New Dubai registration law to curb speculation

Source : Business Times - 28 Aug 2008

Sales of unfinished properties must be registered before they can be resold

Dubai has issued a new law to regulate the sale of real estate still under construction in an effort to curb speculation that has sent property prices in the Gulf Arab emirate skyrocketing, an official said on Tuesday.

Under the law issued this week, sales of off-plan properties in Dubai must be registered with the department before they can be resold, Marwan bin Ghalita, chief executive of the Dubai Real Estate Regulatory Authority (RERA), said.

Standard Chartered Bank warned in July that Dubai’s property market showed signs of overheating as speculators betting on quick gains inflate prices of units still under construction.

‘It will help to curb speculation,’ Mr Marwan said of the mew law. ‘In Dubai we are introducing laws step by step . . . Now everything is going to be transparent because it is with the Land Department.’

Dubai property prices have surged 79 per cent since the beginning of 2007, Morgan Stanley said earlier in the month.

Demand for real estate in Dubai, home to the world’s tallest tower and three man-made islands in the shape of palms, has surged since the government first allowed foreigners to invest in properties in 2002.

The government passed a freehold property law in 2006 granting foreigners the right to own properties at selected developments.

The off-plan law follows the issuance of a mortgage law last week as part of a drive to regulate the Gulf Arab business hub’s booming real estate sector.

It will also prevent master and sub-developers from charging transfer fees on off-plan sales, Mr Marwan said. Developers however can be paid administration fees of 1,000-3,000 dirhams (S$386-1,157) for each transaction after approval by the Land Department, he said.

Property prices will probably jump 35 per cent this year and another 8.5 per cent in 2009, when they are expected to peak as Dubai takes measures to weed out short-term speculators, a Reuters poll showed on Tuesday.

The analysts said property prices would fall at least 15 per cent from peak to trough. — Reuters

Measures put in place for better use of public sector office space

Source : Business Times - 28 Aug 2008

Surcharges will be imposed on agencies in breach

GOVERNMENT agencies that do not make optimal use of their office space will face penalties such as surcharges and rents, Parliament was told yesterday.

Senior Minister of State for Finance & Transport Lim Hwee Hua said the aim is to encourage better management of office space in the public sector.

The ministry of finance (MOF) has reviewed and reduced office space norms. Surcharges will be imposed on agencies in breach of the norms, while rent will be imputed to highlight the opportunity cost.

MOF plans to ‘extend this framework for office space to other types of uses such as staff apartments, chalets, and institutional buildings’, Mrs Lim said.

In addition, vacant properties that are not required by public agencies will be put out to the market for lease if possible.

‘We have, in fact, done this in the past two years to meet the growing demand for office space,’ Mrs Lim said. ‘However, the quantum and pace will need to take into account the market situation.’

To instil greater discipline in the reservation and holding of government properties for development, the law ministry will introduce a framework for public sector agencies.

Under this framework, a charge will be imposed on agencies for reserving state properties for planning and feasibility studies.

‘This will encourage agencies to make land reservations only when necessary and for the optimal period of time,’ Mrs Lim said.

‘MOF and MinLaw will continue to review and enhance our systems and policies to raise the effectiveness and accountability of public sector agencies in the management of land and buildings.’

S’pore housing: Get the bigger picture right

Source : Business Times - 27 Aug 2008

THE media recently highlighted bearish analyst reports about the Singapore residential market. One, I recall, predicted a decline of 40 per cent over three years. Another forecast plunging rents in 2009 and consequent sharp falls in capital values. Perhaps this is why some owners have chosen to sell prime freehold units at implied gross yields of 4 per cent.

However, looking at the same data, I could not arrive at the same dour conclusion. I could not arrive at the same conclusion because I looked at data from other sources as well - in particular, HDB statistics. Since HDB rules on owners leasing out flats have been liberalised, the housing market is now a continuum. Indeed, on a per sq ft basis, rents commanded by well-located HDB flats are now comparable to those for private residential apartments, going by HDB and URA data.

The big picture in housing has always been driven by supply and demand - total supply and demand, not just private residential. If more households are created than housing units completed, there is upward pressure on rents and capital values.

Let’s look at supply first: A net 10,000 private residential homes are estimated to be completed in 2009. HDB does not publish completion data, but based on 2006 build-to-order data, only 2,400 units are estimated to be completed in 2009. In total, that’s 12,400 housing units.

Now let’s look at demand: According to the HDB’s website, sub-letting approvals in 2007 totalled about 12,800, or 50 per cent more than 2006. Yes, the HDB rental market is hot. For 2008, sub-letting approvals are running 30 per cent higher than in 2007, or about 16,300 units. This is consistent with data from the Department of Statistics on population and workforce growth in Singapore. The new (foreign) households are not living in tents. If they cannot afford private housing, they rent HDB flats.

We see that rental demand alone for HDB flats will probably exceed total private and HDB housing completions of about 12,400 units in 2009. Although the world economy is probably going to feel recessionary in 2009, Singapore will be somewhat insulated. This is because of a number of large projects coming on stream will boost job creation significantly in 2009. In particular, the integrated resorts (IRs) are expected to have 20,000 employees and create 50,000 new jobs overall. Given the nature of the IRs, I would expect a significant portion - perhaps 50 per cent of their employees initially to be foreigners, thus boosting household formation in 2009.

Nonetheless, I expect some softness in the private residential rental market relative to the HDB in 2009, as the bulk of completions will be private. For developments with adjacent completions, rents will be restrained by competition. Indeed, we see this happening already.

URA publishes comprehensive data on the property market. I believe it would be helpful for the market if the HDB published similar data, especially vacancy rates and building completion numbers. Even better would be for the authorities to publish composite data that amalgamates HDB and URA data.

Interestingly, despite the liberalised HDB rental market, HDB rents have risen despite volume growth. Demand has clearly been very strong. With average gross HDB rental yields of 6 per cent, or a net yield of about 5 per cent, HDB upgraders buying private property have a financial planning and investment choice. Upgraders who have the liquidity and risk tolerance may want to look out leasing out their HDB flats and taking a bigger mortgage, instead of selling their flats to finance the upgrade to private housing.

The net rental yield of about 5 per cent versus mortgage costs of about 3 per cent means a positive spread of 2 per cent. This 2 per cent on $400,000 delivers an additional $8,000 a year, assuming rental income does not rise with time. This would be handy in accelerating the reduction of the overall mortgage principal. Over the life of the mortgage, it could amount to more than $200,000 - a nice contribution to the retirement nest egg.

The author is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg. This article is for information only. Readers should seek independent advice before making any investment decisions.

Home prices stable till 2010: Wing Tai

Source : Straits Times - 27 Aug 2008

PROPERTY developer Wing Tai Holdings is in no hurry to launch the two sites it owns in the prestigious Ardmore Park area: the Ardmore Park condominium and Anderson 18.

Wing Tai chairman Cheng Wai Keung said yesterday that although home prices are softening, he expects them to remain mostly stable until at least 2010.

This is because projects that are being completed this year and next were originally sold at relatively low prices in 2005 and 2006, so there is no urgency for buyers of these projects to unload their units.

‘Developers are also quite strong financially, so if they can hold and allow the orderly release of units, I do not see prices dropping drastically,’ he told reporters and analysts at the release of Wing Tai’s full-year results.

Beyond 2010, however, the situation may change. Projects to be completed then were launched at ‘very high prices’ last year, and if the economy does not improve by then, these expensive apartments may flood the market while financially strong developers will probably also weaken, Mr Cheng said.

But he added that while prices have softened, it is not because Singapore’s economic fundamentals have worsened but rather because ‘traders’, or speculators, have left the market. ‘I maintain that fundamentals are sound,’ he said.

In fact, Mr Cheng said he is prepared to hold out for prices to reach $4,000 per sq ft (psf) again at Ardmore Park. ‘Even at the peak, when they were talking about $4,000 psf, I still think that was relatively cheap, compared to values in the world and in Singapore.’

He added that Wing Tai owns two of the three sites to be launched in the Ardmore Park area. SC Global has the third, The Ardmore. ‘We are the ones who will set the price; if we never lower prices, how can it lose value?’

For now, Wing Tai has already locked in construction costs for Ardmore Park and is renting out the units in Anderson 18 rather than tearing down the building for redevelopment.

In the meantime, the developer may launch some of the other sites in its land bank this year or next, said Wing Tai’s chief operating officer Tan Hwee Bin.

Belle Vue Residences in Oxley Walk will be launch-ready next month, while a 99-year leasehold site in Alexandra Road near the Redhill MRT Station will obtain all the necessary approvals by the year end.

Ms Tan said the group will position the Alexandra Road condo as a mid-tier project minutes away from Orchard Road, and may bring to it some of the features it has used in its high-end Draycott8 development.

For the past year, slower home sales have taken their toll on the performance of the property and retail group.

Wing Tai’s fourth-quarter net profit fell 60 per cent to $96.3 million, dragging down full-year net profit 40 per cent to $229.4 million. Revenue more than halved both in the fourth quarter, to $107.3 million, and in the full year, to $428.2 million.

Earnings per share dropped to 30.11 cents for the year to June 30, from 53.12 cents the previous year. Net asset value per share slipped to $2.03 as at June 30, from $2.07 a year ago.

Wing Tai is proposing a dividend of six cents per share for the year, comprising a first and final dividend of three cents and a special dividend of three cents.

Super luxury real estate development in Mumbai

Source: www.indiaprwire.com - August 27, 2008

A study of ´Super Luxury´ real estate development by Master Sun Consulting pinpoints to the new superbly profitable high end niche in India.The super luxury development & its demand is unfazed by a slow down in the real estate industry in general. Super premium housing is growing at 25-30%, luxury housing has already grabbed a 10% of the housing market in value terms. Analysts say the country has seen an unmatched surge in demand.

Super Luxury in a Growth Orbit
India, with a 20.5 per cent increase in the number of HNWIs to 100,015 recorded the second-highest growth rate in HNWIs globally, said the annual World Wealth Report by Merrill Lynch and Cap Gemini. India trailed only Singapore, where the increase in HNWIs grew by 21.2 per cent. The HNWIs are keen to flaunt their wealth & acquire prestige assets. Realizing the market for super-luxury homes, more and more developers are coming up with million dollar homes in formats ranging from condominiums and suburban town houses to golf villas. These millionaires could be professionals earning in the excess of 1 crore per annum, industrialists and businessmen. Add to this list NRIs from the US and the UK and one can conclude that super premium housing in India is on a high-growth trajectory.

Along with high disposable incomes there are other trends that are fuelling the demand for super luxury homes. Members of the joint family who are breaking away invest money from their ancestral property in new super luxury developments. Besides the super rich are upgrading from old buildings (which no amenities to speak of) to new buildings which have a pool, a gym, liftmen and a concierge, not to mention enough parking for family’s many cars.

The Mumbai’s richest live in ‘Presidential Apartments’
Presidential apartments are super-premium apartments in exclusive neighbourhoods, with oodles of space, the most luxurious of interiors, named architects, private lifts, landscaped gardens, and every facility that could be required such as a gym, swimming pool, security and CCTV, children´s play areas.

These apartments are large; typically in the 4,000 to 7,000 sq ft range, though some can go as large as 10,000 sq ft. Some of the presidential apartments have as many as 8-10 bedrooms. The prices for these average Rs 30,000-35,000 per sq feet and above. On average, 20,000 sq ft of space can cost as much as Rs 60 crore (Rs 600 million).

The characteristic feature of a presidential apartment is its privacy and exclusivity, rather than the amenities offered. So you have one apartment per floor, with the habitable floors starting from the 10th floor level or above, in order to rise above the clutter of the buildings around. Besides space, these buildings have top-notch clientele, people that each of the prospective buyers would like to associate with. Most are sold by invitation only to the chosen few to maintain the exclusivity of the community.

Super Luxury Addresses in Mumbai
The super luxury addresses in Mumbai are Nariman Point, Cuffe Parade, Napeansea Road, Colaba, Carmichael Road, Altamount Road and Worli. Some of them have been listed below.

Imperial Towers on Kambala Hill, Tardeo, South Mumbai.
Developed by Shapoorji Pallonji along with S D Corporation, Imperial Towers has two 65-storey towers. Designed by Mumbai architect Hafeez Contractor, apartments will begin only on the twelfth floor, with the first 11 reserved for parking and common utilities like a fitness centre. The Imperial offers sea-views by virtue of its height, and a resort-like gardens and fountains on top of the parking-structure podium, with hanging gardens that mask the structure itself.

Each apartment, sized 2,550-10,105 sq ft, will be designed specifically for the buyer. Brokers say the smallest flat here will cost Rs 6- 7 crores. Imperial towers have two 25,000 sq ft penthouses on top. At a conservative Rs 50,000 a sq ft, each of these penthouses could cost Rs 125 crore.

K Raheja’s Project at Altmount Road
Altamount Road, the 2-km stretch of real estate in upmarket South Mumbai, is the hottest address in Mumbai — tall trees, quiet by lanes and thick foliage.Standing tall at 36 storeys, the building on the old Chattan Bungalow site at Altamount Road, being developed by K Raheja Universal. The first 12 stories offer just amenities. The remaining 24 storey have 12 duplex apartments stacked on top of each other. Each apartment has its own huge terrace and an elevator to take the car right up to the living room. The whole building itself is on a hill, enhancing the view. The price tag is Rs.15-25 Crore.

Lodha Solitaire, on Napean Sea Road in South Mumbai
The area of Lodha Solitaire is 30,000 sq ft. The target possession is in 2008. There are 7 apartments and 1 duplex penthouse. Lodha Builders is selling a 7,200 sq ft apartment for Rs 4.32 Crore, which comes to Rs 60,000 a sq ft. The project highlights are beautiful décor and spectacular sea views. Amenities include an infinity-edge swimming pool and mini-theatre.

Lodha Bellissimo, Mahalakshmi, South Mumbai
Lodha Bellissimo is a 50 storey building, with views of the race course and Arabian Sea situated in the west and an extensive breathtaking garden in the east. Apart from the sprawling garden at the ground level, there is one garden at every four floors. This means that there are over ten flats that come with a garden and sundeck area. Since it is inviting to South Mumbai’s richest of the rich, the Lodha Bellissimo promises a three-level parking to accommodate 500 cars within the premises, with valet service for all. The project will only be ready in the middle of 2009. The flats will only be given to people ‘by invitation’.” The building will be providing 3 and 4 BHK flats at Rs. 4 to Rs. 8 crores.

Lodha Bellissimo has three phases A, B and C. While A & B are already launched and are under construction, which are expected to get complete by September 2009, Bellissimo C is set to get complete by December 2010. Bellissimo C is being sold at the rate of Rs 25,000 per sq ft. Bellissimo A & B have already been sold out.

Residents will have the luxury of access to all the ‘club facilities’, a yoga and meditation pavilion, a hi-tech gym, separate swimming pools for adults and kids, a tennis court with floodlights, squash court, multipurpose hall for basketball, volleyball and badminton, indoor games arena, a well-stocked library, a café, a banquet hall and a cricket pitch.

Villa Orb at Napeansea Road
Orbit Corporation Ltd is set to deliver Villa Orb, an extravaganza costing Rs 55,000-Rs 60,000 a square feet along the upscale Napeansea Road, Mumbai beachfront.Villa Orb consists of seven apartments of 7,500 sq ft each with one apartment per floor. There are eight floors to park over 80 cars.A top floor penthouse will make up a total of eight residential floors of the 18-storeyed super structure, which will also house a gym, squash court, snooker and table tennis tables, swimming pool and health club on the 9th and 10th floor. The façade will have a cladding of Italian marble. An air-conditioned lobby, piped music in common area and a 24- hour concierge system make up the rest.

Clients are offered a bare shell structure to opt for the number of bedrooms they prefer — either four or five. The concept of relating the number of parking slots to the number of built-up units appears to be of a bygone era here. “It’s one for each bedroom we are thinking of, if not more,” says Mr Yadav. Moreover, the company claims to be first in using stainless steel in reinforcement

Dubai-controlled KOP buys US$250m Stein hotels stake

Source : Business Times - 27 Aug 2008

Singapore-based KOP Capital, controlled by the emirate-owned Dubai Group, will buy half of European hotel chain Stein Group for US$250 million, and spend the same amount on new hotels in Asia over the next four years.

‘We have always wanted to acquire an international chain of hotels and resorts, and were looking for a product that we felt was missing from the market. Stein looked like a good strategic fit,’ KOP’s managing director Leny Suparman told Reuters in an interview on Wednesday.

She said the group expects a boom in leisure and business travel within and to Asia despite the global economic slowdown, as many of these markets continue to see strong growth relatively to Europe and the United States.

Dubai Group is part of Dubai Holding, which is owned by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.

Stein Group founder David Stein, who remains as chairman and chief executive following the acquisition, said the company will look at buying smaller luxury hotels of up to 85 rooms in big Asian cities such as Singapore, Beijing, Tokyo and Hong Kong.

‘We hope to have about 8 to 12 hotels in Asia over the next four years, depending on whether we can buy existing properties,’ he said, adding that the firm was also looking at purchases in Europe, which has been hit by a property downturn.

The firm owns 15 small luxury hotels in European cities including in London, Monte Carlo as well as in Tuscany, where room rates can cost upwards of US$500 per night on average, Stein said.

The group does not compete directly with large global hotel chains such as Marriott International and InterContinental, but compares most closely with niche hotelier Orient Express, he said.

‘There is an increasing demand by affluent clients for a more exclusive, intimate experience that a smaller hotel can offer. And they will go for a recognised brand because many of our clients can’t afford to have a bad night’s stay.’ — REUTERS

Many expats live like ordinary Singaporeans

Source : Straits Times - 27 Aug 2008

I REFER to Ms Lydia Rahman’s letter ‘Expats score at expense of others’ on Monday. I think Ms Rahman has generalised everything according to her interpretation and expectations.

First, not all expats own cars: they take the MRT, buses and taxis, just as ordinary Singaporeans like you and I do. The ones who own cars are more likely to be families with children, as the wives normally ferry the children around, like some of us do.

Not every expat has perks like interest-free car loans, housing allowance, hardship allowance and relocation allowance (probably a one-off when they arrive), as Ms Rahman pointed out. Some are paid the same or lower than locals.

Most expats do not have their children’s school fees paid for - yes, they actually pay out of their own pocket. Some opt for local schools where possible, but others have no choice but to pay the hefty fees of international schools.

Most expats, if not all, do not have their families with them in Singapore to save on housing costs. They definitely cannot apply for HDB flats.

All those expats with big, fat pay cheques are either at the level of chief executive officers or own their own businesses. They make up only a small percentage of expats here and are a different kettle of fish.

Young Singaporeans are not displaced in Singapore - they are venturing out to see the world and gaining new experiences. People leave for different reasons - the influx of expats is definitely not one of them.

A lot of Singaporeans have been quoted as saying that the lifestyle in Singapore is too hectic for them. It is not an option to change the pace of business here as we would fall behind the rest of the world. It is up to the individual to adapt. The Government is already doing its best by providing more parks and greenery for people to relax in.

A lot of expats appreciate Singapore more than most Singaporeans do. Some Singaporeans complain about minor things and forget what a great place this is. Be thankful that we live here.

The term ‘expat’ has been too widely associated with ‘foreigners with big pay cheques, who are here to take over our country’. In fact, they are ‘foreigners living outside their own countries, who are here to make a living - like you and me’ - without family support and sometimes with discrimination from some locals even though they are already paying higher prices for certain things.

Lastly, what Ms Rahman proposed on separate car and fuel prices is just not practical. Just learn from some expats - buy a really old second hand car at a cheaper price or just take public transportation. I prefer the latter because I think we have a world-class public transport system - so do some of my foreigner friends.

Jennifer Young (Ms)

Ensuring rental flats go to ‘truly needy

Source : Straits Times - 27 Aug 2008

TWO-THIRDS of people who apply to rent Housing Board flats are former flat owners.

And of this group, two-thirds are not in arrears nor are they divorce cases, whose special circumstances are weighed when they apply for rental flats.

These people appear to be ‘not truly needy’, and the Housing Board does not want them to crowd the rental queue meant for low-income earners, said Dr Mohamad Maliki Osman, Parliamentary Secretary of the National Development Ministry.

He was responding to Madam Ho Geok Choo (West Coast GRC), who had asked why there has been a sudden surge in demand for rental flats.

Dr Maliki said that with high property prices, some people sell their flats and turn to heavily subsidised rental flats as ‘an attractive option’.

‘We are in the process of reviewing the rental applicants to make sure the subsidies given to rental housing are targeted at the really truly needy,’ he added.

The not truly needy group plus the higher cost of living are among the reasons for the strong demand for rental flats, he noted.Dr Maliki does not think those on public assistance form the majority of families that default on their rent to the Housing Board.

This is because by and large, they receive ’substantial assistance’ from the Ministry of Community Development, Youth and Sports, he said, adding that he did not have the full profile of defaulters.

People who apply for rental flats must have a household income that is not more than $1,500, and they must not have sold their property in the last 30 months.

In his National Day Rally speech, Prime Minister Lee Hsien Loong had expressed concern over the tripling in the number of people seeking rental flats.

Those who are not needy can look for alternatives, he said, such as moving in with their children or renting a room in the open market.

LEE SIEW HUA

New HDB flats for sale, rent in West

Source : Straits Times - 27 Aug 2008

Coming up in Bukit Panjang: 474 homes for sale, 300 for rent

HOMEBUYERS are being offered a further 474 new flats to choose from, with the launch of a new Housing Board project in Bukit Panjang yesterday.

Also, 300 units in two new rental blocks will be built nearby, for the first time under the same contract as the flats being offered for sale.

Bookings for Senja Green are now open. Models of the development can be viewed at the HDB Hub. — PHOTO: HOUSING BOARD

HDB’s latest move to ramp up the building of new flats and rental homes comes after demand soared for both types of housing in the past year.

The new project, called Senja Green, offers two- to four-room units - with prices ranging from $82,000 to $270,000 each.

The flats, under HDB’s build-to-order scheme, will only be built if a certain level of demand is reached.

HDB’s latest development brings the number of new flats launched for sale this year to 5,000. It plans to launch 8,400 units by the end of the year.

As for rental flats, HDB said it expects to increase its current stock from 42,800 to 49,860 by 2011.

The sharp hike in demand for rental flats was flagged by Prime Minister Lee Hsien Loong in his recent National Day Rally speech as a worrying trend.

To prevent abuse of the rental scheme, National Development Minister Mah Bow Tan announced stricter rules last Saturday, effective immediately, which will see Singaporeans in desperate need of a home given priority for such flats.

Each month, about 131 tenants give up their flats and 382 people join the queue.

In June, there were 4,387 applicants on the waiting list. They wait, on average, 18 months for a one-room rental flat and nine months for a two-room flat.

HDB said yesterday that the rental flats were included in the same building contract ‘for greater economies of scale, amid rising construction costs’.

The launch of Senja Green follows another HDB project, Segar Meadows, in Bukit Panjang town, which was launched last November.

As at 5pm yesterday, 177 applications had been lodged for the new units.

Senja Green is located in Woodlands Road and is bounded by Senja Way and Senja Road. The rental blocks are separate from Senja Green but will also sit on Woodlands Road.

The new flats are close to the Ten Mile Junction shopping mall and Senja LRT Station as well as West View Primary School and West Spring Secondary School.

Residents can also look forward to the Downtown Line 2 in Bukit Panjang, which will be ready in about 2015, HDB said.

The 96 two-room flats available at Senja Green will come with a floor area of 47 sq m each. They will be priced between $82,000 and $106,000 each.

The 94 three-room flats will have a floor area of 67 sq m each and cost $138,000 to $170,000. There are also 284 four-room flats of 93 sq m in size, which will go for $211,000 to $270,000 each.

Buyers can opt for ceramic floor tiles and internal timber doors to be installed in their flats, at an additional cost.

Interested buyers can apply online at HDB’s website www.hdb.gov.sg from now until Sept 8.

The selection exercise will start from November. Models of the estates are on display at the HDB Hub Habitat Forum in Toa Payoh until the closing date.

Lease buy-back kicks off next year

Source : Straits Times - 27 Aug 2008

FROM January next year, elderly home-owners of small flats will receive $550 each month if they join a new plan to sell part of their lease back to the Housing Board.

The proceeds from this sale will go to a Central Provident Fund Life annuity, which gives them a stream of monthly payouts for retirement even as they continue to stay comfortably in their homes.

This plan is open to people who are at least 62 years old.

Senior Minister of State for National Development Grace Fu yesterday gave Parliament an update of the scheme, first announced last August by Prime Minister Lee Hsien Loong.

Said Ms Fu: ‘This is really a good solution to cater to a group of the elderly who probably do not have as many options as those who are staying in the bigger flats.’

Their two- to three-room flats are ’sizeable assets which they can monetise’ by turning to the lease buy-back scheme, she added, replying to Madam Cynthia Phua (Aljunied GRC) and Mr Baey Yam Keng (Tanjong Pagar GRC).

She projected that 25,000 households can sign up for it. This represents 70 per cent of the elderly who own two- and three-room flats.

She addressed two common questions.

First, what happens if the flat owner outlives the lease? ‘No elderly will be left homeless,’ she assured the House.

One option is to buy a lease extension. But not all can afford this, so the HDB will assess the housing options of each family and be ’sensitive’ to their financial health, she said.

Next, what happens if an elderly person dies prematurely? In this case, his estate will receive a ‘pro-rated refund on the residual lease’, Ms Fu said.

For the elderly, studio flats are another option and the Government is building more of these, she noted in her reply to Madam Phua.

Ms Fu said: ‘In many of the new estates we are building, two-room flats are available.

‘In fact, they are not as well subscribed as the bigger flats so once the flats are ready, they are available straightaway.’

MONETISING ASSETS

‘This is really a good solution to cater to a group of the elderly who probably do not have as many options as those who are staying in the bigger flats.’ - Ms Grace Fu, Senior Minister of State for National Development, on the new plan allowing the elderly to sell part of their lease back to the Housing Board

In the name of my neighbours, is there no hope for me?

Source : Straits Times - 27 Aug 2008

I REFER to the article “Fix bank-or-CPF charge problem” (Aug 20) by Jessica Cheam. She called an en bloc sale “a forced sale in the name of urban renewal”.?

I might add that en blocs are “a forced process in the name of my neighbours”. As my condo tries to go en bloc again for the fourth time, I am now at the mercy of en bloc team No. 4 which has decided, after they formed a year ago, to actually stop short of the Collective Sale Agreement (CSA) signing. As most of us know, this is a technical ploy to keep the collective sale in the estate hanging over our heads like the sword of Damocles, for an indefinite period. Because the clock only starts ticking on the collective sale once the first SP (subsidiary proprietor) has signed the CSA.

So, how long will we live under threat of this and every en bloc? Every year after our 10th year in the condo? Should families be allowed to be unsettled in this way? Did the framers of those en bloc laws consider this?

In my estate, there is a diehard group of pro-en bloc residents. They form about 20 per cent of the owners. Again and again, they call for an extraordinary general meeting to “en bloc” the condo? Because the laws allow this. So far, they have been defeated, yet they are indefatigable! Once one disbands, a new committee rears its head. A committee, I might add, which consists primarily of owners who do not live in the condo and do not call it home. Should my abode, my place of rest, be subject to this repeated unease? Should someone who does not value my estate and looks upon it as an economic tool, who has no roots in my community, be allowed to unsettle those who have nested there? Surely the core values of home and community should outweigh those of “urban renewal”? Should it always be about the money?

Property laws that are created to facilitate urban renewal and allow others to steamroll the nesting urges of ‘Stayers’ will always create dissent and unhappiness. Why should we have to fight tooth and nail to keep our home??

Is there hope for Stayers?

Yeo Li Ying (Miss)

Investing in India’s real estate sector

Source : Business Times - 27 Aug 2008

INVESTMENT in the Indian real estate sector continues to grow, albeit the pace may be slowing just a little. Foreign developers as well as private equity funds remain bullish, long-term, on India’s property market.

Not only is investment flowing into the ‘first-tier’ cities, but attractive real-estate deals are also being negotiated and signed in ’second-tier’ cities such as Indore, Jaipur and Cochin.

From a foreign investor’s perspective, the recent correction in real estate prices in some parts of India is good news in that it could result in land being available at attractive values.

But although Indian property may make an attractive investment for foreign investors, it is important that they address some of the regulatory issues prior to making an investment.

According to India’s current foreign direct investment (FDI) policy, 100 per cent FDI is allowed under the automatic route - that is, without requiring government approval - for the construction and development projects that include housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional-level infrastructure and townships.

But this is subject to certain conditions:

~ Minimum area for development under each project should be:

i) 10ha in the case of services housing plots; or

ii) 50,000 sq m in the case of construction development projects.

iii) In case the project is a combination of the two, any one of the two conditions would have to be met.

~ Minimum capitalisation of US$10 million for wholly owned subsidiaries and US$5 million for joint ventures with Indian parties.

~ The funds have to be brought in within six months of commencement of business of the company.

~ The original investment is subject to a lock-in period of three years from the completion of minimum capitalisation.

~ At least 50 per cent of the project must be developed within a period of five years from the date of obtaining all statutory clearances.

~ Investors would not be permitted to sell undeveloped plots.

Though the investment policy seems straightforward, investors still need to address some key issues and comply with other regulatory requirements.

For example, when it comes to funding, India’s exchange control regulations permit external commercial borrowings (ECBs) - that is, commercial loans in the form of bank loans, buyers’ credits, suppliers’ credits, and loans from shareholders.

There are several restrictions on the end use of ECB funds. One of these is that the proceeds of ECBs cannot be used for the purpose of acquiring real estate in India. Accordingly, ECBs cannot be used for real estate development in India.

Preference shares are also considered as ECBs and, likewise, cannot be used to invest in a real estate project in India.

The only exception is the use of compulsory convertible preference shares or fully and mandatorily convertible debentures, which would be treated as part of equity and would be considered as FDI.

Therefore, apart from pure equity funding, only compulsory convertible preference shares and fully and mandatorily convertible debentures can be used. This would tend to minimise the options available for funding a project in India because all funds would have to be in the form of equity or instruments which can be converted into equity.

As per the FDI regulations, a foreign investor’s original investment ‘cannot be repatriated before a period of three years from completion of minimum capitalisation’.

Original investment

The question therefore arises as to the meaning of the term ‘original investment’. Should the term be interpreted as ‘minimum capitalisation’ or should it be interpreted to mean the funds brought into the company in the first six months?

Since the term is not defined, it becomes important to have a correct interpretation, as the ‘original investment’ is subject to a three-year lock-in period. The view that seems to be emerging is that funds brought into the company in the initial six months - that is, the minimum capitalisation of the commencement of business - is the original investment and subject to the lock-in period.

However, the risk is that if an amount in excess of the minimum capitalisation is invested during the first six months, the entire amount would be treated as ‘original investment’ and would be subject to lock-in. To minimise this risk, only funds to the extent of minimum capitalisation should be invested during the first six months.

Investors in real estate have to bring the funds into India within six months of ‘commencement of business’. Again, the term ‘commencement of business’ has not been defined. It can be interpreted in various ways; for instance, in the construction business it could mean the point at which construction actually commences.

The view emerging from Indian regulators is that the term ‘commencement of business’ means when the shareholders agreement or joint venture agreement is signed. Accordingly, the funds have to be invested within six months upon signing the agreement.

Finally, there are questions surrounding partially completed projects. The FDI guidelines do not clarify whether FDI would be permitted into these.

The question would arise as to the meaning of ‘partially developed’. In this connection the view appears to be that if the project is less than 25 per cent complete, FDI would be permitted. However, in this case it may be prudent to seek prior approval of the Foreign Investment Promotion Board before making an investment.

Given the fact that India desperately needs good-quality housing and commercial space, the current slowdown in deals in India is likely to be temporary.

In due course, growth in the Indian real estate sector will resume with more acquisitions and consolidation. But foreign investors planning to enter India’s real estate sector need to address a number of regulatory issues before they go in.

The writer is the head of tax of BDO Raffles in Singapore. The views expressed in this article are his own

HDB launches latest BTO project in Bukit Panjang

Source : Business Times - 27 Aug 2008

THE Housing and Development Board (HDB) yesterday launched its 474-unit Senja Green project in Bukit Panjang.

On the market: Senja Green comprises 96 two-room, 94 three-room and 284 four-room apartments. It is bounded by Woodlands and Senja roads and Senja Way

The flats, offered under HDB’s build-to-order (BTO) scheme, are among 8,400 BTO units planned for 2008, HDB said.

Senja Green comprises 96 two-room, 94 three- room and 284 four-room apartments.

Two-room flats cost $82,000-$106,000, three- room flats $138,000- $170,000 and four-room flats $211,000-$270,000.

Senja Green is bounded by Woodlands and Senja roads and Senja Way. Come 2015, residents will also be near the upcoming Downtown Line 2 at Bukit Panjang.

Amid rising HDB prices, the BTO scheme offers first- time buyers one of the cheapest options, market watchers say.

The flats are priced a shade lower than nearby resale flats, says Eugene Lim, assistant vice-president of property agency ERA Asia- Pacific.

A four-room resale flat in the area costs about $280,000, he said.

‘The new flats offer buyers a variation from previous BTO projects, which have mostly been in areas such as Sengkang and Punggol,’ he noted.

Hotel site at Short Street now available

Source : Business Times - 27 Aug 2008

DEVELOPERS interested in a hotel site in Short Street can apply for it to be put up for tender, after the Urban Redevelopment Authority (URA) released detailed sale conditions.

The 0.12 hectare site is one of two new hotel plots on the reserve list under the second-half 2008 Government Land Sales (GLS) programme.

The site, in the Bras Basah/Bugis district, has a maximum permissible gross floor area of 4,077 sq metres (43,884.4 sq ft) - smaller than others released this year.

Cushman and Wakefield managing director Donald Han believes it will attract smaller developers and new entrants to the market.

The owner of neighbouring Albert Court Hotel may feel compelled to bid, he said.

He reckons that if the site goes up for public tender, bids could range from $350 to $400 psf per plot ratio (psf ppr) - a quantum of $15.4-$17.6 million.

Knight Frank director (research and consultancy) Nicholas Mak also sees bids in this range.

‘Based on planning details and the neighbourhood, a boutique hotel development with an ethnically artistic design is deemed suitable,’ he said.

For instance, a developer could put up a Peranakan-style building similar to Albert Court Hotel.

Earlier this month, URA received a committed bid of $51 million or $249.6 psf ppr for a reserve list hotel site at Kallang and Jellicoe roads.

Also this month, URA awarded a hotel site in Balestier Road to HH Properties, which put in the highest bid of $172 psf ppr.

There are now nine hotel development sites on the GLS reserve list.

According to URA, the reserve list for H2 2008 provides for potential supply of 5,050 hotel rooms, including a white site at Outram Road.

URA rejects sole bid for Tampines condo site, saying it’s too low

Source : Business Times - 27 Aug 2008

FOR the fourth time this year, the government has rejected bids at a state land tender for being too low, amidst weakening property market sentiment and rising construction costs that have forced bidders to clip their land bids.

And what’s interesting is that in three of the four instances, the top or sole bidder was the Midview group, involved in the construction and property businesses as well as in general trading.

The company, controlled by Lim Kim Hong and Lim Huixing, has its office at Midview Building at Bukit Batok Street 23.

Yesterday, Urban Redevelopment Authority (URA) turned down the sole bid for a private condominium housing site at Tampines Avenue 1/Avenue 10 as the price offered was too low.

The 99-year leasehold plot, which faces Bedok Reservoir, drew a bid of about $118 per square foot per plot ratio (psf ppr) from Midview unit Boon Keng Development Pte Ltd.

The sole bid was below general market expectations, which ranged from $150 to $230 psf ppr. When the tender for the site closed on Aug 12, most property consultants had already said there was only a slim chance of the site being awarded.

The three sites where bids were earlier rejected by the state for being too low were the Ten Mile Junction site in Choa Chu Kang (which was to have a residential component), a landed housing plot at Westwood Avenue in Jurong, and a transitional office site at Aljunied Road/Geylang East Avenue 1.

Midview group was the top bidder for the Westwood Avenue plot as well as the sole bidder for the transitional office site.

Analysts have also pointed out that some of these sites were not that attractive to begin with.

The latest Tampines plot that was not awarded, for instance, does not have strong attributes like transportation links or proximity to amenities.

An industry observer also highlighted an element of opportunistic bidding seen, especially on the part of contractors, at recent state tenders.

‘With the current market uncertainty and most developers keeping away from land tenders, some players see a chance to try and get land on the cheap and hopefully reap a windfall. I guess it’s their business strategy: They can manage construction costs better, plus if they can get land at low cost, and even if the property market comes down, say, 30-40 per cent, they would still be OK,’ he said.

The Tampines Avenue 1/10 plot was offered through the confirmed list of the Government Land Sales programme where sites are released according to a pre-stated schedule and the government’s minimum or reserve price is not made known.

Separately, the Housing & Development Board yesterday made available for application a 99-year condo plot at Yishun Ave 2/Yishun Ave 7/Canberra Drive through the reserve list.

The plot will be launched for tender only upon successful application by a developer, with an undertaking to bid at a minimum price that is acceptable to the state.

Rate cut relief but it’s no panacea for Aussie Reits

Source : Business Times - 26 Aug 2008

With Australia poised to cut interest rates, beleaguered property trusts could see their rental yields become more attractive, but the bad news flow that has battered the sector may rumble on.

Australia’s highly leveraged real estate investment trusts (Reits) have suffered as the global credit crunch lifted borrowing rates and raised questions about a practice of using non-rental income to boost dividend payments.

With debt spreads widening to about 110 basis points from 50 basis points six months ago, GPT Group, Mirvac Group and Babcock & Brown Ltd have issued profit warnings and seen their share prices dive.

Centro Properties Group set off the bearish mood when concerns about debt refinancing emerged early this year.

The property index has lost 42 per cent since a peak last October, but has picked up over 20 per cent since mid-July.

Some analysts say the sector is still 20 per cent undervalued, and rate cuts would ease pressure on the securities, which pay most of their rent to investors as dividends.

After more than a decade of expansion backed by a commodity boom, Australia’s economy is now seeing signs of weakness, with consumer spending sapped by rising fuel and mortgage costs.

The Reserve Bank of Australia (RBA), the central bank, has said it would not wait for inflation to fall before lowering interest rates, giving the clearest indication it would ease monetary policy next month.

‘As the RBA begins the easing cycle, this will make Reits more attractive from a yield perspective,’ said Merrill Lynch analyst John P Kim.

The weighted average dividend yield for Australian Reits is 7.8 per cent, slightly above the central bank’s cash target rate of 7.25 per cent and compared with a 10-year government bond yield of 5.8 per cent .

‘The large-cap A-Reits will benefit the most, as equity and global property investors revisit the sector, now that one of the major headwinds against the industry appears to be headed for a reversal,’ Mr Kim added.

During the last two periods of falling interest rates, in 1996-98 and in 2001, Reit prices rose 6.7 per cent in the following 12 months, according to UBS.

UBS says groups active in residential development or which have large domestic floating debt exposure should benefit most, pointing to Stockland Group and Mirvac as examples.

Affordability has become an issue for Australia’s nearly A$3 trillion (S$3.7 trillion) residential market. Home prices have jumped five-fold in 20 years, while household income has only doubled, so lower borrowing costs should offer homebuyers some relief.

But even if the central bank cuts its policy rate, lenders could still be reluctant to adjust their views of risk for property trusts, said Clement Chong, vice-president and senior analyst for Moody’s Investors Service.

‘One has to wonder whether the cut in the funding cost will be passed on to corporate borrowers,’ Mr Chong said. ‘It’s a bit hard to build a rate-cuts case at this point.’

In May, Moody’s said it maintained a stable outlook on the ratings of Australian Reits over the next 12 months, but warned that a challenging credit environment and softening property fundamentals in some overseas markets were risks.

Dugald Higgins, associate director for property research firm Property Investment Research, said a deteriorating global economy could hurt Reit earnings, as commercial property values and rents suffer in Australia and the United States, where many Australian trusts own shopping malls, offices and warehouses.

‘It will only take a piece of bad news to hit the market and I imagine we will see a lot of people jump ship again,’ he said.

‘Valuations, fundamentals are still pretty much out the window and have been in the last six months and I don’t see that changing a lot throughout the rest of this year.’

Last week, Babcock & Brown, which has listed real estate vehicles, saw its share prices tumble after a profit warning due partly to revaluation of real estate assets. Babcock & Brown shares have crashed to below A$4 from almost A$35 in June 2007.

Office vacancy rates in Australia crept higher in July, prompting property executives to predict the global credit crunch will take its toll on rents and the value of buildings.

As the market braces for Reits’ earnings announcements, investors will watch property valuations to see whether the trusts apply mark-to-market accounting.

The practice, which has gained ground in Britain, relies on indices rather than appraisals of individual buildings, and allows companies to adjust their asset valuations faster.

‘Typically in Australia, we’ve still got six monthly valuations,’ said Tim Nation, director of international investment at DTZ.

‘It just inherently slows down the ability for asset values to reflect where the market thinks the pricing should be.’ - Reuters

UAE mortgage market seen growing 220% in next 3 years

Source : Business Times - 26 Aug 2008

The mortgage market of the oil-rich United Arab Emirates (UAE) is projected to grow 220 per cent to 64 billion dirhams (S$24.7 billion) in the next three years, local newspaper Gulf News reported yesterday.

According to a study by the Dubai-based real estate company Bonyan International Investment Group, syariah-compliant house financing will make up more than 60 per cent of the figure.

The UAE is viewed by global investors as the best market for capital gains growth, and has been identified as the only Gulf country to witness an increase in consumer confidence for the second half of this year, Bonyan said.

‘This can be attributed to the UAE’s pioneering move to allow foreigners to invest in local property, which created outstanding opportunities for world-class developers to attract investors to the country,’ it noted.

Capital gains and income yields have been much higher in the UAE than most other international property markets, with investors acquiring investments with no personal income or capital gains taxes.

The UAE has seen a boom in its real estate sector since 2002, when Dubai, the UAE’s commercial and financial hub, gave foreign investors the green light to buy property on a freehold basis.

The government of Dubai issued a 35-article mortgage law last Tuesday in a bid to regulate the emirate’s booming real estate market. — Xinhua

Ban Joo to sell properties for $11 mln

Source : Business Times - 26 Aug 2008

Ban Joo & Company Limited said on Tuesday it plans to sell 23, 24, 25 and 26 Circular Road Singapore for $11 million in cash to Pan Sun Hardware Pte Ltd and its nominee.

Knight Frank Pte Ltd has valued the properties at $10 million.

HDB Lease Buyback Scheme could be implemented in January 2009

Source : Channel NewsAsia - 26 Aug 2008

The Lease Buyback Scheme (LBS) to help low-income households monetise their flats for their retirement needs could be implemented as early as January next year.

Senior Minister of State for National Development Grace Fu gave this update in Parliament on Tuesday when replying to a question brought up by MP for Aljunied GRC Cynthia Phua.

Under the scheme, first announced by Prime Minister Lee Hsien Loong in his 2007 National Day Rally speech, the elderly will get a S$5,000 up-front bonus when they sell their remaining flat lease, less the first 30 years, to the Housing and Development Board (HDB).

The remainder of the sale proceeds will be used to buy a CPF LIFE Plan, which provides a lifelong income stream of about S$550 a month for the flat owner.

Some 25,000 low-income elderly households owning 2- and 3-room flats could benefit from the scheme.

Ms Fu also addressed a concern that the elderly have over the scheme.

She said: “A commonly asked question on the LBS concerns the arrangement should the flat owner outlive the 30-year LBS lease. I want to assure Madam Phua that no elderly will be left homeless in that scenario.

“One option is lease extension. However, we do recognise that not all can afford the full price for such extension. HDB will have to assess the housing options available for each case on an individual basis, and be sensitive to the financial health and family circumstances of the elderly concerned.

“On the other hand, if the lease needs to be terminated prematurely because the elderly has passed away, his estate will receive a pro-rated refund on the residual lease.”

URA releases sales conditions for reserve hotel site at Short Street

Source : Channel NewsAsia - 26 Aug 2008

The Urban Redevelopment Authority (URA) has released detailed sales conditions for a reserve site at Short Street for hotel development.

The site, located within the Bras Basah and Bugis district, is one of two new hotel sites scheduled for release for application under the reserve list of the Government Land Sales programme for the second half this year.

Developers interested in purchasing the site can now apply to the URA for it to be put up for tender.

Under the reserve list system, a site on the list would only be put up for tender if a developer’s indicated minimum bid price in his application is acceptable to the government.

The land area of the site is about 0.12 hectare and can generate a maximum permissible gross floor area of 4,077 square metres.

This makes it ideal for boutique hotel development, URA said.

It has a maximum building height of 12 storeys and will be for lease for 99 years.

Tampines site: Sole bid rejected

Source : Straits Times - 27 Aug 2008

THE sole bid for a Tampines condominium site overlooking Bedok Reservoir has been shot down for being too low.

Boon Keng Development’s optimistic offer of $84.6 million, or $118 per sq ft (psf), for the site was just not enough, said the Urban Redevelopment Authority (URA) yesterday.

Consultants were not surprised that the bid was rejected.

They had previously said that anything from $150 to $230 psf would have been more reasonable as apartments on the 3.2ha site could sell for up to $700 psf.

According to Knight Frank’s director of research and consultancy, Mr Nicholas Mak: ‘If the Government had accepted it, it would be taken as a signal that it is lowering its reserve price for all other sites.

‘Or (a signal) the Government is of the opinion that the land price has fallen to the same level as that during the 1998 recession.

‘Even then, the last piece of government land sold in 1997 before site tenders were suspended because of the recession was $171 psf for a piece of land at Hougang Street 11.

‘So it was too optimistic to expect the government to award this bid.’

The tender for the 99-year residential site at the junction of Tampines Avenue 1 and 10 was launched on June 17 and closed on Aug 12.

Property subsales - who wins and who loses

Source : Business Times - 26 Aug 2008

For those who sold in the first seven months of this year, close to 97% came out ahead

Sentiment in the Singapore property market is now far from bullish, but data shows that nearly 97 per cent of those who have sold private apartments and condos in the subsale market in the first seven months of this year have made profits.

Only 3 per cent incurred losses, an analysis of caveats by Savills Singapore shows.

For those who turned a profit, the average gain per unit came to $417,563 or 36.5 per cent. Generally, the longer the holding period, the bigger the gain.

Subsale deals are seen as a proxy for the level of speculative activity in the market. On average, those who had bought their units in 2004 and sold them in the subsale market this year made the biggest gain, averaging nearly $692,000, or an 84 per cent profit. They are followed by those who had picked up units in
2005, who recorded an average gain of about $645,200 or 62 per cent from selling their homes in the subsale market this year.

In absolute dollar terms, the smallest average gain of around $175,600 was by those who bought their units this year, reflecting a holding period of just a few months.

The profit or loss in the calculation is the difference between sale and purchase prices and does not take into account stamp duty and other expenses.

‘The fact is that longer holding periods allow for larger gains, shorter holding periods for smaller gains. This is consistent with the fact that real estate is a long-term investment. Investors with short exit time frames should look for alternative instruments,’ said Savills Singapore’s director of marketing and business development Ku Swee Yong.

Savills’ analysis was based on 1,040 caveats for subsale transactions from Jan 1 to July 31 this year captured by Urban Redevelopment Authority’s Realis system as at Aug 19. Of these, 821 had previous caveat records dating back to 2003 and Savills compared the latest subsale price of each unit with the earlier price paid by the seller to work out the profit or loss.

Citylights, Varsity Park Condo and The Sail @ Marina Bay had the most subsales in the first seven months of this year - 63, 47 and 45 respectively. The Sea View and City Square Residences had 30-plus subsales each. Park Infinia at Wee Nam, The Calrose, Icon and The Raintree each had 20-odd subsales.

Subsales, often seen as a gauge of speculative activity, refer to secondary market deals in projects that have yet to receive their Certificates of Statutory Completion. This may be anywhere from three to 12 months after the project receives its Temporary Occupation Permit (TOP).

Market watchers note that many of the projects topping the subsale chart this year had either received TOP or are close to receiving TOP. Some of the units that changed hands in the subsale market could have been purchased on deferred payment schemes from developers in the past. Typically, such schemes run out when the projects get their TOP and that is when buyers have to pay the chunk of the purchase price to developers.

The deferred payment scheme was scrapped in October last year to discourage speculative buying.

Of the 25 loss cases for subsale deals done this year, sellers of about half the units had themselves bought theirs in the subsale market, while the other half had made direct purchases from developers. For instance, the four units sold in the subsale market at a loss this year at City Square Residences had all been picked up in the subsale market last year.

Looking ahead, Savills’ Mr Ku expects subsales to maintain at current levels, that is, about 150 units a month. Those who want to sell now will have to expect lower profits, he said.

‘Whether in good or bad times, there will still be subsale losses from people being forced to make untimely sales due to corporate liquidation, bankruptcy, divorce,’ Mr Ku added.

In cases where investors are sitting on potential losses, Jones Lang LaSalle Singapore’s head of residential, Jacqueline Wong, said: ‘My advice to my clients, who are usually foreigners, have bought in prime districts and are well off, would be, ‘If you can, hang on. It will be just a temporary paper loss. Singapore has a lot of things going for it in the mid term’.’

Another seasoned property consultant said: ‘A lot will depend on your entry price vis-a-vis other owners, especially in a big development. If a lot of them bought at say $1,000 psf from the developer and you got your unit later for $1,800 psf in the subsale market from an earlier buyer, you’re in a disadvantageous position. If the market dives, the earlier buyers could offload their units at much lower prices than your cost price.

‘On the other hand, everybody may be in the same boat. Say, if you’ve bought into a small project of 30 units and everyone’s bought at about the same price, and if there’s not much competition from surrounding projects, chances of prices going down substantially may be lower because everyone’s locked in at the same threshold.’

Subsale property gains top out at $4.2m

Source : Business Times - 26 Aug 2008

But Cosmopolitan penthouse seller nurses $463,400 loss

The biggest profit in absolute dollar terms from a subsale deal in the first seven months of this year was $4.2 million, reaped for a 22nd-floor unit at The Grange.

It was offloaded in the subsale market in April for $11 million, compared with a $6.8 million purchase price in September 2005 paid to the developer.

In fact, on an average basis too, The Grange has seen the most profitable subsale deals this year, with the 13 units sold in the project between Jan 1 and July 31 generating an average profit of slightly over $2 million per unit.

In percentage terms, the average subsale gain at The Grange worked out to 52 per cent, according to Savills Singapore, which analysed caveats for subsale transactions from Jan 1 to July 31 captured by the Urban Redevelopment Authority’s Realis system as at Aug 19.

The biggest subsale loss was $463,400 for a penthouse unit at The Consmopolitan at Kim Seng Road. It was sold in April for about $2.3 million, against the $2.8 million purchase price paid in July last year.

Other projects with sub sale losses included two units at Soleil@ Sinaran, four at City Square Residences, three at City Lights and one each at One St Michael’s, Park Infinia at Wee Nam and Marina Bay Residences.

Percentage-wise, some of the biggest subsale profits were recorded for Then Sail @ Marina Bay. The seller of a unit on the 49th floor reaped a 178 per cent return when he disposed of it in May for $1.43 million, compared with the $510,400 he paid to buy the apartment from the developer in late 2004.

Owners of 14 other units at The Sail also doubled their money or more, when they sold their properties in the subsale market this year. However, there was also a unit in the development that chalked up a $63,000 subsale loss.

Among prime district projects, profitable subsales included a 17th floor unit at St Regis Residences, which yielded a handsome $2.78 million return for its seller in June, after a two-year holding period. A subsale deal at The Orchard Residences also generated a $1.44 million profit.

Over in the waterfront housing district of Sentosa Cove, four subsales of The Azure condo resulted in gains of at least $1 million per unit. One unit, in fact, generated a $3 million profit for a two-year-plus holding period.

However, the owner of another unit in the 99-year leasehold condo incurred a $106,000 loss when he sold his unit in the subsale market in April for about $3.4 million after a 10- month holding period.

Analysts note that, given the current weaker market sentiment, profits from subsales can be expected to shrink in the days ahead, or there may be even more loss cases, particularly for those who bought at the peak of the market in the first half of last year.

Savills Singapore director of marketing and business development Ku Swee Yong suggests that there is no reason for panic selling if investors consider that interest rates are still very low.

‘So owners who have not lost their jobs can still afford to hold on to their mortgages,’ he said.

Also demand for rental properties should increase by early 2009 as the Marina Bay Sands resort boosts its employment drive ahead of its planned opening late next year.

A seasoned developer highlighted the fact that subsale transactions, whether at a gain or loss, are still taking place, is a good thing.

‘There’s diversity of different sellers, with varying financial strengths and abilities to hold, and similarly, there’s a diversity of buyers. There’s still liquidity out there. That’s a good thing.

‘If we didn’t have this diversity of behaviour and ability to buy, sell or hold, we’d have a very uni-dimensional and monolithic market.

‘That wouldn’t be a good thing because, then, you may have everybody wanting to sell at the same time (and nobody wanting to buy). Then the market would grind to a halt,’ he said.

Sharp fall in property prices unlikely

Source : Straits Times - 26 Aug 2008

But there are more people keen to sell than buy now, says DTZ study

SINGAPORE’S property market presents plenty of buying opportunities for institutional investors now that it has cooled somewhat, according to a study by property firm DTZ Debenham Tie Leung.

But buyers waiting for a major price correction will be disappointed.

While the growth in prices may slow, there is unlikely to be a significant fall in property prices here, said Mr John Stinson, DTZ’s regional director of sales and investments for Asia-Pacific’s capital markets.

‘Singapore hasn’t had a long boom, unlike some other countries… I don’t think there will be a repricing,’ he told reporters yesterday at a briefing on Money Into Property, DTZ’s latest research report about investing in Asia-Pacific property.

The report is directed at institutional property investors, who can have a significant impact on the property market, given that they buy and sell large numbers of properties.

Mr Stinson also said the Government’s measures to boost Singapore’s population could prop up demand for property and support prices.

So far, no recent transactions by institutional investors have reflected a repricing in the market, added Mr Shaun Poh, DTZ’s senior director for investment advisory services and auctions.

‘Sellers here have become more realistic and lowered their expectations,’ he added.

But because their expectations were so high previously, this has not necessarily led to lower transacted prices, he said.

What it has actually resulted in is more investors coming back to look at properties that may have previously been overpriced but are now open to negotiation, Mr Poh said.

Currently, there are many more people interested in selling Singapore properties than in buying them, DTZ’s study showed.

It polled investors and found that 12 per cent of them intend to sell their properties in Singapore soon, while fewer than 5 per cent plan to buy properties here.

This is creating a situation quite different from the one last year, when there was no lack of demand for properties but very few available for sale.

Now, growth funds and some opportunistic investors are pulling out of the plateauing Singapore market, at a time when owners - including banks, foreign firms and opportunistic funds - are becoming more willing to sell.

‘There is an increasing number of buying opportunities in gateway markets such as Singapore, Hong Kong and Tokyo,’ said Mr Stinson.

‘Six months ago, it wasn’t about whether you wanted to buy property, but whether you were lucky enough to win the race.’

Interest in Singapore properties remains high, however, especially in the logistics and industrial market. This sector still offers a ‘decent return’ as growth has not been as rapid as in other sectors, said Mr Poh.

Commercial assets in Singapore are also in demand to some extent, but the residential sector is likely to turn in a weak performance in the investment market this year, DTZ said in its report.

‘Given the cautious economic outlook, investor focus for the rest of the year would be on occupier fundamentals in the commercial and industrial sectors,’ it added.

These fundamentals include, for example, the quality of the buildings and their tenants.

While repricing is not an apparent risk in Singapore’s property market, the Asia-Pacific region is facing an average repricing of 25 to 100 basis points, or 0.25 per cent to 1 per cent, Mr Stinson said.

The markets that will be the worst hit include Japan, Australia and New Zealand.

Lian Beng subsidiary to build S$99.5m Ritz-Carlton Residences

Source : Channel NewsAsia - 25 Aug 2008

Homegrown construction group Lian Beng has clinched a contract worth S$99.5 million to build a high-end residential project at Cairnhill Road.

Lian Beng will build The Ritz-Carlton Residences through its Millennium International Builders unit.

The deal was awarded by Royce Properties, a subsidiary of Hayden Properties.

The project is the first luxury condominium project to be launched by The Ritz-Carlton Hotel Company in Asia and will feature 58 apartment units - including two penthouses - in a 36-storey block.

It will occupy land area of some 60,000 square feet at Cairnhill Road and work is expected to commence in the third quarter of this year.

The latest contract boosts Lian Beng’s order book to some S$770 million.

Property subsales - who wins and who loses

Source : Business Times - 26 Aug 2008

For those who sold in the first seven months of this year, close to 97% came out ahead

Sentiment in the Singapore property market is now far from bullish, but data shows that nearly 97 per cent of those who have sold private apartments and condos in the subsale market in the first seven months of this year have made profits.

Only 3 per cent incurred losses, an analysis of caveats by Savills Singapore shows.

For those who turned a profit, the average gain per unit came to $417,563 or 36.5 per cent. Generally, the longer the holding period, the bigger the gain.

Subsale deals are seen as a proxy for the level of speculative activity in the market. On average, those who had bought their units in 2004 and sold them in the subsale market this year made the biggest gain, averaging nearly $692,000, or an 84 per cent profit. They are followed by those who had picked up units in
2005, who recorded an average gain of about $645,200 or 62 per cent from selling their homes in the subsale market this year.

In absolute dollar terms, the smallest average gain of around $175,600 was by those who bought their units this year, reflecting a holding period of just a few months.

The profit or loss in the calculation is the difference between sale and purchase prices and does not take into account stamp duty and other expenses.

‘The fact is that longer holding periods allow for larger gains, shorter holding periods for smaller gains. This is consistent with the fact that real estate is a long-term investment. Investors with short exit time frames should look for alternative instruments,’ said Savills Singapore’s director of marketing and business development Ku Swee Yong.

Savills’ analysis was based on 1,040 caveats for subsale transactions from Jan 1 to July 31 this year captured by Urban Redevelopment Authority’s Realis system as at Aug 19. Of these, 821 had previous caveat records dating back to 2003 and Savills compared the latest subsale price of each unit with the earlier price paid by the seller to work out the profit or loss.

Citylights, Varsity Park Condo and The Sail @ Marina Bay had the most subsales in the first seven months of this year - 63, 47 and 45 respectively. The Sea View and City Square Residences had 30-plus subsales each. Park Infinia at Wee Nam, The Calrose, Icon and The Raintree each had 20-odd subsales.

Subsales, often seen as a gauge of speculative activity, refer to secondary market deals in projects that have yet to receive their Certificates of Statutory Completion. This may be anywhere from three to 12 months after the project receives its Temporary Occupation Permit (TOP).

Market watchers note that many of the projects topping the subsale chart this year had either received TOP or are close to receiving TOP. Some of the units that changed hands in the subsale market could have been purchased on deferred payment schemes from developers in the past. Typically, such schemes run out when the projects get their TOP and that is when buyers have to pay the chunk of the purchase price to developers.

The deferred payment scheme was scrapped in October last year to discourage speculative buying.

Of the 25 loss cases for subsale deals done this year, sellers of about half the units had themselves bought theirs in the subsale market, while the other half had made direct purchases from developers. For instance, the four units sold in the subsale market at a loss this year at City Square Residences had all been picked up in the subsale market last year.

Looking ahead, Savills’ Mr Ku expects subsales to maintain at current levels, that is, about 150 units a month. Those who want to sell now will have to expect lower profits, he said.

‘Whether in good or bad times, there will still be subsale losses from people being forced to make untimely sales due to corporate liquidation, bankruptcy, divorce,’ Mr Ku added.

In cases where investors are sitting on potential losses, Jones Lang LaSalle Singapore’s head of residential, Jacqueline Wong, said: ‘My advice to my clients, who are usually foreigners, have bought in prime districts and are well off, would be, ‘If you can, hang on. It will be just a temporary paper loss. Singapore has a lot of things going for it in the mid term’.’

Another seasoned property consultant said: ‘A lot will depend on your entry price vis-a-vis other owners, especially in a big development. If a lot of them bought at say $1,000 psf from the developer and you got your unit later for $1,800 psf in the subsale market from an earlier buyer, you’re in a disadvantageous position. If the market dives, the earlier buyers could offload their units at much lower prices than your cost price.

‘On the other hand, everybody may be in the same boat. Say, if you’ve bought into a small project of 30 units and everyone’s bought at about the same price, and if there’s not much competition from surrounding projects, chances of prices going down substantially may be lower because everyone’s locked in at the same threshold.’

CapitaLand shares slide to 2-year low

Source : Business Times - 26 Aug 2008

The stock of the region’s largest listed property group is taking a sharp knock as funds bail out of regional property stocks amid an increasing bearish outlook for the sector.

CapitaLand’s shares fell 13 cents or 2.9 per cent to $4.32 yesterday - its lowest level in two years. But what baffled many market watchers was the heavy selling volumes. Some 21 million stocks changed hands.

‘It is not just the selling that is worrying, but the heavy volumes on the way down,’ observed a seasoned dealer. ‘This is heavy institutional selling, and a very bearish signal.’

Meanwhile, CapitaCommercial Trust sank 10 cents or 5.4 per cent to $1.75 on some 7.3 million units amid concerns that the office rental market in Singapore was poised for a 30 per cent drop over the next three years as supply significantly outstrips demand.

The current selldowns follow downgrades by some global houses in recent weeks.

About 10 days ago, Morgan Stanley cut CapitaLand’s 12-month price target to $4.16, from $5.94, citing weak earnings for the next two years.

Morgan Stanley noted that CapitaLand’s wider diversification strategy and Asian regional footprint had failed to provide some share price support on the downside. CapitaLand has significant interests in Singapore, China, Vietnam and other regional countries. The investment house’s analysts Melissa Bon and Brian Wee said there were no positive catalysts, and cautioned of a possible absence of new launches for up to 18 months if the economic slowdown dragged on.

‘We are inclined to be less optimistic than CapitaLand’s management who expect the Singapore residential market to remain flat this year,’ the report said.

Meanwhile, UBS said in a report on Friday that it expects office rentals and capital values to drop as much as 34 per cent in the next four years.

But given that it is Asia’s largest listed property company, CapitaLand has a relatively large pool of global portfolio investors. And this makes it more vulnerable to massive selldowns by funds which are scrambling to cash-up in the face of a global liquidity crunch.

The stock’s liquidity - which attracted institutional investors and helped fuel its bull run last year - has also turned out to be a double edged sword, contributing to its savage beating now.

The selldowns came despite the fact that CapitaLand will realise a total portfolio gain of $313 million by injecting four of its Raffles City assets in China into its 50 per cent owned Raffles City China Fund. This comprises a $183 million net gain from the dilution of CapitaLand’s interest in the four Raffles City assets, and a $130 million fair value gain for Raffles City Shanghai.

Vendors drop prices of Asia-Pac commercial properties

Source : Business Times - 26 Aug 2008

These assets have been priced down by 25-100 bps in last few months: DTZ

COMMERCIAL properties in the Asia-Pacific region have been priced down by 25-100 basis points in the past three to four months, more in line with investor expectations, property firm DTZ said yesterday.

Reality check: The re-pricing of commercial assets has been greater in some markets, such as Tokyo (left) and Aussie cities

‘The number is an average figure - it varies from market to market,’ said John Stinson, DTZ’s regional director for sales and investments and capital markets for Asia-Pacific.

Mr Stinson, who was speaking to reporters at a seminar, said the re-pricing has been greater in some markets, such as Tokyo and Australian cities.

For Singapore, it is hard to pin a number to the drop in the asking prices for commercial properties, mainly because of a low number of transactions, he added. But some sellers have marked down their commercial assets about 10 per cent, said Shaun Poh, DTZ’s senior director for investment advisory services and auction in Singapore.

Mr Stinson identified Singapore as one of the ‘gateway cities’ that international investors will look at when increasing their exposure in the Asia-Pacific area.

‘In the next two-three quarters, core (prime) products in gateway cities - Hong Kong, Singapore, Tokyo and Sydney - will see some interest,’ Mr Stinson said.

In Singapore, the opportunities for investors are increasing as vendors price their assets lower, he noted.

DTZ’s executive director and regional head for consulting and research Ong Choon Fah said: ‘Owners are a bit more realistic now than they were previously.’

Right now, there are still more sellers than buyers in Singapore, according to a recent survey of investors by DTZ. More than 10 per cent of investors had ’selling priorities’ while less than 5 per cent had ‘buying priorities’, the survey found.

‘Buyers are sitting on their hands, waiting for the markets to adjust,’ said David Green-Morgan, DTZ’s Asia-Pacific research director.

DTZ’s research also showed that across the Asia-Pacific region, investors with ‘buying priorities’ outnumber those with ’selling priorities’ when it comes to industrial and hotel properties.

Mr Green-Morgan noted that investments into Singapore and the region are likely to continue to be driven by private equity.

In July, DTZ predicted that the value of investment transactions worldwide will fall to US$500 billion this year, from a high of US$730 billion in 2007 and US$600 billion in 2006.

The decline assumes that after a weak first half in 2008, there will be a relatively modest pick-up, likely to be driven mainly by the Asia-Pacific market.

Rental eligibility now a game of cunning

Source : Straits Times - 26 Aug 2008

THE Housing Board has found itself in a quandary over sharply rising demand for the small stock of rental flats available. The twin trends - high rents for conventional HDB apartments and more people conserving assets for fear of prolonged economic uncertainty - that had been building for a year now are not easing. The HDB can expect the tight rental situation to persist, or worsen. Ineligible renters playing the system have added to the long application queues, but the HDB can be counted upon to weed them out at first sieve. To satisfy medium-term demand, raising the current stock of some 43,000 rental flats is an inevitable response.

This the HDB is doing. But the gestation period of about three years for the additional 7,000 to 8,000 units that will be built gives little comfort to those applicants who need shelter now, not three years later. There are an estimated 4,400 of these. These are families with household income of about $1,500 and no assets. Divorcees with young children are common among them. The HDB could consider releasing unsold smaller units from its normal stock for fixed-term leases to relieve pressure.

This is socially more enlightened than keeping the flats, usually in less favoured locations, for choosy purchasers to make up their minds about bidding. Beyond this, means testing which the HDB is considering is the fairest way of sorting out the scale of need.

Abuse of the low-rent dispensation was not a problem when granny flats were being built for retirees and rents for normal HDB flats were about half the current rates. But since the spike of a year ago, rent seekers have resorted to the deplorable practice of sub-letting rooms or whole flats, sometimes to ineligible foreigners. Families of some means, plainly not eligible, have joined the queue, attracted by rents of as low as $26 a month. They should be forced onto the open rental market by fail-safe administrative measures.

To disqualify applicants who own assets and whose household income exceeds the cut-off mark is easy. Trickier is checking the assets of their children and siblings, which the HDB is considering. The thinking is that immediate families should take them in. In practice, this may not always be practical owing to relationship frictions and family feuds. But it does not weaken the case for wholesale means testing.

It remains a logical way to ascertain need but the line should be drawn at checking the assets of applicants’ brothers and sisters. If these siblings are married, with their own grown children and consequent obligations, they are effectively separate families.