S’pore drops to 43rd in office costs rankings

Source : Business Times – 23 Jan 2010

SINGAPORE has dropped to 43rd place from 10th in DTZ’s latest ranking of office occupancy costs around the world, and is a cheaper place for businesses compared with other Asia-Pacific cities such as Tokyo and Hong Kong.

According to the property consultancy, annual occupancy costs per workstation in offices at Raffles Place fell 49 per cent, to US$8,440 in 2009 from US$16,610 in 2008. The slump ‘was triggered by weak demand and a substantial amount of new supply, which dragged down rents and thus total occupancy costs,’ DTZ said in a report.

London’s West End was the most expensive office location in 2009, up from fifth place in the previous year. Tokyo’s Central 5 Wards was ranked second, down from first. In third spot was Washington DC, which rose four places.

Hong Kong kept its fourth position even though annual occupancy costs per workstation there dropped 22 per cent to US$16,970 last year. It was the only other Asia-Pacific city apart from Tokyo to be within the top 10.

Other Asia Pacific cities ranked above Singapore include Sydney, Mumbai and Brisbane.

DTZ expects Hong Kong to ’strongly outpace’ Tokyo by 2013. Its annual occupancy costs per workstation could rise to US$23,800 then, exceeding Tokyo’s US$21,160.

The consultancy estimates that annual occupancy costs per workstation in Singapore could slide another 17 per cent to US$7,020 this year. They might start climbing to reach US$7,840 in 2013, but are unlikely to surpass 2009 levels. ‘This is driven by surplus space driving down rents in the near term,’ it said.

DTZ added that companies in Singapore are set to benefit not just from low occupation costs. There will be ‘a wider and better pool of properties to choose from – the office market will offer tenants real value for money in the current climate’.

Median COV for resale flats doubles in Q4

Source : Business Times – 23 Jan 2010

Resale prices hit record, with the HDB resale price index rising to 150.8 points, up 3.9% from the previous quarter

CASH is king, and this adage rang particularly true in the public housing market in Q4 2009, when the cash premium for Housing & Development Board (HDB) flats doubled from the previous quarter.

The median cash over valuation (COV) for all resale transactions was $24,000 – up from $12,000 in Q3. Nevertheless, the Q4 figure remains some way off from the record in HDB’s books, which was $42,000 in Q3 1996.

Resale flat prices also peaked in Q4 2009. The HDB resale price index rose to 150.8 points, up 3.9 per cent from the previous quarter and 8.2 per cent from the previous year. The increases surpassed HDB’s flash estimates slightly, which projected growth at 3.8 per cent quarter-on-quarter and 8.1 per cent year-on-year.

On the back of a strong housing market, HDB will be pushing out 6,900 flats in H1 2010, spread across areas such as Sengkang, Sembawang, Punggol, Yishun and Jurong West. There will also be monthly launches of build-to-order (BTO) flats for the next few months.

The sharp rise in COV, or the amount of cash buyers pay above flats’ valuations, caught the attention of several industry watchers. COVs indicate that buyers see greater worth in the flats than professional valuers do, and this happens especially in a rising market. In Q4, 93 per cent of resale deals occurred above valuation, compared with 79 per cent in Q3.

Most observers attributed the high COVs to strong demand for flats, while supply remains limited. C&H Realty managing director Albert Lu believes there could have been some panic buying as well.

HDB prices have risen in the last few quarters and with the economy expected to pick up this year, some home seekers could fear further price hikes, he said. ‘That might have prompted them to say ‘hey, better buy before prices go up again’.’

Median COVs displayed the biggest increases for larger flats. It was $25,000 in Q4 for executive flats – 2.8 times the $9,000 in Q3. Median cash premiums of $50,000 were even seen in Clementi and Queenstown for this flat type.

The good news for buyers is that COVs are unlikely to continue their steep rise, according to property consultants. HDB revealed that for the first half of this month, the median COV for all resale transactions has dipped slightly to $22,000.

‘With the resale HDB market trading at such high COVs, many buyers have become resistant and are exploring other options,’ said ERA Asia Pacific associate director Eugene Lim. Some are thinking of buying smaller flats, delaying their purchases or joining the queue for new flats.

He believes that COVs will continue inching up this year, though at a slower pace because ‘we are not in very positive economic waters yet’. PropNex Realty CEO Mohamed Ismail does not expect the overall median COV to exceed $30,000 this year.

Consultants are projecting HDB resale price growth of 5-10 per cent this year. In Q4, the median resale price of executive flats was $485,000 – those in Queenstown even achieved an eye-popping median price of $800,000.

Buyers filed a total of 37,205 resale applications last year, up 31 per cent from 2008. There were 8,926 applications in Q4 2009 alone, though this was 23 per cent down from the previous quarter.

Last quarters of the year tend to be quieter, and rising valuations and COVs could have contributed to the fall, Mr Ismail explained. ‘Furthermore, the steady launch of new BTO projects, the government’s continued assurance of more BTO projects in the pipeline and the increased chances for first-time buyers of BTO flats have all helped to assuage demand.’

HDB recently offered 1,300 flats from two BTO projects in Choa Chu Kang and Hougang and the flats drew a flood of applications. It also launched the tender of two executive condominium sites in Sengkang and Yishun which could yield about 900 units together.

Office and shop prices stop falling

Source : Straits Times – 23 Jan 2010

OFFICE and shop prices appear to have bottomed out at the end of last year.

Both categories of commercial property saw small price rises in the fourth quarter, ending five quarters of decline.

Office prices rose by 1 per cent while shop prices inched up 0.6 per cent, said the Urban Redevelopment Authority. But office prices were still down 16.4 per cent for last year as a whole, and are 24 per cent lower than their peak in 2008. Similarly, shop prices fell 6.1 per cent for the whole of last year, and are still 11 per cent down from their 2008 highs.

‘On the whole, the office market weathered the storm much better than anticipated,’ said Mr Li Hiaw Ho, executive director of CB Richard Ellis Research.

But while sellers of commercial property may be cheerier, landlords are less so.

Office and shop rentals continued to fall in the fourth quarter, for the sixth consecutive time. Office rentals fell another 3.3 per cent, bringing the full-year decrease to a sharp 23.6 per cent. Shop rentals fell 1.4 per cent in the quarter, ending the year down 7.4 per cent.

But property consultants noted that the rate of decrease is slowing, and rents may even rise next year. ‘The expected economic recovery in 2010 will give a boost to business sentiment,’ said Ms Tay Huey Ying, Colliers International’s director for research and advisory.

Still, the upcoming supply of more than 2.5 million sq ft of office space will weigh on the market in the short term, she said. She expects office rents to ease by another 5 per cent in the first half of the year before bottoming out.

One good sign: With lower rents, tenants are taking up more office space.

The amount of office space taken up in the fourth quarter jumped 10 times from that in the third quarter, from 32,292 sq ft to 301,392 sq ft. This meant the office vacancy rate dipped to 12.1 per cent in the fourth quarter, even though an extra 226,044 sq ft of new office space was completed, said Mr Li.

Private home rents pick up

Source : Straits Times – 23 Jan 2010

THINGS are looking up for landlords of private homes, such as condominiums and landed houses.

After suffering through five quarters of rental decline and a 20 per cent drop in rents since 2008, they may finally be able to raise their rates this year.

Private home rents halted their slump and started to turn around with a 0.6 per cent rise in the fourth quarter of last year, according to figures released by the Urban Redevelopment Authority (URA) yesterday.

Although rents still haemorrhaged 14.6 per cent for the whole of last year, consultants say they have stabilised and are on the way to recovery.

‘From September last year, we started seeing more landlords raise rents off the lows of the first and second quarters of last year,’ said Mr Donald Han, managing director of Cushman & Wakefield.

‘I think the trend will probably continue this year in anticipation of an economic recovery.’

As economic growth picks up, businesses, including multinationals, are stepping up hiring and are likely to bring in more expatriates, who form the bulk of tenants of private homes in Singapore, Mr Han said.

‘Usually the first to come in are the heads of divisions, the top honchos, who will be hired to start operations in Singapore,’ he said, adding that this will start pushing up rental demand for high-end properties.

Already, landlords of some luxury homes – from high-end apartments to good-class bungalows with rents of $8,000 per month or more – have raised their rates by 5 to 6 per cent in the fourth quarter of last year, Mr Han said.

Rents are also rising because the demand for completed homes outstripped the supply of such homes last year, noted Ms Tay Huey Ying, Colliers International’s director for research and advisory.

The stock of private homes increased by 8,285 units last year, the biggest net increase in five years, she said.

But that was not enough for home seekers. The increase in demand for physically completed homes hit a nine-year high of 10,520 units, Ms Tay said.

Colliers calculates the demand for completed homes by taking the total number of completed units available and deducting the number of vacant units left on the market.

Any increase in this number of occupied homes is deemed an increase in demand. This pushed the occupancy rate of private homes to an all-time high of 95 per cent at the end of last year, from 93.9 per cent at the end of 2008.

The surge in demand for completed homes allowed rents to inch up towards the end of last year, added Ms Tay. She expects the tight supply of homes to continue pushing up rents by 5 to 10 per cent this year.

High-end homes in central areas, which are traditionally more popular with expats, will lead the charge, she said. Rents there are projected to grow by 8 to 12 per cent this year due to their proximity to the upcoming integrated resorts, international schools, the Central Business District as well as the rejuvenated Orchard Road shopping belt.

But Mr Han said rent increases this year will depend on whether the economy continues to grow in the second half of the year.

Between now and June, ‘homes in the upper mid-tier to luxury range will see a rental uptick of 5 to 8 per cent’, he said. If the economic recovery maintains its strength past June, rents could rise another 5 to 10 per cent.

Mid-tier homes on the city-fringe region, which include expat-friendly areas such as Tanjong Rhu and Marine Parade, are expected to see rents rise by 5 to 8 per cent, said Ms Tay.

But rents of suburban homes are expected to stay soft for a while, rising by at most 3 per cent this year, she added.

These trends are in line with what URA data showed from the fourth quarter of last year.

Rents of non-landed properties in the prime districts – Orchard, Holland, Newton, Novena, Bukit Timah, Marina Bay and Sentosa – led the market increase by rising 0.9 per cent in the quarter, according to URA data.

But rents in the city-fringe areas, which range from Marine Parade to Queenstown to Bishan, were largely flat, as were rents of suburban homes.

For the full year, rents of prime homes plunged 15.9 per cent. Those in city-fringe areas slumped 14.9 per cent and suburban rents dropped 14 per cent.

Cash-rich buyers pushing up prices

Source : Straits Times – 23 Jan 2010

CERTAIN popular public housing estates are commanding the biggest premiums from eager buyers.

Fresh data from the Housing Board (HDB) yesterday showed that flats in established towns such as Queenstown, Marine Parade and Bukit Timah are pulling in the biggest cash top-ups.

The difference between the bank’s valuation and the actual price paid is known as the Cash-over-Valuation (COV).

The median COV hit a record $24,000 in the fourth quarter across all towns islandwide and all flat types.

In some central locations such as Bukit Timah, the overall median COV paid for flats trebled to $30,000 in the fourth quarter from the third quarter.

Further out, even at suburban spots such as Punggol, median COV shot up 195 per cent to $28,000, while at sleepy Pasir Ris, it jumped 186 per cent to $20,000.

Housing agents on the ground say cash-rich buyers – both locals and permanent residents (PRs) – are driving the recent rally in HDB resale flat prices and the resulting high COV levels. PRs are the only foreigners able to buy HDB flats.

PropNex agent Wilson Low, 44, recently brokered a sale where a local couple paid $730,000 for a five-room flat on a high floor at Cantonment Close. That meant an eye-popping $85,000 COV.

‘The buyers, flush with cash from a private property en bloc sale, paid the whole sum without a bank loan. We are seeing quite a few such cash-rich buyers who are meeting the high demands of sellers,’ he said.

He said PRs, mostly from China, Malaysia and Indonesia, tend to favour central locations and are more serious buyers than locals, given their urgent need for housing.

ERA Asia Pacific associate director Eugene Lim added that the resale market ‘will continue to be driven by families who have immediate housing needs, namely the second-time buyers and PRs’, for the near future.

HDB’s data showed median resale prices at central Queenstown hit $800,000 for executive flats and $645,000 for five-room flats, up from $712,000 and $619,000 in the third quarter respectively.

Other notable prices were fetched at Clementi, where the median resale price for an executive flat was $690,000, and Marine Parade, where a five-room flat was $625,000.

Monthly rents for HDB flats also inched up for all flat types in the fourth quarter from the third, except those for three-room units, which were flat at $1,500.

Rents for four- and five-room flats both rose about 3 per cent to $1,750 and $1,850 respectively, while rents for executive units rose 2 per cent to $2,000 a month.

HDB said yesterday that subletting transactions edged up by about 1 per cent to 3,902 cases in the fourth quarter, compared with those in the third.

The number of HDB flats approved for subletting rose to about 24,300 units in the fourth quarter – up from 23,800 units in the third quarter.

ERA’s Mr Lim said COV is ‘likely to continue to inch upwards in 2010 as we enter economic recovery’.

‘However, as we are not in very positive economic waters yet, COV increases are likely to moderate in the months to come,’ he said.

Cash premiums for HDB flats hit a high

Source : Straits Times – 23 Jan 2010

BUYERS desperate to get into the public housing market are shelling out twice as much in cash top-ups for HDB resale flats as they did just a few months back.

These cash premiums are known as the Cash-over-Valuation (COV), and refer to the amount a buyer has to pay above a flat’s valuation set by a bank.

High demand and tight supply drove the median COV paid to $24,000 in the fourth quarter of last year, according to fresh data from the Housing Board (HDB) yesterday.

That is double the $12,000 median in the previous three months and breaks the COV record of $22,000 achieved in the fourth quarter of 2007.

The buying frenzy seems to have abated a little since the new year. The HDB said yesterday that median COV has come down to $22,000 for the first half of this month.

Analysts say COVs are being pushed to dizzying levels on the back of high demand from cash-rich buyers with immediate housing needs in a market with tight supply.

And there is always a disparity between valuations and sellers’ expectations in a hot market, said ERA Asia Pacific associate director Eugene Lim.

‘Valuation is lower than actual resale prices because it is based on past prices,’ he said. ‘Currently, the market is on the upswing and is therefore forward-looking; this explains the disparity,’ he said.

HDB’s latest data showed resale prices rose 3.9 per cent in the last three months of last year to hit a fresh record, bringing the full year increase to 8.2 per cent.

Private homes got in on the act as well with prices up 7.4 per cent in the same period, according to the Urban Redevelopment Authority (URA) yesterday.

This builds on an increase of 15.8 per cent in the previous quarter and offsets the contraction of 18.8 per cent that occurred in the dismal first half of the year.

The final tally saw private home prices rise 1.8 per cent for the whole of last year.

The HDB’s figures showed that about nine out of 10 sales – or 93 per cent – in the fourth quarter were done above valuation. This is up from 79 per cent in the third quarter.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said this indicates that HDB resale prices could still rise as an increasing proportion of sales are done above valuation.

‘This could also fuel the HDB upgraders’ demand for HDB flats and private properties in the months ahead,’ he said.

The new HDB figures are evidence of the price rally that began in the middle of last year. It tripled median COV from $3,000 in the second quarter to $12,000 in the third before the fourth’s spectacular leap.

Sales volume for the fourth quarter – a typically quieter period – declined by about 23 per cent to 8,926 transactions.

But last year was still a bumper year compared with 2008, with the total number of resale transactions surging 31 per cent to 37,205. It was also 26 per cent up on 2007’s sales numbers.

PropNex chief executive Mohamed Ismail noted that the larger flat types commanded the largest jumps in COV. Five-room flats were up 150 per cent, while executive units rose 178 per cent in the fourth quarter.

But the number of sales in these categories fell 34 per cent in the fourth quarter compared with those in the third quarter, while sales of smaller flats declined only 18 per cent.

Such steep rises in COVs are not sustainable, say analysts. But given the continued high demand for public housing, they expect prices to rise by about 5 per cent to 10 per cent this year.

With COVs so high, buyers have ‘become resistant and are exploring other options, including buying smaller flats or delaying their purchases’, said Mr Lim.

Permanent resident Liu Li, 29, said she has given up trying to buy a resale flat and is now queuing for a new flat with her Singaporean husband under the HDB’s build-to-order (BTO) scheme.

The HDB said yesterday it will launch 12,000 BTO flats this year, or more if there is demand.

‘In total, the HDB is planning to offer 6,900 flats in (the first half of this year). The projects will have a good geographical spread over areas such as Sengkang, Sembawang, Punggol, Yishun and Jurong West,’ it said in a statement.

New Jurong leisure centre gets go-ahead

Source : Straits Times – 23 Jan 2010

A LAVISH new entertainment complex for Jurong has received the green light after being put on the back burner during the financial crisis.

The manager of CapitaMall Trust (CMT) told a results briefing yesterday that the facility – including its Olympic- sized ice-skating rink – should be ready in early 2012. Demolition of the old Jurong Entertainment Centre will be completed soon.

The new centre has been designed by Benoy Architects, the group that conjured up the Ion Orchard look.

Besides the ice-skating rink, which will be visible from the surrounding eateries, the centre will have a rooftop garden plaza and cinema alongside retail outlets.

Mr Simon Ho, chief executive of CapitaMall Trust Management Limited, which manages CMT, said the centre will have five storeys and three basement levels. There will be a 24-hour linkway to the Jurong East MRT station.

He said that plans for the centre were reactivated after a deferment last year due to the economic crisis and sky-high construction costs. But he said the retail sector is looking up again.

The retail sales index – an industry measure – was up 4 per cent last November from a year earlier. This was the first increase in 13 months.

CMT’s positive fourth-quarter results also increased confidence about tackling the Jurong centre.

It will have retail floor space of 204,153 sq ft with average rent per sq ft estimated at $12.26, a 123 per cent increase from the $5.49 psf level at the old centre. The project is expected to cost $200.3 million and generate 8 per cent in return on investment.

CMT’s manager also said yesterday that reconfiguration works at Basement 1 of Raffles City Shopping Centre has started. This is to facilitate the building of a linkway from Basement 2 to the upcoming Esplanade MRT station. It will open in the third quarter of this year. About 63 per cent of the retail floor space in the link is pre-committed.

Shopping malls certainly delivered the goods for CMT in the last quarter.

Increases in revenue from five CMT centres – Bugis Junction, IMM Building, Lot One Shoppers’ Mall, Plaza Singapura and Tampines Mall – coupled with savings boosted the bottom line. Distributable income for the three months to Dec 31 increased by 25.5 per cent to $76.5 million from the same period in 2008.

Distribution per unit (DPU) was 2.4 cents, 24.4 per cent higher than the 1.93 cents paid out for the fourth quarter of 2008. Payouts will be made on Feb 26.

Fourth-quarter gross revenue increased 4.2 per cent to $140.1 million while net income rose 32.5 per cent to $61.8 million over a year ago.

Property operating expenses decreased by 9.3 per cent to $44 million. Full-year gross revenue rose 8.2 per cent to $552.7 million while net property income was up by 10.4 per cent at $376.8 million.

It sent full-year DPU 17.7 per cent higher to 8.85 cents from the previous year’s 7.52 cents.

The retail landlord maintained 99.8 per cent occupancy throughout last year and renewed 614 leases.

Positive rental reversions of 3.4 per cent in the last quarter and an overall 2.3 per cent increase in rental rates for the year were good achievements in a tough year, said Mr Ho.

‘Retail rents are likely to remain stable. In addition to active lease management, we will continue to drive DPU growth through asset enhancements, selective acquisitions of yield-accretive properties and prudent capital management,’ he added.

CMT units dropped four cents to $1.78 after the results were announced.

Almost all 120 released Cube 8 units sold

Source : Business Times – 23 Jan 2010

CDL intends to release additional units in the 177-unit freehold condo over the weekend

CITY Developments Ltd (CDL) has sold almost all of the 120 units it had released as of yesterday evening at its Cube 8 condo at Thomson Road during a two-day preview. Most of the units were sold yesterday .

CDL released an initial 80 units at an average price of $1,250 psf but due to strong demand, offered a further 40 units. Prices of the latter batch are understood to have been increased slightly, probably in the order of 2-3 per cent.

The company said yesterday evening that it intends to release additional units in the 177-unit freehold condo over the weekend. ‘The strong sales-to-date for Cube 8 reflects the positive sentiment in the property market and attests to our ability to market the appropriate products at the right time,’ said CDL’s group general manager Chia Ngiang Hong

One- and two-bedrooms were the first to be snapped; for three bedders, higher floor units were in greater demand, BT understands. The 36-storey condo is being built on the site of the former The Albany and Thomson Mansions in District 11. The 39 one-bedders have been sold out and a substantial number of the 58 two-bedroom apartments have also found takers.

The one bedders, with an area of 560 sq ft, were priced from $740,000 upwards, BT understands. Prices of two-bedders start from $1.1 million while three-bedroom apartments, ranging from 1,335-1,475 sq ft, cost anywhere from nearly $1.6-1.8 million. Four bedders are priced at about $2.5 million each, while sky villas or penthouses cost at least $3.5 million apiece.

BT understands that Singaporeans had bought the majority of units as of yesterday. Foreigners (including permanent residents) picked up about 20-25 per cent. Indonesians, Indians and Koreans were among those said to have bought.

CDL opened the showflat to former owners of The Albany and Thomson Mansions on Thursday. After they had made their selections, directors and staff were invited. The ‘public preview’ began yesterday.

CB Richard Ellis and Huttons are the marketing agents for Cube 8.

Property market eyes fruits from Remaking S’pore

Source : Business Times – 23 Jan 2010

Analysts bullish after URA data shows hike in Q4 prices and dip in vacancies

THE increase in Singapore private home prices moderated in the fourth quarter, but there are also signs of things firming again if the economy continues to grow. After all, much of the physical infrastructure for the Remaking Singapore story is being delivered this year.

Urban Redevelopment Authority’s private residential rental indices posted modest quarter-on-quarter increases in Q4 – marking a reversal of the declines posted in the preceding quarter. The islandwide vacancy rate for private homes dipped to 5 per cent as at end-2009, compared with 6.2 per cent as at end-Q3 2009 and 6.1 per cent as at end-2008.

A total 10,488 private homes received Temporary Occupation Permit (TOP) last year – the highest level since 2004 when 11,799 homes were completed. Taking into account demolitions, the net increase in the stock of completed private homes last year was 8,285. However, there was an even bigger net jump in demand for physically completed private homes last year to a nine-year high of 10,520 units, said Colliers Intenational.

DTZ executive director Ong Choon Fah argues that with the number of private homes receiving TOP this year expected to slip 28 per cent to 7,584 units (based on URA’s surveys of developers), vacancies will ease further and rents will continue to firm up across the board.

Singapore also expects to see an influx of workers and expats as the integrated resorts and Marina Bay Financial Centre become operational. This will drive up demand for rental homes across the whole spectrum – from HDB flats to upscale condos.

Landed home prices, especially those for terrace houses, posted a sparkling performance last year. URA’s landed property price index rose 7.7 per cent in 2009, compared with just a 0.5 per cent rise for non-landed homes. The terrace house price index appreciated 10 per cent in 2009, followed by semi-detached houses (up 8.8 per cent) and detached houses, (up 5.6 per cent). Agents credit the landed sector’s resilience to its relatively more limited supply.

URA’s overall private home price index (covering both landed and non-landed segments) rose 7.4 per cent quarter-on-quarter in Q4, translating to a full-year increase of 1.8 per cent. The index slipped 18.1 per cent in the first half of 2009 before recovering 24.3 per cent in the July to December period.

Developers sold 14,688 units in 2009, nearly 3.5 times the 2008 figure and close to the all-time high of 14,811 in 2007. DTZ’s South-east Asia research head Chua Chor Hoon forecasts a take-up of 8,000 to 10,000 units in 2010. Consultants generally predict 8 to 15 per cent increase this year for URA’s overall private home price index, with greater upside for high-end homes.

Knight Frank chairman Tan Tiong Cheng, however, said the pace of price increase for upmarket homes will depend on how many expat tenants pour into Singapore and the size of their rental budgets since the majority of such properties are bought for investment.

On the other hand, mass-market private condo prices may still have room to power up, assuming HDB resale flat prices continue to rally, and especially if the condo launches are in plum locations, Mr Tan added. ‘Landed homes will also continue to do well in 2010 due to the scarcity factor,’ he added.

URA’s figures also show that the supply pipeline of private homes with either provisional or written permission shrank from nearly 65,000 at end-2008 to 60,476 units at end-2009. The number of unsold units in uncompleted private housing projects contracted from 43,414 at end-2008 to 34,234 at end-2009, reflecting developers strong sales last year.

The office market achieved its second consecutive quarter of positive net demand of 301,389 sq ft in Q4 2009, higher than the 32,292 sq ft posted in Q3. For full year, net demand was minus 236,806 sq ft; nonetheless, this was better than in 2002 and 2003, when net demand was minus 926,000 sq ft and 1.13 million sq ft respectively, notes Colliers director Tay Huey Ying.

Islandwide office vacancy improved slightly from 12.2 per cent at end-Q3 2009 to 12.1 per cent at end-Q4.

The median monthly rental for the choicer Category 1 office space based on rental contracts signed in Q4 was $8.76 per square foot, down 7.8 per cent from Q3. DTZ says a recovery in office rentals at the end of this year is plausible if the economy grows more strongly than expected and more existing office blocks are redeveloped.

In the retail property segment, URA’s shop rental index for the Central Region dipped 1.4 per cent in Q4 over the preceding quarter, resulting in a 7.4 per cent full-year drop. Despite another 404,723 sq ft of new shop space being completed in Q4, the islandwide shop vacancy rate improved to 5.7 per cent from 6 per cent in Q3.

Knight Frank’s Mr Tan said: ‘There is a lot of confidence that with the completion of the IRs, there will be multiplier effects for the retail and private residential property markets. The IRs will attract a lot of MICE visitors, who tend to have higher spending power than the typical tourist. Some overseas visitors drawn by IRs may end up liking Singapore and want to buy a home here, especially if there are prospects of economic recovery.’

‘The Government began telling the Remaking of Singapore story about five years ago. Now the physical part of the story is almost ready. And it’s about time to reap the fruits of these investments.’

Home buyers turn up in droves for Cube 8 apartments

Source : Straits Times – 23 Jan 2010

UNITS at City Developments’ Cube 8 in Thomson Road have been selling like hot cakes since the developer opened its doors for previews on Thursday.

The Straits Times understands that all 80 units released in Phase One have been snapped up. A further 40 released in Phase Two have mostly been sold as well.

The average price of the units sold is $1,250 per sq ft, valuing the three-bedroom units at $1.6 million to $1.8 million, while the four-bedders cost around $2.5 million. The penthouses or sky villas will set buyers back by $3.6 million to $3.8 million.

City Developments will be releasing more units this weekend.

‘The actual units sold would have crossed 100 already,’ said Mr Joseph Tan, executive director for residential at CB Richard Ellis, the project’s marketing agent.’From the look of things, maybe around 20 per cent of the buyers are foreigners, with the rest locals. We also see an equal 50-50 mix of owner-occupiers and investors.

‘All the one-bedroom apartments have been sold, as have most of the two-bedders.’

The freehold project in Thomson Road is on the site of the former The Albany and Thomson Mansion and next to City Developments’ The Arte at Thomson, which was launched for sale in March last year.

While the two projects are adjacent, The Arte is in District 12 while Cube 8 is in District 11.

City Developments opened the doors to Cube 8 on Thursday to former owners of The Albany and Thomson Mansion. Staff and directors were also invited to the private preview.

The public preview started yesterday.

The 36-storey Cube 8 has 177 apartments, comprising 39 one-bedroom units, 58 two-bedders, 67 three-bedders, nine four-bedroom apartments and four sky villas.

Sizes range from about 560 sq ft for a one-bedder to 893 sq ft to 926 sq ft for two-bedroom units. and 1,335 sq ft to 1,475 sq ft for three-bedders. The four-bedroom apartments will be around 1,905 sq ft, while the sky villas will be 3,025 sq ft to 3,229 sq ft.

Ms Tay Huey Ying, director of research and consultancy at Colliers International, said: ‘The strong demand for Cube 8 does not come as a surprise.

‘The market has been rather quiet over the last few months in terms of launch activity. Now that people have come back from their holidays, they are ready to look into serious commitments such as home purchases again.

‘With the economy looking up, job prospects looking up, and wages going up… all these contribute to the positive sentiment.’

Ms Tay added that if the economic recovery remains on track and there are no external events or new government cooling measures, buying should stay healthy this year, although new sales volume is unlikely to repeat last year’s bumper figure.

She expects 7,000 to 9,000 new sales this year, as opposed to the 14,688 new units sold last year.

Landed homes lift private property market

Source : Straits Times – 23 Jan 2010

LANDED homes turned out to be the star performer of the private property market last year, rising far more in price than other types of housing.

As a whole, detached, semi-detached and terrace houses jumped in price by 8.3 per cent in the fourth quarter of last year and 7.7 per cent for the whole of 2009.

This significantly outstripped condominiums and apartments, according to data released by the Urban Redevelopment Authority (URA) yesterday.

Despite rising 7.2 per cent in the fourth quarter, non-landed property registered a meagre 0.5 per cent price increase for last year.

‘Landed homes are limited in supply, so people always aspire towards owning one,’ said Ms Chua Chor Hoon, head of South-east Asia research at DTZ Debenham Tie Leung.

‘When the market was in a slump, some buyers took the chance to buy landed properties. And now that condominium prices have gone up a lot again, people are seeing better value in landed homes.’

Terrace houses, the cheapest type of landed housing, were the most sought-after. Prices of terraces shot up 10 per cent last year, followed by semi-detached houses with an 8.8 per cent rise.

Detached houses – which include good-class bungalows, the grande dames of Singapore property – rose in price by a smaller 5.6 per cent last year.

Taken together with non-landed property, this translated into overall private home prices rising by 1.8 per cent for the whole of last year.

The rise in prices, despite 2009 being a recession year, was entirely due to the property market roaring back to life in the second half of the year as the economy emerged from recession.

Private home prices jumped 7.4 per cent in the fourth quarter, after soaring 15.8 per cent in the third quarter, said the URA yesterday.

Unlike in earlier quarters, the price increase between October and December was led by more expensive homes nearer to town.

Prices of homes on the city-fringe – covering the East Coast, Queenstown and Bishan – rose the most, by almost 10 per cent.

Homes in the core central region, which refers to the prime districts of 9, 10, 11, Marina Bay and Sentosa, saw prices rise by 7.3 per cent.

For the first time, suburban homes were the laggard in the fourth quarter last year, with a price rise of only a 6.3 per cent.

But although overall prices surged in the fourth quarter, home sales slowed considerably.

Only 1,860 new homes were sold in the final quarter of last year, just a third of the sales in the preceding quarter, said Mr Li Hiaw Ho, executive director of CB Richard Ellis Research.

Resale and sub-sale transactions fell by about half in the fourth quarter, which is traditionally a subdued period for home sales. Last year, this coincided with the introduction of government measures to cool the property market in September.

For the whole year, home buyers bought 14,688 new homes from developers and 18,129 homes from other home owners. While this was a big jump from the muted activity in 2008, sales were still lower than during the boom year of 2007, Mr Li said.

He expects home sales to moderate this year after last year’s rapid buying activity.

About 8,000 to 10,000 new homes will probably be sold, while prices are projected to rise by 8 per cent to 10 per cent through the year, led by the high-end segment of the market, according to Mr Li’s forecasts.

‘Already, the year has started with a positive sentiment in light of the Government’s forecast of 3per cent to 5 per cent economic growth for the whole year,’ he said. ‘Increased hiring and pay rises are also on the cards.’

Private home prices up 7.4% in Q4 2009

Source : Channel NewsAsia – 22 Jan 2010

Private home prices in Singapore continued to recover in the fourth quarter of last year, growing 7.4 per cent on-quarter.

According to data from the Urban Redevelopment Authority, the rise is a slower pace from the 15.8 per cent jump in the previous three months.

But analysts expect the cost of homes to still creep up this year, and match the peak levels seen in the second quarter of 2008.

Mass market projects powered the private residential sector last year. Strong demand from those upgrading from public housing pushed prices up 11.8 per cent in 2009.

Market watchers said prices of mass market homes will still inch up this year at between 3 per cent and 5 per cent, despite having exceeded their peak prices.

But observers said suburban homes will likely play second fiddle to more expensive projects this year. And prices may match previous highs, given that the 7.4 per cent increase in the three months to December is just 6.6 per cent off the peak in second quarter of 2008.

Donald Han, managing director, Cushman & Wakefield, said: “This year, we are expecting prices to move as much as 10 per cent to 12 per cent, dominated primarily by the high-end as well as the luxury market.

“We would anticipate the first two quarters to go something like four to five per cent first, we would probably hit the top of the market, revisit that towards the third quarter of this year.”

Analysts expect six in 10 homes from the total stock this year to come from the mid- to high-end segments, where prices could rise 10 per cent to 20 per cent this year.

Developers may also launch fewer suburban homes after running down their inventory.

Tay Huey Ying, director, Research & Advisory, Colliers International, said: “If we are looking at the whole market including your secondary sales and your sub-sales, the total number of transactions is likely to hover around the 32,000 over units that we saw transacted in 2009. The bulk of the activity, we think will be led by secondary sales.”

For 2009, prices of new homes in the central area fell 1.8 per cent, while those in the city fringes rose 3 per cent. Overall, prices of private residential properties went up by 1.8 per cent in 2009.

After a bumper year in 2009, where over 14,700 homes were sold, market watchers expect sales to trend lower this year at between 9,000 and 12,000 units.

Rent owed to SLA for another site

Source : Straits Times – 22 Jan 2010

WESTMINSTER Unicampus was also in the news recently when it defaulted on its rent to the Singapore Land Authority (SLA) on another site – the former Queenstown Neighbourhood Police Centre at 15 Commonwealth Avenue.

It was announced in 2007 that it had submitted the highest bid to pay a monthly rent of $55,888 for the site.

Westminster was to use the building for an arts, dance and drama studio, an association, and a martial arts and fencing school.

None of this materialised.

Not only did it default on its rental payments – accumulating arrears and late payment interest of more than $184,000 – it also carried out unauthorised renovations.

Westminster sub-let the place, which became an unauthorised canteen and food outlet. It also demolished the toilets on all three storeys of the building, removed the entire front wall of the first storey and set up a 300 sq m shelter.

SLA terminated the tenancy last May, but gave Westminster several opportunities to pay the arrears and remove the unauthorised structures.

Westminster failed to comply and refused to vacate the premises. Last August, SLA got a court order to recover the property.

When asked about the site, Westminster’s director Tan Eng Hong would only say: ‘It’s an investment that has gone sour and we’re not able to carry on within our ability.’

Mount Sophia sub-tenants in fix

Source : Straits Times – 22 Jan 2010

ART collector Ivan Chin spent half a million setting up his gallery – putting in landscaping, chandeliers, security and sound systems – only to be told four months later that he had to vacate the premises.

He is one of 15 sub-tenants of 7 Mount Sophia who have to go because the master tenant of the site, Westminster Unicampus, breached its tenancy agreement with the Singapore Land Authority (SLA).

Mr Chin’s Enesis Art gallery was to house 55 pieces from his own collection, including one by Picasso, reportedly worth an eight-figure sum.

His two-year lease, at a rental rate of $20,000 a month, was to expire only next June.

Westminster’s own 22-month lease with the SLA – to use the site as an arts, dance and drama studio – expired on Dec 27.

The SLA said that Westminster, a company registered to conduct distance learning courses, sublet some 60 per cent of the space for commercial usage – in breach of the agreement that it should be no more than 20 per cent.

Not only did Westminster refuse to remedy the breaches, it also sublet the premises to be used as a student hostel.

In addition, it had rental arrears and interest on late payments which amounted to over $136,000.

When The Straits Times visited the former Trinity Theological College site on Tuesday, most of the units were vacant.

The four businesses still in operation said they had been given till the end of the month to move out. Two of their leases had ended in December.

All said that Westminster had given them the impression that their leases would be renewed after two years, and so they had pumped in at least five-figure sums to do up their units.

‘If we had known of the situation, we wouldn’t have moved in in the first place. It’s disruptive for the business,’ said a manager of Polystone, a company selling stone products.

Director Barry Hill of office design firm Davenport Campbell said that two previous tenants – a bar and media school – moved out after pumping in large sums, when they discovered that the land was not authorised for such use.

When contacted, Westminster’s director Tan Eng Hong said his original intention was to be at Mount Sophia longer and to build a multi-faculty and multi-campus institution.

When asked why he broke tenancy rules and rented out space to businesses, he said that he had made submissions for the change of use of the site but was not able to get them.

‘We should have gotten the permit first before leasing it out, but it took us quite long to get everything in place,’ said Mr Tan.

The SLA has also started legal proceedings to recover possession of the site, as Westminster has refused to vacate it. It said it would tender out the site again, for approved uses. The Straits Times understands that the site, a national monument, is slated for the creative and artistic industry.

The SLA also said that sub-tenants of state properties should do due diligence checks, and seek it’s written consent, as well as legal advice, before signing any sub-tenancy agreements.

For now, Mr Chin hopes that the SLA will let remaining tenants stay till the next master tenant takes over.

‘We’ve already spent so much money on the place, it would be best if I could stay rather than move my pieces to a warehouse,’ he said.

Income ceiling helps ensure neediest get subsidised flats

Source : Straits Times – 22 Jan 2010

I REFER to the letters by Miss Yvon Lim (‘How realistic is $8,000 income ceiling for flats?’, Jan 6); Mr Glenn Ng (‘Buyer’s appeal’, Jan 12); Mr Joseph Ong (‘It limits price hikes’, Jan 12); and Mr Xavier Chua (‘Flats: Fairer formula for income ceiling’, Jan 14).

We need to manage our public housing budget judiciously. The income ceiling ensures that housing subsidies are targeted at those who need them more. The eligibility for housing subsidies extends up to a monthly income of $10,000, not $8,000. Those earning between $8,000 and $10,000 are eligible for a $30,000 grant to buy executive condominiums (ECs).

They should not compete with those earning less than $8,000 for new HDB flats.

For the same reason, income ceilings are set at $3,000 for three-room flats and $2,000 for two-room flats to safeguard these smaller HDB flats for the lower-income. HDB has recently released two new sites for EC development.

Besides ECs, households with a monthly income of $8,000 to $10,000 can buy a resale flat for which there is a wide range in various locations to suit different budgets and preferences. For instance, a family that earns $9,000 can consider the following:

~ A five-room resale flat in a non-mature estate. The average price for a flat in a non-mature estate is about $380,000, and estimated monthly instalments are about $1,574, which can be fully paid from Central Provident Fund (CPF) savings.

~ A five-room resale flat in a mature estate. For example, the median price for a resale flat in Queenstown is about $619,000.

The estimated monthly instalments are about $2,564, which can be paid mostly from CPF savings, and supplemented with a cash payment of $494.

As these examples show, flat buyers earning above $8,000 a month can comfortably afford HDB flats, but they will have to make trade-offs between price, size, attributes and location.

Lily Chan-Wong Jee Choo (Mrs)
Deputy Director (Policy and Property)
Housing & Development Board

Holland Residences to go on sale

Source : Straits Times – 22 Jan 2010

ANOTHER high-end condominium is set to hit the market following a number of recent upscale launches.

Allgreen Properties will launch Holland Residences for sale next week, said marketing agent CB Richard Ellis (CBRE).

The five-storey freehold development – it is on Taman Warna and next to Chip Bee Gardens off Holland Road – has been 13 years in the making.

Allgreen bought the site, which used to host nine bungalows, for $78.26 million in 1997.

The launch price for Holland Residences is ‘yet to be confirmed’ but is likely to be at an average of $1,600 to $1,700 per sq ft, said Mr Joseph Tan, CBRE’s executive director for residential.

He said CBRE has already received inquiries and expressions of interest. ‘We expect the response to Holland Residences to follow the strong sales momentum that started in the second half of 2009.’

Allgreen will release 30 to 40 of the development’s 83 units for sale in the first phase.

It will start previews on Monday for ex-owners of the site’s former bungalows. This will be followed by a preview for Allgreen’s directors, staff and business associates before sales are opened to the public.

The 83 units at Holland Residences will range from one-bedroom to four-bedroom apartments and penthouses.

Sizes start from 600 sq ft for a one-bedder and go up to 2,800 sq ft for a four-bedroom penthouse.

There will also be three-bedroom loft units of 1,900 sq ft with a jacuzzi on the ground floor.

Other developers are also starting to kick off their 2010 launches.

City Developments opened the doors of Cube 8 at Thomson yesterday to former owners of The Albany and Thomson Mansion, the projects that used to stand on the site.

Staff and directors were also invited to the preview, where units were sold for an average of $1,250 psf, The Straits Times understands.

The public preview for Cube 8 will start today.

COV doubles for HDB flats

Source : Straits Times – 22 Jan 2010

UPFRONT cash paid by buyers for HDB resale flats doubled in the fourth quarter of last year on the back of high demand amid tight supply.

The Housing Board’s official statistics for the fourth quarter released on Friday showed the median cash-over-valuation paid for HDB flats was $24,000 – up from $12,000 in the third quarter last year.

The Resale Price Index hit a fresh record, with resale prices rising 3.9 per cent – 0.1% higher than the flash estimate released three weeks ago – for the last three months of 2009, bringing the full year increase to 8.1 per cent.

HDB said in a statement that sales volume declined by about 23 per cent, from 11,649 cases in third quarter last year to 8,926 cases in the following quarter. But 2009 was still a bumper year compared to 2008, with total number of resale transactions surging to 37,205 – an increase of 31 per cent over the previous year.

HDB also said that 93 per cent of sales in the fourth quarter transacted above valuation – up from 79 per cent in the third quarter. However, it added that the median COV has stabilised in recent times, with the figure for the first half of January down to $22,000.

HDB said it will launch 12,000 new flats this year under its build-to-order (BTO) scheme, or more if there is demand, and will monitor the market closely and adjust the flat supply accordingly.

Home prices up 1.8%

Source : Straits Times – 22 Jan 2010

PRIVATE home prices shot up by 7.4 per cent in last three months of 2009 as the property market made a quick recovery from a nightmarish start to the year.

This followed the previous quarter’s increase of 15.8 per cent – a turnaround from a contraction of 18 per cent in the first half of 2009.

Official data by the Urban Redevelopment Authority (URA) released on Friday showed prices of private residential properties for 2009 as a whole increased by 1.8 per cent.

Prices of non-landed properties rose d by 7.2 per cent in the fourth quarter, compared with the 15.9 per cent increase in the previous quarter. Private apartment prices fetched 9.7 per cent more, while prices of condominiums were up by 6.1 per cent. Prices of non-landed properties in Core Central Region1 (CCR) went up by 7.3 per cent in the fourth quarter, while those in Rest of Central Region2 (RCR) and Outside Central Region (OCR) increased by 9.5 per cent and 6.3 per cent respectively.

For 2009, prices of non-landed properties in CCR decreased by 1.8 per cent, while those in RCR and OCR increased by 3 per cent and 11.8 per cent respectively. For the fourth quarter, office, shop and industrial properties increased by 1 per centm 0.6 per cent and 1.8 per cent respectively.

The URA said as at fourth quarter 2009, there were 60,476 private residential units in the pipeline, comprising supply from projects that were already under construction and those that had been granted planning approval but were not under construction yet.

Cash-over-valuation doubles in Q4 but analysts say limit approaching

Source : Channel NewsAsia – 22 Jan 2010

Prices of resale HDB flats continued to rise in the fourth quarter of last year, bringing the full-year increase to 8.2 per cent.

Statistics from HDB also showed that the median cash premium paid by home buyers doubled quarter-on-quarter. But analysts said the market may be approaching a limit.

93 per cent of resale transactions in the 4th quarter of last year were above valuation and the cash premium paid by home buyers jumped by a 100 per cent from S$12,000 in Q3 to S$24,000 in Q4.

Nicholas Mak, real estate lecturer, Ngee Ann Polytechnic, said: “There seems to be more families that are going in to buy larger flats – your 4-room and 5-room flats – and as a result, these larger flats also come with higher cash-over-valuation amount, which in a way pulls up that median cash-over-valuation.”

But this increase is unlikely to continue indefinitely.

HDB said the median cash-over-valuation amount has stabilised in recent months.

The cash premium for January has gone down to S$22,000. Analysts said this may indicate that the market is approaching a limit to how much home buyers are willing to pay.

Mr Mak added: “Our salary is still not catching up at such a high rate. There will be a certain time when the affordability issue will come into play. As the sellers start to demand higher and higher COV, they may see that there may come a stage when there will be some buyer resistance.”

Efforts by the government to raise the supply of new homes by launching more Build To Order projects and Design Build and Sell Schemes will also gradually help to cool the market, once the flats are completed.

Colin Tan, head of Research and Consultancy, Chesterton Suntec International, said: “The government efforts at pushing out the BTOs and DBSS and all the executive condos, that may have helped to allay some of the panic buying. And this probably resulted in some people actually shifting the demand from the resale market to the new flats.”

To meet demand, HDB said it will be offering 6,900 new flats in the first half of this year.

Urban Suites selling well despite price hike

Source : Straits Times – 20 Jan 2010

PHASE 2 of CapitaLand’s Urban Suites‘ launch has attracted keen interest from buyers who have snapped up units despite a hike in prices.

The 50 units released in Jakarta, Indonesia, last week were all sold out, while at home an additional 16 sales have been clinched since Phase 1 of the project’s launch closed in early January.

The popularity of the development was undiminished by an increase in prices – from between $2,400 and $2,700 psf in Phase 1, to $2,500 and $2,800 psf in Phase 2 – for the units located in District 9 between Cairnhill, Hullet and Saunders roads.

The latest sales mean that 126 out of the 140 released units in the 165-unit condominium have been sold. The 26 two-bedroom apartments are now completely sold out.

Two of five available penthouses are off the market, with the remaining ones expected to fetch a quantum price of about $9 million. The penthouses range from 3,378 sq ft to 4,715 sq ft and are equipped with private pools.

Though no exact figures were provided, the company said only a few three- and four-bedroom apartments remained to be sold.

CapitaLand will preview the remaining units – by invitation only – to buyers tomorrow. Unlike Phase 1, when only multiple purchases were allowed, units will be open to single-unit purchasers. The 1 per cent discount offered to multiple-unit buyers in Phases 1 and 2 will continue.

Another upward revision in prices is a possibility, according to CapitaLand Residential Singapore chief executive officer Patricia Chia.

The development has attracted a high level of interest from foreigners, with 70 per cent of units bought by those overseas. And most of them were Indonesian, CapitaLand said.

‘Indonesians have a preference for freehold if given a choice. This is one of the very rare freeholds on Orchard Road,’ said Ms Chia.

The stronger market is set to lead to more high-end project launches from CapitaLand this year.

Urban Resorts – neighbouring Urban Suites and previously Silver Towers – consists of 64 three- and four-bedroom units. Unit sizes are larger than those at Urban Suites, starting at 2,000 sq ft for a three-bedder.

Ms Chia added: ‘Everybody expects 2010 to be the return of the high and luxury-end residential market. I think at the right opportunity, we will launch.’

Showflats for units at CapitaLand’s Interlace in Alexandra/Depot Road are likely to be ready for viewing after the opening of the Sentosa integrated resort, Ms Chia said.

Details of the company’s future launches at Farrer Park and Nassim Hill have not been disclosed.

Mortgage-backed debt sales stay low

Source : Business Times – 21 Jan 2010

Borrowers are still struggling with declining property values, analysts say

Sales of commercial mortgage- backed securities will likely remain below US$15 billion in 2010 as borrowers struggle with declining property values, according to analysts at Barclays Capital and JPMorgan Chase & Co.

Debt sales backed by skyscraper, hotel and shopping mall loans may be as low as US$10 billion this year, according to Alan Todd, a JPMorgan analyst in New York. Aaron Bryson, a Barclays Capital analyst also in New York, forecasts more transactions, reaching about US$15 billion during the period.

The US government has committed to reviving the US$700 billion commercial-mortgage backed bond market amid plunging property values and a lending pullback. A record US$237 billion of the debt was sold in 2007, compared with US$12 billion in 2008 and US$1.4 billion last year, according to data compiled by JPMorgan. New issuance is not likely to pick up until the second half of this year, Mr Todd said.

‘The banks would like to lend,’ Mr Todd said during an interview at the Commercial Mortgage Securities Association annual conference here. ‘There are fewer properties to lend against.’ Many owners went heavily into debt during the boom years and find it hard to locate properties not already encumbered to lend against, Mr Todd said.

The lack of new loans chokes off funding to borrowers with maturing debt. Two-thirds of loans bundled and sold as securities, amounting to US$410 billion, may require more cash as property values plummet and underwriting standards tighten, according to Deutsche Bank AG data.

US commercial real estate prices are 42.9 per cent below October 2007 peaks, Moody’s data show.

Debt sales dried up in 2008 as the credit crisis sapped demand and the high price investors sought to hold the obligations was too great for Wall Street banks to profitably underwrite and bundle new loans for sale.

The gap, or spread, on top-rated commercial-mortgage backed securities over Treasuries has fallen to about 3.49 percentage points, compared with 9.63 percentage points a year ago, according to Barclays data.

HK luxury home prices may rise 15%

Source : Business Times – 21 Jan 2010

Cheung Kong Holdings also says HK and China’s property markets not in bubble situation

Hong Kong’s luxury home prices may rise as much as 15 per cent this year, and there are no bubbles in the city’s and China’s property markets, said Cheung Kong (Holdings) Ltd, the builder owned by Asia’s second-richest man, Li Ka-shing.

Prices for luxury homes may increase 10-15 per cent this year, and for new mass-market homes 15-20 per cent, said Cheung Kong executive director Justin Chiu in Hong Kong yesterday. Revenue from China home sales may exceed 30 billion yuan (S$6.14 billion) this year, he said. That compares with his September forecast of 1.5 billion yuan for 2009 sales.

‘I don’t really see a bubble,’ Mr Chiu said. ‘There shouldn’t be too much concern about the governments trying to crush the market.’ Mr Chiu’s comments pit him against investor Jim Rogers, who said on Tuesday that real estate prices in the city and Shanghai are in a bubble and ’should decline’. Property prices in 70 cities across China climbed 7.8 per cent in December, the fastest pace in 18 months. Hong Kong’s real estate prices rallied the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP.

Prices in the last six months of 2009 rose by 30 per cent in Hong Kong and 20 per cent in China, leading Mr Chiu to conclude that speculators may be at work.

‘We think that the substantial increase in such a short time, means that there could be a speculation element,’ he said. ‘That’s why I advise buyers to really see whether they have the means to commit to buying an apartment. They should be careful.’

Record new loans fuelled a 75.5 per cent jump in China’s property sales last year. Home prices in Hong Kong, a trading and financial hub for China, are at their highest in almost 12 years, leading the World Economic Forum and Goldman Sachs Group Inc to caution about the formation of asset bubbles.

Homes sales in China, Hong Kong and Singapore by Cheung Kong, the world’s second-biggest developer by market value, may exceed HK$100 billion (S$18 billion) if the company obtains government consent for all projects, Mr Chiu said.

Cheung Kong’s share price fell 1.9 per cent to HK$98.10 as of 2.40 pm in Hong Kong. The stock’s 37 per cent gain last year made it 2009’s worst performer in the six-member Hang Seng Property Index. It has dropped 1.8 per cent this year, compared with the 4.5 per cent decline in the index.

Fred Hu, Goldman Sachs’s chairman for Greater China, said on Jan 18 that property prices in China require monitoring for signs of bubbles forming.

Prices at some luxury residential projects in Shanghai doubled last year, with Shui On Land Ltd’s Casa Lakeview recording sales of 100,000 yuan per square meter in December, Lee Wee Liat, an analyst at Nomura International Hong Kong Ltd, said last week.

Mark Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, disagrees with Mr Rogers, saying on Jan 7 that the bubble in China’s property market isn’t about to burst. Gross domestic product rose 10.5 per cent in the fourth quarter from a year earlier, according to the median of 41 forecasts in a Bloomberg News survey for the release scheduled today.

‘The Chinese will act rationally and they’re not going to kill the market,’ he said.

Mr Rogers, author of A Bull in China, said in on Tuesday that real estate in Shanghai and Hong Kong is ‘very overpriced’. Hong Kong ‘Limited’ Garry Evans, head of global equity strategy at HSBC Holdings Plc, said in a Bloomberg Television interview on Tuesday that ‘China is no way near a bubble’. Hong Kong developers, including Kerry Properties Ltd, Shui On and Hang Lung Properties Ltd, are building homes, offices and shopping malls in China to capture market share in the world’s fastest-growing major economy. The strategy will continue even as China acts to cool the property market, analyst Adrian Ngan said.

‘It’s a long-term strategy, it’s a must, because the growth in Hong Kong is very much limited,’ Mr Ngan, a Hong Kong-based analyst at CCB International Ltd, said before Mr Chiu’s comments.

To cool property speculation, China this month reinstated a sales tax on homes sold within five years of their purchase, and the country’s Cabinet on Jan 10 urged strict applications of a 40 per cent down-payment requirement for second homes.

China accounts for about 10 per cent of Hong Kong-based Cheung Kong’s earnings, Mr Ngan said.

Ronnie Chan, chairman of Hong Kong-based Hang Lung Properties Ltd, said the tightening measures in China will not have an impact on the company’s real estate projects in the country because ‘we have zero debt’. Hang Lung’s strategy of focusing only on developing commercial properties in China helps the developer avoid being affected by volatility in residential prices, the target of tightening efforts, Mr Chan said at a financial forum in Hong Kong yesterday.

Hong Kong home prices, where average values climbed 33 per cent, rose the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP. An index of existing homes is at its highest since March 1998, according to a weekly weighted measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Billionaire Mr Li, 81, is dubbed ‘Superman’ by Hong Kong’s media because of his track record for investing. He has a 41.7 per cent stake in Cheung Kong after adding to his holdings 29 times since December, stock exchange filings show.

Mr Li, estimated to be worth US$16.2 billion by Forbes magazine in March, correctly predicted in 2007 that China’s stock market was in a ‘bubble’.

China not likely to impose property tax soon

Source : Business Times – 21 Jan 2010

China is unlikely to introduce a general property tax this year as it still needs time to prepare for it, a senior government economist said yesterday.

Talk that China could levy an annual withholding tax, which would replace taxes and fees that are mostly payable when a property is bought or sold, has intensified since Beijing started to cool property investment in December.

Zhu Baoliang, chief economist with the State Information Centre, a think-tank under the National Development and Reform Commission, said it was unlikely that China would start collecting the tax this year.

‘Property tax is a very complicated issue and will not be rolled out any time soon,’ he told reporters.

China is already running a trial property tax scheme in 32 cities, counties and districts.

Some industry experts say the tax, once applied, could help bring down China’s property prices as it would dampen market confidence and squeeze investors’ profit margins.

China will be very careful not to over-tighten its real estate policies, Mr Zhu said, adding that it would wait and see the outcome of measures already taken.

Property sales account for more than 10 per cent of the country’s gross domestic product.

China properties: bubble or no bubble?

Source : Business Times – 21 Jan 2010

THE views are split almost right down the middle. Is there or is there not a bubble in China’s property market? Cheung Kong, one of the largest property developers in Hong Kong, yesterday said that there are no bubbles in either Hong Kong’s or mainland China’s property markets. Said its executive director Justin Chiu: ‘I don’t really see a bubble. There shouldn’t be too much concern about the governments trying to crush the market.’

The comments are in direct contrast with that of renowned investor Jim Rogers. Though a very vocal China bull, Mr Rogers cautioned on Tuesday that real estate prices in Hong Kong and Shanghai are in bubble territory and ’should decline’. Efforts to restrain lending underscore the government’s attempt to take ’some of the heat out of the economy’, he said in an interview with Bloomberg. The rest of the Chinese economy, however, is ‘hardly in a bubble’, he added.

Views differ among investment analysts and asset managers as well. Mark Mobius, who oversees US$34 billion of emerging market assets at Templeton Asset Management, said two weeks back that China’s property market isn’t about to crash. ‘The Chinese will act rationally. They are not going to kill the market,’ he said. By contrast, former Morgan Stanley chief Asian economist, and now an independent economist based in Shanghai, Andy Xie is unambiguously bearish, describing China’s asset markets today as ‘a big bubble’.

The numbers give us a clue as to what is going on. Record new loans fuelled a 75.5 per cent jump in China’s property sales last year. Property prices in 70 cities across China climbed 7.8 per cent in December, the fastest pace in 18 months. But in places such as Shanghai and Beijing, prices of new apartments leapt by 50-60 per cent during 2009.

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One should certainly be circumspect when taking in the comments of politicians, stock analysts and fund managers. They may have their own agendas. A good judging yardstick, however, is perhaps the actions (not words) of people in the property business. They seem to be of the opinion that there is genuine demand for properties. On Monday, CapitaLand announced it is buying over the real estate business of Hong Kong-listed Orient Overseas (International) for US$2.2 billion. The purchase includes seven sites in Shanghai, Kunshan and Tianjin, with about 1.48 million square metres of floor space. Meanwhile, Hong Kong developers including Cheung Kong, Kerry Properties, Shui On and Hang Lung Properties are not slowing down their pace of development in China either. Even SOHO China, one of the leading private developers on the mainland, is not stepping back despite saying that it sees a lot of asset bubbles. Its strategy instead is to turn around its developments faster.

The good thing is that China’s government is vigilant and has already imposed a number of measures to cool down the market. Actions from property developers seem to suggest that while the cooling measures may stall the market temporarily, in the longer term, the inevitable trend is up.

Plan for flats at StarHub Centre

Source : Straits Times – 21 Jan 2010

THE prime StarHub Centre office building in Cuppage Road could be partly turned into a residential complex.

A significant slice of the well-sited block – just a stone’s throw from Centrepoint and Somerset – could be turned into flats.

CapitaCommercial Trust Management, the manager of owner CapitaCommercial Trust (CCT), said the building’s potential was not being maximised as a commercial block. It also had lower than usual occupancy rates in the third quarter of last year.

The trust manager disclosed in a results statement yesterday that an outline planning permission has been granted by the Urban Redevelopment Authority. This specified that as much as 80 per cent of the gross floor area could be used for residential development. Approvals are yet to be given by other government bodies. If they are granted, the firm will revisit the plan.

While one of the firm’s buildings faces a makeover, another – Robinson Point – is about to leave the stable. Its $203.25 million sale to AEW Asia should be completed by April, generating a gain of about $19.2 million. The sale price is at an 11.4 per cent premium over its fair valuation of $182.5 million.

The deal – and a robust fourth quarter from CCT – signals that better times are here again for the property giants. Higher revenue and improved operating margins have allowed CCT to increase its fourth-quarter distributable income by 39.3 per cent to $52.9 million.

The stellar result has seen distribution per unit jump 38.2 per cent to 1.88 cents for the three months to Dec 31.

Net property income for the quarter rose 22 per cent, from $65.6 million in 2008 to $80 million, thanks largely to cost-savings and lower property taxes.

Additional revenue from positive rent reversions and growth in its acquired assets, particularly the Wilkie Edge building bought in December 2008 and the office block One George Street acquired in July 2008, were also behind the income rise.

The strong results helped the firm to end the 12 months to Dec 31 by increasing distributable income by 29.7 per cent to $198.5 million.

Net property income for the full year rose 28.6 per cent to $300.2 million. Its estimated distribution per unitis 7.06 cents, 29 per cent up on 2008’s 5.48 cents, after adjusting for rights issues.

Half-year estimated distribution per unit of 3.73 cents will bepaid out around Feb 26. Net asset value per unit fell from $2.97 in 2008 to $1.41 as of Dec 31 last year.

CCT’s portfolio office occupancy rate bucked the trend in Q4 last year, increasing to 94.8 per cent as opposed to industry statistics of 91.2 per cent.

The fourth quarter saw the smallest decline in falling rental rates in five consecutive quarters. Rental rates fell by 8 per cent and 10 per cent for Grade A and prime office space respectively.

The firm’s key focus will be to seek out quality assets that can render sustainable and long-term returns, said Ms Lynette Leong, CEO of CapitaCommercial Trust Management. ‘Our Grade A assets have been most resilient to market stresses. Our core strategy is to reconstitute our portfolio to increase our exposure to Grade A properties.’

One strategy is to enhance asset value via enhancements until divestment seems to be the ideal option. Proceeds from divestments will go into acquiring better-quality Grade A type buildings or be ploughed back into working capital and asset enhancements of existing projects. The Robinson Point deal illustrates the strategy in operation.

CCT also disclosed that it has secured 20 per cent of leases expiring this year while 87 per cent of last year’s gross rental income has been committed for 2010. Advanced negotiations are under way with a major tenant at Raffles City Tower, a property contributing 29.3 per cent of CCT’s net property income, after which positive rental reversions can be expected.

HDB turns 50, looks to new challenges

Source : Straits Times – 21 Jan 2010

IT HAS been quite a journey for the Housing and Development Board (HDB).

When it was set up in 1960, Singapore was mired in a housing crisis, but today the country has one of the highest home ownership rates in the world. Public homeownership in Singapore is 80 per cent.

To share its achievements – and mark its 50th anniversary – the HDB is hosting the International Housing Conference from next Tuesday to Friday.

The event will bring a host of housing experts to Singapore, with many of them no doubt keen to pick up some pointers.

The HDB’s development and procurement director, Mr Fong Chun Wah, told The Straits Times the board hopes to ’share stories from this long journey’, with not just Singaporeans but also an international audience.

More than 30 speakers and experts, including housing ministers from Finland and Spain, will attend the conference along with an estimated 500 local and foreign delegates.

The HDB will share its practices in planning housing estates – such as in design and construction and in fostering human interaction.

These include technology breakthroughs in construction, the use of alternative energy sources such as solar and universal design catering to residents of all capabilities, said Mr Fong.

To some extent, certain aspects of the Singapore model can be replicated in emerging countries such as China, and the HDB hopes to share this experience, he said.

‘But there is much more to learn from others,’ he added. ‘We hope to gain some new ideas and concepts from the speakers, and find areas of collaboration.’

The conference will also feature a special session with Minister Mentor Lee Kuan Yew, who was prime minister at the time of the HDB’s inception and who conceived the home ownership programme implemented in 1964.

The HDB’s golden jubilee ‘is not just an occasion for (it) to celebrate its success’, said Mr Fong, who has been with the organisation for more than two decades.

‘It’s also a time for us to focus on realising our vision for the next five decades – and to rise to the challenge of meeting the housing aspirations of a new generation of Singaporeans.’

The conference will focus on the theme of sustainability – something that the HDB has embraced in its mission for the past 50 years ‘before the word became fashionable’, said Mr Fong.

‘The topic is very current, and sustainable housing is part of a bigger sustainable development trend happening around the world now.’

The deputy director of the HDB’s housing administration department, Mr Norman Chee, added: ‘It goes beyond the ‘hard- ware’ into the ‘heartware’ – providing not just housing but a town with facilities that are easily accessible, and social spaces where people can interact.’

Mr Fong said the HDB will face challenging issues such as land scarcity, changing aspirations and lifestyle of residents, and an ageing population over the next 50 years.

‘The board will be reflecting on how to tackle these challenges even as we look back on what we’ve achieved in the past five decades – we hope the conference will help to discuss some of these issues.’

New rules on property funds not safe enough

Source : Straits Times – 21 Jan 2010

I REFER to yesterday’s report, ‘Proposed law changes to protect clients in property deals’. I doubt the proposed law changes will prevent the problem of lawyers running off with their clients’ money.

I find the new proposals time-consuming and cumbersome without getting to the root of the problem – stakeholder status of law firms. The chain of events in the new proposals creates duplication. The labyrinth of administrative procedure does not address the ‘parking bay’ of transaction proceeds right from the start.

Under the new proposals, who pays to monitor each step of withdrawals during the whole period of transaction? How to ensure no conflicts in approval between client and lawyer to hold up to $5,000 to meet many miscellaneous expenses (ME) in a short time? There could be more questions than answers.

The basic elements in property transaction equation are transaction proceeds (TP), ME, and interest of buyer and seller. Abuse can occur when proceeds are paid into the accounts of the law firm as stakeholder money, and the law firm has full control over its use. If payments for ME are separated from TP, the interest of buyer and seller will be safely protected in the transaction equation.

The key is isolating the client’s money in property transactions from law firms. Strictly speaking, the proceeds have nothing to do with the law firms. The duty of law firms is to administer the process and disbursements. Using a neutral party as stakeholder will eliminate the risk.

I think it is feasible to create a new rule that stipulates that 95 per cent of the proceeds go direct into a conveyancing account in an approved bank as stakeholder until completion, while the balance 5 per cent is administered by the law firm. Disbursements for ME are approved by both parties’ lawyers. It is neat and simple.

This way, the bulk of clients’ money is isolated and protected in the bank. The risk of running off with clients’ money is isolated. The role of the bank is to disburse payments with clear instructions from both parties’ lawyers. This simple tweak to the current procedure will effectively protect clients in property deals.

Paul Chan

Fall in HDB upgraders’ private home purchases

Source : Business Times – 21 Jan 2010

THE strong recovery in private home prices during the course of last year pushed down HDB upgraders’ share of private home purchases to 33.8 per cent in Q4 2009 from a high of 56.2 per cent in Q1 last year, shows the latest caveats analysis by Jones Lang LaSalle.

HDB upgraders accounted for 44.4 per cent of private home purchases in Q2 last year, with the share slipping to 37.9 per cent in Q3.

DTZ executive director Ong Choon Fah says: ‘Whenever the market is down, for instance in Q1 last year, you tend to see more buying activity by HDB upgraders. When prices go up, HDB upgraders pull back, as they are very price sensitive. And there’s no strong push factor for them to buy a private home since they already have a very good-quality roof over their heads.’

Urban Redevelopment Authority’s price index for private homes contracted 18 per cent in the first half of 2009 (from end-2008 level) but recovered 24.2 per cent in the second half.

JLL’s SE Asia research head Chua Yang Liang points out that the gap between prices of private condos/apartments and Housing & Development Board flats has widened since 2008. ‘As such, we expect HDB upgraders’ ‘participation’ in private home purchases to continue to pull back moderately before picking up again as more mass-market condo projects are launched when the government tenders out more sites during the course of this year.’

‘I reckon HDB upgraders’ share of private home purchases could hover around 35-40 per cent by end-2010,’ he added.

Foreign homebuyers show different price preference

Source : Business Times – 21 Jan 2010

Westerners choose units in $1.5-5m band; most Asians prefer $500,000-1m

Among the top foreign buyers of private homes last year, Asians (excluding Indonesians) primarily bought units in the $500,000 to $1 million range, while most Western buyers (Australians, UK and US citizens) picked up homes mostly in the $1.5-5 million range.

Indonesians were in the same category as the Western buyers, with the $1.5-5 million range being their most favoured price band. In fact, 47 per cent of the 1,219 caveats for private homes lodged by Indonesians last year were in this band, shows Jones Lang LaSalle’s analysis of URA Realis caveats.

On the other hand, Malaysians, mainland Chinese, Indians, Koreans and Burmese were more likely to have bought a private home last year in the $500,000 to $1 million category.

DTZ executive director (consulting) Ong Choon Fah argues that Indonesians tend to buy a property here as a home away from home, often as a residence for their children studying here, and as a safe haven to park their wealth in a nearby country. Hence they are prepared to invest more for a property in Singapore.

Generally, though, Asians may set aside smaller budgets for their property investments in Singapore because they also compare property prices here relative to their home markets, Mrs Ong suggests.

JLL’s South-east Asia research head Chua Yang Liang observes that while there is no noticeable difference in the location (district) preference between Asian and Western foreign buyers, there is a more prominent difference in terms of their price range. He suggests that this could be because the majority of Western foreign buyers are probably here on expatriate terms, while Asian buyers are likely to be working here under local terms or are just investors.

Mrs Ong suggests that Asians may be more ‘adventurous’ and prepared to shop for a property in Singapore’s suburban locations, where deals below $1 million can still be found, whereas Western buyers may be more comfortable sticking to their traditional investment locations such as Districts 9 and 10 where expats have traditionally lived and property is pricier.

However, property market watchers point to a stronger presence by mainland Chinese in the higher-end property market in Singapore. JLL’s analysis shows that they picked up 22 properties exceeding $5 million apiece last year. Most of their purchases in this price band were in Districts 10 and 4. District 4 includes Sentosa Cove, while District 10 is one of Singapore’s traditional prime districts covering such locations as Ardmore Park, Cuscaden Road and the Nassim area.

Some 41 Indonesians, 28 Malaysians, 18 British Virgin Islanders and 16 UK citizens each bought properties costing over $5 million apiece in Singapore last year.

JLL’s caveats analysis showed that foreigners’ share of private home purchases increased to 27 per cent in Q4 last year, from a low of 15 per cent in Q1 2009, when the property market was still eschewed by foreign investors who had gone into hibernation in the aftermath of the global financial crisis. Foreigners lodged 20 and 23 per cent of caveats in Q2 and Q3 last year.

Their relatively low share in the first two quarters of last year dragged down their full-year share to 21.8 per cent from 24.1 per cent in 2008. However, in absolute numbers, the number of private residences bought by foreigners doubled from 3,176 in 2008 to 6,472 last year, amid the spectacular overall recovery in private home sales following price cuts by developers in the earlier part of last year. As well, investors soon developed a preference towards investing in property as an asset class after the global financial slump when billions vaporised overnight in investments in financial instruments.

Dr Chua forecasts that foreigners will continue to be active in the local property scene this year as the regional economies improve.

Resales eat into developers’ share of Q4 deals

Source : Business Times – 21 Jan 2010

A higher proportion of private home buyers turned to the resale market in Q4 2009 to pick up their dream homes instead of visiting a developer’s showflat. Fewer launches by developers in Q4 and the removal of the interest absorption scheme in September last year probably contributed to this shift.

Jones Lang LaSalle (JLL)’s analysis of private housing transactions shows that the number of caveats lodged fell in all categories – primary market (or developer sales), resale and subsale markets – in Q4 2009 compared with the preceding quarter.

However, in percentage terms, the decline was bigger for developer sales at 68.8 per cent, compared with drops of 53.1 per cent for subsales and 39.3 per cent for resales.

As a result, the resale market accounted for 62 per cent of private residential caveats lodged in Q4, up from a 49 per cent share in Q3. Conversely, developers saw their share of total private home sales slide from 40 per cent in Q3 to 26 per cent in Q4.

Subsales’ share of total transactions remained unchanged at 11 per cent. Subsales and resales are secondary market transactions; subsales involve projects that have yet to receive Certificate of Statutory Completion (CSC), while resales refer to developments with CSC.

The most popular projects that changed hands in the resale market in Q4 were The Sail @ Marina Bay (51 caveats at a median $1,901 psf), followed by Caribbean at Keppel Bay (49 deals at a $1,355 psf median price). Landed homes in Serangoon Gardens Estate were also much sought after, with 44 caveats lodged at a median price of $592 psf of land area. Melville Park in Simei saw 35 transactions at a median $529 psf in Q4, according to JLL’s analysis of caveats captured in the URA Realis system.

In the subsale market, the top seller was Ferraria Park Condo in the Upper Changi area (32 units at $734 psf median price). Other popular subsale projects in Q4 include The Centris next to Boon Lay MRT Station, Casa Merah near Tanah Merah MRT Station, Botannia in the West Coast area and One Amber.

When it came to buying directly from developers, buyers’ top picks in Q4 were Hundred Trees (310 units at median price of $941 psf), The Interlace (148 units at $1,049 psf median price), Suites @ Guillemard, Cyan and Elliot at the East Coast.

‘The proportion of resale has edged up at the expense of new sales. One reason for this shift is the government’s termination of interest absorption scheme (IAS) and interest only loans (IOL) in September 2009, which had been offered for primary market sales,’ says JLL’s head of research (SE Asia) Chua Yang Liang.

‘Speculators who had been depending on this form of financial leveraging – they only needed to pay 10-20 per cent of the purchase price upfront and could defer paying the rest of the price till the project’s completion – have effectively been removed from the market.’

For more genuine owner occupiers and investors too, the removal of IAS and IOL has cut their incentive to pick up a home from a developer vis-a-vis the secondary market, Dr Chua says.

Also contributing to the rise in resale proportion in Q4 was the completion of 3,930 private homes in Q3 2009, one of the highest quarterly completions since 2000. ‘A corresponding increase in resale transaction volume is to be expected as more buyers are motivated to put their money down for a completed asset,’ Dr Chua says.

Agreeing, DTZ executive director (consulting) Ong Choon Fah, says: ‘Generally, you can pick up a home for relatively less in the resale market than in the primary market, and you can live in it or rent it out straight away.’

Also, developers launched fewer homes in Q4 than in the preceding two quarters, so house hunters had much less choice in the primary market, she adds.

Dr Chua says that he expects the proportion of resale activity to retreat by year-end given the lower projected completion of private homes this year.

Knight Frank managing director (residential services) Peter Ow also points out that as property launches revive this year, the absolute number of homes sold in the primary market, as well as their share of total private housing deals, will pick up.