London luxury-home prices post big gain

Source : Business Times – 19 Dec 2009

LONDON luxury-home prices posted the biggest gain in 19 months as many bankers were undeterred by government plans to tax their bonuses, Knight Frank LLP said.

Values of houses and apartments costing more than £1 million (S$2.3 million) rose 6.1 per cent in December from a year earlier, the most since May 2008. They climbed 2.1 per cent during the month, the London-based broker said in a statement yesterday.

Prices are still 13 per cent below their peak in March 2008.

‘The year is ending on a high note,’ Liam Bailey, head of residential research, said in the statement. ‘The short-term outlook looks positive. Long-term market performance rather depends on the outcome of the general election and next year’s emergency budget.’

Demand for luxury homes has revived in London as international buyers take advantage of the weakness of the British currency. In addition, bonuses for financial- services employees in the City of London and Canary Wharf – the two largest financial districts – may rise 50 per cent this year to £6 billion, according to Knight Frank, whose offices in Mayfair, Belgravia, Knightsbridge and Kensington exchanged contracts on 22 transactions with a combined sale price of more than £60 million in the seven days after Dec 9, when Chancellor of the Exchequer Alistair Darling imposed a 50 per cent one-time tax on bonuses exceeding £25,000. In addition, offers were accepted on a further £45 million worth of property, the broker said.

Shanghai property sizzles despite curbs

Source : Business Times – 19 Dec 2009

Analysts say that the reinstatement of a sales tax is a token measure that won’t change the upward trend in prices

GLORIA Gu paid US$483,000 for an apartment near Shanghai’s financial district so that her three-year-old son could attend one of the city’s best kindergartens. Six months later, a similar place in her building sold for US$615,000.

‘Prices are way past reasonable,’ said Ms Gu, 31, a food company manager who bought her three-bedroom, 140 square meter apartment in the Pudong area in May. ‘The market is too good to be true.’

Escalating prices in Pudong, transformed within two decades from vegetable fields to skyscrapers for Citigroup Inc and HSBC Holdings plc, underscore a Chinese property market that set record highs this year after the government unleashed US$1.3 trillion in new bank lending to counter the global recession.

Premier Wen Jiabao said on Nov 28 that property speculation must be suppressed, and the government on Dec 9 reinstated a sales tax on homes sold within five years of purchase after reducing the period to two years in January. That change is superficial and will have minimal impact, said Lu Qiling, an analyst at Shanghai Uwin Real Estate Information Services Co.

‘It’s only a token measure,’ Mr Lu said. ‘It won’t change the upward trend in housing prices.’

China’s leaders will not make major policy changes because they are preoccupied with economic growth and social stability, overriding concerns that rising property prices are forming a bubble, said Clement Luk, an analyst at Centaline Property Agency Ltd in Shanghai.

‘The government is clearly in a dilemma,’ Mr Luk said. ‘It wants to address the surging property prices and concerns on bubble-bursting, yet it dares not take drastic measures for fear of hitting the market too hard.’

That complacency could have ‘disastrous’ consequences for the world’s third-largest economy, said Michael Wu of Fitch Ratings in Hong Kong.

‘If the government fails to act and the property market goes all the way up nonstop, it will cause a huge bubble and cause some serious issues in 2011,’ said Mr Wu, the head of Fitch’s Asia Corporate team. ‘It will be quite disastrous.’

Home prices in 70 major Chinese cities, including Shanghai, rose 5.7 per cent from a year earlier in November, the fastest pace in 16 months, according to government data. The property market was a prime driver of the economy’s 8.9 per cent growth in the third quarter.

‘Rapid’ increases will continue till the first half of 2010, said Zhou Hu, a real estate analyst at Bohai Securities Co in Beijing. Prices will rise for the next three decades and peak in 2040 at 2.5 times current levels, according to China International Capital Corp estimates.

China risks a ’similar asset bubble’ to that in 1980s Japan unless lending is reined in, Erwin Sanft, head of China and Hong Kong equities research at BNP Paribas, said on Nov 23.

The Nikkei 225 Stock Average surged sixfold and commercial property prices in metropolitan Tokyo rose fourfold before the bubble burst in 1990, triggering what Japanese call the ‘lost decade’ of little or no growth. The Nikkei trades at a quarter of its December 1989 peak.

‘Over-liquidity will lead to asset bubbles in equities, real estate and commodities,’ China central bank adviser Fan Gang said on Nov 18. ‘That’s something we really need to watch.’

China Vanke Co, the country’s largest publicly traded real estate developer, said this month that sales in the first 11 months rose 36.2 per cent to 57.9 billion yuan (S$11.9 billion). Thirty-three of 35 analysts have a ‘buy’ rating on the Shenzhen-based company’s stock.

The Shanghai Property Index, which tracks 33 developers listed in the city, has more than doubled this year, compared with a 75 per cent gain for China’s benchmark Shanghai Composite Index.

Pudong, covering 1,210 sq km from the East China Sea to the Huangpu river, is home to China’s largest stock exchange and its biggest futures exchange by value.

China said in March that it aimed to make Shanghai a world financial centre by 2020 by allowing more foreign participation in its capital markets. Walt Disney Co will build its first mainland theme park in Pudong, and Shanghai is spending US$4.4 billion on subways, roads and other infrastructure before next year’s World Expo there.

Average new apartment prices in Pudong gained 57 per cent this year to a record US$4,061 per square metre (psm), while overall prices for China’s richest city rose 26 per cent to a record US$2,434, according to Shanghai Uwin, which tracks prices.

Accountant Wang Jin waited in a downpour for six hours last month to buy an apartment in a Pudong project by Shui On Land Ltd, a Hong Kong-traded developer controlled by billionaire Vincent Lo.

More than 800 people lined up outside a sports stadium to buy about 220 units costing about US$4,100 psm on average.

‘I couldn’t believe what I saw when I got there,’ Mr Wang, 37, said. ‘I know the property market is sizzling now, but this?’

New home mortgages in the first nine months of this year totalled about US$139.5 billion, quadruple the amount offered a year earlier, the central bank said.

Cao Guanzhou, a real estate agent in Shanghai, tried to take advantage of the boom. After selling his Pudong apartment in May for 54 per cent more than what he paid three years ago, Mr Cao closed his hot pot restaurant and started selling properties.

Business is slow, he said. ‘Too many agencies have opened up,’ Mr Cao, 51, said. ‘There’s too much competition now.’

X’mas comes early for retailers

Source : Business Times – 19 Dec 2009

Sales gather pace in sharp turnaround from last year; newer malls on Orchard Road attract plenty of customers

RETAILERS are upbeat that sales will continue to gather momentum into the holiday season, in tandem with the recovering economy.

‘Early communications from our retailers indicate that this shall be a much better Christmas than the previous year,’ said Michael Kenderes, project development director for Lend Lease which owns 313@somerset.

According to Mr Kenderes, consumers are snapping up electronic devices such as computers, televisions and computer games as well as Apple products like the iPhone.

Over at Tangs, sales have also been improving. ‘So far, we’ve seen a double-digit increase over last year,’ said Lin Pei Hua, its assistant vice-president of marketing and communications.

For Tangs, beauty and fragrance sets, shoes and costume jewellery as well as big-ticket items such as Nespresso coffee machines are proving popular this season. Ms Lin expects sales to continue to flourish for the rest of the festive year-end season, given that the economy is on the road to recovery.

Meanwhile, Elim Chew, founder of the 77th Street chain of stores, remains cautiously optimistic as sales for the store at Ion Orchard are ‘promising’.

‘Sales are indeed picking up, albeit slower than expected,’ she revealed, adding that the company has been rolling out promotions to attract customers. ‘If the economy improves, then the retail industry should march in tempo too.’

However, with economic recovery only surfacing in the latter half of this year, the total annual sales for 2009 are unlikely to beat the previous year, reckoned Lau Chuen Wei, executive director of the Singapore Retailers Association (SRA). ‘Retailers are keeping their fingers crossed that the year-end shopping will close the gap somewhat,’ she added.

The new kids on the block such as Ion Orchard and 313@somerset have also raised the competition level up a notch with new-to-market brands and novelty value.

‘The newer malls on Orchard Road appear to be drawing in the crowds, as they offer newer brands in newer environments. Those in the older malls have seen footfalls suffer because of this,’ observed Ms Lau.

According to Mr Kenderes, 313@somerset – which opened fully leased a few weeks ago just in time for the holiday season – sees an average of 100,000 customers per day.

And while Christmas is still a week away, retailers are already planning ahead for next year. Visitor arrivals are expected to pick up in line with the recovering global economy, which will mean an increase in the tourist dollar for retailers.

‘We will have a post-Christmas sale, followed by new merchandise for Chinese New Year,’ said Ms Lin.

313@somerset also plans to target sales by focusing on Chinese New Year after Christmas.

Retail property in Asia Pacific outshines other sectors

Source : Business Times – 19 Dec 2009

RETAIL property in Asia Pacific continues to outshine other sectors as rents grow, showed a new report by DTZ.

Retail rents have performed well with growth of around 3 per cent per year since 2004 – without any significant falls. The level of growth has been maintained despite overall negative performance during the earlier part of 2009, DTZ noted.

Additionally, retail rents returned to positive growth in Q4 as the more heavily weighted markets (Shanghai and Singapore) have turned positive.

‘Retail markets are generally doing well with quarterly rental growth rates up to 8 per cent being reported during the year,’ said David Green-Morgan, head of DTZ Asia Pacific Research. ‘Strong retail sales have been sustaining retail markets across the region. Government stimulus across the region has helped sustain the retail sector and this is helping to sustain rental levels and boost prices in many locations.’

By contrast, the Asia Pacific office and industrial markets continue to be sluggish as 2009 comes to an end, DTZ said.

Over the course of the year, the office sector experienced the largest fall with a peak to trough decline in office rents of around 27 per cent so far. Industrial rents, on the other hand, have fallen around 3 per cent year-to-date, with the possibility of further falls to come. Despite more encouraging economic fundamentals across the region, occupier demand for these two sectors remains weak on the back of slow global growth, DTZ noted.

But the report also pointed out that both office and industrial sectors around the globe have either reached or are approaching the bottom of the rental cycle as many markets have reached a balance between supply and demand – albeit at a much lower level than the peak of the cycle.

In Q4, global office rents fell by 2 per cent while industrial fell by one per cent. But global retail rents grew by 0.2 per cent on the back of the gains in Asia Pacific and levelling out in Europe.

The report also noted that global capital city prime rents are highlighting the continuing trend for the flight to safety. Prime rents in the main markets have held up far better than anticipated. Rents in London City, Paris’s central business district, Hong Kong and Sydney have all levelled off during Q4 where many tier two cities continued to fall.

Dollars and sense of investing

Source : Business Times – 19 Dec 2009

Are some long-held principles on the markets merely myths?

THE depths of the financial crisis between 2008 and 2009 called into question a number of investment principles that have been accepted almost as truisms – until recently.

Are those principles simply fair weather crutches? That is, they work in a rising market but fail horribly in a bear market. Or worse, are they simply myths?

Here are some of them and what some analysts think.

Diversification

Not putting all of one’s eggs into a single asset is common sense. Portfolio construction typically works on the expectation that correlations among assets are stable based on historical trends. Assets are chosen for their low correlations with one another, so that not all should tank at the same time.

Between mid-2008 and the first quarter of 2009, however, the worst case scenario happened. The unravelling of the credit crisis triggered massive waves of selling and liquidity dried up. Correlations converged to one for almost all assets.

There were exceptions. US Treasuries proved to be the safest of safe havens, for instance. Gold also rallied, thanks to fears that the financial system was on the brink of collapse.

Diversification is still seen as a form of risk mitigation, and widely recommended by advisers. Perhaps the biggest lesson of the crisis, however, is that liquidity has been under-appreciated. Many portfolios were invested substantially in structured products that proved horribly illiquid, or worse, that actually unwound and caused heavy losses.

Says Christian Nolting, lead strategist (Asia-Pacific) for Deutsche Bank Private Wealth Management: ‘We see value in the asset allocation approach and have implemented the same in our private client portfolios. An appropriate distribution of wealth among different asset classes, with an individual strategy geared to the risk-return profile of the client – complemented periodically by dynamic and tactical decisions – is key for a sustainable and satisfying portfolio return.’

‘Time’ diversification

This principle says that the longer your horizon, the more equity risk you can take. In particular, it is common that presentations by banks and fund houses show long-term returns of an index, usually the S&P500, to justify this thinking.

Boston University professor Zvi Bodie believes that the fallacy of time diversification is perpetuated as part of the fund management industry drive to sell funds.

As he told an audience at the National University of Singapore recently, if stocks became safer in the long run, they would not carry a risk premium. An indication of how risky stocks are can be gleaned from the cost of protection, which rises as the time horizon lengthens. Conventional advice, he says, based on the mistaken principle of time diversification, leads to portfolios that are riskier than most consumers realise.

Buy and hold

This mode of investing in markets may truly be one of the biggest casualties of the bear market.

Almost all strategists now say that shifts in tactical asset allocation – that is, shifts around a long-term strategic mix of assets – have become more frequent since the crisis began. They expect 2010 to be no different, as uncertainties remain on the economic outlook and the manner and timing in which central banks will begin to withdraw the massive stimulus.

Financial advisers such as Providend and New Independent have launched portfolio services that actively allocate to exchange traded funds.

Such portfolio services are typically aimed at generating a positive absolute return. The rub, however, is that retail investors with modest sums may not have access to such advice, where the minimum capital for a portfolio can start from $100,000.

An absolute return objective is also not a panacea as a lot will depend on the fund manager or adviser’s skill and ability to time markets.

Schroders’ Asia-Pacific head of multi-assets, Al Clarke, says buy-and-hold is still a sensible strategy ‘as asset allocation is a difficult endeavour that requires time, technical understanding and discipline’.

‘An investor should construct an appropriate asset mix that will deliver the return and risk objectives they need for that investment . . . At Schroders, we believe we can add value through making sensible changes to the asset allocation based on value, cycle and liquidity.

‘What may not make sense is suggesting the best asset allocation to meet the investor’s objectives is 100 per cent equity and leaving this as ‘buy and hold’. This will lead to volatile outcomes and as history has demonstrated, can deliver sub-standard returns for prolonged periods of time.’

Balanced and target date retirement funds

These are marketed as core holdings in a retirement fund that investors can effectively buy and hold. While balanced funds are a staple in the CPF menu, there are not many target date funds here. The latter refer to those designed with a maturity that should coincide with your retirement. Assets are automatically rebalanced such that as the fund nears maturity, it should be invested in more conservative instruments.

In the US, target date funds, in particular, are under tough scrutiny as the market plunge in 2008 caused severe losses among funds that are near maturity. Bloomberg has reported that target date funds labelled 2000-2010 lost an average of 23 per cent last year, with some dropping as much as 41 per cent. The average 2050 fund declined 39 per cent in 2008, while the S&P500 fell 38 per cent.

Prof Bodie heaps particular scorn on target date funds as ’silly, counter productive and disingenuous’. Such funds, he says, do little to provide investors with a secure income in retirement.

The upshot of this is that retirement planning should start with a projection of one’s desired income in retirement, and then choosing assets that are likely to deliver and protect that income stream. This is how institutions with a stream of future liabilities invest. This approach would favour direct investments in bonds, in particular inflation indexed bonds. There are no inflation-linked bonds here. Many investors also sniff at Singapore government bonds whose yields are low. Corporate bonds are also not as easily accessible to retail investors, as they require minimum investments of at least $200,000.

Two Toa Payoh blocks converted to dorms

Source : Straits Times – 19 Dec 2009

TWO Housing Board blocks in Toa Payoh have been converted into dormitories for foreign employees at Resorts World Sentosa.

Blocks 32 and 33 in Toa Payoh Lorong 6 were to be demolished as part of redevelopment plans until a few months ago, when dozens of croupiers, hotel service staff and casino pit supervisors started moving in.

It is estimated that there are more than 300 units in the two blocks. According to interviews with tenants, each flat houses four to six people who each pay between $140 and $260.

When asked about the length of the leases, the HDB would only say it is a private short-term arrangement between Resorts World and its managing agent, EM Services.

Resorts World said it provides accommodation to its foreign employees working and training in preparation for the integrated resort’s opening next year ‘to help reduce their stress and anxiety of relocating overseas’. It also ensures that its foreign staff enjoy a similar lifestyle to their Singaporean colleagues’. It did not state the total number of foreign employees who have moved in so far.

When The Straits Times visited the blocks yesterday, the flats were clean and had been given a fresh coat of paint.

Current tenants said the flats came with basic furniture, such as dining tables and beds, as well as appliances like washing machines and refrigerators. The bedrooms are air-conditioned.

Many found the accommodation comfortable, and the central location convenient. They each pay about $100 per month for a round-trip bus service that ferries them to and from their workplace in Sentosa.

‘It’s not bad. We like it. It’s easy to get to work from here,’ said croupier Low Chui Leng, 25, from Kuala Lumpur.

The employees hail from South-east Asian countries as well as China.

On one floor, Filipinos chatted in Tagalog as they got ready to start their shifts, while on another floor, Malaysian staff were cooking lunch.

To minimise friction with local residents, the workers said they keep their noise levels down after 9pm. At least one corridor wall has a sign reminding tenants to be quiet.

Resorts World said it chose a location that ‘facilitates good interaction between the local community and foreign talent’. When asked if they mingle with local residents, tenants said they keep mostly to themselves as most of them work odd hours. Some leave for work around noon and return only at midnight.

Their situation – a foreign worker dorm in a local neighbourhood – is similar to that in Serangoon Gardens, which has a hostel housing 100 foreign workers. Unlike residents there who kicked up a fuss, however, most Toa Payoh residents interviewed said they do not mind their new neighbours, and there has been no conflict.

A few who live in neighbouring blocks had gripes though.

Madam Xu, a 49-year-old housewife, has seen some of the women walking around in just their underwear.

‘It’s not nice when you have kids living around here,’ she said.

However, most residents share the views of cleaner Rose Laini, 53. ‘Generally, they behave themselves and they don’t cause any trouble. I’m okay with them,’ she said.

Mr Jolovan Wham, executive director of migrant worker rights group Home, said the residents’ acceptance is a good sign. ‘It shows that Singaporeans can be tolerant of foreign workers living in their midst.’

One project, two sites

Source : Straits Times – 19 Dec 2009

Businessman Andy Ong was looking to buy a second home for investment along River Valley Road where he lives.

The 45-year-old was excited when he saw that Adria condominium’s showflat, which was within walking distance of his home, was ready for viewing.

But he was in for a surprise.

‘When I got there, I found out that the actual project site is in the Thomson Road area,’ he says.

‘Even though the property agent did point it out upfront, I think locating the showflat here is misleading.’

He adds that having to make two trips – one to the showflat and the other, to the actual site – was inconvenient.

He is still undecided about the purchase.

Adria, developed by Far East Organization, is not the only property development to have a showflat located away from the actual site.

At least five other projects such as Luma and Lucida, both by the Novelty Group, have similar arrangements.

Luma is being built in River Valley Grove while its showflat is two roads away in Leonie Hill.

Lucida is in Suffolk Road in the Novena area but its showflat is located across the road in Derbyshire Road.

Housewife Maggie Tan, 35, who went to check out the Luma showflat a few weeks ago, was also surprised to find that the condo will not be built on the site.

‘Luckily, the actual condo site is only down the road, so I can still get a feel of the neighbourhood.’

A Far East Organization spokesman says Adria’s showflat had to be located away from the actual site because construction of the condominium will start next month.

Free transport to actual site

Since marketing for the project began last month, ‘it is not practical to build a show suite on site, only to tear it down soon after’, he says.

‘This arrangement allows us to market and build the property at the same time.’

Over at Wing Tai Holdings’ Belle Vue Residences, its showflat is in Clemenceau Avenue while the actual site is in Oxley Walk, a five-minute drive away.

A Wing Tai spokesman says while the company prefers to have showflats on-site, it has to locate them off-site sometimes ‘due to construction progress, safety and access concerns’.

He explains that an off-site showflat would offer customers a better viewing ambience away from the noise and dust of Belle Vue’s ongoing construction.

However, he adds that an on-site showflat is currently being fitted out and will be ready soon.

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore (Case), says the consumers’ body has not received any complaints from the public about this practice.

‘But by having the showflats away from the actual site, developers are not helping consumers to have a better gauge of the amenities around the area,’ he says.

He suggests that developers who want to have off-site showflats provide free visits to the actual site for potential buyers so that they can make more informed decisions about the purchase.

Property agents say they do provide free transport for their clients who want to check out the actual location.

An agent, who declined to be named, says: ‘I will drive the clients to the site and back to the showflat after. It is inconvenient but necessary to seal the deal.’

Some developers prefer to stick with the tried and tested.

A spokesman for Frasers Centrepoint Homes says its showflats are all located within the projects’ sites.

‘This helps to reinforce the unique selling points of the location, which is one of the key considerations when buying a home,’ he says.

But Mr Chris Koh, director at Dennis Wee Properties, says it is becoming common for developers to have their showflats located off-site.

‘Consumers are also getting used to it,’ he says.

Businessman Ong, however, is not convinced.

‘Next time, I will check out a new development only if the showflat is on the actual site. I don’t want to waste my time travelling,’ he says.

---

Show and tell me where

Other projects whose showflats are not on-site:

LATITUDE

Actual site: 31 Jalan Mutiara (off River Valley Road)
Showflat site: Junction of Irwell Bank and River Valley roads
Average sale price: $1,733 psf (per square foot)

LUCIDA

Actual site: 2 Suffolk Road
Showflat site: Derbyshire Road
Average sale price: $1,235 psf

LUMA

Actual site: 6 River Valley Grove
Showflat site: Leonie Hill
Average sale price: $1,662 psf

Hong Leong Finance lowers HDB loan rates

Source : Straits Times – 19 Dec 2009

HONG Leong Finance has unveiled a new HDB loan package with one of the lowest rates in town.

The finance company’s latest offering is aimed at one of the hottest segments of the market, with intense interest in projects such as the new flats to be built at Dawson estate in Queenstown.

Last week, it unveiled a loan package for the other end of the spectrum – the good class bungalow market.

For HDB buyers, it is now offering variable rates for loans of $100,000 and above, with up to 80 per cent financing, at 1.33 per cent, 2.03 per cent, and 2.63 per cent a year for the first, second and third year respectively.

This is another step down in rates from the company’s offer last month, when rates for an equivalent loan were 2.13 per cent and 2.83 per cent for the second and third year respectively.

A borrower looking for a two-year fixed rate loan from Hong Leong will now enjoy a rate of 2.13 per cent in the second year, down from 2.63 per cent.

By comparison, DBS Bank offers a two-year fixed rate of 2.9 per cent for a loan with up to 60 per cent financing, its website says. This is for owner-occupied homes which have been completed.

Hong Leong said the increased activity in the HDB market had led to more inquiries for HDB home loans.

‘We anticipate continued growth of our HDB home loans portfolio in 2010, which will be boosted in part by HDB’s plans to launch at least one build-to-order project per month to meet the housing demand here,’ said president Ian Macdonald.

The company is also offering customers an added sweetener of a $20 Millennium and Copthorne hotels gift voucher for every $100,000 loan.

Customers taking out small loans have not been left out. Those borrowing less than $100,000 with financing of up to 80 per cent will now be offered first-year variable rate of 1.93 per cent, and two-year fixed rates from 2.33 per cent.

Hong Leong’s earlier promotion rewarded its customers with KrisFlyer air miles and spa vouchers.

All eyes on H1 2010 industrial land sales programme

Source : Business Times – 19 Dec 2009

Market sentiment has improved; developers showing much greater appetite for state industrial land than they were last year

INTENSE bidding for state industrial sites in the past few months has market watchers paying close attention to the industrial government land sales (GLS) programme – all eyes are on whether the confirmed list could be brought back for the first half of next year.

‘There’s a possibility,’ says DTZ’s Southeast Asia research head Chua Chor Hoon, pointing to how the government reinstated the confirmed list for residential sites for first-half 2010 as developers bid aggressively for them recently.

The Ministry of Trade and Industry Ministry (MTI) suspended the confirmed list for the first half of 2009 as the global economy went into a tailspin. It kept the suspension for the second half to ‘provide flexibility for the market to adjust supply in accordance with the current economic conditions’.

Sites on the confirmed list are launched for tender based on a schedule. On the other hand, sites on the reserve list are put up for sale only if interested parties submit applications for them, with minimum offers acceptable to the government.

As the year draws to close, MTI has yet to announce what the industrial GLS programme will be like for H1 2010. In the meantime, market sentiment has improved and developers are showing much greater appetite for state industrial land than they were last year.

The revived interest can be seen from the larger number of bids put in. A site at Woodlands Industrial Park E5/Woodlands Avenue 4 attracted eight bids when tender closed in July; one at Kaki Bukit Road 2 received 18 bids in August; and one at Pioneer Road North/Soon Lee Drive drew eight bids this month. In all three cases, the number of bids exceeded the average of seven in the 2007-2009 period.

In contrast, demand was weak for two sites put up for sale towards the end of last year – just as the financial crisis hit rock-bottom. A site at Ubi Avenue 4 drew two bids in September, and one at Kallang Pudding Road attracted just one bid in October.

There is also fiercer competition for land – the gap between the top and bottom bids had shrunk going into 2008, but widened again for the three sites triggered for sale this year. The highest bid for the site at Kaki Bukit Road 2 in August was more than twice that of the lowest.

Colliers International director (industrial) Tan Boon Leong hopes to see the confirmed list for industrial land brought back for H1 2010. He says interest in industrial sites has grown, not just because the economy seems to be recovering, but also because these plots require relatively smaller investment and development outlays compared with large residential or retail parcels.

His wish-list for the confirmed list includes more sites in mature industrial estates such as Changi and Lower Delta. There may not be empty plots left in those areas, but he suggests the government clear some sites and make them available for industrial use.

CB Richard Ellis’s director of industrial and logistics services Bernard Goh also believes the confirmed list for industrial sites should be re-introduced for H1 2010.

Prime landed home prices at new high: DTZ

Source : Straits Times – 19 Dec 2009

SKY-HIGH prices of resale landed homes at some of the best addresses in town have already set fresh record highs this year despite the still tentative economic recovery, a new report has found.

The latest report from DTZ Research singles out resale landed homes in the prime 9, 10 and 11 districts – including the Orchard, Tanglin and Bukit Timah areas.

Among the poshest of all homes, good class bungalows (GCBs) also recorded a new per sq ft price high. However, prices of luxury non-landed homes – mainly condos – are still playing catch-up.

The average price of prime freehold landed resale homes rose 4.6 per cent in the fourth quarter – or 18.6 per cent for the whole of the year – to reach a new high of $1,447 per sq ft (psf).

This is nearly 12 per cent above the previous high of $1,293 psf achieved in the first quarter of last year, it said.

Outside the prime districts, the average price of freehold landed resale homes climbed 2.8 per cent in the fourth quarter – or 12.2 per cent for the whole year – to touch $860 psf.

This is 7.9 per cent higher than the $797 psf reached in the previous peak in the first quarter of last year. However, it is still 8.8 per cent below the price recorded in an even earlier peak period in the second quarter of 1996.

GCBs are like hen’s teeth, with only about 2,400 of them – situated on sprawling land sites – in all of Singapore.

A new record price was set this year. One 25,231 sq ft GCB at Leedon Park was sold in October for $1,407 psf, or $35.5 million overall, breaking the previous psf record of $1,308 psf for a White House Park GCB sold in August 2007, experts said.

More wealthy buyers were willing to fork out more to land a GCB this year. Savills Singapore said that 17 GCBs were sold for above $20 million each this year, up from 11 last year.

Of this number, seven GCBs were transacted at $30 million and above this year, up from two last year and none in 2007, said DTZ.

Head of DTZ South-east Asia research Chua Chor Hoon noted that prices paid for landed and mass market homes, mainly by owner-occupiers, fell less than the prices for mid- and higher-tier non-landed homes in the recent economic malaise.

‘As the recovery this round is led by owner-occupiers and long-term investors, backed by ample liquidity and low interest rates, the demand has quickly driven up prices of the more affordable mass market and the landed homes market where there is less supply,’ she said.

In the non-landed freehold homes segment, resale prices have, with the exception of luxurious units, recovered to near 2007 peak levels this year.

Prices of these prime district units rose an average 2.4 per cent in the fourth quarter – or 20.6 per cent for the full year – to $1,403 psf. This is just 5.4 per cent short of the $1,483 psf in the fourth quarter of 2007 when prices peaked.

In the luxurious apartment segment, higher price increases were recorded in the fourth quarter, compared with the mass and mid-tier markets.

DTZ said its study found that the average price of resale luxurious homes rose 9.1 per cent to $2,400 psf, about 14 per cent below the previous peak of $2,800 psf in the fourth quarter of 2007. The full-year rise was 23 per cent, it said.

Prices of leasehold non-landed resale homes stagnated at $610 psf on average in the fourth quarter, as buyers held off.

After all, prices in this category have risen to 2007 peak levels within two quarters, said DTZ. The previous high of $615 psf was hit in the fourth quarter of 2007.

The rental market stabilised in the second half, with the average rental value of luxurious units down the most this year. It fell 27.3 per cent to $4.65 psf per month – the lowest level since the fourth quarter of 2005.

If the economic recovery remains firmly on track, property prices are likely to appreciate further next year by up to 10 per cent, with more upside seen for the higher end of the market, said Ms Chua.

‘Affordability is a constraining factor in the mass market segment and any price increase there would depend on the job market. We expect more moderated price increases in 2010 as much of the pent-up demand has been satisfied.’

Sluggish rents for past 3 quarters: DTZ

Source : Business Times – 19 Dec 2009

Average monthly rental value of luxury apartments down nearly 40% at $4.65 psf in Q2-Q4 this year

RESIDENTIAL rents have stagnated in the past three quarters across the board in Singapore – for luxury apartments, other prime district apartments as well as suburban apartments – according to DTZ. ‘We expect rentals to start to recover gradually next year as the economy grows more strongly. The estimated 5,737 private homes to be completed in 2010 will also be the lowest level since 1993,’ says DTZ’s South East Asia research head Chua Chor Hoon.

Jones Lang LaSalle’s head of residential Jacqueline Wong reports that luxury apartment rents have started to creep up after sliding in the aftermath of the global financial slump.

‘Rents have been supported by limited supply of large luxury apartments as some developments sold through en bloc sales have effectively come out of the leasing market – either because they have been pulled down such as Habitat One and Two or because the landlord is unwilling to refurbish the apartments and is leasing out units only on an as-is basis, for instance, 18 Anderson.’

Industry watchers add that average monthly rentals for apartments of about 3,000 sq ft at Draycott 8 have recovered to about $18,000 from the low of $15,000 in the first quarter of this year. At its peak in 2007, the figure was about $22,000.

DTZ’s data shows that the average monthly rental value of luxury apartments has declined nearly 40 per cent from a high of $7.70 psf in the first half of 2008 to $4.65 psf in Q2-Q4 this year. For the whole of 2009, the drop has been 27.3 per cent. Average rent for prime district (9,10 and 11) apartments has eased about 33 per cent from $4.93 psf in Q2 last year to $3.32 psf for the past three quarters. Rents of suburban apartments have been more resilient, having come off 18.4 per cent from the $2.12 psf high in Q2 2008 on average.

JLL’s Ms Wong reckons that luxury rents would not drop in 2010, as the outflow of expats from Singapore has slowed and the influx of expats has restarted. ‘Banks and other financial institutions are starting to hire again but they are more cautious, hiring selectively rather than entire teams,’ she observes. ‘So luxury rents should be sustainable next year; as to whether they will go up, will depend on the new supply of luxury apartments expected to be completed next year, including Parkview Eclat, OrchardResidences , Orchard View, The Marq, and Waterfall Gardens.

‘New projects completing next year will put rental pressure on existing developments in the same categories. Tenants tend to prefer brand new products given a choice.’

DTZ’s data also showed that the average price of freehold luxury apartments in the resale market stood at $2,400 psf in Q4 this year, up about 9 per cent from the previous quarter and a 23 per cent full-year increase. The latest capital value of $2,400 psf was, however, still 14.3 per cent shy of the previous peak of $2,800 psf set in Q4 2007/Q1 2008.

The average capital value of prime freehold apartments rose about 2 per cent quarter-on-quarter to $1,403 psf in Q4. For the whole of 2009, the price increase was about 21 per cent. The Q4 figure was just 5.4 per cent below the peak of $1,483 psf in late 2007/early 2008.

For suburban 99-year leasehold apartments, their average capital value stagnated at $610 psf in Q4. The previous high of $615 psf was seen in Q4 2007 to Q2 2008. The capital values refer to the resale market.

In the landed housing segment, DTZ’s numbers also show that second half 2009 prices of freehold resale homes in both prime and non-prime districts have surpassed previous peaks achieved last year. In the prime districts, the average capital value of resale homes rose 5 per cent quarter-on-quarter to $1,447 psf in Q4 – a level that has surpassed the previous high of $1,293 psf (seen in the first three quarters of 2008) by 11.9 per cent. In non-prime districts, the average price of resale freehold landed homes posted a 3 per cent q-o-q gain to $860 psf in Q4. The latest capital value was 7.9 per cent higher than last year’s peak of $797 psf but still 8.8 per cent lower than that recorded during the Q2 1996 property market peak.

HK central bank warns of asset price corrections

Source : Business Times – 18 Dec 2009

Hong Kong’s central bank said the city may face ’sharp corrections’ in asset prices should fund flows reverse, adding to concerns voiced by Japan, China and South Korea on the dangers of speculative capital.

A rally in the stock market was fuelled by an influx of capital as investors’ risk appetite gained and they bet on an improving outlook for China’s economy, the Hong Kong Monetary Authority (HKMA) said in a quarterly report on Wednesday.

Outflows may bring ‘volatilities in the real economy,’ the HKMA said.

Housing prices in Hong Kong have gained for 10 months, while the benchmark Hang Seng Index has surged 50 per cent this year. Financial officials in Japan and China, Asia’s two largest economies, warned last month that the Federal Reserve’s interest rate policy risks spurring speculative capital that may inflate asset prices and derail an economic recovery.

‘It’s highly probable that the asset markets would show fluctuations once the fund flows reverse if the US raises interest rates,’ Peng Wensheng, a Hong Kong-based economist with Barclays Capital, said. ‘The risk isn’t restricted to Hong Kong, but extends to emerging markets, especially in Asia.’

The HKMA left its base lending rate unchanged yesterday at a record low 0.5 per cent after the US Federal Reserve stayed put. The city’s rates track those in the US because Hong Kong’s dollar is pegged to the US currency. The Fed reiterated yesterday its pledge to keep borrowing costs ‘exceptionally low’ for an extended period.

Asset bubbles are the No 1 threat to financial stability in Asia, Norman Chan, HKMA’s chief executive officer said on Dec 14. More than HK$640 billion (S$115.7 billion) has flowed into the city since October last year, he said.

The Fed has kept benchmark interest rates near zero per cent since December 2008 to revive lending after the worst financial crisis since World War II. China’s ‘moderately loose’ monetary policy has fueled record lending in that country.

‘The resultant loose monetary environment may heighten the risks of asset-price and consumer-price inflation through the expectation and credit channels,’ the HKMA said on Wednesday.

Hong Kong has kept its base rate at 0.5 per cent since last December and asked banks to help support the economy. The HKMA has also added money to the market by buying US dollars to prevent the city’s currency from strengthening beyond its fixed-exchange rate maximum.

Donald Tsang, Hong Kong’s chief executive, said on Nov 13 that he was ’scared’ that money flowing into Asia could lead to another crisis.

‘We have a US dollar carry trade at the moment,’ Mr Tsang said. ‘Where is the money going – it’s where the problem’s going to be: Asia. You can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals.’

Prices for existing Hong Kong homes rose 29 per cent this year, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

The price jump has sparked a public outcry, spurring the government to tighten down-payment requirements for luxury homes for the first time since 1991 to curtail speculation.

Hang Lung Properties Ltd chairman Ronnie Chan said Dec 4 that Hong Kong’s home market is a ‘good bet’, joining billionaire Lee Shau-kee in forecasting rising prices. Sun Hung Kai Properties Ltd vice chairman Raymond Kwok said Dec 3 that property prices in Hong Kong are still ‘reasonable’.

Hong Kong’s economy will further improve next year, and consumer-price inflation is expected to ‘remain anchored’ in the first half of 2010, HKMA said in its report.

Consumer prices rose 2.2 per cent in October from a year earlier, after the biggest fall in five years in August, as the government scrapped subsidies and the economic recovery encouraged spending.

Hong Kong’s economy grew for a second straight quarter in the three months through Sept 30 as consumption and investment gained.

Hong Leong, Far East and Frasers tops in property market

Source : Business Times – 18 Dec 2009

HONG Leong Group, Far East Organization and Frasers Centrepoint have been the most active companies on the local property scene this year, making their mark in the number and value of homes sold.

Together, the three developers are likely to have raked in more than $6 billion from selling more than 5,000 private homes – mostly from mass-market and mid-tier sites.

The data comes from a quick poll of several developers. To highlight, not all figures are exact – there is double-counting of sales in some cases because of joint venture projects.

Nevertheless, Hong Leong, Far East and Frasers Centrepoint emerged clear leaders. As at Tuesday this week, entities linked to Hong Leong – City Developments (CDL), Hong Leong Holdings and TID – had sold 2,122 units, valued at $2.39 billion.

CDL alone moved 1,500 homes worth $1.86 billion, from launches including The Arte, Livia and Hundred Trees. Hong Leong Holdings sold 325 units, while TID sold 297. Sales from a joint venture project The Gale are included in figures for both CDL and Hong Leong Holdings.

Far East commanded a sizeable share of the market with 1,932 homes sold, valued at more than $2.34 billion. The developer launched 11 projects this year, and the five that brought in the highest revenue are Mi Casa, Vista Residences, Cyan, Waterfront Waves and Silversea.

But included in figures from Far East are sales from tie-ups with Orchard Parade Holdings and Wing Tai (111 units from Floridian) and with Frasers Centrepoint (225 units from Waterfront Key and 222 units from Waterfront Waves).

Frasers Centrepoint itself has also been a big winner, moving 1,852 units worth $2.17 billion. These came from projects such as Martin Place Residences, Caspian, 8@Woodleigh and Woodsville 28.

Figures from Frasers Centrepoint also take into account sales from Waterfront Key and Waterfront Waves.

Coming behind Hong Leong, Far East and Frasers Centrepoint is UOL, which sold a respectable 1,009 homes for $1.2 billion, from Breeze by the East, Meadows@Peirce, Nassim Park Residences and Double Bay Residences.

CapitaLand sold 535 homes in Singapore valued at close to $1 billion. Keppel Land sold close to 380 homes, also for close to $1 billion.

Investment in Asia-Pac properties seen doubling

Source : Business Times – 18 Dec 2009

But DTZ notes that one major caveat is the capital required for de-leveraging

ABOUT US$85 billion will be available for direct investment in real estate across the Asia Pacific next year, double the US$43 billion transacted in the past 12 months, says DTZ Research.

The US$85 billion equates to 27 per cent of the US$315 billion total capital available for direct investment in real estate worldwide in 2010, DTZ says in its The Great Wall of Money report issued yesterday. The report analyses data generated by DTZ Research’s equity tracker.

It also says 2010 worldwide transaction volume should be more than double this year’s US$157 billion and could return to the level last seen in 2004.

Globally, the ratio of capital chasing real estate is about US$2 for every US$1 of deal volume. The ratio is relatively higher in Europe at closer to 2.2, compared with 2 in the Asia-Pacific and 1.8 in the Americas.

‘Asia Pacific and Europe are relative winners, with more money targeting these regions for investment than they are raising and investing elsewhere,’ DTZ’s report says. ‘Together, these regions are targets for 77 per cent combined of the total investment in 2010 but are raising only 49 per cent of available money.’

But DTZ cites one major caveat – capital required for de-leveraging. It points to the considerable amount of commercial real estate lending due for refinancing over the next two to four years.

‘While some of the available capital may be diverted to this purpose – for example, through provision of debt financing – we expect the de-leveraging and unwinding of support policies will be slowly phased in over time, limiting the immediate impact in 2010,’ it says.

Third party-managed funds are the largest investor category, accounting for 60 per cent of available equity, followed by institutions with 28 per cent and sovereign wealth funds with 6 per cent. The remainder has been raised by German open-ended funds, publicly listed companies and various private companies/high-net worth investors.

DTZ says 81 per cent of total capital raised is being directed towards multi rather than single-sector investments. Just 19 per cent of the capital has been raised to target a specific property sector only – chiefly industrial (5 per cent), office (4 per cent) and retail (3 per cent).

As well, 70 per cent of total capital is targeting two or more countries. Those investing in a single country are predominantly focused on the major liquid markets of the UK and US, accounting for 9 and 7 per cent respectively of total planned investment. Germany, China and Japan are expected to make up a combined 5 per cent of planned investment.

‘Globally, most investors are adopting multi-sector and/or multi-country strategies as part of sector and geographic diversification strategies, and reflecting the opportunistic nature of most fund mandates,’ says Nigel Almond, associate director of real estate strategy at DTZ Research.

Number of mortgagee sales at 12-year low

Source : Straits Times – 18 Dec 2009

MANY expected to see a surge in the number of home loan defaults, what with the worst recession in Singapore’s history and the rising tide of jobless people struggling with mortgage instalments.

Nothing, it turns out, could be further from the truth. The number of properties put up for mortgagee sale fell to a 12-year low this year, said a report by Colliers International yesterday.

Only 195 of the 927 properties put up for auction this year were mortgagee sales or forced sales of repossessed properties. This is a 25 per cent drop from the 260 properties last year, it said.

When banks repossess properties where the homebuyer has defaulted, they invariably choose to sell at auction as that is a fast and transparent mode of sale.

The latest low figures are a far cry from the situation in 1998 when the Asian financial crisis hit home. A total of 452 properties were put up for mortgagee sale that year, it said.

‘The low number of mortgagee sales could be due to the introduction of the Government’s Jobs Credit scheme which stabilised the employment market; which, in turn, provided some home owners with the ability to service their monthly mortgage loans,’ said the firm’s deputy managing director (agency and business services) Grace Ng.

‘Additionally, buoyant sales experienced in the primary market and a steadily improving economy boosted sentiments in the secondary market, hence enabling owners to dispose of their properties and evading the need for banks to foreclose their properties.’

The Colliers report said that 118 properties worth $168.39 million were auctioned off this year, slightly more than double the $83.67 million done last year.

Residential sales at auction this year totalled $88.35 million, up from $25.23 million last year, as upgraders were encouraged by the more positive economic sentiments since March as well as low housing loan rates.

This year, there was competitive bidding for old semi-detached houses with large land areas, noted Ms Ng.

The residential sector was the star performer as usual, but the value of non-residential properties auctioned off this year has more than trebled to $101.8 million to date, said another consultancy Jones Lang LaSalle in a statement yesterday.

Its head of auctions Mok Sze Sze said this can be attributed to the fact that investors are attracted to the higher rental yield from non-residential properties as opposed to a residential one.

Looking ahead, Ms Ng said more high-value properties are expected to be sold next year, possibly bringing the total value of properties sold at auction to more than $200 million.

Property auction sales double to $168.4m

Source : Business Times – 18 Dec 2009

Number of mortgagee properties put up for auction falls 25%

THE property auction scene is expected to continue sparkling next year, spurred by interest in the high-end residential market, says Colliers International. It says that the total value of properties sold at auctions may exceed $200 million in 2010, after the figure doubled this year to about $168.4 million from last year’s $83.7 million.

A total of 118 properties were sold at auctions in 2009, again up from last year’s 72.

The residential property was the star performer, accounting for about 52 per cent of total auction sales value.

Contrary to earlier expectations in some quarters, the number of mortgagee properties put on the auction block fell 25 per cent to 195. The figure includes other forced sales, for instance, by the Inland Revenue Authority of Singapore and management corporations.

‘The low number of mortgagee sales could be due to the introduction of the government’s Jobs Credit scheme, which stabilised the employment market. This, in turn, provided some home owners with the ability to service their monthly mortgage loans,’ says Grace Ng, Colliers deputy managing director (agency and business services) and auctioneer.

The number of properties put up for auction by their owners (including trustee sales) rose 10 per cent to 732, further testament to growing acceptance of auctions as a mode of selling property.

Mok Sze Sze, Jones Lang LaSalle head of auctions, says: ‘Owners are attracted by the competitive nature of the auction environment and the high chance of attaining an optimum price for their property.’

She expects to see more owners putting their properties on the auction block next year and, as the economy continues to improve, a further decrease in the number of mortgagee sales.

Colliers highlighted a more than 200 per cent jump in the sales value of residential and industrial properties sold at auction this year to $88.4 million and $20 million respectively. Older residential properties with large areas were popular for both landed and non-landed segments.

The sales value of retail properties transacted at auction rose from $34.6 million last year to $43.4 million.

This year’s auction tally of $168.4 million is about 59 per cent below the peak figures $409.46 million in 1999 and $407.43 million set in 2007.

Back in 1999, when the private residential property market staged a spectacular recovery after the Asian crisis, 27 per cent of 1,210 properties that went under the hammer were sold at auctions, according to Colliers’ analysis. This year, the 118 properties sold made up just 13 per cent of the total 927 properties put on the auction block.

Colliers’ definition of total number of properties put up for auction includes those withdrawn before auction or sold before/after the auction. However, the number sold refers only to those transacted at auction.

Average price of resale landed homes in prime districts up 4.6% in Q4

Source : Channel NewsAsia – 18 Dec 2009

Prices of resale landed homes in the prime districts of 9, 10 and 11 in the fourth quarter have reached levels that surpassed the previous peak in the first quarter of 2008.

According to a DTZ Research report, the average price of freehold landed resale homes in the prime districts increased 4.6 per cent in the fourth quarter to reach a new high of S$1,447 per square foot (psf).

This is about 12 per cent above the previous high of S$1,293 psf achieved in the first quarter of 2008.

Outside the prime districts, the average price of freehold landed resale homes rose 2.8 per cent in the fourth quarter.

The average price of S$860 psf in the last three months of the year is about 8 per cent higher than the last peak of S$797 psf in the first quarter of 2008. But it is still 8.8 per cent lower than that recorded in the second quarter of 1996.

The Good Class Bungalow (GCB) segment also saw a rebound after a hiatus of sales activities in 2008, with record unit prices recorded.

The highest ever unit price for a GCB, with at least an area of 1,400 square metres, was at Leedon Park in October 2009 at S$1,407 psf.

More GCBs were also transacted at prices of S$30 million and above in 2009. There were seven such transactions in 2009, compared to just two in 2008 and none in 2007.

High demand for Dawson BTO flats

Source : Straits Times – 17 Dec 2009

AN AVALANCHE of home buyer applications has poured in for the eagerly awaited Dawson estate build-to-order (BTO) Housing Board flats in Queenstown.

Applications opened on Tuesday. And as of 5pm yesterday, the studio apartments, four-room and five-room flats at SkyTerrace and SkyVille had all been oversubscribed. And more than half of the three-room flats and paired units under the HDB’s multi-generational living scheme had received applications.

The 40 studio apartments on offer attracted 104 applications, the 270 three-room flats drew 159 applications, the 1,102 four-room flats pulled in 1,440 applications, and the 176 five-room flats saw 507 applications.

For the 65 paired units in SkyTerrace, HDB received 44 applications.

Despite the higher prices of the Dawson flats, applicants seem to have been won over by their prime location and premium furnishings, such as timber flooring in the bedrooms. The apartment blocks are set to soar more than 40 floors when they are completed in 2015.

Sales executive Leonard Tan, 32, who took a day off work to make the trip to the HDB Hub in Toa Payoh with his family, said he was excited about the new launch.

His wife, Mrs Judith Tan, said the development offered the convenience of the nearby Queenstown MRT station and proximity to their daughter’s school in Bukit Merah.

‘This is something new and different that the HDB is offering. It will take longer than usual to build, but we think that with its nicer features, it’s worth waiting for,’ she added.

For Mrs Mary Lim, 51, who applied for a multi- generational paired flat, the classy finishing touches for the building’s facade and the sky gardens were winning factors.

Her 79-year-old mother-in-law will be living with the family in the linked studio apartment.

‘The multi-generational scheme is a novel idea… It is good that families can have their privacy but still have their parents only as far away as a closed door,’ she said.

HDB said it expected the Dawson premium flats to be many times oversubscribed due to features such as the flexi-layout, but that this was not reflective of the overall demand for new flats.

The Dawson development is not the only BTO project the board is launching this month.

Two other BTO projects launched on Tuesday – Montreal Dale in Sembawang and Segar Grove in Bukit Panjang – also drew a bumper response, with the four-room flats in both estates oversubscribed. Two- and three-room flats were, however, less popular, with applications made for under 20 per cent of available flats.

Apart from these projects being more affordable, home buyers cited the fact that both locations were less congested and further away from the city centre.

Applications for these new flats can be submitted online until Dec 28 at www.hdb.gov.sg

Han Seng Juan reaps handsome profit from GCB sale

Source : Business Times – 17 Dec 2009

Stockbroker said to have sold Astrid Hill bungalow for $25.75m or $970 psf

Former star stockbroker Han Seng Juan is believed to be the seller of a good class bungalow (GCB) in Astrid Hill that changed hands last month for $25.75 million. The price reflects about $970 per square foot on land area of over 26,000 sq ft.

The price is almost double what Mr Han is believed to have paid for the property. The bungalow previously changed hands in 2006 for $13.65 million or slightly over $500 psf on land area.

Earlier this year, Mr Han and his cousin David Loh left the stockbroking business to focus on their boutique private equity investment business.

Known as the A-Team within the industry or simply ‘David and Han’, the two men are now focusing their resources on growing Centurion Investment Management, a boutique Asian private equity company which they helped set up in 2004 with other partners to invest in small to medium-sized companies, especially in the Greater China region.

The duo also control Centurion Properties group, which has a majority stake in the company developing Kovan Residences.

Although no longer directly involved in the stockbroking industry as dealers at UOB-Kay Hian, it is believed that their associates are still operating in the same firm.

Mr Han, like many well-heeled Singaporeans, is said to own several bungalows, including one at Cluny Hill.

So far, caveats have been lodged for just six GCB transactions in November.

However, market watchers say there are other transactions that took place last month as well as in December for which caveats have yet to be lodged.

William Wong, managing director of RealStar Premier Property Consultant, says his firm has brokered the sale of four GCBs over the past few weeks for a total of about $57 million that have yet to be caveated.

The four properties are located at Swettenham Green, Holland Road, Garlick Avenue and Rebecca Road. Market watchers also point to the transaction of No 3 Leedon Park for close to $40 million or around $950 psf of land area, which has yet to surface in caveats.

GCBs are an exclusive housing form governed by stringent planning criteria.

Rising prices prompt bubble fears in Asia

Source : Business Times – 17 Dec 2009

Investors concerned a real estate bubble burst would derail the region’s economic recovery

Property prices in parts of Asia have risen sharply, sparking worries that bubbles are forming and prompting policymakers to rein in the sector.

Investors fear any real estate bubble burst could derail the region’s nascent economic recovery in the way the US housing sector slump brought on the worst global downturn in decades.

Here are some questions and answers on where potential bubbles are, their impact on shares, where prices are headed and policies that governments might implement next year:

Bubble threat: where does it loom largest?

China and Hong Kong face the highest risks in Asia, followed by Singapore, as property prices have risen strongly, especially in the second half, due to ample liquidity, low interest rates and a rally in stock markets.

‘If it (the China bubble) does burst, is that going to suddenly be a big burst? In this case, it’s got a big impact on the rest of Asia,’ said Jeremy Helsby, group CEO of UK-based property firm Savills .

Some cities in China and Hong Kong’s mass market have seen residential prices rise by about a third this year, while in Singapore, private home prices soared 16 per cent in the third quarter from the previous quarter, the biggest jump this decade.

‘Singapore and Hong Kong are held up as examples of the effects of excess liquidity and credit in Asia. The residential property data certainly raise cause for concern,’ said Alaistair Chan, an economist at Moody’s economy.com.

China’s aggressive stimulus measures and developers halting some projects late last year due to the economic downturn helped push up prices this year, while Hong Kong’s limited land, coupled with a government land sales hiatus boosted prices.

The bubble threat also surfaced in Australia and South Korea earlier this year though various government policies have allayed those fears.

What is the impact of potential bubbles on shares?

Property shares have been outpacing main indexes in China , Hong Kong and Singapore, with the sector sub-indices up by 70 per cent to more than doubling.

Shares of top Chinese developer China Overseas Land and Investment and Singapore’s CapitaLand, South-east Asia’s largest developer, have signifcantly outpaced their local market indexes.

While some real estate stocks are likely to continue to outperform the broad markets in 2010, gains will be muted due to wariness over governments’ tightening policies as they act to fight off the potential of a property market meltdown.

‘Next year, we won’t see the exceptional returns we’ve seen in either financials or property shares. But I do think we will see some further but moderate growth in a number of property shares,’ said Rod Cornish, division director at Macquarie Capital Advisors. If a bubble does burst, it could hamper developers and real estate agents exposed to the markets affected. For instance, if a bubble bursts in China, major developers in the market, such as Shimao Property , could see their earnings and share prices hurt, analysts said.

Where are property prices headed for next year?

Most of the huge price rises in Asia are in the residential sector as reluctance by companies to hire kept demand for office space relatively weak in the region.

Residential prices in most markets are set to stabilise next year, with rises seen gradual compared to the huge swings this year. Prices from Japan to Singapore are expected to either remain stable or rise by nearly 10 per cent.

Residential prices in China are expected to rise by as much as 5 per cent by the end of next year from now, a Reuters poll showed, less than gains logged for this year.

Comparatively, commercial prices will likely be steady or rise marginally in China, but might see a more significant increase in Singapore, analysts and industry executives say.

What kind of policies will governments come up with?

Some countries have already reacted with monetary and property-related policies to allay fears over speculation.

In December, Australia raised interest rates for a third straight time, while South Korea in September imposed mortgage lending in Seoul and nearby areas to stem a housing boom.

In the months ahead, governments in the rest of Asia will likely resort to releasing land supply, taxes and bank lending measures to stablise property prices, instead of using monetary tools, since inflation is still benign.

‘Governments are nevertheless unlikely to crack down on speculation too harshly. One worry is that this could deter legitimate investment, causing the market to slump,’ said Mr Chan at Moody’s economy.com.

Prime rents in CBD area down 4.9% in Q4

Source : Business Times – 17 Dec 2009

Rental gap between newly completed and existing Prime Grade A blocks expected to widen

The average monthly rent for Prime Grade A office in the CBD core has fallen at a slower pace in the current fourth quarter, slipping 4.9 per cent from Q3, according to data from Jones Lang LaSalle (JLL).

This is a smaller quarter-on quarter decline than the drops of 13.7 per cent in Q3, 11.6 per cent in Q2 and 28.1 per cent in Q1 this year.

The $7.80 per sq ft average rental value in Q4 reflects a 47.8 per cent full-year slide. Against the high of $18.40 psf set in Q3 last year, the figure is now off 57.6 per cent.

JLL says the gap between newly completed Prime Grade A and other existing Grade A buildings is likely to widen over the next few years as new developments are completed. The gap is now 85 cents or 11 per cent. But it has been much wider – at $2 or more in Q3 2006, most of 2007 and even as recently as Q4 last year. In percentage terms, the difference was widest in Q3 2006, when rent for newly completed space was about 28 per cent higher than for existing offices.

Over the next three years, the average annual supply of new office space will be almost 2 million sq ft in the CBD core, and this is likely to dampen rental growth, says JLL’s head of SE Asia research Chua Yang Liang.

For new Prime Grade A properties that have been well received by the market so far, rents may bottom out as early as H2 2010. However, rents in existing office blocks may continue to slide until the end of next year, as vacancies are expected to rise on the back of a ‘flight to quality’ by tenants.

JLL also says shadow office space – surplus stock put up for subletting by occupiers – has shrunk to about 600,000 sq ft this quarter from some 800,000 sq ft at its peak in Q2 2009.

If global and regional economies remain on the recovery track, JLL believes leasing activity is expected to become increasingly stronger during 2010, as companies become more confident about business prospects.

Retail sector expected to hold up in 2010

Source : Business Times – 17 Dec 2009

Analysts forecast a smaller drop in prime retail rents by end-2009

The retail sector – the most resilient segment of the local property market in 2009 – should hold up in 2010 as well.

Most analysts expect prime retail rents to end 2009 down 3-6 per cent – a much smaller drop than they predicted a year ago. A poll of property analysts in late 2008 showed prime retail rents were expected to fall 5 to 13 per cent this year.

Now, heading into 2010, the retail sector is again expected to put up a strong showing, even as rents in sub-sectors such as offices take a further beating.

Prime retail rents are expected to stay flat for the most part, though some analysts are predicting rises of up to 10 per cent.

Rents at suburban malls, on the other hand, are expected to climb, as consumer spending at these malls is thought to be more resilient.

‘Prime retail rents in Orchard Road and Scotts Road and other city areas are likely to drift, with little change, due to more supply,’ said Anna Lee, DTZ’s associate director for retail. ‘Suburban rents may pick up.’

‘There is still healthy demand from local residents and this in turn draws potential tenants and helps stabilise suburban retail rents.’

Cushman & Wakefield Singapore’s director of research Ang Choon Beng agrees prime rents should stay firm in 2010. He is also more bullish than most analysts, predicting a 5 to 10 per cent increase in rents in 2010.

‘We are in agreement with consensus opinion that Singapore’s economy will grow strongly in 2010,’ he said.

‘This will lead to renewed confidence among retailers, keeping prime retail rents firm.’

Retail rents have not fallen sharply this year, despite a large amount of space coming on stream, because consumer spending has been resilient, says OCBC Investment Research analyst Foo Sze Ming.

An estimated 2 million sq ft of new retail space was completed in 2009. And it is expected that another 2.1 to 2.3 million sq ft will be added next year.

But mall operators will be heartened that new supply in 2009 was well-absorbed by the market, and that occupancy rates at new retail malls have been strong.

For instance, Ion Orchard and Orchard Central have achieved respective occupancy rates of 96 per cent and 80-plus per cent. Other new malls, including Tampines 1, Iluma and City Square Mall, have also put up decent showings.

‘While the upcoming supply of new space seems high, an oversupply situation is unlikely as we believe that these spaces can be absorbed by the market,’ said OCBC’s Mr Foo. ‘Some upcoming malls have already secured strong pre-commitments from tenants, well ahead of completion.’

He cited Nex and Marina Bay Link Mall, which have already secured respective lease commitments for more than 70 and 55 per cent of their space.

Analysts reckon retail yields are likely to well supported in the future.

‘They have ranged between 5 and 6.5 per cent over the past 10 years and are now closer to the 5-5.8 per cent range,’ said DBS Group Research analysts Lock Mun Yee and Derek Tan.

‘With limited supply and a robust outlook, we anticipate retail property yields to hover within a tight range.’

And capital values are expected to be stable in 2010. According to URA statistics, retail capital values fell 1.2 per cent quarter-on-quarter in Q3 2009, taking the drop from the peak to 12 per cent.

The decline has been greater for centrally located properties, with values down 12 per cent, versus an 11 per cent dip in fringe areas.

‘We expect capital values will be stable because most retail properties are held by big developers and Reits (real estate investment trusts,’ said DTZ’s Ms Lee.

Rental gap to widen for new and old prime offices

Source : Straits Times – 17 Dec 2009

THE end is in sight when it comes to the supply glut in office space here, at least in terms of falling rental levels.

A leading property consultancy says new prime Grade A office properties – premium office space in prized locations – hold a clear advantage. In a new report, Jones Lang LaSalle has identified a growing rental gap between these new properties and existing prime Grade A office space. In other words, given a wide choice, tenants will tend to opt for the glitzy new building, even if it costs somewhat more.

The consultancy believes rental levels of the new premium space will bottom out in the second half of next year – as early as July. However, rentals of existing office buildings may touch their low point around December.

It said the growing rental price gap between newly completed prime Grade A buildings and existing prime Grade A buildings is similar to a trend in 2006. Back then, the new space commanded a premium of about 28 per cent, or $2 per sq ft per month.

Jones Lang LaSalle’s preliminary estimates show average gross effective rents of Grade A office properties in the heart of the CBD hit $7.80 per sq ft a month in the fourth quarter, down 4.9 per cent from the third.

Office rents here have been falling as demand slows and supply grows. Experts anticipate that rents will continue to fall into next year, though at a slower pace.

The good news for landlords: Activity has picked up lately, with many financial institutions planning for moderate growth – and more space.

Landlords competing for tenants are lowering rents and rolling out incentives at a moderate pace.

Islandwide ’shadow space’ – surplus space that companies carve out to sub-let to others – shrank to 600,000 sq ft in the fourth quarter, from 800,000 sq ft at its peak in the second quarter of this year.

This was because companies withdrew some of the shadow space they were previously marketing, said Jones Lang LaSalle.

Apart from Raffles Place, office rents in Tanjong Pagar, Suntec City area and Harbourfront are likely to touch bottom by the second half of next year, and stay flat in 2011, said Colliers International’s executive director (commercial), Mr Calvin Yeo.

The rate at which the market is able to absorb available space is crucial when more new supply comes onstream from next year, said Jones Lang LaSalle. Over the next three years, new supply in the core central business district will amount to almost

2 million sq ft a year, and ‘is likely to put a dampener on rental growth’, said its head of research of South-east Asia, Dr Chua Yang Liang.

The firm’s regional director and head of markets, Mr Chris Archibold, expects leasing activity to rise further next year if the global recovery keeps up.

‘Many large MNCs see business opportunity ahead and are planning for moderate growth, but are having difficulty establishing headcount due to the uncertainty ahead,’ he said.

Value of non-residential properties more than tripled in Singapore

Source : Channel NewsAsia – 17 Dec 2009

The value of non-residential properties here has more than tripled this year.

Property consultancy Jones Lang LaSalle’s auction house said on Thursday that the quantum of non-residential properties has jumped from last year’s S$26.9 million to S$101.18 million to date.

It said the rise is due to investors being attracted to the higher rental yield from non-residential property, compared with an investment in residential property.

The actual number of mortgagee sales dropped from 232 in 2008 to just 216 this year. Total number of properties put up for auction has also decreased from last year’s 803 to the current figure of 729.

119 properties were sold at auctions this year, with the value amounting to S$167.3 million. This compares to just 68 properties sold last year, which carried a total value of S$69.8 million.

Jones Lang LaSalle expects to see more owner sales being put to auction next year. It is predicting a rise as it feels owners will be attracted by the competitive nature of the auction environment and the high chance of attaining an optimum price for their property.

China to curb home price surge

Source : Business Times – 16 Dec 2009

Cabinet pledges to promote healthy growth in the real estate sector

China’s economic planners have vowed to curb property speculation while downplaying fears that surging prices for real estate, food and other essentials may herald an inflationary spiral.

A statement by the main economic planning agency, reported by state-run media yesterday, outlined various reasons for price increases that contributed to a rise in the consumer price index last month, the first increase since January.

‘We believe that consumer prices will remain at a stable level for the near term and that there is only a slight possibility for serious inflation,’ said the statement issued late Monday by the National Development and Reform Commission.

After slowing in late 2007 through 2008, property sales bounced back this year. Prices have risen steadily since March, helped by lavish government support, tax cuts, a flood of bank lending, and strong interest from speculators who are said to be among the biggest buyers in Shanghai, the financial capital.

China’s cabinet, the State Council, pledged after an economic meeting yesterday to promote healthy growth in the real estate sector, promising a bigger supply of affordable housing as property prices in some cities soar.

The Ocean One luxury development in Shanghai sold 58 out of 67 units at an average price of 108,981 yuan (S$22,200) per square metre, according to the Shanghai government’s official real estate website.

The high prices paid for the apartments, located in a prime location near the Huangpu river and the city’s main financial district, helped raise the average price for real estate to a record 22,000 yuan psm last week, according to Shanghai Uwin Real Estate Information Services.

Housing prices rose 5.7 per cent year on year in November to a 16-month high and new construction rocketed almost 200 per cent, while sales nearly doubled.

Last week, the government re-imposed a 5.5 per cent tax on sales of homes bought less than five years earlier, moving to discourage speculative purchases.

‘Housing prices have risen too quickly this year, but since the property sector is crucial for China’s economy, the government will try to control it and ensure its growth is sustainable in 2010,’ Andrew Li, a partner at consultant PricewaterhouseCoopers, said yesterday at a briefing.

Until recently, declining prices were viewed as a greater threat to the economy.

China’s consumer price index rose 0.6 per cent in November, its first year- on-year increase since January, as prices for food, water, energy and other commodities rose.

Although the rise was modest, it was higher than expected and reinforced concerns among some economists over excess spending and investment in some industries, fuelled by the country’s four trillion yuan economic stimulus programme.

In its statement, the economic planning agency noted that some recent price increases for grain, oil, water and fuel were part of a long-term strategy aimed at raising farmers’ incomes and bringing state-controlled prices in line with market levels.

Bridging the gap between low-earning farmers and city dwellers is seen as crucial for boosting consumer spending to help sustain China’s long-term growth. Bringing the farmers into the cities is another part of that strategy.

But the country’s construction boom, focused mainly on commercial real estate, showcase projects and luxury villa developments, has long been out of sync with the push to step up urbanisation of the country’s rural majority.

The government has said that it would moderate lending and discourage investment in potentially unprofitable projects, and industries already glutted with overcapacity.

With prices for both new and existing housing shooting beyond the means of average wage earners, it has reiterated its plans to step up construction of less expensive housing.

The State Council, chaired by Premier Wen Jiabao, also said that the government would help 15.4 million impoverished households resolve their housing problems by 2012 and would encourage rebuilding or other improvements for urban ’shanty towns’ housing some 10 million households, according to a statement posted on the government’s main website.

Young Chinese find it hard to buy a home

Source : Straits Times – 16 Dec 2009

A year after graduating from the elite Beijing University, Ms Li, who asked that her full name not be used, has turned into a campus squatter.

The 30-year-old office worker ‘pulled some strings’ with the college housing office to rent a dormitory room. Decent, affordable accommodation in Beijing is too hard to find, she complained.

Soaring property prices across China have driven college leavers to, well, not leave college. These ‘college squatters’ have resorted to living surreptitiously on campus, either by renting rooms from current students or leveraging on their connections.

Despite being in the elite of Chinese society, they find that buying an apartment is increasingly beyond their means.

The struggle to own a home has become such a national nightmare that it was named the top cause of anxiety by half of the three million office workers in 15 cities surveyed by the Chinese Medical Doctors Association.

White-collar workers groan under the yoke of ‘mortgage slavery’, dubbing themselves fang nu (house slaves) who are enslaved by their mortgage burdens.

Young couples who cannot afford to buy matrimonial homes are putting off marriage. Singles are renting ever-shrinking rooms.

One young man even reportedly staged a protest on board the inaugural service on Shanghai’s Line 7 metro.

Sporting a portable tent covered in slogans condemning sky-high property prices, he told sympathetic commuters his tale of woe about not being able to find a marriage partner as he could not afford an apartment.

‘I don’t have an apartment, but I do have a brand new tent,’ a slogan proclaimed.

Disgruntlement over unaffordable property has found expression in rock ‘n’ roll songs in Shanghai like Shanghai Bu Huan Ying Ni (Shanghai Does Not Welcome You) – a play on the 2008 Beijing Olympics theme song Beijing Welcomes You.

Its lyrics depict poor people being sent packing from their homes to make way for luxury houses to be built for rich people – the only ones made to feel welcome.

The Chinese government is well aware of the social tensions being whipped up by mass angst over property.

It recently pulled the plug on an immensely popular drama serial called Snail House, which depicted the trials and tribulations of two sisters, born after 1980, trying to buy property of their own.

One of the sisters becomes a mistress of an official so she can help pay for a house, triggering debate over how much one should sacrifice in the quest to own a home.

It touched a raw nerve with the authorities, who ordered that the script be sent for another round of censorship after it garnered some 30 million video views online.

HDB, NUS plan climatic study in Punggol

Source : Business Times – 16 Dec 2009

THE Housing Development Board (HDB) and the National University of Singapore (NUS) yesterday signed a collaboration agreement for the country’s first township climatic study in Punggol Town.

Close to $960,000 has been set aside for the implementation of the project, which is jointly funded by the Ministry of National Development, HDB and NUS.

It is expected to be completed by end-2010.

‘The signing today marks a deeper cooperation between HDB and NUS to carry out cutting-edge research for Punggol town. The results from the study will enable a more effective design for sustainability,’ said Tay Kim Poh, chief executive officer of HDB.

‘HDB residents can look forward to a sustainable living environment that capitalises on naturally ventilated buildings and optimises energy efficiency.’

This study of the climatic conditions for Punggol will lay the groundwork for superior wind flow and cross ventilation, energy efficient buildings, natural energy resources and tropical green architecture within a township.

Punggol, which is HDB’s youngest town, has been earmarked to become Singapore’s most eco-friendly town, as part of its billing as a waterfront town.

‘As the vision of Punggol Town to become Singapore’s most eco-friendly town continues to unfold, NUS is pleased to share our expertise in design and environmental sustainability, and contribute to its design and development,’ said Barry Halliwell, NUS’s deputy president for research and technology.

‘The project will serve as an exemplary example to illustrate the creation of an energy-efficient and sustainable urban living environment through research-based township planning.’

The study will be led by Wong Nyuk Hien from the department of building at the NUS School of Design and Environment.

It will feature the use of software for a range of things, from the Geographical Information Systems (GIS) software that will be used to map the landscape of Punggol Town, to the Ecotect software that will capture the solar radiation profile of Punggol Town in order to identify the best locations for solar panels.

The Punggol area has been the target of intensive development in recent years. Almost 44 per cent of new flats launched in Singapore in the last two years have been in Punggol.

China property: Hot market

Source : Straits Times – 16 Dec 2009

Mr Sam Goi may be best known in Singapore for his Spring Home brand of popiah skins, but in China he is making a name for himself by building high-quality homes for the booming property market.

The ‘Popiah King’ sold 287 condominium units in Yangzhou, in eastern China’s prosperous Jiangsu province, in just one day when the first phase of his Linglong Wan development was launched in mid-September.

The apartments built by Mr Goi’s property arm Junhe Holdings were priced at 500,000 yuan (S$102,000) for a 80 sq m unit.

This was a good 50 per cent more than the units offered by Junhe’s competitors.

But in a red-hot market where buying a home has become a national obsession – residential prices across China hit a 16-month high last month – local buyers plonked down cold hard cash on the spot.

China’s property market has staged a breathtaking rebound, with property sales surging 87 per cent to 3.6 trillion yuan so far this year.

Warning cries of an unsustainable bubble are growing louder by the day.

Low interest rates and the massive stimulus spending by the Chinese government have helped flood the market with liquidity and kindle a property market fever.

But fears that such measures may be withdrawn next year to cool the market have actually triggered a round of ‘panic buying’ of property.

Younger Chinese are under mounting pressure to grab homes before prices spiral to unaffordable heights.

Premier Wen Jiabao chaired a State Council – China’s Cabinet – meeting on Monday, acknowledging such concerns and pledging to increase the supply of lower-cost housing, curb speculation and clamp down on excessive growth in home prices in some cities.

Beijing this week reintroduced a nationwide real estate sales tax in an attempt to reduce property speculation.

Anyone selling a second-hand apartment or house within five years of purchasing it – three years longer than the previous two-year timeframe – will have to pay a sales tax of 5.5 per cent.

Mr Goi said he had been very cautious about the market and the dangers of a bubble forming.

But he still expects prices to rise higher this year, and is on course to expand Junhe with more projects in China and to list the company in a few years’ time.

‘There is still a lot of growth potential, as more people move to the cities and people are willing to pay more for homes with reliable and guaranteed quality. So the Junhe brand, a Singapore brand, appeals to them,’ he said.

UBS economist Tao Dong agreed that the market ‘is just getting hot’.

Beijing wants to push for greater urbanisation of China to stimulate the country’s domestic demand next year and beyond. That is likely to push provincial governments to build more urban housing, she said.

Foreign developers, who exited last year when the Chinese property market sagged, have piled back in recently, according to real estate consultant DTZ.

They are adding to the flurry of activity as the construction of 162 million sq m of new housing and commercial space started last month – double that from a year ago.

Still, some local developers, including China’s largest player Vanke, are starting to get antsy.

While ‘things haven’t risen to a property bubble yet’, the sharp rise in prices across some major Chinese cities could spill over to second-tier ones with potentially damaging effects, its chairman Wang Shi said in an interview with the Wall Street Journal on Dec 4.

The effect, he said, could be similar to the nature of the Japanese bubble decade that imploded in the early 1990s.