Marked for preservation

Source : Straits Times - 17 Jan 2009

It has been nearly a decade since the forlorn Grand Hotel in Still Road South last had a guest to stay, but things are looking up for the distinctive 92-year-old building.

The rundown landmark, now mostly used as storage for unwanted furniture, is among 100 buildings in the Joo Chiat/Katong area that have been marked for conservation by the Urban Redevelopment Authority (URA).

The URA announced the list of buildings yesterday. They join some 700 buildings, mostly shophouses, in that area that have been given conservation status by the URA since 1993.

The Grand Hotel, a massive Victorian-style bungalow with decorative arches and ornate facade decorations, was built in 1917 by Moona Kader Sultan, a wealthy Indian cattle merchant. It was converted into the Grand Hotel in 1947.

The building reportedly now stands on a site worth $300 million and is owned by the Lee Rubber Company, which also owns a similar-looking bungalow across the road that has already been conserved. Both bungalows were part of a site called Karikal Mahal.

Besides this grand dame, the other buildings consist of 95 shophouses and terrace houses in areas such as Onan Road, Tembeling Road and Koon Seng Road, and two other bungalows, in Marine Parade Road and Chapel Road. Also on the list are two familiar churches in the area - St Hilda’s Church and the Bethesda (Katong) Church.

Residents in the area had mixed reactions about the news. Ms Shirley Soh, owner of a two-storey shophouse in Tembeling Road, is pleased her home will be conserved.

‘Old architecture should be preserved, rather than have condominiums dominate our landscape,’ she says. She has been living there for eight years.

But another resident at Chapel Road was not too happy. The owner, who declined to be named, believes that with conservation, her home will fetch a lower price because of its limitations. ‘The house is too big and I want to sell. But now the selling price may be less and I can’t afford the apartment I want.’

However, Mr Colin Chee, a spokesman for the Save Joo Chiat workgroup which was formed in 2004 by residents wanting to promote the area’s Peranakan heritage, was delighted to hear that more buildings will be conserved.

‘The more buildings conserved in this area the better. This enhances the heritage status of the neighbourhood.’

URA’s conservation programme was launched in the early 1980s and so far, more than 6,800 buildings in Singapore have been conserved. Buildings are chosen for conservation based on architectural merits, cultural, social and historical significance and contribution to the streetscape and identity of the location.

The URA says owners of conservation buildings in the Katong/Joo Chiat area need to conserve only the external facades, original structure and key features of the main building.

The rear service block can be demolished to build a new extension of up to the allowable storey height control.

Owners can also modify the interior of their buildings to suit their business and/or residential needs as long as this does not change or endanger the original structure of the building.

25 Still Road South

This bungalow and another bungalow across Still Road South were once part of a larger estate known as the Karikal Mahal. They were built in 1917 by Moona Kader Sultan, a wealthy Indian cattle merchant.

This bungalow was built in the Victorian style, with architectural features such as ornate facade plaster decorations, bay windows and decorative arches. In 1947, it was converted into the Grand Hotel, which closed in 2000 due to poor business. It is now used to store unwanted furniture. The two bungalows are owned by the Lee Rubber Group, which says there are no plans for them.

3, 5, 7-15, 22-32 Crane Road, 64-76, 71-75 Carpmael Road and 169-181 Onan Road

Located on Crane Road and Carpmael Road are two- and three-storey shophouses built in traditional and modern early 20th century styles. They are the gateway between the private developments along Crane Road and the Haig Road public housing estate. Over at Onan Road, the single-storey terrace houses rest on concrete stilts.

St Hilda’s Church, 41 Ceylon Road

Built in 1949, the church is a landmark in this area. It was designed like an English parish church of the time. The single-storey chapel is a charming building with a steep pitched roof and a Victorian-style conical tower.

Squeezed between high rent and poor sales

Source : Straits Times - 17 Jan 2009

A HOME-GROWN brand of women’s clothes has decided to operate in Malaysia - and only Malaysia. Coral Isle, in The Centrepoint, will shut for good next week, before its three-year lease expires on Jan 28.

Slow custom is putting the brakes on owner Poonam Bhandari’s ambitions in Singapore.

The $20 per square foot (psf) rent, or $18,000, she pays every month in The Centrepoint is too much to bear. Amounting to 90 per cent of her operating cost, it was ‘killing’.

She had hoped for a reprieve when her lease was up. But negotiations with landlord Frasers Centrepoint came to nothing. They told her there would be no rent cut, she said, and that there was ‘no room for negotiation’.

Frasers Centrepoint confirmed that they had a request from the owner of Coral Isle about rent but would not go into details.

They said, however, that they had offered Mrs Poonam assistance, in in-store promotions, to help her sales figures.

For Mrs Poonam and many other small businessmen like her, it is too little too late.

Of 45 small and medium-sized retailers and restaurant owners The Straits Times spoke to, five had wound up their businesses in the past six months, four had shut at least one branch, while another seven will close shop entirely when their leases expire this year.

One of them is Ms Amelia Pang, 39, who started Coziz Studio in International Plaza selling clothes imported from Hong Kong four years ago. Rent was then $1,491 a month. She poured in about $40,000 as start-up costs and running capital into her first business foray.

In 2004, turnover could be $10,000 a month. Last June, the landlord, the management of International Plaza, wanted to increase her rent to $2,200. She managed to stay it till October at $2,000.

But business is so bad that she has decided to call it a day. She barely makes enough to cover the rent. ‘Sometimes we have no customers at all,’ she lamented.

Whether in prime Orchard Road or a suburban mall, small businesses are feeling squeezed by falling receipts on one hand, and non-negotiable rents on the other.

Eleven tenants who renewed leases last year report at least a 10 per cent increase in rent.

Asked for specifics, CapitalMall Trust, which has 14 properties, said rents have gone up 4 per cent annually while YTL Pacific Star Management, which has stakes in malls like Wisma Atria, said renewals last year were 5 per cent above past contracts.

Different outlets, however, pay different rents. And tenants could be suffering or thanking their lucky stars depending on whether they signed the lease in a good year or bad, said Singapore Polytechnic retail management lecturer Sarah Lim.

The hardest hit are those who renewed or signed leases in 2007 or early last year, when rents were soaring, she added.

The Singapore Retailers Association, which has been trading words with landlords in recent months, reckons that rents have jumped by as much as 80 per cent in prime areas and 30 per cent in popular heartland spots.

Even those who lease space from the Housing Board are feeling the heat.

At Loyang Point in Pasir Ris, Mr Jeffrey Kam, 43, who owns shoe shop Rayna Collection, had his lease renewed early last year at $4,000 a month, a 12.5 per cent increase.

Six months later, he was losing $1,000 a month because of poor business. His landlord is the Housing Board.

In an e-mail reply, HDB said that new tenants bid for rents, for a fixed-term tenancy of three years. At the end of that term, rent renewals are reviewed by valuers appointed by the board.

Mr Kam said he had to assume the last tenant’s rent when he took over the shop eight years ago. It was a mistake to renew his lease, he said. ‘This is a dead end. We will close down when the lease ends.’

No one anticipated how last year would end. Many thought the good times had yet to come, especially with plans to attract more tourists here. The last time retailers felt the pinch was in 2003 when Sars scared away both locals and tourists from shops.

But with the situation set to worsen, can retailers hope for some relief from landlords?

Mr Turner Canning of real estate consultants Cushman and Wakefield said rent levels depend on benchmark properties in the area, demand and supply, as well as a landlord’s profit margins.

Taking this into consideration, the average super-prime Orchard Road rent now hovers around $54 psf per month, higher than the $51.70 psf a year ago.

Two of the five major landlords The Straits Times spoke to said that they might give out rental rebates on a case-by-case basis.

But they said that such rent adjustments were rare, and preferred to find other ways to help tenants, like increasing traffic.

The five - CapitalMall Trust, AsiaMalls, Far East Organisation, Lend Lease and Frasers Centrepoint - peg rents to factors like floor level, rents in comparable malls and gross turnover.

According to AsiaMalls’ general manager Stephanie Ho, rental adjustments have to be pre-negotiated and agreed on.

The HDB, which is landlord of HDB shops as well as 25 neighbourhood centres, said that to assist tenants, it has offered them the option of paying their rent in instalments. Tenants can also sublet up to 50 per cent of the premises, subject to HDB’s approval.

In terms of rental renewal, it said tenants can get a second opinion from an independent private valuer to assess fair market rent. Tenants can also put the unit for re-tender.

Like the landlords of major malls, HDB also carries out upgrading to ‘enhance…attractiveness and inject more vibrancy’ to shops and complexes.

Retail management lecturer Sarah Lim said smaller landlords might give more leeway on rent.

This seems to be the case for landlords like the Goldkist group, which owns 40 units in the multi-owner Sim Lim Complex. Its director H. D. Gupta said tenants have been given up to a two week rent-free period, case-by-case and based on market conditions.

In 2007, when it had feedback from tenants that the computer industry was flagging, Goldkist absorbed increases in property tax even though rental contracts allowed it to pass them on.

The company, which has been in property rental for about four years, has increased tenants’ rents by 5 to 10 per cent.

Mr Gupta said that a combination of maintenance fees, property tax and interest on bank loans are limitations on rent reductions. ‘For any property owner, we are paying banks in instalments. Interest normally increases every year. All these costs have not gone down,’ he said.

If landlords have obligations, so do tenants. They are typically locked into leases for one to three years. Some contracts do not include exit or subletting clauses.

Even if they did, shopping around for a cheaper place might not work out.

Said Association of Small and Medium Enterprises president Lawrence Leow: ‘A change of location may mean death for a business, especially if their contact base has been built up over the years. The lesser of the two evils is to continue.’

That was what happened in the case of retail brand Leather Ark. When rent at its Parkway Parade outlet jumped 30 per cent to $7,000 a month and business at her other outlet stayed slow, owner Jean Yeo considered, but decided against moving out.

‘We thought of moving, but dismissed it because of high fixed costs, and what about our regular customers who live nearby?’

Instead, the 49-year-old held back plans to open a third outlet at Tampines, and increased the prices at her shop by about $1 per item. She also decided to close her other outlet once the lease runs out in January 2010.

Tenants are doing all they can to stay afloat, like laying off staff and cutting prices to induce sales.

Mr Richard Suen, who owns a jewellery store at Central, now lets customers do the unthinkable - bargain.

‘We still have a year left on our lease, and we just want to keep our heads above water,’ said the 56-year-old. ‘We cannot close shop and run away, can we?’

What tenants want

WANTED: Help for restaurants and retailers.

Hit by a double whammy of declining sales and rising costs, businesses are looking to the Government to ease their burden.

The Association of Small and Medium Enterprises (Asme) and Singapore Retailers Association (SRA) have met ministries in the past two months to ask for help with their cost of operations. Their suggestions included tax rebates to private landlords that can be passed on to tenants.

‘It would help if a rebate was given to the landlords, like in the Sars period,’ said SRA executive director Lau Chuen Wei.

During the Sars outbreak in 2003, the Government unveiled a $230 million relief package, with $155 million going to tourism-related industries. This included rebates to commercial property owners, producing tax savings of $56 million.

Though it was not made mandatory, landlords were ’strongly encouraged’ to pass on the savings to tenants, mostly shops, restaurants and hotels. HDB did the same for commercial tenants.

In a sign of the impact of the current downturn, five companies approached the Singapore Business Federation for help last year, compared to none in 2007.

They were unable to pay their increased rents and asked for help in extending the deadline for them to move or negotiating rental.

Asme president Lawrence Leow said he has heard of tenants negotiating successfully for lower rents by promising to sign on for a longer lease period.

His advice to tenants hoping for a better bargain: ‘You must give the landlord some sweeteners.’

For assistance, struggling companies can approach five enterprise development centres (EDCs) around the island. These are one-stop centres where business consultants will give advice on where companies can go to get funding and what they can do.

WHERE TO GO FOR HELP

EDC @ Association of Small and Medium Enterprises (Asme), 6513 0388/edc@asme.org.sg

EDC @ Singapore Chinese Chamber of Commerce and Industry (SCCCI), 6337 8381/edc@sccci.org.sg

EDC @ Singapore Malay Chamber of Commerce and Industry (SMCCI), 6293 3822/info@edcsmcci.com.sg

EDC @ Singapore Manufacturers’ Federation (SMa), 6826 3020/edc@smafederation.org.sg

EDC @ Singapore Indian Chamber of Commerce and Industry, 6222 2855/edc@sicci.com

Playing the waiting game

Source : Straits Times - 17 Jan 2009

When investor relations consultant Gary Teo reaches for his newspaper every morning, he reads the property news first.

He and his wife, Grace Tan, 32, a senior QA engineer, are looking to buy a place of their own. They have been living with his parents in a terrace house at Novena since they got married in September last year.

‘I’ve been wanting to live independently and now that I’m married, all the more I want to live on my own,’ says Mr Teo, 31.

However, he is in no hurry, although he has been househunting since 2007. ‘I’m waiting for prices to fall further,’ he says, confident that it is now very much a buyer’s market.

So he keeps tabs on property sales online and pores over the classified ads. The couple want to buy a three- or four-bedroom apartment in central Singapore. ‘Our budget is no more than $1 million,’ he says.

They either did not like the few apartments they have inspected or the asking prices exceeded their budget.

Many others are like Mr Teo: buyers playing a waiting game, believing that sellers will blink first.

And all signs point to buyers getting their way, although Mr Eugene Lim, 42, associate director at property agency ERA Asia Pacific, says the private property market is currently at a ’standstill’ because sellers are still struggling to come to terms with the drop in property prices.

Mr Chris Koh, 42, director at Dennis Wee Properties, says it used to take about two to four weeks to sell an apartment. Now he sees some apartments on the market for more than three months because ‘the prices asked for are too high and unrealistic’.

Home buyers prefer to wait till second half of the year

The truth is, private property prices have indeed fallen, some by as much as 25 per cent over the past year.

Sensing this, ‘buyers are just starting to bargain-hunt’, says ERA’s Mr Lim.

Mr Koh agrees that ‘home buyers are taking the wait-and-see approach and thus are not committing to purchases’.

He adds that buyers expect property prices to fall even further and they are looking to buy only ‘in the third or fourth quarter of this year’.

The reason is simple: Analysts are predicting further uncertainty in the economy and home prices may fall another 10 to 20 per cent.

Today’s home-hunters are ‘mostly young couples who are looking to buy their first home’, says Mr Koh, unlike upbeat times such as in 2007 when people bought property for investment.

Graphic designer Edmund Seet, 35, and communications consultant Delicia Tan, 30, are getting married in June. Armed with a $600,000 budget, they are looking for a two-bedroom apartment in East Coast.

‘This will enable us to have more cash for renovations and furnishings,’ says Ms Tan.

Like Mr Teo, she believes that property prices will drop further during the year and so have yet to sign on the dotted line.

She and her fiance monitor property listings regularly, visit new showrooms in the area and keep a lookout for banners and signs that advertise units for sale.

‘We may buy only in June,’ she says.

They are playing it cool because they have a back-up plan: They will rent an apartment from a relative if they cannot find a suitable one to buy after their wedding.

There is no doubt buyers have the upper hand in today’s market, says Mr Vincent Koh, 36, vice-president at HSR International Realtors.

He cites examples of sellers who will let go of their property at 10 per cent less than their desired selling price.

‘Some are so desperate, they may offer to pay for the buyer’s renovations, so they can get the property off their hands,’ he says.

It is not just individual sellers who are finding it tough.

The property experts decline to give specific details but reveal that they have heard of developers who throw in sweeteners such as waiver of maintenance fees to entice buyers.

Which is good news, but not good enough for many buyers such as art director Adrian Low, who prefer to wait.

Currently renting a two-bedroom apartment in Lavender, the 36-year-old bachelor wants to buy a three-bedroom apartment in the Braddell Road area to be nearer his office in MacPherson but does not want to pay more than $900,000.

The 20 apartments he has viewed are not close to an MRT station and eating places. More importantly, the prices he has been quoted are not ideal.

‘I’m waiting till prices drop to $800,000,’ he says.

He could get his wish, because the times are a-changing.

In 2007 when sales were upbeat, ’sellers were more arrogant and would often increase their price once an offer was received’, recalls ERA’s Mr Lim.

In the current climate, he says, ’sellers’ instructions to agents are to relay any offer to them for consideration’.

‘Some are so desperate, they may offer to pay for the buyer’s renovations, so they can get the property off their hands’ - HSR International Realtors’ vice-president Vincent Koh on property buyers having the upper hand over sellers

It’s tougher to get loans

Source : Straits Times - 17 Jan 2009

It may be harder for home buyers to secure bank loans now.

‘Banks are a bit more cautious these days,’ says Mr Chris Koh, director at Dennis Wee Properties. Two other property experts that Life! spoke to agree.

ERA Asia Pacific’s director Eugene Lim says banks now take longer to process home loan applications. ‘During good times, loans would be approved within 24 hours. Currently, it can take as long as two weeks,’ he says, adding that it is a sign that banks are running more detailed checks.

They are also less willing to offer a loan quantum of 90 per cent, which was the norm during good times, says Mr Vincent Koh, vice-president of HSR International Realtor.

Loan quantum refers to the size of a loan in relation to a property’s market valuation. Industry players say there have been cases where the bank’s valuation of an apartment is lower than what a seller is asking for.

‘Most usually offer 80 per cent now,’ says Mr Koh of HSR.

Industry insiders say loans are generally smaller or harder to secure for the following people:

1) Those on commission-based income or are self-employed, compared to employees on fixed salary.

2) Applicants who are single, compared to married couples with dual income.

3) Those who have just started work.

To make up the shortfall, these home buyers will have to dig deeper into their savings or their CPF accounts.

Mr Gregory Chan, OCBC Bank’s head of consumer secured lending, says the bank assesses and approves each loan application on the basis of the customer’s credit worthiness.

‘Ultimately, the loan quantum is determined by property valuation and credit worthiness of the applicant,’ he says.

Among the factors considered are the individual’s financial commitments, income and credit history.

United Overseas Bank’s head of loans division, Mr Kevin Lam, says customers with a good credit record and stable income can be assured that UOB will consider their loan applications favourably despite the current economic environment.

Regardless of the size of the home loan, Mr Dennis Khoo, general manager of retail banking products at Standard Chartered Bank, says that in times of economic stress, it is prudent for customers to consider a smaller loan to ensure that they do not over-extend themselves.

‘We recommend that customers work with their relationship managers to identify their individual situation and preferences, before selecting a home loan package,’ he adds.

URA to conserve 100 more buildings

Source : Business Times - 17 Jan 2009

THE Urban Redevelopment Authority (URA) yesterday said it would conserve another 100 buildings in Katong and Joo Chiat to retain the area’s history and character.

The buildings comprise 95 shophouses and terrace houses, two churches and three bungalows. They will complement some 700 buildings in the Katong/Joo Chiat area which have been gazetted for conservation since 1993 to keep the social memories of the place.

These include shophouses located along Joo Chiat Road, Joo Chiat Place and East Coast Road.

URA said the latest buildings were selected based on a set of comprehensive criteria that included the architectural merits, cultural, social and historical significance of the buildings, as well as their contribution to the streetscape and identity of the place.

URA also considered feedback from building owners, members of the public and the Conservation Advisory Panel. The panel, formed in June 2002, is an independent body appointed by the Minister of National Development to give inputs on built heritage proposals by URA as well as to propose buildings for URA to study for possible conservation.

It includes professionals from the building industry, arts and heritage, as well as education sectors and government representatives.

URA said in its press statement yesterday that more than 6,800 buildings have been conserved since its conservation programme was launched in the early 1980s. They include traditional shophouses, black-and-white bungalows, civic buildings and modern developments such as the Asia Insurance Building and Jurong Town Hall.

Living space and the baby boomer

Source : Straits Times - 17 Jan 2009

BABY boomers as a demographic and cultural phenomenon have been researched extensively, because of their huge impact on post-war economies and spending power. Retirement wants and habits are uniform for middle-class Asian imminent retirees as they are for Western early retirees: customised health care and financial planning; independent housing or community living with their peers; in leisure, cultural and cruise travel preferred; and a fierce devotion to healthier eating and exercise programmes.

The Community Development Ministry’s survey on Singaporean baby boomers, published last week, was skewed more towards establishing attitudes on family relationships and their lifestyle variations, such as housing choices. The most noteworthy finding, which data in previous Housing Board research did not unearth fully, is the tendency of the younger cohort of baby boomers to want to live on their own when they retire and to not expect financial support from family. Planning agencies such as the Urban Redevelopment Authority, besides the HDB, may want to follow the assumption that a good number of better-educated older boomers who are nearing retirement would share that preference. The housing implications are significant, meaning planners have less time than they think to adapt to changes in living habits. An observation in the survey which will interest developers and health-care companies is that four in 10 respondents thought living in a retirement village or a nursing home was feasible.

This is new in a societal context. It is a departure from state policy which encourages and plans for family togetherness. But change is inevitable as this generation’s retirees are independent in spirit and of means. They wish to avoid friction with married children, who themselves value privacy. (The obverse is that young marrieds cannot expect their parents to be willing, fulltime unpaid maids to their children).

Retirement communities which are professionally managed - with superior housing and facilities, resident nursing staff and excursions organised - will appear on the scene sooner or later. In older countries, such amenities tend to be built and managed by insurance and health-care companies, because of the synergies. By the time the youngest of Singaporean baby boomers reach retirement (they are in their mid-40s), organised community living may be a feature of Singapore life, parallel with studio-flat living which the HDB has been gearing up for. Compartmentalised living need not be inimical to family cohesiveness, which is a result of mutual respect and considerateness rather than of space sharing.

Aid for home owners? ‘Sensible steps’ if needed

Source : Straits Times - 17 Jan 2009

THE Government will help home owners during this economic downturn, but moves to artificially prop up the private property market will not work in these uncertain times, said National Development Minister Mah Bow Tan yesterday.

Mr Mah - speaking to the media at a hongbao presentation and Chinese New Year variety show held in Tampines East last night - said buyers are likely to stay on the sidelines in view of the economic uncertainty.

‘We’re in recession… and there’s a lot of uncertainty. People are concerned about their jobs, and all this is feeding through into the property market. Even if there’s demand, I think there’s a lot of wait-and-see attitude,’ Mr Mah said.

According to data from the Urban Redevelopment Authority (URA) earlier this month, only 4,287 homes were sold last year.

This capped the worst year for new sales here since 1990.

Mr Mah said the Government is watching the market very closely. ‘If there’re sensible measures we can take, we’ll certainly do so,’ he said.

What about measures such as a temporary suspension of stamp duty or a reintroduction of the deferred payment scheme?

Some experts have said such measures could give the property market a much-needed boost as they might give buyers greater incentive to purchase homes.

The deferred payment scheme was introduced during the Asian financial crisis to boost the market, but scrapped in late 2007.

Buyers could secure a property for a relatively small cash down payment and then flip it for a profit before so much as a brick had been laid.

Stamp duty is basically a tax that has to be paid for the stamping of documents relating to properties and shares, for instance, leases or mortgages.

Mr Mah said: ‘At this stage, it’s not the right time for us to talk about stimulating demand.’

He added: ‘Until there’s a little more certainty in the market, it’s pointless to talk about artificial measures to stimulate demand. They’ll not work.’

The Government has tried to help ’stabilise’ the market by removing some of the excess supply, he said.

It has also tried to disclose as much information as possible, including sales figures and prices, so the market ‘knows what’s happening’ and people can make ‘informed decisions’.

The Ministry of National Development (MND) said last month that it had decided not to add any new sites to the Government Land Sales Programme for the first half of this year.

Referring to this move, Mr Mah said: ‘This will help to stabilise the market and ensure there is no further overhang.’

As for next week’s Budget, Mr Mah said he could not disclose any details but the focus would be on helping ‘people hurt in the economic crisis’.

The Government will look into how it can help homebuyers own their own homes. It will also see how it can help the elderly monetise their flats so they can earn some money that is ’sustainable’.

Referring to the Government’s lease buyback scheme, Mr Mah hopes to see it implemented during the first half of this year.

The comforts of home prices

Source : Business Times - 17 Jan 2009

WHILE many will be worrying about losing the roof over their heads, 2009 may just be the year for some to find a new one. From luxury to mass market offerings, homes are now more affordable to a wider and more diverse group of buyers.

And with diversity comes stability, says Jones Lang LaSalle South-east Asia research head Chua Yang Liang.

One of the few voices of optimism in 2009, Dr Chua says that affordability has improved by some 5-24 per cent and that in any market, ‘there will always be opportunity’. ‘While we do not deny that the market has to correct in the short term, the medium to longer term opportunities are looking brighter by the day,’ he adds.

The market has already started to correct with the official property price index having fallen for three consecutive quarters.

Dr Chua adds: ‘People should invest on their own terms and not try to plan based on market trends.’

Those who insist on definitive evidence of market trends can look to business cycles.

Cushman and Wakefield managing director Donald Han says that the property market tends to lag some 6-12 months behind local economic growth indicators. While Mr Han says it is difficult to pinpoint when a cycle troughs or peaks, ‘it is okay to buy or sell at some 10 per cent off from these levels’.

But Mr Han also pointed out that the average holding period for investors is between three and five years with owner occupiers holding for between four and eight years. ‘And as market cycles get shorter over time, one’s commitment to buy must include commitment to hold over and beyond these market cycles,’ he added.

Property cycles are difficult to predict. Estimates for when the bottom of the current cycle will come are at least six months apart.

UBS Investment Research appears to be the most optimistic, saying that the property market slide may turn as early as in the third quarter of the year.

‘In the last trough in Q3 ‘98, the URA residential price index - which tends to lag the market - had already weakened for six quarters and residential vacancy rates had risen for eight quarters before a recovery began. GDP growth also hit a trough of minus 4 per cent in Q3 ‘98,’ UBS notes in a recent report.

But UBS also believes that sales volume could stay weak until vacancy rates peak. And it expects private housing vacancy rate to rise to 10-11 per cent by end-2009.

Goldman Sachs reckons the bottom of the market is more likely to be mid-2010, highlighting that since 1980, there have been three private residential property down cycles, each of which lasted between 2.5 and 3.5 years.

Expecting a further 26 per cent and 31 per cent declines in mass and prime residential prices respectively by 2010, Goldman Sachs says: ‘At these new prices, affordability would improve to levels where we believe buyers would be lured back.’

Homes will definitely become cheaper but will they also become more affordable?

Affordability is generally defined as housing costs as a percentage of household income.

Goldman Sachs says that affordability needs to improve for volumes to recover too. ‘We believe that even if the macro economy stabilises and confidence returns to the Singapore market, residential demand is unlikely to quickly recover, as the affordability ratio for the average household has dipped and is less favourable when compared to 2001 levels,’ it added in a recent report.

Focusing on the top 30 per cent of households, it also notes that the current monthly mortgage payment for private mass residential as a proportion of take-home income is high at 43 per cent, compared with 33 per cent during the Q2-Q4 2001 period.

And affordability will further deteriorate if banks tighten credit on mortgages or loan quantum, and the government cuts employers’ CPF contribution to stimulate the economy.

‘Relative affordability’ may have improved, but Chesterton Suntec International’s head of research and consultancy Colin Tan asks: ‘Does it change the market situation?’

‘While some contend that affordability of the private residential market has improved, the reality is that the vast majority of properties currently on the market are still not affordable to the general population,’ he adds.

As Mr Tan notes, CPF cuts could be a big deterrent for potential home buyers. Saying that any cut could have a ‘psychological’ impact, he adds: ‘Right now, uncertainty over actual rate cuts - whether one per cent or 5 per cent, will deter people from buying. And when it happens, there will be uncertainty about future cuts. Although the government will probably do the cut once, this can play on the mind of potential buyers for a long time.’

Indeed, one does not have to look too far back to realise how irrational buying property really is, regardless of price and affordability.

‘In the last two to three years, many people bought property thinking that prices would continue to rise,’ remembers Chua Chor Hoon, DTZ Research senior director.

Interestingly, the opposite is also true.

Conned into renting same house

Source : Straits Times - 16 Jan 2009

Malaysian couple shell out $4,300
Japanese expat coughs up $6,000
Conman duped would-be tenants and agents by posing as property’s manager
A MALAYSIAN couple and a Japanese expatriate have fallen prey to a rental scam run by a conman who took $10,300 from them - then went into hiding.
Neither party realised they had paid him to lease the same terrace house in Serangoon Gardens. But in a twist of fate, they ran into each another there - and discovered his scam.
The man who allegedly made off with their money - his full name is Axley Alexander Ryan Shah and he calls himself Ryan - had no legal link to the property. He pretended to be the property’s manager. It is not clear how he obtained the house keys.
The couple, who are permanent residents, and the Japanese woman have filed separate police reports. A police spokesman said on Monday that two reports of cheating are being investigated.
The property agency involved, ERA, said it is probing the case. Two of its agents were apparently duped by Ryan.
ERA Asia-Pacific associate director Eugene Lim said such scams surface occasionally and often involve a conman fraudulently renting out someone else’s home.
‘We train our agents to do due diligence to ascertain the property’s ownership,’ he said. ‘If they are dealing with a representative, they need to verify his identity and make sure he has the authority to act on behalf of the owner.’
In this case, the agents believed Ryan when he said he was the property manager and when he signed off as property manager-cum-landlord - even though they had run an ownership search that showed he was not one of the owners.
The couple - Ms Elena Fernandez, 35, and her husband, who have lived in Singapore for two years - paid cash to lease the house last November after responding to an online advertisement by an ERA agent.
At the house, they were met by two ERA agents and Ryan, who had asked one of the agents for tenant referrals. He said he represented Sisedel, a firm that owns 11 properties in Singapore, including - he claimed - the house in question.
He asked for $2,500 a month but Ms Fernandez, a part-time announcer at Gold 90FM, bargained it down to $2,150.
She said: ‘We were a bit surprised as the house was in good condition even though it was old. Other houses nearby were going for $2,400 or $2,500.’
Ryan signed off on the tenancy agreement representing Sisedel and collected a two-month deposit of $4,300 in cash - witnessed by the two agents.
Later, he gave them the key. At the house, they were shocked to find sealed boxes in a bedroom and leftover food in the fridge. Ryan did not turn up.
Then a cab pulled up and the Japanese woman, who declined to be named in this article, told them to their dismay that she had paid to rent the house from Feb 1.
The woman, who had recently arrived in Singapore, told The Straits Times: ‘After Christmas, Ryan SMSed me to tell me he could not rent out the house because his agent had found someone else. He said he would refund the deposit, but after that, we could not contact him.’
She had paid him $6,000 - two months’ deposit and advance rent. She went to the house to try to find him.
Ms Fernandez still has the key to the house. She said Ryan had sent her an SMS before disappearing, to apologise, saying greed had got the better of him.
The agents have since found her another place and paid the deposit for it.
The owners of 19 Coniston Grove are listed as Madam Tham Shook Han and Mr Lam Kah Han, according to data from the Inland Revenue Authority of Singapore. They could not be reached for comment.
A company search showed that Sisedel was set up in April last year. Its shareholders and directors are Axley Alexander Ryan Shah and Tan Soon Kiat.
There is no official data on rental scams. At the Consumers Association of Singapore, the number of cases it handles involving rental disputes, including ones that involve misleading claims or misrepresentation, has grown, rising to 231 last year, from 177 in 2007 and 123 in 2006, said executive director Seah Seng Choon.

2,000 flats being readied

Source : Straits Times - 16 Jan 2009

MORE than 2,000 rental flats will be added to the supply of public housing early next year to help the needy.
The move was announced in Parliament by National Development Minister Mah Bow Tan in November 2006.
The first batch of converted flats - comprising 180 one- and two-room units in Block 852, Woodlands Street 83 - were allocated in January last year. In March, Blocks 188 and 191 in Boon Lay Drive were done.
In addition, 290 converted units at Redhill will be added to the supply this year.
An HDB spokesman told The Straits Times that toilets and kitchens were added and improved to the Boon Lay flats.
Each flat has new windows, vents, entrance doors and gates, and internal doors. Floors were retiled and the flats rewired. Elder-friendly features such as grab bars and lever taps were also incorporated.
‘Lifts and essential services in the common areas were upgraded to meet the needs of the increased number of residents,’ the spokesman added.
Mr Mah had said then that such flats would help ease the burden of those who are really needy.
‘This additional supply will help meet demand from lower-income Singaporeans who cannot afford or are not yet ready to buy their own flats,’ he said.
Apart from converting the three-room flats, HDB is also building 976 new rental flats at Choa Chu Kang, Sembawang and Yishun. The final batch will be ready by early next year.

Private home sales hit new low

Source : Straits Times - 16 Jan 2009

December sales of 131 new units cap the worst year since 1990
JUST 131 new private homes were sold last month, down from 193 in November, capping the worst year for new sales in Singapore since 1990.
There were only 4,287 homes sold last year - a striking plunge from the boom year of 2007 when a record 14,811 private home units changed hands.
At least it beat the low in 1990, when just 2,526 new private units were sold.
Developers have caught the miserable mood of the market and launched only 157 units of new private homes in December, according to Urban Redevelopment Authority (URA) data yesterday.
That was even lower than the 174 units in October, when buyers and sellers were in shock from the deepening global crisis.
Total launches last year were at a four-year low of 6,114 units, down 56 per cent from a record 14,016 in 2007, according to Colliers International.
Resale deals also fell, from 20,985 units in 2007 to between 7,400 and 7,600 homes. Sub-sale deals fell from 4,863 units in 2007 to between 1,600 and 1,650 units last year, according to CBRE Research estimates.
Yet despite the dreadful sales numbers, property prices held their own.
‘Developers generally withhold project launches to monitor the market situation, instead of resorting to drastic measures to reduce prices,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.
But with economic conditions subdued, home-seekers are increasingly realistic, looking now at functionality before frills, he said.
The URA price index, on the rise since the second quarter of 2004, reversed direction only from the third quarter last year when it declined 2.4 per cent.
Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, expects it to contract further by another 5 to 7 per cent this quarter on the back of weak take-up, after an estimated 5.7 per cent fall in the fourth quarter.
Buying interest should pick up when prices fall further, experts said.
‘Should more projects be attractively re-priced in 2009, the number of units launched and take-up can expect to sustain or marginally improve, as there is some latent demand from bargain hunters,’ said Mr Mak.
CBRE Research executive director Li Hiaw Ho added: ‘The continued moderation of prices should kick-start some level of activity to the market.’ Sales of new homes this year are likely to improve to around 5,000 to 6,000 units, he said.
But it will take some time to happen. There may be even fewer launches this month as developers are expected to continue to hold back in anticipation of goodies in next Thursday’s Budget, said Colliers International’s director for research and advisory, Ms Tay Huey Ying.
Many prospective buyers are preparing for Chinese New Year so sales this month may hit a new low, said Ms Tay.
Indeed, the entire first quarter or even the first half will likely witness slow sales due to the economy and banks tightening credit, property consultants said.
Last month’s top-seller was the 104-unit Newton Edge in Makeway Avenue, which sold 43 units at a median price of $1,200 per square foot.
Mr Li attributed the favourable interest to the affordable range of $500,000 to $900,000 for a majority of the units, which are 440 sq ft to 915 sq ft in size.
‘The units are a bit squeezy but you are paying less than a million for a property in Newton,’ said an industry player.

Private home launches at record low

Source : Today - 16 Jan 2009

THE grey clouds hovering over the private property market here have gotten even darker.
Islandwide launches of new private homes last month slumped to a record low since the Urban Redevelopment Authority (URA) started releasing the monthly data in June 2007. Developers placed just 157 units for sale last month, down nearly60 per cent from November. And out of these, they managed to sell 131 units.
“Looking at the numbers for the period from October to December, they have been quite consistently low,” said Mr Donald Han, managing director of Cushman and Wakefield. “It is reflective of a subdued market suffering from the cold winds of the financial market.”
For the whole of last year, 4,370 private homes were sold, less than a third of 2007’s 14,811 units.
Mr Colin Tan, research director from Chesterton Suntec International, said: “It tells you one thing, the market is unhealthy. While it is easy to blame the festive period for a dip in sales, it is so low that there is nothing normal about it. Sales of new units have been so low for the past three months that you cannot even excuse it as a blip.”
Based on the latest URA data, it is evident that some developers have been reducing prices to lure buyers.
A total of eight units of the luxurious Ritz Carlton Residences, located at Cairnhill Road, were sold at a median price of $3,086 per square foot. This represents a 40-per-cent discount from the median selling price of three units at $5,088 psf in Dec 2007.
Mr Tan said: “Prices will be coming down, but how it unfolds could be decided by the banks.” He warned that if unemployment rises, more homes might be seized by banks to be sold off to recoup losses, putting more downward pressure on prices.

Developer sales plumb new depths

Source : Business Times - 16 Jan 2009

Home sales hit record lows in 2008 but new launches are on the cards

The year gone by was one to forget for developers as they managed to sell just 4,351 homes in 2008, representing the lowest figure in at least 10 years - diving beyond the previous troughs of 5,156 and 5,520 units in 2003 and 1998 respectively.

The sales in 2008 were also significantly lower than the annual 10-year average (1998-2007) of 8,200 units.

Developer sales fizzled out in the last month of 2008, registering just 131 transactions - less than five a day.

The number of projects with licences for sale in December has, however, risen to 8,350 units, up from 6,512 units in the previous month.

Only 157 new homes were launched in December, the lowest figure since developer data was made available in mid-2007. CBRE Research executive director Li Hiaw Ho said: ‘This shows that developers kept their launch activity to a minimum as they monitored the market.’

But not all developers held back.

Macly Capital sold 43 units of the 104-unit Newton Edge on Makeway Avenue at the median price of $1,200 psf. Mr Li said the strength of the project lay in the affordable quantum of $500,000 to $900,000 for a majority of the units due to their small sizes ranging from 440-915 sq ft.

Pricing is likely to have been a factor also. An earlier report by UBS noted that Newton Edge was priced lower than VIVA at Suffolk Walk nearby, where 15 units were sold in Q3 2008 for around $1,550 psf.

Hayden Properties’ The Ritz-Carlton Residences in Cairnhill also chalked up healthy sales at what appeared to be discounted prices. Eight units were sold at a median price of $3,086 psf.

Hayden Properties director (sales and marketing) David Neubronner revealed that the buyers comprise project shareholders and directors, with just one third-party transaction.

‘The purchase prices by the related parties are preferential rates, and the purchase price paid by the third party reflects current market pricing,’ he said.

Mr Neubronner added that the unit purchased by the third party is located on a lower floor and was priced at $3,700 psf, which is only an 8 per cent decrease from the initial launch price of $4,000 psf.

Colliers International director for research and advisory Tay Huey Ying noted that mid-tier projects in the Rest of Central Region (RCR) dominated launches in December, accounting for 72 per cent of the units launched during the month. ‘This, following the domination of high-end projects in recent months, could be an indication of the weakening holding power among small and mid- tier developers,’ she added.

RCR projects that sold in the month include 10 units at Nova 88 at a median price of $988 psf and nine units of The Aristo @ Amber at a median price of $1,002 psf.

‘This decline in demand has led to the contraction in the islandwide URA property price index (PPI) of some 5.6 per cent as the market attempts to generate more activity through price reductions,’ said Jones Lang LaSalle local director and head of research (South East Asia) Chua Yang Liang. ‘Historically, take-up has been leading the PPI. On the back of this contraction in take-up in Q4′08, we can expect the PPI to contract further, possibly by another 5-7 per cent in Q1′09,’ he said.

Nevertheless, some developers have been continuing to prepare developments for launch.

UOL is expected to launch a 646-unit development at Simei Street 4 billed as a luxury condominium for upgraders in the first half of 2009.

Frasers Centrepoint is also preparing to launch a development on Boon Lay Way. A spokesman said: ‘Caspian, our 712-unit development on Boon Lay Way, is launch-ready. At this point, we are still finalising several details, with regard to the actual launch period, pricing, etc, and will announce them once we are ready.’

It is also understood that Far East Organization is preparing to launch a development in Choa Chu Kang this year.

Notably, all developments are in the Outside Central Region where property prices are not expected to fall as significantly as in the mid-tier and high-end segments.

Conservation of Katong/Joo Chiat area

Source : Straits Times - 16 Jan 2009

100 more buildings

THE Urban Redevelopment Authority (URA) on Friday announced that another 100 buildings in the Joo Chiat and Katong area will be conserved to keep its charm and character.

Among the 100 are three bungalows, including the former Grand Hotel at Still Road South, two churches, St Hilda’s Church and Bethesda (Katong) Church and 95 shophouses and terrace buildings along Tembeling Road, Koon Seng Road, Crane Road and Onan Road.

They join the already 700 buildings in Joo Chiat/Katong that have been conserved by the URA since 1993. These are mostly shophouses on Joo Chiat Road and East Coast Road.

The Joo Chiat/Katong area is well known for its varied mix of architecture, history, culture and activities. It was an established and attractive residential area since the 1920s. Shophouses, terrace ouses, detached bungalows and seaside mansions can be found in the area.

In a statement, URA said the buildings chosen for conservation were selected based on their architectural merits, cultural, social and historical significance of the buildings, in addition to their contribution to the streetscape and identity of the place. For example, the two-storey Art Deco and Late-style shophouses at Koon Seng Road are distinctive local landmarks.

Another iconic landmark in the area is the former Grand Hotel at 25 Still Road South. The bungalow was built in the Vicrtorian style with an Indian influence, and was once part of a larger estate known as the Karikal Mahal. Another house across the road, which was also part of the estate has already been conserved.

URA’s conservation programme was launched in the early 1980s and to date, more than 6,800 buildings around Singapore have been conserved.

Under conservation rules, the facades and major structures of conserved properties cannot be altered. Owners however can choose to restore them. The interiors of conserved properties can be altered to suit new requirements.

The news of the additional buildings to be conserved came as a delight to members of the Save Joo Chiat workgroup. The group was formed in 2004 by residents wanting to promote its Peranakan heritage

‘The more buildings conserved in this area the better,’ says its spokesman, Mr Colin Chee. ‘This enhances the heritage status of the neighbourhood.’

CONSERVATION LIST

The latest 100 buildings in Katong and Joo Chiat to join the conservation list:

Shophouses and terrace houses

The 95 shophouses and terrace houses to be conserved are around four main areas in Joo Chiat and Katong.

3, 5, 7-15, 22-32 Crane Road, 64-76, 71-75 Carpmael Road and 169-181 Onan Road

The shophouses here are two and three-storey ones built in the Traditional and Modern styles. They are the gateway between the private developments along Crane Road and the Haig Road public housing estate.

55-66, 57-61, 89-99 Koon Seng Road and 89-99, 101-113 Everitt Road.

These two-storey Art Deco and Late-style shophouses are distinctive local landmarks.

253-271 Tembeling Road and 1-19 Cheow Keng Road

The shophouses here are two-storey built in the Transitional style.

14-40 Chapel Road and 205-213 Marine Parade Road

These two-storey Transitional-style buildings can be seen from Marine Parade Road, and are familar markers to residents here.

Churches

St Hilda’s Church was constructed in 1949. The single-storey chapel has a steep pitched roof and a Victorian-style conical tower.

Bethesda (Katong) Church

This single-storey church was built in the late 1930s as has a symmetrical look.

Bungalows

These were former seaside bungalows which were weekend homes for wealthy merchants.

25 Still Road South

This huge bungalow and another bungalow opposite the road, were once part of a larger estate known as the Karikal Mahal. This bungalow was built in the Victorian style.

37 Marine Parade Road

This single-storey bungalow was once owned by businessman Choa Kim Keat of whom Kim Keat Road is named after. It was formerly a seaside retreat.

25 Chapel Road

Built on stilts, this single-storey bungalow was common during Singapore’s early days. Being elevated prevented the house from flooding during high tides.

Owner told to pay $382k agent’s fee

Source : Straits Times - 16 Jan 2009

She withheld payment as she blamed agent for not telling her that buyer was neighbour

A JUDGE has ordered the owner of a $25.5 million house to pay the commission that she had withheld from an property agent for alleged wrongful conduct.

Madam Lam Cheng Yee, who owned the unit at 32H Nassim Road, had claimed she was entitled to cancel the payment to Ms Cindy Wong of Areco International who had clinched the sale. At 1.5 per cent commission for the sale, the amount came to $382,500.

She argued that she lost the opportunity to get a better price because it later emerged that the buyer was a neighbour after the sale went through.

The agent, she said, had told her that the buyer, who remained anonymous during the transaction, wanted the house because of its feng shui.

She claimed that Ms Wong had been deceitful as the buyer’s address on the option document was listed as an office in Temasek Boulevard, rather than 32K Nassim Road.

The buyer was Mr Chew Hua Seng, founder and chairman of Raffles Education Corporation. He was ranked No. 10 in the Forbes list of Singapore’s top 40 richest persons in 2007.

Madam Lam’s bungalow on the 1,250 sq m piece of land adjoins his unit at the rear with a narrow passageway leading to the main road. Seen from Nassim Road, both units are separated by another unit, 32G.

Madam Lam’s husband, Mr Thio Keng Thay, a former deputy managing director of Malaysia Dairy Industries, handled the sale on her behalf.

Mr Thio had testified in his affidavit for the civil suit heard last July that an adjacent property would ‘command a substantial premium over the market value’. He added he would not have sold the bungalow for $25.5 million if Ms Wong had told him the buyer was a neighbour.

Ruling against Madam Lam, Justice Kan Ting Chiu said in his written judgment made public on Wednesday that her allegation that she had been misled by Ms Wong could not be supported.

The judge said, among other things, that ‘good feng shui’ could not be the reason Madam Lam was willing to sell the house.

Mr Thio also did not say he wanted the buyer’s residential address to be disclosed as a condition of sale and had in fact set the asking price of $25.5 million. Nor did he ask Ms Wong if it was a good selling price or if there were other factors he should consider in setting the price.

Even if he had sought advice from Ms Wong, the issue would then be whether an agent is expected to know that a property can command a higher price from the owner of an adjoining property.

Ms Wong, Justice Kan noted, was not engaged as a valuer and did not hold herself out to be knowledgeable in property valuation.

Separately, the judge took issue with Madam Lam’s lawyer Lin Ming Khin for following her instructions to revoke the commission payable to Ms Wong ‘without demurral’.

He asked if this was appropriate as the agent’s entitlement would be in jeopardy if the seller happened to be outside the jurisdiction of the Singapore courts or is unable to pay the commission by the time the court rules in the agent’s favour.

‘Prudent solicitors in such a situation’, he said, would have taken steps to retain the commission pending the outcome of the dispute.

Property analysts say that generally, an adjoining property will command a premium as such opportunities are rare. Said Savills Singapore director Steven Ming: ‘It makes sense to pay a higher price as when the buyer combines the cost with what was paid years ago for the property he currently owns, the cost per sq m would have averaged out to a lower level for the total lot.’

Small building jobs restored to help SMEs

Source : Straits Times - 15 Jan 2009

Government will also speed up payments to firms for work done

SMALLER government construction projects that had been deferred since end-2007 amid a building boom are being brought back on stream to help ignite the now-slumping sector.

Restarting the projects, each worth up to $50 million, will help smaller building firms that are feeling the pain more than the construction giants.

The work, which will be outlined in next Thursday’s Budget, could include building schools and upgrading lifts in HDB blocks.

‘The purpose of these additional projects…is to help small and medium-sized contractors because…we are told that the larger firms have jobs in hand,’ said National Development Minister Mah Bow Tan yesterday.

One sign of the tighter market is the fact that the number of tenderers for small projects of up to $30 million has doubled compared with six months ago, added Mr Mah, the guest-of-honour at a construction and property prospects seminar.

To sustain the flow of jobs to smaller firms, the minister said that many of the projects will kick in towards the middle or end of this year. Other suitable work in the pipeline will also be brought forward.

Industry players lauded the move.

‘Most of the construction firms are small and medium-sized, which have recently handled mostly private sector projects,’ said the Singapore Contractors Association’s executive director Simon Lee.

Now that a lot of the private jobs have dried up, these firms would clearly welcome any small public sector projects, added Mr Lee.

If the Government is seeking to pump-prime the economy, smaller projects are good as local contractors can bid for them, said construction firm BBR Holdings’ chief executive Andrew Tan.

If the jobs are packaged as big parcels, few local firms can bid and they are likely to go to the foreign parties, he said.

The move will help to stabilise and boost the industry, said Davis Langdon & Seah Singapore’s director, Mr Seah Choon Meng, who spoke at the seminar.

This year will be a ‘challenging if not depressive year’ for the construction industry, both in terms of work demands as well as construction costs, he said.

Official data show a sector in slowdown. Private industry construction demand - the value of contracts awarded - will drop to between $5 billion and $9 billion this year, well down from $20.1 billion last year, according to Building and Construction Authority (BCA) data released at the seminar.

The projected fall - of 55 per cent to 75 per cent - will be the biggest slide since the 53.5 per cent decline in 1998.

Overall, construction demand is projected to reach $22 billion to $28 billion this year. This will be due to the value of public sector contracts like roads and MRT infrastructure possibly rising 31 per cent to between $17 and $19 billion.

Last year, the overall value of contracts rose 41 per cent to a record $34.6 billion.

Meanwhile, construction output, which records payments made for work done, was estimated at $25 billion last year, up from $17.87 billion in 2007.

While the BCA said it could peak at $28 billion to $30 billion this year, others think the figure is debatable because an increasing number of residential projects were deferred from the fourth quarter last year as home prices fell.

Tender prices, softening slightly now that private sector works are falling off the cliff, are likely to decline by between 15 and 20 per cent from the second or third quarter onwards, said Mr Seah.

Overall construction costs fell by more than 5 per cent in the fourth quarter of last year, according to feedback obtained by the BCA.

Yesterday, Mr Mah said that public sector agencies will be making more frequent, prompt and full progress payments to firms for work done. It will also lower the 5 per cent security deposit for public works by at least half.

Apart from MRT projects, other likely major public works this year include HDB flats, the National Heart Centre and the International Cruise Terminal, while PowerGas’ liquefied natural gas-receiving terminal and Wildlife Reserves Singapore’s new river-themed park and safari at Mandai are on the private sector’s horizon.

Buyers, sellers at impasse

Source : Today - 15 Jan 2009

Owners still asking for sky-high prices while bank valuations fall
A DOWNTURN is usually the time for bargain-hunters to snap up properties on the cheap. But for now at least, the reality could not be more different, as prospective buyers discover.
Said Ms K Chan, a HDB dweller looking to upgrade to a condo: “I thought this would be a good time to pick up a good bargain. But owners are still asking for sky-high prices.”

According to industry players, the volume of transactions in the last month or so has dropped to a level only witnessed during the Sars outbreak when the market was practically frozen.
The reason? A growing gap between falling bank valuations which determine how large a bank loan buyers can take and high asking prices by highly-geared sellers needing to pay off their outstanding loans.
A random check by Today on 15 homes for sale condos and various landed property types spread across the island found stark differences between what owners are asking for and preliminary valuations by independent professionals.
While it is normal for initial asking prices to be higher than the conservative value banks attach to a property, in six cases that Today found, the valuations were less than two-thirds of the asking price.
For instance, while an owner of a four-storey bungalow in Holland Grove Drive was asking for $ 7.2 million, his property was valued at just $3.3m. Likewise, a Caribbean at Keppel Bay unit valued at about $700,000 was being touted for sale for $1.1m.
‘Better for sellers to cut losses now’
Property agent Michael Leong lamented: “It’s very difficult to negotiate deals these days. Both sellers and buyers would hesitate for really long and in the end, they still cannot agree on the price.”
Chesterton Suntec International director Colin Tan said the property bull-run of yesteryear - which pushed prices to record levels - has resulted in once-overly-bullish investors held hostage by the large loans they undertook.
HSR Property Group executive director Eric Cheng thinks this is especially so in the luxury segment, where “people are more likely to be highly geared and own more than one property”.
For sellers unwilling to budge on their asking price, the latest Citigroup report on the property market makes for grim reading.
The bank forecasts mid-tier to high-end residential property prices here to fall another 35 per cent, bringing “prices back to 1998 levels”. For prices of luxury properties such as Ardmore Park, the fall would be even steeper - up to 60 per cent from their peaks two years ago, Citi estimates.
Noting the current general scarcity of cash, Mr Tan said: “For sellers, maybe it’s better for them to cut losses now, rather than take a bigger loss later on. But sometimes you have geared up so much, the situation is out of your hands - you are stuck.”
‘Buyers can wait’
Before buying a property, buyers can request from banks a preliminary valuation - determined by an independent professional - which estimates a property’s open market value.
Such a valuation takes into account, among other factors, recent transactions and property launches in the vicinity. The banks would then carry out a final valuation onsite before granting a loan, capped at 90 per cent of the purchase price or valuation, whichever is lower.
According to Mr Cheng, the final valuations usually do not veer much from the preliminary ones. In rare cases, banks may increase their valuation - by up to 20 per cent - to match the asking price, provided they are convinced of the buyers’ ability to finance the loan, he said.
Still, the lack of activity in the property market, to some extent, means valuers are groping in the dark when setting the property value. “A lot of it is based on gut-feel,” said Mr Cheng.
But Mr Dennis Ng, spokesman for mortgage consultancy portal www.housingloansg.com, believes that valuations accurately reflect current dire sentiments. He predicts the impasse will be broken in the second half of the year - when it becomes a buyers’ market. “Ultimately one party will give way,” said Mr Ng.
For now, Chesterton Suntec International’s Mr Tan has this advice for prospective buyers: “You can afford to wait. Only go (into a transaction) when it is a property you really like and it is within your affordability.”

Empty rooms, falling rates may dog hotels

Source : Business Times - 14 Jan 2009

Hoteliers eye leisure visitors as corporate business set to fall
Hotels in Singapore are in for hard times, with analysts saying that double digit falls in room rates and occupancies could be on the cards in 2009.
Hospitality consulting firm HVS International expects revenue per available room (RevPAR) to decrease to $171 in 2009 and $154 in 2010 - from about $203 in 2008. This translates to falls of 15.8 per cent in 2009 and 9.9 per cent in 2010. In 2007, RevPAR was $175.

Likewise, marketwide occupancy is expected to see negative growth during the first half of 2009, although HVS expects the market to gain momentum in the middle to late 2009.

Marketwide occupancies will fall to 75 per cent and 72 per cent by 2009 and 2010 respectively, HVS said. By contrast, occupancy for 2008 is estimated to be 82 per cent. ‘Looking forward, an increase in supply not met by demand levels will lead to decreased occupancy projections,’ said David Ling, HVS managing director for Asia.
Bill Barnett, managing director of hospitality consulting firm C9 Hotelworks, also has a sombre set of numbers. ‘ARRs (average room rates) look to retreat back to the levels in 2006. RevPAR is forecasted to decline in double digits. Occupancies are set to decline in the region of 7-10 per cent,’ Mr Barnett predicted.
And in a Dec 18 note, DBS Group Research estimated that RevPAR will drop by 15 per cent this year from FY 2008 levels.
Hotels BT spoke to said that so far, they are holding rates firm. However, many are offering packages to draw leisure travellers as business from corporate travellers is expected to fall this year.
Hoteliers are certainly aware that tough times are ahead. ‘There is a definite softening of the market, in line with the global economic slowdown,’ observed Ignacio Gomez, regional vice-president and general manager of Four Seasons Hotel Singapore. Similarly, a spokesperson for Hong Leong Group said that 2009 is expected to be a ‘very challenging’ year.
The Royal Plaza on Scotts told BT that it expects room rates to decline by 5 per cent this year, while occupancy is forecasted to come in one percentage point lower.
The main problem is the expected drop-off in tourism numbers. DBS, for example, forecasted that the global slowdown in travel could drag visitor arrivals for this year 4 to 6 per cent lower than 2008 levels and 10 per cent from the record 10.5 million visitors registered in 2007.
‘This is in line with previous down-cycles in 1997-1998 and 2001- 2003, which declined 2-13 per cent,’ the firm said.
To aggravate the situation, the hospitality industry will also see a fresh injection of supply as various new hotels open their doors. Total room stock is expected to grow by 12,000 rooms between now and 2012, of which about 40 per cent was slated for 2009, DBS reckons.
However, given the hefty construction costs coupled with the credit crunch, completion delays are pushing back launch dates - which could help cushion the impact somewhat.
For instance, NTUC Club’s 200-room Palawan Beach Resort, which was initially supposed to open last year, has been delayed while Far East Organization’s Quincy hotel will see a Q1 2009 opening instead of 2008 as originally planned. As such, the main supply looks set to come only towards the end of 2009 and 2010, with a large chunk stemming from the 2,600-room Marina Bay Sands.
Hotels also appear to be holding on to their staff for now. Four Seasons’ Mr Gomez, for example, said that it will continue to hire talent as required and will not compromise on its service standards. The Royal Plaza on Scotts has no plans to trim its workforce either. ‘In the weakening economy, it is still our top priority to provide our guests with a comfortable stay. The hotel will ensure that training, and staff development and growth are consistently maintained,’ said general manager Patrick Fiat.
Hotels are also expected to undertake various measures to fill rooms - such as tying up with various credit card brands to offer discounts, tweaking its client mix as well as cutting room rates to remain competitive. ‘Hotel operators need to try to match guests’ expectations of paying lower room rates or creating value add propositions in order to retain market share,’ said C9 Hotelworks’ Mr Barnett.
Keeping a watchful eye on costs can also go a long way. To combat the slower growth rate for its hotels in Asia, Hong Leong early on embarked on efforts to manage costs and streamline operations, so as to adapt to the changing market conditions. ‘As a result, we managed t1/4o achieve revenue and earnings,’ a spokesperson said. ‘We will continue to evaluate our portfolio for improvement to remain competitive.’

HK’s 2008 new home sales lowest in 12 years

Source : Business Times - 15 Jan 2009

Hong Kong’s sales of new private homes fell to the lowest level since 1996 last year, as high prices and the slowing economy deterred potential buyers, according to Centaline Property Agency Ltd.
The number of new non-government- built residential units changing hands last year fell 47 per cent to 9,955, Wong Leung-Sing, an associate director at Centaline, one of the city’s biggest real estate agencies, said yesterday. The average value was HK$7.73 million (S$1.48 million), the highest since 1996, he said.
‘Sales started to slow in May, as the pace of price increases was too fast,’ Mr Wong said in a phone interview. ‘Buyers held back. This worsened in the third quarter, when the financial tsunami hit Hong Kong.’ Average prices rose on sales of luxury units costing at least HK$10 million each, he said.
Hong Kong’s economy contracted a seasonally adjusted 0.5 per cent in the third quarter from the three months through June. Gross domestic product shrank 1.4 per cent in the second quarter, as the global financial crisis cut exports and spending cooled.
City Chief Executive Donald Tsang said last month that a recession this year is ‘inevitable’. The bad outlook may lead developers to hold back housing from sale this year, Cusson Leung, an analyst at Credit Suisse here, said yesterday.
‘They will slow down sales because they won’t be sure if the market can absorb all their units at one go,’ Mr Leung said. He estimated that 11,000 new homes will be completed this year, compared with 9,000 in 2008. Developers may have already sold some of these units before completion, he said.
Cheung Kong (Holdings) Ltd, Hong Kong’s second-biggest property developer by market value, sold the most new private homes last year, 2,838 units, Centaline said. Second was Sino Land Co, with 1,385 units.
Sales of all types of residential units fell for a sixth month in December, dropping 65 per cent from a year earlier to 4,706, the Land Registry said last week.

Marina Bay to have dedicated police centre

Source : Channel NewsAsia - 15 Jan 2009

The Singapore Police Force is setting up a dedicated security centre at Marina Bay to manage the challenges expected once the integrated resort there has been completed.
The new Marina Bay Neighbourhood Police Centre (NPC) is expected to have 180 officers, three times the number of staff for each existing centre.
The other 32 existing neighbourhood police centres have an average of about 70 officers each.
Unlike existing police centres that handle mostly residential cases, the one at Marina Bay will carry out operations specific to the needs of Marina Bay.
A quarter of a million people ushered in the new year at Marina Bay last month.
The Singapore Police Force says large-scale activities like the New Year countdown party are expected to be common once the Marina Bay Sands integrated resort is up and ready.
To maintain order, a special security unit will be set up at the new Marina Bay NPC.
Singapore Police Force’s Deputy Assistant Commissioner, Lau Peet Meng, said: “We’ll make sure the event is protected. The officers will be in charge of security patrols. So, they will walk around the vicinity, looking out for suspicious persons or objects and to always be the alert, to sound the alarm if they do see something out of the ordinary.
“We’re looking at possibly using other modes of transport like three-wheelers or bicycles to see how we can actually respond to cases and incidents more quickly.”
Also unique to the Marina Bay NPC is a Plainclothes Taskforce that will look into integrated resort-related vice activities.
Deputy Assistant Commissioner Lau said: “From the experience of overseas casinos, we can see that usually there will be some vice issues. We will form a Plainclothes Taskforce that will reside in this NPC.
“The role of this taskforce is, first of all, to be aware of the situation. So, they (taskforce) will be going around the IR and its vicinity, observing the kind of people that are around the area.
“The second role is to enforce the laws that we have in this country. If we do find vice or any other activities that are illegal, this taskforce will then move in to enforce the laws.”
The Marina Bay NPC will also work closely with building owners and security managers in the area, something the police force decided to do after studying London’s model.
Deputy Assistant Commissioner Lau said: “The more important lesson that we learnt from London is engaging the business owners and business partners in the area. We want to help them think about how to respond to incidents when they take place and how quickly they can recover from those incidents… business continuity plans. These are important issues that we want to encourage our business partners to think about in the downtown area.”
Businesses like Marina Mandarin say it is good planning to have a police centre in the area as that will mean faster response time from officers for activities at the bay as opposed to the current police centre which is located relatively further away - at the Police Cantonment Complex near Chinatown.
The new Marina Bay NPC will also oversee the Singapore River and the Bugis shopping district.
The NPC will be located next to a fire station, the second such centre to do so after Queenstown NPC. But its exact location and other details are still being worked out.
Meanwhile its operations will start at the Police Cantonment Complex in the second half of 2009.
It hopes to move to the Marina Bay area by the end of this year or early 2010.

New bridge linking mainland S’pore to Sentosa to open later this year

Source : Channel NewsAsia - 15 Jan 2009

A new bridge linking mainland Singapore to Resorts World at Sentosa is expected to open later this year.
Resorts World said it should receive traffic ahead of its grand opening.
The 710-metre bridge is expected to serve some 15 million visitors a year once the resort is fully operational.
After completion, the traffic flow to Sentosa will be realigned. The three lanes are capable of handling some 6,000 vehicles per hour.
But the infrastructure also has a dual purpose. Under the bridge, it carries utility pipes for power, telecommunications lines and fresh water.

UAE’s loan quality to worsen: Moody’s

Source : Business Times - 15 Jan 2009

United Arab Emirates-based banks may face worsening loan quality as the region’s slowing property market increases the prospects of developers defaulting, according to Moody’s Investors Service.
‘Moody’s is mainly concerned about the loans to ‘opportunistic’ developers that have been extended over the past four to five years,’ John Tofarides, a Dubai-based Moody’s analyst said in a report. ‘These factors will negatively affect the credit environment over the next 12 to 18 months.’
UAE’s small and medium-sized real estate developers are being hurt as home sales fall, making it harder for them to repay loans. Banks are also cutting lending, which is weighing on property values, bringing the fourfold increase in residential property prices over the last five years to an end. Dubai house prices dropped 8 per cent in the fourth quarter from the prior three months, Colliers CRE said earlier.
Moody’s on Dec 16 cut the outlook on four UAE banks, Dubai Islamic Bank PJSC, Dubai Bank, Abu Dhabi Commercial Bank and First Gulf Bank. Liquidity constraints, the equity price collapse, and the sharp drop in oil prices will significantly weaken the UAE’s fiscal surplus and real economic growth in 2009, Moody’s said.

Moscow property prices down despite mayor’s denial

Source : Business Times - 15 Jan 2009

Property prices in Russia’s previously booming capital are steadily falling even as city authorities tick off local media for predicting a price collapse, newspapers reported yesterday.
Newspapers said that city mayor Yury Luzhkov had given a news conference dismissing talk of a 50 per cent drop in residential property prices and advice by analysts that buyers should hold onto their money and wait for better deals.
Such views were misplaced given a housing shortage and continued migration to the capital from other parts of Russia, and could spell a ‘collapse in the city’s entire building system’, he said.
Mr Luzhkov’s wife, Yelena Baturina, is a leading property developer and has been ranked by Forbes as Russia’s richest woman, with a net worth of US$4.2 billion.
But the daily Izvestia newspaper pointed to prestige projects such as the Federation Tower, due to become Europe’s tallest building, and said that evidence of sharp falls in commercial property prices was incontrovertible.
Office space in the tower is now being offered at US$1,300 per square metre compared to US$2,000-2,500 in the third quarter of last year, reflecting falling prices across the city, Izvestia said.
‘According to real estate experts, 25 per cent of office space in Moscow is currently vacant,’ said Izvestia.
‘This is due to the opening of a large amount of new office space built in recent years and an increase in space for rent as many companies are unable to pay their rents and are looking for cheaper options, even outside the city,’ the paper added.
Vedomosti quoted the head of consultancy Finekspertiz Konsalting as predicting that residential prices in rubles would hold steady or even rise due to progressive devaluation of the ruble, while in dollars, prices could fall by 10-20 per cent by the middle of the year.
The business daily quoted state bank Sberbank as predicting that dollar prices on the primary market in Moscow would fall by 47-60 per cent by the end of next year and in rubles by 34-38 per cent.

Small building jobs restored to help SMEs

Source : Straits Times - 15 Jan 2009

Government will also speed up payments to firms for work done
SMALLER government construction projects that had been deferred since end-2007 amid a building boom are being brought back on stream to help ignite the now-slumping sector.
Restarting the projects, each worth up to $50 million, will help smaller building firms that are feeling the pain more than the construction giants.
The work, which will be outlined in next Thursday’s Budget, could include building schools and upgrading lifts in HDB blocks.
‘The purpose of these additional projects…is to help small and medium-sized contractors because…we are told that the larger firms have jobs in hand,’ said National Development Minister Mah Bow Tan yesterday.
One sign of the tighter market is the fact that the number of tenderers for small projects of up to $30 million has doubled compared with six months ago, added Mr Mah, the guest-of-honour at a construction and property prospects seminar.
To sustain the flow of jobs to smaller firms, the minister said that many of the projects will kick in towards the middle or end of this year. Other suitable work in the pipeline will also be brought forward.
Industry players lauded the move.
‘Most of the construction firms are small and medium-sized, which have recently handled mostly private sector projects,’ said the Singapore Contractors Association’s executive director Simon Lee.
Now that a lot of the private jobs have dried up, these firms would clearly welcome any small public sector projects, added Mr Lee.
If the Government is seeking to pump-prime the economy, smaller projects are good as local contractors can bid for them, said construction firm BBR Holdings’ chief executive Andrew Tan.
If the jobs are packaged as big parcels, few local firms can bid and they are likely to go to the foreign parties, he said.
The move will help to stabilise and boost the industry, said Davis Langdon & Seah Singapore’s director, Mr Seah Choon Meng, who spoke at the seminar.
This year will be a ‘challenging if not depressive year’ for the construction industry, both in terms of work demands as well as construction costs, he said.
Official data show a sector in slowdown. Private industry construction demand - the value of contracts awarded - will drop to between $5 billion and $9 billion this year, well down from $20.1 billion last year, according to Building and Construction Authority (BCA) data released at the seminar.
The projected fall - of 55 per cent to 75 per cent - will be the biggest slide since the 53.5 per cent decline in 1998.
Overall, construction demand is projected to reach $22 billion to $28 billion this year. This will be due to the value of public sector contracts like roads and MRT infrastructure possibly rising 31 per cent to between $17 and $19 billion.
Last year, the overall value of contracts rose 41 per cent to a record $34.6 billion.
Meanwhile, construction output, which records payments made for work done, was estimated at $25 billion last year, up from $17.87 billion in 2007.
While the BCA said it could peak at $28 billion to $30 billion this year, others think the figure is debatable because an increasing number of residential projects were deferred from the fourth quarter last year as home prices fell.
Tender prices, softening slightly now that private sector works are falling off the cliff, are likely to decline by between 15 and 20 per cent from the second or third quarter onwards, said Mr Seah.
Overall construction costs fell by more than 5 per cent in the fourth quarter of last year, according to feedback obtained by the BCA.
Yesterday, Mr Mah said that public sector agencies will be making more frequent, prompt and full progress payments to firms for work done. It will also lower the 5 per cent security deposit for public works by at least half.
Apart from MRT projects, other likely major public works this year include HDB flats, the National Heart Centre and the International Cruise Terminal, while PowerGas’ liquefied natural gas-receiving terminal and Wildlife Reserves Singapore’s new river-themed park and safari at Mandai are on the private sector’s horizon.

Home loans in Australia rise on rate cuts

Source : Business Times - 15 Jan 2009

Mortgages rose 1.3% in Nov, slightly better than forecast

Demand for Australian home loans showed signs of stabilising in November, as aggressive interest rate cuts and generous government handouts lured first-home buyers back to the property market.

Government data yesterday showed that mortgage commitments rose 1.3 per cent in November, slightly better than forecasts of a 1.0 per cent rise and a second straight month of gains.

Yet, loans were still down a hefty 25 per cent for the year, pointing to a long struggle ahead for the housing market and keeping alive expectations of more rate cuts by the Reserve Bank of Australia (RBA).

‘Certainly, it is early days but the signs are encouraging,’ said Craig James, chief economist at CommSec. ‘The number of first-home buyers has posted the best result in a year and is up almost 20 per cent in just the last month.’

The RBA cut rates by 200 basis points between September and November, and eased by a further 100 basis points in December.

The cash rate is now at 4.25 per cent and markets are pricing in further cuts to around 3 per cent as the central bank tries to revive faltering demand amid a gloomy outlook for the economy.

The cuts have fed directly through to mortgage rates, bringing payments on an average A$253,000 (S$254,366) mortgage down by around A$500 a month. In contrast, the US authorities have had far less luck bringing down mortgage rates even though official rates have been cut to near zero.

On its part, the Australian government has also stepped in with an A$10.4 billion economic stimulus package late last year which included a grant of A$14,000 for first-home buyers.

Indeed, first-home buyers accounted for 23.6 per cent of all loans in November, well above 19.5 per cent in October, and the highest level since early 2002.

Still, the overall picture remained lacklustre for the housing sector in Australia. Data last week showed that approvals to build new homes registered their biggest fall in six years in November.

That was reflected on yesterday’s data which showed that demand for loans from investors fell 6.1 per cent in November, as mounting risk aversion and the related credit crunch led banks to stay clear of developers and property trusts.

‘Investor demand will remain weak until house prices start to improve,’ said Spiros Papadopoulos, economist at National Australia Bank.

House prices in the September quarter fell 1.8 per cent, although economists do not expect a collapse in prices like the US, mainly because there is no overhang of empty homes.

Economists estimated that Australia has been building around 40,000 homes a year less than required by population growth and immigration, so this is likely to support prices in the medium term.

But in the short run, a looming recession, growing unemployment and low consumer confidence would keep prices softer.

‘From here, the debate will be whether the rapid reversal of the rate rises over recent years is enough to engineer some recovery in housing against a backdrop of deleveraging and rising unemployment,’ said Paul Brennan, co-head, economics and market analysis at Citi.

‘Overall, the RBA will need to cut interest rates further and we expect the cash rate to fall to 3 per cent by March.’

UK property firms need to raise US$20b

Source : Business Times - 15 Jan 2009

They need to restore their balance sheets at a time when financing is scarce

UK real estate companies may need to be rescued by shareholders this year to stay afloat.

The largest commercial property firms need to raise as much as US$20 billion this year to restore their balance sheets at a time when financing is scarce, according to estimates by Bernd Stahli, an analyst at Merrill Lynch & Co in London.

‘Real estate will be at the front of the queue for equity this year,’ said Ian Coull, chief executive officer of Segro plc, the largest investor in UK office parks. ‘There will be companies like us that want to put themselves in a strong position to benefit from the upturn when it comes.’

The five largest real estate investment trusts - Land Securities plc, British Land Co, Hammerson plc, Liberty International plc and Segro - have combined debt of £19 billion (S$41.6 billion), according to their latest reports. About £700 million of loans are due this year, research by Nomura International plc shows. The banks that granted those loans may now be reluctant to provide more credit.

That could spur another year of losses for real estate investment trust (Reit) investors. The FTSE 350 Real Estate Index of 18 stocks fell 46 per cent last year, the most since the index was created in 1986. The worst performer was Liberty, which declined 56 per cent.

The index has fallen by almost two-thirds since its peak in January 2007. During the industry’s last slump, shares of UK real estate companies fell by about 60 per cent, hitting a low in 1992. Stock prices more than doubled over the following year, even though the three biggest companies, including British Land and Hammerson, carried out rights issues.

This time, some companies may again have to issue new shares, or be forced to sell assets at a time when there are few buyers. Commercial values in the UK have slumped almost 36 per cent from their June 2007 peak, CB Richard Ellis Group Inc said last Friday. There may be another 15 per cent decline in 2009, according to King Sturge estimates.

The companies in the FTSE 350 real estate index need to raise a total of about £13.7 billion of equity, assuming that UK values fall 50 per cent from the market’s peak, said Merrill Lynch’s Mr Stahli. ‘This looks problematic as there is a very real possibility that this money is not there to begin with,’ he said.

British Land, Hammerson, Liberty, Brixton plc and Capital and Regional plc are among the companies that will be pushed close to breaching bank agreements by the end of the year because of depreciating assets, said Harm Meijer, an analyst at JPMorgan Chase & Co in London.

‘Companies could potentially mitigate these problems by obtaining amendments to debt-gearing covenants or by cutting dividends, but we don’t think these measures would be sufficient to address the problem fully,’ said Martin Allen, a London-based analyst at Morgan Stanley.

Half of the large real estate companies would need to take action to avoid breaching debt gearing covenants by December 2009 or March 2010, he said.

JPMorgan, Citigroup Inc and Morgan Stanley estimated that the largest companies in the FTSE 350 index may need about £2.5 billion to bolster their balance sheets.

Liberty, the UK’s biggest owner of shopping malls, is the leading candidate for a rights issue, according to Mike Prew, an analyst at Nomura International. The company does not have enough cash or undrawn debt to fulfil spending commitments and debt obligations this year, he said in a note to investors last Wednesday.

Liberty had debt of about £4 billion as at Sept 30, according to the company’s nine-month report. Liberty spokesman Michael Sandler declined to comment.

British Land, the largest office landlord in London, has ‘no immediate requirement’ to raise capital, said spokeswoman Laura De Vere. ‘But clearly, raising equity is an option that’s open to British Land, especially if matched with an opportunity.’

Credit ratings of European real estate companies could be cut because of shrinking asset values, Standard & Poor’s said in a report on Monday. Falling prices increase a company’s loan-to-value ratio, a key measure of credit.

Some companies are selling assets but not without price cuts. Land Securities, the largest Reit, last week raised £440 million to pay off debt by selling its property management arm at a 25 per cent discount to book value.

London and Stamford Property Ltd, which raised the second largest public offering by a European property company in 2007, made its first purchase last week, a City office building, One Fleet Place, for 45 per cent less than its peak value.

During the five-year boom that ended in 2007, UK commercial property companies saw asset values more than double and used debt to make purchases.

Typically, borrowing by large, publicly traded companies was equivalent to 50-60 per cent of assets. The ratio has since increased as real estate prices have fallen.

To secure a loan, companies usually agree to keep their debt-to-asset ratio below a certain level. Failure to do so limits their ability to borrow in the future.

Some UK companies have already offered investors stock to repay loans. DTZ Holdings plc, a London-based broker, announced a plan last month to raise as much as £55 million in a share sale while Mapeley Ltd, the property manager controlled by Fortress Investment Group LLC, asked shareholders for £45 million in return for convertible bonds.

‘A lot of investors will be against paying just to bail out a balance sheet,’ said Toby Courtauld, chief executive of Great Portland Estates plc. ‘Some may have no choice because it makes sense for their investment to keep it afloat, but the discounts they are going to demand will be enormous.’

The largest real estate companies are unlikely to carry out ‘rescue’ rights issues, according to Nomura’s Mr Prew. ‘It’s so dilutive.’ he said. ‘Why would you annoy all your existing shareholders?’

That may be unavoidable, said Patrick Sumner, head of property equities at Henderson Global Investors Ltd. ‘People would rather see their equity diluted than see it go to zero - it’s a pretty stark but obvious choice,’ he said.