Thursday, March 25, 2010

Circle Line spells boom for property owners

PROPERTY owners big and small are on track to reap big benefits, thanks to the opening of 11 new stations on the Circle Line, according to a report.

Industrial landlords such as Ascendas Reit (A-Reit), Mapletree Logistics Trust (MapletreeLog) and Suntec Reit own large properties around these stations and will see gains from the new transport route, said Credit Suisse.

Its report also showed that property values of homes near these MRT stations – which opened last Saturday – have fared better than the overall real estate market.

The proximity of such homes to the MRT stations – the locations were announced back in 2003 – have been gradually factored in over recent years.

Private home prices at projects such as Chiltern Park and Springbloom around Lorong Chuan station, which opened last May, have risen 27 to 40 per cent since June 2008.

They outperformed the overall market during the period in anticipation of the Circle Line opening, said Credit Suisse.

Report authors Tricia Song and Sean Quek estimate that property near MRT stations fetch a 15 to 20 per cent premium to similar properties that are not close to them.

When the opening of the North-East Line coincided with the Sars-related economic downturn in June 2003, projects such as Compass Heights at Sengkang MRT station and Sunglade near the Serangoon station managed to hold up.

This was despite a 12 per cent dip in the property price index between 2001 and 2004, noted the report.

It also said property firms A-Reit and MapletreeLog, which have industrial assets near the new Tai Seng and MacPherson stations, will benefit from the Circle Line opening.

Credit Suisse is positive on both A-Reit and MapletreeLog shares. It has a target price of $2.24 on A-Reit, which closed at $1.98 yesterday.

It tips 98 cents for MapletreeLog, which ended at 85.5 cents yesterday.

Suntec Reit and its manager ARA were singled out for Suntec City’s offices and mall, which will enjoy a greater footfall due to its location near the Esplanade and Promenade stations.

Property developer Hongkong Land’s One Raffles Link and CityLink Mall, and the mega City Developments South Beach mixed project could enjoy similar increases in traffic thanks to the Esplanade station.

The new Nicoll Highway station will benefit office workers and patrons at The Concourse, Keypoint, The Furniture Mall and The Plaza, added the report.

But Chesterton Suntec International’s research and consultancy director, Mr Colin Tan, said that as traffic patterns change due to the new line, ’shops lining the different routes will swop fortunes – more pedestrian traffic for some and less for others’.

‘For malls, the competition level is raised. If you’re better, you will grab a large market share, but if your mall is not as appealing, you will lose more traffic from your own surrounding catchment than you gain from others,’ he said.

The report also noted that new residential developments such as Waterbank @Dakota by UOL and Dakota Residences by Ho Bee near the new Dakota station, with a range of $900 to $1,400 per sq ft, have been well received by buyers.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that although properties near stations tend to be more resilient, they are not immune to economic downturns and rental pressures.

Developers and sellers of homes near such stations can ask for a 10 to 20 per cent premium, but might not necessarily get it, depending on the property’s other attributes, he said.

The 11 new stations extend the reach of the first five Circle Line stations, which opened last May.

These 16 stations are expected to serve some 200,000 people daily, with that number rising once the last group of stations opens next year, including one at Holland Village.

The entire Circle Line project will cost $6.7 billion to develop.

Source : Straits Times – 21 Apr 2010

Hong Leong’s 76 Shenton sells out on first day of launch

 Developer Hong Leong Holdings has fully sold its new downtown mixed development, 76 Shenton, which was launched on Thursday.

The 39-storey development, at the corner of Shenton Way and Palmer Road has 202 residential units of one and two bedrooms as well as commercial space which will include restaurants-cum-retail units.

Hong Leong said the one-bedroom units were priced between S$1,600 and S$2,600 per square foot, while the two-bedroom units went for between S$1,600 and S$2,300 psf.

Sizes of the units range between 620 and about 1,000 square feet.

A Hong Leong spokesperson said Singaporeans and permanent residents made up about half the buyers, with the remainder coming from overseas.

76 Shenton is expected to get its temporary occupation permit at the end of 2014.

Executive condo prices see new highs

Bullish sentiment has led to aggressive bidding by developers, not just for 99-year leasehold government sites for private condominium development but executive condos (EC) as well. This was most evident in the last two tenders of EC sites, which achieved record prices in terms of land bids.

Earlier this month, a joint venture between Frasers Centrepoint Ltd and Lum Chang Building Contractors beat 10 others for a 19,000 sq m (204,516 sq ft) site in Sengkang at Compassvale Bow with a bid price of $193 million or $315 psf per plot ratio (ppr). The site, next to the Buangkok MRT station, can be developed into a 520-unit EC project. Based on the bid price, property consultant CB Richard Ellis (CBRE) estimates the developer’s breakeven price to be around $600 psf and selling price to be in the $650 to $680 psf range.

On another EC site in Yishun Avenue 3, MCC Land, a unit of Chinese state-owned company Metallurgical Corp of China (MCC Group), topped nine others with a bid of $127.8 million or $281 psf ppr. The 15,074 sq m (162,257 sq ft) plot can be developed into a 400-unit EC project with mainly two-, three- and four-bedroom apartments, which could be launched later this year. The breakeven price for the developer is said to be $500 to $550 psf.

Meanwhile, in February, City Developments Ltd beat 10 others to win a condo development site at Sengkang West Avenue/Fernvale Link. The $200.5 million bid worked out to $365 psf ppr. The breakeven price for the project is expected to be $650 to $700 psf, with the selling price pegged at $750 to $800 psf, according to CBRE estimates. This is the first private condo project in the Sengkang West area. The site is adjacent to Sungei Punggol with immediate access to the Layar LRT station.

Such bid prices are also having an impact on the secondary-market transaction prices of ECs in the Sengkang area. In the week of Feb 23 to March 2, there were two transactions at the 368-unit Park Green EC developed by NTUC Choice Homes and completed in 2005. According to EC rules, which are in line with HDB rules, homeowners can only sell their units after a minimum occupation period of five years, after which the units can only be sold to Singaporeans and Permanent Residents. Only after 10 years can ECs be traded like a private condo and be open to all buyers. ECs were introduced in 1995 to appeal to the “sandwich class” — those whose household income exceeds the HDB ceiling of $8,000 a month and yet are not able to make that leap into private condo. Hence, the household income ceiling for first-time EC buyers is $10,000 a month.

At Park Green, a 12th floor, 1,346 sq ft apartment was sold for $780,000 or $580 psf. The previous owner purchased the unit in July 2003 for $516,904 or $384 psf, hence enjoying a 51% capital gain from the sale. The other trabsaction was for a seventh floor, 1,356 sq ft apartment that was sold for $780,000 ($575 psf). The seller bought the apartment in October 2002 for $523,892 ($386 psf), hence seeing a capital gain of 49% in just under eight years.

With property prices soaring, ECs are once again gaining popularity among the sandwich class. Another EC that saw a spate of transactions was the 492-unit Woodsvale, CapitaLand’s 99-year leasehold development completed in 2001.

Located on Woodlands Drive 72, the EC is one of the few high-rise apartment blocks in the area, near the Singapore American School, that feature relatively large three-bedroom units measuring 1,227 to 1,625 sq ft and maisonettes from 2,217 to 2,626 sq ft.

One of the units that changed hands recently was a 1,281 sq ft three-bedroom apartment on the sixth floor of Block 15 that was sold for $643,000 or $502 psf. The seller bought the unit for $454,000 ($354 psf) in June 2001, hence seeing a 42% capital gain over the last eight years. A fourth-floor, 1,313 sq ft apartment in block 17 was sold for $645,000 ($491 psf). The seller paid $513,480 ($391 psf) for the unit in March 2000 and saw a 26% capital appreciation over that time.

A third transaction was for a ground-floor, 1,496 sq ft unit that was sold for $665,000 ($444 psf). The three-bedroom apartment has changed hands twice over the past decade, the last transaction being in February 2008, when it was sold for $600,000 ($401 psf). The first owner bought the unit at $481,500 ($322 psf) in January 1999.

The highest transacted price for an apartment at Woodsvale was set in February when a three-bedroom, 1,227 sq ft, 13th-floor unit was sold for $650,000 or $530 psf. The seller bought it for $391,500 ($319 psf) in November 2006, hence seeing a capital appreciation of 66% in just three years. The very first owner paid just $488,100 ($398 psf) for the unit in January 1999.

As prices of HDB flats in the resale market and private condos continue to soar, it is not surprising that EC prices are heading north and hitting new highs.

The Edge – 22 March 2010

New engines drive expat rental hubs

DESMOND SIM says demand likely from financial, biomedical sectors

THE leasing market for non-landed homes showed signs of recovery in the final quarter of 2009, going by Urban Redevelopment Authority numbers. Median rents saw their first quarter-on-quarter growth of 0.5 per cent following five quarters of continued decline from a peak in Q2 2008. The monthly median rent in Q4 2009 was $3.02 per sq ft. Occupancy rates also jumped, achieving 94.5 per cent in Q4 2009 – a level previously seen only in 2006/2007.



While these indicators may suggest a recovery in the leasing market, the strength and sustainability of this positive turn are yet to be ascertained.

Overall, leasing demand has been rising over the years as a result of a boost in the foreign workforce. Singapore’s strategy to open its employment market to more foreigners has benefited the leasing market as this transient group looks for short-term housing in the private residential market. The population of Singapore has grown from 4.03 million in 2000 to 4.99 million in 2009. The number of foreigners grew in tandem from 754,500 in 2000 to 1.25 million in 2009.

On the back of better economic performance, the Ministry of Trade and Industry has revised its growth forecast for 2010 from a range of 3-5 per cent to 4.5-6.5 per cent. Job creation has improved, marked by the doubling of total employment from 14,000 in Q3 2009 to 37,500 in Q4 2009. The result is the creation of some 37,600 jobs for the whole of 2009 – a remarkable feat considering the economy was in a recession.

Although the number of foreigners employed has declined by 4,200 in 2009, there are still some 1.05 million of them working in Singapore. The job losses were mainly in the manufacturing sector. The construction and services industries, on the other hand, gained 19,700 and 10,400 new hires respectively.

Demand by industry

Anecdotally, leasing demand remains driven by the financial industry. This sector is making a strong rebound from the financial tsunami, with total employment in Q4 2009 turning a positive 3,000. This trend is expected to continue, further supported by recent poll results from the Business Expectations for the Services Sector Q4 2009 survey by the Department of Statistics. The financial services sector has the most positive outlook in terms of employment and general business expectations.

In addition, based on the latest report on wages in Singapore by the Ministry of Manpower, the financial services sector recorded the second highest median gross wage in 2008 at $9,170 per month for managers aged 35 to 39.

The other emerging leasing demand driver is the biomedical industry. Under the government’s aggressive drive to develop Singapore into a biomedical hub, the country reportedly bagged some US$2 billion worth of investments over the past four years. They include plans to set up six new biologics manufacturing plants that are expected to create some 1,380 jobs. Despite the manufacturing sector reporting negative 4.1 per cent growth in 2009, biomedical manufacturing expanded by 11.5 per cent.

Looking ahead, new leasing demand is likely to come from either the financial or the biomedical industry.

Demand profile

The foreign employment market today is different from what it was a decade ago. Currently, instead of the traditional top management hire, foreign employment involves more middle management to executive levels with a limited housing budget. These expatriates are likely to be young executives working for a financial institution or researchers and laboratory executives. Despite the increase in foreign employees, the average housing budgets have remained relatively low. These new expatriates are likely to be given a housing allowance and are motivated by cost savings. They either downsize or seek discounted rents whenever the opportunity presents itself. As a result, smaller residential units close to their workplace or with good accessibility to public transport remain the main attraction.

Based on rental transactions recorded by URA Realis and sorted by districts, several observations can be made from the rental transaction volume over the decade.

While the prime districts of 9, 10 and 11 remain the traditional hot spots for leasing, the number of leasing deals there has been observed to be falling. At the same time, the Central Area (CBD/HarbourFront) comprising districts 1 to 5 has gained popularity as can be judged from the increase in leasing volume. A key factor is the revival of inner city living with tenants attracted by the proximity to the CBD, the arts and cultural activity, and other amenities within the area.

In addition, there are two emerging regions where we expect strong leasing demand in the future.

Based on the backroom operations of multinational financial institutions such as Credit Suisse, Citigroup and Standard Chartered Bank, residential projects in the vicinity of the Changi Business Park will be in demand. As such, we expect leasing demand growth in Simei, Upper East Coast and Tampines (Districts 16,17 and 18).

With the biomedical industry expected to expand in Biopolis, leasing demand in residential projects in the vicinity of this purpose-built biomedical estate (District 5) is also expected to increase.

The drivers and leasing profiles have changed dramatically over the decade. This has influenced developers’ product offerings and also recently caught the attention of investors who have been making a beeline to these areas.

Evolving supply


Over the decade, developers have also been tweaking their product offerings to match changing demand. Overall, the market supply is shifting towards smaller apartments. Smaller units are easier to lease while maintaining a high per sq ft rental value. Similarly, smaller units are also more palatable in terms of absolute quantums paid. At the same time, developers are able to maintain their selling price on a per sq ft basis. Using a sample of major launches in the prime districts (9,10 and 11), an analysis of the composition by bedrooms was done. Studio apartments were excluded from the analysis.

There is a stronger focus on units with fewer bedrooms. Increasingly, one and two-bedroom apartments are found in the new supply. Based on the sample comparison study, one and two-bedroom apartments account for half the supply launched currently. This compares with 2000, when two-bedroom apartments made up just 15 per cent of the supply (with no count of one-bedroomers). This sample comparison shows that while demand has shifted over the decade, developers are also redesigning their product offerings to accommodate these changes.

Market outlook


After a challenging 2009, Singapore, along with the rest of Asia, is expected to experience a strong economic recovery this year. Financial markets are reported to have stabilised, while trade flows and industrial production have also picked up strongly. However, the recovery in Europe and the US remains weak. A pan-continental movement of talent from Europe and the US to Asia can be expected.

As Singapore continues to attract top talent here, leasing demand is also expected to grow. This is coupled with the improved economic outlook and the planned business expansions that are scheduled for the second half of this year. Island-wide rents are expected to grow in the region of 3-5 per cent by end-2010. However, rents will still remain affordable as they have generally come off during the recent economic downturn. Further rental upside is expected in the Central Area (Districts 1-4), Buona Vista (District 5) and Simei/Tampines and Upper East Coast (Districts 16,17 & 18).

The writer is associate director, research and consultancy, Jones Lang LaSalle

Source : Business Times – 25 Mar 2010