Steep fall in transactions surprises many

Source : Business Times - 24 Jan 2009

THE public housing market - the only property segment still growing - suffered a sharp fall in transaction volume in the fourth quarter of 2008. HDB’s Resale Price Index rose just 1.4 per cent - a marked slowdown from 4.2 per cent in Q3 and 4.5 per cent in Q2.

Analysts had expected price increases to moderate because the economy was losing steam.

But what has taken some by surprise was the steep drop in transactions.

The number of resale homes sold fell 24 per cent, from 8,110 in Q3 to 6,190 in Q4 - the lowest Q4 volume ever, according to one analyst.

The poor showing meant total transaction volume for 2008 was 28,419 units - 1,926 fewer than 2007’s 29,436.

The median cash-over-valuation (COV) amount in Q4 also fell, by $4,000 to $15,000. Sales involving COV constituted 85 per cent of all resale transactions, 4 per cent fewer than in Q3.

‘ERA’s resale transaction volume for Q4 was quite stable and that led us to predict resale volume of about 30,000 units for the whole of 2008. So the overall dip certainly caught us by surprise,’ said Eugene Lim, associate director for ERA Asia Pacific. ERA says it has a 45 per cent share of the HDB resale market.

One of the main reasons for the dip could be that COV amounts have been falling. ‘The days of transactions involving more than $50,000 COV are over,’ said Mr Lim. Unusual exceptions are well-renovated flats with unobstructed, panoramic views.

With the economy likely to shrink further and more lay-offs on the way, home buyers have become sharper, analysts say.

They start by making offers below valuation, and many deals now are closed at valuation, or at most a COV of $5,000-$30,000.

Propnex chief executive Mohamed Ismail said that this is ‘indeed a buyer’s market’. The dip in 2008 transaction volume can be explained partly by the financial crash in October and partly by fewer launches, which led to fewer upgrading transactions.

Another reason for the dip could be that HDB plans to increase the supply of new flats in 2009. With this, buyers have more choice, so demand is taken away from the resale market.

Demand for public housing is still expected to grow this year, but probably not at the double-digit pace of 2007 and 2008. Mr Ismail expects the resale price index to grow 3-7 per cent in 2009, with smaller (three and four-room) flats accounting for 5-8 per cent growth and larger flats seeing slower one to 3 per cent growth.

‘If the economy doesn’t improve there will be more downgraders and increasingly cautious buyers in the wake of retrenchments and tighter budgets,’ he said. ‘But we should still see growth because demand exceeds supply.’

The public housing sector is also expected to get a boost from the Government’s Budget announcement on Thursday that it will widen the Additional CPF Housing Grant (AHG) for first-time home-buyers.

To ensure that public housing remains affordable for first-timers, the Government has decided to increase the maximum grant to $40,000, from $30,000. At the same time, the household income ceiling will be raised from $4,000 to $5,000.

An extra 2,700 first-time buyers will benefit from the enhanced AHG every year, taking the number of beneficiaries of the scheme to 8,000 a year.

Analysts reckon that this will boost demand from first-timers who look to the resale market rather than waiting for new homes to be completed by HDB.

Commercial rents feel the slowdown

Source : Business Times - 24 Jan 2009

AFTER more than four years of steady increases, rents and prices of industrial space have finally caved in to the economic slowdown, falling 3.7 per cent and 6.5 per cent respectively in Q4 2008 from Q3.

The office sector also continued to weaken, with rents and prices sliding 6.5 per cent and 4.9 per cent respectively.

Falling rents are likely to provide some comfort to companies hit by slumping demand amid the downturn. And with the government pushing out cost-cutting measures in the Budget, some property owners could pass on savings to tenants.

Q4 data from the Urban Redevelopment Authority (URA) yesterday showed the first signs of weakness in the industrial property sector, as several consultants had expected. Until then, rents and prices had been rising quarterly since Q2 2004.

‘The economic turmoil and shrinking manufacturing sector slowed the take-up rate for factories and warehouses in the fourth quarter,’ said CB Richard Ellis Research’s executive director Li Hiaw Ho. For instance, the amount of occupied factory space jumped 175,000 square metres in Q4, but this increase was lower than the 344,000 sq m in Q3.

Still, industrial rents chalked up a 4.2 per cent increase year-on-year in 2008. Prices also rose slightly, by 1.5 per cent. Performance was buoyed by strong take-up in the first three quarters of the year.

Unsurprisingly, the office sector softened again in Q4. ‘The continued price for office space reflects limited investor interest in quality office buildings as economic sentiment remains pessimistic,’ said Knight Frank’s director of consultancy and research Nicholas Mak.

Office rents rose 5.8 per cent year-on-year in 2008, but this was disappointing compared with 2007, when they soared 56.1 per cent. Prices in the office sector fell 7 per cent in 2008, a striking turnaround from the 32.6 per cent gain in 2007.

Mr Mak expected the office market to continue to weaken this year, but said that he sees a silver lining. ‘Sombre economic conditions will encourage office space providers to be more understanding,’ he said. ‘Landlords will be more willing to retain tenants by renewing leases at lower rents, and offer more generous incentives such as longer rent-free periods.’

The Budget’s 40 per cent property tax rebate for industrial and commercial properties in 2009 could also help. ‘The government strongly urges landlords to pass on the benefits of this rebate to their tenants,’ Finance Minister Tharman Shanmugaratnam said in Thursday’s Budget statement.

To help reduce business costs, ‘we intend to pass on the property tax rebates to tenants of CapitaLand’s wholly owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust’, a CapitaLand spokesperson said. Similarly, ‘we will pass on the property tax rebates in full to our tenants in properties owned by CapitaLand Retail and CapitaMall Trust’.

City Developments also told BT that it is looking at various ways to pass on savings to its tenants.

HDB resale prices inch up but demand falls by 24%

Source : Straits Times - 24 Jan 2009

PRICES of Housing Board resale flats continue to defy the gloom, although the pace of increase is easing off a little.

Data from the last three months of last year show that prices inched up 1.4 per cent, following a robust surge of 4.2 per cent in the third quarter and 4.5 per cent in the second.

Valuations are still rising but not as much as before, said C&H Realty managing director Albert Lu.

HDB resale prices are supported by a relatively strong base of potential buyers, particularly for three- to four-room flats, said ERA Asia Pacific’s associate director, Mr Eugene Lim.

Experts say the impact of the gloomy economic outlook has seeped into the HDB market, reflected in the significant drop in the median cash-over-valuation portion for resale deals.

It fell from $19,000 in the third quarter to $15,000 in the fourth - a drop of 21 per cent - and back to levels last seen around the third quarter of 2007.

Demand was also down: Fourth-quarter resale deals fell 24 per cent to 6,186 transactions, while the number of resale deals for the whole year dipped 3 per cent from the figure in 2007.

Despite the relatively large fourth-quarter drop, property experts expect fairly strong demand as the continued economic slowdown will bring new buyers.

‘If the economy does not improve, there will be more downgraders and increasingly cautious home buyers in the wake of retrenchments and tighter budgeting,’ said PropNex chief executive Mohamed Ismail.

If the recession drags on, prices may fall, albeit marginally, said ERA’s Mr Lim, although C&H Realty’s Mr Lu said they could just level off.

‘This is about the peak for HDB (resale) prices, but they won’t fall immediately because there is demand and valuations are still holding,’ he said.

Median sub-let rents remained steady and owners are still keen to rent out their homes.

The total pool of HDB flats approved for sub-letting grew from 21,400 units in the third quarter to about 22,200 units in the fourth.

But demand has been hit. While sub-letting deals for the whole of last year grew by 20 per cent, the number of such deals for the fourth quarter fell 7 per cent to 3,690.

Property price slump worsens

Source : Straits Times - 24 Jan 2009

THE property slump gathered pace on two fronts late last year with rents moderating and private home prices registering their biggest quarterly fall in a decade.

Developers also continued to delay the completion of new flats as well as office projects as the recession tightened its grip.

Prices slumped 6.1 per cent in the last three months of last year, according to the Urban Redevelopment Authority (URA) yesterday, higher than the earlier estimate of 5.7 per cent.

The slump follows a 2.4 per cent fall in the third quarter, which was the first decline in over four years.

Private home prices - which started last year on an uptrend even as sales fell dramatically - dropped 4.7 per cent over the whole of the 12 months. It was a striking contrast to 2007 when prices surged a whopping 31.2 per cent.

The declines will likely continue this year with some consultants estimating that falls of 10 to 20 per cent are possible.

In the fourth quarter, homes in prime districts fell the most - by 6.5 per cent - while suburban home prices dropped 5.9 per cent.

The slump in suburban home prices reflects waning buying interest for mass-market property, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

This segment was initially expected to hold up better than the high-end segment last year but the mood has become so cautious that some homeseekers are buying HDB resale flats instead, he said.

Rents are feeling the pain as well. Private home rents fell 5.3 per cent in the fourth quarter after a marginal 0.9 per cent decline in the third quarter.

Non-landed homes in prime districts recorded the largest drop of 6.1 per cent with mass-market homes down 4.3 per cent. Overall, private home rents rose 2 per cent last year.

Sales are on the slide as well. A total of 7,701 resale homes were transacted last year, down from 20,980 in 2007 while sub-sales, an indicator of speculative activity, fell to 1,628 units last year, down from 4,097 in 2007.

New home sales went into freefall last year, with a record low of only 4,264 changing hands, down from 14,811 in 2007.

Price declines should be accompanied by increased buying volumes, said Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan.

But one reason that is not happening now is that prices have not fallen low enough. To generate demand, the price drops have to be bigger than seen in previous downturns as this is the worst downturn ever, he said.

To add to the gloom, there is also a standstill in the investment market due to the tight credit situation facing developers. ‘Those who want to capitalise on the lower prices today still find it hard to do so,’ said a market watcher.

The two parallel markets give rise to a divergence in the price expectations of buyers and sellers, he said.

The market will take several quarters to find its new footing with at least some price convergence between buyers and sellers, he added.

This quarter is likely to be a slow period due to the cautious sentiment, poor economic conditions and interruptions by the Chinese New Year celebrations, said CBRE Research.

While the market is expected to stay tentative, the continued price falls should kick-start some sales, especially in mid-tier and mass-market projects, said its executive director, Mr Li Hiaw Ho.

There is no lack of supply, even as developers pushed back the completion of more projects to beyond 2011.

The URA now expects 7,012 private homes to be completed next year, down from an earlier estimate of 8,538. The number for 2011 has been revised to 13,686, down from a forecast of 16,145.

Meanwhile, rentals of office space, shops and industrial properties all fell in the fourth quarter, as leasing interest softened in light of the economic climate.

Further drops in rentals are expected, experts said.

Up to 4% in rent relief

Source : Straits Times - 24 Jan 2009

IF PRIVATE landlords pass on the property tax rebate, then tenants can look forward to an estimated 4 per cent adjustment in rents, said president of the Association of Small and Medium Enterprises Lawrence Leow.

He explains:

The amount of property tax a landlord has to pay amounts to 10 per cent of the gross rental amount they collect per year. This amount is also called the annual value of their property.

For example, if a mall’s annual value is assessed at $120,000 a year, the landlord will have to pay $12,000 in property tax a year (10 per cent of $120,000).

A 40 per cent rebate, amounting to savings of $4,800, means the landlord pays only $7,200.

The savings, of $4,800, accounts for 4 per cent of the annual value.

Give green spaces some variety: MM Lee

Source : Today - 24 Jan 2009

LIVING in an urban jungle of HDB flats, residents would find green open spaces a natural tonic. So, it may seem counter-intuitive to suggest that Singapore’s green planners take a leaf from their housing counterparts.

But Minister Mentor Lee Kuan Yew, who said on Friday that the evolution of green spaces here was “not bad”, believes the lessons learnt from building HDB flats could in a way be instructive for the Republic’s greening efforts.

In a word, variety. “We need some variations because in many of the open spaces now, you see the same pattern of vegetation. So we need to involve different shapes, sizes - give it some variety,” he said.

“Just like HDB houses ˜ they used to be all uniform, but as we progressed, we got them to design it differently. So we’re learning all the time and improving.”

Mr Lee spoke of the need to keep improving parks and outdoor recreation following a tour of the Eastern Coastal Park Connector Network.

In fact, it would require nothing less than ingenious green spaces across the island if Singapore is to be a unique city, he told reporters.

The Active, Beautiful and Clean Waters Programme and park connectors are some examples of “maximising our limited land space to give the most to everybody who wants to get out of the urban jungle”.

“Now we’re trying to give (Singapore) some flourish,” he said.

On Friday, the National Parks Board (NParks) announced that it will be accelerating the construction of its park connectors in light of the economic downturn.

It will build 42km of park connectors this year - double its target of 20km per year - more than 80 per cent of which will be for the western and northern loop of the island. With the acceleration, the western loop is targeted to be completed by the end of the year, and the northern loop in mid-2010.

Call to ensure relief reaches right people

Source : Straits Times - 24 Jan 2009

WHEN the Government gave landlords a property tax rebate in 2003, many did not pass on the savings by reducing the rent for tenants, a post-Budget forum heard last night.

With the provision in this year’s Budget of a 40 per cent property tax rebate, what assurance do tenants have that landlords will do so this time, asked optometrist Christopher Tan.

Mr Tan, who rents a shop at The Adelphi shopping centre, raised the question at the forum, a day after Finance Minister Tharman Shanmugaratnam unveiled a $20.5 billion Budget to help Singaporeans keep jobs and ensure that viable companies can stay afloat in a downturn that is set to be deep and long.

Forum participants at The Grassroots Club in Ang Mo Kio had other concerns about how various measures could be effectively implemented.

One was worried that the needy living in larger flats may not get enough help. Another, who said that people may not spend their payouts wisely, suggested having financial literacy classes for them.

On the issue of rebates, Acting Manpower Minister Gan Kim Yong said channelling it to landlords made the scheme easier to administer.

‘The whole idea of this Package is to try to keep it simple, so that the money and help can flow through to companies as soon as possible,’ he told some 60 participants, including national servicemen, businessmen and grassroots leaders.

‘We will continue to encourage property owners to pass down (the rebate).’

Landlords who passed on the savings would also become more competitive than those who did not, he explained.

He added that tenants would in any case benefit from other measures - such as the 1 percentage point cut in the corporate tax rate, and the Jobs Credit scheme that gives bosses a cash grant for each resident worker on their Central Provident Fund payroll.

The need for simplicity and efficient implementation was also the reason why the Government linked some help measures for households to the size of their flat, he said at the forum organised by Reach, the Government’s feedback arm.

He encouraged needy families who did not qualify for more aid due to their larger flat size to see their MPs.

Reach chairman Amy Khor told participants earlier that the feedback would be useful when implementing the Budget.

The forum was one of three jointly organised with the Finance Ministry.

At one of the other sessions, Senior Minister of State (Finance) Lim Hwee Hua said the Jobs Credit scheme may not reduce the number of jobs lost. But it could slow down the pace of layoffs.

She was speaking to reporters after an online forum where participants posed questions on jobs and why the Budget’s focus seemed more on helping businesses rather than individuals.

On the question of banks not lending to companies, she said there was a need to discuss with banks whether they need to change the way they assess credit, and the credit-worthiness of companies.

Banks should think long-term and consider the kind of relationship they want to have with the companies they lend to, she added.

‘Ultimately when we recover, these are the customers that they will need to keep…Banks that stick with companies through the bad times will also be remembered by the companies in good times. And when the companies grow they will continue to bank with them and deal with them.’

NParks to cultivate more open spaces in Singapore

Source : Straits Times - 24 Jan 2009

FEW cities in the world are able to cultivate and transform open spaces into green lungs - tranquil places where those from the urban jungle can relax in.

Having achieved this, Singapore will have to think of ingenious ways and means to keep this a green and clean city, Minister Mentor Lee Kuan Yew said yesterday after touring the Eastern Coastal Park Connector Network.

‘It’s (about) maximising our limited land space to give the most to everybody who wants to get out of the urban jungle. So you can come here and feel that your surroundings are completely different, the ambience is different,’ he said after an hour-long tour.

‘And we’ve got to do this in many parts of Singapore in ingenious ways.’

This will make Singapore a unique city, he added.

‘There are very few cities that can set out to do this. We started out just by greening the place and keeping it clean. Then we’ve tried to beautify it. Now we’re trying to give it some flourish,’ said the architect of Singapore’s Garden City concept.

He noted that as Singapore urbanised, there were less uncultivated open spaces here. So the authorities have now been building ‘cultivated open spaces’.

An example of this is the islandwide Park Connector Network, which links up parks and nature sites to give people better access to recreation and nature.

The National Parks Board (NParks) aims to develop a 300km network by 2015.

About 105km of this has already been built. This includes the 42km Eastern Coastal stretch, completed in 2007, a portion of which MM Lee visited yesterday with Minister for National Development Mah Bow Tan.

The stretch is one of the seven similar networks being planned islandwide.

Finance Minister Tharman Shanmugaratnam said in his Budget Statement on Thursday that $1.3 billion worth of government projects would be brought forward this year. These range from HDB lift upgrading to building of park connectors and upgrading of military facilities.

An NParks spokesman told reporters yesterday that it plans to build 42km of park connectors this year - about twice its original 20km target - in the light of the economic downturn. This will cost $40 million in all.

Mr Lee yesterday also commented on the issue of littering. Asked about the prevalence of the problem, he said it remains a constant battle which will have to be tackled by engaging the public and schools, and through the media. It is also something Singaporeans have to accept, given the presence of a large foreign worker population.

‘You’ve got one million foreign workers who are not part of the community, who come in with different habits. You need them to do the jobs that Singaporeans either don’t want to do or can’t do. You can’t say ‘You’re going to go through a training course before you start work’. So we have to put up with all these aberrations.’

Public housing market slows

Source : Today - 24 Jan 2009

Surprise drop of 24% inQ4 volume, but analysts say HDB demand intact

IT WAS a drop that caught most analysts by surprise - raising fears of a demand downtrend amid a souring economy, even in the traditionally resilient public housing market.

After a strong showing in the first three quarters, the number of Housing and Development Board (HDB) resale flat transactions plunged 24 per cent in the last quarter of 2008 to 6,186. That brought the total transaction volume last year to 28,419 - or 3 per cent lower than in 2007.

Prices, on the other hand, have continued to climb, but at a much slower pace. The HDB resale price index rose 1.4 per cent in the fourth quarter, down from 4.2 per cent in the third quarter.

The widening gap in price expectations between buyers and sellers in a weakening market is one of the reasons for the decline in volume, said ERA’s Asia Pacific associate director Eugene Lim, who noted the longer time needed to negotiate a deal.

“Opportunistic buyers would offer below valuation … while sellers still want to have as high a cash-over-valuation (COV) as possible. So the haggling will take time,” he said.

Already, the overall median COV values have decreased about $4,000 - or about21 per cent - to $15,000 in the fourth quarter. In fact, going by HDB statistics, a buyer of a five-room flat in Ang Mo Kio would only need to pay a median COV of $7,000 in the last three months, compared to $20,000 in the previous quarter.

But Ms Carol Loo, a 26-year-old prospective buyer, is biding her time and hoping for a good bargain. The insurance agent, who is getting married in August and plans to buy a resale flat in June, is confident that prices will drop further.

“Already, some agents are willing to drop the COV. A lot of people are affected by the economic crisis. Some owners will find that they can’t finance their mortgages and … need to get it off their plate really soon. When it’s a fire sale, they are usually willing to go down below valuation,” said Ms Loo, who is looking for a flat in Pasir Ris.

Another reason for the low volume, said PropNex chief executive Mohamed Ismail, could be the lack of units put on the market by HDB upgraders due to the dearth of private condo launches in the fourth quarter.

While analysts say the fallout from the global financial crisis and economic downturn hurt buying sentiment in the fourth quarter, many think the HDB market will be largely resilient.

“HDB is the most affordable housing, so the base is there. It’s just a difference in expectations, that’s why sales have slowed. But support in terms of buyer interest is still there,” said ERA’s Mr Lim.

In fact, Dennis Wee Group’s vice-president, Mr Chris Koh, said the expected deterioration in economic conditions could ironically spur demand for HDB flats from private condo downgraders.

The Government’s move to increase the additional CPF housing grant for first-time HDB buyers to $40,000 from $30,000 in tandem with the raised household income ceiling to $5,000 from $4,000 will encourage low to middle-income young couples to buy their first flat through the resale market as well, said Mr Ismail.

Private home prices fall 6.1% in Q4

Source : Today - 24 Jan 2009

BUYERS of new private homes don’t have to worry about not being able to move in on time even as some developers take advantage of incentives announced in Thursday’s Budget that allow them to extend the completion period of their projects.

To help developers improve their cash flow and give them more flexibility to plan their projects, the Ministry of National Development will allow developers of uncompleted Government residential sale sites to apply for a one-year extension of the completion period without having to pay an extension premium. But this only applies if none of the residential units in the project has been sold.

For projects in which homes have been sold, the extension will only be allowed up to the date of delivery of the sold units as stipulated in the sales agreement signed between the developer and the purchasers.

The Budget measure was announced just a day before the Urban Redevelopment Authority (URA) reported private home prices falling by the most a decade as they slipped 6.1 per cent in the fourth quarter last year.

This was much worse than the 5.7 per cent decline in the URA’s flash estimates and down from a 2.4 per cent decline in the third quarter. For the whole of last year, prices fell 4.7 per cent, compared to the 31.2-per-cent rise in 2007.

Rents for private homes also retreated along with home prices, declining 5.3 per cent in the fourth quarter, extending the 0.9-per-cent fall in the previous three months.

The URA data also showed there were 64,982 uncompleted units of private homes at the end of December, of which 31,004 units are expected to be completed between 2009 and 2011. Of the total, 43,414 or a hefty 66.8 per cent remained unsold, suggesting prices are likely to fall much further in the coming months.

Amid the gloomy prospects for the property market, analysts told Today developers - especially the larger ones - are likely to apply for the extension so that they can price their projects better at a later time.

City Developments (CDL), one of Singapore’s largest developers, welcomed the move. “The extended timeline gives us more flexibility in the way we market the property. We will certainly explore how best to utilize these measures in relation to the market conditions where necessary,” said a CDL spokesperson.

While prospects are bleak in the year ahead, Mr Li Hiaw Ho, executive director of property consultancy CBRE says the continued moderation of prices will kick-start the market, especially in the mid-tier and mass-market projects.

Saying that home prices are likely to see a further correction of 10 to 15 per cent this year, Mr Li added: “We believe sales momentum will pick up gradually from the second quarter onwards so that the total number of new homes transacted this year should be higher than the 4,264 units chalked up last year, at around 5,000 to 6,000 units.”

More landlords passing on full tax rebate to tenants

Source : Straits Times - 24 Jan 2009

LANDLORDS Mapletree and Lend Lease, which between them own and manage four shopping malls, announced yesterday that they would pass their government property tax rebate on to their tenants.

The 40 per cent rebate, for owners of industrial and commercial properties, is part of the $20.5 billion Resilience Package unveiled on Thursday by Finance Minister Tharman Shanmugaratnam. A key component of it is to help Singapore’s companies cut costs.

Government-linked CapitaLand, Singapore’s biggest landlord, was the first to announce the same day that it would pass the rebate down in full.

Australian property and financial services group Lend Lease will be doing likewise with every one of its estimated 350 tenants in Parkway Parade and PoMo, but declined to reveal how much each would receive because ‘complex calculations have yet to be made’, said a spokesman.

Mapletree, which manages VivoCity and HarbourFront Centre, will pass the rebate down too, but was unable to reveal how or how much.

Tenants in these malls are grateful, but wonder how much relief they could get from this.

According to Association of Small and Medium Enterprises president Lawrence Leow, they might expect at most a 4 per cent adjustment in rents, if landlords passed on the savings in full.

The rebate each tenant gets will also depend on factors such as demand for the shop space, when the lease was signed and the relationship between tenant and landlord. ‘It is a difficult process, and rebate amounts may even vary from tenant to tenant,’ said Mr Leow.

Feeling happier are retailers like Mr Jason Ng, who owns the Swee Heng Bakery chain, and whose landlord is the Housing Board. The government agency is one of four taking the lead in giving their tenants a 15 per cent rental rebate from Jan 1 to Dec 31 this year. The others are JTC Corporation, the Singapore Land Authority and the National Environment Agency.

The 34-year-old entrepreneur, who rents 12 shop spaces from the Housing Board, will save more than $150,000 this year because of it.

‘It is the right thing at the right time,’ said Mr Ng. ‘Now, let us just hope private landlords follow suit.’

Private landlords have not yet said if they will give other concessions on rent, so for now, shopkeepers are just taking what they can get.

Small businesses are feeling the squeeze of high non-negotiable rental contracts signed in good times on one hand and falling sales on the other.

Figures from the Ministry of Finance show more than 130 businesses closed down last year, nearly a 25 per cent jump over 2007.

The owner of Leather Ark in Parkway Parade, Ms Jean Yeo, said: ‘We have not received news from our landlord yet, but we are happy that they are doing this. It will be a relief in these bad times.’

Mr Charles Wong, owner of Charles & Keith, hopes the rebates would be fairly distributed and done fast. ‘We can then immediately plough it back to help us train staff and prepare for the recovery of the economy,’ he said.

The Singapore Retailer Association hopes that more landlords will respond this time around.

The association’s executive director, Ms Lau Chuen Wei, recalls that in 2003, $64 million worth of property tax rebates were handed out to commercial property owners, as part of the Sars relief package, but only a handful passed it on to a few retailers.

One example was Lend Lease, which gave 50 per cent of its rebate to tenants, and ploughed the other 50 into advertising and promotions.

Retailers like Mr Wong remember the disappointment.

The 35-year-old owner of a successful local brand said he ‘hardly benefited’ from the rebate in 2003, something that he hopes will change this time.

Private housing supply shrinking as prices fall

Source : Business Times - 24 Jan 2009

Developers delay projects’ expected completion dates to beyond 2011

DEVELOPERS appear to be turning their backs on the property market, deferring more projects as property prices keep falling.

Private residential property prices fell 4.7 per cent last year. This, after rising over 30 per cent in 2007. On a quarterly basis, prices fell 6.1 per cent.

And according to statistics from the Urban Redevelopment Authority (URA), the number of private residential homes expected to be completed between 2009 and 2011 is now also expected to be lower.

URA said that as at Q4 2008, there were 64,982 private residential units in the pipeline. Of these, about 31,000 units were expected to be completed between 2009 and 2011, lower than the pipeline supply of about 34,600 private residential units as at Q3 2008.

URA said that the decline in the pipeline supply was mainly because a number of developers had in Q4 2008, made adjustments to the expected year of completion of their private housing projects to beyond 2011.

DTZ senior director for research Chua Chor Hoon said that while developers have already been delaying completions over the last few quarters, the momentum increased in Q4 2008. She also believes that with the recent Budget announcements giving developers more leeway to delay completion of their projects, ‘there would be further adjustments to improve the supply-demand balance’.

Still, she notes that 10,448 private housing units are expected to be completed this year, which is higher than the past 10-year average of 8,700 units. ‘These projects are at the advanced stage of construction and cannot be delayed. These would add pressure on prices and rentals.’

While the property tax deferment on approved development sites is expected to cost the government $290 million over the next two years, Knight Frank director of research and development Nicholas Mak said that this will not have much impact on the supply pipeline - but only because many developers have already decided to do this. He does, however, believe that it will help developers bear the holding costs.

Barclays economist Leong Wai Ho added: ‘I don’t think these (Budget) measures per se will reverse the slide in the property market. The dominant factors in the near term are the increase in white-collar unemployment and falling household income.’

Poorer economic prospects are more likely to persuade developers to defer projects.

Already, of the 64,982 uncompleted units in the pipeline, 43,414 units were still unsold. These comprised 3,880 units that had been launched for sale by developers and 14,386 units which had the pre-requisite conditions for sale and could be launched for sale immediately. The remaining 25,148 units with planning approvals did not have the pre-requisite conditions for sale.

Prices of non-landed properties fell by 6.3 per cent in Q4 2008 compared with the decline of 2.5 per cent in the previous quarter. For the full year, prices of non-landed properties fell by 5.3 per cent.

Prices of non-landed properties in Core Central Region1 (CCR) fell by 6.5 per cent in the quarter while prices of non-landed properties in Rest of Central Region (RCR) and Outside Central Region (OCR) fell by 6.2 per cent and 5.9 per cent respectively. For the whole 2008, prices of non-landed properties in CCR, RCR and OCR fell by 5.6, 4.7 and 2.9 per cent respectively.

Mr Mak said that despite the mass market sector experiencing the slightest decline in home prices, a drop in prices in OCR reflected that buying interest for mass-market private homes has waned. ‘Prices of mass-market homes were initially thought to be able to hold better than high-end private residential properties in 2008, as some buyers settle for mass-market private homes for lower-cost alternatives. However, the cautious homebuying sentiments have become so significant that some homeseekers chose to purchase HDB resale flats,’ he added.

Rental decline accelerated, easing by 5.3 per cent in Q4 2008 quarter-on-quarter. Mr Mak noted: ‘On a yearly basis, the 2 per cent growth rate in 2008, though still positive, is a far cry from the double-digit expansion observed in the last two years.’

Last year saw the total number of homes sold fall to 13,593 units, down from a record high of 40,654 units in 2007.

CBRE Research executive director Li Hiaw Ho notes that the fall in sales volume was seen in both the primary and secondary markets, with only 419 new homes, 965 resale homes and 203 sub-sales registered in the fourth quarter. ‘The decline in sales momentum was indeed significant as both home-buyers and developers retreated from the market,’ noted Mr Li.

For the whole year, the 4,264 new private homes sold was a record low, and made up only 29 per cent of the 14,811 new homes sold in 2007. Similarly, a total of 7,701 resale homes were transacted last year, compared with 20,980 sold in 2007. Sub-sales fell to 1,628 in 2008 from 4,097 in 2007.

Property slump to worsen Asia slowdown

Source : Business Times - 23 Jan 2009

Activity in China, Korea cools fast as force of global financial crisis hits home

Slumping Asian property markets could intensify the region’s economic downturn this year, further undermining consumer and investor confidence and prompting homeowners to tighten spending.

Japan, Hong Kong, Singapore and New Zealand are already in recession, and data yesterday showed activity in regional powerhouses China and South Korea is rapidly cooling as the full force of the global financial crisis hits home.

Goldman Sachs sees economic growth in Asia excluding Japan falling to 4.4 per cent this year from an estimated 6.9 per cent in 2008, but says the risk is to the downside.

‘People are worried about losing their jobs and that the economy will get worse, so they are refraining from making very large investments,’ said Michael Spencer, Deutsche Bank’s Asia economist.

Half the wealth of Malaysia, Singapore, South Korea and India is tied to property, according to CLSA.

In Hong Kong and Singapore, double-digit declines in property prices last year and falling real interest rates have made apartments more affordable, and home prices are forecast to slide another 20-25 per cent this year as the global economy weakens.

Buyers, however, are thin on the ground as investors who lost heavily in Asian stock markets last year have less money to put down for property purchases. Worsening economic data across the region, meanwhile, is also discouraging people from committing to big investments like housing.

As homeowners see the value of their assets being eroded in tandem with the deteriorating economic climate, they become part of a vicious cycle, cutting back on consumption - which needs to grow significantly to offset declining Asian exports - and thereby accelerating the slowdown across the region.

Hong Kong homeowner Maggie Chan fears she will soon be strapped with negative equity on the HK$3 million (S$578,500) two-bedroom apartment she bought eight years ago, owing more on her mortgage than the property will be worth. ‘Property prices are going to go down and that’s making me think a lot more before I spend,’ she said.

As exports and domestic consumption weaken, HSBC forecasts a 0.6 per cent contraction in Asian GDP ex-China and Japan in the first quarter of 2009 from a year earlier, the region’s weakest performance since late 1998 during the Asian financial crisis.

Asia would typically lag a US economic downturn by two to three quarters, but is moving more in sync with the US cycle in this crisis, says Goldman Sachs. That’s partly because the credit crisis is making banks worldwide reluctant to lend, further depressing business activity and property sales.

‘Asian loan-to-deposit ratios are lower now than during the Asian financial crisis,’ said Michael Buchanan, Goldman Sachs’ Asian economist. In Hong Kong, banks are offering 70 per cent mortgages on just 85-90 per cent of the value of a property, says Colliers International.

Receding inflation is enabling Asian policymakers to slash interest rates aggressively but that may not be enough to stimulate demand.

South Korea has introduced measures to support its property market, including easing tax rates on luxury property, but Mr Spencer expects more action may be needed, such as cutting taxes on property transactions and capital gains.

In China, capital gains tax exemptions and reduced down-payment requirements, together with hefty discounts by developers, have boosted property sales though they are still well down on a year ago and supply overhang persists in cities like Beijing and Shenzhen, analysts say.

S’pore private home prices fall 6.1% in Q4

Source : Business Times - 23 Jan 2009

Singapore private home prices fell 6.1 per cent in the fourth quarter as the city-state plunged into its worst ever recession, government data showed on Friday.

The drop marked the second quarterly decline in residential property prices following a 2.4 per cent fall in July-September.

The decline in prices during the fourth quarter was also steeper than the initial estimate of a 5.7 per cent drop made earlier this month.

Rents during the October-December period fell by 5.3 per cent, the Urban Redevelopment Authority (URA) said.

Singapore releases advance estimates on property prices shortly after the end of each quarter based primarily on transactions during the first 10 weeks of the period.

The government subsequently provides detailed data for the period that includes price changes by region as well as rental trends.

Singapore’s gross domestic product shrank in the fourth quarter at a deeper-than-expected seasonally adjusted rate of 16.9 per cent, the biggest fall on record, and the government said the economy may contract as much as 5 per cent this year.

Property-related Budget measures are deemed developer-friendly

Source : Channel NewsAsia - 23 Jan 2009

Market-watchers have welcomed Budget measures, announced by Finance Minister Tharman Shanmugaratnam on Thursday, which are aimed at helping Singapore property developers through the current downturn.

While analysts had already expected the government to unveil help for the depressed property market, they noted on Friday that some of the moves are particularly creative.

These measures include allowing developers to rent out unsold units and deferring property tax for land approved for development. This deferment allows developers to hold back projects, easing near-term supply in the weak market.

Brandon Lee, investment analyst, DMG & Partners, said: “It’s a positive thing for the medium to long-term growth of Singapore’s property sector. If you look at these measures, a lot are pro-developer.

“It shows the government is giving a very definitive stance to help the developers tide through this tough period, while at the same time re-tweaking the demand-supply disequilibrium right now.”

On the flip side, some analysts said few measures actually benefit home buyers.

Nicholas Mak, director, Consultancy and Research, Knight Frank, said: “In the previous downturns, one of the measures announced was the deferment of stamp duty. That will lower the cost and demand for cash for home buyers.”

Demand-side concerns extend beyond the property market itself. For example, people are unlikely to buy a home when job security is an issue.

The government expects unemployment to increase this year due to the severe global economic downturn.

Office rents dip 6.5% in Q4: URA

Source : Business Times - 23 Jan 2009

Rentals of office space fell 6.5 per cent in Q4 2008, data released by the Urban Redevelopment Authority (URA) on Friday showed.

But for the whole of 2008, rents for office properties still rose by 5.8 per cent, lower than the 56.1 per cent increase in 2007.

The median rental for ‘Category 1′ office space, based on leases which had commenced, was S$13.00 per square foot per month (psf pm) in fourth quarter of 2008, lower than the median rental of S$13.57 psf pm in third quarter 2008.

Category 1 office space refers to office space in buildings located in core business areas in Downtown Core and Orchard Planning Area which are relatively modern or recently refurbished, command relatively high rentals and have large floor plate size and gross floor area.

URA’s data also showed that prices of office properties fell 4.9 per cent in Q4. For the whole of 2008, prices of office properties fell 7.0 per cent.

As at the end of Q4 2008, there was a total supply of about 1.39 million sq m gross floor area of office space in the pipeline, URA said.

HDB resale prices see slower growth in Q4

Source : Business Times - 23 Jan 2009

HDB resale prices rose by 1.4 per cent in Q4 2008 over the previous quarter - lower than the 4.2 per cent increase seen in third quarter and the 4.5 per cent climb recorded in the second quarter.

Resale transactions decreased by about 24 per cent, from about 8,110 cases in third quarter of 2008 to about 6,190 cases in fourth quarter. The total number of resale transactions for 2008 was 28,419, about 3 per cent lower than in 2007.

The median cash-over-valuation (COV) amount among all resale transactions conducted in Q4 2008 was $15,000 - which was $4,000 lower than that in Q3.

Cases requiring COV constituted 85 per cent of all resale transactions in fourth Quarter 2008, 4 per cent lesser than that in the third quarter.

Private home prices, rents fall in Q4

Source : Business Times - 23 Jan 2009

Private home prices fell 6.1 per cent in the fourth quarter of 2008, bringing the full-year price drop to 4.7 per cent.

The decrease is the second quarterly decline in private residential property prices following the 2.4 per cent fall in Q3.

The latest decline, announced the Urban Redevelopment Authority (URA) on Friday, is worse than expected. Initial estimates earlier this month forecast a drop of a 5.7 per cent.

The URA also said that private home rents in the fourth quarter slipped 5.3 per cent. But for the whole of 2008, private residential rents still rose 2.0 per cent.

As with previous quarter, homes prices in Singapore’s prime districts were hit the hardest. Prices of non-landed properties in Singapore’s Core Central Region (CCR) fell by 6.5 per cent in Q4 - the largest fall among the three regions URA tracks. Prices of non-landed properties in Rest of Central Region (RCR) and Outside Central Region (OCR) fell by a slightly smaller 6.2 per cent and 5.9 per cent respectively.

For the year 2008 as a whole, prices of non-landed properties in CCR, RCR and OCR fell by 5.6 per cent, 4.7 per cent and 2.9 per cent respectively.

Singapore private home prices dip 6.1% in Q4 amid downturn

Source : Channel NewsAsia - 23 Jan 2009

The economic downturn is hitting home, with private residential prices recording their steepest drop in a decade.

Private home prices fell by 6.1 per cent in the fourth quarter of 2008, worse than an early estimate of a 5.7 per cent drop.

The quarter-on-quarter decline in the October to December period follows a 2.4 per cent drop in the third quarter ended September.

Strong demand pushed up private home prices by about 31 per cent in 2007. But the picture changed very quickly in just one year.

In 2008, overall prices of private residential properties fell by 4.7 per cent, hurt by the global slowdown. Market watchers said they expect to see more downside.

Karamjit Singh, managing director of Credo Real Estate, said: “I expect the decline to accelerate, going forward, as the full effect of the meltdown that took place in the fourth quarter is being felt by the market. Q1 (2009) and Q2 would definitely be negative. In fact, I won’t be surprised if prices will reflect declines by more than 6.1 per cent.”

Donald Han, managing director of Cushman & Wakefield, said: “We think, probably, Q1 will be worse than Q4, mainly because we are at the epicentre of the economic downturn. We expect home buying mood to also descend from here… probably anything from 6 per cent to 7.5 per cent for Q1 and the same number for second quarter.”

Prices of homes in prime areas continued to slip faster than those in the mid-tier and mass market segments in the fourth quarter of 2008. They fell 6.5 per cent, compared with the 6.2 per cent drop for the mid-tier and the 5.9 per cent decline for the mass market segments.

It is unclear how long and how deep the recession will be, but some market players are already expecting the potential fall in private home prices to be comparable to levels seen during the Asian financial crisis when prices dropped by 42 per cent over two years.

Sales of private homes also declined in the fourth quarter. There were only 407 transactions, about 72 per cent lower than in the third quarter.

Despite the gloomy economic outlook, property analysts believe sales momentum will pick up towards the second half of the year. They expect 5,000 to 6,000 units to be sold in 2009, higher than the 4,264 transacted last year.

According to the Urban Redevelopment Authority, 706 uncompleted units were launched for sale by developers in the fourth quarter, down from 2,244 units in the previous three months.

Many developers have delayed projects as demand and prices head south. Analysts say that in total, about 10,000 units have to be deferred, easing concerns of an oversupply in the private residential market.

The frail market sentiment also impacted the private home rental market, which saw a 5.3 per cent drop in rentals in the fourth quarter.

Meanwhile, public housing prices remained more resilient. HDB resale flat prices in the fourth quarter rose by 1.4 per cent, albeit lower than the 4.2 per cent increase recorded in the third quarter.

But transactions fell by 24 per cent to about 6,190 units, while the median cash-over-valuation amount dropped by S$4,000 to S$15,000 in the fourth quarter. Property analysts expect the downtrend to continue.

Donald Han said: “You will have the (resale flat prices) beginning to taper off after a very strong 14 per cent last year. We probably expect the HDB prices to remain flat for the first half, before you see a slight dip towards the second half of 2009.”

15% rental rebate

Source : Straits Times - 23 Jan 2009

FOUR government agencies are taking the lead in passing on savings from the property tax cut to their industrial and commercial tenants.

More than 36,000 businesses renting hawker stalls, factories, offices or land from the Housing Board, JTC Corporation, Singapore Land Authority (SLA) and the National Environment Agency (NEA) will get a 15 per cent rent rebate from Jan 1 to Dec 31 this year.

This year, some tenants will enjoy rebates ranging from about $150 to as much as $24,000, depending on the size of the property.

It will cost the four statutory boards a total of $311.6 million in lost rental revenue, but it is good news for Pasir Ris shoe-shop owner Jeffrey Kam.

Mr Kam, 43, was going to fire one of his five employees in a bid to keep a lid on costs, but he can now keep the worker and ’see how it goes’.

‘This means lower expenses, more discounts for customers and faster clearing of existing stock,’ said Mr Kam, who pays $4,000 in rent.

‘It will help cash flow. We are happier.’

Business at his shop at Loyang Point has fallen by about 30 per cent in the past six months. Revenue began decreasing right after he renewed his rental lease at 12.5 per cent higher than the year before, in August last year.

The rebates will benefit 7,700 JTC customers who rent land, factories and offices, another 5,300 stallholders who operate in NEA-managed markets or hawker centres, and 2,600 businesses that rent from the SLA, say the organisations.

According to the HDB, its rebates will go to 8,700 commercial and 12,000 industrial tenants and 360 industrial-land lessees. This translates into a rebate of between $31 and $960 per month for cooked-food stallholders. Market stallholders will get $12 to $467 off their rents per month.

Rebates for those renting from the HDB will range from $400 for a shop tenant to $300 for an industrial unit and up to $2,100 for an industrial-land lessee.

Special measures to lift property sector

Source : Straits Times - 23 Jan 2009

THE ailing property sector has received a special Budget boost, with a host of measures to help developers wait out the slump in demand.

Property tax will be deferred for two years for land approved for development. This means developers sitting on their land bank will not have to pay this tax - which can amount to millions of dollars - for the time being.

Rules have also been relaxed for developers who bought government land sites and foreign developers who own private residential land here.

Normally, they have to develop the land within six years, and they cannot resell the land without developing it.

But these developers have been given a one-year extension of this period so that they have more flexibility in building and selling their developments according to market conditions.

On top of that, those who have decided they want out of the development can now resell the land or dispose of their interest in it before Jan 21 next year.

Foreign developers have also been given more leeway. Currently, they are required to sell all the units in their project within two years of completion and are not allowed to rent out unsold units.

They have now been given two more years to dispose of the units and they can also rent out unsold apartments for up to four years.

All property owners and firms will also benefit from the Inland Revenue Authority of Singapore’s bringing forward of its assessment on property taxes this year.

Property values rose last year, pushing up tax bills for their owners, but the market has since turned and an updated assessment would yield some savings.

Most developers and tax experts applauded the Budget steps.

‘The measures will provide welcome relief and help to ease funding for the industry, and provide developers with flexibility in scheduling their developments,’ said the Real Estate Developers’ Association of Singapore.

Hong Leong Group, which has property investments through its companies City Developments and Hong Leong Holdings, said the moves ‘are a huge confidence boost to the economy and property market and we welcome it’.

Deferring tax on land for development ‘will help reduce business costs and help the company spread costs over a period of time’, while the other measures ‘will provide more flexibility for developers and will ease pressure on the markets’, it said.

Foreign developers also cheered the measures specifically directed at them.

‘I am very pleased by the pro-active measures taken by the Singapore Government to support foreign property developers,’ said Malaysian tycoon Francis Yeoh, who is managing director of YTL Corporation.

‘I find the measures realistic, and I am confident that they will give the property market in Singapore a much-needed boost.’

YTL owns two plots in Sentosa Cove as well as Westwood Apartments in Orchard Boulevard.

But some industry watchers thought the Government could have gone further.

In the 1998 Budget following the Asian financial crisis, the Government waived, rather than deferred, property tax for land under development for five years.

‘The deferment of property tax will help to ease developers’ holding costs, but is viewed as less desirable compared to previous downturn Budgets where property tax exemptions were handed out,’ said Ms Tay Huey Ying, director for research and advisory at property consultancy Colliers International.

Rebates, flexibility to ease property pains

Source : Business Times - 23 Jan 2009

THE government yesterday announced a 40 per cent property tax rebate for industrial and commercial properties as well as owner-occupied residential properties, but not for rented residential properties.

It also promised an earlier assessment of Annual Values of properties this year.

KPMG executive director (tax services) Leonard Ong said: ‘Hopefully, they will reduce Annual Values to reflect the current weaker rental market.’

Property tax is calculated as a percentage of the Annual Value of a property.

Finance Minister Tharman Shanmugaratnam in his Budget statement also announced several other property market measures aimed at providing greater flexibility for developers to stage the construction and sale of their projects, particularly residential, in accordance with market conditions and to ease their cashflow situations.

‘This will also help ease current supply-demand imbalance in the market,’ says DTZ executive director Ong Choon Fah.

Colliers International director Tay Huey Ying noted that the property sector measures are ‘aimed more at keeping supply at bay rather than boosting demand’.

The measures include allowing a one-year extension of the project completion period (PCP) for private residential projects on sites sold by the government (without developers having to pay an extension premium) as well as for private residential projects undertaken by foreign housing developers with Qualifying Certificates (QCs), a category that covers effectively all listed developers.

In both instances, if any units have been sold in the project, the PCP extension is only up to the date of delivery of vacant possession for sold units as stipulated in the sale & purchase agreement signed between the developer and buyers.

In addition, the government is extending the period for developers with QCs to dispose of all residential units in their projects, from two years currently to four years from the date that the project is issued with Temporary Occupation Permit. This is in view of the weak residential market and will allow developers more time to sell their housing projects.

In addition, the same developers will be allowed to rent out unsold private homes for a maximum of four years (from the date of TOP or date of application, whichever is later).

This is aimed at giving developers greater flexibility in managing the unsold units in their projects and to minimise their cost of holding on to these units.

Mr Tharman also announced a property tax deferral of up to two years for all land (not just residential) approved for development. However, this is not an exemption as developers will have to pay back the deferred tax later.

KPMG’s Mr Ong said that the deferral that developers will enjoy effectively works out to 0.5 per cent of the estimated freehold market value of the land.

Colliers’ Ms Tay lamented that the latest measure is viewed as less desirable compared with previous downturn budgets, where property tax exemptions were granted for land under development.

The government is also allowing a reassignment of government sale sites and private residential land owned by QC holders.

Applications must be made by Jan 21, 2010.

Only one reassignment will be allowed for each site and the transaction must not be of a speculative nature, that is, the seller is not supposed to profit from the transaction.

In granting the 40 per cent property tax rebate for industrial and commercial properties this year - which will cost the government $800 million - the government strongly urged landlords to pass on the benefits to their tenants.

‘Landlords should also consider further adjustments of rentals and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants,’ Mr Tharman added.

JTC Corp, the Housing & Development Board and Singapore Land Authority will provide a 15 per cent rental rebate to their tenants and land lessees, exceeding the savings from the property tax rebate.

The rent rebate will also be extended to stallholders paying market rents in markets and food centres managed by National Environment Agency.

Another piece of good news from the Minister is that the Inland Revenue Authority of Singapore will bring forward its property tax assessments for 2009, in view of the change in market conditions.

‘The assessed Annual Values of properties went up last year, in line with actual market rentals. Most property owners have therefore seen increased tax bills. IRAS’s move to accelerate assessments for this year will help property owners in addition to the savings they will be getting from the property tax rebate,’ Mr Tharman said.

Govt spends $4.4b to build a home for the future

Source : Business Times - 23 Jan 2009

THE government is already looking beyond the current crisis and will spend $4.4 billion to ‘build a home for the future’.

‘We should take the opportunity of this downturn to build our capabilities and infrastructure, and position Singapore for its next phase of growth,’ Finance Minister Tharman Shanmugaratnam said in yesterday’s 2009 Budget.

The government will therefore invest in linking all parts of the island through a comprehensive road and rail network, creating new suburban nodes in the process.

Mr Tharman also revealed spending of $4 billion over the next five years on health care infrastructure, which will include redeveloping older hospitals, medical centres and a new hospital in the west.

Public sector construction spending will increase significantly this year. Total contracts will amount to $18-20 billion, up from $15 billion in 2008 and $6 billion in 2007.

Citigroup economist Kit Wei Zheng said that while the infrastructure spending is not likely to create a lot of demand stimulus because of ‘high import leakage’, it will put Singapore in good stead in terms of longer-term competitiveness.

The $4.4 billion to be spent on ‘building a home for the future’ is part of the $20.5 billion Resilience Package outlined by Mr Tharman in the Budget.

Barclays economist Leong Wai Ho reckoned that the Resilience Package will deliver a positive fiscal impulse estimated at 1.5 percentage points to headline growth in 2009, with the $4.4 billion contributing roughly 0.3-0.4 percentage points.

But will it save jobs? ‘Spending to save jobs is way of cushioning the pain, which is what the government intends to do,’ said Mr Leong.

The Budget has given cheer to the construction industry. Mr Tharman said that up to $1.3 billion of government projects will involve contracts of $50 million or less, so that small and medium contractors can tender for them.

Projects brought forward will include HDB lift upgrading, park connectors and upgrading military facilities.

While the larger infrastructure projects are likely to go to the big construction firms, Lawrence Leow, president of the Association of Small and Medium Enterprises, was heartened that there will be a mix of different-size projects. ‘Most of the smaller companies do more residential projects,’ he said.

Desmond Hill, president of Singapore Contractors Association Ltd, expected a multiplier effect from the range of project sizes. ‘The whole industry works on a outsourcing basis,’ he said, adding that sub-contractors can also hope to benefit from the increase government spending.

Mr Hill was disappointed that the foreign worker levy was not addressed in the Budget, as it amounts to about $150 a month for each of the approximately 250,000 foreign workers here.

But there is no fear that the industry will be over-burdened, he said. ‘Contracts last year totalled $34 billion, so I think we should have enough resources to handle contracts this year.’

Straits Construction Co director Wong Chee Herng said that ‘quite a few private construction projects are stalled’, and he hoped that government spending will make up for this drop in demand.

The construction sector can also expect more spending in the area of sustainable development.

As part of the government’s ‘building package’, more than $1 billion will be spent on sustainable development initiatives to support energy efficiency, green transport, clean energy and greener living spaces.

Joseph Lim of the Department of Architecture at the National University of Singapore’s (NUS) School of Design and Environment said that a downturn is the perfect time to invest in sustainable development because developers are in no rush to complete projects. As Prof Lim also noted, research and development in this field takes time - ‘time to make better buildings’.

Hardware aside, Budget 2009 also addresses the nation’s software by spending $1.6 billion a year to support marriage and parenthood through initiatives such as government-paid maternity leave, and infant care and childcare subsidies. It will also provide better facilities in schools and spend up to $9,200 a year on each student - an increase of 60 per cent.

Paulin Straughan, a sociologist with NUS, said: ‘It’s good that the government is standing by its pro-family policies. For such schemes to work, the people must see there is a certain consistency and reliability.’

‘The proposed 40 per cent property tax rebate is a most welcome relief for property owners and businesses alike. If these savings are passed on to tenants, it would have an immediate effect of reducing significantly the cash flow burdens for businesses. Cheaper rents are as good as enhanced cash flow for businesses.’
- Leonard Ong, executive director, KPMG

‘CapitaLand welcomes the government’s comprehensive slew of property-related budget measures to enhance the competitiveness of Singapore’s economy. For commercial properties, we intend to pass on the property tax rebates to tenants of CapitaLand’s wholly owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust in order to provide some relief to their business costs. Similarly for retail tenants, we will pass on the property tax rebates in full to our tenants in properties owned by CapitaLand Retail and CapitaMall Trust.’
- A CapitaLand spokesman

40% tax rebate for owner-occupied residential properties

Source : Business Times - 23 Jan 2009

THE government will provide a 40 per cent property tax rebate for owner-occupied residential properties for 2009 in a bid to ease the financial burden on households this year.

The rebates will cost the government some $75 million in all, said Finance Minister Tharman Shanmugaratnam yesterday.

He also said that right now, owners who own higher-value homes (homes with a net annual value of more than $150,000) or secondary residences have to pay income tax on the net annual value of their property. This tax will be removed from year of assessment 2010 onwards.

The net annual value of a property is an estimate of how much the property will fetch on the rental market, less related expenses.

Analysts said that the 40 per cent property tax rebate is a broad measure that will help most households here, as most homes in Singapore are owner-occupied. Right now, the property tax for owner-occupied homes stands at 4 per cent of the property’s net annual value.

On the other hand, income tax exemption for higher-value homes or secondary residences will affect few. Most properties have a net annual value of less than $150,000, said Ooi Boon Jin, executive director of KPMG Tax Services.

Analysts said that the two measures should be taken together with all the other handouts announced yesterday.

‘If you look at the whole thing holistically, families will save a few hundred here, a few hundred there, which all adds up,’ said Choo Eng Chuan, tax services partner at Ernst & Young. ‘A 40 per cent property tax rebate for owner-occupied homes is a broad-based measure.’

Some analysts pointed out that owners who rent out their properties will not benefit from the property tax rebate. The property tax on rental properties is 10 per cent of the net annual value.

The government yesterday offered a 40 per cent property tax rebate to landlords of industrial and commercial properties. If this had been extended to residential properties as well, it would have helped ease the financial burden of Singapore’s expatriate community - if the rebates are passed on by the landlords - said Tay Huey Ying, Colliers’ director for research and advisory. ‘This will help to improve Singapore’s cost competitiveness,’ she said.

Mr Tharman also said that to ensure that public housing remains affordable to first-time home buyers, the government has decided to increase and broaden the Additional CPF Housing Grant (AHG) for first-time home-buyers.

It will increase the maximum grant amount to $40,000, from $30,000 previously. At the same time, the household income ceiling will also be raised from $4,000 to $5,000.

‘Another 2,700 first- time home-buyers will benefit from the enhanced AHG every year, bringing the number of beneficiaries of the AHG scheme to 8,000 yearly,’ said Mr Tharman.

The enhancements will more than double the estimated cost of the AHG scheme to about $150 million a year.

FCOT may sell assets in Japan, Australia

Source : Business Times - 23 Jan 2009

FRASERS Commercial Trust (FCOT) may sell its assets in Japan and Australia worth over $98 million, as it restructures its portfolio following a strategic review.

The trust said this yesterday as it released results for the fourth quarter ended Dec 31, 2008. Its performance was dampened by rising borrowing costs and higher property expenses.

Net property income for the trust fell 10 per cent year-on-year to $18.6 million in Q4 08. This contributed to a 41 per cent plunge in distributable income to $9.3 million.

As a result, distribution per unit (DPU) dived 43 per cent from a year ago to 1.26 cents. This translates to an annualised DPU of 5.01 cents, and a distribution yield of 21.3 per cent based on FCOT’s closing price of 23.5 cents on Dec 31. FCOT closed 0.5 cent up at 24.5 cents yesterday.

Of its portfolio of 10 assets, FCOT is exploring the sale of Cosmo Plaza in Japan and its investment in the Allco Wholesale Property Fund (AWPF) in Australia. A strategic review which began last August concluded that these assets ‘do not meet the long term investment strategy’ of the trust, said FCOT.

After further write- downs, Cosmo Plaza and units in the unlisted AWPF were valued at $72.6 million and $26.3 million respectively as of Dec 31.

‘Divestments of these assets will be conditional upon a number of factors and appropriate updates to unitholders will be made in due course,’ FCOT said.

On top of the possible asset sales, FCOT also said that it was deferring asset enhancement plans for retail areas in KeyPoint and China Square Central under the current economic and financial market conditions.

‘Management priorities include the refinancing of the trust’s existing facilities and addressing the capital structure of FCOT,’ said Low Chee Wah, CEO of the trust manager Frasers Centrepoint Asset Management (Commercial).

‘We are studying a variety of options and will look to begin implementing them during the course of the year.’

FCOT has $624.5 million of borrowings due in one year or less, and its gearing was 54.4 per cent as of Dec 31.

For FY2008, FCOT’s net property income rose 32 per cent from a year ago to $81 million. Nevertheless, its DPU still registered a 5 per cent drop to 6.35 cents.

Tianjin Eco-city gets first partner

Source : Straits Times - 23 Jan 2009

Despite the financial crisis, the Tianjin Eco-city signed up its first business partner yesterday in the northern port city.

A Memorandum of Understanding was inked between the eco-city and Indian-owned Sembawang Engineers and Constructors (E&C) to study the feasibility of building a US$1 billion (S$1.5 billion) solar polysilicon production plant.

The plant is expected to create about 500 direct jobs in the city, as it produces this key raw material required to make solar panels.

The chief of the eco-city’s master developer lauded the deal as a sign of the project’s potential, saying it will pave the way for greater growth in this tie-up between the Chinese and Singapore governments.

The landmark eco-city project, which is expected to be completed in about 10 to 15 years, will cost about 50 billion yuan (S$11 billion). It is the biggest bilateral venture between Singapore and China since the Suzhou Industrial Park in the early 1990s.

‘Sembawang E&C’s plant will form the nucleus of our eco-business cluster, creating several spin-off benefits for the Tianjin Eco-city’s broader development in terms of job creation and training,’ said Mr Goh Chye Boon, the chief executive of Sino-Singapore Tianjin Eco-City Investment and Development (SSTEC).

‘Sembawang E&C’s participation amid the current economic environment is a clear signal of the tremendous potential of the Tianjin Eco-city.

‘The firm commitment from the Chinese and Singapore governments to its success makes the Tianjin Eco-city a highly attractive investment opportunity for companies that are looking for long-term sustainable growth.’

If the 15ha plant goes ahead, it will start with an initial capacity of 5,000 tonnes a year, with the option to expand annual production by 2,500 tonnes after 2012.

It is to be located in the eco-city’s northern manufacturing ‘Eco-Silicon Valley’ zone.

And in line with the eco-city’s green environment, the plant will use a closed loop system so that any pollutants from the production process will be treated before being discharged.

Sembawang E&C was a former Singapore Government-linked company, responsible for the construction of Changi Airport and the MRT system. It was acquired by New Delhi-based engineering and construction group Punj Lloyd in 2006. Its headquarters remains in Singapore.

Sembawang E&C president and CEO Richard Grosvenor said: ‘We are very pleased to join SSTEC in the development of the Tianjin Eco-city.

‘The strategic location at the heart of the bustling Tianjin Binhai New Area, coupled with favourable supporting policies, provides an ideal base for this production facility in China.

‘This partnership also represents a significant step in our efforts in bringing technology know-how into China. I have been visiting Tianjin for over 15 years and watching its progress. While we have the world to choose from, this is where we wish to site the facility.’

SIGN OF CONFIDENCE

‘Sembawang E&C’s participation amid the current economic environment is a clear signal of the tremendous potential of the Tianjin Eco-City.’- Mr Goh Chye Boon, the CEO of Sino-Singapore Tianjin Eco-City Investment and Development

No secret buyer or profit, says property exec’s wife

Source : Straits Times - 23 Jan 2009

THE wife of a senior property agent who bought an apartment through her husband’s subordinate, then quickly sold it for a $257,000 profit, yesterday refuted claims that she had made a ’secret profit’ from the deal.

Madam Natassha Sadiq, 40, told the High Court her purchase of the downtown flat from Mr Yuen Chow Hin and Madam Wong Wai Fan was done on a ‘willing buyer and willing seller’ basis.

Mr Yuen, 50, and Madam Wong, 48, have sued ERA Realty Network to seek profits from the sale and the return of about $7,300 in commission.

They claim their agent did little to market the flat to other buyers, and was in a clear conflict of interest when he sold the unit to his boss’ wife.

In a testimony echoed by her husband, Mr Mike Parikh, Madam Sadiq said there was no secret buyer in waiting when she bought the two-bedroom Keng Cheow Street apartment in mid-2007. Mr Parikh is a senior group division director of ERA.

Madam Sadiq said that in early July last year, her husband told her about The Riverside Piazza unit being marketed by his subordinate, Mr Jeremy Ang.

She made an offer of $685,000 as her identity card number started with ‘685′. She said: ‘I know it sounds a bit crazy, but it’s from my IC number.’

The price was eventually agreed at $688,000. Madam Sadiq said she was granted the right to buy the flat on July 5 last year, but the couple disputed this date as the option was dated July 12.

Madam Sadiq said she then decided to try to sell the apartment as property prices were then ‘roaring’. Two days later, on July 7, the unit was on the market again. This time, it sold for about $945,000.

‘At the time, the market was bullish, and we decided to put up this price. We happened to make a bit of a profit,’ Madam Sadiq said.

Mr Parikh, 44, took the stand after his wife. He said the first sale to his wife and her subsequent resale were separate transactions. He said his subordinate, Mr Ang, called him up on July 5 to tell him that the sale to Madam Sadiq was a ‘done deal’.

The next day, Mr Parikh placed advertisements in The Straits Times for July 7 and July 9. When there was no response, he changed the text, adding ‘en bloc potential’ in a third ad on July 14.

He admitted that he had not actually heard of any plans to sell units at The Riverside Piazza collectively. ‘It’s just a common term that agents use because there were a lot of en blocs going on. The possibility is always there,’ he explained.

On the same day that he placed the third ad, an interested buyer responded. Four days later, Madam Sadiq granted him an option to buy at $945,000.

It was only later that Mr Yuen and Madam Wong found out about the resale.

About the case

MR YUEN Chow Hin and Madam Wong Wai Fan have sued property agency ERA Realty Network for breach of contract and misrepresentation.

In July 2007, the couple, through ERA agent Jeremy Ang, sold their apartment for $688,000.

Unknown to them, the buyer, Madam Natassha Sadiq, was the wife of Mr Ang’s boss. Soon after she was granted the right to buy the property, Madam Sadiq flipped the flat for $945,000.

Mr Yuen and Madam Wong are now seeking from ERA the price difference of $257,000 and the return of about $7,300 in commission.

They claim the agency did not try its best to find more offers and allege that there was conflict of interest.

ERA says it is not liable for the actions of its agents, who are independent contractors. In any case, says the agency, Mr Ang has not breached its code of conduct.

Lawyers for both sides are to make closing arguments next Thursday.

Higher prices drive Marina expressway costs up

Source : Straits Times - 23 Jan 2009

THE $2.5 billion budget to build the Marina Coastal Expressway (MCE) has been exceeded because of higher construction and material costs.

Transport Minister Raymond Lim explained this in response to Madam Ho Geok Choo (West Coast GRC), who asked why the 5km expressway was costing more than expected.

Mr Lim said the budget for the MCE - which will link the Kallang-Paya Lebar Expressway and the Ayer Rajah Expressway - was approved based on preliminary engineering and construction prices in 2006.

Since then, material and resource costs have risen significantly.

Another reason is that soil at certain stretches is weaker than expected. So more robust and deeper temporary structures have to be used and additional works done to improve the soil.

Agencies like the Building and Construction Authority also called for tighter specifications for temporary works such as earth retaining systems, while the Singapore Civil Defence Force wants compliance with the latest international fire safety standards.

Mr Ong Kian Min (Tampines GRC) asked if the ministry looked at other possibilities before deciding to build ‘underground and under water’. Mr Lim said his ministry considered other possibilities but found them unsuitable:

‘I’d like to assure the House that when it comes to infrastructure projects such as the MCE, the Government takes a stringent financial approach and transport agencies would evaluate the cost and match that against the benefits of the particular infrastructure project.’

The benefit of the MCE, slated for completion in 2013, is to support increased traffic volume when the Marina Bay area is developed.

Bigger grant for first-time HDB home buyers

Source : Straits Times - 23 Jan 2009

FIRST-TIME home buyers were given a leg up on the property ladder yesterday with the expansion of a grant designed to help financially struggling home hunters.

Another 2,700 first-timers will qualify for the additional CPF housing grant every year, due to changes announced by Finance Minister Tharman Shanmugaratnam.

In a rare move, the Government has lifted the income ceiling for first-time home buyers qualifying for the additional grant - from $4,000 a month previously to $5,000 now.

At the same time, the grant’s maximum amount has been raised from $30,000 to $40,000.

This comes about 18 months after the additional housing grant was raised from $20,000 to $30,000 in August 2007.

Then, the eligibility criterion was also lifted to $4,000 from $3,000.

Mr Tharman said the total number of households benefiting from HDB’s additional housing grant scheme will now be boosted to 8,000 annually.

The enhanced scheme, which aims to ensure that public housing remains affordable to first-timers, will double the
estimated cost of the scheme to about $150 million per year, he said.

Market watchers observed that the additional housing grant - typically aimed at the low-income group - is now being extended to the lower middle-income group.

PropNex chief executive Mohamed Ismail said this departure was a ‘positive move’ as HDB prices have risen about 30 per cent in the last two years.

‘With prices going up, monthly mortgages are also rising. In this difficult time, the grants will really help first-timers who want to buy a home, and start a family,’ said Mr Ismail.

Mr Samuel Ng, 43, head of the Marine Parade Family Service Centre, said the latest HDB initiative will address some newlyweds’ concerns during this crisis.

In particular, the move seems to address the ’sandwich class’ or what he calls, the ‘middle poor’.

‘For the really low-income, there is already a support network in place for them. But the low- to mid-income families often find themselves squeezed, and find that there are fewer social initiatives that cater to them.’

Housing, Mr Ng pointed out, is crucial to starting a family. This is one of the priorities for the Government.

Mr Tharman said yesterday that the Government will spend $1.6 billion this year - and the same in each of the next three years - to support marriage and parenthood.

These include initiatives such as government-paid maternity leave, infant-care and childcare subsidies.

Ms Y.L. Huang, a 25-year-old teacher, welcomed the news as her income combined with her fiance’s exceeds the $4,000 mark for the housing grant.

‘Knowing we now qualify for a bigger housing grant makes buying a new home a bit easier,’ she said.

40% property tax rebate

Source : Straits Times - 23 Jan 2009

OWNERS of industrial and commercial properties will get a 40 per cent tax rebate, worth $800 million, from the Government this year.

The rebate is part of the $20.5 billion resilience package announced by Finance Minister Tharman Shanmugaratnam yesterday to help Singapore’s companies cut costs and save jobs.

He said: ‘The Government strongly urges landlords to pass on the benefits of this rebate to their tenants.

‘Landlords should also consider further adjustments of rental and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants.’

Small businesses are feeling the impact of high non-negotiable rental contracts signed in boom times and falling receipts due to the recession.

A Straits Times check with 45 small- and medium-sized retailers and restaurant owners found that five had wound up their businesses in the past six months, four had shut at least one branch and seven will close shop when their leases expire this year.

More than 130 small businesses closed down last year, according to recent data from the Ministry of Finance, a nearly 25 per cent jump over 2007 and the first annual increase since the dot.com bust seven years ago.

After doing the maths, president of the Association of Small and Medium Enterprises Lawrence Leow said the rebate would mean tenants can expect an estimated 4 per cent adjustment in rents if private landlords choose to pass on the savings.

‘But it might not even be that, because landlords might keep some of the rebate for themselves,’ he said, adding that rent adjustments are likely to vary from landlord to landlord.

He pointed out that the amount passed on would depend on factors like landlord-tenant relationship and the demand for a particular shop space.

Others are more optimistic.

Singapore Retailers Association president Jannie Tay is hopeful that this measure will translate into a 30 to 50 per cent fall in rental rates for businesses.

The association has been pushing for a rental reduction since the financial crisis hit last September. But, she said, landlords have resisted the push.

‘We do know that if there is a drop in property tax, the landlords are willing to discuss the reduction of rents with us,’ she said.

Mrs Tay said rental rates for retail outlets had shot up as much as 80 per cent in the past three years, pinned on expectations of Singapore becoming a boom town with the opening of the two integrated resorts and new shopping malls coming up along Orchard Road.

But since last September, sales have nose-dived and the high rents are slowly bleeding retailers dry, she added.

The association is meeting individual landlords in the coming weeks to see how they can negotiate a better deal for retailers.

At least one major private landlord has signalled its intention to pass on the whole rebate.

Singapore’s biggest mall operator CapitaLand will pass on the property tax rebate in full to its retail tenants in properties owned by CapitaLand Retail and CapitaMall Trust.

These include tenants in malls such as Bugis Junction and Tampines Mall.

Tenants of CapitaLand’s wholly-owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust will also benefit fully from the rebate.

A company spokesman said CapitaLand ‘welcomes the Government’s comprehensive slew of property-related Budget measures’ in the current ‘challenging economic climate’.

Two other major landlords, who did not want to be named, said that while it was too soon to make an announcement, a rental reprieve for their tenants was definitely on the table.

‘The question now is one of quantum - how much (of the) savings will be passed down,’ said Mrs Tay.

KepLand reviewing timing of projects

Source : Business Times - 22 Jan 2009

KEPPEL Land, Singapore’s third-largest property group by market capitalisation, said it will conduct a review to see if it can delay building some of its projects as it reported an 88 per cent fall in fourth- quarter earnings yesterday.

‘We are reviewing our operation costs as well as the project costs of all our development projects to trim fat and conserve cash, so that we can invest in any attractive opportunities that come along,’ said group chief executive Kevin Wong. ‘This cost review exercise could include developing projects in phases to meet demand and even temporarily suspending the entire project if it does not add value to the company under current market conditions.’

Projects that are yet to be launched for sale are those that are most likely to be delayed both in Singapore and abroad, he added.

The developer reported that net profit for the three months ended Dec 31, 2008 fell to $68.5 million, from $572.3 million in 2007. KepLand’s Q4 2007 earnings were boosted by the divestment of its one-third stake in the One Raffles Quay office building to property trust K-Reit Asia for about $940 million. Q4 2007 recorded a $235.2 million surplus from the restructuring of the interest in One Raffles Quay Pte Ltd.

Revenue for Q4 2008 fell 46.8 per cent to $197.4 million, from $371.4 million, as KepLand saw slower sales across many key markets. Several projects in Singapore and overseas were also completed in previous quarters, which means that these projects did not contribute to KepLand’s balance sheet in Q4. Lower revenues also came from the group’s fund management business and property services.

On the back of this, earnings for the full 2008 financial year slumped 70.8 per cent to $227.7 million, from $779.7 million the previous year. Revenue fell 40.2 per cent to $842.2 million, from $1.4 billion in 2007. Analysts said that full-year earnings and turnover were in line with estimates.

Full-year earnings per share fell to 31.6 cents, from $1.08 in 2007. KepLand proposed a final dividend of 8 cents a share.

The developer also said it made no provisions or writedowns in its Q4 financials. ‘We had been disciplined and cautious in land acquisition, especially over the last two years, in Singapore and overseas. As a result, there are no provisions needed for our land bank,’ said Mr Wong. The carrying values of KepLand’s investment buildings are also within the current market range, he said.

In the previous downturn of 2001, KepLand wrote down its land bank by $455.1 million, resulting in a net loss of $366.5 million for that financial year.

The developer had net debt of $1.5 billion as at end-2008, up from $1.09 billion at the end of 2007. Gearing at end-2008 was 0.52 times, up from 0.41 times in 2007.

KepLand said that 2009 will be a challenging year as the group continues to face strong headwinds from the global economic crisis.

‘In Singapore, KepLand’s exposure is mainly in the mid-to-high-end segments, where demand is really weak. The regional markets China and Vietnam are also experiencing slow sales,’ wrote Kim Eng analyst Wilson Liew in a note earlier this month.

Credit Suisse yesterday cut its price estimates for several property stocks on fears that property demand may slump further as Singapore sinks deeper into recession. The research firm cut KepLand’s target price to $1.55, from $2.48 previously.

KepLand shares lost one cent to close at $1.50 yesterday amid a broad market pullback.

KepLand achieves Green Mark in Vietnam

Source : Business Times - 22 Jan 2009

THE Estella, a condominium being developed by Keppel Land, has become the first property in Vietnam to be granted the Green Mark Gold award by the Building and Construction Authority (BCA) of Singapore.

The BCA Green Mark is a rating system to evaluate a building for its environmental impact and performance.

Through some of the latest green technology, The Estella is expected to yield overall annual savings of 23 and 48 per cent in energy and water consumption, leading to over $850,000 in cost savings. The green initiatives used include solar roof panels, special paint and composite wood.

To promote eco-consciousness among residents, Keppel Land will set up an information corner on going green, as well as collection and storage areas for recyclable material at The Estella.

On the Green Mark Award, Keppel Land’s executive director and CEO, International, Ang Wee Gee, said the group is ‘privileged to contribute to the growth of Vietnam while balancing our economic and environmental objectives’.

The Green Mark for The Estella adds to Keppel Land’s four developments in Singapore that have achieved the Green Mark Award, with each property yielding up to 40 per cent in energy and water savings.

Peninsula plans Paris hotel, its first in Europe

Source : Business Times - 22 Jan 2009

Venture with Qatar follows forays into Tokyo, Shanghai

The company behind the Peninsula, one of Asia’s most prestigious hotel groups, has announced it will develop a new destination in Paris, its first foray into the European market.

Hongkong and Shanghai Hotels Ltd (HSH) said it had signed a deal with the Qatar Investment Authority worth 100 million euros (S$194.4 million) and will develop the site of the former Majestic Hotel in the French capital.

Michael Kadoorie, chairman of HSH, said the new hotel would follow the launch of a Peninsula hotel in Tokyo in 2007 and the Peninsula Shanghai later this year.

‘We hope that The Peninsula Paris will bring a new level of distinction to the Paris luxury hotel market,’ Mr Kadoorie said in a statement released late Tuesday.

‘It is housed in a historic, magnificent building which will be a very special experience for our guests.’ Work on the new project is expected to begin in the second quarter of 2009 and it is hoped the hotel will open in mid-2012.

Under the deal, HSH will take a 20 per cent stake in a subsidiary of Qatari Diar, which owns the property on Avenue Kleber.

Qatari Diar is the real estate arm of the Qatar Investment Authority, the country’s state-owned investment vehicle.

The building was originally constructed and opened in 1908 as the Majestic Hotel and is currently used as the Centre International de Conferences by the French Ministry of Foreign Affairs, the statement said.

HSH will commit another 50 million euros in renovation costs, and will manage the property for 30 years with an option to extend another 20, the statement said.

The new hotel will have 200 guestrooms and suites, the statement added.

The Peninsula hotel is one of Hong Kong’s most well-known buildings and has become a byword for luxury since it opened in 1928, including its own fleet of Rolls Royce limousines in a unique green livery.