IT HAS remained silent — and passive — in the protracted saga over the proposed sale of Gillman Heights (picture) to developer CapitaLand for $528 million.
But now, the National University of Singapore (NUS) finds fingers pointing at it after the Strata Titles Board (STB) approved the deal on Friday.
The biggest faction opposed to the deal, comprising 53 of the 76 minority owners, told Today they would appeal against the STB’s decision, and chief among their grouses is the NUS’ role in the en bloc process.
The university owns almost half of the estate’s 608 units, which it rents out to its academic staff.
Said one minority owner: “We are very unhappy and very disappointed with the result. NUS was pressurised by the majority owners to agree to the en bloc sale.”
In its grounds of decision, the STB said that it was “very mindful” that the NUS was the single majority owner.
Throughout the sale, the NUS stuck to its original position that it would not take part in the proceedings other than agreeing to abide by the majority decision of the remaining owners, the STB noted. It also ruled that the majority owners had “acted properly” in dealing with the NUS.
However, even after the ruling, some of the minority owners insisted that the NUS should not have followed the decision to sell, based on a simple majority. Instead, it should only do so when at least 80 per cent of the remaining owners agreed to the sale, they argued.
Today understands that the NUS signed the Collective Sale Agreement in June last year, after some 70 per cent of the remaining owners did so.
The university could not be reached for comment at press time.
But Lee & Lee senior partner Quek Mong Hua, who represented the majority owners, said: “There’s no reason why NUS should not support the en bloc sale when a big majority of the other owners want the deal.”
The STB also had strong words for one of the valuation reports — prepared by a former chief valuer for Overseas Union Bank, Mr Yick Keng Hang — put up by the minority owners. The report revised the value of Gillman Heights from $580 million to $660 million within seven months.
The board, which rejected Mr Yick’s evidence, said in its ruling: “Yick had shown himself to be given to hyperbole. A review of his evidence would show that he was shifty and self-serving whenever it suited him.”
Launched in February last year, the en bloc sale process — which eventually garnered 86.7-per-cent consent — has been dogged by several controversies, including a dispute over the level of consent needed for the sale to go through.
Barring any appeal, the sale committee has three months to complete the deal.
Sale committee chairman Robert Wiener was “relieved” at the decision.
But he added: “Obviously, we would be happier if we could get our money earlier, what with property prices going through the roof.”
Source : Today Weekend - 22 Dec 2007
Sunday, December 23, 2007
Retail rents are expected to rise
As far as retail space is concerned, the weakening market sentiment now grabbing the headlines might well belong to another planet. Retail rents are expected to rise next year - especially in prime areas such as Orchard Road - fuelled by strong demand and limited prime space.
Jones Lang LaSalle (JLL) expects rents to rise between 4.5 and 4.8 per cent in the Orchard area, while CB Richard Ellis (CBRE) is forecasting an increase of 4-8 per cent. And rents at suburban malls could go up 2-5 per cent in 2008, says CBRE.
In Q3 2007, the Orchard area achieved about $40 to $41 per square foot (psf) per month, according to JLL. And for the same quarter, retail rents increased 3.3-3.5 per cent year on year.
With occupancy rates around 95-98 per cent in Orchard Road malls, demand is clearly alive and well.
But Pua Seck Guan, CEO of CapitaLand Retail, CapitaMall Trust Management and CapitaLand Financial, is quick to point out that any increase in rent has to be relative to increases in retailers’ takings, so as to ensure sustainable growth.
‘Sales this year, over last year, are 5-7 per cent higher due to the economy and sales productivity,’ he says. ‘Customer traffic has seen a 27 per cent increase over the past four to five years. This outweighs the rent increases.’
According to him, rent renewal rates this year are 12 per cent higher than the expired rent, which he deems reasonable owing to GDP growth and rising inflation. ‘Moving forward, we expect to see an 8-12 per cent increase over the next two to three years,’ he told BT. The leases are generally three years for specialty stores.
While the injection of new retail space next year will help pace retail rents, take-up is expected to increase with the new supply. CBRE puts new supply for 2008 at 2.57 million sq ft, thanks to upcoming shopping malls such as ION Orchard, Orchard Central and West Coast Plaza.
Consumer spending has been on the rise. According to Citibank economist, Zheng Kit Wei, private consumption rose 4.5 per cent in the first three quarters of this year, which is substantially higher than the 2.5 per cent increase last year. Retail sales are expected to remain robust in the high single digits.
‘The unemployment rate has fallen to a 10-year low of 1.7 per cent,’ says Mr Zheng. ‘Wages have risen almost 7 per cent in the first three quarters of the year, nearly double the 3.2 per cent increase last year. This has put more cash into consumers’ pockets and given them greater confidence to spend more.’
Mavis Seow, executive director of retail services for CBRE, says retail sales to date this year total $23.8 billion on the back of the hot property market, optimistic economic outlook and steady stream of tourist arrivals.
And with the launch of the Singapore Flyer and the inaugural Formula One night race next year, as well as the upcoming integrated resorts, sales are expected to keep going strong, if not improve, says Chua Yang Liang, head of research (South East Asia) for JLL.
Retailers, too, are expecting cash registers to ring into the New Year, thanks to the festive season and fat bonuses. Tan Yew Kiat, general manager of homegrown fashion label bYSI, is forecasting a sales increase about 25-30 per cent this Christmas.
bYSI, for one, plans to capitalise on the additional supply of space by launching a flagship store when Orchard Turn opens in October next year.
As for shoppers, they can look forward to new concept stores, flagship stores and new entrants to the market. This year has seen a lot of demand from retailers in terms of new brands compared with last year, says CapitaLand’s Mr Pua, who cites examples such as Cortefiel as well as new stand-alone stores like Kate Spade and Agnes B.
‘Fashion is on its way up, although I think there’s still strong growth for jewellery and watches and even healthcare and beauty products,’ he reckons. ‘This year has been particularly encouraging across the board.’
Source : Business Times - 22 Dec 2007
Jones Lang LaSalle (JLL) expects rents to rise between 4.5 and 4.8 per cent in the Orchard area, while CB Richard Ellis (CBRE) is forecasting an increase of 4-8 per cent. And rents at suburban malls could go up 2-5 per cent in 2008, says CBRE.
In Q3 2007, the Orchard area achieved about $40 to $41 per square foot (psf) per month, according to JLL. And for the same quarter, retail rents increased 3.3-3.5 per cent year on year.
With occupancy rates around 95-98 per cent in Orchard Road malls, demand is clearly alive and well.
But Pua Seck Guan, CEO of CapitaLand Retail, CapitaMall Trust Management and CapitaLand Financial, is quick to point out that any increase in rent has to be relative to increases in retailers’ takings, so as to ensure sustainable growth.
‘Sales this year, over last year, are 5-7 per cent higher due to the economy and sales productivity,’ he says. ‘Customer traffic has seen a 27 per cent increase over the past four to five years. This outweighs the rent increases.’
According to him, rent renewal rates this year are 12 per cent higher than the expired rent, which he deems reasonable owing to GDP growth and rising inflation. ‘Moving forward, we expect to see an 8-12 per cent increase over the next two to three years,’ he told BT. The leases are generally three years for specialty stores.
While the injection of new retail space next year will help pace retail rents, take-up is expected to increase with the new supply. CBRE puts new supply for 2008 at 2.57 million sq ft, thanks to upcoming shopping malls such as ION Orchard, Orchard Central and West Coast Plaza.
Consumer spending has been on the rise. According to Citibank economist, Zheng Kit Wei, private consumption rose 4.5 per cent in the first three quarters of this year, which is substantially higher than the 2.5 per cent increase last year. Retail sales are expected to remain robust in the high single digits.
‘The unemployment rate has fallen to a 10-year low of 1.7 per cent,’ says Mr Zheng. ‘Wages have risen almost 7 per cent in the first three quarters of the year, nearly double the 3.2 per cent increase last year. This has put more cash into consumers’ pockets and given them greater confidence to spend more.’
Mavis Seow, executive director of retail services for CBRE, says retail sales to date this year total $23.8 billion on the back of the hot property market, optimistic economic outlook and steady stream of tourist arrivals.
And with the launch of the Singapore Flyer and the inaugural Formula One night race next year, as well as the upcoming integrated resorts, sales are expected to keep going strong, if not improve, says Chua Yang Liang, head of research (South East Asia) for JLL.
Retailers, too, are expecting cash registers to ring into the New Year, thanks to the festive season and fat bonuses. Tan Yew Kiat, general manager of homegrown fashion label bYSI, is forecasting a sales increase about 25-30 per cent this Christmas.
bYSI, for one, plans to capitalise on the additional supply of space by launching a flagship store when Orchard Turn opens in October next year.
As for shoppers, they can look forward to new concept stores, flagship stores and new entrants to the market. This year has seen a lot of demand from retailers in terms of new brands compared with last year, says CapitaLand’s Mr Pua, who cites examples such as Cortefiel as well as new stand-alone stores like Kate Spade and Agnes B.
‘Fashion is on its way up, although I think there’s still strong growth for jewellery and watches and even healthcare and beauty products,’ he reckons. ‘This year has been particularly encouraging across the board.’
Source : Business Times - 22 Dec 2007
United States economy is unlikely to slip into recession
The United States economy is unlikely to slip into recession, Abby Joseph Cohen, chief investment strategist at Goldman Sachs, said in remarks published yesterday.
‘That does not mean that the probability of a recession is zero. We just think that a slowing in growth is more likely than a recession,’ Ms Cohen told Germany’s Sueddeutsche Zeitung newspaper.
‘The Federal Reserve has shown in recent weeks that it is paying attention and that it wants to boost people’s confidence,’ she added.
While there was weakness in US housing construction and some areas of private consumption, this would be offset by export growth and corporate investment, she said. Goldman expected US economic growth of 1.8 per cent next year, weaker than other institutions are predicting, she said, adding that the bank nonetheless viewed shares as undervalued.
Some finance companies would report terrible earnings figures for the fourth quarter but Goldman still expected single digit profit growth for next year overall.
The ‘fair value’ for the Standard & Poors 500 Index of top US companies for the end of 2008 was 1,675 points, up from around 1,460 now, Ms Cohen said.
The Dow Jones industrial average would be around 14,750 at the end of next year, compared with just over 13,000 now, she estimated.
Ms Cohen told the paper that the trend in US inflation would remain moderate. Central banks did not have to worry about wage increases and could concentrate on the current problems on financial markets.
‘It’s true that over the past week there was some confusion among investors over the Fed’s communication but you have to look to the longer term,’ she said.
‘The decisive factor is that central banks have acted in close cooperation and that is an enormously important signal to the markets as to the availability of liquidity. I am increasingly optimistic: when we are into 2008 everyone will see that the central banks did the right thing.’ - Reuters
Source : Business Times - 22 Dec 2007
‘That does not mean that the probability of a recession is zero. We just think that a slowing in growth is more likely than a recession,’ Ms Cohen told Germany’s Sueddeutsche Zeitung newspaper.
‘The Federal Reserve has shown in recent weeks that it is paying attention and that it wants to boost people’s confidence,’ she added.
While there was weakness in US housing construction and some areas of private consumption, this would be offset by export growth and corporate investment, she said. Goldman expected US economic growth of 1.8 per cent next year, weaker than other institutions are predicting, she said, adding that the bank nonetheless viewed shares as undervalued.
Some finance companies would report terrible earnings figures for the fourth quarter but Goldman still expected single digit profit growth for next year overall.
The ‘fair value’ for the Standard & Poors 500 Index of top US companies for the end of 2008 was 1,675 points, up from around 1,460 now, Ms Cohen said.
The Dow Jones industrial average would be around 14,750 at the end of next year, compared with just over 13,000 now, she estimated.
Ms Cohen told the paper that the trend in US inflation would remain moderate. Central banks did not have to worry about wage increases and could concentrate on the current problems on financial markets.
‘It’s true that over the past week there was some confusion among investors over the Fed’s communication but you have to look to the longer term,’ she said.
‘The decisive factor is that central banks have acted in close cooperation and that is an enormously important signal to the markets as to the availability of liquidity. I am increasingly optimistic: when we are into 2008 everyone will see that the central banks did the right thing.’ - Reuters
Source : Business Times - 22 Dec 2007
SOARING office rents
SOARING office rents have forced the Shenton Medical Group clinic out of its Republic Plaza location to a cheaper space at an older building nearby - The Arcade.
The company had been paying $5 plus per sq ft (psf) since 2002-2003 but was stunned with a demand for about $18 psf in the middle of the year, when lease renewal talks started.
Dr Lee Hong Huei, deputy president, Singapore operations division of ParkwayHealth, said the massive rise was a major factor in the firm’s decision to move.
‘We felt that it was a bit difficult to pass on the costs to our clients,’ he said.
It is becoming a familiar story around town with companies caught between a space crunch and relentless rent rises.
Parkway’s new clinic will open in January and take up a similar amount of space on part of The Arcade’s 18th floor and all of the 19th floor.
While The Arcade is in the prime Raffles Place area, it is not a new or top-grade building. Republic Plaza, on the other hand, is among the most coveted addresses in the area.
Asking rents at the City Developments-owned building have climbed to a whopping $19.80 psf amid the supply squeeze.
Monthly asking rents for prime office spaces in the Central Business District now average $16.30 psf, according to property consultancy Cushman & Wakefield.
This is up 4.5 per cent from last month and an eye-watering 285 per cent increase from the market bottom about three years ago.
Even in the shopping belt of Orchard and Scotts Roads, prime office rents have risen to $13.61 psf, up 8 per cent from last month and nearly 102 per cent from a year ago, said Cushman & Wakefield.
‘Almost all our facilities have experienced rents rising at 30 to 40 per cent on average, except for the 300 per cent jump at Republic Plaza,’ said Shenton’s Dr Lee.
‘Medicine costs have also gone up, so our margins are very thin.’
The increase in prime office rents this year has been rapid.
Last month, net rents for the top 25 grade A office buildings were at a record $16.02 psf a month on average from $15.54 in October.
To manage the supply squeeze, the Government has released transitional office sites for short-term lease and more office sites for sale.
But a new building on a sale site may not come in time to meet current demand.
The buildings on sites sold recently in Tanjong Pagar and Marina View are expected to come on stream only around late 2010 to 2011, said Cushman & Wakefield managing director Donald Han.
There are also concerns of an oversupply from 2010, when a large amount of space in the Marina Bay Financial Centre becomes available.
Nevertheless, space remains tight for now.
Next year, just about 1.35 million sq ft of space will come on stream, with less than half a million sq ft in prime areas such as VisionCrest in the Oxley area near Orchard Road, said Mr Han, but historical office demand is at two million sq ft a year.
‘The upswing in rents will continue next year, but the pace of acceleration will slow as we are already moving to a high base,’ he said.
There is also increasing resistance, as companies move to cheaper space in alternative or suburban locations.
Mr Han forecasts a rise of 20 per cent to 25 per cent in office rents for next year.
Source : Straits Times - 22 Dec 2007
The company had been paying $5 plus per sq ft (psf) since 2002-2003 but was stunned with a demand for about $18 psf in the middle of the year, when lease renewal talks started.
Dr Lee Hong Huei, deputy president, Singapore operations division of ParkwayHealth, said the massive rise was a major factor in the firm’s decision to move.
‘We felt that it was a bit difficult to pass on the costs to our clients,’ he said.
It is becoming a familiar story around town with companies caught between a space crunch and relentless rent rises.
Parkway’s new clinic will open in January and take up a similar amount of space on part of The Arcade’s 18th floor and all of the 19th floor.
While The Arcade is in the prime Raffles Place area, it is not a new or top-grade building. Republic Plaza, on the other hand, is among the most coveted addresses in the area.
Asking rents at the City Developments-owned building have climbed to a whopping $19.80 psf amid the supply squeeze.
Monthly asking rents for prime office spaces in the Central Business District now average $16.30 psf, according to property consultancy Cushman & Wakefield.
This is up 4.5 per cent from last month and an eye-watering 285 per cent increase from the market bottom about three years ago.
Even in the shopping belt of Orchard and Scotts Roads, prime office rents have risen to $13.61 psf, up 8 per cent from last month and nearly 102 per cent from a year ago, said Cushman & Wakefield.
‘Almost all our facilities have experienced rents rising at 30 to 40 per cent on average, except for the 300 per cent jump at Republic Plaza,’ said Shenton’s Dr Lee.
‘Medicine costs have also gone up, so our margins are very thin.’
The increase in prime office rents this year has been rapid.
Last month, net rents for the top 25 grade A office buildings were at a record $16.02 psf a month on average from $15.54 in October.
To manage the supply squeeze, the Government has released transitional office sites for short-term lease and more office sites for sale.
But a new building on a sale site may not come in time to meet current demand.
The buildings on sites sold recently in Tanjong Pagar and Marina View are expected to come on stream only around late 2010 to 2011, said Cushman & Wakefield managing director Donald Han.
There are also concerns of an oversupply from 2010, when a large amount of space in the Marina Bay Financial Centre becomes available.
Nevertheless, space remains tight for now.
Next year, just about 1.35 million sq ft of space will come on stream, with less than half a million sq ft in prime areas such as VisionCrest in the Oxley area near Orchard Road, said Mr Han, but historical office demand is at two million sq ft a year.
‘The upswing in rents will continue next year, but the pace of acceleration will slow as we are already moving to a high base,’ he said.
There is also increasing resistance, as companies move to cheaper space in alternative or suburban locations.
Mr Han forecasts a rise of 20 per cent to 25 per cent in office rents for next year.
Source : Straits Times - 22 Dec 2007
Gillman Heights
CAPITALAND and Hotel Properties Ltd (HPL) separately said yesterday that the Strata Titles Board (STB) had given the green light for the en bloc sale of Gillman Heights Condominium. Both cited notification by the vendors’ solicitors that approval was given yesterday.
Gillman Heights was sold in February for $548 million, or $19 million above the property’s reserve price, to a joint venture formed by CapitaLand, HPL subsidiary HPL Orchard Place Pte Ltd, and two private funds.
Gillman Heights, on Alexandra Road, covers an area of 836,432 square feet and is a 99-year leasehold site. It has a 2.1 plot ratio.
CapitaLand plans to turn the site into a distinctive residential landmark, with about 1,200 homes.
Earlier this month, the much publicised Horizon Towers’ en bloc sale was finally approved by STB, after several stops and starts along the way. The delay stemmed from various owners being dissatisfied with the $500 million sale price as the property market began to flourish and property prices started to appreciate steeply, shortly after the sale.
The buyers for the property are HPL and partners Morgan Stanley Real Estate and Qatar Investment Authority.
Another major en bloc sale that was approved this month was that of Farrer Court. In June, a consortium - comprising CapitaLand, HPL and US-based Wachovia Development Corporation - purchased Farrer Court for the massive sum of around $1.34 billion, the biggest amount ever garnered for a collective sale.
The privatised HUDC estate has 618 existing apartments of two sizes - 1,615 square feet and 1,453 square feet. A 36-storey condominium with about 1,500 apartments will be built and it is expected to be launched in the first half of 2009.
Source : Business Times - 22 Dec 2007
Gillman Heights was sold in February for $548 million, or $19 million above the property’s reserve price, to a joint venture formed by CapitaLand, HPL subsidiary HPL Orchard Place Pte Ltd, and two private funds.
Gillman Heights, on Alexandra Road, covers an area of 836,432 square feet and is a 99-year leasehold site. It has a 2.1 plot ratio.
CapitaLand plans to turn the site into a distinctive residential landmark, with about 1,200 homes.
Earlier this month, the much publicised Horizon Towers’ en bloc sale was finally approved by STB, after several stops and starts along the way. The delay stemmed from various owners being dissatisfied with the $500 million sale price as the property market began to flourish and property prices started to appreciate steeply, shortly after the sale.
The buyers for the property are HPL and partners Morgan Stanley Real Estate and Qatar Investment Authority.
Another major en bloc sale that was approved this month was that of Farrer Court. In June, a consortium - comprising CapitaLand, HPL and US-based Wachovia Development Corporation - purchased Farrer Court for the massive sum of around $1.34 billion, the biggest amount ever garnered for a collective sale.
The privatised HUDC estate has 618 existing apartments of two sizes - 1,615 square feet and 1,453 square feet. A 36-storey condominium with about 1,500 apartments will be built and it is expected to be launched in the first half of 2009.
Source : Business Times - 22 Dec 2007
CAPITALAND shares have endured a turbulent journey
CAPITALAND shares have endured a turbulent journey of late, and this week was no different.
The property stock plunged from $7.05 on Tuesday last week to as low as $5.85 during intra-day trade this week amid heavy volume.
Unlike in the previous week, when the daily volume never exceeded 17 million units, the daily volume remained above 21 million this week.
The stock closed five cents up at $6.15 yesterday - down 45 cents for the week.
Real estate investment trusts, or Reits, associated with CapitaLand also went south this week.
CapitaMall Trust fell to as low as $3.10 on Tuesday before it rebounded to end flat for the week at $3.30, while CapitaCommercial Trust dropped seven cents to $2.36.
Shares of CapitaLand were worst-hit on Monday, when they fell 50 cents to $6.10 - their lowest close so far this year.
Strong selling pressure triggered by an 11 per cent fall in Australia’s property trust index caused that day’s plunge.
That came amid news that Centro Properties, an Australian property trust that owns 700 United States shopping malls, had problems refinancing its debts.
Centro shares plunged 76 per cent on Monday after the firm said it was struggling to refinance $1A.3 billion ($1S.9 billion) worth of maturing debts because of the collapse in the US sub-prime housing market.
There are, however, signs that the worst might be over for CapitaLand.
An AmFraser Securities report on Tuesday said: ‘These two days could well mark the selling climax for CapitaLand, which lost 17 per cent in the past week, falling from $7.05 to a new 2007 low of $5.85 today.’
That seems true, with the shares staying above $6 since Tuesday.
In a show of confidence, UBS maintained its ‘buy’ call, while keeping its target price of $10.60 that same day.
A UBS report says CapitaLand still enjoys strong access to capital. It also doubts whether the property firm will face the same debt problems as Centro since ‘it has not overextended itself’.
But OCBC Investment Research kept its ‘hold’ rating, while slashing its price forecast from $7.83 to $6.94.
It noted: ‘As for its recent results, though headline numbers were strong, this was due mainly to one-off items.
‘Excluding these one-off items, we estimate that its profit after tax and minority interests would have been more modest at about $34 million.’
Source : Straits Times - 22 Dec 2007
The property stock plunged from $7.05 on Tuesday last week to as low as $5.85 during intra-day trade this week amid heavy volume.
Unlike in the previous week, when the daily volume never exceeded 17 million units, the daily volume remained above 21 million this week.
The stock closed five cents up at $6.15 yesterday - down 45 cents for the week.
Real estate investment trusts, or Reits, associated with CapitaLand also went south this week.
CapitaMall Trust fell to as low as $3.10 on Tuesday before it rebounded to end flat for the week at $3.30, while CapitaCommercial Trust dropped seven cents to $2.36.
Shares of CapitaLand were worst-hit on Monday, when they fell 50 cents to $6.10 - their lowest close so far this year.
Strong selling pressure triggered by an 11 per cent fall in Australia’s property trust index caused that day’s plunge.
That came amid news that Centro Properties, an Australian property trust that owns 700 United States shopping malls, had problems refinancing its debts.
Centro shares plunged 76 per cent on Monday after the firm said it was struggling to refinance $1A.3 billion ($1S.9 billion) worth of maturing debts because of the collapse in the US sub-prime housing market.
There are, however, signs that the worst might be over for CapitaLand.
An AmFraser Securities report on Tuesday said: ‘These two days could well mark the selling climax for CapitaLand, which lost 17 per cent in the past week, falling from $7.05 to a new 2007 low of $5.85 today.’
That seems true, with the shares staying above $6 since Tuesday.
In a show of confidence, UBS maintained its ‘buy’ call, while keeping its target price of $10.60 that same day.
A UBS report says CapitaLand still enjoys strong access to capital. It also doubts whether the property firm will face the same debt problems as Centro since ‘it has not overextended itself’.
But OCBC Investment Research kept its ‘hold’ rating, while slashing its price forecast from $7.83 to $6.94.
It noted: ‘As for its recent results, though headline numbers were strong, this was due mainly to one-off items.
‘Excluding these one-off items, we estimate that its profit after tax and minority interests would have been more modest at about $34 million.’
Source : Straits Times - 22 Dec 2007
Don’t just leave it to your lawyers and agents. Let’s go through six legal aspects of buying property.
Don’t just leave it to your lawyers and agents. Let’s go through six legal aspects of buying property. Tan Hui Yee
Figuring out your options
THE option to purchase is the right to buy a property at a specified price within a specified period of time.
To secure this, the buyer must pay an option or booking fee to the property’s developer. This usually amounts to 5 to 10 per cent of the purchase price for private homes.If a buyer is granted an option to purchase, the developer has to deliver to the buyer or his lawyer the sale and purchase agreement and title deed within 14 days. The option is valid for three weeks from the date of delivery of these documents.
To exercise the option, the buyer must sign the sale and purchase agreement, and pay the balance of the down payment.
The usual down payment for private homes - comprising the option fee and option exercise fee - is 20 per cent of the purchase price.
If the buyer does not exercise his option, he loses 25 per cent of his option fee.
The developer can sell the property to another party after he refunds to the first buyer 75 per cent of the option fee.
Those buying resale Housing Board flats will use a standard option to purchase form issued by the HDB.
The buyer in this case gets 14 days to consider his purchase after paying the seller a non-refundable option fee of up to $1,000.
This fee is forfeited if the buyer decides not to go ahead with the purchase.
If he does decide to go ahead with the purchase, he signs the same form and pays another fee to the seller to exercise the option. This option exercise fee, together with the option fee, cannot exceed $5,000.
If the buyer abandons the purchase after exercising his option, the owner of the flat can claim damages against him.
Lawyers’ role
LAWYERS play a key role in the homebuying process, and they come into the picture once the buyer decides on a property.
A conveyancing lawyer is responsible for doing all the relevant searches on the title deed to a property, to ensure that the seller does not owe any debt to the Government.
Such debts could range from unpaid property tax to money that is owed to the Government over road improvement works nearby, said the head of conveyancing at Lawhub, Ms Winnie Tan.
The lawyer also needs to check to see if there is a road reserve on the property, which would allow part of the property to be acquired by the Government in the future for roads to be built.
This is important as it may affect the value of the property, which may in turn reduce the loan amount you can get to finance it.
If a buyer is taking out a bank loan, the lawyer has to ensure that the relevant documents are ready.
Usually, said Ms Tan, a lawyer is hired after the buyer puts down an option fee or booking fee for the property.
She suggests that buyers could look for a lawyer even before that stage, if they want to avoid forfeiting the option fee should the property turn out to have problems and they have to let the option lapse.
The lawyer’s role ends when the title deed is handed over to the buyer.
For uncompleted properties, this could take up to three years. Resale transactions, however, are usually completed within three or four months.
Ms Tan estimates that the legal fees for a typical home costing not more than $1 million, and paid for with Central Provident Fund savings and bank loans, will range from $2,500 to $3,000.
This does not include the $800 to $1,000 usually charged for searches on the property and other associated costs.
Fees and taxes
THERE are various charges you need to take note of when buying property: property tax, stamp duty and agents’ commissions.
Commission structures are not fixed under the law, though there are market norms for the different segments such as private homes and resale Housing Board flats.
Buyers of private homes typically do not pay anything to agents, as the agents collect a 2 per cent commission from the sellers.
Buyers of resale HDB flats, however, are charged a 1 per cent commission if they hire the agent. Most sellers’ agents also charge buyers a 1 per cent fee if they are not represented by a broker.
This practice has been called into question by the Consumers Association of Singapore because of a possible conflict of interests.
Many agents for sellers, however, refuse to show a flat to independent buyers unless a fee is promised. They argue that an independent buyer would have a higher chance of tripping up in a transaction if he did not have the help of a broker.
Buyers also need to take note of the stamp duty. This is a tax on commercial and legal documents that record and give effect to certain transactions. The duty is payable even if the transaction is aborted.
The stamp duty for the purchase of property is calculated at 1 per cent of the first $180,000 of the purchase price or market value of the unit, whichever is higher.
The rate goes up to 2 per cent for the next $180,000, and 3 per cent for the remainder if the value exceeds $360,000.
Finally, the buyer has to remember the property tax payable for his new home. This is calculated based on the annual value of his home, which is the estimated annual rent it can fetch if it is let out.
This amount, which excludes the rent for furniture and fittings, is determined by analysing rents for comparable buildings and other data, so it changes with market trends.
The property tax on owner-occupied homes is charged at 4 per cent of the annual value. This concession is applicable to only one property at any one time.
If the property is not owner-occupied, the tax rate is 10 per cent of the property’s annual value.
This year’s Budget included a one-off property tax rebate of up to$100 per year for 2008 as well as 2009. The rebates apply to owner-occupied residential properties.
If you are not Singaporean…
FOREIGNERS can buy condominiums and private apartments in buildings that have six or more storeys, but face restrictions in buying landed homes.
To buy landed property, they need to submit an application to the Government.
They will get the go-ahead only if they are deemed to have made a significant economic contribution to Singapore.
Those buying plots of land in Sentosa Cove, however, were recently allowed to submit a shorter application form and granted fast-track approval.
For public housing, only foreigners who are permanent residents (PRs) may apply for a new flat directly from the Housing Board (HDB) but they have to do this with their Singaporean spouse, child or parent.
PRs are free to buy resale HDB flats on the open market.
Those who choose to buy an HDB flat need to be aware of the Board’s ethnic integration policy. This limits the proportion of each ethnic group represented within a block and precinct, to encourage various groups to interact with each other on a daily basis.
If the limit has been reached for a particular area, the owner can sell his flat only to someone of the same ethnic group as him.
Meanwhile, executive condominiums are available to foreigners after 10 years.
These developments usually have the same facilities as condominiums, such as swimming pools and gymnasiums. PRs may buy a new executive condominium with their Singaporean spouse, child or parent.
Insuring your home adequately
BUYING a home is a major purchase for many people.
To make sure that things don’t go wrong after your major purchase, you may want to insure your home.
Apart from the standard fire policy that covers losses caused by fire, lightning and explosion, you can also take a home insurance policy that covers destruction to a building, home contents and any renovations carried out.
If your property is mortgaged, the mortgagee will require you to have a fire insurance policy on the outstanding loan amount.
When taking out home insurance, make sure that the sum insured is adequate.
The sum should reflect the total cost of rebuilding or reinstating your insured property to its original state, plus professional fees and the cost for removal of debris, says the General Insurance Association of Singapore.
Market value is normally not used as the sum insured.
To estimate replacement cost, you need to know your property’s gross floor area.
As a rough guide, the replacement cost of a medium-quality condominium could fall between $137 per sq ft (psf) and $182 psf, while that for landed cluster housing could range between $152 psf and $182 psf.
You should note that the total claim amount is limited to the total cost of the property or reinstatement.
Valuation matters
A PROPERTY’S valuation determines how much a buyer can borrow to pay for it.
Banks can grant a loan of up to 90 per cent of a home’s purchase price, or valuation, whichever is lower.
This means that if the price of a property exceeds its valuation, the buyer has to come up with cash to cover the shortfall.
A buyer can get an indicative valuation for a property before committing to the purchase. This does not involve a detailed inspection.
The bank’s offer is subject to the formal valuation confirming the indicative valuation. This figure is usually derived from the bank’s own panel of private valuers.
When valuing a property, these professionals consider the current value of comparable projects in the area. Other factors taken into account include the property’s location, size, layout, age and condition, as well as its orientation.
Valuers usually take about two to three weeks to complete the assessment.
Mr Eugene Tham, a director of property consultancy Chesterton International, estimates it would cost about $400 to $500 to value a home worth about $1 million.
For resale Housing Board flats, buyers need only to submit a request for a valuation report, which would cost about $200 for three-room or larger flats. The HDB will then randomly assign a private valuer to assess the property.
About two years ago, it was common for buyers and sellers to inflate the price of the flat so the buyer could get a bigger housing loan than he would otherwise be allowed. Such illegal “cashback” arrangements were supported by inflated valuations from the colluding valuers.
The Government, however, clamped down on this practice in 2005, by requiring flat purchases involving withdrawal of Central Provident Fund savings to be supported by valuations carried out through the HDB system.
Such cashback arrangements largely fizzled out after the curbs. Those caught can be fined $5,000 and jailed for six months for giving false information to the HDB.
Source : Sunday Times - 18 Nov 2007
Figuring out your options
THE option to purchase is the right to buy a property at a specified price within a specified period of time.
To secure this, the buyer must pay an option or booking fee to the property’s developer. This usually amounts to 5 to 10 per cent of the purchase price for private homes.If a buyer is granted an option to purchase, the developer has to deliver to the buyer or his lawyer the sale and purchase agreement and title deed within 14 days. The option is valid for three weeks from the date of delivery of these documents.
To exercise the option, the buyer must sign the sale and purchase agreement, and pay the balance of the down payment.
The usual down payment for private homes - comprising the option fee and option exercise fee - is 20 per cent of the purchase price.
If the buyer does not exercise his option, he loses 25 per cent of his option fee.
The developer can sell the property to another party after he refunds to the first buyer 75 per cent of the option fee.
Those buying resale Housing Board flats will use a standard option to purchase form issued by the HDB.
The buyer in this case gets 14 days to consider his purchase after paying the seller a non-refundable option fee of up to $1,000.
This fee is forfeited if the buyer decides not to go ahead with the purchase.
If he does decide to go ahead with the purchase, he signs the same form and pays another fee to the seller to exercise the option. This option exercise fee, together with the option fee, cannot exceed $5,000.
If the buyer abandons the purchase after exercising his option, the owner of the flat can claim damages against him.
Lawyers’ role
LAWYERS play a key role in the homebuying process, and they come into the picture once the buyer decides on a property.
A conveyancing lawyer is responsible for doing all the relevant searches on the title deed to a property, to ensure that the seller does not owe any debt to the Government.
Such debts could range from unpaid property tax to money that is owed to the Government over road improvement works nearby, said the head of conveyancing at Lawhub, Ms Winnie Tan.
The lawyer also needs to check to see if there is a road reserve on the property, which would allow part of the property to be acquired by the Government in the future for roads to be built.
This is important as it may affect the value of the property, which may in turn reduce the loan amount you can get to finance it.
If a buyer is taking out a bank loan, the lawyer has to ensure that the relevant documents are ready.
Usually, said Ms Tan, a lawyer is hired after the buyer puts down an option fee or booking fee for the property.
She suggests that buyers could look for a lawyer even before that stage, if they want to avoid forfeiting the option fee should the property turn out to have problems and they have to let the option lapse.
The lawyer’s role ends when the title deed is handed over to the buyer.
For uncompleted properties, this could take up to three years. Resale transactions, however, are usually completed within three or four months.
Ms Tan estimates that the legal fees for a typical home costing not more than $1 million, and paid for with Central Provident Fund savings and bank loans, will range from $2,500 to $3,000.
This does not include the $800 to $1,000 usually charged for searches on the property and other associated costs.
Fees and taxes
THERE are various charges you need to take note of when buying property: property tax, stamp duty and agents’ commissions.
Commission structures are not fixed under the law, though there are market norms for the different segments such as private homes and resale Housing Board flats.
Buyers of private homes typically do not pay anything to agents, as the agents collect a 2 per cent commission from the sellers.
Buyers of resale HDB flats, however, are charged a 1 per cent commission if they hire the agent. Most sellers’ agents also charge buyers a 1 per cent fee if they are not represented by a broker.
This practice has been called into question by the Consumers Association of Singapore because of a possible conflict of interests.
Many agents for sellers, however, refuse to show a flat to independent buyers unless a fee is promised. They argue that an independent buyer would have a higher chance of tripping up in a transaction if he did not have the help of a broker.
Buyers also need to take note of the stamp duty. This is a tax on commercial and legal documents that record and give effect to certain transactions. The duty is payable even if the transaction is aborted.
The stamp duty for the purchase of property is calculated at 1 per cent of the first $180,000 of the purchase price or market value of the unit, whichever is higher.
The rate goes up to 2 per cent for the next $180,000, and 3 per cent for the remainder if the value exceeds $360,000.
Finally, the buyer has to remember the property tax payable for his new home. This is calculated based on the annual value of his home, which is the estimated annual rent it can fetch if it is let out.
This amount, which excludes the rent for furniture and fittings, is determined by analysing rents for comparable buildings and other data, so it changes with market trends.
The property tax on owner-occupied homes is charged at 4 per cent of the annual value. This concession is applicable to only one property at any one time.
If the property is not owner-occupied, the tax rate is 10 per cent of the property’s annual value.
This year’s Budget included a one-off property tax rebate of up to$100 per year for 2008 as well as 2009. The rebates apply to owner-occupied residential properties.
If you are not Singaporean…
FOREIGNERS can buy condominiums and private apartments in buildings that have six or more storeys, but face restrictions in buying landed homes.
To buy landed property, they need to submit an application to the Government.
They will get the go-ahead only if they are deemed to have made a significant economic contribution to Singapore.
Those buying plots of land in Sentosa Cove, however, were recently allowed to submit a shorter application form and granted fast-track approval.
For public housing, only foreigners who are permanent residents (PRs) may apply for a new flat directly from the Housing Board (HDB) but they have to do this with their Singaporean spouse, child or parent.
PRs are free to buy resale HDB flats on the open market.
Those who choose to buy an HDB flat need to be aware of the Board’s ethnic integration policy. This limits the proportion of each ethnic group represented within a block and precinct, to encourage various groups to interact with each other on a daily basis.
If the limit has been reached for a particular area, the owner can sell his flat only to someone of the same ethnic group as him.
Meanwhile, executive condominiums are available to foreigners after 10 years.
These developments usually have the same facilities as condominiums, such as swimming pools and gymnasiums. PRs may buy a new executive condominium with their Singaporean spouse, child or parent.
Insuring your home adequately
BUYING a home is a major purchase for many people.
To make sure that things don’t go wrong after your major purchase, you may want to insure your home.
Apart from the standard fire policy that covers losses caused by fire, lightning and explosion, you can also take a home insurance policy that covers destruction to a building, home contents and any renovations carried out.
If your property is mortgaged, the mortgagee will require you to have a fire insurance policy on the outstanding loan amount.
When taking out home insurance, make sure that the sum insured is adequate.
The sum should reflect the total cost of rebuilding or reinstating your insured property to its original state, plus professional fees and the cost for removal of debris, says the General Insurance Association of Singapore.
Market value is normally not used as the sum insured.
To estimate replacement cost, you need to know your property’s gross floor area.
As a rough guide, the replacement cost of a medium-quality condominium could fall between $137 per sq ft (psf) and $182 psf, while that for landed cluster housing could range between $152 psf and $182 psf.
You should note that the total claim amount is limited to the total cost of the property or reinstatement.
Valuation matters
A PROPERTY’S valuation determines how much a buyer can borrow to pay for it.
Banks can grant a loan of up to 90 per cent of a home’s purchase price, or valuation, whichever is lower.
This means that if the price of a property exceeds its valuation, the buyer has to come up with cash to cover the shortfall.
A buyer can get an indicative valuation for a property before committing to the purchase. This does not involve a detailed inspection.
The bank’s offer is subject to the formal valuation confirming the indicative valuation. This figure is usually derived from the bank’s own panel of private valuers.
When valuing a property, these professionals consider the current value of comparable projects in the area. Other factors taken into account include the property’s location, size, layout, age and condition, as well as its orientation.
Valuers usually take about two to three weeks to complete the assessment.
Mr Eugene Tham, a director of property consultancy Chesterton International, estimates it would cost about $400 to $500 to value a home worth about $1 million.
For resale Housing Board flats, buyers need only to submit a request for a valuation report, which would cost about $200 for three-room or larger flats. The HDB will then randomly assign a private valuer to assess the property.
About two years ago, it was common for buyers and sellers to inflate the price of the flat so the buyer could get a bigger housing loan than he would otherwise be allowed. Such illegal “cashback” arrangements were supported by inflated valuations from the colluding valuers.
The Government, however, clamped down on this practice in 2005, by requiring flat purchases involving withdrawal of Central Provident Fund savings to be supported by valuations carried out through the HDB system.
Such cashback arrangements largely fizzled out after the curbs. Those caught can be fined $5,000 and jailed for six months for giving false information to the HDB.
Source : Sunday Times - 18 Nov 2007
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