Private home rents may wobble but won’t crash

Source : Business Times - 2 Aug 2008

Fears of their decline next year may be somewhat exaggerated

Recent media reports predicting that private home rents will take a steep dive next year are certainly alarming. But a closer look at the numbers suggests that they may not take such a beating after all.

Last week, CB Richard Ellis (CBRE) said that it expects rents to fall by 5-10 per cent on average next year. In the prime areas, rents could slide by up to 15 per cent, the property firm said.

The projections are based on two major assumptions: that a record number of homes will be completed next year; and that the tenant pool here will shrink significantly as corporations stop hiring expatriates or, in some cases, even send some expats home.

‘It’s a double blow,’ said CBRE Research.

However, developers and other analysts say that the number of completed homes may not be that high and the economic situation next year not that bad.

According to CBRE’s data, 13,400 homes will be completed next year. But official estimates from the Urban Redevelopment Authority (URA) put the number of landed and non-landed private homes expected to be completed in 2009 at a more modest 10,418.

Likewise, CapitaLand’s in-house estimates say that about 12,000 units will be completed from the second half of 2008 to end-2009.

‘It is a comfortable number,’ Patricia Chia, head of CapitaLand’s Singapore residential unit, told reporters at the developer’s second-quarter results briefing yesterday. Over the past six years, 8,000-8,500 private homes were completed on average each year, she said.

There are also demolitions to consider. CBRE said there will be 1,700-1,850 units demolished in 2009. Net supply next year could therefore come in even lower.

Take, for example, Q2 2008 numbers. According to Citigroup, while 2,587 units were completed in the second quarter, net supply was only 761 - implying that some 1,826 units were demolished. This partly helped occupancy rebound slightly to 93.9 per cent following three consecutive quarters of decline, the bank said in a recent report.

Rentals will also be helped by other factors, developers point out. Many of the new units coming onstream in 2009 and 2010 have already been sold, and not all of them will end up on the rental market.

The HDB market, where prices rose 4.5 per cent quarter-on-quarter in Q2, is also cause for optimism. The number of HDB resale applications also rose 22 per cent quarter-on-quarter.

‘HDB upgraders who buy mass market private units will not rent out their new homes,’ said one developer. ‘Many of the units in new mass market condos completed in 2009 and 2010 will not be part of the supply for renters.’

For now, while rental growth is slowing down, it is still on the uptrend. Citigroup said that rentals rose 2.5 per cent quarter-on- quarter in Q2 - much slower than the 6 per cent increase seen in the first quarter.

But the other, bigger factor which could also lead to rents taking a precipitous plunge next year - the state of the macroeconomic environment - is still up in the air.

CBRE, for example, adopted scenarios in which the economic climate either stays the same or worsens in 2009 to arrive at its forecasts.

Other analysts, on the other hand, expect things to turn around in the second half of 2009.

For now, jobs growth is continuing apace, they point out. 70,600 new jobs were created in the second quarter, down only slightly from a record 73,200 jobs in Q1 and the second highest job creation rate on record.

The slowdown in services jobs creation to 37,600, from a record 46,500 jobs in Q1, was however a cause for concern. ‘We suspect much of this may have reflected a slowdown in financial services hiring,’ said Citigroup economist Kit Wei Zheng.

But while firms in the financial sector may hold off on hiring, companies in other industries should continue hiring next year. The overall pool of renters should therefore continue to climb in 2009.

‘There should be enough people looking to rent in the next 12-18 months,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Growth in mass market and HDB rents should continue next year, he said. But asking rents at large high-end apartments - of 4,000 sq ft and more - could fall as companies cut back on housing allowances for their employees, Mr Ku added.

As for overall rents, it’s anybody’s guess. Much depends on how quickly the world recovers from the US sub-prime mortgage crisis - or how much worse things get. But private home rentals here are unlikely to make a large reversal.

Solved - the rental spike mystery

Source : Today - 31 Jul 2008

It was caused not by a jump in demand, but by a contraction in supply

LAST week, I suggested that the private housing oversupply may have been understated.

This is because units that have been bought by investors can still be considered as part of the housing supply until they are resold or are tenanted. If the rental income cannot cover the mortgage payments and if the owners are highly geared, then they will have to sell the units sooner or later. If a greater proportion of owners are in the same predicament, the competition to sell will result in lower prices.

But surely, finding a tenant cannot be a problem.

After all, was it not so long ago that we heard complaints of unreasonable hikes in rentals. Between the third quarter of 2006 and the second quarter this year, the official rental price index went up by a hefty 69 per cent. This is almost 10 per cent each quarter.

What were the factors responsible for this? Many attributed it to higher demand. It could not have been anything else. But was this really the cause?

Amid the euphoria and excitement of the construction of the two integrated resorts and the anticipation of the tremendous spillover effects, the market misread the cause.

Many attributed it to the surge in foreign talent arriving on our shores. For sure, more expatriates were coming but were their arrivals in such large numbers so as to cause rents to escalate to such dizzy heights?

Even the new plans to prepare Singapore to accommodate up to 6.5 million people were loosely bandied around as proof that Government officials shared the same view. Investors bought the story and snapped up apartments at prices which presupposed a continuation of that strong upward trend.

However, official figures showed the number of rental contracts actually contracted by 17.6 per cent in 2006 and remained flat last year.

On the other hand, the average cost of rentals rose by 15 per cent in 2006 and43 per cent last year. So, where are the missing expatriate households?

Certainly, the high rents did cause some to leave Singapore, others - especially Permanent Residents - to purchase, and for those without a generous budget, to rent HDB flats.

But there should have been at least a substantial - if not dramatic - nett increase in rental contracts. After all, they were supposed to have come in droves.

The mystery is solved if we realise that the spike was caused, not by a steep jump in demand as many had assumed, but by a sharp contraction in supply. The result may be the same but the implications are different.

The surge in en bloc sales had led to groups of tenants leaving their homes. The competition for homes simply drove rentals sky high.

There are no official figures but I estimate that the supply of rental accommodation to have shrunk by at least a quarter to a third of the existing stock.

Today, the rental market has stabilised. Those seeking homes would have found them by now - either by buying, downgrading or leaving Singapore.

What are the market implications?

First, there are now no hordes of expatriates scrambling for accommodation. This means demand will lag behind supply. Rents will decline. Lower rents translate into lower yields.

Second, for less prime units, it will come to a point when the low rents make no sense. It will be better to sell.

Recently, a consultant’s report extolled the benefits of owning a home on Sentosa Cove and a $19,500 monthly lease was reported in a the news as having been achieved.

Checks revealed that the 560-square-metre unit was sold in July last year for $8.59 million. It was probably a penthouse. This translates to a gross yield of 2.7 per cent. Does this even cover the interest on the mortgage?

Lest we forget, we have not factored in property tax of 10 per cent or maintenance charges of about $12,000 a year for a penthouse. What about the additional security cost for Sentosa homes? Or the cost of furnishings?

Eventually, the nett yield may dwindle to below 1.8 per cent - certainly a high risk to take for such a low return.

Is this situation typical of the other ”investor” units completing over the next 12 months? I hope I am wrong, but I fear this may be so.

The writer is the head of research at property consultancy Chesterton International.

94% of Yishun residents vote in favour of HIP programme

Source : Channel NewsAsia - 31 Jul 2008

94 per cent of eligible residents in Yishun have voted strongly in favour of upgrading in the first Home Improvement Programme (HIP) polling exercise.

The HIP is a new upgrading programme for ageing flats, and comprises two components.

Essential Improvements are works that have to be carried out for public health, safety or technical reasons.

This includes the repair of spalling concrete and replacement of waste pipes.

Optional Improvements are items residents want, such as toilet upgrading and the replacement of doors.

The HIP works are expected to start in the fourth quarter of 2008 and be completed by the first quarter of 2010.

Parkway in US$622 mln loan for new hospital

Source : Business Times - 31 Jul 2008

Singapore healthcare firm Parkway Holdings said on Thursday that it has obtained an $850 million (US$622 million) syndicated loan to build a new hospital in the city-state.

The 13-bank syndicated transferable secured financing facilities was arranged by Calyon, DBS Bank, HSBC, OCBC, Royal Bank of Scotland and Standard Chartered, Parkway said in a statement.

Parkway did not provide details about the loan’s maturity and interest rates.

Australand fund picked to develop Brisbane site

Source : Business Times - 31 Jul 200

CapitaLand’s Australian unit Australand said on Thursday that its recently-formed Australand Residential Development Fund - which is a joint venture between Australand and BOS International (Australia) - has been selected as the preferred organisation to purchase and develop a 6.28 hectare riverfront site in the Brisbane suburb of Hamilton.

This follows a two-stage selection process run by the Port of Brisbane’s Northshore Development Group.

The fund will acquire and develop the project over the next eight years, subject to the satisfactory finalisation of commercial terms, Australand said. The fund will utilise the equity and debt financing currently in place, the company added.

‘Developing Northshore Hamilton through the Residential Development Fund will allow us to increase Australand’s residential pipeline in Queensland, especially in the strong Brisbane market, without the need for additional capital,’ Australand managing director and chief executive Bob Johnston said in a filing to the Singapore Exchange.

Jones Lang Q2 profit dives 67% to US$25m

Source : Business Times - 31 Jul 2008

Jones Lang LaSalle Inc, the world’s second-largest commercial real estate broker, said that second-quarter profit fell 67.6 per cent as borrowing costs increased for apartment buildings, offices and retail properties.

Mr Dyer: Diverse business lines offset the impact of illiquid credit markets

Net income declined to US$25.5 million, or 73 US cents a share, from US$78.6 million, or US$2.32, a year earlier, the Chicago-based company said in a statement on Tuesday. Revenue dropped 2.5 per cent to US$660 million.

Higher borrowing costs and scarcer financing for investment in commercial real estate cut into property sales.

Financial services firms have lost or written down more than US$468 billion since the beginning of last year, prompting them to curtail lending.

The company said that it had a 34 per cent increase in investment advisory fees and a 23 per cent increase from commissions.

‘Solid revenue performance from LaSalle Investment Management and our diverse business lines offset the continued impact of illiquid credit markets,’ chief executive officer Colin Dyer said in the statement.

Jones Lang, second in market value to CB Richard Ellis Group Inc, earns about 34 per cent of its revenue from Europe and the Middle East, 29 per cent from the Americas and 23 per cent from the Asia-Pacific region, according to a company report this month.

The company was projected to earn US$1.01 a share, according to the average of four analysts’ estimates in a Bloomberg survey.

In the Americas region, Jones Lang said, revenue rose 6 per cent to US$190 million. In Europe and the Middle East, it rose 20 per cent to US$236 million, and Asia Pacific revenue fell 33 per cent to US$142 million. That decline came after the company failed to repeat a year-ago gain made on a hotel transaction.

Jones Lang stock has lost 20 per cent in New York Stock Exchange composite trading since the beginning of the year.

Jones Lang operates in more than 700 cities and 60 countries with about 30,000 employees, according to its website. It represents tenants, and manages, leases and values commercial real estate. — Bloomberg

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CBRE Group income dives 88% in Q2

Source : Business Times - 31 Jul 2008

Brokerage fees hit as sales dry up due to global credit market crunch

CB Richard Ellis Group Inc, the world’s largest commercial real estate brokerage, said quarterly net income plunged 88 per cent, partly on lower brokerage fees from sales that have all but dried up due to the severely constrained global credit markets.

Hazy days: CBRE’s two biggest markets, the US and Britain saw a dramatic fall-off in commercial real estate sales and a slowdown in demand for space leasing. A bright spot was the Asia-Pacific where revenue rose 27.8%

Second-quarter net income fell to US$16.6 million, or 8 cents per share, from US$141.1 million, or 59 cents per share, in the year-earlier quarter, the company said on Tuesday.

Excluding one-time charges Los Angeles-based CB Richard Ellis would have earned US$33.2 million, or 16 cents per share, compared with US$157.3 million, or 66 cents last year, still far from the 44 cents analysts on average had expected, according to Reuters Estimates.

‘As we had anticipated, the leasing business turned down from the strong first quarter, especially in the Americas and the UK, reflecting weak economic activity and decreasing business confidence,’ Brett White, chief executive, said in a statement.

‘Investment sales activity remained quite soft due to a broadening of the credit market turmoil and a continuing gap between buyer and seller expectations of property values. Decreased investment volumes have now become evident in all parts of the world.’

Revenue fell to US$1.3 billion from US$1.5 billion and behind the US$1.42 billion analysts had expected, according to Reuters Estimates.

The commercial real estate market has been hampered by the broader tightness in the credit markets.

The company’s two biggest markets, the United States and Britain have seen a dramatic fall-off in commercial real estate sales and a slowdown in demand for space.

One bright spot was the company’s real estate outsourcing business, which overseas real estate needs for large global companies. That segment saw revenue rise 29 per cent, accounting for one third of the Los Angeles-based company’s global revenue. Also the Asia-Pacific region saw revenue rise 27.8 per cent to US$155.7 million.

But the larger regions were gloomy. In the Americas region, which includes the United States, Canada and Latin America, revenue fell 16 per cent to US$785.5 million. In Europe, Middle East and Africa, revenue fell 9.4 per cent to US$299.7 million.

In the Global Investment Management segment, which consists of investment management operations in the United States, Europe and Asia, revenue fell 49 per cent to US$42.7 million, compared with the second-quarter last year, which included performance fees from funds.

In addition, the second quarter of 2008 included a writedown of US$11.9 million for two investments whose market value declined. — Reuters

HK home sales may fall on inflation worries

Source : Business Times - 31 Jul 2008

Share slide, global credit crunch could push property prices down, say analysts

Hong Kong’s apartment transactions may fall to a 10-month low in July, then drop further, on concerns that accelerating inflation and a slumping stock market may push prices down, analysts said.

Pricey: Hong Kong has the most expensive luxury home prices in Asia - US$10,490 to US$14,780 psm, compared with US$12,510 to US$22,923 psm in Manhattan

Transactions in 10 of Hong Kong’s biggest housing complexes, used by many analysts as a benchmark, fell to 27 last week from 33 the previous week, Centaline Property Agency said. Total home sales in the city may drop to 6,100 in July, the lowest number since September, from 7,167 in June, it said.

‘This will probably continue for the whole of the third quarter,’ said Louis Chan, managing director of residential properties at Centaline. ‘We’re looking at between a 3 and 5 per cent correction in prices within the quarter.’

Home values have tracked Hong Kong’s economy, peaking in the second quarter of 1997, then crashing in the Asian financial crisis, leaving many homes worth less than their mortgages for years. The 2000 dotcom bubble burst, the Sept 11, 2001, terrorist attacks and the 2003 Sars epidemic caused prices to fall as much as 70 per cent from the peak. The rebound started in late 2003 and prices doubled in the past four years.

Now, the benchmark Hang Seng Index has fallen almost a third from its record in October as credit-market losses climbed worldwide, threatening global economic growth even as inflation accelerates in Hong Kong. The combination could deter potential homebuyers, possibly for the balance of the year.

‘The Hong Kong residential market will go into a quiet period for the rest of 2008,’ said Cusson Leung, a Hong Kong-based analyst at Credit Suisse. His July 8 report forecast a 5 to 10 per cent reduction in home prices in the second half.

Overall housing transactions in the second half may fall between 20 and 30 per cent from a year earlier, said Patrick Chow, head of research at real estate agency Ricacorp Properties. ‘Many people looking to upgrade their properties again have had their capital drained by the stock market,’ Mr Chow said. ‘This may seriously impact the high-end market, in part because many of those homebuyers had upgraded last year.’

Hong Kong’s four biggest real estate agencies this month fired a total of more than 300 workers in anticipation of a housing slump, according to a July 23 report in the Hong Kong Economic Times.

Hong Kong’s inflation accelerated in June to the fastest pace in four months as food and energy costs climbed. Local lenders including BOC Hong Kong (Holdings) and Hang Seng Bank last month raised their mortgage rates for some customers to deflect the squeeze on lending margins.

‘Inflation is giving many people second thoughts about buying properties,’ said Alnwick Chan, a Hong Kong-based executive director at property research company Knight Frank LLP. ‘There’s going to be a correction but it won’t be a crash.’ Hong Kong has the most expensive luxury home prices in Asia, US$10,490 to US$14,780 per square metre, according to the Global Property Guide website. That compares with US$12,510 to US$22,923 per square metre in Manhattan.

The Hang Seng Properties Index, which tracks the city’s six biggest builders by market value, has dropped 30 per cent this year on concerns Hong Kong banks may lift rates.

The expectation that the US Federal Reserve will start raising interest rates in the fourth quarter of this year has damped Asia’s stock markets, according to Credit Suisse.

Sino Land sold almost 70 per cent of the apartments it made available at the Palazzo, a high-end complex overlooking the Sha Tin horse track in the first nine days of sales, Sing Tao Daily reported in May. Billionaire Li Ka-shing’s Cheung Kong (Holdings), Hong Kong’s second-biggest builder by value, met full-year sales targets by June, selling 2,700 apartments for HK$23 billion.

Transactions and prices may rebound in the fourth quarter if both the US and Hong Kong stock markets show they have weathered the sub-prime crisis, Centaline’s Mr Chan said.

The property affordability ratio, homeowners’ average monthly mortgage payment as a percentage of income, is 32 per cent, ‘a very healthy level’ compared with 93 per cent at the peak of the 1990s boom, according to Buggle Lau, chief analyst at Midland Holdings Ltd, Hong Kong’s biggest publicly traded property agency.

‘Growth is definitely slowing, but the fundamentals of the economy are still strong,’ Mr Lau said. ‘When the uncertainties go away we’re pretty sure buyers are going to come back.’ Midland’s shares have plunged 66 per cent this year, after nearly quadrupling between the beginning of 2007 and January. — Bloomberg

Pan-United to sell 13th floor of Octagon for $9.4 mln

Source : Business Times - 31 Jul 2008

PAN-United Corp on Thursday granted an option to a Ms Meryani and/or nominee to buy its premises on the 13th floor of The Octagon at 105 Cecil Street. The sale price is S$9.4 million, excluding goods and services tax.

The sale price is S$67,000 above a valuation price obtained earlier this month and is S$2.6 million above book value. Pan-United said the premises were acquired for investment purposes in 1993.

One per cent of the sale price has been received by the company. The deal, if completed at the end of last year, would have increased earnings per share to 6.5 Singapore cents, from 6.03 Singapore cents.

Award-winning architects to design new Dawson Estate

Source : Channel NewsAsia - 30 Jul 2008

Two award-winning private architects have been officially appointed by the Housing and Development Board (HDB) on Wednesday to put a new spin to the old Dawson Estate in Queenstown.

SCDA Architects Pte Ltd and WOHA Architects Pte Ltd were earlier commissioned to draw up plans for two separate public housing sites at the junction of Margaret Drive and Dawson Road.

The new flats will be launched for sale under the Build-To-Order system in the third quarter of 2009.

The 60-hectare Dawson district, which was first developed in the 1950s, will have new homes nestled among lush greenery.

SCDA’s plan features multiple layers of common spaces such as car parks, shops and facilities, while individual residential units can be combined to create lofts, which are ideal for home offices or larger families.

The 823-unit project is also eco-friendly.

Chan Soo Khian, design director, SCDA Architects, said: “All the surface runoffs will be collected in retention tanks and these will then be used to irrigate all the landscape. The staircase would be integrated with solar panels.”

At a separate site in the same district, architects at WOHA spent over four months on their work. The project will also boast sky gardens and integrated facilities.

It is expected to be home to about 1,000 households, which will have plenty of opportunity to interact.

Richard Hassell, founding director of WOHA Architects, said: “Every apartment feels like it belongs to a smaller community of about 60 or 80 homes The way we’ve done it is to make a space… so on the way from the lift to the front door, you always go through this space.”

These flats are expected to be ready in 2014 and their price tags will be unveiled next year.

To preserve the heritage of the area, HDB is also calling on the public to contribute items relating to Queenstown. These could be old photographs, postcards or even cinema tickets, which will be incorporated into the design of the new estate.

Subana International Consultants has been chosen to develop a third site in the Dawson Estate. The company will be officially appointed when the plot is cleared in 2011.

The plans will be on display at the HDB Hub from Thursday to August 10.

Award-winning architects to design new Dawson Estate

Source : Channel NewsAsia - 30 Jul 2008

Two award-winning private architects have been officially appointed by the Housing and Development Board (HDB) on Wednesday to put a new spin to the old Dawson Estate in Queenstown.

SCDA Architects Pte Ltd and WOHA Architects Pte Ltd were earlier commissioned to draw up plans for two separate public housing sites at the junction of Margaret Drive and Dawson Road.

The new flats will be launched for sale under the Build-To-Order system in the third quarter of 2009.

The 60-hectare Dawson district, which was first developed in the 1950s, will have new homes nestled among lush greenery.

SCDA’s plan features multiple layers of common spaces such as car parks, shops and facilities, while individual residential units can be combined to create lofts, which are ideal for home offices or larger families.

The 823-unit project is also eco-friendly.

Chan Soo Khian, design director, SCDA Architects, said: “All the surface runoffs will be collected in retention tanks and these will then be used to irrigate all the landscape. The staircase would be integrated with solar panels.”

At a separate site in the same district, architects at WOHA spent over four months on their work. The project will also boast sky gardens and integrated facilities.

It is expected to be home to about 1,000 households, which will have plenty of opportunity to interact.

Richard Hassell, founding director of WOHA Architects, said: “Every apartment feels like it belongs to a smaller community of about 60 or 80 homes The way we’ve done it is to make a space… so on the way from the lift to the front door, you always go through this space.”

These flats are expected to be ready in 2014 and their price tags will be unveiled next year.

To preserve the heritage of the area, HDB is also calling on the public to contribute items relating to Queenstown. These could be old photographs, postcards or even cinema tickets, which will be incorporated into the design of the new estate.

Subana International Consultants has been chosen to develop a third site in the Dawson Estate. The company will be officially appointed when the plot is cleared in 2011.

The plans will be on display at the HDB Hub from Thursday to August 10.

CDL Hospitality Trusts looks to foreign markets to grow

Source : Channel NewsAsia - 30 Jul 2008

CDL Hospitality Trusts is setting its sights overseas for potential acquisitions, favouring markets like Japan and China.

It said that while the Singapore hospitality sector is still strong, it is also seeing many interesting offers from the rest of Asia.

Medical tourism and a growing financial sector have kept room rates at record levels in Singapore, but CDL Hospitality Trusts is looking to spread its wings.

About 97 per cent of its S$29.5 million revenue comes from Singapore right now, and the REIT is hoping to take advantage of the current downturn to change that.

Vincent Yeo, CEO of CDL Hospitality Trusts, said: “I think it’s part of our plan to diversify and become a pan-Asian REIT. We like to think that we can find bargains around the region, within the next six to twelve months.”

CDL Hospitality has a deep well of reserves to draw from. It currently sports borrowings of 20 per cent and has a debt ceiling of S$740 million before it hits the threshold of 40 per cent.

Among the markets that the REIT finds particularly attractive are Japan, China and India.

Mr Yeo said: “Recently, there have been a lot of deals made available in Japan, and that has come about because of the credit environment where the loan to value ratio has dropped significantly in terms of what banks are willing to lend.

“Credit spreads have also gone up significantly, so people have had refinancing difficulties and have looked to sell at realistic prices.”

For the first half of 2008, CDL Hospitality clocked in a 34 per cent increase in revenue per available room.

Distributable income per unit rose to 5.89 cents, up 52 per cent from last year.

Award-winners to design HDB flats

Source : Business Times - 31 Jul 2008

FLAT-BUYERS eyeing Dawson Estate in Queenstown will be spoilt for choice, as upcoming public housing will feature designer looks courtesy of not one, not two, but three local award-winning architectural firms.

The Housing & Development Board (HDB) said yesterday that it will appoint SCDA Architects, WOHA Architects and Surbana International Consultants as design consultants for the district’s public housing projects.

Dawson Estate comes under a ‘Remaking Our Heartland’ exercise that aims to transform public housing into vibrant homes for Singaporeans.

To showcase the regeneration of an old estate, HDB invited the three architectural firms last year to design public housing precincts in Dawson Estate based on new ideas and concepts.

Favourable response from the public led HDB to appoint all three as design consultants.

SCDA and WOHA received their letters of appointment at a HDB awards dinner yesterday evening. The two sites which both firms worked on are vacant and ready for development.

HDB plans to launch the first batch of flats on these two sites for sale under the Built-to-Order system in the third quarter of next year.

Construction could start in the first quarter of 2010 and be completed in 2014.

HDB will appoint Surbana later, when the site it worked on is cleared and ready for redevelopment in 2011.

‘The participation of these firms will not only give HDB flat buyers greater variety and choice, it will also bring a livelier, more attractive buzz to Dawson,’ said Senior Minister of State for National Development and Education Grace Fu.

HDB has also appointed a local landscape architectural firm, Cicada Pte Ltd, to draw up a landscape masterplan. The plan will create a distinct identity for Dawson Estate and bring together the three different precincts.

To retain Dawson Estate’s heritage, HDB is inviting the public to contribute items from the district’s past. Selected heritage items will be woven into the new development.

Ms Fu said yesterday that the ‘Remaking Our Heartland’ programme has made much progress. Nevertheless, she added: ‘There will be challenges along the way, such as grappling with inflation and competing for resources amidst the global construction boom, while keeping HDB flats affordable.’

Frasers to support top KL serviced residences

Source : Business Times - 31 Jul 2008

FRASERS Hospitality, the hospitality arm of property group Frasers Centrepoint. said yesterday that it will provide technical and advisory services for a ‘gold-standard’ serviced residence project in Kuala Lumpur.

The project, Fraser Place Kuala Lumpur, is in the Malaysian capital’s ‘Golden Triangle’, where most international banks, oil-and-gas companies and multinationals are based.

It is also within walking distance of the Petronas Twin Towers and the retail mall Pavilion KL.

Fraser Place Kuala Lumpur is owned by Malaysian-listed YNH Property.

The project is part of a mixed development comprising an office tower and a second tower with 217 studios, one-bedroom, two-bedroom and penthouse serviced residences.

Frasers said in a statement yesterday that when Fraser Place Kuala Lumpur opens in the third quarter of 2009, it will set a new standard for Malaysia’s extended-stay segment.

Every apartment has a separate bedroom, a fully-equipped kitchen with cooking implements, cutlery and a dishwasher, and a washer-dryer for clothes.

Guests can also make use of an all-day dining outlet, meeting and function rooms, fitness centre, and playground and playroom for children.

Frasers Hospitality chief executive officer Choe Peng Sum says the project will be ideal for expatriates working in Malaysia on medium- term projects, as it provides comfort, all-day-dining and even facilities for accompanying spouses and families.

End of the road for 174 Seletar colonial homes

Source : Business Times - 31 Jul 2008

As aerospace park takes shape, many ‘black-and-white’ homes must go

The first phase of the $60 million Seletar Aerospace Park (SAP) project is nearing completion and Phase 2 is about to take off, so the agencies spearheading the redevelopment of the complex have been briefing residents and other tenants about the next step forward.

Agency officials, led by Edwin Ho, JTC Corp’s assistant director for industrial parks, met tenants of the colonial ‘black-and-white’ residences last night to inform them that 174 of the 378 buildings could be demolished.

A significant number of the remaining units will be converted to offices and commercial outlets, including F&B and lifestyle clusters around The Oval/Parklane area.

But about 100 will be retained as residences.

All affected tenants will have to move out by this December, while those remaining will have to sign up to new tenancies.

Mr Ho assured everyone that all aspects of the development of SAP were being done with the input of ‘all stakeholders’ including residents, commercial tenants, aviation business operators, the Nature Society and other interest groups.

Other works in the upcoming Phase 2 of the massive project will be road widening and refurbishment of buildings which will be retained.

Phase 2 works will begin next January and stretch until 2013.

Phase 1 has essentially focused on the groundbreaking works for new tenants Rolls-Royce and Pratt & Whitney, and upgrading facilities for existing giants like ST Aerospace and Jet Aviation.

Besides the demolition of old buildings and refurbishment of others, key elements of Phase 2 will also include demolition of the old water reclamation plant located in the complex and the upgrading of the airport and the lengthening of the runway by some 300 metres.

The runway lengthening will be done for 14 hours a day for 18 months, starting this November, with works done at night.

Also starting next January will be works on construction of a new flyover from the Tampines Expressway, which will be the main entrance to the complex. There will also be some road diversions within the area.

A joint project of the EDB, CAAS and JTC Corp, the SAP will host an integrated aerospace industry cluster incorporating maintenance, repair and overhaul, design and manufacturing of aircraft systems and components, business and general aviation, and an aviation campus to train pilots, other industry professionals and technical personnel.

When completed in 2018, the SAP is envisaged to elevate Singapore’s status as an aviation hub, contribute $3.3 billion a year or one per cent of GDP and create jobs for 10,000 people.

Is CMT morphing from pure retail play into a mixed Reit?

Source : Business Times - 31 Jul 2008

CAPITAMALL TRUST (CMT), Singapore’s first real estate investment trust when it listed in 2002, has enduring appeal.

Six years since its flotation and with another 20 contenders in the Singapore Reit (S-Reit) market today, CMT remains Singapore’s biggest Reit with an asset size of $7.2 billion.

The market has rewarded the trust’s consistent ability to deliver total returns by according it one of the lowest costs of capital for any Singapore Reit. That is, CMT trades at one of the lowest distribution yields among S-Reits. The market demands a lower risk premium from CMT than it does for just about any other S-Reit. CMT is also trading above its net asset value. This has to do with CMT’s track record in managing retail properties.

However, lately some institutional investors have been concerned that the shopping centre trust could be morphing into a mixed development trust. In 2006, CMT bought a 40 per cent stake in Raffles City, which comprises a mall, office tower, convention space and two hotels.

In May this year, CMT announced it was buying Atrium @ Orchard - a predominantly office asset - for $839.8 million.

Is CMT being forced to buy mixed developments because of the challenge of sourcing for pure-retail assets in Singapore as more shopping centres are already owned by Reits and private property funds?

Some investors would prefer CMT to be a pure retail play. If CMT dilutes its portfolio by acquiring mixed developments with office and other components, investors may demand a higher risk premium, that is, CMT may have to trade at a higher distribution yield, putting pressure on its unit price.

Not only that, there may be potential conflict of interest within the CapitaLand stable of Reits, since CMT’s sister Reit CapitaCommercial Trust (CCT) owns mostly offices.

It may be timely to revisit some of the reasons behind CMT’s acquisitions of Atrium and Raffles City.

Offices make up nearly 96 per cent of Atrium’s existing net lettable area (NLA) of 373,446 sq ft. CMT’s attraction to the property, however, is due to its strategic location next to the trust’s existing mall, Plaza Singapura. By drawing synergies between the two properties, CMT can extract more value out of Plaza Singapura. Atrium is directly linked to Dhoby Ghaut MRT Station, which will be the interchange station for three lines. By integrating Atrium with Plaza Singapura, the latter will have improved MRT connectivity. CMT plans to boost Atrium’s retail NLA from about 16,100 sq ft now to 172,100 sq ft by converting the first three levels into full-retail use. It also plans to create retail space on state land that it hopes to buy in front of Plaza Singapura.

CMT could also potentially move some big tenants from Plaza Singapura’s upper floors to Atrium’s upper levels and subdivide the vacated space at Plaza Singapura into smaller units that will hopefully fetch higher rents. Another possibility is to attract fitness centres and signature restaurants to Atrium’s upper levels as office leases expire.

Given CMT’s impressive track record at asset enhancement plans and its ability to create new retail space in its properties, it’s possible to imagine Atrium transformed into a predominantly retail asset in future.

So too at Raffles City, asset enhancements have boosted the retail net lettable area by 12.5 per cent. These initiatives required the close cooperation of CCT, which owns the remaining 60 per cent in Raffles City. Had CMT bought only the mall in Raffles City, leaving the office tower to CCT, the two Reits might have had sibling arguments during the mall’s refurbishment as many common areas were involved. Instead, by taking stakes in the entire development, the two Reits worked in unison.

When Raffles City’s asset enhancement potential has been substantially realised, CMT and CCT could neaten their ownership - with CCT holding the office tower and CMT the mall. This will sharpen the two Reits’ respective foci and give investors clearer choice to invest in their preferred asset class. Likewise, when CMT is done transforming Atrium and creating more retail space, it could sell the remaining office space to CCT. After all, CMT should not be competing with CCT - a big office landlord - for office tenants at Atrium.

There will also be office space when CMT builds four more floors on top of Funan DigitaLife Mall to tap the site’s unutilised development potential. CMT has all approvals in place but will begin work only after the new office space has been substantially leased; this should make it easier for CMT to dispose of the office space and once more stick to its core strength in retail.

Moving ahead, CMT is unlikely to shy away from mixed assets as long as there are strategic reasons and where such assets have a retail component that it can add value to.

CMT will have to hope that investors will still find this defining strength endearing.

94% support for new upgrading scheme in Yishun

Source : Straits Times - 31 Jul 2008

YISHUN residents have given the thumbs-up to the Housing Board’s first Home Improvement Programme, which aims to spruce up the town’s existing facilities and add new ones.

Over nine in 10 voted in favour of upgrading when polling closed on Monday night, said Senior Minister of State for National Development Grace Fu.

Referring to the 94 per cent support, she said: ‘This shows a really strong endorsement.’ She was speaking at the HDB’s annual awards yesterday.

Township planner Surbana International Consultants swept the design awards in all categories - new housing, upgrading and parks - for the second year.

Two projects - Edgedale Green in Punggol and Central Horizon in Toa Payoh - won for new housing, while its work at Clementi Meadows won for the main upgrading programme. The firm won the park prize for Montreal Green in Sembawang.

Quality awards for building were also given to Poh Lian Construction and Straits Construction. Three contractors - Kienta Engineering Construction, Chiu Teng Construction and Teambuild Construction - won for quality in upgrading projects.

Six firms were lauded for good service, including Sun Microsystems, which runs the backup and recovery of HDB business data, and V-Workz International, supplier of e-brochure and virtual showflat systems.

For construction safety, Straits Construction, Sim Lian Construction and Teambuild Construction took top honours.

SCDA, WOHA and Surbana named consultants for Dawson Estate flats

Source : Business Times - 31 Jul 2008

Award-winners to design HDB flats

FLAT-BUYERS eyeing Dawson Estate in Queenstown will be spoilt for choice, as upcoming public housing will feature designer looks courtesy of not one, not two, but three local award-winning architectural firms.

The Housing & Development Board (HDB) said yesterday that it will appoint SCDA Architects, WOHA Architects and Surbana International Consultants as design consultants for the district’s public housing projects.

Dawson Estate comes under a ‘Remaking Our Heartland’ exercise that aims to transform public housing into vibrant homes for Singaporeans.

To showcase the regeneration of an old estate, HDB invited the three architectural firms last year to design public housing precincts in Dawson Estate based on new ideas and concepts.

Favourable response from the public led HDB to appoint all three as design consultants.

SCDA and WOHA received their letters of appointment at a HDB awards dinner yesterday evening. The two sites which both firms worked on are vacant and ready for development.

HDB plans to launch the first batch of flats on these two sites for sale under the Built-to-Order system in the third quarter of next year.

Construction could start in the first quarter of 2010 and be completed in 2014.

HDB will appoint Surbana later, when the site it worked on is cleared and ready for redevelopment in 2011.

‘The participation of these firms will not only give HDB flat buyers greater variety and choice, it will also bring a livelier, more attractive buzz to Dawson,’ said Senior Minister of State for National Development and Education Grace Fu.

HDB has also appointed a local landscape architectural firm, Cicada Pte Ltd, to draw up a landscape masterplan. The plan will create a distinct identity for Dawson Estate and bring together the three different precincts.

To retain Dawson Estate’s heritage, HDB is inviting the public to contribute items from the district’s past. Selected heritage items will be woven into the new development.

Ms Fu said yesterday that the ‘Remaking Our Heartland’ programme has made much progress. Nevertheless, she added: ‘There will be challenges along the way, such as grappling with inflation and competing for resources amidst the global construction boom, while keeping HDB flats affordable.’

1,800 flats to go on sale at Dawson estate next year

Source : Straits Times - 31 Jul 2008

Two 40-storey towers to be constructed under build-to-order system by 2014

A NEW generation of Housing Board flats is set to go on sale in about a year’s time at now-sleepy Dawson estate.

The 50-year-old Queenstown estate is set to be transformed with the construction of two striking 40-storey towers, designed by award-winning architects, SCDA Architects and WOHA Architects.

The towers, to boast about 1,800 flats, are being built under the HDB’s build-to-order (BTO) system - now the board’s main means of providing new housing stock.

HDB rarely builds new flats within a mature estate due to the lack of space. The new towers in Dawson will be nestled among gardens designed by landscape architects - a first for an HDB estate.

News that the flats will be on sale in a year’s time was unveiled by Ms Grace Fu, Senior Minister of State for National Development, at the HDB awards dinner yesterday.

She later told reporters that she expects very strong demand for the new flats.

Sales will start in the third quarter of next year. Construction could start six months after that and be completed in 2014, Ms Fu said.

At Dawson - Singapore’s first Housing Board estate - the SCDA-designed tower block is on a 2.2ha site and could feature about 800 flats. The other block, on a 2.7ha site, will have about 1,000 units.

The towers will have special features such as lofts, flexible flat designs, and sky villages or common high-rise space shared by every 10 floors.

But potential buyers can still influence the final design. Feedback is invited at an exhibition on Dawson estate before the consultants finalise their designs. The show at the HDB Hub in Toa Payoh runs from today until Aug 10.

Home-hunter Lauren Shen, 27, a graphic designer, said: ‘The flats are exciting because they can be customised. I have applied for a flat in Punggol. If I don’t get it, I will wait for these new ones.

‘But it will depend on the prices. My chances may be limited because I think they will be very popular.’

A third new-generation development will be added later at Dawson by Surbana International Consultants. It will be launched when the site for it is cleared by 2011.

To tie the three developments together, HDB has asked award-winning local landscape architects Cicada to draw up a landscape plan.

The plans will rejuvenate Dawson estate, which has about 3,000 flats. Dawson eventually could boast about 10,000 new homes, most of which are expected to be public flats.

HDB is keen to preserve Dawson’s heritage and is seeking contributions of old photos, postcards, books and other items for use in a display.

1,800 flats to go on sale at Dawson estate next year

Source : Straits Times - 31 Jul 2008

Two 40-storey towers to be constructed under build-to-order system by 2014

A NEW generation of Housing Board flats is set to go on sale in about a year’s time at now-sleepy Dawson estate.

The 50-year-old Queenstown estate is set to be transformed with the construction of two striking 40-storey towers, designed by award-winning architects, SCDA Architects and WOHA Architects.

The towers, to boast about 1,800 flats, are being built under the HDB’s build-to-order (BTO) system - now the board’s main means of providing new housing stock.

HDB rarely builds new flats within a mature estate due to the lack of space. The new towers in Dawson will be nestled among gardens designed by landscape architects - a first for an HDB estate.

News that the flats will be on sale in a year’s time was unveiled by Ms Grace Fu, Senior Minister of State for National Development, at the HDB awards dinner yesterday.

She later told reporters that she expects very strong demand for the new flats.

Sales will start in the third quarter of next year. Construction could start six months after that and be completed in 2014, Ms Fu said.

At Dawson - Singapore’s first Housing Board estate - the SCDA-designed tower block is on a 2.2ha site and could feature about 800 flats. The other block, on a 2.7ha site, will have about 1,000 units.

The towers will have special features such as lofts, flexible flat designs, and sky villages or common high-rise space shared by every 10 floors.

But potential buyers can still influence the final design. Feedback is invited at an exhibition on Dawson estate before the consultants finalise their designs. The show at the HDB Hub in Toa Payoh runs from today until Aug 10.

Home-hunter Lauren Shen, 27, a graphic designer, said: ‘The flats are exciting because they can be customised. I have applied for a flat in Punggol. If I don’t get it, I will wait for these new ones.

‘But it will depend on the prices. My chances may be limited because I think they will be very popular.’

A third new-generation development will be added later at Dawson by Surbana International Consultants. It will be launched when the site for it is cleared by 2011.

To tie the three developments together, HDB has asked award-winning local landscape architects Cicada to draw up a landscape plan.

The plans will rejuvenate Dawson estate, which has about 3,000 flats. Dawson eventually could boast about 10,000 new homes, most of which are expected to be public flats.

HDB is keen to preserve Dawson’s heritage and is seeking contributions of old photos, postcards, books and other items for use in a display.

Three parts to Dawson’s new face

Source : Today - 31 Jul 2008

THE public first got wind of the ambitious vision last August, when Prime Minister Lee Hsien Loong spoke of giving the 56-year-old Dawson Estate a new face.

Now, the surgeons who will design its new face have been appointed, and flats could go on sale by next year.

Construction is expected to start six months after the sale and the new generation of flats would be ready by around 2014, said Ms Grace Fu, Senior Minister of State for National Development and Education, yesterday.

She added that since the conceptual designs from the three architects invited to give shape to the ideas had been well-received by the public, all three - SCDA Architects, WOHA Architects and Surbana International Consultants - would be appointed as consultants for the Dawson project.

The rejuvenation of Dawson Estate is part of an initiative to transform public housing into vibrant homes for Singapore. Apart from Dawson, Yishun and Punggol have also been earmarked for major facelifts.

Dawson Estate - formed by the merger of Princess and Duchess estates - was first developed in the 1950s by the Singapore Improvement Trust.

Last September, the Housing Development Board (HDB) commissioned the three architects to come up with design ideas for Dawson Estate and showcased these concepts in an exhibition called “Remaking Our Heartland”.

The majority of the 11,000 Singaporeans who visited the exhibition gave the designs a thumbs up.

As a result, the HDB decided to appoint all the three architects to regenerate Dawson Estate.

SCDA and WOHA will work on the next stage of the estate’s detailed design as the sites they would be working on are now vacant.

SCDA and WOHA told Today that they are already talking to landscapers, quantity surveyors, structural and mechanical engineers.

The HDB will appoint Surbana at a later date when the site that the firm would be working on is ready for development in 2011.

Under SCDA’s concept, residents can look forward to flats with tall ceilings in the living room. These lofts are built next to smaller flats which can function as “granny units” should the owners of the bigger flat decide to buy over the smaller unit.

Other features include a central staircase with solar panels which face the West and cascading landscaped terraces. Around 800 units will come under the SCDA’s design.

WOHA’s design is based on a concept of a “kampung in the sky” by creating a 10-storey column as the heart of each village, overlooking a village square.

“This village square has community gardens, study areas, barbecue areas and gathering spaces which will allow people to get to know the other 60 to 70 households in their village,” said Mr Richard Hassell, WOHA’s founding director.

Surbana plans to stretch a park six storeys upwards with ramps covered with greenery.

It will meander in a figure-of-eight shape around the twelve 48-storey blocks. The site includes the old Queenstown town centre.

But with construction costs going up, will all these features and amenities be included?

Mr Chan Soo Khian, SCDA’s founding principal and design director, said the firm would stick to its design and “it is up to HDB” how it wants to price these units.

Mr Chan, however, said there is a possibility that not all features - such as solar panels - will be included since they “are an economic issue”.

WOHA’s Mr Hassell said it would be working very closely with the HDB to achieve Dawson’s expected standard “at a reasonable market price”.

The HDB is inviting all Singaporeans with fond memories of Dawson Estate to contribute old photos, postcards, cinema tickets and souvenirs commemorating the estate at its “Transforming Our Dawson” exhibition, which is being held at the HDB Hub until Aug 10.

Meanwhile, another first step in remaking Singapore’s heartland was taken, when 94.1 per cent of voters in a Yishun precinct said “yes” to the new Home Improvement Programme. The nine blocks are the first to come under this scheme.

Three parts to Dawson’s new face

Source : Today - 31 Jul 2008

THE public first got wind of the ambitious vision last August, when Prime Minister Lee Hsien Loong spoke of giving the 56-year-old Dawson Estate a new face.

Now, the surgeons who will design its new face have been appointed, and flats could go on sale by next year.

Construction is expected to start six months after the sale and the new generation of flats would be ready by around 2014, said Ms Grace Fu, Senior Minister of State for National Development and Education, yesterday.

She added that since the conceptual designs from the three architects invited to give shape to the ideas had been well-received by the public, all three - SCDA Architects, WOHA Architects and Surbana International Consultants - would be appointed as consultants for the Dawson project.

The rejuvenation of Dawson Estate is part of an initiative to transform public housing into vibrant homes for Singapore. Apart from Dawson, Yishun and Punggol have also been earmarked for major facelifts.

Dawson Estate - formed by the merger of Princess and Duchess estates - was first developed in the 1950s by the Singapore Improvement Trust.

Last September, the Housing Development Board (HDB) commissioned the three architects to come up with design ideas for Dawson Estate and showcased these concepts in an exhibition called “Remaking Our Heartland”.

The majority of the 11,000 Singaporeans who visited the exhibition gave the designs a thumbs up.

As a result, the HDB decided to appoint all the three architects to regenerate Dawson Estate.

SCDA and WOHA will work on the next stage of the estate’s detailed design as the sites they would be working on are now vacant.

SCDA and WOHA told Today that they are already talking to landscapers, quantity surveyors, structural and mechanical engineers.

The HDB will appoint Surbana at a later date when the site that the firm would be working on is ready for development in 2011.

Under SCDA’s concept, residents can look forward to flats with tall ceilings in the living room. These lofts are built next to smaller flats which can function as “granny units” should the owners of the bigger flat decide to buy over the smaller unit.

Other features include a central staircase with solar panels which face the West and cascading landscaped terraces. Around 800 units will come under the SCDA’s design.

WOHA’s design is based on a concept of a “kampung in the sky” by creating a 10-storey column as the heart of each village, overlooking a village square.

“This village square has community gardens, study areas, barbecue areas and gathering spaces which will allow people to get to know the other 60 to 70 households in their village,” said Mr Richard Hassell, WOHA’s founding director.

Surbana plans to stretch a park six storeys upwards with ramps covered with greenery.

It will meander in a figure-of-eight shape around the twelve 48-storey blocks. The site includes the old Queenstown town centre.

But with construction costs going up, will all these features and amenities be included?

Mr Chan Soo Khian, SCDA’s founding principal and design director, said the firm would stick to its design and “it is up to HDB” how it wants to price these units.

Mr Chan, however, said there is a possibility that not all features - such as solar panels - will be included since they “are an economic issue”.

WOHA’s Mr Hassell said it would be working very closely with the HDB to achieve Dawson’s expected standard “at a reasonable market price”.

The HDB is inviting all Singaporeans with fond memories of Dawson Estate to contribute old photos, postcards, cinema tickets and souvenirs commemorating the estate at its “Transforming Our Dawson” exhibition, which is being held at the HDB Hub until Aug 10.

Meanwhile, another first step in remaking Singapore’s heartland was taken, when 94.1 per cent of voters in a Yishun precinct said “yes” to the new Home Improvement Programme. The nine blocks are the first to come under this scheme.

Solved - the rental spike mystery

Source : Today - 31 Jul 2008

It was caused not by a jump in demand, but by a contraction in supply

LAST week, I suggested that the private housing oversupply may have been understated.

This is because units that have been bought by investors can still be considered as part of the housing supply until they are resold or are tenanted. If the rental income cannot cover the mortgage payments and if the owners are highly geared, then they will have to sell the units sooner or later. If a greater proportion of owners are in the same predicament, the competition to sell will result in lower prices.

But surely, finding a tenant cannot be a problem.

After all, was it not so long ago that we heard complaints of unreasonable hikes in rentals. Between the third quarter of 2006 and the second quarter this year, the official rental price index went up by a hefty 69 per cent. This is almost 10 per cent each quarter.

What were the factors responsible for this? Many attributed it to higher demand. It could not have been anything else. But was this really the cause?

Amid the euphoria and excitement of the construction of the two integrated resorts and the anticipation of the tremendous spillover effects, the market misread the cause.

Many attributed it to the surge in foreign talent arriving on our shores. For sure, more expatriates were coming but were their arrivals in such large numbers so as to cause rents to escalate to such dizzy heights?

Even the new plans to prepare Singapore to accommodate up to 6.5 million people were loosely bandied around as proof that Government officials shared the same view. Investors bought the story and snapped up apartments at prices which presupposed a continuation of that strong upward trend.

However, official figures showed the number of rental contracts actually contracted by 17.6 per cent in 2006 and remained flat last year.

On the other hand, the average cost of rentals rose by 15 per cent in 2006 and43 per cent last year. So, where are the missing expatriate households?

Certainly, the high rents did cause some to leave Singapore, others - especially Permanent Residents - to purchase, and for those without a generous budget, to rent HDB flats.

But there should have been at least a substantial - if not dramatic - nett increase in rental contracts. After all, they were supposed to have come in droves.

The mystery is solved if we realise that the spike was caused, not by a steep jump in demand as many had assumed, but by a sharp contraction in supply. The result may be the same but the implications are different.

The surge in en bloc sales had led to groups of tenants leaving their homes. The competition for homes simply drove rentals sky high.

There are no official figures but I estimate that the supply of rental accommodation to have shrunk by at least a quarter to a third of the existing stock.

Today, the rental market has stabilised. Those seeking homes would have found them by now - either by buying, downgrading or leaving Singapore.

What are the market implications?

First, there are now no hordes of expatriates scrambling for accommodation. This means demand will lag behind supply. Rents will decline. Lower rents translate into lower yields.

Second, for less prime units, it will come to a point when the low rents make no sense. It will be better to sell.

Recently, a consultant’s report extolled the benefits of owning a home on Sentosa Cove and a $19,500 monthly lease was reported in a the news as having been achieved.

Checks revealed that the 560-square-metre unit was sold in July last year for $8.59 million. It was probably a penthouse. This translates to a gross yield of 2.7 per cent. Does this even cover the interest on the mortgage?

Lest we forget, we have not factored in property tax of 10 per cent or maintenance charges of about $12,000 a year for a penthouse. What about the additional security cost for Sentosa homes? Or the cost of furnishings?

Eventually, the nett yield may dwindle to below 1.8 per cent - certainly a high risk to take for such a low return.

Is this situation typical of the other ”investor” units completing over the next 12 months? I hope I am wrong, but I fear this may be so.

The writer is the head of research at property consultancy Chesterton International.

Solved - the rental spike mystery

Source : Today - 31 Jul 2008

It was caused not by a jump in demand, but by a contraction in supply

LAST week, I suggested that the private housing oversupply may have been understated.

This is because units that have been bought by investors can still be considered as part of the housing supply until they are resold or are tenanted. If the rental income cannot cover the mortgage payments and if the owners are highly geared, then they will have to sell the units sooner or later. If a greater proportion of owners are in the same predicament, the competition to sell will result in lower prices.

But surely, finding a tenant cannot be a problem.

After all, was it not so long ago that we heard complaints of unreasonable hikes in rentals. Between the third quarter of 2006 and the second quarter this year, the official rental price index went up by a hefty 69 per cent. This is almost 10 per cent each quarter.

What were the factors responsible for this? Many attributed it to higher demand. It could not have been anything else. But was this really the cause?

Amid the euphoria and excitement of the construction of the two integrated resorts and the anticipation of the tremendous spillover effects, the market misread the cause.

Many attributed it to the surge in foreign talent arriving on our shores. For sure, more expatriates were coming but were their arrivals in such large numbers so as to cause rents to escalate to such dizzy heights?

Even the new plans to prepare Singapore to accommodate up to 6.5 million people were loosely bandied around as proof that Government officials shared the same view. Investors bought the story and snapped up apartments at prices which presupposed a continuation of that strong upward trend.

However, official figures showed the number of rental contracts actually contracted by 17.6 per cent in 2006 and remained flat last year.

On the other hand, the average cost of rentals rose by 15 per cent in 2006 and43 per cent last year. So, where are the missing expatriate households?

Certainly, the high rents did cause some to leave Singapore, others - especially Permanent Residents - to purchase, and for those without a generous budget, to rent HDB flats.

But there should have been at least a substantial - if not dramatic - nett increase in rental contracts. After all, they were supposed to have come in droves.

The mystery is solved if we realise that the spike was caused, not by a steep jump in demand as many had assumed, but by a sharp contraction in supply. The result may be the same but the implications are different.

The surge in en bloc sales had led to groups of tenants leaving their homes. The competition for homes simply drove rentals sky high.

There are no official figures but I estimate that the supply of rental accommodation to have shrunk by at least a quarter to a third of the existing stock.

Today, the rental market has stabilised. Those seeking homes would have found them by now - either by buying, downgrading or leaving Singapore.

What are the market implications?

First, there are now no hordes of expatriates scrambling for accommodation. This means demand will lag behind supply. Rents will decline. Lower rents translate into lower yields.

Second, for less prime units, it will come to a point when the low rents make no sense. It will be better to sell.

Recently, a consultant’s report extolled the benefits of owning a home on Sentosa Cove and a $19,500 monthly lease was reported in a the news as having been achieved.

Checks revealed that the 560-square-metre unit was sold in July last year for $8.59 million. It was probably a penthouse. This translates to a gross yield of 2.7 per cent. Does this even cover the interest on the mortgage?

Lest we forget, we have not factored in property tax of 10 per cent or maintenance charges of about $12,000 a year for a penthouse. What about the additional security cost for Sentosa homes? Or the cost of furnishings?

Eventually, the nett yield may dwindle to below 1.8 per cent - certainly a high risk to take for such a low return.

Is this situation typical of the other ”investor” units completing over the next 12 months? I hope I am wrong, but I fear this may be so.

The writer is the head of research at property consultancy Chesterton International.

Home-buyers today cautious, but genuine

Source : Today - 30 Jul 2008

Applications for Park Central@AMK roll in, but how many will translate into actual sales?

SINCE its launch last week, more than 1,000 applications have been received for 578 units at Park Central@AMK, Singapore’s third condominium-style public housing development.

With developer United Engineers (UE) pricing its Design, Build and Sell Scheme (DBSS) project at $490 psf to $500 psf, it remains to be seen how much of the 20,000 visitors to the showflats will translate into applications by the Aug 5 deadline.

Mr David Liew, managing director of UE Developments, said: “The people coming here are more cautious, more serious … what we are seeing is more genuine interest.”

Earlier this year, the pricing of such projects built by private developers had caused a stir.

City View@Boon Keng’s price tag of $520 psf was a record for new public housing flats. More than 3,500 people applied for the 714 units - but only 66 per cent actually bought them.

Six months after its launch, 20 per cent of the units remain unsold, said the project’s marketing agent.

But this slower pace of sales “does not mean the market cannot sustain the price”, said Mr Donald Yeo, executive director of HSR International Realtors. “It’s still very competitive and I believe the prices are still realistic.”

Buyer response had hit fever pitch for the first DBSS development in 2006, when nearly 6,000 people applied for 616 units, going for around $300 psf, at Premiere@Tampines.

At Park Central, all units come with the look and feel of a private residential home but they cost about 40 per cent less, at $500 per square foot.

The developer did not think the resale flats in the area would pose a threat to sales of Park Central, as many of the resale units are about 10 to 20 years old - and most home hunters prefer to buy new flats, even at a 10 per cent premium.

Industry players expect prices at the next condo-style public housing project in Bishan to be even higher, partly due to the spike in construction cost.

Rents falling at most condos

Source : Straits Times - 30 Jul 2008

New supply of homes and weak demand could mark start of downward trend

TENANTS, rejoice: rents have begun to fall at a majority of condominiums in Singapore on the back of fresh home supply and a turnaround in market sentiment.

Two in every three projects with a substantial number of leases saw rents drop in the second quarter from the previous three months, according to the latest data from the Urban Redevelopment Authority (URA).

This marks a reversal from the last two years, when private home rents soared, especially in expatriate-friendly areas, due to an insufficient supply of rental homes and an influx of expat tenants.

Now, rents are dipping in almost every location around the island, but particularly in the two areas most popular with expats - East Coast and the central region around Orchard Road.

This could mark the start of a downtrend that experts say may worsen with more home completions, especially in the prime areas, where rents have reached stratospheric levels.

URA’s data analysed rents in developments with at least 100 units and that have 10 or more leases each in the first and second quarters this year. Of the 124 projects in this category, 80 - or about 64 per cent - saw rents drop between the two quarters.

But URA also has a more comprehensive rental index that covers all rental transactions, including those at projects with fewer than 10 leases. This showed that rents across the country rose 2.5 per cent overall in the second quarter, the smallest rise in three years.

Rents are taking a hit largely because the stock of homes available for rental has risen, property consultants said.

Several major projects have recently been completed that were heavily bought into by investors planning to rent out their units. These include the 640-unit Icon in Tanjong Pagar, a 430-unit tower at Sail @ Marina Bay, the 600-unit Citylights at Lavender, and the 546-unit Sea View in Amber Road.

Ms Tay Huey Ying, director of research and advisory at property firm Colliers International, said the ‘peakish’ rents could also be due to the current run of high inflation, pushing up living costs in general and making expats more resistant to any rental rises.

Another source of rental demand, collective sale sellers, has also dwindled due to the delay in demolishing several en-bloc sale estates amid a slow property sales market, she added.

Colliers’ own research showed that monthly rents of luxury apartments fell 3 per cent in the first six months of this year. A 1,000 sq ft apartment was fetching $6,730 in June, down from $6,930 in December last year.

But Ms Tay said luxury rents are unlikely to fall by more than another 10 per cent in the second half, as Singapore remains attractive to expats.

Mr Colin Tan, head of research and consultancy at Chesterton International, agreed that the rental declines in the prime central districts will be ‘more gradual than elsewhere as their central location means there will be no lack of demand’.

‘At the other end of the rental market, in far-flung locations such as Changi and Pasir Ris, the declines are expected to be more pronounced as they will face the twin problems of weak demand and declining rentals,’ he added.

US obsession with owning homes has gone too far

Source : Business Times - 30 Jul 2008

THE real lessons of America’s housing crisis have gotten lost. It’s portrayed as the financial system run amok; the housing market became a casino. The remedy is to enact rules that prevent a repetition. All this is partly true. But it ignores a larger truth: our infatuation with homeownership, embedded in dozens of government policies, has turned housing into something of a National Nightmare.

As a society, we’re overinvesting in real estate. We build too many McMansions. They use too much energy, and their carrying costs absorb too much of Americans’ incomes. We think everyone should become a homeowner, when many families can’t or shouldn’t. The result is to encourage lending to weak borrowers who are likely to default. The avid pursuit of a few more percentage points on the homeownership rate (it rose from 64 per cent of households in 1994 to 69 per cent in 2005) has condoned enormously damaging policies.

Does every house need a ‘home entertainment centre’? Well, no. But when you subsidise something, you get more of it than you otherwise would. That’s our housing policy. Let’s count the conspicuous subsidies. The biggest favour the upper-middle class. Homeowners can deduct interest on mortgages of up to US$1 million on their taxes; they can deduct local property taxes; profits from home sales are mostly shielded from taxes. In 2008, these tax breaks are worth about US$145 billion. Next, government funnels cheap credit into housing through Congressionally chartered Fannie Mae and Freddie Mac. Perceived as being backed by the US Treasury, Fannie and Freddie can borrow at preferential rates; they now hold or guarantee US$5.2 trillion of mortgages, two-fifths of the total. Finally, the Federal Housing Administration (FHA) insures mortgages for low- and moderate-income families that require only a 3 per cent down payment.

Congress’ response to the present crisis is, not surprisingly, more of the same. The legislation enacted last week adds new subsidies to the old. It creates more tax breaks; most first-time homebuyers could receive a US$7,500 tax credit. It expands the lending authority of Fannie Mae and Freddie Mac. Previously, the permanent ceiling on their mortgages was US$417,000; now that would go as high as US$625,500. And the FHA would be authorised to support, at much lower monthly payments, the refinancing of mortgages of an estimated 400,000 homeowners in danger of default.

More subsidies may - or may not - stabilise the housing market in the short run. But there are long-term hazards. Make no mistake: I’m not anti-housing. I believe that homeownership strengthens neighbourhoods and encourages people to maintain their property. It’s also true, as economist Mark Zandi shows in his book Financial Shock, that today’s housing collapse had multiple causes: overconfidence about rising home prices; cheap credit; lax lending practices; inept government regulation; speculative fever; sheer fraud.

Still, the government’s pro-housing policies contributed in two crucial ways. First, they raised demand for now suspect ’sub-prime’ mortgages. The Department of Housing and Urban Development sets ‘affordable’ housing goals for Fannie Mae and Freddie Mac to dedicate a given amount of credit to poorer homeowners. One way Fannie and Freddie fulfilled these goals was to buy sub-prime mortgage securities - many of which have now gone bad. Second, government’s housing bias created a permissive climate for lax lending. Both the Clinton and present Bush administrations bragged about boosting homeownership. Regulators who resisted the agenda risked being ’roundly criticised’, notes Zandi.

Good intentions led to bad outcomes: an old story. Fannie’s and Freddie’s losses impelled the Treasury Department to propose a rescue for the companies; given their size and the government’s implicit backing of their debt, doing otherwise would have risked a financial panic. Personal savings have been skewed toward housing. Many Americans approaching retirement ‘have accumulated little wealth outside their homes’, concludes a study by economists Annamaria Lusardi of Dartmouth College and Olivia S Mitchell of the University of Pennsylvania.

We might curtail housing subsidies without exposing the economy to the disruption of outright elimination. The mortgage interest deduction could be converted to a less generous credit; Fannie’s and Freddie’s expanded powers could be made temporary; FHA’s minimum down payment could be set at a more sensible 5 per cent. But even these modest steps would require recognising that the homeownership obsession has gone too far. It would require a willingness to confront the huge constituency of homeowners, builders, realtors and mortgage bankers. There is no sign of either. When tomorrow’s housing crisis occurs, we will probably find its seeds in the ’solution’ to today’s. — The Washington Post Writers Group

By ROBERT SAMUELSON

Award-winning architects to design new Dawson Estate

Source : Channel NewsAsia - 30 Jul 2008

Two award-winning private architects have been officially appointed by the Housing and Development Board (HDB) on Wednesday to put a new spin to the old Dawson Estate in Queenstown.

SCDA Architects Pte Ltd and WOHA Architects Pte Ltd were earlier commissioned to draw up plans for two separate public housing sites at the junction of Margaret Drive and Dawson Road.

The new flats will be launched for sale under the Build-To-Order system in the third quarter of 2009.

The 60-hectare Dawson district, which was first developed in the 1950s, will have new homes nestled among lush greenery.

SCDA’s plan features multiple layers of common spaces such as car parks, shops and facilities, while individual residential units can be combined to create lofts, which are ideal for home offices or larger families.

The 823-unit project is also eco-friendly.

Chan Soo Khian, design director, SCDA Architects, said: “All the surface runoffs will be collected in retention tanks and these will then be used to irrigate all the landscape. The staircase would be integrated with solar panels.”

At a separate site in the same district, architects at WOHA spent over four months on their work. The project will also boast sky gardens and integrated facilities.

It is expected to be home to about 1,000 households, which will have plenty of opportunity to interact.

Richard Hassell, founding director of WOHA Architects, said: “Every apartment feels like it belongs to a smaller community of about 60 or 80 homes The way we’ve done it is to make a space… so on the way from the lift to the front door, you always go through this space.”

These flats are expected to be ready in 2014 and their price tags will be unveiled next year.

To preserve the heritage of the area, HDB is also calling on the public to contribute items relating to Queenstown. These could be old photographs, postcards or even cinema tickets, which will be incorporated into the design of the new estate.

Subana International Consultants has been chosen to develop a third site in the Dawson Estate. The company will be officially appointed when the plot is cleared in 2011.

The plans will be on display at the HDB Hub from Thursday to August 10.

Chinese sanguine about potential of Beijing property market

Source : Business Times - 29 Jul 2008

Analysts remain confident it will hold up after the Games

Chen Jingnian is a confident young man with a mission - ride the wave of Beijing’s red-hot real estate market and buy a luxury car before he turns 30.

Riding on development: Completion of new lines and stations will also drive new property growth in less developed areas, says Jones Lang LaSalle report

Tempted by the promise of rich rewards, the 26- year-old quit a university course that laid out a path as an IT engineer to instead become a real estate agent.

‘The salary of engineers is fixed, but the growth potential in the real estate agent industry is much bigger,’ he said, adding that he planned to buy an Audi A6 worth around 500,000 yuan (S$99,600) within three years.

‘Many of our investor clients have two or three apartments … and a client I met last month holds more than 10.’

And like many analysts and industry observers, Mr Chen is confident that the Chinese capital’s real estate market will not deflate following next month’s Beijing Olympics - as has been the case with some other Games host cities.

‘I will stay in the industry,’ said Mr Chen, who focuses on selling apartments on the Olympic Green area with Century 21 Real Estate. ‘Maybe I will open my own company in the future.’

Prices in the Chinese capital jumped by 11.4 per cent last year, compared with an average rise of 7.6 per cent in 70 major cities across the country, according to government figures.

New apartments now hit the market at an average price 3.5 times higher than in 2001, when Beijing won the Olympic bid, according to data collected by real estate agency 5i5j, which has more than 300 outlets in Beijing.

Suites near the Olympic venues and new subway lines, the best known projects covered by a US$40 billion government budget to improve infrastructure and clean the city’s environment, are the hottest spots.

‘The implications of ongoing infrastructure growth for Beijing’s urban development and the property market are substantial,’ said a report by real estate consultancy Jones Lang LaSalle.

Not only is navigating the city more convenient and less costly, the completion of new lines and stations will also drive new property growth in less developed areas, it said.

However, the fact that one square metre of a new apartment in Beijing costs about the same as China’s average annual disposable income had stoked worries a bubble had developed that could burst after the Games.

Sales this year turned sluggish after China raised the downpayment requirement for second homes in 2007, after earlier hiking taxes and interest rates to prevent the market from overheating.

Debate on whether the property market nationwide was about to spiral downwards has been prominent in the Chinese media, particularly after prices in the south led the fall in the second half of last year.

Analysts attributed the current volatility to frenzied speculation during the market’s rise, and an increasingly widespread ‘wait and see’ attitude this year that delayed buyers’ activities.

But Beijing’s massive population and the fact that the city is in its initial development phase, are fundamentals that will bolster demand and keep post- Games prices stable in the city, analysts said.

‘Beijing is a young man in terms of its growth momentum and development stage,’ said Zhang Yukun, a senior investment consultant at property agency Centaline China.

‘The Olympics is just an accelerator for the city, not an engine without which the growth would stop.’

Even average consumers feel confident about the potential of the city, which has a population of 16.3 million people and is still growing quickly as people from around the country come to live in the nation’s bustling capital.

‘The demand is strong - Beijing has so many newcomers every year and many young people I know are still living with their parents and need their own house,’ said Liu Jing, a 34-year-old export company executive from southern China who has her own apartment in the city. — AFP

UK house price fall biggest since ‘01: research firm

Source : Business Times - 29 Jul 2008

Average cost of residential property down 4.4 per cent in July from a year ago

UK house values fell by the most in at least seven years in July and the property slump will continue for months, Hometrack Ltd said.

Slump: Banks have raised mortgage rates and limited credit supply, reversing a decade-long property boom

The average cost of a residential property in England and Wales slipped 4.4 per cent from a year earlier to £168,500 (S$361,600), the London-based research company said yesterday in a statement. That’s the biggest annual drop since the index started seven years ago. Prices fell 1.2 per cent from June.

‘With no immediate end in sight to the current uncertainty, activity levels are likely to remain suppressed with prices remaining under pressure into the autumn,’ said Richard Donnell, director of research at Hometrack, in an emailed statement. Prices ‘are now back to levels last seen in October 2006′.

Banks have raised mortgage rates and limited the supply of credit, reversing a decade-long property boom in which prices tripled. The Bank of England kept the benchmark interest rate at 5 per cent this month on concerns that inflation is accelerating, even as the economy risks slipping into a recession.

The pound fell after yesterday’s report to US$1.9869 from US$1.9906 on July 25. Against the euro, it fell to 0.2 per cent 79.14 pence as of 10.01am in London.

The majority of house-price declines were in southern England. Demand for housing has declined 20 per cent in the past three months, Hometrack said.

However, a shortage of housing supply will still drive prices up by 25 per cent by 2013, the National Housing Federation said in a report yesterday, citing research by Oxford Economics. Average home values will drop 4.4 per cent this year and 2.1 per cent in 2009 before they start rising again, the group, which represents 1,300 housing associations in England, said on its website.

Central bank policy-makers said this month that the housing downturn has ‘gathered momentum’, minutes of their monthly meeting showed last week. The Monetary Policy Committee split three ways in its interest-rate vote. Timothy Besley favoured an increase to help stem the fastest in inflation in a decade and David Blanchflower supported a cut to ease the economic slowdown.

Britain’s economy grew 0.2 per cent in the second quarter, matching the slowest pace since 2001. Unemployment jumped the most in June since the aftermath of the last recession in 1992 as homebuilders and banks cut jobs.

Banks are curbing lending following the collapse of the US sub-prime mortgage market, which so far has cost financial institutions worldwide US$469 billion in writedowns and losses. UK mortgage approvals slumped in June to the lowest level in at least a decade, according to the British Bankers’ Association.

Demand for farmland also declined for the first time since 2005 in the first half of the year, the Royal Institution of Charted Surveyors said in a separate report yesterday.

The deteriorating economic outlook has contributed to the pound’s 12 per cent decline against a currency basket of Britain’s main trading partners, making exports cheaper for overseas buyers.

The weaker pound ‘won’t prevent the credit crunch, a major housing downturn and a sharp retrenchment in corporate spending from sending the economy into recession’, Roger Bootle, chief economic adviser to Deloitte & Touche LLP in London, wrote in a report published on Sunday. — Bloomberg