Markets learn to live with IR worries

Source : Today - 13 Nov 2008

Impact of any delay likely to be greater in luxury segment
THE uncertainty surrounding the two integrated resorts projects — in particular, the Marina Bay Sands — is unsettling already fragile sentiment in the property market. After all, the prospects for economic benefits from the IRs have been positive for the market.
But recent developments and positive announcements from the operators have eased fears that the projects would be delayed, with analysts and industry players confident that the IRs will be completed more or less on schedule.
Still, they cautioned that any major delay would affect all parts of the property market — from luxury properties right through to the HDB market.
The Marina Bay Sands resort, which promises jobs for 10,000 people, had been under the spotlight recently, after its parent company Las Vegas Sands ran into financial difficulties.
Jones Lang LaSalle head of research (South-east Asia) Chua Yang Liang noted that the market “understands the significance” of the Marina Bay Sands IR to the Government, which is why it is not getting overly jittery.
Dr Chua said: “It is not in the State’s interest to have a gaping hole and a semi-completed structure right at the mouth of the newly-completed barrage. The negative image that could bring to the international front is not ideal and the State is likely to do what is required to push it on.”
Colliers International director of research and advisory Tay Huey Ying agreed, saying: “There is underlying optimism and confidence that the Government will ensure that the development of the Marina Bay IR will proceed one way or another.”
Prior to the current financial turmoil, the buzz generated by the announcements of the opening of the IRs — together with the F1 Grand Prix — contributed a lot to the property bull run, which has ended abruptly as the world financial crisis develops.
An example is the way “early bird” prices at The Sail @ Marina Bay went up 20 per cent, from $900 per square foot to $1,080 psf, within six months after the IR was given the green light.
Dr Chua said: “While the announcements probably did affect the psychology of the buyers, the direct impact in terms of genuine demand for real estate would only come closer to the completion of the projects with the hiring of new staff to man the resorts.”
On Tuesday, Las Vegas Sands issued a press statement stressing that Marina Bay Sands was its “No 1 priority”, as it pulled the plug on its Macau developments to focus on Singapore.
The threat of bankruptcy appeared to be staved off following the injection of US$525 million ($787 million) by Sands founder and chief executive Sheldon Adelson, but financial analysts expressed concern that it had been achieved “at a heavily dilutive price”.
Any delay to the completion of the Marina Bay Sands IR, said Dr Chua, was likely to hit the mass market more, given that some 60 to 70 per cent of the IRs’ labour requirements are expected to be filled by the local workforce typically residing in HDB flats.
But Ms Tay believe the impact of a delay would be felt greater in the high-end and luxury segments, where speculative activity is stronger.
HSR Property Group chief executive Patrick Liew expect any repercussions to be restricted to private residential properties near the Marina Bay area, with prices dipping by 3 to 5 per cent in the event of a delay.
He said: “The supporting factors for the HDB market are very well controlled. At this point in time, there’s no major oversupply situation and there is still a healthy demand.”
In fact, DTZ senior director of research Chua Chor Hoon felt a slight delay to the completion of the hotels and retail space at the Marina Bay Sands project “may not be a bad thing, as the economy is expected to fare worse next year and it is uncertain whether the expected number of visitors would materialise”.
She added: “So, if some of these are delayed, it would add less pressure to the retail and hotel sectors.”
Regardless of the short-term uncertainty, Ms Tay pointed out the IRs have already left “permanent marks” on the property market. She said: “For example, it has since paved the way for Singapore to be placed on the world map of global investors.
“While the ultimate failure of the IRsto proceed will adversely affect market sentiment, uncertainty and slight delay in the IRs’ completion and opening dates are notforeseen to have any major negative impact on the property market.”