Right on track but returns have to wait

Source : The Edge - 25 Apr 2009

While the billions poured into Marina Bay are expected to bring in the crowds, the recession and asset re-pricing means it will take a while to recoup that investment.

LAST TUESDAY MORNING, wearing a hard hat, safety harness, safety boots, and accompanied by an entourage of executives from the Urban Redevelopment Authority, Minister for National Development Mah Bow Tan, toured some of the key areas of Marina Bay, Singapore’s equivalent to Canary Wharf in the UK and other major urban development projects around the world.

Sites that Mah visited included the US$5.4 billion ($8.1 billion) Marina Bay Sands integrated resort, the 3.5km double-helix bridge, the rejuvenated Clifford Pier (now Sino Land’s Fullerton Heritage development) at Collyer Quay and the 70-storey The Sail@Marina Bay, considered Singapore’s tallest residential tower.

The tour served as an assurance to the rest of the world that the ambitious transformation of Singapore has not been derailed by the global economic slump. “What we have seen today shows that the progress on Marina Bay is very much on schedule and on track,” said Mah to a group of reporters at an interview at the end of the tour.

Total investment in new developments at Marina Bay today amount to a whopping $22 billion, of which $16.3 billion is from the private sector. The remaining $5.7 billion is in infrastructural works for the bay area. A further $1 billion will be pumped into infrastructure in the longer term.

There is no doubt Singapore’s skyline is going to change in the next two years with the completion of the Marina Bay Sands and the first phase of the Marina Bay Financial Centre (MBFC) by next year, and the progressive completion of the double-helix bridge, the Art Park, and the Gardens by the Bay by 2011.

Three to four years ago, when property markets around the world were booming, the maxim was very much, “If you build it, they will come”. That maxim is now undermined by a global recession in full swing and real-estate prices deflating, especially at the top end of the market. Developers and investors who embarked on multi-billion dollar projects are now facing a much starker reality, far different from the projections made in rosier times. “I don’t think that maxim applies today,” concedes Donald Han, managing director of property consulting firm, Cushman & Wakefield. “The issue now is to build confidence in a market that is dealing with an oversupply situation.”

The Marina Bay Sands resort has a total of 2,600 hotel rooms, of which 1,800 will open by year-end. Meanwhile, the $6.59 billion Resorts World at Sentosa will have six hotels with a total of 1,800 rooms, of which 1,350 will be soft-launched in 1Q2010. The two integrated resorts will contribute the bulk of the 8,000 hotel rooms scheduled for completion over the next two years. Last Tuesday, Resorts World gave a preview of the showrooms for Maxim Tower, Hotel Michael, Festive Hotel, and the Hard Rock Hotel, which will be opening next year.

In the meantime, Singapore’s tourist arrivals and hotel-occupancy levels continue to plummet. Last Thursday, the Singapore Tourism Board reported that March tourist arrivals tumbled 13.2% to 790,000 compared with March 2008. Hotel-room revenue dropped 33.3% to $125 million compared with the same month last year, while average room rates slipped 18.5% to $196 per night. Occupancy rates last month were 74%, a 13.1% drop from March 2008.

However, the government is pinning its hopes on the two integrated resorts and their economic spin-offs in terms of job creation and other sectors of the economy. “It will be a catalyst for tourism because it will be something new for visitors, and I’m sure visitors will come and visit the resorts in Singapore,” says Mah. He acknowledges the inevitability of belt-tightening among tourists given the current recession, but “when it comes to travel and leisure, even in a recession, people will want to enjoy themselves and relax”.

Source: Corporate Locations

Apart from the Marina Bay Sands, the other key development in the bay area is the MBFC, developed jointly by Cheung Kong (Holdings)/Hutchison Whampoa, Hongkong Land and Keppel Land. When fully completed, the entire mixed development will have three million sq ft of Grade A office space, two residential towers with a total of 649 apartments and 176,000 sq ft of retail space.

The first phase is expected to be completed by the end of 2Q2010, and will contain two office towers and the 428-unit Marina Bay Residences condominium tower. “We have 61% of the office space pre-committed to blue-chip tenants some one to three years ahead of completion,” says Wilson Kwong, general manager of Raffles Quay Asset Management on behalf of the consortium. Anchor tenants include Standard Chartered Bank, which has committed to taking up 500,000 sq ft of space and DBS, which is taking up 700,000 sq ft, adds Kwong.

With the completion of the first phase of the MBFC next year, property analysts and consultants expect the market to be awash in new supply. In his April market review, Douglas Dunkerley, managing director of office specialists, Corporate Locations, notes that most new office developments this year, will only be completed in 3Q and 4Q and those within the CBD will collectively provide around 1.5 million sq ft of new space. This will be followed by a short lull until 2H2010 “when a massive wave of space arrives with two million sq ft due for completion inside the CBD and a further two million sq ft will be ready outside the CBD”, he says. On top of that, the secondary supply from major relocations will further exacerbate the situation of chronic oversupply.

Hence, Dunkerley expects the Singapore office market to continue experiencing major adjustments over the next two years as demand has fallen off at a time when massive supply is arriving — “just when it’s not needed”, he notes. “If only this supply had arrived in 2006/07.” That was when there was a chronic shortage of office space. The last time the office market bottomed out was in 2004, when prime rental levels were around $5 psf (or $6 psf for the very best space) in Raffles Place. With the glut of new supply available and fierce competition from new developments, Dunkerley predicts that top rates could come down to between $9 psf and $10 psf per month by year-end, and prime properties could see rental rates fall by another 30% to around $6 psf to $7 psf by the end of next year.

“Historically the office-rental market has lagged behind any recovery in the stock market by around 12 months,” observes Dunkerley. “If there is a firm recovery in the stock market by yearend, then one would normally expect the office-rental market to start recovery early 2011 but, with so much supply, this is likely to be delayed until later in 2012.” (See Charts)

According to URA data, office rents in 1Q2009 fell by 10.7% compared with a 6.5% drop in 4Q2008. The median rental rate for prime office space stood at $11.56 psf per month in 1Q2009, down from $13 psf per month in 4Q2008. Meanwhile, prices for office space are down 12% in 1Q2009, which is more than the 4.9% decrease in 4Q2008.

“If you’ve been around long enough you will know that there will always be cycles — there will be booms and there will be busts,” says Mah. “When we started this [MBFC site] in 2000 and 2001, there was similar apprehension that we were offering land for sale in Marina Bay when there was a glut. Then what happened? When we started building, suddenly we were running out of space, and everybody was saying, ‘Why didn’t you sell more land at that time? You remember that?’”

Mah notes that while there’s a need to be mindful of the economic downturn, and to find means and ways to cope with it, there is also a need to “prepare ourselves for when the economy recovers”.

In the residential sector, it is also a time of reckoning. According to URA’s 1Q2009 report last Friday, prices of non-landed homes (both apartments and condominiums) fell 15% in 1Q2009, compared with a 6.3% drop the previous quarter. Meanwhile, rentals in the core central region fell 10.3% in 1Q2009.

When the market was booming, and condominium prices were spiralling upward, investors were looking for capital appreciation, and rental yield took a backseat. However, with valuations and property prices on a downward trend, investors are once again looking at property fundamentals and rental yields are fashionable once again. At The Sail@Marina Bay, the benchmark for condos in the core central region, based on the caveats lodged in the URA Realis database, there were four transactions done in the week of March 30 to April 6. Of these, three were apartments of 657 sq ft to 678 sq ft sold in the resale market at $1,302 psf to $1,357 psf. A larger unit of 1,184 sq ft was transacted at $1,600 psf. When the first tower was launched in October 2004, prices started from $900 psf, and subsequently at the peak of the market from 2Q2007 to 1Q2008, over 150 units changed hands in the secondary market at $2,000 psf to $3,000 psf, with over six units sold at prices above $3,000 psf.

“The bottom line in any property portfolio is that if the purchase price was at $2,000 psf to $3,000 psf, the question is what kind of rent will you be able to get for your property?” says Cushman & Wakefield’s Han. In the central region, for condominiums like The Sail@Marina Bay and even those at Sentosa Cove, rental rates are now pegged at $5 psf to $6 psf per month, or up to $6.50 psf to $7 psf for fully-furnished apartments and serviced apartment-like offerings, notes Han. At those rental rates, people who bought units at $2,000 psf to $3,000 psf would be looking at rental yields of around 2% to 3% per annum.

There is no doubt that the Singapore skyline is going to change, but it’s taking place at a time of massive price and rental adjustments.

Premium for HDB resale flats in sharp fall

Source : Business Times - 25 Apr 2009

BUYERS are increasingly reluctant to pay a premium for HDB flats, going by fast-falling cash-over-valuation (COV) figures from the Housing & Development Board yesterday. The median COV for resale transactions dived a stunning 73 per cent from $15,000 in Q4 2008 to $4,000 in Q1 2009.

In fact, the median COVs for five-room and executive flats were both zero dollars in Q1 2009. Just a quarter ago, buyers paid median cash amounts of $11,000 and $12,000 on top of valuation for five-room and executive flats respectively.

‘The sharp drop in COVs is due to increasing public resistance to paying above what are already higher valuations,’ said PropNex chief executive officer Mohamed Ismail.

According to HDB, the proportion of flats that changed hands above valuation fell in Q1 2009 to 62 per cent of all resale transactions, from 85 per cent in Q4 2008.

ERA Asia-Pacific noted that more higher-value HDB resale flats are being sold below valuation - for $30,000 to $50,000 less in some cases. ‘In coming quarters, we are likely to see more and more larger flats sold at or below valuation as the harsh economic conditions hit home,’ said ERA associate director Eugene Lim.

Stricter loan-to-value ratios could have contributed to the trend. ‘Banks are becoming more conservative and there have been cases where buyers are offered only 70 per cent loans instead of the usual 80 per cent,’ Mr Lim said.

The cooling economy has also turned some home-seekers away from five-room to four-room flats, he noted. And as a result, prices of larger flats may face downward pressure.

On the whole, HDB’s resale price index slid 0.8 per cent in Q1 2009 from Q4 2008, shrinking more than the flash estimate of minus 0.6 per cent released early this month. This is the first time the index has shrunk after growing more than 30 per cent over nine straight quarters.

Property consultants expect resale HDB flat prices to drop 5-10 per cent for the whole year, with larger flats accounting for more of the fall.

Nevertheless, ‘we do not expect the decrease in HDB resale prices to dent upgrader demand for private property, because the rate of price fall of HDB resale flats is still smaller than that of private homes,’ said Knight Frank’s director of consultancy & research Nicholas Mak.

Three to four-room flats should enjoy greater demand, consultants reckon. As PropNex’s Mr Mohamed observed, buyers are still willing to pay COV for these flats.

HDB data also shows a rising proportion of resale flat applications involving smaller flats.

Three- and four-room flats accounted for 69.8 per cent of applications in Q1 2009, compared with 67 per cent in Q4 2008.

There were 6,446 resale transactions in Q1 2009, 4.2 per cent more than in the preceding quarter. ‘HDB resale transactions typically increase when times are bad,’ said ERA’s Mr Lim.

But with HDB building more new flats, some demand may shift, he added.

HDB said yesterday that it plans to launch another 2,400 build-to-order flats over the next six months, of which about 1,000 will be three-room and smaller flats.

Private home prices spiral further downward

Source : Straits Times - 25 Apr 2009

PRICES of private homes fell off a cliff in the first quarter, continuing a dramatic slide that has now wiped out the gains owners have made since 2007.

Values dived 14.1 per cent in the first three months this year - the biggest fall on record - and followed a 6.1 per cent slide in the last quarter of last year.

Figures from the Urban Redevelopment Authority (URA) yesterday also point to pain in the residential rent market and in the office sector.

But the plight of the private home sector caught most attention. The first-quarter fall was worse than an initial URA estimate of 13.8 per cent, indicating the slide accelerated towards the end of the quarter.

The souring of the market has been fast and furious. Prices had been rising for four years and were still going north until as late as September of last year but then the rot set in.

Price declines have been registered in three consecutive quarters with the fall in the first three months of this year the worst since the URA began keeping data in 1975. Private homes on the city fringes suffered the most, with prices down 17 per cent, compared with 16.2 per cent in the city centre and 7.3 per cent for suburban residences.

The hefty gains over the past two years have been erased, so owners who bought after the first quarter of 2007 could see their home’s valuation fall below the purchase price, said Colliers International’s director for research and advisory, Ms Tay Huey Ying.

Rents for private homes also kept falling and at a faster rate. They plunged 8.5 per cent in the first quarter compared with a 5.3 per cent decline in the last three months of 2008. Rents of non-landed prime homes fell the most, at 10.3 per cent.

HDB resale flats showed more resilience with prices inching lower by just 0.8 per cent in the first quarter - the first fall since the third quarter of 2006.

But there was a sliver of good news. Sales of new homes in the first quarter were a robust 2,596 units, driven by pent-up demand, price cuts and innovative product packaging, experts said.

The mass market sector was most active with upgraders picking up many units to help lessen the rate of price fall in suburban areas, said Knight Frank consultancy and research director Nicholas Mak. Developer sales in suburban areas reached 1,637 units in the first quarter, almost as many as were sold last year, he said.

But the prime market accounted for only a meagre 9.5 per cent of all developer sales. And sales in the resale and sub-sale markets remained weak.

‘Property really depends on the economy, and the economy around the world and in Singapore still looks pretty weak.’ National Development Minister Mah Bow Tan told Bloomberg in Vietnam yesterday.

Mr Mak expects private home prices and rents to contract sharply in the first half of the year but the rate of decline will decelerate.

Singapore’s office market also took a beating in the first quarter. Rents slid 10.7 per cent, the biggest fall since the first quarter of 1992, while prices fell 12 per cent. Take-up contracted for the second consecutive quarter and for the first time since late 2006, the islandwide vacancy rate hit 10 per cent.

Tribute to a pioneer

Source : Business Times - 25 Apr 2009

IF ONE person could be said to have played an essential role in shaping Singapore’s landscape, Liu Thai Ker would be that man. Prof Liu is closely associated with the implementation of public housing here and formulating a vision for the urban development of the city. For his public service, he was honoured last night with an Outstanding Service Award from the National University of Singapore (NUS).

Prof Liu, who is currently director of RSP Architects, Planners & Engineers, made his mark on Singapore’s landscape while heading two major organisations - the Housing & Development Board, and later the Urban Redevelopment Authority (URA).

Trained as an architect, his sense of aesthetics was derived from his father, pioneer local painter Liu Kang. After graduating from the University of New South Wales, Prof Liu continued his studies and early career in Australia and the US.

On returning to Singapore he joined the HDB in 1969, and became chief executive in 1979. First, as head of HDB’s design and research unit, he guided the board’s planning concepts as it shifted from large-scale estates with localised facilities to near-self-sufficient new towns for 200,000 to 300,000 people.

While chief executive of the HDB, he oversaw the completion of more than half-a-million dwellings as the government embarked on its ‘Home Ownership for All’ policy. ‘The building programme was very important for Singapore,’ says Prof Liu. In 1984, the HDB built a whopping 64,000 homes - a ‘watershed year’ for the agency.

After his time at the HDB, Prof Liu moved on to become chief executive officer and chief planner of the URA in 1989, where he oversaw and completed the revision of the Concept Plan - credited with making Singapore the attractive and efficient city it is today.

Prof Liu says he started by working with an old concept plan from the 1970s, which he updated between 1989-1991. ‘The government wanted the Singapore masterplan to be on par with other advanced cities in the world,’ he says. His 1991 Concept Plan put forward a vision that is still in place - future master plans from the URA have used the 1991 Concept Plan as a template.

Prof Liu also initiated an island-wide conservation policy under which about 5,000 buildings were permanently gazetted as historic. He says his team surveyed as many as 10.000 buildings before coming up with the final list to be conserved.

During his time at the URA, Prof Liu also made sure that planning regulations and guidelines were transparent and unambiguous. ‘They (developers) then know very clearly what they can do and what they cannot do,’ he says. ‘That works in the interest of property development.’

The key ingredient to planning a successful city is attention to the ‘fundamental details’, says Prof Liu. ‘I think the success story of Singapore’s planning is that we put in solid work at the beginning to make sure everything works,’ he says. Issues such as traffic flow, infrastructure and a good mix of land use must be carefully planned.

‘What we want is a solid community, a solid city. And when we get these things done, in time the glamour will appear.’ His view has been somewhat vindicated - the city is slowly building up a buzz after the fundamentals were in place.

The other secret to successful urban planning is to set out clear parameters and then give designers and architects free rein. ‘We give a lot of room to designers and architects to exercise their talent,’ says Prof Liu.

He has also re-planned close to a dozen cities for millions of people across Asia and in the Middle East, as well as central business districts, townships and residential and industrial estates. His work also includes the master plan for NUS, as well as major city planning and urban design projects in India and South-east Asia.

Accepting the award last night, Prof Liu, who is an adjunct professor at the Lee Kuan Yew School of Public Policy, said he is happy to be involved with NUS on academic matters, campus planning and architecture.

New in Raffles Place

Source : Straits Times - 25 Apr 2009

28-storey Straits Trading Building has unusual trapezoidal shape

When the flagship building of the Straits Trading Company is completed in November, it will be the only new office building in Raffles Place this year.

The 28-storey Straits Trading Building at 9 Battery Road will have an eye-catching faceted blue glass facade.

‘The building will resemble a crystal in the city,’ says Madam Wong Meng Heng, director of Team Design Architects, the firm behind the building. The first Straits Trading Building was built in 1972 and was torn down in 2007 to make way for this new $60-million building.

Besides its faceted blue facade, the building’s other highlights include two covered sky terraces on its 13th and 21st floors.

The two-storey terraces, which will be accessible only to tenants, will have lush greenery, built-in water features, wi-fi connectivity as well as a glass meeting room on the 21st floor.

Mr Eric Teng, Straits Trading Company’s executive vice-president of property, says: ‘The sky terraces add value for tenants and give personality to the building.’

Of course, the building will also offer views of the Marina Bay area and Raffles Place. Rather than conforming to a conventional box-like structure, Madam Wong explains, the building has a trapezoidal shape to maximise the views.

Every floor will offer tenants about 8,000 sq ft of column-free space. Each floor can take up to two tenants and the space will be rented out for about $10 to $12 psf a month.

The core business of the 122-year-old Singapore-based Straits Trading Company is tin mining. It also owns Hotel Rendezvous and is the developer of Gallop Gables condominium. It is likely to occupy the top three floors of the new building.

Mr Teng says that about one-third of its tenants are confirmed. They are mostly service offices and law firms.

He is confident that all units will be occupied by November. ‘Each tenant in the building can even have the whole floor to itself, which is a desirable factor,’ he says.

HDB resale flat buyers pay less cash upfront

Source : Straits Times - 25 Apr 2009

BUYERS of resale HDB flats now tend to need much less cash upfront to secure a home - and those looking at bigger flats may need none at all.

Data released yesterday by the HDB showed first-quarter median cash-over-valuation levels fell substantially to $4,000 in the first quarter, from $15,000 in the previous quarter.

This refers to the sum that flat buyers pay above a valuation set by HDB-appointed private valuers. Buyers can use Central Provident Fund money for any sum up to this level but need cash for any more.

The significant fall is attributable to twin factors - falling resale flat prices in a deteriorating economy and higher valuation levels, after a run-up in prices over the past year or so before recent falls.

HDB resale flats fell 0.8 per cent in the first quarter, just over the initial estimate of 0.6 per cent, after prices peaked late last year. However, resale prices are still at healthy levels, about 2 per cent above the 1996 peak, said Knight Frank’s director of consultancy and research Nicholas Mak.

Higher HDB valuations are why resale HDB prices dipped only slightly despite a far lower cash portion, said PropNex chief executive Mohamed Ismail. ‘It is evident that public housing remains resilient in this gloomy economy, thanks to continued strong demand for resale flats. The alternatives, Build-To-Order and Design, Build and Sell Scheme projects, are still years away from completion.’

But things may change. ‘Generally, though valuations are still high, banks are becoming more conservative and there have been cases where buyers are offered only 70 per cent loans instead of the usual 80 per cent,’ said ERA Asia Pacific’s associate director, Mr Eugene Lim. That means more higher-value HDB resale flats are now being sold below valuation - in some cases, perhaps, up to $30,000 to $50,000 below, he said.

‘For larger flats, the days of transactions with cash-over-valuation are over,’ adds Mr Lim.

ERA’s first-quarter resale HDB deals show 21 per cent of flats sold below valuation, 19 per cent at valuation. Of the rest, most fetched no more than $15,000 cash, said Mr Lim.

First-quarter median sublet rents were unchanged for the smaller flats, and down $100 to $200 for the four-room and larger flats.

In the first quarter, more people bought smaller three- to four-room flats. Their prices fell a little.

The larger flats saw a slightly bigger price fall of up to 2.8 per cent for executive flats, said Mr Mak. These larger flats will continue to face stronger downward price pressure, property experts said.

They expect increased demand for smaller flats as home buyers exercise prudence. ‘In the coming quarters, we are likely to see more and more larger flats sold at or below valuation as the harsh economic conditions hit home,’ said Mr Lim.

The good news is that the fall in HDB resale prices is not expected to dent upgrader demand for private homes as the rate at which HDB resale flat prices are falling is still less than that of private homes, Mr Mak said.

Watch this vacant office space

Source : Business Times - 25 Apr 2009

Vacancies hit 10% in Q1; broader property market sees prices fall across sectors; rentals also slide, URA data shows

SINGAPORE’S property sector continues to take the bumpy slide down, with the office market gathering its share of bruises.

This segment took a hit for the second consecutive quarter, government data showed. The broader property market also saw prices and rentals slipping.

The take-up of office space fell nearly 323,000 sq ft in Q1 2009 after sliding 366,000 sq ft in Q4 last year.

That sent islandwide vacancies for offices up from 8.8 per cent at end-Q4 2008 to 10 per cent by end-Q1 2009 - the first time that Singapore is seeing double-digit office vacancies since late-2006.

CB Richard Ellis executive director (office services) Moray Armstrong reiterated the Singapore office market could see negative take-up for the whole of this year in excess of one million sq ft. ‘Many of the corporates we talk to are well advanced in implementing their restructuring programmes. From this, we deduce we may be going through the period of sharpest contraction in office demand now. Contraction may ease in the second-half,’ he said.

‘The outlook for office rents remains bearish because of the negative take-up and the onset of greater supply from completion of new office developments,’ he added.

CBRE expects office vacancies to rise sharply going forward. Rival firm Colliers International predicts that the average gross monthly rental of Grade A space in the central business district will ease by up to 30 per cent over the next three quarters of 2009 from the Q1 level - which was already 22 per cent lower than at the end of last year.

The weak demand in the office sector also rubbed off on business park space, which saw negative take-up of about 215,000 sq ft in Q1, against positive take-up of some 10,700 sq ft in Q4 2008. Vacancy rate for the sector increased from 6.2 per cent in Q4 2008 to 9.7 per cent in Q1 2009.

In the private residential segment, URA’s overall islandwide price index slipped 14.1 per cent in Q1 over the preceding quarter, slightly steeper than the flash estimate decline of 13.8 per cent. The Q1 drop was also the biggest quarterly drop to date. The index has now eased 21.2 per cent since peaking in Q2 last year.

Colliers International director Tay Huey Ying says: ‘Mass market homes could see more gradual price corrections averaging about 8 to 12 per cent over the next three quarters (from Q1 2009 levels) as more sellers in the secondary market as well as developers with unsold units from earlier launches can be expected to adjust the pricing of their properties to near-current levels.’

She predicts bigger average price declines of 10-15 per cent for the mid-tier and high-end/luxury segments over the same period.

URA’s private residential rental indices show that the sharpest contraction in Q1 was for non-landed homes in the Core Central Region, which shrank 10.3 per cent quarter on quarter. The overall private residential rental index slipped 8.5 per cent in Q1, bigger than the 5.3 per cent drop in Q4. ‘The decline in rents could be attributed to supply outstripping demand as more expats left the country and to more new projects being completed,’ CBRE executive director Li Hiaw Ho said.

Developers sold a total 2,596 private homes in Q1, about six times the 419 units in Q4 2008.

The latest Q1 number was 64 units lower than the 2,660-unit figure collated from monthly developer sales stats (for January to March 2009). The decline reflects lapsing of options on units sold earlier in the quarter, URA’s spokeswoman said.

Market watchers also observed a slight easing in residential supply.

Some 27,423 private homes are expected to be completed between Q2 2009 and 2011, lower than the 31,004 units projected for completion between 2009 and 2011 in URA’s Q4 2008 data.

The smaller pipeline supply partly reflects the completion of 2,230 units in Q1 2009.

Developers may also have postponed redevelopment of some of the sites they had bought through en bloc sales and delayed construction, said URA’s spokeswoman.

URA’s shop rental index eased 3.3 per cent quarter on quarter in Q1, after dipping 0.6 per cent in Q4. The all industrial rental index slid 5.6 per cent in Q1, also worse than the 3.7 per cent fall in Q4.

Summing up prospects for Singapore’s property markets, Knight Frank managing director Tan Tiong Cheng said: ‘For the private residential sector, there’s evidence of a pick-up in activity - not just in the primary market but also subsales and resales. For office and industrial, there are going to be more rental declines because of the economic slowdown. Retail will be difficult. New malls opening this year may drum up business, but it will be at the expense of existing malls, given that tourism numbers are weak.’

Sports Hub project hit by lack of money

Source : Straits Times - 24 Apr 2009

A LACK of financing has put the brakes on the $1.87 billion Singapore Sports Hub project at Kallang.

Construction cannot go ahead because of this, Mr Ludwig Reichhold, managing director of construction firm Dragages Singapore, the lead agency of the Singapore Sports Hub Consortium (SSHC), told The Straits Times yesterday.

He said: ‘The project is more or less ready to start because the design has been developed to a stage where we have a provisional permit to start.’

However, he added, ‘obviously, we have found difficulty in financing because of the financial crisis, and we’re trying to resolve this with the Government.’

He was confident, however, that this would be a short-term hiccup, saying: ‘This situation with the financial market is a temporary one, and we’re trying to overcome that. Once that is resolved, we will be ready to start.’

When contacted, asset management firm United Premas, another member of the consortium, echoed Mr Reichhold’s comments on the difficulty of securing financing.

Other members of the consortium, meanwhile, are keen to get started.

Asked about the progress in planning, co-lead designer of the project, DP Architects’ Mr Teoh Hai Pin said: ‘As far as I’m concerned, the design side is very advanced. We’re ready.’

The Sports Hub, an integrated complex featuring a 55,000-seater stadium, watersports centre and leisure, shopping and dining facilities, is due to be completed by end-2011, in time for Singapore to host the 2013 South-east Asia Games.

SSHC won the bid to build the Sports Hub in January last year, but little work has been done so far. The contract agreement was to have been signed in March last year, followed by the tearing down of the National Stadium the following month. The contract remains unsigned, and the Grand Old Dame still stands.

The lack of progress has raised speculation about SSHC’s ability to deliver on its plans for the 35ha hub.

The latest came on Wednesday when the London-based, subscription-only online publication Infrastructure Journal said the Singapore Government was ready to step in and bail out the struggling project.

The Journal, which claims a global readership that includes investors and government officials, also said that banking giant HSBC, the consortium’s financial adviser, is looking for 10 to 12 banks to provide financing. The report said no bank was prepared to put up more than $200 million for the project.

When contacted, both the Ministry of Finance and HSBC declined to comment on the report. Said HSBC’s resource and energy group director Lynn Tho: ‘We are working closely with the Government and are still in discussions.’

The Sports Hub is a public-private partnership (PPP) project. The Government will pay the SSHC - which will design, build, finance and operate the Hub - a monthly unitary payment throughout the project’s 25-year term. In return, the Government will receive a cut of third-party revenues.

CEO’s bonus not an issue

Source : Straits Times - 24 Apr 2009

IT HAS grabbed many headlines over recent weeks but the $20.52 million bonus paid to CapitaLand’s chief executive hardly raised a stir at the firm’s annual general meeting yesterday.

Only one investor questioned whether the amount paid to Mr Liew Mun Leong in 2007, but which was announced only recently, made any sense.

More attention was paid to other issues, including the property giant’s prospects in the coming years, and its dividend policy and financial health.

But Mr Lim Chin Beng, chairman of the executive resource and compensation committee, tackled the bonus question head-on.

He told the 360 shareholders that the bonus in 2007 was accrued, and was due to an economic value added payment or EVA. This measures the net operating profit after tax, minus the cost of all capital employed.

CapitaLand’s EVA in 2007 was $2.3 billion but fell to $660 million last year.

This was why Mr Liew was credited with a comparatively more modest bonus of $2.98 million for last year.

‘EVA has been proven to be a very effective way of determining how efficient a company is and it is for the long-term interest of the company that it uses EVA,’ said Mr Lim.

He added that Mr Liew’s bonus goes into an ‘EVA bank account’ and he takes home one-third of the balance every year.

In a bad year for CapitaLand, for instance, that running total in his bonus account may be clawed back.

‘In the early years of CapitaLand’s life, there have been very bad years. There have been negative EVAs,’ Mr Lim said.

He added that in calculating EVA, CapitaLand excluded revaluation gains. These typically would have boosted the earnings of most developers during the 2007 property boom.

Mr Liew told shareholders at the Capital Tower auditorium that one of the company’s main cornerstones today is ’solvency’.

That was a main reason it undertook a recent $1.84 billion rights issue to increase its war chest from $4.2 billion to $6 billion.

‘That’s why you’ve companies like AIG and General Motors - they’re all not solvent,’ he said.

‘What we’re doing is to make sure that…we can survive the crisis and we’ve enough at the same time to take advantage of new investment opportunities.’

Some shareholders told The Straits Times yesterday that Mr Liew’s bonus was not an issue for them.

‘He has managed the company well and he deserves it,’ said shareholder Don, who did not want to give his full name.

Mr Tan, another shareholder seated alongside him who also did not wish to give his full name, said he was confident that the board of directors would do the right thing.

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GOOD PERFORMANCE GAUGE

‘EVA has been proven to be a very effective way of determining how efficient a company is and it is for the long-term interest of the company that it uses EVA.’

Mr Lim Chin Beng, chairman of the executive resource and compensation committee, on the economic value added payment (EVA) which measures the net operating profit after tax, minus the cost of all capital employed

Fiorenza: Koh Brothers targets Kovan condo at HDB upgraders

Source : Straits Times - 24 Apr 2009

KOH Brothers Group hopes to tempt HDB upgraders with the release of a small Kovan project this weekend while it holds off launching high-end properties until the time is ripe.

The freehold Fiorenza in Florence Road has 28 units and will be priced at $790 per sq ft, or between $749,000 and $1.2 million per unit.

There are two- and three-bedroom units ranging from 840 to 1,442 sq ft in the five-storey block as well as penthouses of 1,378 to 1,851 sq ft each.

In the same area, the 521-unit Kovan Residences, which is nearer the Kovan MRT station than Fiorenza, still has unlaunched units. The 99-year leasehold project went for about $880 psf last year but those levels have since been cut. Last month, 56 units were sold at a median price of $705 psf.

Koh Brothers is offering the interest absorption scheme at a 2 per cent premium for Fiorenza.

Chief executive and managing director Francis Koh said the project would feature a glass jacuzzi imported from Italy on all the balconies. Each unit will also get a multi-room digital music system.

Koh Brothers had planned to release Fiorenza in the second quarter of last year. It was also hoping to launch the high-end Lincoln Suites off Newton Road by early this year, but the market has not been in its favour.

With high-end demand still muted, the launch is unlikely anytime soon.

Mr Koh said the consortium would continue to lease out Lincoln Lodge - which is the site for Lincoln Suites - right into next year. It had, together with Heeton Holdings, KSH Holdings and Lian Beng Group, bought Lincoln Lodge at the height of the property boom in 2007 for $1,449.30 psf per plot ratio.

Koh Brothers has other development projects in the pipeline which it is holding until an appropriate time.

‘The market may change very quickly. It can go up quickly, it can also come down quickly,’ said Mr Koh.

Secondary market buzzes as prices fall

Source : Business Times - 24 Apr 2009

The pick-up in private home sales by developers has spilled over to the secondary market. Falling prices are greasing the flow.

Caveats have been lodged for 1,063 private homes in the resale market in the first three months of this year, up 11.7 per cent from the preceding quarter. In the subsale market, 384 caveats were lodged in Q1 2009, reflecting a 44.4 per cent increase from the Q4 2008 figure, according to Savills’s analysis of caveats captured by the Urban Redevelopment Authority’s Realis system.

Resales and subsales refer to secondary market transactions. Subsales involve projects that have yet to obtain Certificate of Statutory Completion while resales relate to projects that have received CSC. CSC is typically obtained anywhere from three to 12 months after the project receives Temporary Occupation Permit (TOP).

The average prices of resale and subsale transactions at the most popular projects in Q1 2009 were generally lower than in the preceding quarter as well as the same period last year.

City Square Residences, the most popular subsale project in the first three months of this year with 41 units, saw an average price of $804 psf, down 5 per cent from the $845 average subsale price in Q4 2008 and 15 per cent below the $947 psf average subsale price seen in Q1 2008.

Average prices for 11 of the 12 most popular subsale projects in Q1 this year fell between one and 14 per cent from the preceding quarter. The exception was Clementiwoods Condo, where eight subsale deals were done at an average of $664 psf in Q1, some 5 per cent higher than in the previous quarter but down 7 per cent from the same period a year ago.

Compared with Q1 last year, average prices for all 12 top-selling subsale projects in Q1 2009 fell between 4 per cent (Centris) and 36 per cent (The Cosmopolitan).

As for resale transactions, the 11 hottest developments saw quarter-on-quarter price declines ranging from 4 per cent (for The Lakeshore) to 19 per cent (Bayshore Park) in Q1. The Lakeshore was the most popular resale project in the first quarter, with 27 units changing hands, followed by Costa del Sol, with 11 units.

Savills Singapore head of research Priya Sengupta noted that the 11 most popular resale projects in Q1 were all in the mass and mid-tier sectors. ‘Amid the economic uncertainties, affordability remains a key consideration for home buyers/investors; 100 of the 113 deals in the 11 most popular resale projects in Q1 were at below $1 million,’ she said.

Resale activity for high-end projects was limited. ‘This could be attributed to the price disparity between sellers and buyers as the latter expect further downward price adjustment in the near future, as well as the stricter home loan criteria in terms of loan-to-value ratio, especially for investors,’ Ms Sengupta said.

Mass and mid-tier projects also saw more subsale transactions than high-end projects. Much of the subsales activity in Q1 surrounded projects that have either received TOP recently or are close to receiving it. For instance, City Square Residences, The Esta, The Sail @ Marina Bay, The Cosmopolitan and Rivergate have received TOP in 2008/2009, while One Amber and The Centris will get TOP soon, Savills said.

Market watchers said that this could be because many specuvestors who bought on deferred payment schemes (DPS) may be inclined to offload their units as the TOP date approaches, when they have to pay up the bulk of the purchase price to developers.

However, CB Richard Ellis executive director Joseph Tan pointed out that regardless of whether buyers opted for DPS, private housing projects are typically a hive of activity around the time they receive TOP, drawing buyers who want to move in themselves or to rent out immediately.

He also attributed the increase in subsale and resale transactions in Q1 to ‘prices being at fairly reasonable levels now’, with the stock market rally improving sentiment.

Mr Tan said that whether the buzz in the secondary market continues will depend on the stockmarket. ‘So long as the Straits Times Index remains fairly stable, it will give comfort to investors that the property market is close to bottoming out, given the price correction in the past 12-15 months,’ he added.

According to DTZ’s figures, which are based on resale prices, the average freehold luxury condo and apartment price of $1,880 psf in Q1 this year marks about a one-third drop from the peak of $2,800 psf in late 2007/early 2008.

The most expensive subsale deal (in terms of psf price) in Q1 this year was a 29th floor unit at Orchard Residences that changed hands for $2,579 psf. In absolute dollar quantum, the most expensive subsale deal was an 11th floor apartment at The Tate Residences at Claymore Road, which sold for $5.93 million ($1,850 psf).

As for resale transactions, the top grossers were a 10th floor apartment at Richmond Park at Bideford Road which sold for $2,199 psf and a 25th floor unit at Four Seasons Park at Cuscaden Walk that fetched $6.5 million ($1,701 psf).

Sentosa Cove residential developer gets one-year extension

Source : Channel NewsAsia - 24 Apr 2009

Total land sale on Sentosa Cove reaped some $5.1 billion in investments.

A slowdown in the prime property market in Singapore has prompted a handful of developers to ask for extensions on their projects in the high-end Sentosa Cove. One developer has been granted a one-year extension.

The residential properties on the resort island of Sentosa are aimed at providing luxury waterfront living. But prices have been hit amid the property slump in Singapore.

There are 1,700 residents in Sentosa Cove but the number will grow to about 3,000 by the end of the year.

These high-net worth residents come from over 21 countries like Ireland, China, Indonesia and Russia. Forty per cent of the residents are Singaporeans.

Sentosa Cove is seen as one of the most sought-after addresses in Singapore, and at their peak, units there were retailing at about S$2,000 per square foot.

But the global slowdown has forced prices to come down by half, prompting some developers to ask for relief.

Sentosa Cove’s general manager, Jason Yeo, said: “Developers are seeking for some flexibility in completion period. There are already live-in populations and they have to live with some construction activities, so it’s how we balance between developers’ needs as well as residents’ needs.”

Landed properties are given a four-year completion period while condominiums get five years.

Sentosa Cove says it will review requests for extensions on a case-by-case basis. But it is confident that all 2,100 units will be completed by 2014.

Sentosa Development Corp’s board member, Low Teo Ping, said: “When we selected the developers, it was not just based on price itself but on the track record and also the experience and the credibility of the developers. So that’s our first line of defence. So far, it has only been a handful of developers who have actually requested for some consideration.”

Sentosa Cove will spend some $300m to improve the island’s infrastructure over the next decade.

Mike Barclay, CEO of Sentosa Leisure Group, said: “We’re doubling capacity on the causeway into the island. There’ll be three lanes in each direction, and that will be up and running in about six months’ time.

“We’ve bought two new trains, we’ll increase capacity by about 50%. We’ll love to get a ferry service running from the waterfront. So we’re in discussions with the MPA (Maritime and Port Authority of Singapore) and the cruise centre to see if this is viable.”

Property sales and rentals down in Q1 2009

Source : Channel NewsAsia - 24 Apr 2009

Property prices across the board were down in the first quarter of 2009.

Official figures released Friday showed that in the private property market, residential, office, shop and industrial properties decreased fetched lower prices both in terms of sales and rentals.

As for HDB’s Resale Price Index (RPI) for public housing, it showed a fall by 0.8% in 1st Quarter 2009 over the previous quarter. This comes after an increase of 1.4% in 4th Quarter 2008.

There was an increase in resale transactions from 6,186 cases in 4th Quarter 2008 to about 6,446 cases in 1st Quarter 2009, but this increase is slightly lower at 1.4% compared to 1st Quarter 2008.

The HDB data also revealed that the median Cash-Over-Valuation (COV) amount for all resale transactions has been declining since 1st Quarter 2008.

In 1st Quarter 2009, it fell to $4,000, which is $11,000 lower than that in 4th Quarter 2008.

As for the rental of government flats by owners, the numbers in the 1st Quarter remained the same as previous quarter for the smaller flats, but fell by $100 to $200 for 4-room and larger units.

The number of subletting transactions also fell by 4.3% from 3,685 cases in 4th Quarter 2008 to 3,525 cases in 1st Quarter 2009, even though the total number of flats approved for subletting rose to about 22,800 units as at 1st Quarter 2009.

In the private property sector, overall prices for residential units fell by 14.1% in 1st Quarter 2009, compared with the decline of 6.1% in the previous quarter.

Prices of non-landed properties fell by 15.1% in 1st Quarter 2009, compared with the decline of 6.3% in the previous quarter, with apartment prices falling by 15.9%, while those of condominiums fell by 14.7%.

Hardest hit was those in the Core Central Region(CCR) where the drop was by 16.2% while the Rest of Central Region(RCR) and Outside Central Region (OCR) fell by 17.0% and 7.3% respectively.

Rentals of non-landed properties in CCR, RCR and OCR also fell but not as sharply by 10.3%, 7.2% and 6.5% respectively in 1st Quarter 2009.

The drop was not as steep for landed property sales which fell by 9.2% in 1st Quarter 2009, compared with the decrease of 4.8% in the previous quarter.

Overall, the rental market for private properties fetched prices that were 8.5% in 1st Quarter 2009, compared with the decrease of 5.3% in the previous quarter.

The URA also reported in its latest release that as at the end of the 1st Quarter 2009, there was a total supply of 64,152 uncompleted units of private housing from projects in the pipeline.

Of these, 42,045 units remain unsold.

As for the 64,152 uncompleted units, 27,423 units were expected to be completed between 2nd quarter 2009 and 2011, and most are already under construction6.

The URA also said that developers have obtained planning approvals for for projects totaling some 4,000 units, but have yet to commence construction.

Simei condo-style flats: No balloting

Source : Straits Times - 17 Apr 2009

360 four- and five-room DBSS units can be booked on the spot.

A NEW condo-style estate being launched by the Housing Board will allow buyers to secure a flat on the spot and not have to join a ballot like for other Design, Build and Sell Scheme (DBSS) projects.

An artist’s impression of the Parc Lumiere development under the Design, Build and Sell Scheme. The project will offer condo-style fittings but not facilities. — PHOTO: SIM LIAN GROUP.

Parc Lumiere at Simei Road will have 120 four-room flats and 240 five-room units. The four-roomers, of 1,012 sq ft each, are priced at between $378,000 and $425,000. The five-roomers range from 1,152 sq ft to 1,195 sq ft and are priced at between $462,000 and $575,000. The average price is $425 per sq ft (psf).

The walk-in selection sale starts with a viewing period from tomorrow for buyers to check out the showflats and enquire about eligibility. Booking on a first-come, first-served basis starts next Tuesday. The executive director of developer Sim Lian Group, Ms Diana Kuik, said the booking date may be brought forward if there is strong interest.

Parc Lumiere will have eight 12-storey blocks and an elevated landscape deck. Like other DBSS projects, it offers condo-style fittings such as bay windows and balconies, built-in wardrobes and kitchen cabinets. But unlike condominiums, DBSS projects do not have facilities such as pools and barbecue pits.

The Peak @ Toa Payoh, a DBSS project with 1,203 units, was launched on Wednesday for sale via the balloting system. Buyers have until April 28 to apply.

DBSS projects are public housing and so are subject to rules for new HDB flats. For instance, only those who earn $8,000 or less a month can buy them.

Because DBSS homes are sandwiched in a narrowing price gap between private condominiums and HDB flats, experts have cited a $500,000 price point as the resistance level for such homes.

Real estate company PropNex’s chief executive Mohamed Ismail Gafoor said there may be some buyer resistance for the Parc Lumiere five-roomers.

Other DBSS projects like Natura Loft in Bishan and Park Central in Ang Mo Kio still have units available for sale.

Recent DBSS projects take into account peak HDB prices because the developers had bought their land when the market was still fairly strong, Mr Ismail said. Sim Lian bought the Simei site last June for $137 psf of potential gross floor area.

Mr Ismail said four- and five-room flats in Simei are now valued at around $350 psf. If buyers do not mind an older flat, they can get a five-room unit nearer the Simei MRT station for the price of a four-room DBSS flat, he said.

Ms Kuik said Sim Lian should be able to complete Parc Lumiere by the first half of 2011. The developer was behind Singapore’s first DBSS project, the 616-unit Premiere @ Tampines, which drew nearly 6,000 applications in late 2006.

Recovery expected only after mid-2010

Source : Straits Times - 23 Apr 2009

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, according to new research.

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year. The firm bases its view on a new report from its Asia forecasting unit.

This shows how a slump, or recovery, in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: The housing market will not recover until at least one quarter, or even a year, after the stock market recovers.

And as any stock market investor knows, the Straits Times Index (STI) is well down from its 2007 peak, even though it has risen slightly recently.

‘The STI reflects people’s view of the economy so its recovery will really depend on clear signs of an economic recovery,’ said DTZ’s senior director of consulting and research Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

‘It’s all co-related in one way or another. The stock market is usually the earliest indicator but it’s not hard and fast… its timing might be off,’ said Daiwa Institute of Research analyst David Lum.

Last week, the Government said it expects gross domestic product to contract by 6 per cent to 9 per cent this year, well up on an earlier forecast of a 2 per cent to 5 per cent contraction. DTZ’s study also underlined the high levels of unsold stock held by developers - another drag on prices and an eventual recovery.

The report indicated that the residential market thus has a higher chance of bottoming out only by mid-2010 and then staging a gradual recovery.

Mr Lum said the property market has already started to correct so anyone who bought recently would not have purchased at the peak.

If prices fall further, these people will not be happy, but they would have been comfortable with the price levels they bought into and will not be overstretched as they would have thought about their purchase, he added.

DMG & Partners Securities investment analyst Brandon Lee believes the mass market segment would have bottomed out at around $550 psf to $600 psf so recent buyers may not have much to worry.

Those who bought prime homes, however, may have gone in too early. Mr Lee sees the property market bottoming out only in the first half of next year.

‘Crises in the past have lasted for six to eight consecutive quarters and we are only half way through,’ he said.

‘Further, equity markets are still volatile and prices have not reached the bottom for prime properties. Interest in prime property remains very subdued.’

The property market remains largely weak, even though recent sales of new private homes brought a glimmer of hope to the market. First-quarter new private home sales hit 2,660 units, representing 62 per cent of all new private homes sold during the whole of last year.

Whether it was pent-up demand, discounted levels or other factors, sales did reach very high levels given the recession.

But most sales were in the mass market segment, which consultants tip to be the best-performing sector this year.

Demand for prime and high-end homes remains sluggish.

‘Since when does a ‘rebound’ in one segment signal a recovery for the entire market?’ asked Chesterton Suntec International head of research and consultancy Colin Tan.

‘The greatest danger we face now is complacency…If it were an ordinary recession, I can understand why we are starting to call this period of optimism the first signs of a recovery, but it is not,’ said Mr Tan.

‘The recovery cycle will be like no other. There will be further twists and turns.’

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Unsold stock rising

THE DTZ report highlighted another indicator: unsold stock of new housing held by developers.

It observed that the Straits Times Index has, since 1993, been leading the Urban Redevelopment Authority’s non-landed residential price index by one to four quarters.

Historically, the level of unsold stock - which has risen to around 21,000 units since the third quarter of 2007 - has preceded the property market price recovery by two to 12 quarters, said Ms Chua Chor Hoon, DTZ’s senior director of consulting and research.

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NOT OVER YET

‘Crises in the past have lasted for six to eight consecutive quarters and we are only half way through.’

Mr Brandon Lee, investment analyst with DMG & Partners Securities

TOO SOON FOR OPTIMISM

‘If it were an ordinary recession, I can understand why we are starting to call this period of optimism the first signs of a recovery, but it is not. The recovery cycle will be like no other. There will be further twists and turns.’

Mr Colin Tan, Chesterton Suntec International’s head of research and consultancy

Failed deal nets Horizon Towers owners $1.5m

Source : Straits Times - 23 Apr 2009

HORIZON Towers owners may reap some $1.5 million from their failed en-bloc deal, which in turn could help pay their legal bills.

The sum represents the interest earned on the $50 million deposit paid by the would-be buyers when the $500 million deal was inked in 2007.

The deposit was paid when the initial option to purchase and sales pacts were signed. The deal was made between the condominium’s sales committee on behalf of the majority owners, and property developer HPL and two partners.

The en-bloc deal derailed early this month after a handful of objectors fought all the way to the Court of Appeal, which ruled for them. The $50 million deposit is understood to have been returned to the would-be buyers. But the deal provided for the interest to be given to the sellers, probably including the minority objectors. Not all contracts spell out how to deal with the interest earned on the 10 per cent deposit from the option to purchase and sales agreements, which in this case was substantial, said lawyers.

But today’s sales-savvy sellers are likely to insist the interest goes to them if a sales bid falls through, said lawyer Philip Fong. In disbursing the money, the sales committee would have to include the minority objectors, as the the Court of Appeal decision made clear the sale contract applied to all owners, said Mr Fong, a partner of Harry Elias Partnership.

It is not clear how far $1.5 million will offset legal costs, which have not been totalled up. Horizon Tower sales committee member Mamata Kapildave Dave, 40, said yesterday no decision had been made yet on how the 210 owners would deal with the $1.5 million while the court assesses legal fees.

The total costs in the long-standing case would include lawyers’ fees for the initial 17-day Strata Titles Board hearings, two High Court appearances and the final Court of Appeal session.

A total of 173 majority owners have already paid some $2.6 million, or $15,000 each, while a group of three minority owners are reported to have coughed up some $1.5 million in lawyers’ fees.

Meanwhile, lawyers from Allen & Gledhill, representing the failed buyers, are going to court today about a suit that has been brought against the sales committee. The suit was filed in 2007 and sought a declaration that the sales committee had allegedly not done all it could to make sure the sale went through.

According to court documents filed, the suit also sought damages for alleged breach of contract. It has been in abeyance since February, pending the outcome of the Court of Appeal’s judgment, which was delivered earlier this month.

‘They can either go ahead with the suit, amend the suit or drop it altogether,’ said Ms Mamata.

‘We are on the horizon, and there is sunrise and there is sunset.We hope in good faith everything goes right.’

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REALISTIC OUTLOOK

‘They can either go ahead with the suit, amend the suit or drop it altogether. We are on the horizon, and there is sunrise and there is sunset. We hope in good faith everything goes right.’

Horizon Towers sales committee member Mamata Kapildave Dave, on an upcoming suit

CapitaLand CEO bonus likely a hot topic

April 23, 2009

CAPITALAND heads into its annual general meeting (AGM) today in the awkward position of having to justify the $20.52 million bonus paid to chief executive Liew Mun Leong in 2007.

The huge payout, which is thought to be the largest bonus ever awarded to a chief executive here in a single year, has quickly become the talk of the town.

The amount came to light only when CapitaLand published its summary report for 2008 on March 24. CapitaLand justified the figure by pointing to the group’s record profit of $2.76 billion that year.

In the summary report, it was also revealed that Mr Liew was paid $6.36 million for 2006, when CapitaLand recorded a net profit of some $1.01 billion. When the three years from 2006 to 2008 are taken together, Mr Liew’s total bonuses came to almost $30 million.

The company said that it uses the economic value added (EVA) indicator to calculate performance-based bonuses for its top management. So Mr Liew’s 2007 bonus was based on an EVA of $2.3 billion.

The EVA figure for 2007 included revaluation gains. During that year, CapitaLand recognised revaluation gains of about $1.1 billion from its investment portfolio. Strike them out and the underlying profit will be lower. Following a commentary by this paper, CapitaLand clarified that it discounted revaluation gains from the EVA when computing bonuses.

But that still leaves a question mark. If revaluation gains were indeed discounted from the EVA, then the resultant figure for computing bonuses should be significantly lower. So why is Mr Liew’s 2007 bonus still more than three times what he received in 2006?

Performance bonuses do have a place in attracting and retaining talent. CapitaLand can point to the part played by management - including Mr Liew - in transforming the property group from a debt-leaden company into Southeast Asia’s largest developer. But that doesn’t mean such large payouts shouldn’t be put under scrutiny. Investors should ask: how exactly was the bonus arrived at? Is the amount, reasonable?

The other thing that shareholders might want clarity on is CapitaLand’s plans for its cash hoard. The developer recently completed a $1.84 billion rights issue, bringing its total war chest to some $6 billion.

‘Upon the completion of its rights issue and its subscription for CapitaMall Trust’s rights shares, CapitaLand now has a cash hoard of about $5.698 billion and its net gearing has fallen from 0.46 times to 0.3 times,’ noted OCBC Investment Research analyst Foo Sze Ming in a recent note. ‘Focus will now be on the deployment of the funds raised, which could be a potential catalyst to the re-rating of CapitaLand’s shares.’

Lots of cash sounds good in times like these, but, if not put to the right use, may not necessarily be a good thing.

Two signals speak volumes about condo prices

Source : Business Times - 23 Apr 2009

Study by DTZ finds STI and developers’ stock to be reliable guides to turning points

THE Straits Times Index and cumulative unsold inventory held by developers have been found to be reliable indicators preceding major turning points for private apartment and condo prices in Singapore, according to a study by DTZ.

The STI has been observed to lead the Urban Redevelopment Authority’s non-landed private residential price index by one to four quarters since 1993.

For instance, the STI peaked in the third quarter of 2007 - nine months before the URA’s index peaked in Q2 2008.

Similarly, the cumulative unsold inventory of non-landed private homes - with sales licences - held by developers has peaked or bottomed between two to 12 quarters ahead of turning points in the URA’s index.

DTZ also devised an internal risk assessment model to estimate the probability of future major turning points in the Singapore residential market.

It showed the risk of entering a correction phase has escalated considerably since Q2 2008.

The property consulting group said: ‘Our assessment indicates that the probability of a full recovery by the end of 2009 - for the office and residential property markets in Hong Kong, China and Singapore - remains low.’ DTZ added: ‘Our internal model also indicates that the Singapore residential market has a higher chance of bottoming by mid-2010 (than by end-2009) and staging a gradual recovery from that point onwards.’

Both the Hong Kong and Singapore office markets have a lower probability of recovering by end-2010 than the residential markets in these two cities, as the office sector is more closely correlated with economic growth than the residential sector, DTZ reckons.

Asked whether the recent stockmarket rally will presage a recovery in home prices in Singapore, DTZ senior research director Chua Chor Hoon said: ‘It’s too early to say if the stockmarket rally will be sustained. A lot will hinge on when the economy recovers.’

CapitaLand sees good prospects in China

Source : Channel NewsAsia - 23 Apr 2009

Property developer CapitaLand believes the China market presents the best prospects in the current challenging economic climate.

Speaking to shareholders at the company’s annual general meeting on Thursday, CEO Liew Mun Leong said real estate is all about economic growth. And CapitaLand is hopeful that Beijing’s US$585 billion stimulus package will help spur consumption there.

CapitaLand is also on track to open another 10 malls in China this year.

Despite the downturn, CapitaLand expects its shopping malls and serviced apartments to continue performing well in 2009, and for all its business sectors to remain above water.

In addition, CapitaLand said the group will also benefit from past investments as they come to fruition.

The developer added that its S$4.2 billion war chest will primarily be retained to maintain its solvency and credibility with lenders. But CapitaLand does not rule out spending some of this if good opportunities come along in the next few years.

Seafront resort a short hop away

Source : Business Times - 23 Apr 2009

THE Indonesian island of Batam is only very slightly known as a marine leisure playground. To most people, it is more often thought of as Singapore’s industrial extension where many of our shipyards and manufacturing companies have relocated their lower-end operations. As such it suffers from the perception of being a huge polluted island dedicated to providing low-cost services.

But to boaters and leisure seekers that know better, there are little pockets of tranquillity and luxury to be found. The island is much bigger than the main shopping and industrial areas that most Singaporeans would be familiar with and apart from the main Batam island, there is a chain of islands stretching southwards that have yet to be developed or explored for the most part.

On the northeastern fringe of the island lies a small string of beaches centred around Nongsa Point. This area is conveniently located just 20 km from Singapore’s Tanah Merah Ferry Terminal and is served by its own ferry terminal. The less than one hour ferry ride makes connections quick and hassle-free.

This area is best known for the Nongsa Point Marina, one of the few entry points where leisure boats can clear in and out of Indonesian waters and the main gateway to the Riau archipelago. The marina has been recently given a major face-lift and is poised to serve the high-flying superyacht crowd as well as other leisure boaters who come to Batam for its rural charm of rustic fishing villages, friendly people and quiet beaches lined with majestic palms.

The area is also home to understated luxury resorts and is starting to see some new developments as well. The Turi Beach Resort just round the corner from the marina has also been recently refurbished and now has a new wing featuring an updated modern resort look. The cluster of high-end waterfront lifestyle-oriented developments has attracted others to the area.

Diversified real estate investment, development and management group KOP Group is developing its luxury seafront resort development, Montigo Resorts, on a 12-hectare site there. KOP, majority-owned by the Dubai Group, is known for innovative projects in Singapore like Hamilton Scotts, a luxury high-rise condominium featuring special elevators that bring cars right up to the units.

With one kilometre of pristine waterfront on Nongsa Beach, Montigo Resorts will offer 133 seafront villas, of which 45 are private villas and 88 are terraced and semi-detached homes. All homes come with the option of private swimming pools and/or jacuzzi.

‘Boaters often complain that they don’t have any place to go when they are out on their boats so hopefully this may be something that appeals to them,’ said KOP marketing and communications manager Joanne Lim. ‘We’re well known in the luxury developments area and we felt we could provide a solution to meet the boaters’ needs and create products that suit their lifestyle,’ she said.

‘There are also many who wish to enjoy a beachfront lifestyle without having to endure the hassle of flights and long transits so this will be ideal for them,’ she added.

Montigo Resorts will be easy to get to, being just a short ferry hop away. And if there’s a need for privacy or perhaps a bit of pampering, private yacht rides will also be provided for residents. Montigo Resorts offers its residents a modern haven with breathtaking sea views, sun, sand and fresh air, a welcome respite from the madding world yet with all the creature comforts of a modern and luxurious home.

The resort will offer residents all the services and amenities of a world-class hotel with fine dining restaurants, swimming pools, an exclusive clubhouse, a state-of-the-art spa, and even play areas and water sport facilities. The site is also within easy reach of Batam’s six championship golf courses, two modern marinas and a wide range of boutiques and luxury shopping malls.

KOP had planned to launch 60 villas in the first of three phases during Boat Asia, but 30 of these have already been sold as at yesterday. Each villa will have an approximate built-up area of 3,300 square feet.

‘The show is a good platform to launch this development because it provides a very targeted audience and will help us create awareness as well as meet potential clients so we are better aware of their needs,’ said Ms Lim.

Whiff of revival in northeast US home market

Source : Business Times - 23 Apr 2009

But strong recovery some way off despite increased interest as buyers still finding it hard to get mortgages

After one of the worst slumps in memory, the housing market in the Northeast United States is stirring to life with more buyers on the prowl and bigger crowds at home showings. But few are in a rush to buy and many of those willing to spend find it hard to get mortgages, suggesting a strong recovery is still some way off and those hoping for a swift return to the go-go days will be disappointed.

Many home-buyers are like 26-year-old Jessica Doctoroff, who is taking her time as she hunts for her first home in the densely populated neighbourhoods around Somerville, a middle-class Massachusetts city that neighbours Boston.

After years of renting and living with roommates, the insurance manager wants her own home and is ready to buy. She’s viewed about 20 condominium apartments since February and has seen plenty of bargains get even better. One two-bedroom apartment had its price cut by US$25,000 and another was reduced just 10 days on the market.

‘I don’t feel like there is a rush,’ she said after viewing a 1,177 sq ft two-bedroom apartment priced at US$499,000. ‘There’s a lot more people coming out to look at these places, that’s true, but there’s a lot more property on the market.’ Massachusetts was one of the frothiest markets in the boom.

In the first quarter of 2000, the state ranked first in the pace of year-on-year house price rises in the country. And from 1995 to 2004, home sales notched double-digit growth.

But the recession is hammering the region. Home sales fell by 11 per cent year-over-year in February in Massachusetts, 15 per cent in neighbouring Rhode Island, 22 per cent in Maine and 26 per cent in Connecticut, according to the Federal Reserve’s ‘Beige Book’ survey of economic conditions released last week.

Home prices fared even worse. The median price of a home in those four states plus New Hampshire fell 17 per cent or more year-over-year, including a 26 per cent drop in Rhode Island where the unemployment rate has scaled double digits.

Real-estate brokers agree those numbers are dismal but say several factors may turn the tide - from low prices to low interest rates and a new-homebuyer tax credit. Mother Nature also could help as warmer weather and sunshine draw bigger crowds to home showings after an unusually cold winter.

Expectations are high for a spring thaw in sales. ‘It’s definitely getting better,’ said real-estate broker Stephen Bremis of Bremis Realty Inc in Somerville. Attendance at the home showings he organises has nearly doubled since February. He sold two houses in three days last week. He said buyers are responding to a drop in interest rates that has pushed the national average on a 30-year fixed-rate loan to around 4.85 per cent, the lowest on record, along with a tax credit of up to US$8,000 for qualified first-time buyers, part of the federal housing rescue plan passed in February. Some banks are also offering unprecedented incentives, like money for closing costs to unload foreclosed properties.

Brokers point to other positive signs such as a rise in Massachusetts condominium sales and prices in February compared to the previous month, according to the Fed’s Beige Book.

‘It’s likely that we have seen or are very close to seeing the bottom in home sales. But that’s very different from saying there is going to be a meaningful pickup in sales,’ said David Berson, chief economist of mortgage insurer PMI Group. He cites an index of housing affordability calculated by the National Association of Realtors that jumped in January to its highest since tracking began in 1970.

‘If you look at all the recessions for which we have housing data - and that goes back into the 1960s - home sales have bottomed and started to move up always before the official end to the recession,’ he said. ‘Before you can run you have to walk. And home sales bottoming is an important precondition for the housing market overall to recover. And I think that is where we are now.’ But for many, the credit crisis has made getting a mortgage harder than ever as banks demand larger down payments and more liquidity. And condominium sales have been slowed by new rules that make it hard to get conventional loans unless 70 per cent of the apartments in a building are at least under contract to be bought.

‘It used to be really difficult to find some buyers. And now there may be more buyers, but they are having a whole new battery of challenges, mainly financing,’ said Marc Charney, president of Charney Real Estate in Wellesley, Massachusetts. ‘So even if you have somebody who is ready, willing and able to buy, that doesn’t mean much,’ he said. ‘The appraisers are also under such new scrutiny. That’s another big factor.’ In the housing boom of the 1990s, an appraiser valued homes based on sales transactions in the same neighbourhood going back six months. Many lenders tightened that during the recession, narrowing the timeframe for appraisals to three months.

The experiences of brokers in Massachusetts are echoed in other parts of the US Northeast.

‘A lot more people are coming to shows. But they are taking a lot longer to make a commitment,’ said Carol Tangorra of brokers Schweppe Burgdorff in Upper Montclair, New Jersey.

Good idea to scrap balloting for flats

Source : Straits Times - 23 Apr 2009

I DISAGREE with Tuesday’s letter by Mr Zhou Zhiqiang, ‘Ballot is fairer to all’.

If the HDB decides to do away with balloting for flats, it is a good sign that Design, Build and Sell Scheme (DBSS) projects are gaining support, and becoming viable and acceptable to the public. In future, there may be many DBSS projects in the pipeline to complement private condominiums, so buyers have more choice.

Queuing for a home is very different from queueing for a concert ticket. It may cost you $88 if you do not like the concert, but it will cost you hundreds of thousands of dollars if you do not like your flat.

For that reason, a serious buyer should have done his homework before considering buying a DBSS flat. If he likes the location, considers the price acceptable and is keen to buy a flat, he should make himself available at the launch to visit the site and evaluate the designs. Viewing a solid mock-up model and layout details will give potential buyers the information they need.

I hope that one day, all HDB and DBSS flats are offered to the public without the need for balloting.

Paul Chan

Capitala defers UAE projects

Source : Business Times - 23 Apr 2009

Property developer Capitala, a joint venture of Abu Dhabi’s Mubadala and Singapore’s CapitaLand, said on Tuesday it was holding off on new projects and would offer more lower-end housing.

‘We will defer any new launch until sentiment returns to the market,’ Peter Wilding, deputy CEO, told Reuters on the sidelines of a property exhibition here, where Capitala is based.

‘Demand is still there, but there is no positive sentiment at the investor level and occupier level. People are waiting and watching, but we are confident of the future because of the demand curves,’ Mr Wilding said, adding the Abu Dhabi market was faring better than others in the region during the downturn.

‘There is far too much high-end products, and there is stronger demand for more affordable housing products,’ he said.

‘There is a requirement to diversify our product offering.’

Dubai home prices may slump 70% from peak, says UBS

Source : Business Times - 23 Apr 2009

Falling demand, bank mortgage lending may prompt developers to merge

Dubai house prices may slump as much as 70 per cent from their peak late last year as demand drops and banks fail to resume mortgage lending, prompting mergers, UBS AG said.

‘We are still in relatively early stages of the property down-cycle in United Arab Emirates,’ Saud Masud, a Dubai-based analyst at the Swiss bank, wrote in a report to clients dated Tuesday.

‘We believe risk-reward profiles are not yet compelling for investors to consider market re-entry, hence continued price declines are expected.’

Economic growth in Dubai, the second-biggest of seven states that make up the UAE, slumped after the worst financial crisis since the 1930s hurt its property, financial services and tourism industries.

The economy may contract 2 per cent to 4 per cent this year, Standard & Poor’s Ratings Services said in a report last month.

UBS downgraded Emaar Properties PJSC, the UAE’s biggest developer, and Union Properties PJSC to ’sell’ from ‘neutral’ as first-quarter results ‘will be disappointing’.

House prices in Dubai have slumped at least 25 per cent since their peak, and apartments have tumbled 39 per cent, UBS said.

Dubai’s majority expatriate population may drop 8 per cent this year and a further 2 per cent in 2010 as residents lose their jobs and leave within 30 days in accordance with the emirate’s visa laws, the Swiss bank said.

Property prices in Dubai quadrupled in the five years to September 2008, helped by new laws allowing foreigners to own property and a growing expatriate workforce.

Falling property prices now raise the prospect of rising loan defaults.

Property loans of UAE banks, including mortgages, stood at 172.74 billion dirhams (S$70.92 billion) at the end of 2008, or 17.8 per cent of gross domestic product, the central bank said.

Dubai may see ’significant consolidation among its key developers in addition to smaller less visible ones,’ UBS said.

The analyst started Abu Dhabi-based Sorouh Real Estate Co with a ’sell’ recommendation and cut Aldar Properties PJSC to ‘neutral’ from ‘buy’.

Hopes of a quick turnaround in property market fizzling out

Source : Channel NewsAsia - 22 Apr 2009

Hopes of a quick turnaround in the property market here are fizzling out.

Property consultancy DTZ said the probability of a full recovery in the Singapore property market by the end of this year is low.

In a research report issued on Wednesday, DTZ predicted there is only a 0.1 per cent chance that the Singapore office rental market will recover by year-end.

The residential market here is not faring much better, with only a 0.9 per cent probability of recovery by the third quarter and a 5.8 per cent chance by the end of the year.

DTZ said the Singapore residential market has a better chance of bottoming by mid 2010 and stage a gradual recovery from then onwards.

It also expects the office market to lag the residential market in staging a recovery.

Factors that DTZ used in its forecast include Singapore’s stock market index and the cumulative unsold inventory held by developers.

Ex-condo chief scoffs at fine for mischief

Source : Straits Times - 22 Apr 2009

FOR his acts of mischief in Laguna Park condominium, Lee Kok Leong, 62, former chairman of its management committee, was fined $1,200.

Arms folded as he sat in the dock yesterday, he told reporters: ‘Fine, then fine lah. After all, I can afford it. I can spend $4,000 in one night on karaoke.’

The general manager of a shipping company was so sure he would not be jailed that he had made plans to go to his office in Bukit Merah later in the day.

Earlier, he had pleaded guilty to inserting super glue into the keyholes of the padlock, front and rear gates of Mr Yap Cher Sim’s flat at Block 5000E on Aug 25 last year. For that, he was fined $800.

That same day, he did the same thing to another flat in the same block, belonging to Ms Alice Elizabeth Rappa. That resulted in another $400 fine.

Lee could also have been jailed up to a year for the offences, on top of being fined.

The Community Court heard that he had been caught in the act by the closed-circuit television camera installed by Mr Yap along the common corridor.

Lee later told police he had bought two tubes of super glue a day earlier with the aim of damaging Mr Yap’s unit. Someone had done the same super glue stunt to his own letterbox earlier, he claimed.

The acts of vandalism in the Marine Parade condominium came to light last July amid a row which erupted among residents over whether the condominium should be sold en bloc.

Among those who opposed the sale were Mr Yap and Ms Rappa. At that time, a regular apartment in the 530-unit condominium could have fetched more than $2.1 million in a collective sale. A penthouse owner could have received almost $4 million.

Proponents had included Lee, a 1998 Public Service Medal recipient who has lived there for the past 30 years.

His lawyer, Mr Ramesh Tiwary, said his client wanted a nest egg for his retirement and was unhappy at attempts to derail the collective sale process.

He was so upset that he suffered a relapse of a psychiatric condition which he had been diagnosed with since 1998, Mr Tiwary told Community Court judge Soh Tze Bian yesterday.

Dr Ung Eng Khean, a senior consultant psychiatrist and psychotherapist, confirmed this in his medical report, saying that Lee had a relapse of ‘moderate to severe depression’ last June.

The court case is not the end of the mischief that has plagued Laguna Park residents. Mr Larry Chan, 51, filed a police report after he found his mailbox forced open, its metal flap bent, and all the mail removed two weeks ago.

Residents told The Straits Times that the lift button for the ninth floor, where Mr Yap and Ms Rappa live, has been burnt three times. The last time was two months ago.

Lee has paid for the damage he caused to his neighbours’ property, amounting to about $600.

But no, he had not apologised to them, he told reporters. And no, he had no regrets about what he had done.

‘What’s there to regret? What’s done is done. I am not remorseful.’

Asked if he knew about the recent vandalism acts in his condominium, he shrugged his shoulders and said: ‘Yes I heard about it. But it’s none of my business.’

Ex-condo chief scoffs at fine for mischief

Source : Straits Times - 22 Apr 2009

FOR his acts of mischief in Laguna Park condominium, Lee Kok Leong, 62, former chairman of its management committee, was fined $1,200.

Arms folded as he sat in the dock yesterday, he told reporters: ‘Fine, then fine lah. After all, I can afford it. I can spend $4,000 in one night on karaoke.’

The general manager of a shipping company was so sure he would not be jailed that he had made plans to go to his office in Bukit Merah later in the day.

Earlier, he had pleaded guilty to inserting super glue into the keyholes of the padlock, front and rear gates of Mr Yap Cher Sim’s flat at Block 5000E on Aug 25 last year. For that, he was fined $800.

That same day, he did the same thing to another flat in the same block, belonging to Ms Alice Elizabeth Rappa. That resulted in another $400 fine.

Lee could also have been jailed up to a year for the offences, on top of being fined.

The Community Court heard that he had been caught in the act by the closed-circuit television camera installed by Mr Yap along the common corridor.

Lee later told police he had bought two tubes of super glue a day earlier with the aim of damaging Mr Yap’s unit. Someone had done the same super glue stunt to his own letterbox earlier, he claimed.

The acts of vandalism in the Marine Parade condominium came to light last July amid a row which erupted among residents over whether the condominium should be sold en bloc.

Among those who opposed the sale were Mr Yap and Ms Rappa. At that time, a regular apartment in the 530-unit condominium could have fetched more than $2.1 million in a collective sale. A penthouse owner could have received almost $4 million.

Proponents had included Lee, a 1998 Public Service Medal recipient who has lived there for the past 30 years.

His lawyer, Mr Ramesh Tiwary, said his client wanted a nest egg for his retirement and was unhappy at attempts to derail the collective sale process.

He was so upset that he suffered a relapse of a psychiatric condition which he had been diagnosed with since 1998, Mr Tiwary told Community Court judge Soh Tze Bian yesterday.

Dr Ung Eng Khean, a senior consultant psychiatrist and psychotherapist, confirmed this in his medical report, saying that Lee had a relapse of ‘moderate to severe depression’ last June.

The court case is not the end of the mischief that has plagued Laguna Park residents. Mr Larry Chan, 51, filed a police report after he found his mailbox forced open, its metal flap bent, and all the mail removed two weeks ago.

Residents told The Straits Times that the lift button for the ninth floor, where Mr Yap and Ms Rappa live, has been burnt three times. The last time was two months ago.

Lee has paid for the damage he caused to his neighbours’ property, amounting to about $600.

But no, he had not apologised to them, he told reporters. And no, he had no regrets about what he had done.

‘What’s there to regret? What’s done is done. I am not remorseful.’

Asked if he knew about the recent vandalism acts in his condominium, he shrugged his shoulders and said: ‘Yes I heard about it. But it’s none of my business.’