New brands at Orchard Central

Source : Straits Times - 31 Oct 2008

ORCHARD Central, Far East Organization’s upcoming mall, has signed up more than 100 tenants so far - including several names that are new to Singapore.

The 250,000 sq ft mall is now 60 per cent leased with five months to go before it opens its doors to shoppers.

‘We are very encouraged by our tenants’ positive response to Orchard Central to date,’ said Far East deputy director for retail management Susan Leng.

Fashionistas can look forward to Spanish brand Desigual’s flagship store in Singapore which wiill take up 3,369 square feet of space at the mall.

Other well-known labels like Tyan and Levi’s Dockers are also among the confirmed tenants.

There will also be a wide choice of new dining options including the first Ootoya branch in Singapore. Japan’s Ootoya has a chain of almost 200 restaurants and is known for its healthy, affordable cuisine.

Also new to the food scene here is Duo Le Restaurant, a luxury restaurant chain from Shaanxi province in China, which will be opening a 2,700 sq ft eatery in the mall.

The mall will also have a new chic-casual dessert restaurant set partly in an outdoor verandah on the eighth floor - developed by The Happy People Co - which runs the Ben & Jerry’s stores in Singapore.

And as previously announced, it will also be home to the first Mediterranean-themed market place, The Med, in basement two.

Far East is looking mainly for mid-range tenants because the mall is aimed at young working professionals.

In line with this, Orchard Central will also offer its adventure-seeking patrons a chance to get an adrenaline fix by climbing and rappelling off Singapore’s first and only five- storey Ferrata Wall located inside the mall.

Rents at the mall range from $20 per sq ft per month (psf pm) to more than $70 psf pm, Ms Leng has said previously.

Orchard Central will open in the first quarter of 2009.

SPIO to be one-stop portal for state tenders: SLA

Source : Business Times - 31 Oct 2008

THE Singapore Land Authority (SLA) said yesterday that from tomorrow onwards, state tenders will be launched only on its State Property Online Information (SPIO) portal.

Such tenders were previously posted on both the Government Electronic Business Portal (GeBIZ) and SPIO.

SLA said the move is aimed at providing a seamless and one-stop information update on state tenders, which include sites for office, commercial, food and beverage, education, lifestyle, residential, industrial, civic, community and institutional use.

The statutory board said it recently revamped its website www.SPIO.sla.gov. sg - and users can now follow the stages of the state tender, download all tender documents and check what properties are up for tender.

They can also check when tenders open and close, the bids for each property, and finally the tender results and final award.

A new archival feature of past tender information allows users to do market comparisons for more informed investment decisions.

The enhanced SPIO also includes better categorisation of information through building types - that is, whole buildings, residential units, office units, retail units.

It is easier to find out which properties are available at a click.

Members of the public can also view and rent properties that are available for residential use, such as black-and-white bungalows, apartments, semi-detached and terraces through SLA’s open bidding system.

IRs insist: we will open on time

Source : Straits Times - 31 Oct 2008

Don’t bet on it! That’s the advice from quite a few observers as the people behind Singapore’s two planned integrated resorts insist that they will open on time.

Marina Bay Sands is scheduled to open at the end of next year. Sentosa Resorts World is set to open in the first quarter of 2010.

Upset contractors, who say the two operators are trying to renegotiate the prices verbally agreed upon for their services, told Today this was a sign of “budget difficulties”. And as a result, the projects would most likely be delayed.

“The cost of building the IRs are turning out to be higher than they had budgeted for,” said a contractor, without giving his name.

A major stumbling block - quite literally - for the construction of the Marina Bay Sands is an old British sea wall which was discovered shortly after excavation works began. Last year, the project designer told the media that the process of removing it was “extremely costly and
complicated”.

But when contacted, both resort operators rebutted suggestions - reported in The Straits Times yesterday - that they would not be opening on time.

Marina Bay Sands general manager George Tanasijevich said: “We continue to target the end of next year for the opening of Marina Bay Sands.”

The Straits Times article added that show organisers and couples hoping to book the venue for their weddings at the end of the year had been turned away.

Mr Tanasijevich replied that Marina Bay Sands were only accepting bookings that take place after the end of next year. A logical move, according to the company, given that no specific date has been fixed for the resort’s opening.

Sentosa Resorts World’s head of communications Krist Boo also reiterated that its plans were on track. The Straits Times article said only four hotels, casinos and the Universal Studios theme park would be opened as scheduled in the first quarter of next year. The reason for the delays of its remaining facilities was due to the fact that there was “a pressing need to find storage space for the equipment” of the theme park.

But Ms Boo maintained this had been “the plan all along”. She added: “The other attractions, including the marine life park, the integrated destination spa and remaining two hotels, will open in subsequent quarters.”

She stated: “It would not be accurate to describe this schedule as the result of ‘delays’.”

Responding to the contractors’ grievances, Ms Boo said the resort’s management “has a responsibility to its shareholders to drive a hard bargain during negotiations”. She stressed: “All the financing for the resort is in place, and there are no ‘budget difficulties’.”

HDB prices up as demand rises

Source : Business Times - 25 Oct 2008

Rents also rise, Q3 data shows; prices and rents of private mass-market homes fall as demand shifts to HDB flats

DEMAND is shifting to HDB flats from mass-market private homes - pushing up HDB prices and rents, but causing mass-market home prices and rents to fall.

Figures released yesterday by the Housing & Development Board (HDB) and Urban Redevelopment Authority (URA) show HDB’s resale price index rose 4.2 per cent in the third quarter.

This means that in the first nine months of 2008, HDB resale prices climbed 12.4 per cent. The number of transactions also increased in Q3 to 8,110, from 7,760 in Q2.

In contrast, private mass-market properties put up a decidedly lacklustre showing in Q3. Prices of non-landed properties in the outside central region - where most mass-market private homes are located - fell 1.5 per cent.

The decline was not expected - most analysts have said mass-market home prices will hold steady this year.

‘In contrast to the private property market, despite the gloomy economic outlook, demand in the resale HDB market is still very active, with buyers coming from up-graders, down-graders and Permanent Residents,’ said ERA assistant vice-president Eugene Lim.

Analysts attribute this to a shift in demand towards HDB flats and away from private mass-market projects.

‘Demand is moving towards the HDB market,’ said Nicholas Mak, director of research and consultancy at Knight Frank. ‘A greater proportion of new homeowners, such as newlyweds and new immigrants, are looking only at HDB flats.’

In the past, a greater proportion of new homeowners would have considered private mass-market apartments, he said: ‘Compared to purchasing private residential properties, buying an HDB flat may allow some to set aside funds for liquidity during this uncertainty.’

More people are also eligible to buy HDB flats now. Statistics show the number of Singapore citizens and Permanent Residents (PRs) is set to hit a record this year. In the first half of 2008, there were 34,800 new PRs and 9,600 new citizens, up from 28,500 new PRs and 7,300 new citizens in H1 last year.

Another reason homebuyers are choosing HDB flats over private mass-market homes is that HDB flat prices are still rising, while prices of private homes are falling.

‘People want the asset they buy to appreciate in value. In the HDB market there is still room for prices to move up,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore. At Sengkang, where HDB flats are going for around $250,000-$300,000, prices could climb 5-10 per cent in the next few quarters, he said.

Private mass-market rents have also been hit by the shift in demand. They fell 2.7 per cent in Q3, as demand switched to the HDB rental market. Overall median sub-let rents for HDB flats rose slightly in Q3.

But looking ahead, even growth in HDB prices is expected to slow as the economy worsens. ‘As such, although there is good demand for resale HDB flats, we expect buyers to turn more cautious and exercise more prudence by offering less for flats so as not to overstretch,’ said ERA’s Mr Lim.

Because of this, cash-over-valuation (COV) figures will continue to decline in the coming quarters, analysts say. The median COV for resale transactions fell to $19,000 in Q3, from $20,000 in Q2 and $21,000 in Q1.

The bigger drops in median COVs were for five-room flats (down 15 per cent) and executive flats (down 22 per cent), notes Mohd Ismail, chief executive of PropNex. ‘This is evidence of buyers resisting paying larger COVs for larger properties in this bleak economy,’ he said.

The increasing popularity of smaller three and four-room flats was also reflected in the median resale prices. The increase for smaller flats, at almost 5 per cent, outstripped the 1.5 per cent increase for larger flats.

HDB resale prices are expected to continue to increase, but probably at a more measured pace in the coming months.

ERA’s Mr Lim said: ‘For 2008 we may see an overall price increase of 15-17 per cent, slightly lower than the 17.5 per cent increase for the whole of 2007. As for 2009, we are likely to see only marginal quarterly price increases, as current resale prices are a new peak.’

Likewise, PropNex’s Mr Ismail expects the HDB resale price index to increase about 15 per cent for the whole of 2008.

No reason for alarm over credit: Ascendas

Source : Business Times - 30 Oct 2008

Industrial space provider spent over $1m on energy audit

THERE are no alarm bells ringing for Ascendas despite the credit crunch, says chief executive Chong Siak Ching.

‘We’ve always operated on a very conservative gearing, so we don’t see any reason to be alarmed,’ she told BT yesterday on the sidelines of the Ascendas green month launch.

‘What we are facing is what everyone else is facing in terms of the credit situation. I think all the various countries and economies are looking at how best to deal with the situation. I don’t think we are in any different position.’

Ascendas runs the Ascendas Real Estate Investment Trust (A-Reit) and its India Trust (a-iTrust). A-Reit’s gearing is 41.4 per cent and business trust a-iTrust’s is 5 per cent.

A-Reit said at its results briefing this month that it has fixed-rate hedging for 76.7 per cent of its debt for the next 3.93 years at a weighted average cost of 3.25 per cent.

Ms Chong declined to comment on the outlook for industrial space, saying that it is too early to tell how the market will unfold. ‘We will continue with our plans across Asia,’ she said. ‘We would expect every country to be hit. We are just watching to see how best to react.’

Ascendas spent more than $1 million over the past two years on an energy audit to help check and upgrade systems such as pumping and cooling. It said yesterday that it has saved $500,000 a year by introducing energy-saving measures.

Ascendas is open to the concept of green leases that include utility usage, Ms Chong said. ‘We also see a trend where customers are asking and looking for green features within the building before they decide on their location.’

The company is also funding a research project by Singapore Polytechnic to build solar kiosks. The kiosks - which each cost about $15,000 to build - can charge about four laptops for two to four hours of use. Ascendas will look at installing the kiosks at its industrial units after prototypes are up early next year, Ms Chong said.

New serviced homes brand for Frasers Hospitality soon

Source : Business Times - 30 Oct 2008

CEO says business actually picks up as MNCs look for more flexible staff housing

WHEN the going gets tough, tough hospitality operators open more rooms.

Frasers Hospitality CEO Choe Peng Sum says that it is looking to start a new serviced residence brand and will announce this soon. This despite his view that the downturn in the global economy is likely to be protracted.

Mr Choe, who was speaking at the opening of the Fraser Suites Top Glory in Shanghai, said that while he did not want to sound ‘contrarian’ in times of a slowing economy, business actually picks up for serviced residences because MNCs start to look for more flexible housing packages for their staff.

Already, he says that Frasers Hospitality has seen its long term stay business in Singapore (averaging about six months) increase from about 50 per cent previously to about 65 per cent in 2008 to date.

Highlighting that serviced residences were full during the financial crisis of 1997 and later during Sars, he added: ‘They were pulling their staff out of bungalows and condominiums and booking them into serviced apartments for three months before deciding what to do.’

Mr Choe did not reveal details of its new brand but said that there is a growing market for hip but functional serviced residences. ‘Road warriors don’t need that fancy stuff,’ he added.

When the brand is launched sometime next year, rooms are expected to be smaller. ‘These businessmen just want fast broadband and a place to sleep,’ said Mr Choe, citing Express by Holiday Inn as a close equivalent.

Apart from reaching out to a broader market, the slowing economy has other knock-on effects for Frasers Hospitality too with parent Frasers Centrepoint considering turning unsold properties such as Martin Place Residences into highend serviced apartments, a strategy also employed during previous downturns. ‘We are still exploring this,’ he said.

As at September, Frasers Centrepoint was reported to have launched and sold about 30 units at its 302-unit Martin Place Residences, with apartments going for about $1,800 psf on average. However, the property market has since largely stalled.

Turning condos into serviced residences is something that Mr Choe has some experience with.

He joined Frasers Centrepoint to set up its service residence arm in the late 1990s. At the time, the company had development sites at River Valley, Robertson Quay and Alexandra Road. With property prices being what they were in 1998, however, the first two sites eventually contributed the seed properties for Frasers Hospitality.

Now, with the property market again in the doldrums, Mr Choe expects that more developers may again turn condominiums into serviced residences.

Apart from Frasers Centrepoint, most of the big players including CapitaLand, City Developments, Keppel Land and Far East Organization all have hospitality arms. All also have unsold apartments. Whether they choose to convert them will depend on whether they see returns from serviced residences out-weighing holding costs.

Trading in condos for serviced residences is already happening, at least in China with Fraser Suites Top Glory, which Frasers Hospitality manages but does not own.

The 317-unit Shanghai property in Lujiazui, owned by China conglomerate COFCO, was initially slated to be sold as high-end condominiums. However, when property prices began to soften, it was converted into a five-star serviced residence. But as Mr Choe notes, ‘in five or ten years, this could change again’.

Amidst the crisis, a perfect day

Source : Today - 30 Oct 2008

There may be many good buys available at the height of the fear cycle

AS A novelist, Charles Dickens’ works appeal to readers of all generations because he understood the psyche of the human race. He realised that we are people of extremes.

When things are bad, we often see them as worse than bad. Conversely, when things are good, we are inclined to see them as better than good.

During current times, people tend to focus on what can go wrong rather than see what can go right. The emotional pendulum swings from one end to another. Fear and greed drive us to extremes and blind us to the truth.

Yes, the sub-prime lending problems have caused a domino effect, putting the global economy into a spin. Singapore, including our property market, has not been spared.

On a brighter side, our economic fundamentals remain sound; the Economic Development Board has forecast a healthy pipeline of foreign direct investment.

We have one of the highest financial reserves per capita. If leveraged correctly, especially during downtimes when you can get more ‘‘bang for the buck,” this will help us leapfrog other nations when the market recovers.

When negative sentiments clash with sound fundamentals, they open a window for profits. In particular, property investments will become more attractive because it is a tangible instrument, proven to be a good hedge against inflation and providing one of the highest leveraged returns in the medium to long term.

Remember, everyone needs a roof over his or her head.

The HDB market is at a steady equilibrium and prices are still rising because of demand from upgraders, downgraders and buyers shifting their attention from the private residential market. The centrally-controlled supply will provide a positive support to the HDB market.

The private residential property market is facing the brunt of the economic crisis. While there seems to be an oversupply, research by Credit Suisse indicated that 57 per cent of the oversupply is in the high end of the property market.

When the market turns around (which will most likely happen when we least expect it), properties in the core central region will be the focus of attention again. Singapore, as a favoured business destination, is cheaper than Mumbai, Moscow, Tokyo or Hong Kong.

In the mass market, the current downturn, coupled with fear gripping many owners, has generated many opportunities for investment. Many properties are being sold at below current replacement cost.

The property market is not suffering from any structural problems that cannot be resolved. Major developers are in a better position to overcome current challenges and hold back the launching of new properties.

The support level will also be underpinned by the foreign talent we are attracting to live and work in Singapore. Demand will come from many sectors, including more than 12,000 families that sold their houses through en bloc sales in the past three years, global citizens, and families with children who are pursuing their education in Singapore.

All said, it is wrong to think that property investments march to the same tune up and down the property cycle. At any point in the cycle, there will always be good buys. Many such good buys are available at the height of the fear cycle - which possibly could be during this period of time.

There are sellers who are over-geared or have factored in the worst-case scenario and have decided to exit the market.

For sellers, there is no better time to upgrade or downgrade your property than now. Remember, when you sell low, you also buy low - or possibly lower.

Moreover, as the gap between prices of HDB flats and private residential properties is narrowing, it is a good time to move your family to a better home or location.

What’s more, you do not have to rush with any crowds, and can take your time to find the right home. You can also be assured of closer attention and better service too.

The key forces are converging into what I call a perfect day to invest in the market. In the near future, many people will look back and regret they did not take any action to profit from it.

Patrick Liew, chief executive officer of HSR Property Group.

More private equity may flow into hospitality sector

Source : Business Times - 30 Oct 2008

But investors must be choosy and have a long-term view, say analysts at a panel discussion

PRIVATE equity is expected to play a bigger role in the hospitality sector, given the likely medium-term difficulty in securing debt finance.

But investors should be careful to pick the right type of project and must realise that investments have to be made with a long-term view.

‘Prices have been correcting. And we expect them to correct a lot more,’ said Quek Kwang Meng, Citigroup’s real estate investment head international, yesterday. As such, investors should take their time in choosing which projects to put their money in, he said. Ideally, hospitality projects should fulfil a basic need - such as three-star service apartments to cater to business travellers.

Greenfield projects in parts of China such as Shanghai and Beijing also remain of interest to most private equity investors, Mr Quek said.

This is because of rural-urban migration and a steady stream of some four million university graduates every year. ‘They need to find jobs and are going to the cities to look for them,’ he said.

Still, investments have to be made with a long-term view.

‘If you take such a view, then you have - to some extent - ignore what’s happening now,’ said David Faulkner, regional director, valuation and advisory for Colliers International, referring to the slowing economy and credit crunch.

‘That’s how you make serious money.’

While distressed properties are likely to be found on the market in time, for now, Asia remains in good shape financially, he said.

‘The bigger corporations are in a better position. Smaller developers and corporations are suffering a bit. But there’s no sign of panic in the region.’

Mr Quek and Mr Faulkner were speaking during a panel discussion at the inaugural Invest, Develop, Build - Resorts, Spas, Hotels, Marinas Asia-Pacific 2008, a networking platform for the hospitality sector which kicked off yesterday.

The event is supported by the Singapore Tourism Board and the Economic Development Board and endorsed by governments of countries such as Thailand, Indonesia, Japan and Russia.

In a presentation yesterday morning, EDB positioned Singapore as the ‘living lab to develop and test new concepts’ such as green buildings or health-and-wellness concepts.

Singapore’s pro-business environment, access to regional partners, supply chain management capabilities and stylish city scene are among factors that make it a window to the future of urban Asia, according to EDB.

China, Korea face housing market bust

Source : Business Times - 30 Oct 2008

Analysts say both countries have to take more steps to spur demand

China and South Korea have moved to prop up their frazzled housing markets but probably need to do much more to avoid major price slides that could ruin developers, damage banks and threaten the region’s economies.

A share price collapse this week for Chinese property developers such as Guangzhou R&F and China Overseas Land suggests that many investors believe a housing market bust is on the cards, despite a policy U-turn by Beijing.

‘Investors might just be throwing in the towel,’ UBS analyst Eric Wong said of the sharp drop, which saw some stocks lose as much as 35 per cent of their value over Monday and Tuesday. The Chinese government, fearing a price bubble, was in market cooling mode only a year ago, squeezing developers with a clampdown on loans and hatching moves to stamp out speculation.

New home prices then slumped by up to 40 per cent in the southern cities of Guanzhou and Shenzhen as sales dried up, and property firms began slashing prices across the country to keep cash flowing in.

The outlook grew even dimmer as the global credit crisis began to buffet Asia and batter its financial markets, stalling the region’s once-roaring economies.

So last week Beijing unveiled cuts in taxes, mortgages and down payments on homes in an effort to breathe life into a property industry that accounts for about 10 per cent of gross domestic product (GDP) in the world’s fourth-largest economy. But the country’s biggest developer, China Vanke Co, reported on Tuesday a 13 per cent decline in net profit and a nearly 30 per cent drop in sales volume, in another reminder of how deep-seated the problems are.

If the housing market fails to perk up, analysts say policy makers will probably resort to macro-economic measures to spur demand, such as cutting taxes and interest rates.

‘The usual monetary cocktail is a blunt instrument but it’s longer lasting,’ said UBS’s Mr Wong, adding that Beijing might also raise export subsidies and hike pay at state companies.

On the property side, the government could reel back on its measures to dissuade people from buying apartments as investments and tell banks to start lending to developers again, Mr Wong said.

In South Korea, where around half the country’s personal wealth is tied up in property, the government pledged five trillion won (S$5.3 billion) last week to buy unsold homes and land from developers to prevent mass bankruptcies in the industry.

An interest rate cut of 75 basis points followed on Monday as policy makers tried to keep the global financial storm at bay.

The steps are a reaction to slowing economic growth and a steep climb in the number of unsold new homes on the market, which rose 43 per cent to a record 160,595 units in July from the end of 2007, according to government data.

Just as in China, the government had a hand in slowing the market in early 2007, tightening restrictions on mortgages and buying second homes.

Analysts believe freeing up finance for homebuyers is the answer, not just taking homes off the market. Apartment prices in the most expensive districts in Seoul and in satellite towns have fallen up to 20 per cent from their peaks in 2006.

‘The measures came too late and are too weak,’ Daiwa Institute of Research analyst Hyo Yim said of the government’s action to shore up the property market.

The government should loosen rules on mortgage lending and cut back taxes on owners of two or more homes, Mr Yim said.

Mortgage debt in South Korea is still only a quarter of GDP, compared to 61 per cent in Australia, and 105 per cent in the United States, according to CLSA. In China, home loans equal only 12 per cent of GDP.

‘The government cracked down on so-called speculative buyers, but people won’t buy homes if they don’t expect prices to rise,’ said Mr Yim, adding that the housing market would probably not recover before 2010.

Many of South Korea’s 12,000 builders face a cash crunch as credit dries up and home sales slow, with 88 firms defaulting in the first nine months of 2008, up 17 per cent from a year earlier.

Even top developers are not immune to such worries, with shares in GS Construction, Hyundai Development and Samsung Engineering tumbling between 37 and 50 per cent in the last month.

But some analysts are suggesting that South Korean construction stocks may have bottomed thanks to the government’s actions, with valuations at historical lows and at a 30 per cent discount in price/earnings terms to the overall stock market. BNP Paribas analyst Jae Rhee has a 12-month target stock price for Hyundai Development that is double its current price. And the potential upside for GS Construction and Samsung Engineering is about 70 per cent, he wrote in a report last week.

Chinese developers are now trading at near 70 per cent discounts to net asset value, and at 7.4 times forecast 2008 earnings, according to Citigroup analyst Oscar Choi, who believes the stocks have been sold off ‘indiscriminately’.

And Beijing will do all it can to stop a property market crash, said CLSA analyst Nicole Wong, who has a buy rating on New World China Land and Agile Property.

‘Policy is very supportive; basically they’re underwriting a put option on market,’ she said. ‘For sure the government will take further steps if the downward spiral doesn’t stop.’ - Reuters

51% of US owners say their property value fell

Source : Business Times - 30 Oct 2008

Perception of values more accurate as economy’s weakness hits home: survey

A majority of US homeowners believe the value of their property fell over the past year, according to a survey of real estate market confidence by data company Zillow.com.

The survey of 1,388 homeowners between Oct 7 and Oct 9 found 51 per cent said their houses had lost value, while 49 per cent believed the value had stayed the same or increased, Seattle-based Zillow found.

In an earlier survey, taken from June 30 to July 2, 38 per cent said their homes had lost value and 62 per cent said they had gained or stayed the same. Three quarters of homes have actually fallen in value over the past year, Zillow said.

‘The bad news on the general economy front is getting through to people and certainly is making their perception of home values more accurate,’ Zillow’s vice-president of Data and Analytics Stan Humphries said in an interview.

The median price of an existing home dropped to US$191,600 in August, down from a record high of US$230,200 in July 2006, according to the Chicago-based National Association of Realtors.

The disconnect between owners’ perception of value and actual market conditions makes it harder for real estate agents to price homes to sell, Mr Humphries said.

Homeowners ‘have a larger sense of the personal wealth of their portfolio than is actually the case,’ he said.

Zillow’s Home Value Misperception Index shrank to 16 in the third quarter from 32 in the second quarter. An index value of zero indicates homeowner perceptions are in line with actual values.

Homeowners also were less optimistic about the future. About 21 per cent said they believe their home’s value will rise over the next six months, compared with 32 per cent who predicted price appreciation in the previous survey.

About 57 per cent said they thought property values in their local market will fall.

‘It’s human nature for people to imagine that what they have is nicer than what their neighbours have and unfortunately that’s not always the case,’ said realtor Elizabeth Blakeslee, an agent with Coldwell Banker Residential Brokerage in Washington, DC and a regional vice-president of the National Association of Realtors.

Purchases of existing homes jumped 5.5 per cent in September to a 5.18 million annual pace, the highest level in a year, according to NAR. Part of the reason is that a flood of less expensive foreclosed property drew buyers.

Foreclosure-related sales accounted for 35 per cent to 40 per cent of total September sales, NAR said. The median price dropped 9 per cent.

Respondents to the Zillow survey who said they plan to vote for Republican presidential nominee John McCain were more optimistic about their home values than were supporters of Democrat Barack Obama.

About 50 per cent of would-be McCain voters said their home values have decreased in the last year, compared with 56 per cent of Obama voters, Zillow said. — Bloomberg

Sentosa IR to delay parts of project

Source : Straits Times - 30 Oct 2008

Only four hotels, casino and Universal Studios to open as scheduled in first quarter of 2010

FOUR hotels, Universal Studios and the casino of the Sentosa integrated resort are set to open as scheduled in the first quarter of 2010.

But sources told The Straits Times that Resorts World at Sentosa is negotiating with the Government to defer the opening of the remaining facilities in the $6 billion resort.

The setback, The Straits Times understands, has arisen out of a pressing need to find storage space for the equipment for the 14 attractions in the Universal Studios theme park.

To create space on-site, the resort has had to turn one of its venues into a store and, while the venue is used this way, construction has to be put on the backburner.

Asked about this, Resorts World at Sentosa head of communications Krist Boo would only say the project is ‘on track’ for a ’soft opening’ in 2010.

She added: ‘Due to the tight labour market and the need for many varied specialist skills - both front-line and in operations - in the resort and in Universal Studios Singapore, we will be progressively opening our many hotels, food and beverage outlets, casino, entertainment and attractions from the first quarter of 2010.’

Like Las Vegas Sands Corp, Resorts World at Sentosa’s parent company Genting has been hit by the financial crisis. Its stock price fell by half from RM8.50 a year ago to its current value of about RM4.

The Singapore Tourism Board declined to respond to queries on the ongoing negotiation.

Marina IR not likely to open fully in end-’09

Source : Straits Times - 30 Oct 2008

THE integrated resort (IR) at Marina Bay is unlikely to be fully open for business at the end of next year, sources have said.

An old British-built sea wall on its site, which stands on reclaimed land, is among the problems. It delayed foundation works by three to four months, and then a shortage of labour and the rising cost of building materials also created setbacks.

When the Marina Bay project was awarded to Las Vegas Sands in 2006, its top executives announced that the entire resort would be ready by end-2009 - a departure from the industry practice of opening such mega projects in stages.

But sources now confirm that it is ’several months’ behind schedule and that, even if the physical structure can be ready by then, it will be ‘impossible’ for all its facilities to be fully operational.

The 2,600-room resort with a gross floor area bigger than 70 football fields is supposed to be the new hub for the meetings, incentives, conventions and exhibitions business with its 200 meeting rooms, exhibition hall for 2,000 booths and ballroom for 6,600 diners.

Asked about the delay, Marina Bay Sands general manager George Tanasijevich maintained: ‘As previously announced, we are scheduled to launch at the end of 2009.’

But show organisers and wedding couples hoping to book the venue at the end of next year have been turned away.

Bride-to-be Rachel Law, 27, called the resort in August to ask about holding her wedding dinner there next November and was turned down despite having begged for her booking to be taken.

An event organiser, who said the earliest booking available was for an April 2010 event, asked: ‘If they are opening next year, why are they turning away business until 2010?’

Construction woes aside, the free-fall in the stock value of the resort’s parent company Las Vegas Sands Corp - from US$178 13 months ago to under US$5 now - has also raised questions about the fate of the US$4.5 billion (S$6.7 billion) project here.

CIMB-GK economist Song Seng Wun, predicting that the gaming sector will be hit by the global recession, said the operators’ vulnerability is on everyone’s mind.

The collapse of banks like Lehman Brothers Finance Asia and Merrill Lynch International Banks has also put a question mark on the $5.25 billion loan secured by Marina Bay Sands. The two American banks were among the lead arrangers for the loan, along with local banks like DBS Bank, United Overseas Bank and OCBC Bank.

Mr Tanasijevich did not reply to questions on the status of the Singapore loan, nor those on whether the IR will open in phases and when it would accept bookings for events.

Singapore Tourism Board (STB) director of integrated resorts Margaret Teo told The Straits Times the board is monitoring the situation, but did not respond to other queries on penalties or whether the resorts will open in phases.

She said, however, that the STB was working with key agencies and the resorts to resolve potential delays and to enable the resorts’ completion.

Analysts note that the two resorts have up to eight years to finish construction, but delays are bound to hurt the Singapore economy because of the 60,000 new jobs and $5.4 billion in revenue that they are expected to generate.

Tourism and gaming consultant Jonathan Galaviz, reckoning the losses to run into millions of dollars every month, said: ‘It brings into question the true economic value each bidder promised the Singapore Government in the formal proposal.’

The rules of the awards of the two projects given in 2006 stated that both companies must start construction within three years and complete them in eight years.

They stand to lose their deposits of $200 million each and the Government could repossess the land as a penalty.

Natura Loft to be launched on Friday

Source : Straits Times - 29 Oct 2008

QingJian upbeat about condo-style HDB project despite market blues

UNDETERRED by gloomy sentiment in the local financial and private property market, Chinese firm QingJian Realty is launching Singapore’s fourth condo-style public housing project on Friday.

Natura Loft at Bishan, a project under the Housing Board’s Design, Build and Sell Scheme (DBSS), will feature three 40-storey blocks of 160 four-room units and 320 five-roomers.

The four-room units of about 95 sq m each are priced from $465,000 to $586,000 while the five-roomers of 120 sq m will go from $600,000 to $739,000.

That works out to around $450 to $570 per sq ft (psf).

QingJian Realty’s move reflects the relative strength of the HDB market amid a general downturn in the property market here. Managing director Zuo Hai Bin said demand is still strong and resale flat prices are holding.

‘We’re very confident that there’ll be a strong demand for our flats, which are new and attractively priced compared to resale flats in Bishan,’ he added.

Natura Loft is QingJian Realty’s first foray into property development here. The firm is a unit of QingJian Group, formerly known as Qingdao Construction Group Corporation. The China-based builder won the tender in February with a bid of $135.9 million or $237 psf per plot ratio for the Bishan Street 24 site.

QingJian Realty has 15 property and construction units worldwide with real estate developments in Qingdao, Jinan and Beijing. It began operations here nine years ago, starting as a sub-contractor on HDB projects. It then moved to taking on the main contractor role for HDB homes in Sengkang and Punggol and now to being a DBSS developer, said Mr Zuo.

‘We’ve moved step by step in the Singapore market and we see it as an important expansion location in our firm’s overall strategy,’ he added.

The firm is on the look-out for more DBSS sites to develop but considers the private market ‘too risky’ to venture into at the moment, said Mr Zuo.

Flat prices at Natura Loft are a notch higher than HDB’s third DBSS project, Park Central at Ang Mo Kio. This was priced between $400,000 and $500,000 each for four-roomers, and $600,000 and $670,000 for five-roomers.

Mr Zuo said his firm has already revised the Bishan prices down due to the prevailing cautious sentiment. Its prices are competitive, considering Sim Lian’s Clover By The Park condo in Bishan sold for about $750 psf, he added.

Natura Loft is also an eco-friendly project, with bamboo flooring for its bedrooms - a first for public housing - bay windows and energy-saving inverter air-conditioning systems, said architect Tang Too Voon of ADDP Architects.

The homes are also built with universal design, and have amenities such as basement carparks, playgrounds, fitness corners, jogging track and barbecue pits.

Are Housing Board subsidies regressive?

Source : Straits Times - 29 Oct 2008

IN THE 1990s, the Housing Board changed its subsidy policy of flats to, in effect, be a discount on the market price. Hence, a HDB flat located in the same precinct as a private condominium sold at a much lower price.

In the Government’s drive towards home ownership so everyone has a ’stake in the country’, 95 per cent of the 80 per cent of HDB dwellers are owner-occupiers. This is a remarkable achievement in a country just over 40 years old - a true testimony to the success of the Government and the HDB.

However, there has been recent public discussion of the rising costs of HDB flats and whether housing is still affordable in Singapore. Some asked why government subsidies are not cost-based or break-even, but rather a discount on the market price.

To this, the government stand has been that such a market-based approach ‘reflects the true subsidy buyers enjoy’ and has allowed the HDB to price its flats affordably despite the sharp escalation in construction costs. Indeed, this is true. If the HDB changed its policy to a cost-based break-even subsidy, the amount of subsidy would increase with construction costs and this might prove unsustainable over a prolonged period. Basing a subsidy on the market price means the state as public housing provider gains less than if it was a private developer. The public benefits from this discount. The state still gains an excess over costs from its public housing developments, which is used to keep future public housing prices affordable. All this works well.

However, let us explore deeper the contributors of these subsidies - who subsidises public housing in Singapore?

Under a cost-based break-even subsidy, an increase in construction costs means the Government will have to use more taxpayers’ funds. Tax in Singapore is progressive, which means the better off contribute a larger percentage of their wealth. Paying for subsidies from taxpayers’ funds means the better off will subsidise an increasing proportion of the subsidy increase. This is definitely progressive.

Under a market-price-based discount subsidy, the reduced profit from current public housing developments the state receives is used to subsidise future public housing developments. The reduced profit is received from Singaporeans living in public housing developments today. The subsidy for future public housing is for Singaporeans living in public housing developments tomorrow. This means the population living in public housing is, effectively, subsidising itself over time.

But what about the state subsidy - the discount on market price given to this 80 per cent of the population? Who actually pays that? The answer depends on the actual market price of these public housing developments, based on supply and demand. Simply put, if there was no demand for these developments without the discount (because those who can afford it would seek out private developments, and those who cannot afford it, cannot afford to own a home), the discount would not exist. The market price of something with no demand is zero, and a discount on zero is zero.

Therefore, it seem that having 80 per cent of public housing dwellers subsidise themselves over time, with 20 per cent in private housing unaffected, is regressive. This housing subsidy policy seems to go against our quest of a progressive society, outlined in other policies. Crucially, this regressive policy affects 95 per cent of the 80 per cent in public housing, as they are home owners. This is a percentage much larger than the population actually paying progressive taxes.

However, I do not advocate a cost-based break-even subsidy, as it is undeniable that over an extended time, that may prove increasingly unsustainable as construction costs and the living standard demands of public home owners rise. Nor do I think we should relook the home ownership policy of Singapore, as the ‘everyone has a stake in this country’ argument is a good and justified one. The solution may lie in an area in which Singapore was weak and could not afford to rely on when a young nation in 1965, but which has since grown from strength to strength - private property developers. Can they offer affordable social housing?

Foo Cexiang

Property auctions see few takers

Source : Business Times - 29 Oct 2008

Buyers waiting for prices to fall further, despite recent drop, say auctioneers

PROPERTIES for auction are being left on the shelf even after vendors cut prices - as buyers hold out for further drops.

198 properties were put on the block by the five main auction houses from July to September this year, according to figures from one of them, Knight Frank. But just 14 of these properties were sold during their first time on the podium.

And in October, there have been no takers at the two auctions held so far - one by Knight Frank and the other by Jones Lang LaSalle. DTZ, Colliers and CKS have yet to hold auctions this month.

The abysmal results are a far cry from 2006 and 2007, when many properties were snapped up the first time they were auctioned.

‘The current market is essentially a buyer’s market as sentiment is very sluggish in view of the global financial turmoil,’ said Knight Frank’s executive director for auctions Mary Sai.

The slowdown started early this year, auctioneers say. ‘The auction market has been generally quiet since the beginning of 2008, and as such, buyers are adopting a wait-and-see attitude,’ said Shaun Poh, DTZ’s senior director for investment advisory services and auction.

Buyers are not biting because they are waiting for prices to fall, even though asking prices have already come down as much as 20 per cent in some cases, auctioneers say.

‘Vendors generally are more realistic in their pricing now as property values have declined in the past few months in the wake of bad news on the economy, inflation and sub-prime woes,’ said Ms Sai.

Mr Poh said that properties from various sectors are being put up for auction, and vendors are mostly hoping to make just a slight profit or break even.

But despite this, transaction volumes are low, although property firms are still getting enquiries.

Demand from investors is weak, but there is still some interest in value buys and properties that are well located and priced right, as investors are very price-sensitive, said Grace Ng, Colliers’ deputy managing director for agency and business services.

Demand from owner-occupiers is slightly better. Colliers says that it is seeing good interest in mass-market private homes from upgraders and for landed properties such as terraced houses.

As yet, there are no fire sales, auctioneers report. But looking ahead, fire sales from owners who need to unload properties and cut losses before banks step in to foreclose are likely, said Knight Frank’s Ms Sai.

There will also be more mortgagee sales as borrowers default on loan payments - if they lose their job or find themselves unable to hold multiple properties they acquired earlier at much higher prices and are now unable to rent out, she added.

Demand will come from owner occupiers, said Colliers’ Ms Ng. ‘As for the investors, they are likely to take advantage of the current market situation and offer prices that are below market valuation,’ she said.

Frasers bullish despite crisis

Source : Today - 30 Oct 2008

IT LOOKS like being a business for all seasons. The global economic and financial turmoil has yet to have a major impact on Frasers Hospitality, the serviced apartments arm of Frasers Centrepoint, itself the property division of mainboard listed Fraser & Neave.

The firm is certainly playing in the big league; its newest property in China - Fraser Suites Top Glory in Pudong - was formally opened yesterday by former United States Secretary of State Henry Kissinger.

Chief executive Choe Peng Sum said: “We are still on course to meet our target of raising the number of apartments in our portfolio to over 8,000 units in 2010. In fact we’ll have some 7,000 by the end of next year.”

Frasers Hospitality maintains that the current crisis is providing new opportunities, as developers are finding that their projects could run up huge losses if they were to unload them now. So leasing them out as serviced apartments to generate recurring income makes better sense - and who better to manage these apartments in the meantime than a company like Frasers.

In many of the places Frasers is currently pursuing opportunities - such as China, the Middle East and India - many of the properties are owned by state-owned enterprises, sovereign wealth funds, or other entities with plenty of liquidity, and for whom the credit crunch hasn’t had much of an impact.

Mr Choe said: “In spite of the global economic issues, we are still extremely bullish about China. In fact, earlier we had announced 12 China properties by 2010, but as of now it is 13 and we are still signing on more properties.

“China is simply the world’s largest growth engine. The tremendous growth of economies like China and India is an ‘internal support base’ for the rest of the Asian economies, and a buffer from the full impact of the economic malaise sweeping the world.”

The 317-unit complex of six apartment blocks is owned by Cofco, one of China’s most widely diversified conglomerates and listed on the Fortune Global 500.

Frasers has a 10-plus-10-year service contract on the property. It has another two properties on the Puxi side, including one near the Xintiandi complex which is expected to open next February. And it is in negotiations for another one.

Frasers is looking for properties outside its four core areas of Beijing, Shanghai, Shenzhen and Guangzhou. It is also going into cities like Tianjin, Chengdu, Dalain, Suzhou, Xian, Chongqing, Hangzhou and Wuxi, besides going into Hong Kong.

Mr Choe says prospects for serviced apartments remain good as companies still have to carry on with their business, “unless there is a real crash which will throw all forecasts to the winds”.

Frasers is playing safe by seeking to lock clients into contracts for long-term stays. Up to now, business has been roughly equally divided between these tenants and short-term visitors, who pay more but by nature of their circumstances, offer a less certain income stream.

STB working hand-in-hand with Marina Bay Sands

Source : Business Times - 29 Oct 2008

The Singapore Tourism Board (STB) yesterday said it is working closely with Marina Bay Sands to ensure success of its integrated resort (IR) project, amid concerns over the financial position of parent company Las Vegas Sands (LVS).

In a statement, STB’s director of integrated resorts, Margaret Teo, said the agreement with Marina Bay Sands ‘takes into account various eventualities’ and it is ‘premature to speculate at this stage’. ‘STB is monitoring the situation and is aware that the current uncertain economic climate may give rise to concerns,’ Ms Teo said.

The LVS share price went into free fall on rumours the company is having trouble refinancing debt amid poorer outlook on the casino business in the US. On Monday, the stock closed at US$5.80 - down from a high of US$148.76 on Oct 29 last year.

On Friday, it said it was hiring an investment bank to raise capital, with the help of founder and chief executive officer Sheldon Adelson and his family. Mr Adelson pumped US$475 million of his own money into the company last month to prevent a breach of loan covenants.

Bankers and analysts say the Singapore government is not likely to allow the iconic project to fail, even if Marina Bay Sands is forced to default on loans. The three local banks are financing $2.2 billion of the $5.44 billion project, according to sources.

S’pore ‘most politically and socially stable in region’

Source : Straits Times - 29 Oct 2008

SINGAPORE is well-positioned to weather the economic slowdown because of its political and social stability, said Hong Kong-based Political & Economic Risk Consultancy.

Its analysts ranked Singapore as having the least political and social risks next year among 16 territories in Asia-Pacific, according to a summary of its 87-page report released to the media yesterday.

The unlikelihood of sudden political changes, stable labour relations and sound policies, including measures to help the poor, were among the factors in Singapore’s favour, said Perc’s managing director, Mr Robert Broadfoot.

He told The Straits Times: ‘Singapore’s fiscal situation is strong enough for the fiscal incentives that are going to help the country get over the crisis and spread the pain of recession.’

Politically, he noted, Singapore has no election coming up and the Government would stay in power.

In addition to crafting good policies to take Singapore through a recession, the Government’s ability to implement them is a plus point.

Social stability is also expected, he said, because Singapore has ‘no insurrection movements, the labour situation is stable and more harmonious than most countries, and you don’t have religious fundamentalist movements.’

The report also concluded that despite external shocks, Singapore and Hong Kong will emerge stronger in their credibility as regional and international business centres.

Singapore’s Government-backed institutions such as Temasek Holdings and the Government Investment Corporation (GIC) remain well-positioned to capitalise on opportunities that emerge in the region and globally in these times.

Mr Broadfoot said: ‘GIC and Temasek have assets and are liquid. Their brands are still quite good: Temasek has an image of a stable company and will be viewed as a preferred partner.’

Hong Kong’s ace in its pack is The Hongkong and Shanghai Banking Corporation (HSBC) coming through the crisis intact as one of the large remaining private banks in the world.

The report found that while Singapore, Hong Kong and Australia could be hurt the most by the crisis, they were the most stable politically and socially.

On a scale of zero for the least risky to 10 for the most, Singapore scored 2.76, followed by Australia (2.9) and Hong Kong (3.23). Most risky are India (6.87), Thailand (6.28) and Malaysia (6.07). They are vulnerable not so much to the financial fallout but due to internal developments, the report added.

So, while India and China have been seen as engines of growth that will lift Asia out of a slowdown, the report warned of the external and internal troubles these countries will face.

China will have to contend with a drop in exports to the US, and deal with social instability arising from a widening income gap and a surge in unemployment.

India faces uncertainties over a general election due by May next year, rising communal violence and acts of terrorism.

The report predicted that a weakened US is likely to be less aggressive in pushing its views on other countries.

This will put more responsibility on US allies like Singapore, Japan and Australia to take the lead in issues the US has previously fronted, such as countering terrorism.

Singapore Management University law professor Eugene Tan warned that Singapore still faces terrorist threats.

It is also uncertain how long the slowdown will last, he said, adding: ‘Race, language and religion are still fairly strong faultlines and the slowdown will make those faultlines more significant.’

S’pore ranked 7th among top global cities

Source : Business Times - 29 Oct 2008

THEY are cities that exude power, sophistication, wealth and influence. Most of all, they continue to forge global links despite the intensely tough and complex economic environment.

They are the top global cities. And Singapore is one of them, along with the usual suspects: New York, London, Paris and Tokyo.

Singapore has been ranked seventh on a list of 60 cities compiled by Foreign Policy magazine, consultancy AT Kearney and The Chicago Council on Global Affairs based on five factors - business activity, human capital, information exchange, cultural experience and political engagement.

Singapore is cited for its financial links, along with Hong Kong, which was ranked fifth on The 2008 Global Cities Index.

With Hong Kong and Chicago, Singapore is recognised as a regional gateway - an efficient economic powerhouse ‘with favourable incentives for businesses and easy access to natural resources’ of its region.

It is a magnet for smart, well-trained people worldwide and it often reinvents itself to stay competitive.

Singapore ranked sixth for business activity, seventh for human capital, 15th for information exchange - how well news and information is dispersed about and to the rest of the world - 37th for cultural experience and 16th for political engagement.

While behind Hong Kong overall, Singapore ranked above Seoul, which came in ninth. These three and Tokyo, in fourth place, are the four Asian cities in the Top 10 Global Cities.

Three cities from the US are also in the Top 10 - New York (1), Los Angeles (6) and Chicago (8). Europe is represented by London (2) and Paris (3). Canada’s Toronto is ranked 10th.

‘The Big Apple beat other global powerhouses largely on the back of its financial markets, through the networks of its multinationals and by the strengths of its diverse creative class,’ Foreign Policy says.

London is runner-up largely on account of the cultural dimension, where Paris and New York trail far behind.

Paris, known more for museums than modems, is ranked third - thanks to its world-leading position in information exchange. Tokyo is highly rated for its strong showing in business.

‘As diverse as they are, the most successful global cities have several things in common,’ Foreign Policy says. ‘As New York proves, global cities are those that excel across multiple dimensions.’

Even Shanghai’s staggering, decades-long double- digit economic growth alone can’t make it global, says the magazine. The city must determine how to use that wealth to influence policy, attract the brightest young minds and accurately portray the rest of the world to its citizens.

‘Global cities continuously adapt to changing circumstances,’ Foreign Policy says. ‘London may be the city hardest hit by the global credit crunch, but chances are that it will leverage its abundant global financial ties to bounce back. Singapore, San Francisco (15) and Mexico City (25) will no doubt be taking notes.’

S’pore ranks 7th in the world

Source : Straits Times - 29 Oct 2008

Republic scores well in business and education, but fares poorly as cultural capital

SINGAPORE has been ranked as one of the best global cities in the world in a study by the influential Washington-based magazine, Foreign Policy.

The country was ranked seventh in an index of the top 60 global cities, defined as cities that radiate influence, wealth and sophistication.

It was hailed as a place to get a degree and do business, but fared poorly as a cultural capital.

The cities that finished ahead of Singapore were New York, London, Paris, Tokyo, Hong Kong and Los Angeles - in that order. But the Republic placed higher than other powerhouses such as Chicago (No. 8), Beijing (No. 12) and Frankfurt (No. 21).

The cities were ranked based on five factors: business activity levels; human capital - the ability to draw diverse groups of people and talent as well as the number of international schools and degree holders it has; cultural experience; information exchange; and political engagement.

The last two categories measure news and data distribution through various means and the degree to which a city influences global policy-making and dialogue, respectively.

On business, Singapore was cited for the large number of top-40 global service firms with offices in the country and the volume of goods that passed through here, among others.

On the list of top cities to get a degree, Singapore finished behind New York and London, but ahead of places like Boston, Los Angeles and Paris.

When it came to cultural buzz however, 36 cities, including Seoul, Shanghai and Tel Aviv, finished ahead of Singapore.

The culture rankings are based on the number of major sporting events held, culinary offerings, international travellers, museums and performing arts.

Assistant Professor Michael Netzley of the Lee Kong Chian School of Business at the Singapore Management University said he was ‘not surprised’ by Singapore’s rankings.

‘The question is, does Singapore want to be a cultural capital, given that it is already doing great overall without this, based on its business and human capital?’

When contacted for a response, the Singapore Tourism Board’s director of communications Rostam Umar said: ‘Many of the cities topping the Cultural Exchange listing are well-established centres of commerce that have a long history and have, over the years, developed organically into cultural hubs as well.

‘Compared to these cities, Singapore is relatively young.’

He added: ‘However, we believe that Singapore is on track to improve its ranking in this area with the entire city gearing up as a place for all to live, work and play.’ He cited the increasing number of leisure and lifestyle events being held here in recent years as an example of this.

The Global Cities Index, the first done by the magazine, aimed to measure ‘cultural, social and policy indicators’, not just ‘economic or financial ties’, it said.

It said the top global cities were continuously adapting to changing conditions.

‘London may be the city hardest hit by the global credit crunch, but chances are that it will leverage its abundant global financial ties to bounce back. Singapore, San Francisco and Mexico City will no doubt be taking notes,’ it added.

Foreign Policy, co-founded by noted American political scientist Samuel Huntington in 1970, is published by the Slate Group, a division of Washingtonpost.

New owner for two local malls?

Source : Today - 29 Oct 2008

YTL CORP, Malaysia’s biggest builder, will spend $285 million for control of Macquarie Prime Real Estate Investment Trust (Reit), owner of stakes in two Singapore malls - Wisma Atria and Ngee Ann City.

YTL, which is based in Kuala Lumpur, will buy 26 per cent of Macquarie Prime at 82 cents each from Macquarie Bank, it said yesterday in a statement.

The company will also acquire 50 per cent of Prime Reit Management Holdings, the holding company for the manager of Macquarie Prime, allowing YTL to control the Reit, it added.

Singapore’s economy entered a technical recession in the last quarter as the global financial crisis curbed demand for its exports, tourist arrivals fell and real estate prices declined.

“Challenging equity and debt conditions on account of the sub-prime crisis and tightening credit market conditions have led to attractive valuations,” said Mr Keith Magnus, head of investment banking for Singapore and Malaysia at Merrill Lynch, YTL’s adviser for the transaction.

Trading in Macquarie Prime was halted yesterday. On Friday, the stock climbed 1.9 per cent to 54 cents, the first gain in eight days. YTL said it bought the units at a 49-per-cent discount to their net asset value.

The Singapore-based Reit, which will be renamed Starhill Global Reit, owns $2.2 billion worth of retail and office properties in Singapore, Japan and China, according to YTL’s statement.

The Malaysian company owns the luxury Starhill mall in Kuala Lumpur and has said it wants to bring the brand to projects in Singapore and London.

Macquarie Prime controls Wisma Atria and has stakes in Ngee Ann City, which together offer the longest stretch of street-level frontage along the Orchard Road shopping belt, YTL said.

Macquarie Prime said in February it was conducting a review that may lead to the sale of the trust after Macquarie Real Estate, its biggest shareholder, received “unsolicited offers” for the 26-per-cent stake.

Macquarie Real Estate is a unit of Macquarie Group, Australia’s biggest securities firm.

No place like home

Source : Sunday Times - 26 Oct 2008

As financial markets crashed around the world over the course of the last few weeks, there were plenty of worried people in the newsroom. None more so than a young colleague of mine.

In the face of a looming recession and plunging stock prices, she wasn’t so much fretting about the price of Capitaland shares as the Capitaland apartment she had bought just before the great September meltdown.

The 99-year leasehold two-bedder she bought in the Redhill area was priced at just above $1,000 psf.

It was a carefully researched decision and quite a bargain considering the awesome view from 40 floors up. Yet she couldn’t shake off her unhappiness.

‘When we bought our condo, I was fairly certain prices would hold fairly steady, barring a recession,’ she wrote in her blog, adding that she felt like a Minibond investor.

With the kind of pessimism in the market today, it looks fairly certain that property prices will continue to head south.

And considering that an apartment is the mother of all big-ticket items, it’s an ill-timed purchase that’s not so easy to brush off.

It wasn’t so much a question of losing money, she said, because she didn’t buy the apartment - which is to be her first marital home - for investment.

But with every 10 per cent fall in prices, her fiance and her would have saved as much as $100,000.

And you can really feel like a loser watching your biggest asset drop so much in value so soon after buying it.

‘Sigh… if only we had waited just that little bit longer,’ she complained to me the other day.

‘Don’t be silly,’ I said. ‘If you hadn’t bought the apartment, you wouldn’t be happily discussing colour schemes and furniture layout options now.’

In fact, she would still be reading the classifieds each week, with no real idea about where her dream home will be, or what it will even look like.

Where would you rather be, I asked.

The fact is: When it comes to starting a home, you can never really time the property market.

Prices may be at rock bottom, but that doesn’t mean that you will see a need to swop a current home that you have grown attached to for something bigger.

And like my young colleague, often the moment comes for two people to share their life together, but prices are sky high all over the island.

When I look back at the highs and lows of the Singapore property market over the last decade, I find the arcs and curves of the URA Property Price Index (PPI) impossible to ride on.

From the impossible peaks of close to 200 points in 1996, the index fell to 100 in late 1998. But I had just started work then and couldn’t afford to buy a home.

I was also thinking about ending a four-year relationship and starting life anew with a career switch to journalism, so buying a house was the furthest thing from my mind.

During the mini-bull run around the year 2000 (PPI:140), I was renting an apartment, still trying to manage the monthly cashflow issues that inevitably come with moving out and living alone.

By the time I was financially ready to buy an apartment, it was already the second half of 2002. The PPI had fallen back to 115, but what was more important was that I was ready to start a home with the person I loved.

The Government gave me an extra nudge by changing a CPF rule that reduced by half the cash I needed to put up for the downpayment, so I took a deep breath and bought my current home - a studio apartment in River Valley for about $880 psf in end 2002.

Things on the relationship front turned tumultuous for me in the next few years, but the PPI remained relatively stable until prices started picking up again in 2006.

Then when my love-life stabilised late last year, I was ready again to move to a bigger apartment. So I found myself house-hunting, even though the PPI had shot back up to 170 or so.

The fear that home-buyers often have is that they will end up the fool who bought at the peak, the sucker who played into the hands of greedy property developers.

Yet nearly everyone I know who bought a home for themselves to live in at the peak of the property market never regretted that decision.

One reason is that even if you decide to change homes in a slump and have to sell your property at a loss, chances are you will also be picking up a new house on the cheap. So if you sell and buy at roughly the same time, you become sort of ‘immune’ to the swings of the market.

But most of them just simply loved the houses they saw and didn’t even bother to bargain. The timing and the circumstances were perfect to start a home and they came away from the deal feeling happy and blessed.

The reverse is true as well. Sometimes people sell homes because they cannot bear to live in them anymore, whatever the PPI is at the moment.

A friend of mine recently sold an apartment that he and his partner were supposed to call home. But things didn’t work out and he dreaded coming home to the empty apartment every day.

So he bought the unit just downstairs, even though it was more expensive and the property market was about to turn against him. But I think he’s much happier for it.

In the end, it’s the intangibles of a property purchase that you best remember, not the psf figure you paid or how prices moved up or down after that.

And often, you can’t put any sort of price on the warmth of just settling down in life in a place that you can call your own.

When I was in school, I had a friend who spent much of his childhood moving from one rented house to another because his parents were perpetually waiting for the right time to buy.

It may well have turned out to be a prudent decision financially, but I still wouldn’t have wished that on anyone.

My young colleague says that whenever she gets into a panic about her home purchase, she calls her fiance and he calms her down.

I tell her that it’s not so much where the property index is headed after this that matters, but where the curve of her relationship now goes.

And in the current circumstances, my hope is that never the twain shall meet.

Luxury condo prices come off their peaks

Source : Business Times - 27 Oct 2008

But most units in high-end projects still changing hands at above their launch prices

PRICES for some luxury and high-end projects launched in 2006 and 2007 have come off their peaks by up to about 26 per cent, anecdotal evidence shows.

Data compiled for The Business Times by property firm DTZ shows that at selected high-profile upmarket properties launched in 2006 and 2007, prices started dipping in the third quarter of 2007 and are now between some 4 to 26 per cent off their highs.

At City Developments’ The Oceanfront @ Sentosa Cove, prices have fallen some 26.4 per cent since the third quarter of 2007.

On the other end of the scale, prices at Wheelock Properties’ Scotts Square, fell 3.6 per cent between their peak in Q3 2007, and the second and third quarters of this year.

In both cases, the caveat is that the volume of transactions was relatively low. There were only about 10 transactions for each project in the second and third quarters of 2008.

DTZ’s data supports what other property consultants are saying - that luxury apartments in prime districts are harder hit by the current downturn.

Knight Frank’s in-house numbers show for example that prices of luxury apartments in Districts 9, 10 and 11 have fallen by 12-13 per cent since the start of the year.

And the fall is gathering pace, said Nicholas Mak, director of research and consultancy at Knight Frank.

Savills also reported that its in-house price index, which tracks luxury and ’super-luxury’ projects, fell 10 per cent from January to July this year. Other analysts estimate that prices at some condos are around 20-30 per cent lower than during last year’s peak.

The drop has been larger than expected. Knight Frank, for example, was expecting to see a 10 per cent fall in high-end residential prices for the whole of 2008.

Official numbers show that residential prices in the upmarket core central region started to fall in the third quarter of 2008, and has to date registered a 2.7 per cent drop. These numbers, however, take into account all property transactions.

Despite the price correction, property firms say that most units in high-end projects are still being transacted at prices higher than their launch prices. DTZ’s data supports this.

The price falls from Q3 2007 are partially due to property investors and speculators selling out, said DTZ’s senior director of research Chua Chor Hoon. ‘For some projects launched in late 2006 and early 2007, there was a lot of speculation as the market was very bullish,’ she said.

Luxury and high-end residential projects attract more investors and speculators than the broader residential market. With the current economic downturn, many of them are off- loading their properties.

Knight Frank’s Mr Mak said: ‘Right now, what everyone is saying is that cash is king.’

The availability of cheap and ready credit in 2006 and 2007 boosted property sales then. But now, banks have cut back on the amount of financing they are willing to offer to home buyers who are seen to be speculators and/or investors - as opposed to owner- occupiers, who are thought to be lesser credit risks.

In the past, most buyers were able to obtain 80 per cent financing for homes. In contrast, banks now offer speculators and investors only 60-70 per cent financing.

Ku Swee Yong, director of marketing and business development at Savills Singapore, believes that prices at projects that will soon receive their temporary occupation permits (TOPs) could go even lower.

Speculators who bought homes under the deferred payment scheme (DPS) could sell as TOP approaches. Under the DPS scheme offered by most high-end properties launched in 2006 and 2007, buyers could pay only a 10 per cent or 20 per cent downpayment, with the rest due upon completion. With TOP, these speculators will have to fork out a big chunk of the remaining sum owing.

‘So there is the danger of price drops as TOP approaches,’ Mr Ku said. ‘But how much prices fall at each property depends on the profile of the buyers there.’

Most agents BT spoke to said they have yet to see fire sales though the pressure could continue to build up.

During the Asian Financial Crisis, the official Urban Redevelopment Authority price index fell 40 per cent from Q2 1997 to Q4 1998.

‘In the next six to nine months, we are going to see downward pressure (on prices) across the board,’ said Knight Frank’s Mr Mak. ‘And how severe the chill that spreads across the property market will be depends on the real economy in Singapore, especially the employment market.’

Phillip Securities Research analyst Alfred Low expects high-end property prices to fall by 15-25 per cent in the next four quarters.

Others are more bearish. Morgan Stanley analysts Melissa Bon and Brian Wee on Oct 24 took a more aggressive approach to cutting residential prices and projected that residential prices for the mid-high end segment will fall by 75 per cent for the next three years.

Australian school to expand again

Source : Straits Times - 28 Oct 2008

It plans new wing for senior students, following expansion of junior school campus

Barely three months after the Australian International School opened an extension for its preschoolers, it is making plans to expand again, with a new wing to house senior students.

The $33 million project at its Lorong Chuan campus will create space to take in another 600 senior students when it is ready by April 2010.

And while the previous expansion focused on the preschool and junior school, the Australian school is planning to expand its secondary school cohort because expatriates are now staying longer in Singapore, it said.

A bus bay, open-air carpark and canteen will be torn down by the end of the year to make way for a two-storey building with up to 35 classrooms and specialist science teaching laboratories as well as open study areas.

Principal Peter Bond said he was not perturbed by the current economic crisis and was thinking long term when he decided to go ahead with the new wing. ‘It would be foolish to delay just because things might soften in the short term, when in the long term we know that the Singapore Government’s policies on expansion of population and growth of business need international schools,’ he said.

While the demand for places over the last five years has grown steeply, Mr Bond said he expected it to slow down or even plateau over the next 12 months.

‘But I’m optimistic that it will pick up eventually. Businesses go through cycles,’ he said.

The new wing will add at least 50 places to each level in the secondary school, enabling the school to take up to 200 children per level from Year 7 to Year 12.

The school, which has already reached full capacity for most of its junior section, decided to increase places for older students as expatriate parents are tending towards longer stays here, he said.

‘The average stay has gone up from an average of 21/2 years to about four years. People have a longer term view on what it means to work offshore now, plus there are good educational choices for high levels available in Singapore,’ Mr Bond said.

The school, which now has about 2,150 students, will see another 200 joiners come January. It expects to reach its capacity of 3,000 in the next five years.

Though demand for places at international schools has been increasing, the recent economic slowdown has caused some other schools to rein in their expansion plans.

The Government recently released new land parcels for up to four schools to be opened next year but some now prefer to wait it out.

One of them is the Global Indian International School, which opened its third campus in Balestier this year.

Chairman Atul Temurnikar said: ‘Sooner or later, Singapore will feel the impact of the global crisis. We want to take a cautious approach since we have vacancies in our campuses, before expanding again.’

Unexpected rise in new US home sales

Source : Straits Times - 28 Oct 2008

Sales of new homes in the United States recorded an unexpected increase last month as median home prices dropped to their lowest level in four years, the Commerce Department reported yesterday.

Sales of new single-family homes rose by 2.7per cent to a seasonally-adjusted annual rate of 464,000 homes, it said. Economists had expected sales to drop from the August level.

The median price of a new home sold last month fell by 9.1per cent from a year ago to US$218,400 (S$329,000) - the lowest price level since September2004 and a period when home prices were rising rapidly as the country experienced a five-year housing boom.

The surprising increase still left them 33.1per cent below the level of a year ago as the US is battered by the worst slump in housing in decades.

The report on a rise in new home sales follows news last week that sales of existing homes rose last month by 5.5per cent, the largest monthly gain in over five years.

Analysts are not convinced that the sales increases are signalling a bottom for the housing market. They note that last month’s gains came before the latest upheavals in the financial markets which have raised new worries about the overall state of the economy.

Many analysts believe the country has already entered a recession. They are forecasting significant increases in job losses which will make it even harder to mount a sustained rebound in housing.

New home sales fell by 21.4per cent in the north-east and were down 5.8per cent in the midwest. However, sales rose by a sharp 22.7per cent in the west, a region of the country which has seen some of the biggest declines in prices, a development which has spurred sales. Sales were up 0.7per cent in the south.

The rise in sales left a total of 394,000 unsold new homes on the market at the end of last month, down a record 25.4per cent from the number of unsold homes on the market at the end of September last year.

Builders have been sharply cutting back on production, trying to get inventories more in line with sales.

Even with the latest drop in total unsold new homes, the inventory represents a 10.4-month supply at the September sales pace, still a historically high level.

Murkier outlook for construction sector

Source : Straits Times - 28 Oct 2008

THE deepening global financial crisis has hit the outlook for the local construction sector, even as current demand is at a record high.

Contractors are now expecting a fall in demand from next year as more developers defer their projects.

Just four months ago, the construction sector was so hot that the Government deferred another batch of projects.

Today, as the global financial turmoil rages on, calls have been made for the Government to consider bringing forward those projects.

‘Developers are postponing the completion dates of their projects and that will affect the construction sector,’ said Mr Nicholas Mak, Knight Frank’s director of research and consultancy.

While most contractors will be kept busy with contracts on hand until 2010, the situation after that depends on how the crisis pans out, Mr Desmond Hill, president of Singapore Contractors Association Limited (Scal), told The Straits Times.

If the global market situation improves next year, projects will be tendered out again, keeping contractors busy till 2011 or 2012, he said.

In a speech made at a Scal dinner last week, Mr Hill said the association hopes the Government will bring back deferred projects by next year or latest by 2010, as existing jobs will be completed by mid- to end-2010.

Speaking at the same dinner, Minister for National Development Mah Bow Tan said the Government would consider doing so if the need arose. Any such move would have to be carefully timed so as not to drive up construction costs.

It was just in July when the Government made the decision to defer $1.7 billion worth of public-sector construction projects to ease pressure on building costs and resources.

That was the third deferment since November last year, when it took the rare step of deferring $2 billion worth of projects. It deferred another $1 billion worth of projects in February.

In July, capacity was very tight and construction material prices were then seen to be climbing for the rest of the year, raising concerns that the costs would diminish developers’ profits.

Today, the picture is very different.

Steel rebar prices have dropped from $1,700 a tonne in July to about $1,300 a tonne recently, said Mr Hill.

Manpower and other costs relating to contract requirements remain high. But rental prices of equipment such as cranes could soften next year after suppliers finish recovering their capital cost.

‘Margins which looked bleak in the past months are starting to improve as commodity prices (primarily oil and steel) are starting to come off,’ said Mr Jackson Yap, managing director and chief executive of United Engineers.

But the tight resource situation will continue to prevail as mega projects such as the two integrated resorts and Orchard Road rejuvenation are still ongoing, he added.

The latest forecast for Singapore’s construction demand this year is at a whopping $30 billion, above an earlier forecast of up to $27 billion and last year’s $24.5 billion.

But the current crisis is expected to hit demand.

‘If the banks are not lending as much as before, some developers may not be able to get sufficient credit to start construction,’ said an industry source.

Said another industry executive: ‘Generally, when markets soften, demand will pull back faster than supply adjustment.’

Any government move to bring forward deferred projects would help to keep people employed, but it has to be done carefully so as not to strain contractors’ tendering and construction resources.

For now, there is a good chance of costs coming down.

‘As global markets right themselves in the aftermath of the financial crisis, prices are likely to correct themselves to more tenable levels that will keep the construction industry alive,’ said Mr John Brells, senior vice-president and managing director, Asia-Pacific, at United States-listed construction consultancy firm Hill International.

CREDIT CRUNCH

‘If the banks are not lending as much as before, some developers may not be able to get sufficient credit to start construction.’ - An industry source

Hotel business still healthy but economic cloud dims outlook

Source : Business Times - 28 Oct 2008

Like a game of dominoes, the economic crisis is making its presence felt in most industries and tourism - which is dependent on the corporate dollar and discretionary spending - is unlikely to escape unscathed.

For now, it appears that local hotels are posting relatively healthy occupancies but as visitor arrivals continue to dwindle, what will happen next year seems to be anyone’s guess.

Singapore’s rapid increase in average room rates (ARR) over the last few years may have priced itself out of the market, reckons Citigroup economist Kit Wei Zheng.

‘The fact that until recently, tourist arrivals in the rest of Asean still maintained positive growth even as tourist arrivals in Singapore fell, attests to this. Not only is the size of the tourism pie shrinking, I suspect Singapore may be getting a smaller share of that shrinking pie,’ he said.

In a research note dated Oct 17, DBS Group Research noted that RevPAR (revenue per available room) in August was down 10 per cent from April’s peak of $210, but that FY08 RevPAR should finish off with a 20 per cent rise year on year, on the back of a stronger first six months.

For FY09, DBS Research is predicting RevPAR to worsen, chalking up a 15 per cent year-on-year fall, before strengthening 3 per cent in 2010.

Even then, DBS Research warned that downside risk still exists in its RevPAR estimates if Asia slumps into recession and the average length of stays is lower than expected.

While visitor arrivals in Singapore for the first six months of the year registered a 2.9 per cent increase to 5.1 million visitors, tourism receipts were 0.2 per cent less compared to H107 with $6.5 billion. June also marked the beginning of the decline, as it posted a year-on-year drop in tourist arrivals for the first time since early 2004.

Tourist arrivals contracted 4.1 per cent in June, a further 3.8 per cent in July and then as much as 7.7 per cent in August.

Speaking to the press at the sidelines of ITB Asia last week, Singapore Tourism Board’s (STB) assistant chief executive of business travel and MICE group Aloysius Arlando urged hotels to ‘cast nets wider’ as well as establish the optimum mix of business and leisure travellers. This is expected to put industry players in a better position to ride out the storm until the tourism sector regains its footing in 2010.

For now, MICE events seem to be proving a blessing for some hotels as they bring in the dollars. At the same time, the higher ARRs this year compared to 2007 should do well to protect profits even if occupancies dip slightly, as any increase in ARR generally goes straight to the bottom line.

The Mandarin Oriental, for one, was running a full house last week thanks to ITB Asia, and it expects occupancies for November and December to run into the 80s.

‘Bookings are on track compared to the past few years,’ said director of communications Ruth Soh. ‘People are still flying in. We’re not feeling the impact yet. We will have to see how next year goes,’ she added.

Grand Copthorne Waterfront Hotel is also banking on the MICE segment, which is fuelling demand for November and the first half of December.

‘The second half of December will be dependent on the leisure market, which might be hit by the financial turmoil,’ said DayLin Koh, director of marketing communications. Still, the hotel expects to post higher occupancy rates this November compared to last year, and December occupancies that are on par with last year.

The Raffles Hotel said bookings for its 103 suites are healthy because of the festive year-end.

Other hotels that have seen minor dips in occupancy include Swissôtel The Stamford and Fairmont Singapore, which saw occupancies in the low 80s and high 70s, respectively, this month, sinking a few percentage points year on year.

‘Bookings for November and December remain positive although we see a marginal drop in volume as compared with last year,’ said Belladonnah Lim, director of marketing communications at the group.

The two hotels will be ramping up sales and marketing efforts to actively seek out new business both here and abroad, in order to maintain market share.

And over at the Royal Plaza on Scotts, occupancy in recent months has been slightly below average. It expects occupancy to hit between 80-86 per cent for November, and 80 per cent in December.

‘Year-end is still good as most companies would have planned ahead and budgeted for their spending in 2008. However, Q109 would be challenging if the economic situation does not improve. It will be a real test of the room rates,’ said Patrick Fiat, general manager of Royal Plaza on Scotts.

Private home prices and rents down

Source : Straits Times - 25 Apr 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.