Singapore Property Watch: 7/6/08

Saturday, July 12, 2008

The White House Residences

Majestically poised in the coveted environment of Tanglin, Singapore’s prime residential district, are the White House Residences, a prospective living development of grandeur and privilege. The owner says of this prestigious area, “Singapore is not a mere jewel in Asia but a whole jewelry box with its rapidly changing and ever-progressing business, entertainment, cultural, and lifestyle opportunities.” Surrounded by a mélange of romantic colonial bungalows, stately villas, and classic architecture, these homes sit amid verdant landscape surroundings and share the exclusive neighborhood of ambassadors, senior politicians, and captains of industry. Centrally located, yet secluded, the residences enjoy proximity to Singapore’s Botanic Gardens and the bustle of Orchard Road

Only 12 distinctive homes comprise this enviable community. They share a sheltered enclave clad in an elegant mix of contemporary white stones and expansive glass enhanced by a fully equipped gym and a reflective infinity-edge pool set against a sweeping tropical backdrop. Embracing a milieu somewhere between Modernism and Romanticism, each residence has an architectural weave of comfort, style, and class with finishes that are simple and understated.

Casa, one of the three distinguished developments, boasts homes of 5,000 to 5,600 square feet spanning three stories with five voluminous bedrooms. Roof terraces, a lap pool, and landscaped gardens highlight these four dwellings. Penthouse is the second hamlet of residences that are enviably spacious and feature a roof top whirlpool with timber decks and landscaped planters. Suite is the third set of resplendent homes and graces owners with four bedrooms and a secluded private garden.

Each division of the White House Residences features homes of exemplary designer finesse, outstanding architecture, and the finest finishes. The most renowned names in the creation of masterful domains have been employed, including Anotnio Lupi and Gaggenau. The custom kitchens, baths, and wardrobe structures have each been meticulously borne of a specialist’s discerning eye. A Home Intelligence System provides state-of-the-art technology to ensure each resident supreme comfort and security. A tasteful vision and white-glove standards have been imbued into each of these Singapore jewels. Breathtaking scenery, world-class structures, upscale shopping, and refined dining are just some of the alluring attractions of the urban centerpiece that frames these gracious homes.

Singapore growth slows in Q2

Source : Business Times - 10 Jul 2008

Singapore’s economy suffered its biggest contraction in five years in the second quarter as exports to the United States and Europe tumbled, leaving less room for the central bank to battle inflation at a 26-year high.

Singapore is the first Asian country to report quarterly GDP data and its heavy dependence on trade make the US$160-billion economy a good gauge of the impact of a slowdown in the United States and Europe on Asia

But economists said the annualised and seasonally adjusted 6.6 per cent contraction - much stronger than the forecast 1 per cent decline - was exaggerated by a slump in volatile drugs output, and the economy should avoid slipping into recession.

‘It’s a slowdown, not a slump. We do not think a technical recession is likely,’ said Kit Wei Zheng, an economist at Citigroup. He said drugs output should rise marginally in the July-to-September period from the second quarter.

A recession in usually defined as two consecutive quarters of contraction.

Drugs production, which accounts for about a fifth of Singapore’s total factory output, is volatile due to changing production cycles when manufacturers shut factories to change from one drug to the next.

Economists say activity generated by a Formula One Grand Prix motor race, which the island hosts in September, will help support the republic’s economy.

That shrinking feeling?

Drugs output fell 58 per cent and 26 per cent respectively in May and April, after it more than doubled in March.

The Singapore dollar weakened on the news and was trading at 1.3591 at 0159 GMT to the US dollar, compared with 1.3588 before the data. The benchmark Straits Times Index was down 1.3 per cent.

The advance estimate, largely based on the first two months of the quarter, is the worst since the second quarter of 2003 when the economy shrank 7.8 per cent. From a year ago, the economy grew 1.9 per cent.

Given that demand in the United States, Asia’s top export market is likely to weaken in coming quarters, economists said the central bank is unlikely to further tighten monetary policy at its next meeting in October, barring a spike in oil prices.

‘The government is still concerned about inflation so perhaps it will adjust the rate of appreciation of the Singapore dollar a little higher, but there probably isn’t a need for that,’ said David Cohen, an economist at Action Economics.

Rollercoaster

Singapore’s central bank conducts monetary policy by managing the Singapore dollar within a secret trading band against a basket of currencies instead of setting interest rates.

It tightened policy at its last meeting in April to tame inflation which reached a 26-year high of 7.5 per cent in May.

Volatility in Singapore’s drugs output has helped set off sharp swings in the overall economy, which shrank 4.8 per cent in the final quarter of 2007 before surging 15.6 per cent in the first quarter, aided by a recovery in the drugs sector.

The trade ministry said that while the electronics output fell due to weaker foreign demand, other industries such as transport engineering and chemicals continued to grow.

Asian economies, many of which rely on exports, are bracing for a slowdown this year, with healthy growth in the region’s powerhouses such as China offering less of a cushion than earlier anticipated.

Singapore saw exports drop in May at its sharpest rate in more than two years. Shipments to Europe and the United States - which make up a third of all exports sold - were the hardest hit, but exports to other major markets, including China also fell. — REUTERS

Singapore is facing its most promising decade ahead

Source : Channel NewsAsia - 11 Jul 2008

Minister Mentor Lee Kuan Yew says Singapore is facing its most promising decade ahead.

He expects the economy to grow by up to 7 or 8 per cent over the next few years, barring a global economic downturn.

He was speaking at a dialogue session organised by the Monetary Authority of Singapore (MAS) and the Economics Society of Singapore (ESS) on Friday.

Mr Lee told his 800-strong audience of industry players and economists that he was convinced that Singapore was heading into its most promising decade yet.

“We’re going to move into a new plateau, new platform. You can see it visibly before your eyes. In 5 years, it will be good. In 10 years, wonderful,” he said.

To a question about whether Singapore’s economic future could be affected by the structural issues it is facing now, Mr Lee pointed to the country’s special circumstances even as it strives to grow its economy.

“I’m always worried about Singapore’s future in the long term because it’s not a normal country. You know, population to resource, it’s just abnormal. You therefore have no room for making mistakes,” he said.

To make the economic system work, Mr Lee reiterated that it is important to have a strong team in place to govern the country.

“We bring the best to the top. They are not taken randomly. The first batch was a fluke of history. But thereafter, we had to replace ourselves,” he said.

When asked if he would have done anything different now, given the benefit of hindsight, Minister Mentor Lee said it is hard to change the cards as time has gone by.

But on the whole, things have turned out relatively well over the years, he said.

“It’s very difficult to be all perfect. I make decisions, given the circumstances of the time, given the best options at that time. I would say on the whole, we have not done as badly as we could have. We could have done slightly better,” he said.

The Singapore government expects GDP growth this year to come in at 4 to 6 per cent, which economists consider to be a decent performance given today’s challenging economic backdrop. - CNA/ir

URA wins award for Bras Basah-Bugis master-planning efforts

Source : Channel NewsAsia - 11 Jul 2008

The Urban and Redevelopment Authority has won an international award for its master-planning efforts for the Bras Basah-Bugis district.

Dubbed as an enclave for arts, culture, learning and entertainment, the 95-hectare district was conferred the Award for Excellence 2008 in Asia Pacific by the Urban Land Institute (ULI) - an international, non-profit education and research institute.

The award is widely acknowledged in the land use industry as the most prestigious in the world.

Work to revamp the Bras Basah-Bugis district started in 1989, to inject vibrancy while preserving its rich architectural heritage.

Also nestled within the area are institutions offering diverse learning opportunities.

They include the Singapore Management University (SMU), LASALLE College of Arts, Nanyang Academy of Fine Arts and the upcoming School of the Arts (SOTA).

It is the second time the URA has received accolades from ULI - the first being an award given in 2006 for its conservation programme.

Tampines Court collective sale in peril

Source : Straits Times - 12 Jul 2008

THE sales committee at Tampines Court looks to have shot itself in the foot after a ruling by the Strata Titles Board (STB) yesterday almost certainly killed off its estate’s $405 million collective sale.

It delayed seeking mandatory STB approval for the deal and is now caught in a deadline trap of its own making.

The key date is July 25, that is when the estate’s sales committee must complete the deal. However, that looks impossible now after yesterday’s STB decision.

The board ruled that it would not bring forward an Aug 7 hearing set to allow testimony from witnesses that have yet to be called.

The STB had pencilled in the date after listening to sale objectors on June 16 to 18 and ‘taking into account the availability of all parties and the board’, it said.

Until that Aug 7 hearing is conducted, the sale cannot be signed and sealed.

The Straits Times understands that the sales committee wanted a date change as the buyers - Frasers Centrepoint and Far East Organization - will not extend the completion deadline.

With no extension, the sale agreement will likely lapse on July 25. This means the developers can walk away from a deal that looks far less compelling now than last July, given souring homebuyer sentiment and escalating construction costs.

However, this might be a blessing in disguise for some owners at the estate. The deal was inked just before the property boom at prices around $430 per sq ft (psf), but private homes in Tampines now go from $550 to $700 psf.

The deadline crunch seems to be of the sales committee’s own making.

The conditions of the sales agreement were met on July 25 last year but the committee delayed applying for the standard STB approval until Jan 7.

The committee told the STB that it wanted to await the outcome of legal challenges over the contentious Gillman Heights sale.

The committee argued that if the Gillman Heights sale was halted over issues of majority consent, it would have made a Tampines Court application futile.

In the Gillman Heights case, minority owners appealed all the way to the High Court, claiming that collective sale rules did not apply to former Housing and Urban Development Company (HUDC) estates.

Tampines Court is also a former HUDC estate so any ruling could have killed its own collective sale.

But Justice Choo Han Teck ruled last month that a privatised HUDC estate can be sold collectively if the requisite conditions are met.

While that also cleared the way for the Tampines Court sale, it left the sales committee with little time to tie up loose ends, including objections by minority owners.

The STB registrar had some sympathy yesterday for the committee’s argument about why it delayed applying for sale approval.

But he pointed out that a sale agreement has a deadline and, by waiting for the High Court ruling, the committee took the risk that it would not have enough time to get a ruling from the board before the expiry date.

‘This is a calculated risk, whose consequences they will have to bear,’ he said.

‘The board should not be pressured to accommodate a deadline set by the applicants and the buyer.’

A lawyer acting for the minority owners told The Straits Times that he did not want to comment on the outcome.

The one lifeline for the majority owners would be if the buyers extend the deadline but that also looks a lost cause.

Far East Organization and Frasers Centrepoint told The Straits Times last night that they are ready to complete the deal, but ‘the onus was upon the vendors to secure the STB order within the agreed timeframe, which is about 16 months from the date of the agreement’.

Savills director of marketing and business development Ku Swee Yong said since the deal was inked last July, construction costs have escalated a lot faster than mass market property prices.

‘The project, unsurprisingly, has become less attractive,’ he said.

Tampines Court is a sizeable 702,162 sq ft site with 560 units. It could be redeveloped into a new condominium with around 1,580 units averaging 1,300 sq ft.

Key proceedings

March 25, 2007: Tampines Court’s sales committee enters a sale and purchase agreement with Far East Organization and Frasers Centrepoint.

July 25, 2007: The conditions of the sales agreement are fulfilled.

Jan 7: The sales committee applies to the Strata Titles Board (STB) for sale approval and the minority owners then file their objections.

June 16 to 18: The STB hears the objections and sets the next hearing for Aug 7.

June 30: The sales committee applies to bring the Aug 7 hearing forward to before the sale’s July 25 expiry date.

July 11: STB dismisses the sales committee’s request.

New guidelines could discourage condo developers from including planter boxes and bay windows

Source : Sunday Times - 13 Jul 2008

Buyers of most new developments have been paying for bay windows and planter boxes even if they have no use for such building features.

But soon, they may no longer have to do so as a recent change in government guidelines is expected to discourage developers from building such features.

Last week, the Urban Redevelopment Authority (URA) said it will include planter boxes and bay windows in the calculation of the gross floor area (GFA) of residential developments. This means that developers will have to pay for these boxes and windows. They have been happily providing these features as these are ‘bonus’ space that they can sell.

‘It makes economic sense to utilise the exemption,’ said a local developer. ‘Whether we continue to build bay windows and/or planter boxes will depend very much on the design of the building.’

Consumers benefit in that they will be paying for only liveable space, market watchers say.

Few owners interested in gardening

The URA had encouraged developers to build planter boxes so as to give visual relief to Singapore’s high-density living environment. However, feedback and its investigations have revealed extensive unauthorised conversions of planter boxes for use as balcony space or an extension of the living room.

‘Such conversion will result in additional GFA for which the end-user will need to meet onerous requirements such as seeking consent from the management corporation and paying further development charge, if applicable,’ the URA said.

It has also received feedback that flat owners are unhappy that they are not allowed to convert the planter boxes to other uses since they had paid for the space when they bought their flat.

‘From a practical point of view, most homebuyers do not make use of planters,’ said ERA Asia Pacific’s assistant vice-president, Mr Eugene Lim. Bay windows, however, do help to make the room look bigger than it really is. They also let in more light, he said.

Bay windows bring light and also heat

Indeed, bay windows are supposed to help encourage energy-efficient building design and sustainability. They were originally not counted as part of the GFA because they were viewed as raised window ledges.

But the relaxation of the height of the bay window ledge has made it a usable internal space that is no different from the rest of the floor space, said the URA.

Also, the URA found that there are more new buildings that are virtually wrapped around by bay windows. The extensive use of bay windows leads to higher heat transfer into buildings and increases the need for air-conditioning to cool the buildings, it said.

It noted: ‘Often, the provision of bay windows is intended mainly to increase the saleable strata space.’

Typically, planter boxes and bay windows take up about 5 per cent of a unit’s saleable space, although it can be a bigger portion in some developments. This information is often not divulged to buyers.

The motivation is there to increase the proportion of such space vis-a-vis the GFA or what used to be called liveable floor area, said Chesterton International’s head of research and consultancy, Mr Colin Tan. ‘That is why we see new units sold today have larger balconies, lots of bay windows and planter areas and super-sized air-con ledges.’

The URA said it will now leave it to developers and building owners to decide if they wish to continue to provide bay windows and planter boxes. Non-residential developments such as hotels and offices are not affected by the revised guidelines.

They take effect from Oct 7 and will affect new development applications received on or after the date.

When deciding between a new unit and one with planter boxes and bay windows, a buyer may perceive the latter to be worth less than the former, assuming they are of the same size, said Mr Tan.

‘A consumer will view a unit with full GFA of 1,300 sq ft as being worth more than a 1,300 sq ft unit with 1,150 sq ft of GFA and 150 sq ft of non-GFA area, although both will be listed as having the same strata area of 1,300 sq ft.’

Friday, July 11, 2008

Mapletree starts construction of Shah Alam Logistics Park

Source : Channel NewsAsia - 11 Jul 2008

Mapletree Investments on Friday said that it has started the construction of a 10-hectare logistics park in Malaysia.

The Shah Alam Logistics Park is expected to be completed early next year and be mostly pre-leased to logistics operators.

It will have 60,000 square metres of gross floor area in three single-storey warehouses with mezzanine offices.

When completed, the project is estimated to have a value of about S$60 million.

The park is one of the 10 logistics park projects that Mapletree is developing in China, Vietnam and Malaysia.

All in, Mapletree has committed some S$850 million to these projects.

Mapletree, which owns 30 per cent of Mapletree Logistics Trust (MapletreeLog), said the development projects it is undertaking will be offered on a right of first refusal basis to MapletreeLog.

This will ensure a regular pipeline for MapletreeLog, while catering to the expansion needs of logistics clients in the region.

Mapletree also said it will take up its entire 30.16 per cent entitlement of the proposed underwritten renounceable rights issue by MapletreeLog announced recently. And it may take up excess rights units, subject to unitholders’ approval at an extraordinary general meeting on July 18.

Last month, MapletreeLog said it was planning to raise nearly S$607 million through a renounceable rights issue. It is issuing about 831 million rights units at 73 Singapore cents each. Unit holders will get three rights for every four units held.

The net proceeds will be used to finance or refinance the acquisition of certain properties by MapletreeLog, to repay bank borrowings and for working capital. - CNA/ms

Thursday, July 10, 2008

Cambridge Reit expects to be Sharia Compliant soon

Source : Business Times - 10 Jul 2008

Singapore’s Cambridge Industrial Trust expects to declare itself ’sharia compliant’ early next week, sources familiar with the matter told Reuters, in an effort to draw investment from the Middle East.

The property trust has asked the Islamic Bank of Asia to conduct due diligence, and an initial report has shown that few of its 43 assets were not in line with sharia principles.

One of the sources said the bank’s sharia board was due to meet in Kuwait over the weekend and would probably give the go-ahead for the trust to announce it is sharia compliant.

New investors have been lined up to buy stakes in the trust following the move, the source said.

A manager of Cambridge Industrial Trust declined to comment on the matter.

Asia’s once-hot real estate investment trust (Reit) markets have slumped in the last year as the global credit crunch raised expectations that debt refinancing would be difficult and expensive.

Singapore-listed Reits, with a market capitalisation of US$19 billion, have fallen 35 per cent since a peak a year ago and are now yielding on average 6 per cent against 2008 dividend forecasts.

Units in Cambridge have also fallen 35 per cent since a peak in late June 2007, and are down 11 per cent this year.

Units in the trust were trading at S$0.63 on Thursday afternoon, down 1.56 per cent on the day.

In a note to clients on July 9, UBS analyst Alastair Gillespie said ‘potential rebranding of Cambridge could bring the price closer’ to the trust’s net asset value of S$0.76 per unit. — REUTERS

Dubai property prices may fall when projects are completed

Source : Business Times - 10 Jul 2008

There will be an oversupply of Dubai property leading to a fall in prices if current planned projects are delivered on time, Fitch Ratings Ltd said.

There is a ‘prospect of oversupply if current delivery plans are met, and the risk of being unable to stimulate demand in view of massive development projects in the pipeline’, wrote Bashar Al Natoor, director in Fitch’s corporate team, in an e- mailed statement. The UAE is the largest construction market in the Gulf Cooperation Council, which forecasts US$2 trillion worth of projects by the end of the first quarter, according to the Middle East Economic Digest.

Dubai, the second-largest UAE sheikhdom, became the first place in the Gulf to allow foreigners to own property in 2002, sparking the current real estate boom.

There is a ‘high probability’ of late delivery, and even project cancellation, because of shortages of labour and building materials, which would mean a better match between supply and demand, Mr Al Natoor said. — Bloomberg

Chinese developers may win relief from falling prices: ING

Source : Business Times - 10 Jul 2008

Home prices rose 9.2 per cent in May, the slowest in eight months

Real estate developers in China may win relief from a shift in government policy towards stabilising property prices instead of depressing them, according to an analyst at ING Groep NV.

The People’s Bank of China and government ministries held talks on stabilising the real estate market, the Economic Observer reported on July 5, citing a person it didn’t identify.

Home prices rose 9.2 per cent in May, the slowest in eight months.

The CSI 300 Index of A shares traded on China’s two exchanges lost 46 per cent this year, the second- worst-performing stock benchmark, data compiled by Bloomberg show.

‘With recent corrections in A-shares and property prices, it’s possible the government has begun to worry about the economic implications of crashing asset prices,’ ING’s Hong Kong- based analyst Steve Chow wrote in a research note on Tuesday.

Developers including China Vanke Co, Poly Real Estate Group Co, Gemdale Corp and Xinhu Zhongbao Co are raising funds selling yuan-denominated bonds and so-called trust loans that banks provide to companies with excess cash.

The China Securities Regulatory Commission allowed China Merchants Property Development Co to sell new shares.

Hong Kong-listed Agile Property Holdings Ltd has almost stopped buying land this year, recorded five billion yuan (S$995 million) of pre-sales in 2008, and raised 5.28 billion yuan selling a 30 per cent stake in a unit, ING’s Mr Chow wrote.

Baida Group Co, a department-store operator, said on June 13 it agreed to lend 100 million yuan to Hangzhou-based real estate developer Cosmos Group Co for one year at an annual interest rate of 16 per cent.

Sunny Loan Top Co, another department-store operator in China, said in May it would provide 100 million yuan in a one-year loan to a developer in Jiaxing, eastern China, for 18 per cent interest.

Zhongshan, China- based Agile and Lai Fung Holdings Ltd, which is 20 per cent owned by Singapore’s CapitaLand Ltd, are ING’s top picks in the sector, the research note shows.

The spread, or extra yield investors demand above US Treasuries, to buy Agile’s US$400 million 9 per cent bonds was down four basis points to 983, which is 31 basis points lower from the end of June, according to ING’s prices.

A basis point is 0.01 percentage point. The stock advanced 7 per cent this month after losing 52 per cent in the first half.

The spread of Lai Fung’s US$200 million 9.125 per cent securities maturing in 2014 has come down to 933 basis points from a record high of 1,201 on March 17.

Hopson Development Holdings Ltd has the tightest liquidity among developers rated from BB+ to BB-, three levels below investment grade, according to the ING report.

Hong Kong-based Hopson, whose 2007 profit more than doubled, recorded only three billion yuan of pre-sales this year while having an estimated nine billion yuan of land premiums to pay, Mr Chow wrote.

The spread of Hopson’s US$350 million 8.125 per cent notes due in 2012 has risen 62 basis points this month, ING’s prices show. — Bloomberg

SingPost HQ up for sale with $850m tag

Source : Business Times - 10 Jul 2008

Terms of any leaseback deal could determine price it fetches: observers

THE buzz created by recently unveiled plans to develop the Paya Lebar area into a commercial hub may get a boost from Singapore Post’s planned sale of its landmark headquarters building next to Paya Lebar MRT Station.

BT understands the listed group has launched an expression of interest for the 14-storey building and the price tag is said to be around $850 million based on the existing use of Singapore Post Centre.

SingPost is expected to lease back the space it currently occupies - which is roughly half the building’s one million sq ft net lettable area - for both its corporate office and operations, including the mail processing centre.

The rest of the property is leased to a mix of retail and office tenants, including NTUC FairPrice, Kopitiam, Barang Barang, This Fashion, HSBC Insurance, Northwest Airlines and Symantec Corporation.

CB Richard Ellis is understood to be handling the sale of SingPost Centre.

The current approved use for the site is around 60 per cent industrial and 40 per cent commercial, based on an earlier report.

However, potential investors may seek the authorities’ approval to convert the use to full commercial, to optimise the site’s commercial zoning under both the 2003 and 2008 (draft) Master Plans.

A differential premium would have to be paid to the state in exchange for realising the enhancement in use.

SingPost Centre’s existing gross floor area of 1.48 million sq ft has already tapped the 4.2 maximum plot ratio allowed under the two Master Plans.

The property is on a 352,389 sq ft site with a remaining lease of about 73 years. The 14-storey building, which also has three basement levels (mostly for retail), has 587 carpark lots.

Industry observers say the terms of SingPost’s leaseback arrangement with the potential buyer will be a critical factor in determining the price the building fetches.

Banks have also tightened lending for property acquisitions but core funds and core-plus funds, which rely less on debt and more on their own equity when making property purchases, are still interested in making acquisitions.

BT also reported recently that some of the big overseas funds which have been buying office properties in Singapore in the past few years are now also looking at industrial, logistics and business park assets, which offer higher yields.

Against this backdrop, SingPost Centre’s potential buyer may well continue with the existing industrial/commercial use of the property.

SingPost has also been selling some of its smaller properties, for instance, at Clementi Central, Boon Lay, Marine Parade and Hougang South. The group is still left with a dozen properties, including two in the prime districts - Tanglin and Killiney Road post offices.

Goldhill Centre up for tender

Source : Business Times - 10 Jul 2008

AFTER 13 years in the making, the collective sale of Goldhill Centre - a three- storey walk-up building of shop and office units next to Goldhill Plaza and United Square in the Novena area - has finally been put up for tender.

The asking price is $315 million, which works out to $1,496 per square foot of potential gross floor area.

Jones Lang LaSalle (JLL), which is marketing the collective sale, says no development charge is payable because of the high historical development baseline for the 70,177 sq ft freehold site.

The plot is zoned for commercial use with a 3.0 plot ratio (ratio of maximum gross floor area to land area) under both the 2003 and 2008 (Draft) Master Plans.

This means the site can be redeveloped into a new project with a maximum gross floor area (GFA) of 210,531 sq ft, which would surpass the property’s existing GFA, estimated at 112,283 sq ft.

‘With provision for a basement connection to the Novena MRT station and nestled in an established residential estate, the site offers excellent opportunity for retail development,’ JLL said. The tender for Goldhill Centre closes on Aug 19.

JLL’s associate director (investments), David Batchelor, said some owners of strata units in Goldhill Centre have been trying to do a collective sale since 1995, but issues relating to titles of some of the units had held up the sale.

This was ironed out under an amendment to the Land Titles (Strata) Act passed last year.

Most of the units in Goldhill Centre have 999-year leases but the original developer (Goldhill Properties) retained the title certificates.

So, owners of such units could do an en bloc sale only with the unanimous consent and approval of the original developer, which owned the reversionary interest in the property, under the old rules.

But with the new amendment that took effect last year, such owners can now proceed with an en bloc sale by majority consent.

The original developer’s consent will not be required, because if the Strata Titles Board approves an en bloc sale, it will lose all rights to the land.

Another factor that has held back Goldhill Centre’s en bloc sale is that owners had been trying to seek a higher plot ratio for the site in line with those for surrounding commercial sites, Mr Batchelor explained. But these efforts were unsuccessful.

Owners controlling 80 per cent of share values as well as strata area in Goldhill Centre have consented to a collective sale, thus achieving the mandatory minimum consensus under the revised legislation.

Goldhill Centre comprises three blocks of walk-up buildings with a total of 87 units.

These comprise 29 shops ranging from 1,066 sq ft to 1,109 sq ft and 58 office units between 1,206 sq ft and 1,668 sq ft. Based on the $315 million asking price, owners will receive about $3.4 million to $3.9 million per unit.

Goldhill Centre is part of a bigger complex originally developed by companies in the Goldhill group.

Goldhill Centre was developed in 1969, Goldhill Plaza in 1973 and Goldhill Square (now known as United Square and owned by UOL Group), in 1982.

Seah Kim Bee, chairman of the sales committee of Goldhill Centre’s en bloc sale, recounted: ‘We were very close to getting the 80 per cent approval level under the old en bloc rules when the amended Act took effect on Oct 4 last year. So we had to start all over again. We held an extraordinary general meeting in November 2007 where the sales committee was set up and the members elected, as required under the new rules.’

The 79-year-old, a chartered town planner, has also been chairman of Goldhill Centre’s management council for nearly 10 years.

Investment sales fall in Q2 but foreign funds still looking

Source : Business Times - 10 Jul 2008

Residential sector continued to soften, contributing 13% to the total

PROPERTY investment sales in Q2 2008 saw a significant decline due to increasing cautiousness from investors and tightening of credit.

In a report, DTZ Research also noted that in the quarter, total transactions fell 37 per cent quarter-on-quarter (QOQ) to about $5.2 billion.

Total sales for H108 amounted to $13.5 billion, 33 per cent of 2007’s total sales and 54 per cent of 2006’s total sales.

However, DTZ said that since 2007 was an exceptionally active year for property investment, ‘$13.5 billion is not a low figure compared with sales in 2006 which was the second most active year in the last decade’.

The residential sector continued to soften, contributing only 13 per cent to total investment sales, mostly from government sale of sites.

Transactions in the industrial and commercial sector amounted to $2.4 billion, 45 per cent of total investment in the quarter.

Of note were the transactions by foreign investors, including Commerz Real AG which acquired 71 Robinson Road and Morley Fund Management which acquired Commerce Point.

Boustead Hub at Ubi Avenue 1 was also sold to a unit of SEB Asset Management.

Shaun Poh, DTZ’s senior director (investment advisory services and auction), said: ‘Although pressure on Reits has made them less active purchasers, investor interest especially from private equity funds remains strong as the property market is supported by economic growth and occupier market fundamentals.’

DTZ’s Investor Intention Survey also revealed that overall, investors expect to increase funds allocated to property investments by an average 4 per cent, with a comparable figure for Asia- Pacific investors of 10 per cent.

DTZ added that US investors are intending to shift asset allocation significantly away to Asia-Pacific while European pension funds are also waking up to the investment possibilities of the region.

Although European pension funds’ exposure in the Asia-Pacific is minimal at the moment, DTZ estimated that as pension funds begin to target the region, they could allocate as much as 20-30 per cent of their real estate portfolios to the region.

DTZ said, however, that the survey does suggest that within Asia-Pacific, China remains the primary area of interest, while there appears to be some shift in focus away from Japan, Australia and Singapore in favour of emerging markets such as Vietnam and Indonesia.

CB Richard Ellis (CBRE) believes that Singapore’s long-term prospects as a financial hub and popular business destination for MNCs will see Singapore continue to attract both local and foreign investors’ interest.

In a recent report, CBRE said: ‘The more active investors in the short to medium term would be the core and core-plus investors who have a lower risk appetite and are able to fund their acquisitions largely with equity.’

Future new office supply has threatened to undermine occupier fundamentals.

However, CBRE added: ‘At face value, potential confirmed supply seems abundant, but it should be viewed in context with a strong take-up. Some 22 per cent of known supply from 3Q08-2012 is pre-committed, with around 9 per cent under offer.’

Bay window loophole slammed shut by URA

Source : Business Times - 10 Jul 2008

Developers will now have to include planter boxes, bay windows in GFA

Here’s some bad news for developers: a loophole that helped them sell in excess of the gross floor area (GFA) has been plugged.

Till now, bay windows and planter boxes, which often make up around 5 per cent of a condo’s saleable area, had been exempted from GFA calculations. But in providing them to buyers, developers had been charging buyers for them.

This exemption will no longer apply from Oct 7, according to a circular issued by the Urban Redevelopment Authority (URA) on Monday.

The exemption has led to ‘unintended and undesirable consequences’ and ‘unwittingly shifted market behaviours and negated the objective of the GFA exemptions for these building features’, URA said in explaining why bay windows and planter boxes will no longer be exempted from GFA.

Explaining the impact of the new rules on residential developers, a property industry player said: ‘Developers’ profit margins will be reduced because they will no longer enjoy this benefit of not counting bay windows and planter boxes as part of their GFA and yet selling this space to home buyers. If the developers want to have these features, they will have to pay the full price since these will be included as GFA.’

The new rules apply to all residential developments - landed and non- landed - and are expected to lead to a rush of new development applications, especially from developers who have bought land recently.

URA said bay windows have been ‘found to have contributed significantly to the building bulk, affect the design of buildings and generally do not encourage energy efficiency’. ‘Often the provision of bay windows is intended mainly to increase the saleable strata area,’ it noted.

Planter boxes were introduced to provide ‘vertical greenery’ in condos and create ‘visual relief to our high-density living environment’. However, feedback and URA’s investigations have revealed extensive unauthorised conversions of planter boxes within residential units for use as a balcony space or an extension of the living room instead. The planning authority said it has also received feedback that condo owners are unhappy that they are not allowed to convert planter boxes - which are part of their strata space and which they paid for when they bought their unit - to other uses.

‘URA will leave it to the developers and building owners to decide if they wish to continue to provide bay windows and planter boxes for their residential developments so long as these building features are counted as GFA. The industry will have a free hand to design and provide these building features based on their commercial considerations as there will no longer be restrictions on the size of bay windows and planter boxes,’ URA said.

Planter boxes within non-residential developments (like hotels and business parks), as well as those located within the common areas of residential developments like sky terraces, will continue to be exempted from GFA as these areas are typically well-planted and maintained by the management corporation for the benefit of all occupants in a development.

Only formal development applications (which exclude outline applications) with a valid provisional permission issued before Oct 7 will continue to be evaluated under the old GFA guidelines. For approved developments, bay windows and planters will remain GFA-exempted until the buildings are redeveloped, URA added.

Knight Frank managing director Tan Tiong Cheng had an alternative suggestion for URA. ‘Instead of just removing GFA exemption for bay windows and planters, URA could have let the exemption continue but require developers to specify and identify these features in their sales brochures so that buyers know exactly how much of their strata area is taken up by bay windows and planter boxes. Buyers can then decide whether these features are as attractive to them.’

DTZ executive director Ong Choon Fah observed that bay windows can be a useable area - for sitting, keeping books or displaying photo frames, for instance. ‘Planter boxes, on the other hand, often end up not being used for the purpose they were meant for,’ she added.

Summing up the change, a seasoned industry observer said: ‘This closes one loophole for developers. They’ve had a good run on it.’

Home price rebound could take time

Source : Today - 10 Jul 2008

Continued weakness comes amid caution caused by inflation and bleak outlook

RECENT developments in the local property market have sent conflicting signals to investors. Several developers have indicated willingness to delay launches as residential property prices show signs of weakness, while others are pointing to still-strong demand. Meanwhile, market data from the Urban Redevelopment Authority (URA) has indicated that the pace of increase is slowing down. In fact, the second quarter increase is the slowest rate of increase since the third quarter of 2004.

Market analysts have also downgraded their ratings on property stocks in view of the slowing demand, with certain segments more susceptible to further downward price revisions. While the delay in property launches looks negative at first glance, it is actually a good move to regulate the supply of units coming onto the market and should not be viewed wholly as a negative move.

Residential property prices stayed resilient in the first quarter of 2008, with the property price index up 3.8 per cent from a quarter ago, but this eased to a growth of a mere 0.4 per cent quarter-on-quarter in the second quarter, based on the latest URA flash estimate, pointing to likely weakness.

Transaction volumes have been declining since the second quarter of 2007, plunging to a low of 762 transactions in the first quarter of this year. Such a trend points towards an inevitable correction in prices as historically, a price correction would follow about one to five quarters after transaction volume has peaked in a rising property market.

A sharp recovery in transaction volume over the near-term may avert a price correction, but is unlikely to occur in view of present global woes resulting from record high oil prices and high inflationary fears.

First, foreign interest in local properties is waning, as foreign buyers turn cautious over subprime issues and the credit crunch. Secondly, the recent en bloc fever, which fuelled part of the demand for housing by the displacement of en bloc sellers, has slowed in recent months. Lastly, the withdrawal of the deferred payment scheme has taken out the speculative transactions in the property market, as seen from the declining number of subsale transactions.

I would also caution against using property as a hedge against inflation, as there is no conclusive evidence of the correlation between inflation and property prices. Properties are cyclical in nature and are subject to market sentiment. As such, inflationary pressure is unlikely to have any positive impact on property prices, as buyers are likely to exercise greater caution in light of the weakening sentiment in the property market.

The recent release of the sites under the Government Land Sales programme for the second half of this year further confirmed the weakening sentiment in the residential property sector. The number of residential sites under the confirmed list for the second half of this year has been halved, from eight sites released in the first half of this year to four sites planned in the second. Recent bids for government sites had also came in below market expectations, another sign of cautiousness among developers.

Going forward, we expect to seefurther weakness in residential property prices. Sentiment is likely to remain cautious against the backdrop of a weaker economic outlook, tighter credit market and rising inflation. This should deter buyers from spending on big ticket items. With the prevailing cautious market sentiment, and if prices trend lower, smaller developers with comparatively lower holding power are likely to offload their units onto the market to reduce gearings and holding costs.

The high-end segment of the property market is also likely to be at risk to price correction, as this segment has been the driving factor for the run-up in property prices since the beginning of 2006. With foreign investors turning wary, this could result in lower demand. For the mass market, a surge in launches in the first quarter of this year may have caused buyers to be more cautious, but we expect the take-up rate for mass market properties to move up once concern of over-supply eases. In addition, prices for the mass market segment have not moved up as rapidly as those for the high-end segment.

CARMEN LEE, head of research at OCBC Investment Research.

Simon says: Home prices have hit floor

Source : Today - 10 Jul 2008

Head of property developer SC Global still bullish on the local real estate market

JUDGING from recent transactions, property prices appear to have hit or are near the floor, according to Mr Simon Cheong, the president of the Real Estate Developers’ Association of Singapore (Redas).

As evidence, Mr Cheong, the head of high-end property developer SC Global, points to recent transactions of luxury apartments at Nassim Park and Goodwood Residences, which went for nearly $3,000 psf and $2,800 psf respectively.

“The high-end is the leading indicator. Why? Now you see the sophisticated investor coming in - people who spend $10 million, $20 million, $30 million (on a property) - these guys are no fools you know,” he says noting that during the 1997 financial crisis luxury flats like those at Ardmore Park were selling for just $1,000 psf.

Even mid-class units at developments like those at Dakota, Clover by the Park and Livia are enjoying brisk sales.

“Nett nett, property is still a great performer in the mid to long term. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received,” Mr Cheong says.

The property market is driven very much by sentiment, and not just by the laws of supply and demand - the “feel good” factor, he says.

According to Mr Cheong developers’ prices have fallen by 30 per cent in all sectors of the market since their peak last year, but are still double those before the sub-prime problem kicked in last August.

“The current situation is timely, as since 2005 the property market has been climbing relentlessly for eight straight quarters according to URA (Urban Redevelopment Authority) figures. So, it’s time it took a breather.

“We developers were getting concerned that it was climbing so fast. So the sub-prime crisis, in a way hit at the right time and took some of the steam off the market. In a way it came as a relief to developers who were afraid that the steep climb in prices could tempt the authorities to take measures to curb speculation,”Mr Cheong told Today.

He also pointed out that it was not in the interest of developers to see prices going up too fast: “There is no reason why developers would like to see an exuberant market and see the bubble burst.”

But he claims that his positive outlook for the property market is also driven by fundamentals as interest rates are at present so low and the inflation rate so high it does not make sense to keep your money in the bank.

“What do I do if I have a lot of money in my bank account earning 0.6-per-cent interest while inflation is 6 per cent or more, and my money gets smaller and smaller by the day?” he asked.

One answer is to put your money in property as in the long run it is a better hedge against inflation than equities.

Furthermore, property rentals currently provide yields of 2 to 4 per cent, again better than putting your money in the bank.

And there is plenty of money around for when Standard Chartered Bank, earlier this month offered a promotional deposit rate of 2.28 per cent, it was so swamped that it had to withdraw the offer in just two days.

Mr Cheong expects interest rates to remain low over the next two years or so.

The supply of properties is also not as high as many people think. He pointed to a recent Citibank report which said that the bank sees no oversupply of homes over the next two years.

The report estimated that only 60 per cent of the 30,000 units forecast by the URA, will be completed during this period as by end March there were 6,000 en bloc flats that had yet to be demolished.

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

High construction costs have also resulted in many projects being delayed. With the many building projects going on - both by the private (including the integrated resort projects) and public sectors - and high material costs caused by worldwide demand, constructions costs will remain for some years, Mr Cheong said.

He pointed out at the same time that construction costs here are currently higher than those of Dubai or Hong Kong.

”It takes three months to tear a building down but three years to put them up. Once you have taken it down, supply is taken off immediately but to put that supply back it will take three years,” he said.

Construction costs are now double what they were a year ago, with high end building costs between $600 and 800 psf and at the low end from $300 to $350 psf.

Sometimes Singaporeans also do not realise that market here being relatively small, it would take less than 1 per cent of the available global funds to see the market run up. So, it is not unreasonable to expect a strong turnaround when the sentiment improves, Mr Cheong said.:

He added that Singapore has also become a global city and price comparisons of property were now benchmarked against cities like London, Hong Kong, Shanghai and New York rather than against historical prices here.

”And contrary to market perception, funding is not an issue, There is no shortage of funding for end purchasers as evidenced by various bank packages (for mortgage loans),” he noted.

”My advice to potential buyers is that if you do not have high exposure to the property market, it is an opportune time to consider property”, he said.

Prime rents poised to ease further

Source : Straits Times - 10 Jul 2008

JLL sees more falls over next half year but rest of market should stay stable

THE surging rents in prime areas that have had expatriates screaming for the best part of a year look to be easing, with some condos already registering falls of up to 12 per cent.

The declines are expected to intensify over the next three to six months, reversing a trend that saw some rents double or treble during the property peak last year.

Consultant Jones Lang LaSalle (JLL) said increased supply from newly built condominiums and a weakening economy are behind the projected prime rent slide, although rents in other parts of Singapore should stay largely stable.

Expats have also been voting with their feet and abandoning pricey prime areas and moving to fringe locations - and nudging rents there up a little in the process, said Dr Chua Yang Liang, the firm’s head of research (South-East Asia).

Rents in the East Coast area, for example, rose 1.4 per cent in the first quarter but are now tipped to grow at a slower pace or even stay unchanged.

This is in contrast to prime areas, where landlords are feeling the chill of the new economic headwinds.

For instance, at Cuscaden Residences in the Tanglin area, rentals have fallen 12 per cent, from $6.20 per sq ft (psf) a month in the fourth quarter of last year to $5.46 psf in the first quarter of this year, said JLL.

A 1,485 sq ft unit will now fetch about $8,100, down from $9,200 at the end of last year.

Over at Tanglin Park, rentals have fallen 3.1 per cent from $5.21 psf to $5.05 psf.

Islandwide, supply started creeping up from the third quarter of last year, said Dr Chua.

But not all owners are yet willing to lower their expectations, said market watchers.

‘The rental market is a lot slower than last year,’ said Ms Kavita Borglin, an agent with Premiere Realty, who said rents in prime areas will be hit by new supply, particularly smaller units.

‘The availability of one- to three-bedroom apartments has increased so rents have softened,’ she said.

At Robertson 100 in Robertson Quay, at least 10 two-bedroom flats are on the market but the owners were all reluctant to lower their asking rents of $5,000 to $6,000, she said.

Ms Borglin’s client, an expat with a rental budget of $4,500, eventually settled for a Newton area apartment.

She added that owners with large apartments of four bedrooms or more could still keep the same rents, as such large flats are still hard to come by.

JLL said Singapore’s rating as the 13th most expensive Asian city for expats, coupled with a slower hiring pace in the coming months, may lead to fewer leasing deals over the remainder of the year.

A lacklustre collective sale market and weakening housing prices will continue to hit sentiment in the non-landed rental home market, said Dr Chua.

Meanwhile, JLL said in a statement yesterday that it has put Goldhill Centre near Novena MRT station up for sale. The indicative price for the freehold commercial site is $315 million.

Wednesday, July 9, 2008

Developers offer agents fatter cuts to push projects

Source : Business Times - 9 Jul 2008

In some segments, commissions have doubled compared to a year ago

Developers are paying property agents bigger commissions - in some cases almost double of what was offered a year ago - to push their new residential project launches.

This is because the environment for selling homes is far more challenging now and agents have to work much harder to persuade potential buyers to part with their money.

A modest-sized developer told BT he does not mind rewarding agents with commissions of 2 per cent or more as, to him, speed of sales is paramount. He needs to achieve enough cash flow to begin construction and move on to his next project. But even the big boys are having to pay a higher commission rate to agents these days - if they want their help to move units.

An established developer launching a big project these days could pay its appointed marketing agent 0.8 per cent of sale price - compared with possibly 0.5 per cent 12 months ago. To further incentivise agents, the commission rate may go up to, say, one per cent nowadays, once a certain number of units have been sold.

Developers of smaller projects, for instance in the Telok Kurau area, are understood to be paying even higher commissions - often up to 2 per cent - compared with around one per cent or less a year ago, BT has learnt from property agents and developers. On top of that, some developers are offering a bonus payout in the form of an additional 0.5 per cent commission if the project sells out within a certain time frame and at a price exceeding the developer’s target.

BT understands that high-end projects have also not been spared. Their developers are having to reward agents with 0.7 to 1.5 per cent commissions - up from 0.4 to 0.5 per cent a year ago.

Teo Hong Lim, executive chairman of property group Roxy-Pacific Holdings, says: ‘Speed of sales is most important to us. We don’t want to target sales of just 30-40 per cent of total units in a project. We need to sell 80-90 per cent or even 100 per cent. We can then begin construction, and move on to our next project.

‘At the end of the day, agents are also very much incentivised by commissions. It’s a sort of a no-lose situation for us when we achieve speed of sales and the final net sales value of a development is higher than our initial target, even after we less the additional bonus commissions we pay the agents.’

While some market watchers may think that paying agents higher commissions will eat into the developers’ profit margins, Mr Teo argues: ‘Commissions are only part of our total project cost. It’s definitely much, much lower than land and construction costs.’

A property agent says: ‘Developers are more concerned with cash flow and sales take-up. The higher commission is a small amount to pay for boosting their cash flow. If they don’t have the cash flow, higher interest expense will be a much bigger cost item than the commissions.’

Agreeing, Knight Frank executive director Peter Ow explains why agents need higher motivation today. ‘The main reason for increasing our fees is that we’re operating in a tougher market and, frankly, agents are highly motivated by fees. If you get two projects side by side, most agents will naturally push for the one where the reward is higher.’

Industry players acknowledge that agents have to work a lot harder to convince buyers, given the more cautious economic outlook, thinner foreign buying and the fact that fewer speculators are left in the market after the deferred payment scheme was scrapped last October.

BT understands that the extra work being put in by agents these days to realise sales at showflats includes studying the project’s costing. ‘We tell buyers the price we’re offering is below current replacement cost, either because the developer bought the land cheap or locked in construction costs early.

‘Sometimes we also use pressure tactics. We tell potential buyers that the developer will raise prices once it achieves a certain percentage of sales. And it works,’ an old hand in the game told BT.

3 new malls, 5 million sq ft

Source : Today - 9 Jul 2008

Will landlords face apossible over-supply?

SHOPAHOLICS can look forward to a fresh injection of 5 million sq ft of new retail space by the end of next year, according to Knight Frank’s calculations.

By then, at least three big new malls are projected to be ready to welcome shoppers: West Coast Plaza, Illuma and ION Orchard.

However, while customers rejoice over larger and more novel malls, will retailers and landlords face a possible over-supply?

Probably not, says Mr :Nicholas Mak, director of research and consultancy at Knight Frank, despite up to 60 per cent of this new supply being in the centre of the city.

“Pent-up demand for retail space in the area, brought about by government initiatives to boost tourism, such as the inaugural Formula One night race, is likely to absorb most of the on-coming supply,” said Mr Mak.

It has been more than a decade since a new mall has appeared in the premier Orchard Road shopping area.CapitaLand and Sun Hung Kai Properties’ ION Orchard will provide 663,000 sq ft of prime retail space on Orchard Turn. Work is also underway on the nearby 313@Somerset. Both should help rejuvenate the area.

Compared to Hong Kong, Mr Mak believes Singapore, :based on its current population, has room to expand its retail stock further.

Tourism figures have been robust, with 10.3 million visitors and $13 billion spent last year. And despite global economic woes, 4.26 million visitors came to Singapore in the first five months of this year, up 4.3 per cent year-on-year.

“With a fast-rising population, coupled with strong visitor arrivals, growth in retail space is imperative to sustain the quality of the shopping experience,” said Mr Mak.

Nominal retail sales are anticipated to rise from $650.60 per sq ft (psf) last year to almost $700 psf in 2010, according to Knight Frank.

“Therefore, this potential new supply in the retail sector will be positive news for both retailers and consumers,” saidMr Mak. “Retailers can look forward to choice shop space and higher retail sales psf, while consumers can expect a more exciting retail scene coming their way.”

In Bugis, six-storey Illuma shopping mall is almost completed, with Jack Investments billing it as an “urban entertainment centre”.

West Coast Plaza is slated to open before the end of this year and is being billed as “An Oasis in the West” by developer Far East Organisation. This follows the revamp and renaming of the 16-year-old Ginza Plaza.

Beyond next year, the largest retail development currently planned is Marina Bay Shoppes by Marina Bay Sands. This is part of the integrated resort project and will provide 800,000 sq ft of waterside shopping space.

CB Richard Ellis estimates a total6.9 million sq ft of retail space will come on stream by 2012, albeit mostly next year.