller together

SLP International Property Consultants Pte Ltd does something many of its ilk just don’t. And it is this extra touch that has propelled the property agency into the ranks of Singapore’s top SMEs.

SLP doesn’t just bring buyer and seller together; it takes the trouble to find out what potential buyers want and how potential sellers can deliver.

Helmed by the husband-and-wife team of Stanley Yeo and Kain Sim, the outfit took off in 2001 with the objective of serving clients in the commercial and industrial property sectors. Notably, both of them had earlier helped developers and investors to acquire more than S$48 million worth of investment properties in Singapore; some A$383 million (S$471 million) worth of properties in Australia; and over £128 million (S$289 million) worth of properties in London.

So it carved a niche for itself by assisting developers in designing properties that meet the demands of the target market, recommending them potential land and buildings for development that have strong projected returns.

On the buyer or lessee side, SLP takes the initiative of going to them. Its marketing team visits SMEs at their premises so as to better understand their needs. This way, it can propose better facilities even before the client looks for it.

Over time, it will also be able to tell developers what sort of space will be in demand. Hence, SLP likes to work closely with developers right from the start.

The agency built its reputation right from the first project it secured, after facing its fair share of problems as a small outfit getting its first break. The job: assisting in the sale and development of a 265-unit light and clean industrial building in Bukit Batok.

The economic downturn back then, in 2001, naturally impeded the selling process. But SLP dug in and generated sufficient sales proceeds to assist the developer in funding the development. The project was completed on time without the developer suffering any major cash flow problems along the way.

Topping that, SLP managed to sell every unit over a period of 18 months for the project.

‘To us, it was a very good record because back in 2001, no local industrial development of this size was able to achieve 100 per cent sale before temporary occupation permit was granted,’ Ms Sim recalls.

This was also an important precursor to the many subsequent projects that SLP was to be involved in. But rising business drove the outfit into another wall: hiring people. Recruitment was a challenge because it was difficult to attract people to work for a relatively unknown company. SLP tackled the problem by offering on-the-job training to encourage people who did not have prior experience in the field to join the company. And it worked.

Having established a favourable business presence in the commercial and industrial property sectors, SLP diversified into residential property. By 2004, it was expanding beyond Singapore. Today, it has operations in Indonesia and China.

SLP has achieved many milestones. It sold out industrial office building Alexcia – where its head office is located – in just two months. Just recently, it broke the industry track record with the 100 per cent sale of Northstar, a 654-unit industrial building, within 15 months.

SLP is proud to have maintained its commitment to each project from the start till the end, regarding each project as completed only when every unit is sold. Because of that, SLP has become a well-recognised brand name for business space solutions within the industry. The confidence in SLP’s expertise and dedication has brought in a continuous stream of clients, allowing the company to reinvest its earnings to fund its regional expansion.

In the residential property sector, in which SLP is a relatively new player, the company has also fared well. A living testimony of its achievement here is the recent three stunning blocks of DBSS (Design, Build and Sell Scheme) public housing apartments, Natura Loft, each standing at 40 stories high along Bishan Street 24.

Qingjian Realty Pte Ltd, one of China’s leading developers, engaged SLP as its consultant in its first foray into property development in Singapore. Not only was SLP put in charge of the sale and marketing of the property but, more importantly, SLP contributed to the successful bid for the project by Qingjian, as well as the design and development of the housing project with its knowledge of the needs of the local population.

SLP’s partnership with Qingjian seeks to change the local perception of public housing and property projects undertaken by mainland Chinese property developers. This partnership has also set a new benchmark in residential property value and quality.

On a walkthrough of the project’s showroom with Ms Sim, we were impressed by the high quality of the materials used, the thoughtfulness of the spatial arrangements, and the environment-friendly design of the interior space and exterior landscaping.

Last November, SLP won the prestigious Enterprise 50 Award, a clear recognition of the company’s successful approach to business and its strong growth potential in the coming years.

Looking ahead, SLP’s owners are convinced that the only way for the company to grow is to venture into foreign lands. In 2004, it started searching actively for strategic partners locally and internationally to begin its expansion into the region, starting with the Indonesia market. Last October, SLP made its foray into the Chinese market amid the financial turmoil, beginning with the city of Shanghai.

‘Despite the global financial crisis, our Shanghai office was able to break even in just two months. Now, we are in the process of opening the second branch in Shanghai,’ Ms Sim says.

The founders also believe that the company is capable of fulfilling its targeted milestone of establishing 35 branches nationwide in China within the next 3-5 years.

Besides wanting to expand overseas, Mr Yeo and Ms Sim also want to grow the company from within. ‘We have the vision to gradually move towards the next stage – to nurture the next generation of leaders in the company and to let key management staff become business owners,’ Ms Sim says.

As a parting shot, she advises: ‘You must dare to dream big dreams when starting a business. There will be plenty of setbacks and disappointments, but if you are passionate about what you are doing, you will be able to overcome the problems that come along your way.’

Let’s get real on the Sports Hub

Source : Business Times – 29 Sep 2009

THE clock is ticking as Singapore awaits the outcome of discussions between the government and the consortium tasked with building the country’s $1.87 billion Sports Hub.

The mega-project in Kallang – originally scheduled to be ready by end-2010 but which will now be completed only in mid-2013 at the earliest – has been delayed time and again, chiefly due to financial and legal issues.

It’s time for the authorities and other relevant parties to come clean and make clear their plans for the hub going forward, because whatever they say will have a bearing on the Republic’s ambitions to be a major player in the international sporting arena.

The Singapore Sports Hub Consortium must set itself a deadline to decide on what to do next. Pick a date (the sooner the better), work within that timeframe and come up with a firm working plan on how the hub should progress, after factoring in all the various stumbling blocks.

In the event that securing bank loans is still a problem next year – a distinct possibility, given the scale and budget of the Sports Hub – then a Plan B must be activated.

Perhaps the hub could be scaled down for now so that at least some of the facilities are built first, with the rest to follow at a later date. Is it possible to build the national stadium and aquatic centre first, for instance, and then construct the other facilities some time after that?

As things stand, the government is sticking by its earlier statement that it remains in active discussion with the consortium to help resolve the funding issues. The agreement now is for the consortium to provide the necessary funds to build the infrastructure and carry out the programming. The government would, in turn, pay the consortium for labour and operational costs over a 25-year period.

But no matter which way you look at it, it is already uncharacteristic by Singapore’s standards for a national project to be delayed nearly three years – and possibly even longer, given that the consortium has yet to sign the final contract with the Singapore Sports Council. It is set to do so by year-end.

A project of this scale is by no means easy to plan and execute. Like all other sports fans, I am eagerly awaiting the day when we finally have a world-class Sports Hub that we can call our own and be proud of. Under the circumstances, the least we can expect is some clear direction on the next course of action, as well as the various options available.

The ball is now firmly in the court of the government and the consortium to provide the many answers that the sporting public craves.

Hundred Trees sells another 116 units

Source : Straits Times – 29 Sep 2009

WEEKEND buyers again flocked to one of the most popular recent mass market condominium launches, though the frenzied pace of selling of late last week appeared to have slowed slightly.

City Developments (CDL) said it had sold another 116 units at the weekend preview of its latest condo project Hundred Trees, bringing total sales to 316 units.

That is nearly 80 per cent of the development, or more than 90 per cent of the 350 launched units. The condo, which sits on the 267,598 sq ft former Hong Leong Garden condo site in West Coast Drive, has 396 units.

The average price achieved is about $910 per sq ft (psf), up from the initial price of $895 psf for the first 151 units sold, the developer said yesterday.

There was a ’slight adjustment of 1 to 2 per cent increase in price’ for the subsequent phases, it said.

As with many recent launches, the smaller units were the first to be snapped up. CDL started the preview last Thursday and sold 200 units, including all the 22 one-bedders and most of the two-bedders, within two days.

The 66 two-bedders priced from $701,000 as well as the six penthouses costing $2.4 million to $2.6 million were sold out after the weekend.

CDL will be formally launching the 956-year leasehold condo for sale this weekend even though most units were sold in the preview.

About 25 per cent of the buyers paid 2.5 per cent on top of their purchase price in order to take up the interest absorption scheme.

The scheme allows them to defer the bulk of the purchase price until the condo is completed. This option was removed by the Government earlier this month, though projects that were offered for sale with the scheme before the removal can continue to do so.

CDL said 85 per cent of the buyers were locals, and that they were a balanced mix of HDB upgraders and buyers who already live in private residential property.

Its group general manager Chia Ngiang Hong said the company observed that some buyers were keen to hold their units for investment or rental income in view of the upcoming redevelopment projects like Clementi Town Centre.

KOP sails from property to yachts

Source : Business Times – 29 Sep 2009

LUXURY property firm KOP Group is expanding its presence from land to sea, having snagged exclusive distribution rights for the Princess brand of yachts in Singapore and most parts of China.

Princess Yachts Asia – a 40:60 tie-up between KOP and Reignwood Group – will start off with four Princess yachts for sale or lease. The joint venture plans to grow its fleet to around 20 yachts, and will invest up to $48 million in the next 12 months.

China-based Reignwood has various businesses across the property, recreation and beverage sectors. Princess Yachts Asia’s distribution rights will not extend to Hong Kong and Zhejiang province.

KOP is largely known for its prime residential projects – The Ritz-Carlton Residences and The Hamilton Scotts. It also owns Franklyn Hotels and Resorts, a hotel management company. The new nautical business fits well with the group’s existing portfolio given its ’strength in building the ultimate lifestyle experience,’ says CEO Ong Chih Ching.

The price of a V class Princess sports yacht can start from $850,000. In June last year, luxury goods giant LVMH acquired the boat maker Princess Yachts International for around £200 million (S$450.3 million).

KOP’s involvement with yachts does not stop with Princess Yachts Asia. It also runs Aqua Voyage, which offers yacht management services and private cruise itineraries within Asia. The outfit can draw up a route from Singapore to destinations ranging from Bintan in Indonesia to Sanya in Hainan province, China. According to Ms Ong, some travel agents have expressed interest in marketing the cruise itineraries. Princess Yachts Asia and Aqua Voyage can provide yacht owners with comprehensive services, Ms Ong adds. Owners can charter a captain and crew for cruises, and when they are not using their yachts, lease them out for some earnings.

‘With the integrated resorts, Singapore is expecting to have more high-end and more affluent customers. I think that we are in time for tapping into that marketplace,’ she says.

KOP has set aside some $350 million for international investments in the next 12-18 months.

Bid to stop re-routing of road rejected

Source : Straits Times – 29 Sep 2009

A SPAT between two developers about the re-routing of an access road has gone all the way to the Court of Appeal.

Both Pacific Rover and Yickvi Realty have condominium projects on adjoining parcels of land off Newton Road. But Yickvi had a right-of-way access road to its new 11-storey property that cut through Pacific Rover’s land.

Pacific Rover, which had received planning permission to build two 30-storey residential units, wanted to optimise land usage and shift part of the access road nearer to the property’s boundary. Its condominium, called Trilight, is due to be completed in April 2011.

Yickvi initially agreed to the request, provided the subterranean electric cables, pipes and other service installations beneath the road were shifted in line with the newly adjusted road.

But talks broke down last year and the case went to the High Court, which ruled Yickvi could not object to the road shift as it would not cause a major inconvenience to the occupants of its building.

Yickvi, through lawyers from Rajah & Tann, appealed to the highest court, which agreed with the earlier ruling but ordered Pacific Rover to make sure Yickvi had immediate access, whenever reasonably required, to maintain and repair the cables running under the original route.

The Court of Appeal made clear the inconvenience caused by the realignment of the access road was not the real issue.

Chief Justice Chan Sek Keong, in delivering the grounds on the court’s behalf, said: ‘First, because of the scarcity of land in Singapore, land should be allowed to be developed to its optimal potential as permitted by planning law and the claimant suffers no injury or inconvenience as a result.’

He added that allowing the road shift would prevent further suits taking place and this was a second public benefit.

Lawyers from Rodyk & Davidson, acting for Pacific Rovers, said the judgment was a landmark move as past cases showed a right-of-way cannot be changed without the consent of the party who held that right.

Lawyer Ling Tien Wah said the court showed in this case that, in certain circumstances, the change could go ahead.

‘The court held the owner of the right could not stop the other party from realigning the right-of-way, provided it was advantageous to both parties,’ he said.

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DEVELOP LAND OPTIMALLY

‘Because of the scarcity of land in Singapore, land should be allowed to be developed to its optimal potential as permitted by planning law and the claimant suffers no injury or inconvenience as a result.’ - Chief Justice Chan Sek Keong

Go back to basics for affordable flats

Source : Straits Times – 29 Sep 2009

WHAT does ‘affordable’ mean?

With rising home prices hitting headlines in recent weeks, Singaporeans are falling over themselves trying to pin down affordability.

The Government, which built its reputation housing a nation, has defended its record. It says that public housing is affordable because new home owners use less than 30 per cent of their income to service their housing loans.

While this is persuasive, public scepticism has been just as strong. The gap exists because there is no agreement on what ‘affordability’ means.

The Government feels flats are affordable because those who applied for them will not be paying through their noses. But this, however, does not take into account home seekers priced out of these flats in the first place.

Many home seekers, meanwhile, feel aggrieved because an HDB flat that does not require a long commute to work is getting out of reach.

Furthermore, a study by National University of Singapore economists Tilak Abeysinghe and Gu Jiaying published last year found that the buying power of people’s lifetime earnings in 2007 was lower than it was in 1990 when tracked against the prices of HDB resale flats. By this measure, the prices of HDB resale flats have become less affordable.

The HDB’s pricing system for new flats has also caused suspicion. New flats are priced at a discount from their market value, but this figure – as well as the size of the discount – has never been revealed. What is known is that the HDB bases the market value on the resale price of similar flats in the area. This means new flat prices can be affected by the speculative bubbles that emerge in the wider market. Enhancements made to new flats over the years have also raised prices.

In July’s batch of new premium flats offered in Punggol – which comes with timber and ceramic flooring and toilet fittings – four-room flats were going for a top price of $322,000. This is just $2,500 shy of the median resale price of four-room flats in the same town from April to June.

The response of the authorities to all these? It all boils down to home owners’ expectations, they say. Lower your expectations, live further away from town, or buy a smaller flat.

But perhaps it is time to take a hard look at the HDB’s increasingly conflicting mandates. In a Sept 14 letter to The Straits Times Forum page, the HDB said its ‘key responsibilities are to help first-time home buyers and to ensure flat values are sustained over the long term’.

The HDB undoubtedly had an easier time accomplishing these goals in its early days, when flat owners were largely resettled families who had not quite caught on to the income-generating potential of their homes. Both of the HDB’s goals could then be met rather easily by giving subsidies, keeping estates well maintained, and upgrading them over time.

Today, with the buying, selling and renting of HDB flats supporting an industry, it has become more difficult for the HDB to meet its goals.

The humble flat today is a shelter, an asset, as well as a source of rental and retirement income with the Board’s lease buyback scheme. A flat owner who moves on to a bigger home is entitled to a second subsidised home loan from the Board, while others who sell their first subsidised flat can go back for a second if they pay a levy. The benefits are substantial once someone gets his foot in.

But this cradle-to-grave system has also raised expectations about how much money flat owners can make from their property. People have come to expect that their flat values will rise – indefinitely. They do not seem to realise that this rise has to, to some extent, come at the expense of home seekers down the line. But just like passengers on a plane, they hope it will take off once they get on it.

Such expectations – supported by the HDB’s mandate to sustain flat values – also prevent the housing authority from building too many new flats at any one point in time. If the Board builds enough to satisfy quickly the demand of all home seekers, prices in the resale market will fall.

It was not too long ago that flat owners in Sengkang complained that the surplus of new flats created by the Asian financial crisis was suppressing the value of their homes. But the pendulum these days may have swung too far against the interests of home seekers.

What this means is that the HDB may be forced to prioritise one of its two mandates: Should it focus on helping home seekers own homes, or should it focus on protecting the value of the existing flats of existing home owners?

The Board cannot abandon either goal without political consequences. But it cannot achieve both in equal measure either.

It need not look far for clues about the way out. Former HDB chief executive Niam Chiang Meng declared in 2003 that the Board was going back to basics to improve the workmanship on its flats. Over the next few years, the Board cut out the more elaborate features in its upgrading programmes and focused instead on practical improvements like plugging ceiling leaks.

Why not apply this back-to-basics approach to the HDB’s goals: Provide shelter first before worrying about the values of existing flats?

The HDB could also slowly dismantle the systems that feed into the unreasonable expectations of home owners. For example, eligible households might be limited to just one subsidised flat, or just one housing subsidy, so as to wean people from the assumption that huge profits automatically await every flat owner.

Flat owners, meanwhile, have to realise that there are limits to how far public housing can be commercialised. They certainly cannot demand that the value of their properties appreciate – or even be protected – under any circumstances.

After all, they were all home seekers once, looking for that same leg up on the property ladder as the people who are starting off now.

Developer KOP sails into yacht business

Source : Straits Times – 29 Sep 2009

PROPERTY developer KOP Group is moving into the yacht business with the launch of a $48 million joint venture that is poised to sell and manage luxury cruisers.

The new business, Princess Yachts Asia, has secured the exclusive distribution rights for British luxury yacht brand Princess Yachts in Singapore and most of China.

KOP and its partner, China conglomerate Reignwood Group, whose businesses include property development, are investing the money over the next 12 months. KOP holds a 40 per cent stake, and Reignwood 60 per cent.

Initially, the business is offering four Princess yachts in Singapore for sale or lease.

KOP has set up yacht management service company Aqua Voyage to work alongside Princess Yachts Asia and offer private cruises to destinations across Asia. It will also help yacht owners lease out their boats on the charter market.

KOP’s chief executive officer, Ms Ong Chih Ching, said yesterday that the group’s foray into the leisure marine sector was based on what it saw as the huge growth potential in Singapore.

‘As Singapore’s status as a luxury lifestyle destination grows… we believe there’s an opportunity for us to elevate Singapore as a global leisure boat and luxury lifestyle hub,’ she said.

The number of marinas in Singapore has grown steadily over the years and now includes the Marina at Keppel Bay, One Degree 15 Marina Club on Sentosa island, the Republic of Singapore Yacht Club on the West Coast and Raffles Marina at Tuas.

KOP group is majority-owned by the Dubai Group and known for innovative residential projects in Singapore, such as the luxury Hamilton Scotts high-rise condominium that features special elevators that carry cars up to the residential units.

The group is currently looking for opportunities to enter Singapore’s mid-market residential segment in city-fringe areas, said Ms Ong. It has set aside some $350 million for international business opportunities in the next 12 to 18 months.

KOP is also in talks with local travel agencies to begin offering customised cruises to destinations in Asia.

Reignwood Group chairman Chanchai Ruayrungruang said: ‘We are confident that this venture will be successful in meeting considerable pent-up demand for the nautical lifestyle here.’

Ms Ong added: ‘We have got a very positive response so far. We believe that yachts will become a mainstream experience in Singapore soon.

Q3 investment sales jump 71%: report

Source : Business Times – 29 Sep 2009

CBRE raises total sales forecast for 2009 to $7.5b from $2b 3 months ago

THE investment sales market continued to improve in Q3, boosted by a large number of good class bungalow (GCB) transactions, according to a new report.

Total investment sales in the current quarter have so far amounted to $3.28 billion, an increase of 71 per cent from the previous quarter, said CB Richard Ellis (CBRE) in its report yesterday.

With the strong showing, CBRE is bumping up its forecast for total investment sales for the whole of 2009 to as much as $7.5 billion. Three months ago, the property firm estimated that total sales would exceed $2 billion by end of the year.

In Q3, residential investment sales made up the bulk of the transaction volume. Residential investment sales – including GCB sales – accounted for $2.2 billion in transacted value, or 67 per cent, of the quarter’s total investment sales. This is 92 per cent higher than the $1.2 billion residential investment sales recorded in Q2.

And to date, GCB sales have made up a quarter of total residential investment sales in Q3, with 35 GCB sales between July and September totalling some $535 million. Several of these GCBs were sold for above $1,000 per square foot of land and these included the sale of 6 Leedon Park for $19.4 million, and 42 Dalvey Road and 12 Bishopsgate for $19.0 million apiece.

The government land sales (GLS) programme also contributed to property investment sales volume in Q3. Two industrial sites, a hotel site and three residential sites were awarded from the GLS programme during the quarter.

The current quarter saw the re-emergence of investors buying units in bulk in residential projects. An undisclosed buyer bought 21 units at Sui Generis for $65 million, while 18 apartments at Hilltops condominium were reported to be purchased by a group led by former Parkway Holdings’ Tony Tan for $48.2 million.

In the office investment market, a total of $261.4 million were logged in transactions, representing 8 per cent of total investment sales.

‘Although buyers are still cautious on big deals above $200 million, buyers are much more optimistic than in the first quarter of the year when sentiment was poor and economic difficulties loomed large. The credit market has improved and financing is available,’ said Jeremy Lake, CBRE’s executive director for investment properties.

The robust volume of transactions in the residential market also means that developers are on the look-out for new sites. In light of these positive signs, it is expected that total investment sales for this year could hit $7.5 billion. ‘Though this total is lower than the $18 billion recorded in 2008, it is significantly higher than what was originally anticipated,’ added Mr Lake.

Hundred Trees defies market chill elsewhere

Source : Business Times – 29 Sep 2009

Sales taper off at many projects as cooling measures start to seep in

City Developments Ltd (CDL) sold a whopping 316 units last week at its Hundred Trees condo in the West Coast, a quarter of them on interest absorption scheme (IAS). Demand for most other projects, however, seemed to falter.

‘Hundred Trees is amongst the last few developments where buyers may opt for IAS,’ CDL noted in its press release yesterday. The developer has raised the 956-year leasehold condo’s average price from $895 psf initially to about $910 psf. Those who buy on IAS pay a 2.5 per cent price premium.

It was a different story elsewhere as house-hunters ponder the implications of the Sept 14 measures by the government to cool the market. These include scrapping IAS and restarting confirmed list government land sales in first half 2010.

One property consultant even hazarded a guess that ‘a pull-back in demand of 10 per cent is not unrealistic’.

BT understands that CapitaLand and its partners last week sold fewer than 20 units at The InterLace condo which will be developed on the Gillman Heights site, after selling 233 units the preceding week. No IAS is being offered for the 99-year leasehold condo.

Analysts point out that the project’s pricing is also not compelling. Prices range from $850 to $1,150 psf though market watchers say that on average, the price is about $1,000 psf. The project’s unique design may appeal to some but not others, they added.

InterLace also does not have any one-bedroom units, which typically involve a lower lump sum investment and tend to sell off fastest in projects, a market watcher said.

In the Marine Parade location, GuocoLand sold another 21 units at its freehold Elliot At The East Coast project last week. This brings total units sold to 66 units. The developer has released 80 of the total 119 units in the five-storey project at an average price of $970 psf. It is offering IAS in exchange for a 2 per cent price premium. So far four buyers have taken up the scheme. GuocoLand began selling the condo on Sept 19.

Sales at projects that have been on the market longer have tapered off. For instance, NTUC Choice Homes last week sold five units at its 99-year leasehold Trevista condo in Toa Payoh bringing total units sold to 478 units in the 590-unit condo.

So far this month, the developer appears to have sold 65 units. The average price currently is $935 psf, higher than $898 psf initially. The price premium for IAS buyers is 2 per cent. So far 21 per cent of the total 478 units sold have been on IAS.

Far East Organization sold 24 units last week at its various projects across the island. Its top selling projects were Waterfront Keys and Waterfront Waves in Bedok, Floridian in Bukit Timah, and Mi Casa in Choa Chu Kang.

BT understands several other projects on the island saw sales of just one or two units over the weekend. Meadows @ Peirce is said to have seen sales of two units and Trizon in the Mount Sinai area, just one unit.

A seasoned property consultant said: ‘The market had cooled off slightly even before the Sept 14 measures as price resistance set in after rapid price increases between May and August. People throng showflats of newly released developments, looking for the best units and buy what they can afford. After that, it can be a slow climb in terms of sales volume.’

Most developers and agents have been arguing that the removal of IAS will not make a big dent on home sales as only a minority of buyers in projects where it is offered at a price premium have been taking up the scheme in recent months.

‘However, it is not the removal of IAS but the overall message, that the government is monitoring the market closely and ready to do more if necessary, that is having a psychological impact,’ reckons DTZ’s South-east Asia research head Chua Chor Hoon.

‘The Sept 14 package was a warning to market participants and a reminder to potential buyers to be careful,’ she added.

A property agent told BT that some people have walked away from buying units in new condos from developers recently as prices at some just-completed developments nearby or projects which are nearing completion are about 20 per cent less in some instances.

CDL said yesterday that 85 per cent of Hundred Trees’ buyers were Singaporeans.

‘There was a balanced mix of HDB upgraders and buyers who hold private property addresses,’ it added. All 22 one-bedroom units, priced from $500,000, and 66 two-bedroom apartments, priced from $701,000, have been sold,’ it added.

All six penthouses costing between $2.4 million and $2.6 million have also been taken up. So far, CDL has soft launched 350 of Hundred Trees’ total 396 units.

It will release the remaining units this weekend, when it does an official launch, involving an ad campaign.

Fitch gives S-REITS negative rating

Source : Channel NewsAsia – 29 Sep 2009

Ratings agency, Fitch, said Singapore real estate investment trusts or S-Reits still face questions about their financial flexibility and refinancing ability.

In a research report, Fitch noted that S-reits have largely been able to refinance their maturing debt obligations in 2009.

As at June this year, Fitch pointed out that S-Reits are moderately geared at an average of 31 percent.

It added that though S-reits have been negatively affected by the financial crisis, they have responded by taking several positive steps.

These include sourcing for bank loans in advance for refinancing purposes and reducing their expenditure and acquisition plans.

But Fitch has maintained a negative rating for the sector due to the sector’s negative asset performance expectations.

Financial flexibility remains key for Singapore REITs

Source : Business Times – 29 Sep 2009

Singapore REITs (S-REITs) have, to a large extent, refinanced their maturing debt obligations in 2009 and have benefited from a recent share price recovery, though questions still remain regarding their financial flexibility and refinancing ability, notes Fitch Ratings in a new special report.

In the report, the agency discusses some of the aspects of S-REITs’ structures, highlighting its concerns, and discusses the impact of the financial crisis and the outlook for S-REITs and their ratings as they emerge from the crisis.

S-REITs have been negatively affected by the financial crisis as a limited availability of debt financing and stock price corrections forced them to restrict their previous aggressive asset acquisition programmes and concentrate on survival and tenant retention in a difficult market. S-REITs responded to the changing market dynamics by sourcing bank loans in advance for their refinancing and by reducing their capex and acquisition plans, and development pipelines; some S-REITs have successfully issued equity. These steps are positive, from a ratings standpoint, but do not address other aspects of the debt structure and liquidity profile on which Fitch continues to have concerns.

‘The requirement for S-REITs to distribute a major portion of their earnings affects their liquidity profiles. This coupled with concentrated debt maturity profiles can significantly increase the refinancing risk around S-REITs,’ says Peeyush Pallav, Director with the agency’s REIT team.

S-REITs are moderately geared at an average of 31.0% (as at June 2009) although industrial S-REITs are more highly geared at an average of 39.6% (as of June 2009). In the year ending June 2009, S-REITs have faced falling asset valuations as well, for instance, office S-REITs reported a 4.2% drop in total assets in the year ending June 2009, compared with an increase of about 54% in the previous year, while retail S-REITs added 1.5% to their total assets in the same period. Fitch does not expect leverage to increase significantly in the near term as S-REITs are currently focused on tenant retention and organic portfolio growth, and may only look to acquisitions when they become yield accretive.

The ability of S-REITs to access the capital markets and maintain adequate liquidity for their debt refinancing and capex requirements remains critical to their ratings outlook. ‘S-REITs would benefit from long term undrawn committed bank facilities, less reliance on secured financing and a wider spread of debt maturities to ensure debt refinancing funding is available even in the most difficult circumstances,’ adds Mr Pallav.

Fitch will continue to monitor the steps taken by S-REITs in the wake of the financial crisis, including their efforts to reduce debt concentration, acquire sufficient committed bank facilities and improve their liquidity profiles. Fitch’s overall outlook for the sector remains negative owing to negative asset performance expectations; however the sector’s credit performance is expected to be driven by the industry sub-sectors, and hence individual S-REITs may have different outlooks.

Wee Hur Holdings to buy 70% stake in Villas@Gilstead development

Source : Channel NewsAsia – 29 Sep 2009

Wee Hur Holdings said it plans to buy a 70 per cent stake in the Villas@Gilstead development for S$9 million.

It said the proposed acquisition is in line with its growth strategy to diversify into the property development business.

Villas@Gilstead is a residential property project at Gilstead Road, near Novena MRT station.

It is a strata housing development comprising 10 semi-detached houses, 6 terrace houses and 2 bungalows.

It is around 50 per cent sold and is expected to obtain Temporary Occupation Permit (TOP) in the third quarter of 2011.