Saturday, September 29, 2007

Tokyo exchange in discussions with SGX

(SINGAPORE) The Tokyo Stock Exchange (TSE) yesterday said that it is in talks with the Singapore Exchange (SGX) on collaboration in the future.

Mr Pillay: 'Here in Asia there are still restrictions on what can be done. That doesn't mean there won't be some M&A activity but it will be fairly limited and modest.'
Masaki Suzuki, general manager of TSE's representative office in Singapore, declined to comment on its discussions with the exchange.

Mr Suzuki told BT that there is no time frame within which the TSE intends to increase its stake, although he stressed that TSE does not intend to hold more than 5 per cent, up from the current 4.99 per cent.

JY Pillay who was appointed as non-executive chairman of SGX yesterday at its annual general meeting said the exchange is 'always looking' at alliances and joint ventures to grow and develop itself and the capital market in Singapore.

'That is our prime concern. M&A (mergers and acquisition) activity is purely a means to that end.'

SGX's share price has rocketed on takeover talk. Since news of the deal struck between Nasdaq and Dubai's stock exchanges broke last week, SGX shares have surged 23 per cent to hit $13.80 on Wednesday.

It fell 3 per cent to close at $12.90 yesterday.

On the share price spike, Mr Pillay said that there is an 'M&A buzz all over the world' particularly in the West where the markets are more open.

However, he expressed doubt that the wave of acquisitions among exchanges in Europe could be replicated in other parts of the world.

'Here in Asia there are still restrictions on what can be done,' Mr Pillay said.

'That doesn't mean there won't be some M&A activity but it will be fairly limited and modest.'

With chief executive Hsieh Fu Hua due to step down in September 2009, Mr Pillay said that SGX will have to start to seriously think about a replacement in a year's time.

'I would say we always have a little shortlist of our own. But we'll have to start pursuing the matter very vigorously from the middle of next year.'

Mr Hsieh was paid $6.4 million in FY07, including a bonus of $4.5 million and long-term incentive of $1 million. Last year, he got $4.3 million, including a bonus of $2.75 million.

For the first time, SGX disclosed total remuneration paid to its five top-earning executives, including head of markets Gan Seow Ann and chief financial officer Seck Wai Kwong who got about $2 million each.

SGX said that total remuneration to directors in FY07 was $10.4 million, up from $6.7 million the previous year.

Including total remuneration to key management, the figure was $20.7 million, up from $12.5 million in FY06.

Although no share options were granted to key management, 1.7 million shares under a performance share plan were granted.

SGX reported a 125 per cent rise in net profit for FY07 of $422 million, including the write-back and gains on SGX Centre.

China's central bank raises growth forecast for 2008

China's central bank raises growth forecast for 2008
Economy may grow 11.6%; inflation seen rising by 5%

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(SHANGHAI) The People's Bank of China's research department raised its economic growth forecast and said inflation will probably accelerate.

High demand: The People's Bank of China has raised interest rates on some home mortgages and increased minimum down payments to cool property prices gains
The economy may grow 11.6 per cent this year, according to the report published in the China Securities Journal, faster than the agency's June estimate for a 10.8 per cent expansion. Inflation this year will rise by 5 per cent, up from 3.2 per cent forecast previously, and the trade surplus will widen to about US$250 billion this year, from US$177.5 billion in 2006.

The forecasts puts pressure on People's Bank of China governor Zhou Xiaochuan to raise lending and deposit rates for the sixth time this year to cap surging asset prices and cool the overheating economy. The bank on Thursday raised interest rates on some home mortgages and increased minimum down payments in an effort to cool property prices gains.

The government is concerned that a surge in lending is creating a bubble, which would drive up bad loans should it collapse. Investment in real-estate development jumped 29 per cent in the first eight months of this year. The statement also said the maximum mortgage for commercial property is half of its value, and the term can't exceed 10 years.

The decision by the central bank and the China Banking Regulatory Commission is 'to prevent credit risks and protect the borrower's repayment ability', according to the statement on the People's Bank of China website.

'It's clear they know they're behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and going into other assets where there is already frothiness,' said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.

Until now, banks were barred from charging less than 90 per cent of the benchmark rates for mortgages. Interest rates on loans for first homes are unchanged.

China raised its one-year lending rate for the fifth time this year on Sept 14, to 7.29 per cent. Those increases have failed to damp demand for property as China's economic growth raises incomes and people prefer fixed assets amid inflation at a 10-year high of 6.5 per cent.

China's economy, the world's fourth largest, expanded 11.9 per cent in the second quarter from a year earlier, the fastest pace in more than 12 years.

The World Bank on Sept 12 raised its 2007 China growth forecast to 11.3 per cent from a May forecast of 10.4 per cent. -- Bloomberg

China tries to cool property market

(SHANGHAI) China has announced another package of measures to cool the country's red-hot property market, including raising the the down payment requirement for second homes to 40 per cent.

'Domestic property prices are rising quite fast and there are obviously irrational factors behind this,' the central bank and the China Banking Regulatory Commission said in a joint statement released late on Thursday.

The statement said commercial banks were facing 'significantly higher risks' and if property prices became too volatile, a surge in bad loans was likely to follow.

As part of the new measures, which take effect immediately, the down payment requirement for people buying a second home was raised to 40 per cent from 30 per cent.

The down payment required for commercial properties such as offices was also raised to 50 per cent from 40 per cent.

Further, mortgage rates for second homes and commercial properties must now be at least 1.1 times the benchmark lending rate, the statement said.

Previously the minimum was equal to the benchmark rate.

The statement said banks were banned from providing loans to developers that had been found hoarding land or houses, and that real estate vacant for more than three years must not be accepted as collateral for bank loans.

China has, since 2005, taken many steps, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.

Interest rates have been hiked five times this year alone, most recently on Sept 15, with apparent little effect.

Property prices in 70 major cities across the country rose 8.2 per cent in August from a year earlier, the fastest so far this year, according to official data.

Property prices in Beijing were up 12.1 per cent in August year-on-year and 20.8 per cent in southern Shenzhen, a booming city just across the border from Hong Kong. -- AFP

Agency likely to be called China Investment Corp (CIC), say reports

Agency likely to be called China Investment Corp (CIC), say reports

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(BEIJING) A government fund that is to invest part of China's US$1.3 trillion in foreign currency reserves is due to be officially launched tomorrow, according to news reports.

Close watch: Analysts are observing the agency's possible impact on financial markets
Financial analysts are watching the agency closely to see where it invests and its possible impact on financial markets. It is expected to be entrusted with US$200 billion, which would make it one of the world's richest investment funds.

The agency is likely to be called the China Investment Corp (CIC), Dow Jones Newswires and the Chinese newspaper Securities Journal reported yesterday. Both cited unidentified sources.

A Chinese official who was involved in setting up the fund said that he could not confirm the reports. Foreign reporters will be barred from the official opening ceremony, said Jesse Wang, chairman of state-owned Jianyin Investment Co.

Beijing created the fund in an effort to earn higher returns on its currency reserves, which have soared amid a boom in export revenues. A large portion of the reserves have been invested in safe but low-yielding US Treasuries.

Its creation comes at a time of tension with Washington over China's swelling trade surplus and unease in the US and elsewhere over Beijing's growing economic and military might.

Authorities said that the agency would be modelled in part on Singapore's Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere.

A key question has been the possible impact of the new strategy on the market for US Treasury securities.

Beijing is a big buyer of Treasuries, helping to finance the American government budget deficit. Chinese officials have given no details of how much money might be diverted to other assets.

The Chinese agency agreed in May to pay US$3 billion for just under 10 per cent of American investment firm Blackstone Group LP.

Mr Wang, who was involved in negotiating the Blackstone purchase, told The Associated Press in May that the Chinese agency was expected to try to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.

Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC Ltd's attempt to acquire US oil and gas producer Unocal Corp. CNOOC dropped its bid after American critics said that it might endanger energy security. -- AP

STRONG corporate profits and a global commodities boom in 2006 helped grow fortunes and sparked a surge in demand for trophy homes

STRONG corporate profits and a global commodities boom in 2006 helped grow fortunes and sparked a surge in demand for trophy homes.

Riding high: Hayden Properties' latest development at 37 Scotts Road features a glass car elevator so owners can park and show off their rides from their living room --
A survey by Cap Gemini and Merrill Lynch shows the number of high net worth individuals (HNWI) worldwide increased 8.3 per cent in 2006 to 9.5 million, with Singapore reported to have the fastest-growing number - up 21.2 per cent to 67,000. With this rising affluence, it is not surprising that high-end homes are being snapped up as soon as they go on the market, as they are just another example of luxury goods in hot demand.

Prices of high-end apartments continue to rise steadily, with new launches commanding increasingly higher rates in the prime districts of 9, 10 and 11. The average price of high-end residential property rose 9.1 per cent to $1,960 per sq ft from the last quarter, while the average price for super-luxury residential homes was even higher at $2,990 psf. The number of homes costing more than $5 million increased almost 54 per cent last year to 650. Foreign purchases at the top end of the market are also increasing.

'Singapore is increasingly acknowledged as a safe haven for investments, backed by a strong Singapore dollar and an attractive tax regime,' says Galen Tan, a managing director of EFG Private Bank. 'An increasing number of high net worth clients have included Singapore as a part of their multi-generation wealth succession planning and are attracted to the conducive environment for retirement.'

Foreign purchases stand at 60 per cent of transactions above $5 million, compared with 39 per cent in 2006 and 14 per cent in 2005 ( See Table 1). Looking at the top 10 transactions over the last five or six years in terms of price, the past two years have seen significant increases - from about $2,050 psf in 2000 to $3,090 in 2006 and $4,078 in first-half 2007. The number of units sold above $4,000 psf in July this year soared more than 350 per cent to a record 72, compared with just 16 in June. (See Table 2)

Escalating prices of super-luxury apartments have not put buyers off. In fact, most such developments - like The Marq at Paterson Hill, Parkview eclat, Scotts Square and The Boulevard Residences - have reported good sales, with foreigners buying off the plan without even viewing showflats. At the high end of the market, we are dealing with excess wealth, not merely income. Hence, some of the factors that influence the rest of the market do not come into play in this segment.

High-end apartments indisputably cost more nowadays, but what do you get for your $5 million? Is there really much difference between, say, a $1 million apartment, a $5 million and a $10 million model? Besides the current property boom which has pushed up land prices, there is another reason for the soaring prices of top-notch apartments. Developers are loading them with more luxurious features to justify higher pricing. We note that apartments above the $5 million mark boast dramatic additions, such as top-of-the-line fixtures and finishes, sophisticated amenities and sprawling living areas that normal apartments do not have. Parkview eclat, for example, offers superior finishes and state-of-the-art appliances such as mirror televisions, spas and custom showers to create a hideaway for hard-working owners to take a break from their hectic lifestyles.

Hayden Properties' latest development at 37 Scotts Road has taken opulence to an even higher level. It features a glass car elevator so owners can park their exotic wheels near their entrance. Assuming the development costs $3,000 per sq ft, it will cost as much as $600,000 for the parking space. Aside from providing additional functionality, such features imply a certain social status for owners. Large living areas and bedrooms are other common characteristics of luxury apartments. Hence, units that come with separate guest suites, spacious home entertainment rooms, wine cellars and open spaces, which were rare in the past for high-end apartments, are offered more commonly now.

The Marq at Paterson Hill and Cliveden at Grange offer the spaciousness of a bungalow in a luxury condominium setting. The love of space is reflected in the increasing number of large units sold. From January to July 2007, 1,250 units bigger than 2,500 sq ft were sold - 75 per cent more than in the same period last year. (See Table 3)

In terms of amenities, we have also seen vast improvements. Developers are increasingly aware that people are not buying a mere home but a lifestyle. In the past year, some developers have come up with creative ideas to provide a more attractive living experience for purchasers.

St Regis Residences and Beaufort on Nassim are tying up with hotel operators to provide hotel-style services. And Hilltops by SC Global promises a resort-style environment. We expect this trend of joint ventures between developers and prestigious hotel brands to continue.

Another distinguishing feature of luxury apartment buildings is the level of security. Developers are expected to place more emphasis on this as personal privacy and safety are big concerns. High-tech equipment such as fingerprint recognition and even eye scanners are being installed to identify residents and visitors. Cameras are mounted in every corner, panic buttons are wired to the bedside and a security guard placed outside each apartment to provide 24-hour surveillance.

The list continues, with buildings designed with infrared sensors that will sound alarms to warn security guards if moving objects are detected. Other security measures such as bullet-proof windows, a separate route and lifts for evacuation, a safe room that is bullet-resistant and wired with a phone line, back-up generators and keyless entry systems could be seen in future projects.

Compared with prices of high-end property elsewhere, Singapore has room for growth. In London, the average price for top-end apartments stands around $8,900 psf. In Monaco, the price of a luxury condominium averages $5,000 psf, while in New York it is about $4,500 psf. Apartments at Roppongi Hills, Tokyo, average around $3,400 psf, while in Hong Kong, prices of luxurious apartments average $3,100 psf, though those in the super-luxury category have now topped $7,800 psf.

Despite recent turmoil in global financial markets, the mid to long-term outlook for the Singapore economy remains positive, with the government upgrading GDP growth from 5-7 per cent to 7-8 per cent this year. The narrowing of the revised forecast to just a single percentage point range - from the usual two-point range - shows the government's confidence. Furthermore, Prime Minister Lee Hsien Loong has increased the long-term GDP growth target by one percentage point to 4-6 per cent per annum.

Going forward, we expect the property market to remain optimistic, with high-end prices likely to increase another 20-30 per cent a year until 2010, mainly due to the quality of projects and increasing land prices.

Land prices are likely to rise at a slower pace after strong growth in 2006. The increase in apartment prices is likely to be attributed to the fancy items and amenities that developers include. Furniture from the exclusive Lamborghini or Armani/Casa lines, Hasten Vividus beds that cost almost $120,000 apiece and high-end entertainment systems are just a few of the new frills that will allow developers to market the project as unique, so as to command a premium.

HDB resale prices have been recovering slowly but surely since a dip in late 2005 when anti-cashback measures were introduced

HDB resale prices have been recovering slowly but surely since a dip in late 2005 when anti-cashback measures were introduced to stamp out the illegal over-declaration of resale prices.

Sky-high: Prices for resale units hit a record high as a five-room unit in Kim Tian Place changed hands for $720,000 this year, leading to an overnight hike in prices by up to $200,000 above valuation
The recovery was based purely on the market fundamentals of an improving economy and employment market; as well as the actual play of supply and demand.

From Q4 2006's 103.6 points on the HDB Resale Price Index, resale prices for HDB flats jumped 4.2 per cent in the first half of this year to reach 108 points in Q2 2007. Besides demand being fuelled by improving sentiment, the spate of collective sales in the private property market has unleashed a group of cash-rich house hunters, many of whom are opting for high-end resale HDB units. These buyers are willing to pay top dollar for flats that fit their criteria.

In June, wide media coverage of two five-room HDB flats that changed hands in the resale market at record-breaking prices of $675,000 in Jalan Mebina (off Tiong Bahru) and $720,000 in nearby Kim Tian Place spun the HDB resale market into euphoria. It led hopeful sellers all across Singapore to hike asking prices overnight, some by up to $200,000 above valuation.

This led to a mismatch of price expectations between sellers and buyers as these high-priced deals are limited to fairly new, well-renovated, high-floor resale flats in coveted estates such as Tiong Bahru and Queenstown.

The HDB was quick to respond to concern among home buyers about runaway prices and released additional data on median resale prices and median cash-over-valuation in all the housing estates. Median prices give a more accurate picture of the market and minimise the distorting impact of headline-grabbing prices.

With these additional statistics, to be provided by HDB on a quarterly basis from the second quarter, home buyers have better information on which to base their decisions. Sellers are also able to use these statistics to price their flats realistically and competitively.

Going forward, HDB resale prices are expected to continue trending upwards. HDB's Resale Price Index rose by 3 per cent in Q2 2007 over the previous quarter, with price increases across most flat types and towns. Seventy per cent of the resale transactions in Q2 2007 were transacted at an average of $7,000 cash-over-valuation. As at the end of the first half, HDB resale prices have increased by 4.2 per cent. With such positive market sentiment, prices are likely to continue to rise in the subsequent quarters and we may possibly see an overall price increase of 6-9 per cent for the full year.

Resale volume

With improving sentiment, the volume of resale transactions jumped 39 per cent in Q2 2007 to 8,708 units from an all-time market low of 6,258 units recorded in Q1 2007.

HDB's data also indicates a strong preference among buyers for larger flats. Between Q1 2007 and Q2 2007, executive flats saw the largest increase in resale transactions of 67 per cent (343 units); followed by five-room flats at 64 per cent (903 units); four-room flats at 31 per cent (726 units) and three-room flats at 25 per cent (482 units).

The resale mix for H1 2007 showed three-rooms making up 29 per cent (down from 2006's 32 per cent; four-rooms at 37 per cent (about the same level as 2006); five-rooms at 25 per cent (up from 2006's 22 per cent); and executive flats at 9 per cent (up from 2006's 7.5 per cent).

This preference for larger flats is likely to continue for the rest of the year as the demand is fuelled by those upgrading from smaller flats as well as buyers who have been priced out of the booming private residential market. By year-end, we may possibly see three-room flats accounting for 25 per cent of resale transactions, four-rooms at 37 per cent, five-rooms at 28 per cent and executive flats at 10 per cent.

Assuming the current momentum holds, we are likely to see this year's total resale volume surpassing last year's 29,723 units, which was an all-time low. Some 30,000 to 32,000 are estimated to be transacted for the whole year.

Changes in housing policy

At last month's National Day Rally, Prime Minister Lee Hsien Loong announced a slew of housing policy changes. These include:

Revised additional CPF housing grant: The Additional CPF Housing Grant (AHG) Scheme will be enhanced to provide more subsidy to lower-income families to help them buy their first HDB flat. The income ceiling for AHG will be raised from $3,000 to $4,000, while the maximum grant will be raised from $20,000 to $30,000.

The enhanced scheme can be used to subsidise the cost of buying a new or resale flat. It is expected to benefit an additional 1,300 first-timer households annually. In total, some 4,000 households are expected to benefit from this programme every year; and this may boost the demand for three-room flats which has been lessened in view of the current upgrading trend.

New HDB buy-back scheme: This scheme helps unlock the value of flats for elderly Singaporeans aged 62 and above, providing them with an income stream. HDB will buy back the tail-end of the lease on their two- or three-room flats, leaving them with a shorter lease of 30 years on the same flat.

The flat owner will then receive a payout from HDB in two parts - a lump sum upfront and monthly payments for the rest of his or her life which will serve as a form of annuity. This scheme is not expected to have a significant impact on the resale market as it focuses on the elderly.

Two new upgrading programmes: HDB will be introducing two new upgrading programmes, namely, the Home Improvement Programme (HIP) and the Neighbourhood Renewal Programme (NRP).

The HIP aims to address common maintenance problems in ageing flats, such as spalling concrete and ceiling leaks; while the NRP focuses on precinct- and block-level improvements.

These upgrading schemes are designed to improve the internal and external environment of affected flats. While the flats' condition and aesthetics are improved, the possibility of fetching higher prices is basically dependent on supply and demand rather than upgrading per se.

With strong market fundamentals, supported now by added transparency in transaction information, the HDB resale market is expected to continue its uptrend for the rest of the year.

MOST individual investors of real estate have a gut feel about whether they made, lost or broke even after holding their property for a certain period

MOST individual investors of real estate have a gut feel about whether they made, lost or broke even after holding their property for a certain period. In reality, few attempt to do the math to measure how well the investment truly performed and whether they were rewarded for the risks they took.

The only ones who are fairly confident of quantifying their profit or loss are the 'flippers' who speculate and deal in the sub-sale market without involving bank loans, rental income and outgoings.

This article takes the reader through two real-life case studies of investing in private residential properties in Singapore over two different time periods. The focus is on getting a sense of timing, time horizon, interest rates, rental yields and rate of returns. The outcome is to help an individual investor assess if real estate investing is worth the risks involved.

Case 1: 1982 to 1991

Not many of us will recall that there was a red-hot residential property market in Singapore in the early 1980s. Condominiums were making a splash and the Central Provident Fund was made available for investment in properties. It's hard to believe but mortgage rates were in the low teens in Singapore at that time. The particular property in this case was in the Pandan Valley area. It was a brand new 1,000 sq ft studio apartment that was launched at $300 per sq ft. The initial tenancy was at $2,500 a month. This translated to a gross rental yield of 10 per cent, bearing in mind that mortgage rates were around 13 per cent a year.

Everything was fine until the recession of 1984. The monthly rent dropped to $900. The value of the condo unit languished at the $200,000 level for the next two years. The gross rental yield fell to a more realistic 5.4 per cent (annual rental of $10,800 divided by prevailing market value of $200,000), almost in line with mortgage rates prevailing through the brief recession.

If the owner had sold the property after holding it for five years, the capital loss would have been massive. However, the property market recovered and by 1991, this studio apartment was sold for $400,000. The owner was not prepared to hold on because of the uncertainties connected with the first Gulf War.

More importantly, the investor decided to use the proceeds to upgrade his primary residence. Intuitively, he was satisfied that he had broken even in terms of cash flow. But he did not know (or care) that his actual internal rate of return (IRR) was only 6 per cent a year for the 10-year holding period.

Incidentally, an opportunistic investor who bought an identical unit in 1987 would have realised an IRR of 34 per cent a year in 1991. (see sidebar).

The question is: Was the investor who held the property from 1982 to 1991- while suffering the throes of economic upheavals - fairly rewarded for the risks he took?

Case 2: 1996 to 2007

This period in time will be more familiar to most of us. The climax of the bull market of the 1990s came about unexpectedly when the government intervened in May 1996 with anti-speculation measures. Our second investor bought a brand-new condo in District 9, a few months prior to the drastic new housing rules. The 1,300 sq ft three-bedroom unit was acquired at $1,200 psf, or $1.56 million. The first tenant paid $4,500 a month for a gross rental yield of 3.6 per cent. The interest rate was 5 per cent a year in the initial period, but steadily dropped to 1.5 per cent in 2001.

Till today, this condo is very marketable and the maximum period of vacancy between tenants was six weeks. The rent fell to $3,000 a month in 2000 for a gross yield of 4 per cent (annual rental of $36,000 divided by the market value of $900,000 in the downturn years).

Other property owners who did not have the holding power were forced to sell at a loss at around the turn of the millennium. Our investor took the lumps and hung on. By the end of 2006, with strong interest for second tier properties, the investment broke even compared to the original purchase price in 1996.

If this unit is sold today, the investor can pocket $1 million after settling with the bank (sales price of $1.8 million less outstanding mortgage of $800,000). The internal rate of return from the date of acquisition now stands at 3 per cent a year over 11 long years.

The question is: Should the owner sell now or wait for a more respectable return? What is the appropriate benchmark to gauge if this investment has met the threshold for an acceptable return?

The two real-life cases were selected to demonstrate that timing in property investment is critical. Peak to peak time horizon within a property cycle may result in a lower than optimal rate of return. Investors cannot anticipate external forces that may derail the best laid plans. Speculators know this too well and they have no intention of holding property longer than necessary. It's simply capital gain they chase.

Exposure to real estate is part of a sound overall investment strategy. This exposure may not necessarily be in bricks and mortar (which has no liquidity) and should be beyond Singapore (for diversification). One alternative for liquidity and diversification is to invest in a portfolio of global property shares, funds and Reits. Due to higher risks, the expected rate of return from a well-timed property investment will be higher than a globally diversified portfolio of property securities.

If we assume an average inflation rate of 3 per cent a year in Singapore, then any investment should exceed this minimum return in the medium to long term. Then, there is the risk premium for property: an average net rental yield of 3 per cent and capital gain of 5 per cent add up to 8 per cent a year total return, or 5 per cent a year above inflation.

A useful proxy for the local landscape is the All Singapore Equities Property Index (left). The total return for the period August 1997 to August 2007 was 4 per cent a year. That's a dreadful performance indeed for the long-term investor in Singapore property stocks during this eventful decade. Maybe our Case 2 investor should not feel too badly after all.

In conclusion, investing in residential property provides pride of ownership and a hedge against inflation. Whether it delivers adequate income or capital gains to an investor depends on many factors. In a nutshell, the property investor should acquire a quality product, pay a reasonable price and have the ability to hold for a long enough time horizon to earn the appropriate return.

The property agent, conveyancing lawyer and banker play their part in the buying and selling of the asset. These roles are necessary to ensure a smooth transaction. An experienced financial adviser can offer advice on the required return on investment, asset allocation and risks connected with the property as part of an overall investment portfolio.

A broadbased recovery in the housing market now looks imminent with some developers feeling confident enough to put in new benchmark bids for 99-year

A broadbased recovery in the housing market now looks imminent with some developers feeling confident enough to put in new benchmark bids for 99-year suburban leasehold sites.

But HDB upgraders are finally making a comeback, bolstered no doubt by salary revisions in the civil service and mid-year bonuses.

Even the much-anticipated fallout from the United States sub-prime crisis and subsequent global credit crunch appears to have left the Singapore property market relatively unscathed. Not only have foreign institutional investors continued to pump money into the property sector, a new base of investors, most notably from the Middle East, are making their presence felt.

Of course, there is still a level of volatility in some segments. The high-end and luxury residential sector may see both foreign and local investors make more cautious decisions about buying into a segment that is already a little peakish.

Speculators, who have been driving up prices in the high-end and luxury segments, also appear to be beating a retreat, after considering the upsides in flipping properties no longer worth the risks.

Emerging markets are also looking like pretty safe bets though.

Few will have failed to notice that when the US sub-prime situation started to unravel in July and August, the China and India markets seemed impervious to its effects.

The growth story of both these powerhouses is well known, so much so that industrialists and developers alike are looking for new frontiers.

Vietnam is certainly a hot favourite now but closer home, Malaysia too holds many opportunities.

And if the Singapore market is anything to go by, the increasingly buoyant high-end sector in its capital city certainly bodes well for the rest of the real estate market.

Risk aversion may yet be the catch phrase of choice for the months ahead.

Not surprising then, financial analysts have come out in support of the mass market and the mid-cap developers most exposed to this segment.

Also looking relatively safe is the growing Singapore real estate investment trust (S-Reit) sector. The first Reit was listed in 2002 and, to date, there are 17 S-Reits with more expected to be listed here, giving even more depth to the market.

Friday, September 28, 2007

25% more HDB flats rented out since March

25% more HDB flats rented out since March
September 24th, 2007 · No Comments

MORE Housing Board (HDB) flatowners are cashing in on the rising rental market by letting out their units following a relaxation of the rules on doing so.

The new rules have spurred 5,700 more people to rent out their flats over the past six months.

The latest figures from the HDB show that a total of 15,773 flats have been given the green light for rental by the middle of this month.

This is a 25 per cent jump on the total figure before the March 3 rule change. About 39 per cent of these additional homeowners would not have qualified had the rules not been eased.

Previously, flatowners could rent out their flats only five years after buying them - or 10 years if they had not paid off HDB home loans.

Now, they can do so after living in their flats for just three years - or five years if they had bought it with a government subsidy or grant. It no longer matters if the home loan has been paid off.

The change almost doubled the pool of eligible flats to 645,000, out of more than 800,000 across the island.

The relaxation was part of a series of measures to make it easier for flatowners to earn income from their units.

Besides easing subletting rules, the HDB also allowed homeowners to take out reverse mortgages on their flats. It is also looking into a novel scheme to buy back the tail-end of flats’ leases from homeowners.

Newly minted landlords included Madam Yee Kin Moi, 58. The retired hawker and her husband rented out their four-year-old flat in Choa Chu Kang just last month for about $1,000 a month, and moved in with their daughter to help take care of their 18-month-old grandson.

The rental income, said Madam Yee, covers their monthly housing instalments and helps pay daily expenses as well.

She told The Straits Times: ‘The good thing about renting the flat out is that we do not need to sell it. We can go back to live in it if our children choose to migrate elsewhere.’

According to the HDB, about 27 per cent of flats rented out after March 3 belonged to owners who were older - aged 55 years and above.

Most of those renting out their flats under the revised rules moved in with their family members. About 22 per cent now live with their children, while another 36 per cent live with their parents, siblings and other relatives.

About two-thirds of flats being rented out are three- and four-room units.

HDB statistics show that three-room flats fetched a median rental of $980 islandwide from April to June, while four-room flats fetched $1,180.

Property agents estimate that rents are up about 10 per cent to 15 per cent since then, but say demand for rental flats remains strong as tenants, deterred by rising private rentals, choose public housing instead.

Median rentals of non-landed private homes islandwide grew by 11 per cent from April to June to $31.87 per sq m per month. This means it would cost about $3,200 a month to rent a 100 sq m, three-bedroom home.

As a result, rental flats being put on the market are being snapped up within a month, said the chief executive of property agency Propnex, Mr Mohamed Ismail.

Most homeowners, though, will not rush to rent out their flats even if rental rates become even more attractive. This is simply because they would have nowhere else to live if they did.

The director of Dennis Wee Properties, Mr Chris Koh, pointed out: ‘Not every elderly couple would want to live with their children.’

Source: The Straits Times

En blocked: How Horizon Towers made history

En blocked: How Horizon Towers made history

The Leonie Hill condo was just one of scores of estates snapped up by developers in a collective sales frenzy over the past two years. Now its owners are being sued by a developer in a landmark case that will go before the High Court on Thursday. How did it all come to this?

THE first hint that the $500 million sale faced trouble can be traced to an anonymous letter dated April 25 that was sent to owners of the condo’s 210 units.

It started: ‘Dear fellow owners, Some of us begin to wonder if our en bloc exercise now makes sense.’

The letter writers urged decisive action, suggesting that the owners of the 25-year-old property were being short-changed and that a far higher price was possible.

‘If enough like-minded owners decide to rescind the (agreement) and the majority falls below 80 per cent, the application to the Strata Titles Board (STB) can be repealed.’

The buyers were local developer Hotel Properties Ltd (HPL) and its two partners Morgan Stanley Real Estate managed funds and Qatar Investment Authority.

They agreed in a private treaty deal in February to buy the 99-year leasehold condo for $500 million, which was the reserve price set last year. Until early February, it was a record price in absolute terms for an en bloc sale.

At that price, each owner of the condo’s 199 units would get about $2.3 million, with the 11 penthouse units reaping $4 million to $6.28 million.

But the letter writers were unhappy. Prices of neighbouring properties had skyrocketed since the deal was struck.

‘We are now believing that our en bloc price no longer reflects the true value of Horizon Towers and we strongly feel that if we sell our unit individually, we would achieve prices far better than what this en bloc has fetched us.’

One case the letter cited was neighbouring condo development The Grangeford.

Grangeford owners were asking for $660 million, or $2,016 per sq ft (psf) of potential gross floor area.

That was more than double the $850 psf of total floor area achieved by Horizon Towers. ‘Deep down…many owners may now be regretting this en bloc. They may be willing to join this…movement,’ the letter said.

It engendered enough discontent over the sale price to lead some owners to attempt a deal reversal. Also, 10 groups filed objections to the sale.

Mediation sessions before the STB to settle the dispute started in late May. But those attempts at mediation between the warring camps of owners failed.

A group of 42 disgruntled owners, who had hired a law firm for advice, called for an extraordinary general meeting at Horizon Towers.

They wanted to remove the sale committee, which was blamed for not consulting the owners when it granted the option to purchase nine months after the reserve price was set. This failed.

But most members of the first sale committee later resigned and were replaced by new ones - and a second committee took their place.

At this point, it is worth noting that when the original Horizon Towers sale tender closed in August last year, there were no offers at its reserve price.

But the property market picked up significantly after that. In late June this year, a developer said it wanted to buy The Grangeford for $592 million, or about $1,810 psf per plot ratio - the highest price achieved for a 99-year leasehold site.

According to an affidavit filed by HPL for the High Court case on Thursday, an anonymous letter was circulated around this time to Horizon Towers residents, asking them to ‘act quickly and decisively’ to salvage something for themselves as Horizon Towers was, the letter said, being given away at a relatively paltry sum.

The STB hearing

THE bitter dispute that had focused on the condo’s sale price took an unexpected turn on Aug 3.

That was when the STB threw out the application for sale approval because of procedural errors - the sale paperwork was not in order.

There was another problem: The contract between the HPL-led consortium and the sellers included an atypical condition, according to market players.

The sellers were given the option to extend the sale deadline by another four months if the sale was not completed within six months of the original deal in February - that is, by Aug 11.

A senior property consultant said: ‘The discretion to extend the time frame usually lies with the buyer in the first instance, and thereafter upon mutual agreement.’

With the deal now apparently dead, the HPL-led consortium, represented by lawyers K. Shanmugam and William Ong from Allen & Gledhill, immediately swung into action. They wrote to the sellers alleging they were in breach of the February contract and wanted them to extend the Aug 11 deadline so that the procedural errors could be corrected and the application to the STB refiled.

But the Aug 11 deadline came and went. By now, neighbour had turned against neighbour as the stakes grew higher.

The HPL-led consortium has now proceeded to sue the members of the first and second sale committees and is seeking an order to bind all the other sellers. If that order is granted by the court on Thursday, it will mean that all Horizon Towers sellers will be liable to pay damages to HPL.

HPL is seeking about $800 million to $1 billion in lost profits as a result of the alleged breach of contract. So the owners of each unit could be looking at a bill of more than $5 million.

Since then, some majority owners have reached out to HPL, and last Wednesday, a group of them met HPL chief Ong Beng Seng, where HPL made it clear that it will drop the suit only if a collective sale order is obtained.

A ray of hope emerged the following day, last Thursday, when a large group of owners met to appoint yet another - the third - sale committee. More significantly, they agreed to extend the sale deadline until Dec 11.

HPL and its partners are waiting for an official confirmation of the extension before they seek an adjournment of this Thursday’s hearing.

Even if the High Court case is adjourned, the sale would have a long way to go, given the disputes so far.

Lessons learnt

THE case - which has involved more than 10 lawyers - has underscored the point that a collective sale agreement is a legal document and sellers may be liable to legal action.

This is a sobering thought for property investors or owners who believe that the only serious question they have to consider in a collective sale is the price they will receive for their units.

Lawyer Henry Heng from Tan Peng Chin LLC said: ‘The case highlights and reinforces the potential consequences and liabilities of owners pushing for an en bloc sale when the en bloc process or application goes wrong.”

The Horizon Towers case has also changed the way collective sales are conducted. Owners, their property agents or lawyers involved would now pay more attention to procedural requirements, said Mr Heng.

The High Court hearing is fixed for this Thursday while a separate appeal by the sellers to the High Court to quash the STB order invalidating the original sale will be heard a day later.

If that appeal succeeds, the case could return to the STB. What would happen then is anyone’s guess - though many owners are no doubt longing for signs of a resolution on the horizon.

Source: The Sunday Times

The rant over rent: Landlords strike back

The rant over rent: Landlords strike back

We’re not greedy, we’ve been ’subsidising’ tenants with low rates since 2003, they say

RETIRED doctor S.M. Soon, 62, is one happy landlord.

She collects $16,000 a month from her tenant at Emerald Hill, which means she doesn’t have to use her own funds to top up her monthly mortgage payments.

But things weren’t always so rosy.

From 2002 to last year, the monthly rent from her 5,000 sq ft Peranakan house was $12,000, and she was coughing up $4,000 every month to service the loan and pay for maintenance.

‘Prices are just returning to what they were 10 years ago. For us landlords, it’s not always Sunday,’ said Dr Soon.

Tenants have been crying foul over soaring rents which have shot up by 31.2 per cent over the past year.

Last week, The Sunday Times featured a family whose rent rose from $2,400 to $7,200 when the lease ended this year.

In the end, the family had to move from Jervois Road near the city to the East Coast area, and still pay rent that is twice as much.

But landlords are also keen to debunk their greedy image.

In a letter to The Straits Times’ Forum page last week, Madam Yeo Boon Eng pointed out that expatriates had been enjoying extremely low rents since 2003 and owners were ’subsidising’ tenants before the increase in rents.

She is now charging her tenant $2,100 for a corner terrace house in Yio Chu Kang, up from $1,600 last year.

She said her tenants did not complain or bargain. But if they did, she would have stood her ground and they would have had to look elsewhere.Nine of the 12 landlords who spoke to The Sunday Times said they, too, collected very low rents in the past few years.

The higher prices are not arbitrary, they argued. They simply reflect property prices now and are a function of demand.

It is only recently that landlords are seeing returns on their investments, with rental yields exceeding monthly instalments.

Said Dr Soon: ‘It’s not a matter of raising prices because we’re greedy. We get whatever the property will fetch in the market.

‘I wouldn’t dare ask for $16,000 if the market rent is $10,000.’

Retired lecturer H. Chu, 65, who is renting out three properties in Holland Grove View, Binjai Crescent and Eastwood, said: ‘Landlords are not unreasonable. It’s just that there are too many people at this time who want a place.’

He didn’t even have to raise the rent on his Binjai Crescent bungalow; the tenant offered him $8,500 this year, instead of the $5,600 he was paying.

‘He knows the market,’ he said.

Property agent Andrew Tan, 51, agrees. The only landlords he would call greedy are those with ‘moving targets’.

This year alone, he has dealt with five landlords who kept upping their prices even after letters of intent had been signed by prospective tenants. Among the landlords contacted by The Sunday Times, none admitted to doing this. Most said they try to keep their existing tenants.

Said Dr Soon: ‘It makes sense to keep a good tenant, instead of waiting another month for another tenant to come along and paying commission fees to the agent.’

She said she charged her existing tenant $16,000 when she could have put her property on the market for $20,000.

But no matter how much of a ‘discount’ existing tenants get, they are bound to be unhappy about the sudden rent hikes. And landlords are peeved by the attention the more vociferous tenants get.

‘When tenants were enjoying low rents, nobody thought about the landlord. It’s not that prices have gone up drastically. It’s that, in the first place, they went down so much,” said housewife V. Wong, who is in her 50s.

Her 1,800 sq ft apartment at Central Green in Tiong Bahru used to fetch $4,300, which meant she had to chip in about $800 to meet the mortgage payments and taxes. Now she rents it out at $6,800.

Ultimately, the sums have to add up.

Said landlord Ms Y. Tan, an accountant who is in her 60s: ‘Who wants to charge low rents? We’re not running a charity.’

Ups and downs

‘When tenants were enjoying low rents, nobody thought about the landlord. It’s not that prices have drastically gone up. It’s that, in the first place, they went down so much.’

HOUSEWIFE V. WONG, on why tenants are unhappy about the sudden rent hikes

Source: The Sunday Times

Potential risks of buying undeveloped land

Potential risks of buying undeveloped land

THE gains from investing in undeveloped or raw land might sound attractive, but experts say retail investors need to take care.

Mr Ku Swee Yong, the director of marketing and business development at property consultant Savills Singapore, said such investments can be ‘a good tool’ because of the potential for capital gains and because they require smaller sums than direct property purchases.

He pointed out, however, that investors keen on land banking have other options, for instance, buying uncompleted properties or investing in real estate investment trusts.

The chief executive of wealth management firm dollarDEX, Mr Chris Firth, warned that ‘a big problem’ with land banking is that most of these activities are not regulated anywhere. Thus, the offerings vary greatly, ranging from ‘genuine ones to scams’.

Pricing is another issue. ‘In some cases, the markup from wholesale plots into retail plots is so huge, investors have virtually no hope of turning a profit.’

In July, in Britain, four firms that had sold plots of agricultural land to the public were wound up by the High Court after a probe into misrepresentations. It was revealed that the sites had little or no chance of getting planning permission.

The chief investment officer of private wealth manager Providend, Mr Daryl Liew, said investors should perform due diligence on the firm and assess the land’s potential.

Here are some issues you should consider.

Absence of regulation

The buying of raw land as an investment is not regulated in Singapore. If investors choose to deal with investments not regulated by the Monetary Authority of Singapore, they forgo legal protection.

Consumers are thus urged to find out as much as possible about the company, understand the product and ensure the investment fits in with their financial goals.

Long wait for developers to come in

There is no guarantee as to how soon developers will buy over the land. Estimates by strategic land investment companies range from three years to eight or even 14.

Fruitless wait; the land is never developed

It is possible the land might never undergo development. It was reported last November, that British land banking firm Land Heritage (UK) closed after a probe and its 700 investors were not refunded.

High ‘hidden’ costs

Depending on the country, you might have to pay capital gains tax, withholding tax or miscellaneous legal fees before you can realise the profits. These costs could well eat up half your profits.

Lack of liquidity

Land assets are illiquid. In most cases, there is a minimum holding period before you can sell your individual plots of land even if developers have yet to buy the area in question.

Exchange rates

If you bought the land in a foreign currency, there is a risk of currency moving against you.

Source: The Sunday Times

Banking on overseas land

Banking on overseas land

Thousands of Singaporeans have sunk money into undeveloped plots overseas in the hope of getting high returns. Finance Correspondent Lorna Tan talks to three investors who have ventured into this foreign territory FOR some, it is not enough to have a roof over their heads. Singaporeans’ love affair with property has extended to owning raw land beyond the Republic’s shores, with more than 10,000 opting for this type of investment.

In the 1990s, there was just one firm marketing such undeveloped land, or raw land.

But now at least five firms are selling land in Britain, Canada, Thailand and the United States. The latest two entrants are Profitable Plots, which offers British land, and Royal Siam Trust, which sells beachfront plots in Thailand.

Investor Helen Tay

FOR Ms Helen Tay, 37, it has been a long wait for her raw land investment to bear fruit, and she is still waiting.

In 1998, the former lawyer turned network marketeer bought two plots of Canadian land for C$50,000 (S $74,485) after visiting a roadshow at a hotel. It was organised by land asset management firm Walton International Group.

Set up here in 1996, Walton markets plots of raw land in the Canadian cities of Calgary and Edmonton, as well as in Texas, in the US. It buys the land, keeps a portion for itself and sells the rest to individual investors, who in turn get a title deed in their name. Each unit of land costs about C$25,000. Investors are typically advised that there could be a wait of five to seven years before the parcel of land obtains development approvals. When that happens, Walton will sell the land to developers at a higher price, subject to 60 per cent of investors consenting to the sale.

For Ms Tay, the wait to see profits from her plots in Northridge, Calgary, has been longer than expected. ‘I still haven’t seen my money. It’s been a long wait…Back in 1998, I was given a forecast of five years. It’s not a great investment but if the money comes in, it should still be better than putting money in a fixed deposit,’ said Ms Tay.

But her long wait could be coming to an end.

In May, she was informed by Walton that there was an offer to buy the land at a price that worked out to C $130,000 per plot. This would mean a profit of about C$96,000 for Ms Tay, after she coughs up a capital gains tax of 40 per cent to the Canadian government, plus transfer fees.

If she had bought one plot of land, the tax would be a lower 25 per cent.

Investor John Khoo

UNLIKE Ms Tay, another raw land investor, Mr John Khoo, 50, made sure he saw his plot of land before purchasing it. Mr Khoo works in a foreign bank here but has been visiting relatives in Edmonton, Canada every year since 1990.

In 2004, he plonked about C$100,000 into two plots of land measuring 700 sq ft each (excluding the garden areas), after visiting the raw land sites to assess their appeal.

Mr Khoo took a loan for 60 per cent of the purchase price at an annual rate of under 2 per cent from a Canadian bank. He was also informed that he need not pay a property gains tax as it was his first property in Canada.

‘Location is the most important factor and that means buying land near a mall, a train station, an oil field, a windmill, biodiesel farmland…If you don’t go there, you don’t really know what kind of site you’ve bought. So unless you are familiar with the area, better go see for yourself,’ said Mr Khoo.

Before investing, he also consulted banker friends who were familiar with the location of his sites.

Mr Khoo added that by the time land banking firms sell their plots to Asian investors, the good ones would have been taken up by local investors, who would have picked the cream of the crop of the raw land sites.

The land that he bought had just received planning permission then, and two two-bedroom houses now sit on his two plots of land. The land is near a university in downtown Edmonton.

The value of his land has since doubled and Mr Khoo expects to pay a legal fee of about C$1,000 when he sells his land. Currently, he enjoys an annual rental yield of 10 per cent.

Investor Dr Chiu Jen Wun

DR CHIU Jen Wun, 45, said that ‘the main bugbear of raw land investing is time’, because you can never be sure when you can cash out.

In recent years, the anaesthesiologist has invested in Canadian and British land, which he purchased from Walton and Profitable Plots. He declined to reveal the amount.

Early this year, he made a net profit of about $20,000 from two plots of Canadian land, which were about half an acre, or 0.202ha, each. He had bought them at $37,000 per plot, 41/2 years ago.

Two years ago, he invested in British land. At that time, Profitable Plots was selling units of land with each ranging between £3,000 (S$9,044) and £28,000. Customers were told to expect returns of 2.5 to 14 times, said Dr Chiu. Profitable Plots has advised him that it may take five years to see results.

A personal friend of financial guru Robert Allen, Dr Chiu was motivated to invest in raw land as part of his overall investments so as to generate multiple streams of income.

‘This is one allocation in my diversified balanced portfolio of investments,’ said Dr Chiu, who aims for a minimum 7 per cent annual return on his investments. He adds that the advantage of buying British land for Singaporeans who do not work or live there, is that they need not pay either capital gains tax or stamp duty to the British government.

To boost the confidence of investors and to make it easier for them to part with their cash, both Walton and Profitable Plots offer some sort of buyback guarantee.

Instead of opting for such a guarantee, Dr Chiu decided to wait it out in the hope of bigger returns.

At Walton, investors can sell the land back to Walton at the original purchase price in five years, based on an agreement. But this is believed to be limited to Canadian land and not US land. In fact, the firm used to offer a financing scheme at a rate of 11.75 per cent a year but it has since been withdrawn.

And Profitable Plots, which has paid up capital of $2.1 million, offers two ways of getting a return. Group operations director Andy Nordmann said: ‘One is where the return is earned when planning permission is given and the land is sold to a developer. The other is a fixed return of 12.5 per cent paid annually. This allows our clients the choice of both a short-term and a medium-term investment strategy.’

The firm provides a warranty to all clients which allows a five-year opt-out with no loss of capital. And it also allows clients the flexibility of switching their plots to ones that have already received development approval, so that they can enjoy faster gains.

Mr Nordmann emphasised that Profitable Plots ensures that all funds are placed in the hands of an independent trust which helps to safeguard the investments no matter what happens to the seller of the land.

Source: The Sunday Times

SELETAR Garden, a mixed development at Yio Chu Kang Road, is up for sale by tender with the estimated price of between $70 million and $75 million.

SELETAR Garden, a mixed development at Yio Chu Kang Road, is up for sale by tender with the estimated price of between $70 million and $75 million.

This works out to be $684-$733 per square foot per plot ratio (psf ppr) inclusive of development charge (DC) for the 73,099 sq ft site.

The property is being marketed by PropNex, whose head of investment sales Charles Chua says there is also a possibility of the alienation of three parcels of adjoining remnant state land at an estimated additional $8.3 million.

This will bring the total site area to over 100,000 sq ft and with a possible gross floor area (GFA) of over 140,000 sq ft.

Together with the state land, the site could cost between $555 and $590 psf ppr. Mr Chua believes the site, which is within a 15-minute walk of the Yio Chu Kang MRT offers potential for a boutique serviced-residence or condominium and food-and-beverage centre.

Mr Chua estimates that the current open market value for the residential units at Seletar Garden is between $850 and $850 psf.

Based on the indicative collective sale price, each owner is expected to make a premium of at least 80 per cent over the open market price, Mr Chua said. He estimates that about 40 residential units of between 1,600 and 1,800 psf can be built on the site. The break-even price for the potential new development would be about $750 psf.

Source: Business Times

THE government yesterday launched for sale its second transitional office site in a bid to improve the supply of office space.

THE government yesterday launched for sale its second transitional office site in a bid to improve the supply of office space.

Market watchers estimate that the 1.2 hectare site in Tampines could fetch about $100 per square foot per plot ratio (psf ppr) - which works out to some $12.4 million in total.

The land parcel is the second transitional site offered by the Urban Redevelopment Authority (URA) as office rents in Singapore continue to climb amidst a supply shortfall.

Transitional office sites are expected to help tide over the space shortage until new supply starts to kick in from 2009 onwards.

URA in August awarded the first transitional office site at Scotts Road. That site attracted 11 bidders, with the winning bid coming to $37 million, or $219 psf ppr.

The new site, which has a maximum gross floor area of 124,000 sq ft and a 15-year lease, is expected to fetch a lower price as it is not in the central area.

‘The Scotts Road site can fetch rents of between $7 and $8 psf per month, while this site will be able to get only about $4-$5,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Some experts were more bullish, however.

Knight Frank director of research and consultancy Nicholas Mak expects the site to fetch between $200 and $260 psf ppr, similar to the Scotts Road site. That price works out to $24.8-$32.2 million.

‘With the current absorption rate of office space at 91.9 per cent, coupled with a shortage of Grade A office space in the prime area, demand for suburban offices with good location and well-developed infrastructure is in strong demand,’ said Mr Mak.

‘The office space that will be developed on this site is likely to be attractive to banks and financial institutions to house their backroom operations.’

The land parcel is located at Tampines Concourse/ Tampines Avenue 5 - within the established Tampines Regional Centre.

The upcoming office building will be within walking distance of the Tampines MRT station and bus interchange.

The building is expected to be a low-rise development of about three storeys that can be built quickly in about a year, URA said.

Source: Business Times

Ho Bee previews Turquoise, Wheelock properties to launch Scotts Square

Ho Bee previews Turquoise, Wheelock properties to launch Scotts Square

DEVELOPERS are slowly stepping up residential property launches again, with Ho Bee Investments previewing its Turquoise condo at Sentosa Cove and Wheelock Properties (Singapore) holding the official launch of Scotts Square later this week.

Turquoise, which will have 91 apartments, will be priced at $2,500 psf on average. Ho Bee has been conducting viewings at its showflat lately for its business associates and is expected to begin sales at a preview starting on Thursday.

The 99-year leasehold project comprises three- and four-bedroom units, and penthouses.

Ho Bee will develop the six-and-a-half storey project on Sentosa Cove’s Waterfront Collection site, which is flanked by Tanjong Golf Course and waterways.

It bought the site in a tender that closed in November last year, for $919 psf per plot ratio (psf ppr).

This will be the first condominium launch in Sentosa Cove’s Southern Residential Precinct.

Ho Bee also won another condominium site (jointly with Malaysia’s IOI Group) in March this year. The duo paid $1,361 psf ppr for the plot, dubbed The Seaview Collection, and they are expected to develop it into an eightstorey condo with about 150 units.

Ho Bee is also said to have begun marketing The Orange Grove, a 72-unit freehold condo, in Indonesia.

The average price of the 12-storey project is understood to be around $3,000 psf.

It is diagonally across the road from another condo that Ho Bee began selling around January this year - the 60-unit Orange Grove Residences. Four units are left in the five-storey freehold condo. The current price is about $2,500 psf on average.

Over in the Scotts Road area, Wheelock Properties has sold about half of its 338-unit Scotts Square at an average price of $3,983 psf since July. And although it is holding an official launch for the freehold project on Friday, the group’s executive director, Tan Bee Kim, says the plan is not to sell off all the remaining units just yet.

The developer is in the midst of deciding just how many units it will sell for now, as well as the pricing. Market watchers expect the average price to inch up to slightly above $4,000 psf.

Over in the Dunearn Road location, MCL Land has sold off all but the showflat of its 163-unit cluster terrace housing development, Hillcrest Villas, in two weeks. The average price achieved for the 99-year leasehold development was around $870 psf of strata area.

Source: Business Times

Union Investment looks to quadruple its regional portfolio over a 4-year period

Union Investment looks to quadruple its regional portfolio over a 4-year period

GERMAN fund manager Difa Deutsche Immobilien Fonds (recently renamed Union Investment) is looking to quadruple its property portfolio in Asia over the next four years, its Asia-Pacific head has told BT in an interview.

‘Right now, we have 10 properties worth about 500 million euros (S$1,055 million) in Asia,’ said the group’s Asia- Pacific managing director, Steffen Wolf.

‘We would like to grow the portfolio value to at least two billion euros or so.’ he added.

Union Investment, which owns some 15 billion euros worth of real estate across the world, last year turned its attention to Asia in search of attractive acquisitions.

Since September last year, it has acquired 10 properties in the region, including six residential projects in Japan and two office properties in South Korea.

In Singapore, Union Investment has bought two properties.

In January, it acquired Vision Crest’s office block and the House of Tan Yeok Nee next door in the Penang Road/ Clemenceau Avenue area for a total of $260 million from mainboard-listed property group Wing Tai.

Union Investment is now working on more acquisitions in Japan, China and Singapore, Mr Wolf said.

‘We are also closely looking at Malaysia, India and Thailand,’ he added.

Right now, the group’s focus is on the key cities in all the countries, he said.

Asia, said Mr Wolf, is ‘very strategic’ to Union Investment.

The group has traditionally invested in Europe and the US, but has of late been building up its Asian team in Germany.

The logical next step was to set up a physical presence in the region, and so the group opened an office in Singapore in October 2006.

Right now, the office has just two people, but Mr Wolf wants to grow the team to six or eight by the end of the year, he said.

In Singapore, the group is looking at office properties as well as residential, retail and hospitality assets for acquisition, Mr Wolf said.

The group ideally has to acquire finished, freestanding and already leased-out buildings. It is, for example, not allowed to take on the risks involved with developing a greenfield project.

Its business model is based on collecting rents and distributing them to shareholders.

But Union Investment will not rush into acquisitions, Mr Wolf said.

The cash-rich company is in Asia for the long haul, and will be willing to wait for good acquisition opportunities to come by, rather than compete head-on with more aggressive bidders.

‘We can ride through market cycles,’ Mr Wolf said. ‘We are not affected by crises such as the sub-prime crisis. We have a lot of cash.’

Foreigners snap up 87% more landed homes in first half: DTZ

(SINGAPORE) Foreigners, including permanent residents, bought 232 landed homes here in the first half of this year, up 87 per cent from the same period last year, according to DTZ Debenham Tie Leung’s analysis of caveats.

But foreign buyers’ share of total caveats lodged for landed homes in H1 2007 was about 7.6 per cent, down slightly from a 7.9 per cent share in the same year-ago period.

Nearly 90 per cent of these foreign buyers in the first six months of this year were Singapore permanent residents.

Malaysians accounted for the biggest share or 23.7 per cent of foreign buyers of landed homes in H1 2007, followed by United Kingdom nationals (18.5 per cent) and Australians (7.8 per cent).

The number of landed homes picked up by Singaporeans in H1 2007 was up 76.3 per cent year-on-year, though Singaporeans’ share of total caveats for landed homes fell to 83.7 per cent in H1 2007 from 92.1 per cent in H1 2006.

The decline was due to a surge in the number of landed homes bought by companies, to 265 in H1 this year from just one in the same period last year.

In all, 265 caveats were lodged by companies for bungalows, semi-detached houses and terrace homes in H1 2007, compared with just one caveat in H1 2006. The companies include both local and foreign corporations, and could possibly reflect the effect of some investors including individuals or small groups of investors who made purchases through companies, market watchers reckon.

‘There have been small developers and contractors buying up stretches of landed houses in places like Telok Kurau and Kembangan, with the aim of tearing them down and redeveloping the site into a small block of apartments,’ says Knight Frank executive director Peter Ow.

DTZ’s analysis, which was based on caveats captured by Urban Redevelopment Authority’s Realis system, also showed that the most popular landed housing districts sought after by foreigners in H1 2007 differed from those pursued by Singaporeans.

The top location for foreigners (including PRs) who bought landed homes during the period was District 10 (which covers areas like Grange Road, Tanglin, Chatsworth, Jervois, Bishopsgate, Holland Road, Swettenham Road and Laurel Wood Avenue), followed by Districts 15, 11 and 19.

District 15 covers Katong, East Coast and the Meyer Road locations; District 11 includes the Bukit Timah and Dunearn vicinity, Gilstead Road and Gentle Drive; and District 19 includes Serangoon Gardens and Lorong Chuan.

Other popular locations included Districts 21 (which covers the Upper Bukit Timah area) and 4 (Sentosa Cove) In contrast, among Singaporean landed home buyers, the most popular district was 19, followed by Districts 15, 10, 16 (part of Bedok and Tanah Merah), 20 (including Sembawang Hills and Upper Thomson) and 28 (which covers locations like Seletar Hills and Mimosa Place).

‘Foreigners seem to be zooming in more on traditional residential property investment locations, such as prime Districts 10 and 11 and the traditionally popular District 15,’ said a market watcher.

Among companies which bought landed homes from January to June this year, District 15 was the most in demand, followed by Districts 19, 10 and 14.

The 232 landed homes that foreigners purchased in the first half was just 11.5 per cent shy of the 262-unit figure for the whole of last year. The record was set in 1999, when foreigners picked up 347 landed homes on the island.

In Singapore, foreigners have to be PRs before they can receive permission to buy landed homes on mainland Singapore, and Sentosa Cove is the only location where foreigners who are not PRs are allowed to purchase landed property. Even then, foreign would-be buyers must seek permission from the Land Dealings (Approval) Unit under the Singapore Land Authority.

Typically, it takes about four weeks for approval to be granted, but on Sentosa Cove, the time has been cut to less than 48 hours under a special fast-track approval scheme.

Foreigners, including PRs, can at any one time own only one landed home in Singapore and must occupy it themselves rather than renting it out.

Source: Business Times

Jumeirah to open its first European resort

Jumeirah to open its first European resort

(DUBAI) Jumeirah Group, the hotel management company owned by Dubai’s government, leased a property being built in Mallorca, Spain from a German real estate fund to gain its first European resort and spa.

The 120-room Jumeirah Port Soller resort is held on a ‘long-term’ lease from the WestInvest Interselect fund, Jumeirah said in a statement posted on its website yesterday.

The resort, due to open in 2010, is being built by WingField Corp and was bought for WestInvest by Deka Immobilien GmbH, according to the statement.

Jumeirah is expanding outside Dubai, where it manages the sail-shaped Burj al-Arab hotel. The company has urban hotels in London and New York, and aims to expand its network five-fold to 57 properties by 2011, chairman Gerald Lawless had said in May.

Spanish hotel prices rose the most in four years last month, led by rate increases on the Balearic islands including Mallorca, the Spanish government said in a report yesterday.

Source: Business Times

Ciputra Property to tap up to US$150m in Jakarta IPO

Developer plans to use proceeds to acquire companies and subsidiaries

(HONG KONG/JAKARTA) Indonesian real estate developer PT Ciputra Property is planning to raise up to about US$150 million in a domestic initial public offering, according to a listing prospectus and a source familiar with the deal.

Ciputra Property, a mixed-use commercial property unit of PT Ciputra Development Tbk, plans to sell 40.19 per cent of its enlarged share capital ahead of a listing scheduled for Nov 12.

The company, which has holdings in shopping malls in Jakarta and Semarang, said it plans to use 521.9 billion rupiah (S$85.4 million) from the proceeds to acquire a number of companies and subsidiaries, and the remaining funds from the sale as working capital and for construction costs.

Registration and book- building for the deal are scheduled for Oct 9-19, with pricing due on Oct 22, and the public offering set for Nov 5-7.

The deal is being sponsored by Citigroup and Danareksa.

Indonesian companies have raised over US$3 billion so far this year in initial public offerings and follow-on equity sales according to Thomson Financial, marking a record for Jakarta’s stock market.

Initial public offerings, or IPOs, raised US$680 million.

The Jakarta stock market has risen 30 per cent so far this year on the back of strong foreign demand and an improving economy.

In May, the president director of the Jakarta Stock Exchange, Erry Firmansyah, told Reuters the bourse was aiming to double the number of new listings this year. During 2006, a total of four initial public offerings raised just US $278 million.

Some of the bigger listing candidates in Indonesia include state-owned toll road operator PT Jasa Marga, which hopes to raise roughly US$300 million this year, and coal miner PT Indo Tambangraya Megah, a unit of Thailand’s Banpu plc, which is looking to raise about US$100 million in an IPO.

Source: Reuters

Business is brisk as visitor arrivals climb steadily, pushing up room rates and triggering a flurry of new hotel construction

Business is brisk as visitor arrivals climb steadily, pushing up room rates and triggering a flurry of new hotel construction, writes DONALD HAN

SINGAPORE is all set to spur tourism in the next few years with high-impact projects like the two integrated resorts, the Singapore Flyer, the Formula One (F1) Grand Prix and a rejuvenated Orchard Road.

Last year, a new record was set with 9.7 million foreign visitors coming to Singapore. This year’s visitor arrivals are expected to hit a blistering 10.2 million with Singapore Tourism Board (STB) numbers showing a glowing mid-term report card. From January to July this year, visitor figures reached 5.9 million, a 5 per cent rise over the same period last year. July alone saw hotels raking in $168 million in room revenue, a 28 per cent increase from a year ago. This puts it right on target for another record-breaking year.

STB has set a target of 17 million visitor arrivals by 2015 with $30 billion in tourism receipts. Based on the impressive year-on-year growth over the past 12 months, we should be on track to achieve the 2015 target.

To meet the growing number of visitor arrivals, more hotel rooms have to be built. Presently, there are about 37,000 rooms in Singapore. Based on new supply under construction, some 11,000 rooms will come on-stream by 2010. This includes 4,300 rooms from the two integrated resorts at Marina Bay and Sentosa. It is estimated that in 2010, a total of 14 million foreign visitors will visit Singapore. Based on a conservative average stay of 3.4 days, the city-state will experience an acute shortage of at least 35,000 rooms from now till 2010. Come next September, the F1 event alone will bring an estimated 50,000 visitors. In short, our existing hotel stock needs to be doubled in the next three years to meet surging demand.

To meet this need, the government has since 2006 offered 25 hotel sites for sale. Of this, 10 sites valued at $2.4 billion million have been acquired by developers. In addition, 11 hotels have effectively changed hands. Total private hotel investments soared to over $1.3 billion. Another two hotels, Paramount Hotel and Mitre Hotel, are either under negotiation or waiting for a finalised offer.

About 53 per cent or nine out of the total 17 hotel properties (including government sites), were sold to international investment funds, foreign hoteliers and investors since 2006. In the recent Beach Road tender, US-based Elad Group and Dubai-based Istithmar are joining forces to develop a $2.7 billion integrated hotel, office and retail project. The strong interest from foreign investors shows their astute reading of the opportunities arising from the shortage of Singapore hotel rooms, as well as the potential of reaping higher yields from room-rate increases. It is this overwhelmingly positive outlook that is driving investors’ appetite.

In the first half of this year, the average occupancy rate (AOR) hit a high of 86 per cent with average room rates (ARR) reaching $189. STB recently announced that ARR had increased to $210 in June, the highest rate ever achieved. AOR in July hit 91 per cent, a whisker shy away of November 2006’s 13-month peak of 92 per cent. With the third and fourth quarters typically being the busy period for hoteliers, room charges and occupancy rates are likely to be maintained or surge further.

For 2008, we are projecting that AOR will test the 90 per cent level with ARR expected to grow by at least 15 per cent from current levels.

With higher occupancy and rising room rates, the burning question is: Can Singapore hotels maintain their competitiveness to continue attracting foreign visitors? The answer is a resounding yes, based on the following reasons.

Singapore ranks sixth out of 15 key Asian cities in terms of ARR, according to a recent Cushman & Wakefield survey. Tokyo has the distinction of having the highest room rates in Asia followed by Hong Kong.

The government has been releasing more three-star hotel sites as part of its strategy to have enough affordable class hotels. These hotels cater to budget-conscious tourists, predominantly from South-east Asia, China and India. The hotel sites on the government sale list tend to be located at the city fringe such as Alexandra Road and Bencoolen Street. The latter is where Accor’s Ibis three-star 538-room hotel will be built.

The opening of Changi Airport’s Terminal 3 in January next year is set to bring in a steady stream of foreign visitors. The new terminal is capable of handling up to 22 million passengers a year and some of the world’s largest aircraft.

Despite the US sub-prime lending setback, Singapore’s hospitality sector is experiencing one of its strongest recoveries in over a decade. The market is at the initial stages of takeoff as the high-impact tourism projects start to unveil from 2008. This is when the world’s tallest observatory, the Singapore Flyer and the F1 Grand Prix take centrestage in thrilling visitors from around the world.

A year later, all eyes will be on the opening of Marina Bay Sands, which will be the most expensive casino-cum-integrated resort ever built. In 2010, Universal Studios and Resorts World will open their doors to charm a global audience.

Some cities looking to break onto the world stage have looked to hosting mega catalytic events like the Olympic Games, which would instantly give them global city status. Singapore has its own booster in the high-impact tourism projects that will be ready between 2008 and 2010. These should collectively propel Singapore to a different league in the global travel and hospitality industry.

The writer is managing director, Cushman & Wakefield

Source : Business Times - 27 Sep 2007

Acquiring properties through an auction is not a taboo

Acquiring properties through an auction is not a taboo, says MARY SAI

WHEN one flips through the property classifieds these days, it not uncommon to see properties advertised for auction. It is also not uncommon for a prospective buyer to immediately get the impression that the property to be auctioned, or the owner, must have some problems, otherwise why auction?

This misconception stems mainly from the days when auctions were the main mode of sale for banks when they repossessed property from owners who defaulted in their loans. In the 1980s and 1990s, most of the property auctions were mortgagees’ auctions. So many people saw them as forced sales.

But today, in a bullish property market, auctioneers are seeing more owners choosing to auction their property. In this article, we try and dispel some of the misconceptions about auctioned property.

Myth No 1: Auctions are fire sales

Contrary to widespread belief, an auction can secure the best price through open competitive bidding. Even the courts recognise an auction sale as an appropriate way to sell a property under dispute. It is deemed that through competitive bidding, a fair open market value can be realised for the seller. An auction sale is not tantamount to a desperate sale. Although the auction sale can be organised within a fortnight, it does not mean that the vendor has to sell in a hurry at bargain basement prices! Similarly, in mortgagee auction sales the bank exercises due diligence and is guided by valuations when they sell repossessed properties. They are genuine sellers, not desperate sellers.

In a recent forced sale of a dilapidated two-storey building at 27 Onan Road, two auctions conducted failed to secure a buyer. However, instead of an expected fire sale in the third round of auction, the property went under the hammer for $610,000 - a whopping 36 per cent increase from the opening price of $450,000.

Another good example was a auction of a bungalow plot at 59 Goodman Road in January this year. Vigorous bidding from more than eight parties saw the property knocked down at a record price of $626 per sq ft while comparable sales then were transacted around $350-$400 psf. Similarly, the recent auction sale of bungalow plots at Sentosa Cove also saw benchmark prices established way above $1,000 psf for their 99-year leasehold titles.

Myth No 2: ‘Challenging’ properties are auctioned

Many people consider the auction route as the last resort for the sale of properties. It would be the mode of sale for ‘challenging’ properties - those with inauspicious numbers like 4, 14 or 44 or with irregularly-shaped sites.

Going through past auction data, we see no anecdotal evidence to show that auction properties carry more inauspicious house numbers or are of inferior quality. In the past year and a half, several investors have picked up gems like good class bungalows in Bukit Timah/Holland; heritage properties at Emerald Hill Road and shophouses fronting main roads like Serangoon Road, Geylang Road, South and North Bridge Roads. These properties have appreciated substantially, with some doubling from the time they were bought at auction.

Recently, there has been a trend of luxury properties put on the auction block, as well as those in developments with en bloc potential. Some of these include apartments in The Beaumont, Stevens Loft and Watten Estate Condo. Hence, there is no lack of quality properties to buy in the auction market.

Myth No 3: Auctioned properties bring bad luck

This superstitious belief can be traced to the days when auctions were mainly for banks’ foreclosed properties. People refrained from buying such properties as they feared they would suffer the same fate as the previous owners.

Today, this superstitious view is slowly disappearing with a younger generation of property buyers.

Again, not all auctioned properties are forced sales by banks as more owners are now choosing the auction route on their own accord. They see the many advantages of auction sale and want to leverage it in a bullish property market.

As a matter of fact, buyers who successfully bid for apartments at Leedon Heights, Tulip Gardens and Silver Towers are now laughing all the way to the bank as these developments have just been collectively sold. Good fortune was theirs as a result of their smart purchases at auctions.

Myth No 4: Hungry ghosts

The seventh lunar month has been traditionally the ‘Hungry Ghost Festival’ - an inauspicious period when buyers refrain from buying property. All the more so at auctions.

Generally, businessmen and property buyers who observe Chinese religious rituals during this period, would rather bid for goods that have been ceremoniously blessed by their gods which they believe will bring them good luck - items such as ‘black charcoal’, symbolic sculptures, etc.

However, in the past few years, many property buyers are breaking away from this trend and are buying properties during the Hungry Ghost month, even at auctions. In the latest auction on Aug 16, which fell on the third day of the Hungry Ghost month, a dilapidated two-storey conservation terrace house at Spottiswoode Park was aggressively bid for by six parties from an opening price of $680,00 to an eventual $1.36 million. That’s a 100 per cent increase! Two other properties were also sold at the same auction and these transactions defy the myth that property auctions are a ‘no-no’ during the Hungry Ghost Festival.


Auctions will go on, be it bullish or bearish markets. With technological advances, improvements such as electronic biddings may complement conventional auctions. At the same time, myths and misconceptions relating to property auctions will be erased over time as people become more familiar with this mode of sale. Having cleared the suspicions and doubts concerning auctions, buyers can safely head to the weekly property auctions and pick up some good buys.

The writer is Knight Frank’s auctions director

Source : Business Times - 27 Sep 2007

The combination of sand, sea and location have worked wonders for Sentosa Cove Pte Ltd (SCPL).

The combination of sand, sea and location have worked wonders for Sentosa Cove Pte Ltd (SCPL).

It has raised more than $3 billion selling land parcels in its namesake upscale waterfront housing district since late 2003, market watchers have calculated. And by the time SCPL finishes selling the last few land parcels that remain, the total takings are expected to go way over $4 billion.

By the time it is completed, Sentosa Cove will have about 2,500 homes.

The remaining 99-year leasehold plots that the master planner and developer of Sentosa Cove is now left with include four seafronting bungalow plots; the man-made Pearl Island which can be developed into 19 bungalows (this site is being relaunched today) and a plum condo site, dubbed The Pinnacle Collection at the entrance of Sentosa Cove’s marina basin.

The tender for The Pinnacle Collection was launched earlier this month and closes on Dec 12, with a reserve price set at $963.8 million or $1,600 per square foot per plot ratio. But most market watchers expect the winning bid to be much higher.

As for the 159,742.1 sq ft Pearl Island, CB Richard Ellis executive director Li Hiaw Ho expects it to draw bids of $800 to $900 psf of land area. This is about 30 to 46 per cent above the $617 psf that the next-door Sandy Island fetched during an expression of interest that closed in November last year.

Pearl Island was offered for sale during the same exercise but the site was not awarded by SCPL although it received offers above the reserve price.

Pearl Island, which can accommodate up to 19 luxury waterfront villas with private berths in their backyards, will not be sold to individual buyers seeking a plot. Instead, the entire land parcel must be bought at one go, presumably by developers. ‘This is an opportune time for developers to develop and offer luxury waterway villas in Sentosa Cove to satisfy the pent-up demand,’ said Ms Kemmy Tan, general manager of Sentosa Cove.

CBRE said that assuming land bids of $800-900 psf for Pearl Island, prices for the completed individual bungalow units will likely start from $8 million upwards.

Taking a more bullish view, Savills Singapore director of marketing and business development Ku Swee Yong predicts winning bids for Pearl Island will come in at $1,200 to $1,300 psf, reflecting absolute quantums of $191.7 million to $207.7 million.

The breakeven cost works out to about $13 million per bungalow. ‘This still leaves a profit margin for the developer. After all, the owner of a seafronting completed bungalow at Sentosa Cove with a 9,000 sq ft land area is said to be asking for close to $20 million,’ Mr Ku said.

The expression of interest for Pearl Island closes on October 25. Its award will be based solely on price.

SCPL yesterday also revealed that new benchmarks have been achieved for individual bungalow sites during an expression of interest that closed on Sept 4. A waterway plot fetched $1,247 psf of land area - a new high for such a site - while a fairway facing site achieved $1,527 psf, surpassing even the $1,473 psf that a seafronting bungalow site achieved during an expression of interest that closed in May this year.

Source : Business Times - 27 Sep 2007

A broadbased recovery in the housing market now looks imminent with some developers feeling confident enough to put in new benchmark bids for 99-year

THERE is a lot to smile about these days.

A broadbased recovery in the housing market now looks imminent with some developers feeling confident enough to put in new benchmark bids for 99-year suburban leasehold sites.

But HDB upgraders are finally making a comeback, bolstered no doubt by salary revisions in the civil service and mid-year bonuses.

Even the much-anticipated fallout from the United States sub-prime crisis and subsequent global credit crunch appears to have left the Singapore property market relatively unscathed. Not only have foreign institutional investors continued to pump money into the property sector, a new base of investors, most notably from the Middle East, are making their presence felt.

Of course, there is still a level of volatility in some segments. The high-end and luxury residential sector may see both foreign and local investors make more cautious decisions about buying into a segment that is already a little peakish.

Speculators, who have been driving up prices in the high-end and luxury segments, also appear to be beating a retreat, after considering the upsides in flipping properties no longer worth the risks.

Emerging markets are also looking like pretty safe bets though.

Few will have failed to notice that when the US sub-prime situation started to unravel in July and August, the China and India markets seemed impervious to its effects.

The growth story of both these powerhouses is well known, so much so that industrialists and developers alike are looking for new frontiers.

Vietnam is certainly a hot favourite now but closer home, Malaysia too holds many opportunities.

And if the Singapore market is anything to go by, the increasingly buoyant high-end sector in its capital city certainly bodes well for the rest of the real estate market.

Risk aversion may yet be the catch phrase of choice for the months ahead.

Not surprising then, financial analysts have come out in support of the mass market and the mid-cap developers most exposed to this segment.

Also looking relatively safe is the growing Singapore real estate investment trust (S-Reit) sector. The first Reit was listed in 2002 and, to date, there are 17 S-Reits with more expected to be listed here, giving even more depth to the market.

Source : Business Times - 27 Sep 2007

DESPITE the cooling off in the property market, there seems to be something of a rush to launch collective sale sites this week.

DESPITE the cooling off in the property market, there seems to be something of a rush to launch collective sale sites this week.

The latest offerings are Chateau Eliza at Mount Elizabeth, Toho Garden in Yio Chu Kang, Vista Park at South Buona Vista Road, and a stretch of 15 houses at Jalan Bunga Raya near Balestier Road.

Property consultants said there are a string of other collective sale cases where agents have either recently secured the minimum consent levels or are rushing to do so before new en bloc sale legislation kicks in early next month.

In some cases, agents have had to raise minimum reserve prices a little in the collective sales agreements to entice the last few owners to sign up.

However, in other instances, they have also managed to persuade owners to set more realistic expectations, pointing to the perils of not achieving the minimum consent levels before the new rules are in force. The various processes and safeguards entailed in the new rules are expected to lengthen the time taken to get collective sale sites ready for launch, market watchers said.

CB Richard Ellis executive director Jeremy Lake said the US sub-prime mortgage woes in the past four to six weeks have also served to add a dose of realism to owners’ price expectations, helping to expedite securing minimum consent levels in some instances.

‘Prior to that, it seemed like a never-ending party,’ he said.

DTZ Debenham Tie Leung director (investment advisory services) Shaun Poh said: ‘I would say that in 50 per cent of our cases, we’ve had to up the reserve prices a bit to get the last few owners to sign up. But we’re also trying to ensure owners’ pricing expectations are realistic.’

In the remaining cases, Mr Poh did not have to raise minimum prices but persuaded owners to be more realistic and sign up.

‘Our advice to clients is: Let’s lock in the 80 per cent consent level first, before the new laws take effect. We can then watch the market and see how new residential property launches in the location fare before deciding whether to launch the tender for our en bloc sites,’ Mr Poh said.

Chateau Eliza at Mount Elizabeth has an indicative price of about $115 million to $120 million, which works out to $2,130 to $2,222 psf per plot ratio (psf ppr). No development charge (DC) is payable.

In July, the site was launched through an expression of interest before the minimum consent level had been secured, with an indicative price of $120 million.

Marketing agent Credo Real Estate is now launching a tender for Chateau Eliza as it has secured consent for a collective sale from owners controlling more than 80 per cent of share values. The freehold site has a land area of 17,997 sq ft and can have a maximum gross floor area of nearly 54,000 sq ft, based on preliminary checks.

Over in South Buona Vista, Newman & Goh is launching the tender for Vista Park, which stands on a site with a remaining lease of about 71 years. Owners are looking at about $265.7 million, which reflects a unit land price of about $680 psf ppr, inclusive of an estimated $37.3 million payable for upgrading the site’s lease to 99 years. No DC is payable.

Newman & Goh is also offering the freehold Toho Garden at Yio Chu Kang Road with an 86,881 sq ft site area through a tender. Its owners are seeking $60.8 million, which works out to $580 psf ppr including an estimated $9.7 million DC. Both Vista Park and Toho Garden have a 1.4 plot ratio (ratio of maximum gross floor area to land area).

DTZ has also launched the tender for Nos 1-15 Jalan Bunga Raya, with a freehold land area of 24,058 sq ft. Access to the terrace houses is by a road which can be alienated by the state for about $7 million, boosting the total land area to about 32,978 sq ft, according to DTZ.

A DC of $263,000 is also payable. The $66 million to $67 million price expected by owners reflects an all-in unit land price of about $800 psf ppr. The site is designated for 2.8 plot ratio.

Meanwhile, Jones Lang LaSalle yesterday launched the tender for a 28,798 sq ft freehold residential site with a 2.8 plot ratio at River Valley Road for sale by tender. It did not indicate price expectations in its release.

Source : Business Times - 27 Sep 2007