Single owner who splashes out on style

Source : Straits Times - 25 Oct 2008

THE metal gate at the entrance of the three-room HDB flat in Bedok North is a head-turner. Obviously custom-made, its wrought iron grilles have been shaped to spell the owner’s middle name across the top.

The gate cost Mr Ho Weng Kay $500, but the 39-year-old bank manager feels it is money well spent. After all, it is his first home.

‘Throughout my adult life, I was looking forward to turning 35 so I could finally buy my own flat,’ he says.

When he did, it took him a couple of years before he decided on the 893 sq ft unit, which cost him $205,000 and is just one block away from his parents, who are retirees.

‘I had become so used to my surroundings, living in a three-room HDB flat with my parents, that I wanted something similar when I moved out.’

He moved in last year, but not before splurging $60,000 on renovations and furniture.

He came up with the design concept himself, and got his brother, a renovation contractor, to realise it for him.

The view from his eighth-storey flat looks out onto an expanse of green open spaces, with a basketball court and playground below.

Among other things, the cooking enthusiast had a shelf made just to display his collection of vodka bottles, and a chalkboard to write down cooking ingredients - just like a restaurant.

‘As I get older, I like spending more time at home and having friends over for dinner and drinks,’ he adds. ‘So the size of this home, for a single like me, is perfect.’

Although he wished he could have moved out sooner, Mr Ho says the good thing about waiting until 35 is having enough savings.

‘I could have bought a private unit before 35 but that would have been a stretch. I’m quite glad I didn’t need to borrow a lot of money to buy this flat,’ he adds.

‘Nothing beats having your own home. It’s better late than never.’

Private home prices and rents down

Source : Straits Times - 25 Oct 2008

PRIVATE home prices in Singapore fell faster than expected in the third quarter as the global financial turmoil weighed heavily on already weakened market sentiment.

The price slide is expected to continue into next year, property consultants said.

But the HDB resale flat market continued to buck the trend, with prices rising 4.2 per cent in the third quarter following a 4.5 per cent rise in the second quarter.

They have now surpassed the peak seen in the fourth quarter of 1996. But analysts expect this growth trend to slow as buyers turn cautious.

Urban Redevelopment Authority (URA) data yesterday put the private home price dip at 2.4 per cent for the period ended Sept30, the first contraction after 17 straight quarters of growth.

This compares with an initial estimate of a 1.8 per cent drop released by URA earlier this month. In the previous quarter, private home prices rose 0.2 per cent.

The outlook is grim. Since the end of the third quarter, global markets have tumbled further and Singapore officially entered a technical recession. Buyers expecting a full-blown recession are set to become even more cautious, analysts say.

Colliers International’s director for research and advisory, Ms Tay Huey Ying, said the lower-than-expected third-quarter private home price figure indicates that sales recorded in the last two weeks of the quarter were done at lower prices.

The price fall was led by luxury homes, as such properties in choice areas like Orchard Road and Sentosa Cove posted a 2.7 per cent fall after slipping just 0.1 per cent in the previous quarter.

Prices of city-fringe homes dropped 2.4 per cent, compared with a 0.7 per cent rise in the the April-toJune period.

Suburban homes, which showed the strongest growth of 0.9 per cent in the second quarter, fell 1.5 per cent in the third. Landed home prices, which inched up 0.6 per cent in the second quarter, fell 1.9 per cent.

In a reversal from relentless rent increases of recent years, rentals of private homes fell by 0.9 per cent compared with a 2.5 per cent rise in the second quarter. Like home prices, the fall in rents was the first after 17 straight quarters of growth.

Mass-market homes saw a bigger fall of 2.7 per cent in rents, compared with 0.7 per cent for coveted high-end homes and 0.5 per cent for city-fringe homes.

The growing market caution was also reflected in resale and sub-sale deals. A total of 1,974 resale deals and 462 sub-sales were done in the third quarter, down from 2,291 resale deals and 518 sub-sales in the previous period.

Given the worsening global financial climate, private homes prices are expected to continue slipping. ‘The momentum of home sales will likely slow down due to either the increasing difficulty in obtaining loans or buyers’ anticipation of further price cuts,’ said CBRE Research’s executive director Li Hiaw Ho.

In the HDB market, resale transactions rose 4 per cent to 8,110 sales, amid continued buying from permanent residents and Singaporeans upgrading from a smaller flat or downgrading from a private home.

While the sector is still strong, property experts are expecting slower price growth ahead as current resale prices have hit a new peak. With slower economic growth and possible job losses, buyers are likely to turn more cautious and exercise more prudence by offering less for the flats so as not to overstretch, said ERA Asia-Pacific’s associate director Eugene Lim.

On a brighter note, URA revised down its supply figures, dispelling the prospect of a private home oversupply.

Its data also showed that office rents have slipped by 0.8 per cent, compared with 6.3 per cent growth in the second quarter.

Shop rents also dipped 0.6 per cent islandwide in the third quarter, reversing a growth of 5.2 per cent in the second.

Industrial rents rose, but at a slower pace.

MM sees 3-5% Asia growth as world recovers

Source : Business Times - 25 Oct 2008

China and India’s growth momentum may spill over to the rest of Asia in the next three to five years

DRIVEN by China and India, Asia will still see annual growth of 3-5 per cent as the world economy recovers in the next three to five years, says Minister Mentor Lee Kuan Yew.

‘It (the 3 per cent to 5 per cent growth) isn’t bad in this condition,’ he said yesterday at the Singapore Human Capital Summit conference.

Employers should use the down-time to build up the skills and knowledge of their workers for the upturn in the economy, he said. ‘You’ve got to be optimistic and realistic enough that this will recover - when? I don’t know.’

The government will push on with the continuing education and training of workers, Mr Lee said.

In the absence of ‘malfunctioning’ in the banking system, he sees the global economy restored - in an upbeat scenario - in 3-5 years to the growth path it was on before it was derailed by the financial crisis.

Asia excluding China and India will, meanwhile, do better than other regions, as it continues to post economic growth of 3-5 per cent a year.

The International Monetary Fund’s growth forecast is 5-6 per cent, but that includes China and India.

According to Mr Lee, while growth in China and India may ease, the two economies are large enough to have growth momentum of their own, with spillovers for the rest of Asia.

While China and India offer Singapore growth opportunities, Mr Lee said they also pose a big challenge to it.

‘We have to decide where is our future, assuming China and India will (continue to) grow,’ he said. ‘We have to accept that what we do they will do as well, if not better.’

So what is it that Singapore can do that China or India cannot do, at least in the next 20-30 years?

Singapore’s comparative advantage over China and India is its system, Mr Lee said. ‘They can have the individuals to catch up with us but they can’t catch up with our system so easily.’

In particular, he cited Singapore’s system of laws and fair play, its meritocracy and patent laws.

He also said that in a globalised world of greater mobility and competition, the ability to attract and retain talent is the key to economic success.

Singapore has won and lost talent, but its important that it ‘wins more than it loses’, he said. ‘Without foreign talent, Singapore would not be where it is today.’

The US has also done well because of foreign talent, Mr Lee noted. But the issue of foreign talent is politically dicey and political leaders must convince their electorate ‘why you need foreign talent to give that extra boost’.

Indian hotels start feeling the pinch

Source : Business Times - 20 Oct 2008

AFTER a two-year bull run, Indian star-rated hotels are now feeling the pinch of a palpable slowdown. Room occupancies have plunged, corporate discounts have got bigger, restaurant footfalls have dropped while expansion plans have been put on hold.

According to HVS International, a global hospitality consulting firm, almost all the major Indian hotel markets - Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore - have witnessed a sharp fall in occupancies with Delhi registering an 8 per cent dip during the April-September period this year over the same period last year.

Though tariffs have not yet been slashed - as most hotels are still assessing the inflationary market - they are offering corporate discounts and better deals to keep the clients hooked. In some cases, corporate discounts are as high as 40 to 50 per cent.

Says Neelabh Chugh, manager at Interncontinental The Grand in New Delhi: ‘Most companies have cut down on foreign and domestic travel due to market volatility. As a result, there’s an immediate visible drop in our business by about 20 to 25 per cent. Room occupancies and F&B (food and beverage) sales have both been hit.’

In fact F&B sales have been impacted by both - a downslide in room occupancies and lesser number of walk-in guests. Said Amit Chowdhury, executive chef at Taj Mahal Hotel in New Delhi: ‘Though it is tough to quantify, F&B revenues in star hotels have definitely taken a beating due to the slowdown.’

In addition, Mr Chowdhury says hotel guests have also become price sensitive lately and are steering clear of ordering expensive dishes and drinks.

What has further impacted the hospitality industry is the whittling down of travel by company executives who are now relying more on tele and videoconferencing to conduct business. Airfares too have been travelling north since last year. This has had a cascading effect on the hospitality sector too.

Says the CEO of a Delhi-based multinational company: ‘We’re advising our staff to stay put and defer travel plans unless there’s an emergency. In these times, spending on steep airfares and expensive hotel accommodation is not a smart idea.’

Indian hotels command top dollar rates and are one of the most highly-priced in the world. For instance, a standard five-star hotel room in any of the Indian metros cost in the range of 14,000 to 17,000 rupees (S$425-515). Compare this to Singapore, Thailand or Malaysia, where a similar room can be had for around 10,000-12,000 rupees.

As a precursor to the current slowdown, in this year’s off-peak period (May to October) hotels reported occupancies of 70 per cent against 75 per cent last year. According to estimates, in the last six months, the average occupancy rate across the industry fell by 10 per cent, impacted by the US sub-prime crisis that began in September last year and growing domestic terrorism.

In fact fewer foreign tourists are expected to visit India this year following bomb blasts in some cities the past few months. They typically account for about 70 to 80 per cent of a hotel’s revenues.

All major hotel groups, including the Oberoi group, Taj, Leela Ventures and Asian Hotels, were busy fleshing out aggressive expansion plans with a combined capital outlay of around 45 billion rupees. International players like the Starwood Hotels, Hilton Hotels, Raffles Holdings and Shangri-La Asia too have entered the Indian market with much fanfare.

But now, most groups are busy applying brakes on expansions. Furthermore, according to industry forecasts, Indian hotels are unlikely to see a buoyant phase before 2010 when the Commonwealth Games, being hosted by the capital city, will spike demand for more rooms.

However, despite the current gloom, there’s optimism still. Says Ilan Weill, general manager at Grand Hyatt in Mumbai: ‘Though the economic slowdown has impacted the hospitality business in the short term, it’s unlikely to do too much damage in the medium and long term. India has a fairly strong positioning in that sense as compared to other countries. And its economy is far too resilient for such temporary setbacks.’

Earnings spotlight on Reits, Keppel

Source : Business Times - 20 Oct 2008

INVESTORS will be presented with a barometer for assessing the impact of the financial crisis on the property sector with five Reits turning in their quarterly report cards this week.

Real estate investment trusts, or Reits, make up nearly one-third of the 16 companies that are set to release their results over the coming days as third quarter reporting season kicks into high gear.

Office trust K-Reit Asia will be the flag bearer for the sector with its results due out later today, followed by CapitaMall Trust tomorrow. Ascott Residence Trust and Mapletree Logistics Trust will release their earnings on Wednesday, with CapitaCommercial Trust rounding up the segment on Thursday.

A year ago, Reits were shunned by analysts due to concerns over their ability to refinance debt amid the credit crunch. In the last few weeks however, they have regained the lost favour with market watchers pointing to their falling prices and rising yields as the key selling point.

Against growing economic uncertainty, analysts say that Reits have an advantage over property developers as they are still expected to derive stable, visible and recurring income.

However, falling rentals, will take some shine off the sector. Meanwhile, debt refinancing remains a key issue with nearly $4 billion worth of Singapore Reit debt expiring next year.

In other sectors, Keppel Telecommunications and Transportation, the victim of a recent sell-down, is slated to report its Q3 results tomorrow.

The company’s performance will likely be impacted by its main asset MobileOne, which turned in a 21 per cent drop in third-quarter profits last Friday.

Keppel Corp’s China unit Evergro Properties will announce its Q3 results today, while the group’s local developer arm - Keppel Land - will follow suit on on Wednesday. For Keppel Land, the softening local property sector, as well as its exposure to the troubled Vietnam economy, are expected to be two major bug bears.

Marine giant Keppel Corp, which derives nearly half of its profits through rig building, will report its Q3 results on Thursday. Once considered invulnerable due to its fat order book, its share price tanked last week due to indiscriminate selling, while plummeting oil prices is another lingering concern.

Other companies that are set to release their Q3 results this week include Singapore Petroleum Company, First Ship Lease Trust, technology firm Aztech Systems and beleaguered healthcare equipment maker OSIM International.

Property firms may feel squeeze as banks turn coy

Source : Business Times - 20 Oct 2008

Gearing under scrutiny; but future proceeds, old ties could tip balance

As the financial turmoil wrings precious liquidity out of markets, talk of tighter credit affecting property developers here has been making the rounds.

Analysts have scrambled to redo their math, and as the earnings reporting season kicks in, property developers will be closely scrutinised for their debt levels and overall financial standing. Not only are the property sector’s fortunes at stake, market watchers will also be on the lookout for any implications for banks, which have a significant exposure to real estate.

‘(We) could see banks continue to reduce their exposure to the property sector,’ said a recent OCBC Investment Research note. According to the outfit, the proportion of bank loans to the sector has already been reduced to 17.9 per cent in August, down from 18.1 per cent in June.

But just how leveraged are property developers and do numbers alone tell the whole story? While gearing ratios will shed some light, market watchers highlight other factors to watch in evaluating firms’ resilience to scarcer credit.

According to financial data on over 30 developers from DMG & Partners Securities, net gearing levels range from a negative 0.1x to 3.2x. Expressing net debt as a proportion of shareholders’ equity, the higher the net gearing ratio, the more debt a firm has comparatively.

Topping the list is Sim Lian Group, with a net gearing of 3.2x. SC Global Developments, Hiap Hoe, Sing Holdings and Soilbuild Group Holdings complete the top-five band.

‘Gearing will determine how much future funding property developers can get,’ an analyst told BT. ‘Highly-geared companies may face more covenants from banks, or get charged higher interest rates.’

But the market should not judge developers based on net gearing alone, analysts say. Another critical indicator to watch is the size of short-term debt and the amount of cash available to cover it.

Some property developers have more breathing space when it comes to short-term loans. In fact, Sing Holdings has no such debt to service. While SC Global has $19.5 million repayable till June next year, it has cash and cash equivalents of $70.8 million to meet this need.

A third factor to look at is the amount of proceeds going to developers in the near future. As the OCBC report also noted, with strong property sales in 2007 and progressive recognition of profits from sold projects, ‘developers are financially stronger to weather the storm’.

Sim Lian, for instance, will receive temporary occupation permits for The Premiere @ Tampines and Carabelle over the next 12 months. It expects to collect about $255 million from sales, which exceeds short- term debt of $136.2 million as at June 30.

For Hiap Hoe, Cuscaden Royale and Oxford Suites are due for completion in December next year. Their outstanding sales proceeds amount to over $100 million - far more than the $12.2 million held as short- term debt as at end-June.

DMG & Partners’ list also highlights a trend: smaller property developers are more likely to have higher net gearing ratios. This ratio is just around 0.5 for bigger players such as Keppel Land and City Developments. For CapitaLand, net gearing is 0.43x if capital from recent property divestments is included in the end-June results.

Some industry watchers attribute the trend to portfolio differences. Besides having development properties, larger firms tend to own other sites for rentals or capital gains. Such investment properties can be revalued to reflect higher fair values (though not all developers practise this). This boosts the equity base and shaves net gearing.

Smaller companies holding more development properties would hence benefit less from rising markets, because these sites can be reported only at the lower figure of cost or net realisable value.

But regardless of size, property developers across the board will find new loans costlier or harder to come by. ‘Banks are definitely more cautious these days,’ a banker told BT.

The softening property market provides little comfort. ‘Developers with ongoing projects that have limited flexibility in deferment . . . may find themselves stretched for cash, as sales and rental income slow down,’ warned a Credit Suisse report last month.

This is where developers’ past performance and relationships with banks count. ‘We take into account a host of factors which include the project’s viability, the parties involved (their financial strength, background, track record and our experience with them), the project’s cashflow and the market demand for the project,’ said Samuel Tsien, global head of OCBC’s global corporate bank.

‘If these factors are deemed to be present, we are open to considering financing under the appropriate terms and conditions.’

An industry insider also said that some banks are prepared to extend loans to existing clients but could shy away from new ones.

‘Soilbuild is well supported by financial institutions which have developed long-term relationships with us,’ said the firm’s executive director Low Soon Sim. To further strengthen its capital base, the developer is also raising funds through a rights-cum-warrants issue, supported by commitments from the founders and directors.

The great crash - fire sale: owners dump condos

Posted by luxuryasiahome on October 20, 2008

Agents: Some clients give as much as 20 per cent discount

FOR sale: Luxurious multi-million-dollar apartments, not quite for a steal, but with a hefty discount.

Stock market losses have forced some property owners to resort to ‘fire sales’ for a quick return to liquidity.

THE SALE: Buyers, seen in a file picture, at the launch of The Sail. Units which were going for $2,000 psf are now offered for $1,450 psf. TNP FILE PICTURE

And because the property market is almost flat, they have had to let go of their property at huge discounts.

Property agent Henry Neo receives one SMS a day from different clients asking him to sell their homes.

Mr Neo, who has been a property agent for close to 20 years, said: ‘The Asian financial crisis of 1997 and this crisis are real challenges.

‘It’s a tsunami of the stock market.’

Two or three of the 50 clients he is servicing now are what he calls ‘desperados’ - people who had their fingers burnt so badly in the stock market they need to sell their houses.

The situation is worse for those who opted for deferred payment schemes, said Mr Neo, because some are no longer eligible for loans, and cannot meet payments once the developers issue the Temporary Occupation Permit (TOP).

‘They have to get rid of their properties before TOP, so they would be giving even more discounts.’

Noting that the high-end property market seems to be hit the hardest, Mr Neo said: ‘My colleagues who specialise in high-end properties are not doing well. They do not have any transactions at all.’

Mr David Cheang, senior vice-president of the Resale Division at HSR Property Group, noted that two out of every 10 clients are affected by the stock market crash, and are selling their property investments to ‘get more liquidity’.

A property agent who declined to give his full name said one of his clients had made such losses on the stock market that he was selling his 27th floor freehold apartment at the Twin Regency for a mere $1.05 million, though its market price is $1.3 million.

Last year, he had sold another unit, on the 29th floor of the same condominium, for $1.4 million.

It is the same story for Mr Felix Young, 35, a property agent specialising in high-end condominiums. Some of his clients are prepared to go as low as 20 per cent below their offer price.

He had taken out an advertisement for five properties, all high-end condominium units in the city.

Apartments at The Sail at Marina Bay, which were going for $2,000 psf are now being offered for sale at $1,450 psf, said Mr Young.

But even such a huge discount is failing to entice buyers, who are asking for $1,100 psf. That is because even with such discounts, the two-room apartment costs about $1.3 million.

In the current climate, not many people would be able to shell out that kind of money because they could be sitting on huge paper losses in the stock market.

Mr Young said: ‘Buyers have the sentiment that the property market will cool even more, and prices will drop further.’

And because of this, said Mr Young, there has been a significant drop in transactions - up to 70 per cent for high-end properties that people buy for investments.

Most buyers also know developers’ launch price for the condominiums and are holding out until they can get a unit at that price.

He said: ‘These days, when buyers call me, they ask me if I have any owners who are ‘bleeding’.’

Bleeding is a term that is used to describe owners who over-committed themselves financially and need to sell their properties in a hurry.

Mr Young said: ‘Many of my clients’ bank loans are kicking in soon, so they need to release the properties quickly, before TOP.

‘They are stuck because they can neither sell their property, nor rent it out to cover their mortgages, as the rental market has slowed down a lot.’

Source : New Paper - 19 Oct 2008

Malaysia to ease investment and property rules

Source : Straits Times - 21 Oct 2008

Malaysia plans to loosen investment rules to lure foreign funds and will review guidelines to ease rules on foreigners buying property, Finance Minister Najib Razak said yesterday.

The government will also inject RM5 billion (S$2 billion) to double the size of a local fund that invests in undervalued companies to reduce the impact of a global slowdown.

‘We have to make Malaysia more competitive,’ Datuk Seri Najib said, adding that it is inevitable that the country’s real economy would feel the impact of the financial turmoil.

While insisting that the country will not slide into a financial crisis, he said its economic growth forecast for next year will have to be cut from the current estimate of 5.4 per cent.

‘Malaysia is not in a crisis and we will not go into a recession,’ he was quoted as saying by Bernama news agency.

He added: ‘Yes, our stock market is affected by the sentiments in other markets but I would like to stress that we are not in a financial crisis, and certainly we should not talk ourselves into one.’

Mr Najib said the government may also review its budget deficit targets for this year and next, and postpone some infrastructure projects.

Details will be revealed on Nov 4 in Parliament.

Mr Najib said some investments and property purchases may no longer require the approval of the Foreign Investment Committee (FIC).

Industry players say top foreign property buyers include Singaporeans and those from the Middle East, Britain, Europe and, more recently, China.

The government last liberalised the property market in April last year with measures including a blanket exemption on real property gains tax, the removal of FIC approvals for foreign ownership of houses costing RM250,000 and above, and unlimited loans for non-residents.

The measures paid off, with developers reporting higher sales, more than half of which went to foreigners, and prices in popular areas up too, said property consultant Ho Chin Soon.

Real Estate and Housing Developers’ Association (Rehda) president Ng Seing Liong said that this time around, the government might further relax the rules on commercial or industrial properties.

Not many analysts were impressed with the measures announced, and some said the government needed to present more concrete economic policies.

Bank Islam senior economist Azrul Azwar said the measures would not provide the immediate results needed.

‘The results of the liberalisation will be seen only in two to three years. The measures do not really respond to the needs of the hour,’ he said.

Plans for One-North are taking shape

Source : Straits Times - 21 Oct 2008

WE REFER to the letter, ‘Treasure the new: One-North project’ (Oct 13). We are glad Mr Christopher Chan has great interest in the development of One-North and he will be happy to know that plans are taking shape, as shared with him in June this year.

Several new developments will soon be seen at the Buona Vista Sub-Regional Centre, some of which are already under construction. Some of the new developments have been highlighted in URA’s draft Master Plan 2008 exhibition. For example, the existing Buona Vista MRT station will be coupled with the Buona Vista CCL station and, together, both stations will function as a strategic transport node to serve the Sub-Regional Centre. The new Buona Vista station is part of the Circle Line which is expected to be open from 2010.

Developments to position One-North as the innovation and R&D hub are progressing well. Announcements on upcoming milestone projects will be made when they are ready to be launched. The vision of One-North goes beyond the physical infrastructure - it also encompasses the less readily visible ’software’ initiatives behind the building of this innovative and experimental community.

We would like to invite Mr Chan to visit the One-North website (one-north.sg) or the One-North Gallery @ Fusionopolis for up-to-date information on this 200ha master planned development.

Lim Eng Hwee
Assistant Chief Planner & Director (Physical Planning)
Urban Redevelopment Authority

Philip Su
Assistant Chief Executive Officer
JTC Corporation

Disclosing take-up rates will help buyers

Source : Straits Times - 18 Oct 2008

I REFER to Tuesday’s report, ‘Robust demand for recent HDB launches’.

On the one hand, young Singaporeans are urged not to delay marriage and have more children to help solve our procreation problem.

On the other, new Housing Board five-room flats cost more than half a million dollars: $645,000 in Pinnacle@Duxton and about $700,000 in the two HDB Design, Build and Sell Scheme (DBSS) projects at City View@BoonKeng and Park Central@AMK.

Certainly one needs a five-room, 1,100 sq ft flat to house a family of two parents, three children and a maid comfortably.

Many young couples do not feel the immediate pinch of such pricey flats because up to 90 per cent of the cost can be financed by long-term debt stretching up to 30 years.

A recent Sunday Times editorial rightly advised prudence.

For a couple with a combined monthly income of $8,000, an HDB loan of $500,000 at the concessionary interest of 2.6 per cent and a monthly loan instalment of about $2,000 may appear affordable.

But at the end of the 30-year loan period, they would have coughed up some $800,000 in total capital and interest repayments.

Indeed, when young couples sink so much money into their HDB flat, how much will there be left to raise their children, and to provide for their health-care and retirement needs?

The first HDB DBSS project in Tampines was launched with publicity attesting to its success.

Despite similar publicity for the two DBSS projects in Boon Keng and Ang Mo Kio, both private developers have frequently advertised immediate walk-in selections.

For transparency and to help HDB buyers, the HDB should publicly disclose the actual take-up rates for the various types of flats in such DBSS projects, as well as Pinnacle@Duxton.

See Leong Kit

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Pricing puzzle

‘After taking all such costs into account at the launch of Pinnacle@Duxton in 2004, the HDB went on to price leftover stock at $200,000 above the initial launch price.’

MR TAN KIM CHUAN: ‘I refer to the article on Tuesday, ‘New HDB flats below market value’. The HDB says it takes a market-based approach when pricing new flats and then sells them at a discount to the market value. However, on Aug 1, the HDB explained in a letter, ‘HDB flats: Low figure is building costs alone’, that ‘the total construction cost of flats includes other costs such as infrastructure, piling works, lift installation, consultancy and project management, financing and purchase of land’. That is, the total cost had already been taken into account and the prices subsidised before the flats offered to the public. Yet, after taking all such costs into account at the launch of the Pinnacle@Duxton development in 2004, the HDB went on to price its leftover stock of flats at $200,000 above the initial launch price. One can’t help but feel that the HDB is either over-pricing its flats or is profiteering from the property boom. I hope the authorities can shed some light on the discrepancy.’

Dicing with a downturn

Source : Business Times - 18 Oct 2008

With so much riding on Singapore’s IRs, can they beat a global slowdown?

REACHING deep into the earth and also soaring above it, Singapore’s two integrated resorts (IRs) approach their moment of truth. Just over a year back, when the skies above them were clear, they were set ambitious targets.

Each was primed to bring in $2.7 billion - 0.8 per cent in all - as value-add contribution to Singapore’s gross domestic product. Between them, they were expected to add 50,000 jobs to the economy by 2015.

What could go wrong? This was 13 months ago and Macau had just made headlines for achieving US$10 billion in gaming revenue, propelling it ahead of glitzy Las Vegas.

Then came the surge in construction costs that raised the amount being pumped into the Marina Bay and Sentosa IRs to US$10.5 billion - a 20 per cent hike above initial plans. For the IRs to reach their financial targets, they would have to recoup these extra billions through higher revenues. But 15 months before casino doors are thrown open, it looks as if even meeting revenue targets would be an achievement.

Already, Singapore’s in a technical recession and it is likely to stay with us for several quarters. The US and Europe are staring at their bleakest outlook in decades. Even China, previously thought to be immune to the meltdown, has seen its tycoons get trimmed. The average billionaire on Hurun’s 2008 China Rich List now has US$2.4 billion of personal wealth, down from US$3.6 billion the year before.

Macau, meanwhile, is bleeding. So what does the future hold for Singapore’s IRs?

Macau’s loss, ironically, could be Singapore’s gain. For the first time in three years, Macau’s casino revenue fell last month from the 52.5 per cent average growth achieved in the first eight months of 2008.

This has everything to do with the curbs imposed on mainlanders visiting Macau. From once a fortnight, the frequency of these visits was cut to once a month from June 1, then once every two months from July 1 - and now once every three months from Oct 1. Macau tourism operators reckon the curbs could slash the number of mainlanders joining package tours to Hong Kong and Macau by 10 per cent.

So where will Chinese gamblers - especially the high-rollers - go for their kicks? Las Vegas is very far away. But Singapore - just three hours from Hong Kong - is not. And it could emerge as their destination of choice when the IRs at Marina Bay and Sentosa open by 2010.

The IRs are going all out to lure big spenders from China and elsewhere, says Andy Nazarechuk, a gaming industry expert and dean of the University of Nevada Las Vegas campus in Singapore. ‘High-rollers in Las Vegas spend anywhere between US$50,000 and US$150,000 for their vacation at such resorts,’ he says. ‘The revenue generated from this group here will be high, which is why the investors are building these IRs.’

But can the China tide alone lift the worry clouds around Singapore’s IRs?

Resorts World (RW) spokesperson Krist Boo does not want to single out China as Sentosa’s big bet. ‘We have an unparalleled sales and distribution network in Asia and are confident of delivering the numbers. We are in 18 cities - Jakarta, Kuala Lumpur, Bangkok, Shanghai, Mumbai and Tokyo, just to name a few.’

Resorts World is sticking to its forecast of 15 million visits in the first year. According to Ms Boo, Asians still take holidays when times are not so good but favour nearby destinations to save on airfare. This could swing the pendulum in RW’s favour, she says. ‘We are confident the visitors will come. We are building a destination that Asia has never had - six hotels, Universal Studios Singapore, the world’s largest oceanarium, a water park, maritime museum and spa.’

Tourists are expected to account for about 60 per cent of visits and locals the rest.

Marina Bay Sands, too, is sticking to its forecast that it will turn a profit the minute it opens. ‘We expect to be profitable from day one,’ says George Tanasijevich, its general manager and vice-president of Singapore development. ‘Our expected payback time-frame remains at five to eight years.’

That, however, may be easier said than done. The Singapore Tourism Board itself is not confident of achieving this year’s target of 10.8 million visitors. And even if visitor numbers do pick up, it remains to be seen whether they will spend as freely as initially expected. For while the IRs have spread their bets to markets all over the world, their problem is that almost each of these markets has sunk in unison. The Shanghai index has fallen 69 per cent from its peak in October 2007 and hit a 22-month closing low in September this year. Mumbai has not fared much better.

‘While locals will be excited about the IRs initially, over time, the tourists will be the main market,’ says Dr Nazarechuk. And that is where the problem lies.

The immediate outlook for the IRs also hinges on how well airlines perform, according to Jonathan Galaviz of Globalysis, a Las Vegas-based boutique travel and leisure consultancy. ‘A significant risk when the IRs open will be the health of the airline industry. If capacity to Singapore is reduced substantially, it will jeopardise the performance of the resorts.’

On their part, the IRs are betting on Singapore’s resilience. ‘Our MICE-driven business model serves to mitigate the effects of a challenging economy,’ says Mr Tanasijevich.

Nevertheless, confidence is hard to pin down in uncertain times - as the principal players behind the two projects know. Las Vegas Sands has seen its share price slump from a peak of US$144.15 last year to just US$11.83 now. Genting International has weathered the storm better, falling from S$0.72 last year to S$0.39 now.

Analysts, meanwhile, have cut back their projections on how much the IRs here will contribute to GDP, and expect the number to remain between 0.3 per cent and 0.5 per cent between 2010 and 2015.

The IRs would give a lot for a glimpse of blue skies now.

Over 2,000 homes for Q4 launch?

Source : Business Times - 18 Oct 2008

Expect more high-end and mid-range launches before the year ends.

DEVELOPERS, looking to clear their stockpiles of unsold homes before the economy takes a turn for the worse, could launch more mid-range and high-end projects before the end of the year.

And for projects that have already been launched, anecdotal evidence shows that developers have already started to cut prices in order to move unsold inventories.

Data compiled by CBRE Research shows that some 34 properties with a total of 2,012 units may be launched before 2008 draws to a close. Of these, some 10 projects with a total of 1,104 units are in Singapore’s core central region (CCR), while another 13 projects with some 718 units are in the rest of central region (RCR). Developments priced mid-range and above are usually in the CCR and RCR.

The launches could go ahead even as appetite for higher priced homes remains weak. In September, developers put up 258 units for sale in the CCR. But just 70 homes were sold in the region - a take-up rate of 27 per cent. The RCR fared slightly better with a take-up rate of 61 per cent. Some 370 homes were launched and 224 were sold there.

Developers could have pushed out homes in the CCR - even with the current sluggish demand for high-priced homes - in order to move stocks before prices fall even further, analysts said.

“With the uncertain economic outlook, the increase in launches of higher-priced CCR properties is no indication of improving sentiment and it could be an attempt by developers to clear stocks in CCR in anticipation of further weakness in the property market,” said OCBC Investment Research analyst Foo Sze Ming.

Some could also be selling to generate cash. “Take-up is poor but as long as the developers sell a few units, they will be able to generate cash-flow for interest rate expenses and also start construction,” said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Anecdotal evidence also shows that in order to sell, some developers are now accepting lower prices. Far East Organization’s listed unit Orchard Parade Holdings and Wing Tai sold eight units in Floridian in September, after registering no sales since February. But the sales came as the median transacted prices fell 16.8 per cent from $1,735 per square foot (psf) in January to $1,443 psf in September.

Similarly, some units at Madison Residences along Bukit Timah Road were sold at median prices of $1,801 psf - 10 per cent lower than a year ago. Viva in Thomson Road and Park Infinia in Wee Nam Road achieved $1,555 psf and $1,501 psf - about 5 per cent less than comparable projects early this year, CBRE noted. But even then, demand remained weak. Among the developments priced mid-range and above, there were only 10 projects that achieved sales of over five units for the month of September. A key driver of demand in the high-end and mid-range residential market has been growth in migrants due to strong job creation in Singapore. With this trend slowing, the demand for pricier homes is affected, analysts said.

The increase in new launches and weak take-up rate in September saw the number of launched but unsold properties increase by 10.1 per cent month-on-month to 3,903 units. “With properties in CCR and RCR contributing to the bulk of this increase, we do not foresee a pullback in unsold inventory level, especially with weaker sentiment towards higher-price properties,” noted OCBC’s Mr Foo. “Coupled with the weak macro outlook and tighter credit condition, we think more developers are likely to follow suit with price-cutting.”

But the fact that there are some sales at lower prices is encouraging, analysts said. “It shows that there are some potential buyers out there who are waiting for the right price to enter the market,” said Nicholas Mak, director of research and consultancy at Knight Frank.

Looking ahead, the mass market is likely to get support from HDB upgraders since the HDB resale market is going strong, analysts said. But other potential buyers are expected to wait on the sidelines - which could prove to be bad news for sellers of high-end and mid-range properties.

One potential source of buyers is those with handsome gains from collective sales who have yet to find suitable long-term replacement homes, said Tay Huey Ying, Colliers’ director for research and advisory. “Some of them who have opted to reside in public flats are waiting for an opportune time to re-enter the private home market and are keeping a vigilant watch on private home price movements,” she said.

Can I get money back if flat sale fails?

Source : Sunday Times - 19 Oct 2008

Q Recently, I exercised an option to purchase and put down a $5,000 deposit to buy a resale three-room HDB flat. I did not appoint an agent, but had agreed to pay the seller’s agent a 1 per cent commission.

Later, I was told by the seller’s agent that the resale application had not been approved by the HDB as the seller had not completed the minimum occupation period of five years.

This was due to a grant the seller had taken when the flat was bought under the Single Singapore Citizen Scheme in 2004. The agent claimed that the seller had earlier told her she had not taken any grant.

What legal recourse do I have against the seller and her agent?

A You have not mentioned whether you have in fact paid the agent her commission. I would assume that you have not, but will deal also with a situation in which you have paid it.

The agent’s commission is usually paid upon legal completion of a sale to ensure that she has done what is necessary under her commission agreement.

But there appear to be cases where agents ask for their commission or introductory fee immediately upon signing the Sale and Purchase Agreement, whether the sale is successful or not.

A lot thus depends on the agreement, whether spoken between the agent and yourself or written in a commission agreement.

If you have not paid the commission, you may not need do so as she did not help you secure the purchase of the new flat, unless you had agreed to pay something for an abortive deal.

If you have paid the commission, you are entitled to get a refund of either all of it, or half of it if you have signed an Agent’s Commission Agreement, which usually provides that the agent still be paid half the agreed commission if the sale is abortive through no fault of the agent.

If you have signed such a commission agreement, you should look at the specific terms governing abortive sales.

You have paid the $5,000 deposit to the flat owner. You are entitled to a refund if the sale does not materialise.

In the case of the flat owner, you have only a claim for damages resulting from this aborted sale.

However, your claim for damages is unlikely to be significant or assessable as the damages payable are what you would have lost out on had the contract been fulfilled as it should have been.

Lim Choi Ming
Partner
KhattarWong

Advice provided in this column is not meant as a substitute for comprehensive professional advice.