Too many shopping malls?
March 23rd, 2007
Singapore will see some 20 new retail venues by 2010, but the space may well be overdue, say ELAINE CHEW and WILLIAM TEO
Shopping fanatics may have to hang on tight to their purses as Singapore is poised to see a mushrooming of shopping centres in the next three years or so with some 20 malls, large and small, sprouting throughout the island.
It kicks off a little slowly this year, with the key new mall being the redeveloped Kallang Leisure Park. But a slew of developments will emerge in 2008 and the momentum will increase once the Singapore Flyer is in operation. Orchard Central and Orchard Turn will also be competing for the festive dollar by Christmas 2008.
Come 2009, all eyes will be on Marina Bay Shoppes, the retail mall of the Marina Bay Sands integrated resort. Orchard Road will welcome Somerset Central in 2010, the last of the trio of new malls aimed at rejuvenating Singapore’s main shopping belt.
Putting all this into numbers, Singapore will see an additional 4.5 million sq ft of net lettable retail space by 2010, equivalent to four VivoCities. By then, total retail stock on the island could be about 40 million sq ft.
If you’re wondering if there will be enough shoppers to support the large increase in shopping space, it is worthwhile to note the situation in the past decade, which saw two contrasting supply swings.
From 1996 to 2000, annual new supply averaged 415,000 sq ft. But from 2000 to 2005, interest waned and supply was just 15,000 sq ft a year. This occurred when the economy was still growing at a healthy 4 per cent annually, with relatively high consumer confidence and good tourist arrivals.
Also, new retail malls in the past decade were mostly built in the eastern and western regions, catering to suburban shoppers. However, future major supply will largely be in the downtown core, Orchard Road and other parts of the central region. These are locations that have been lacking in new retail developments from 2000 to 2005.
The potential increase in supply is thus overdue, both in terms of quantity and location. Still, the 4.5 million sq ft of new retail space is not an insignificant amount, bumping up supply by 10 per cent. While some may be concerned that Singapore will be over-shopped, the worry may be premature given current and projected trends.
Growing retail sales
After the 1997 Asian crisis, retail sales excluding motor vehicles have been on an uptrend, growing at an annual compounded rate of 4.2 per cent. Even after the 9/11 bombings and Sars, retail sales were surprisingly resilient, dipping by only one per cent and 2 per cent in the respective years.
Retail sales continued to rise in 2006, which is why we are still seeing ambitious expansions and local and foreign brands hunting for more space.
Going forward, Singapore’s retail scene presents a robust picture. According to the latest MasterIndex of Consumer Confidence survey by MasterCard Worldwide, Singaporeans are the most optimistic in the Asia-Pacific region as the economy strengthens and unemployment falls. This high level of optimism will contribute to the ringing of cash registers.
Tourist dollars
Like most retail sectors in major cosmopolitan cities, Singapore’s retail industry relies not just on local demand, but also foreigners. The authorities have been looking at ways to grow tourist spending. In 2006, the tourism sector generated an estimated $12.4 billion in tourism receipts from 9.7 million visitors, both record highs.
With the two integrated resorts and initiatives by the Singapore Tourism Board, Singapore is on course to achieve its target of doubling tourist arrivals to 17 million and nearly tripling tourism receipts to $30 billion by 2015.
This will ensure that the bulk of new shopping malls, which are located in the major tourist attractions, will be filled with shoppers.
Key performance indicators
When seven malls sprouted in Simei, Tampines and Pasir Ris during the 1990s, naysayers reckoned that the fierce competition would make them unsustainable. However, the malls have exceeded expectations and are enjoying good traffic flow. Currently, yet another mall is being built at the Tampines Regional Centre, at the former DBS Tampines Centre and the adjacent Pavilion complex site. Thus, having more malls does not necessarily point to an over-shopped situation. Indicators such as retail space per capita and retail sales productivity may give a better picture.
Retail space per capita is currently about 7.8 sq ft. Including the new malls in the pipeline, Singapore’s retail space per capita will grow to 8.2 sq ft in 2010. This is still lower than in the late 1990s. At 8.2 sq ft, the ratio is also considerably lower than major shopping cities across the globe. Hong Kong has retail space per capita of 15 sq ft while New York has close to 25 sq ft.
Singapore also scores well in retail sales productivity. Our average retail sales per sq ft amounts to S$46 which is higher than Hong Kong’s S$34. This implies that retailers in Singapore are able to generate more revenue from the same amount of retail space.
Strong demand for malls
Islandwide occupancy for retail stock has remained relatively stable over the years, fluctuating between 90.8 per cent and 92.4 per cent. This means that new supply that came on stream was matched by demand most of the time. A good example is 2006 when annual supply of retail space hit a 13-year high of 1.2 million sq ft from the opening of VivoCity. Demand for the year rose to a 13-year high of 980,000 sq ft.
The strong demand signals that retailers are willing to chase prime retail space. This has also been reflected in retail rents. In 2006, rental growth gained traction, rising between 4 per cent and 9 per cent in prime shopping localities. The strong momentum is expected to continue with rentals projected to rise another 5-10 per cent annually in the next few years.
If a possibility of being over-shopped exists, retailers would not be willing to pay higher rents. Yet we have seen healthy increases in rentals year after year and more entrepreneurs are setting up businesses.
In Singapore’s case, the risk of being over-shopped is outweighed by favourable factors: rosy retail sales, an expected boost in tourist receipts and reasonably healthy retail performance indicators.
While it is too early to say if the new malls will bring something of New York’s Fifth Avenue or Paris’ Champs Elysees to Singapore, there is no denying that additional malls will result in a more competitive retail landscape. This will only serve to strengthen Singapore’s position as a regional shopping hub.
At the end of the day, the biggest gainers are likely to be the shoppers.
Elaine Chew is associate director and William Teo an analyst at Knight Frank
Source: The Business Times, 22 March 2007
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Saturday, March 24, 2007
Demand for GCBs set to stay high
Demand for GCBs set to stay high
March 23rd, 2007
Average land prices for good class bungalows may surge to $650-$750 psf this year, says STEVEN MING
The surge in Singapore’s stock market in the past year has not dimmed the allure of property. With property favoured by many wealthy investors across the region, Singapore’s residential market is powering ahead, led by the luxury segment.
While demand is focused on high-end condominiums, there is also strong interest in good class bungalows, or GCBs. GCBs are seem as the highest class of residential housing available in Singapore. Each GCB sits on a minimum plot of 1,400 square metres and they can be found in only 39 gazetted GCB areas.
Like anything of value, there are never enough of these prized properties to go around. In fact, there are a finite number of GCBs. Since the GCB areas are already gazetted and the boundaries defined, there is rarely new supply on the market unless a much larger parcel of land is sub-divided.
There are an estimated 2,000 to 2,500 GCBs across the island. This class of properties would generally cost in excess of $10 million each today and are affordable to only a small circle of buyers.
Due to the government’s restriction on foreigners buying landed property here, GCB buyers are predominantly Singaporeans, although there are a number of permanent residents who have been granted approval to buy them. Buyers are usually businessmen who have made their fortunes on the back of a robust economy.
Some buyers have also benefited from the creation of new wealth following the listing of their companies on the stock exchange. High-flying professionals are another segment of GCB buyers. Then there are the beneficiaries of recent en bloc transactions who have enjoyed cash windfalls and are moving up the housing ladder to join the exclusive GCB club. However, they form a small proportion of GCB buyers.
Even before the recent surge in prices of luxury condos, the GCB market saw a strong run-up in mid-2004. Since then, prices in selected prime areas have surged by as much as 60 to 70 per cent. There were 118 transactions last year, up 13 per cent from the 104 transactions in 2005. The substantial price increase over the last 12 months has translated into a higher total value of transactions. This stood at $1.2 billion last year, a 42 per cent jump from 2005.
The growing affluence of buyers is probably the main reason for the increased number of large GCB transactions last year. We have also observed a rising trend of opportunistic buying and selling. We have seen several GCBs changing hands in a matter of months or even weeks, with each realising quite handsome capital gains. As rental yields from GCBs are relatively low, these investors would not be buying them for rental returns, but for potential capital gains.
Due to the limited number of GCBs available for sale, and their high demand, these fortunate investors would have easily made a sizeable profit over a relatively short period. There were at least 27 such buy and sell transactions that took place in the past six years, with sellers booking handsome gains. With the strong market, new owners may well be already sitting on paper gains.
With the bright economic outlook for Singapore, we expect to see continued demand for GCBs. Even recent 99-year leasehold bungalow land parcels on Sentosa Cove have crossed $1,100 per sq ft. We believe that the record prices there will only accelerate the price surge for GCB land. A recent Nassim bungalow plot has already achieved close to $1,000 psf. So it would not be too far-fetched to expect GCBs in other prestigious locations to quickly play catch-up. Average GCB land prices may surge to $650-$750 psf this year from $500-$600 a year ago.
This year looks set to be another good year for the GCB market with possibly more record-breaking prices.
The writer is director, Prestige Homes, at Savills Singapore
Source: The Business Times, 22 March 2007
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March 23rd, 2007
Average land prices for good class bungalows may surge to $650-$750 psf this year, says STEVEN MING
The surge in Singapore’s stock market in the past year has not dimmed the allure of property. With property favoured by many wealthy investors across the region, Singapore’s residential market is powering ahead, led by the luxury segment.
While demand is focused on high-end condominiums, there is also strong interest in good class bungalows, or GCBs. GCBs are seem as the highest class of residential housing available in Singapore. Each GCB sits on a minimum plot of 1,400 square metres and they can be found in only 39 gazetted GCB areas.
Like anything of value, there are never enough of these prized properties to go around. In fact, there are a finite number of GCBs. Since the GCB areas are already gazetted and the boundaries defined, there is rarely new supply on the market unless a much larger parcel of land is sub-divided.
There are an estimated 2,000 to 2,500 GCBs across the island. This class of properties would generally cost in excess of $10 million each today and are affordable to only a small circle of buyers.
Due to the government’s restriction on foreigners buying landed property here, GCB buyers are predominantly Singaporeans, although there are a number of permanent residents who have been granted approval to buy them. Buyers are usually businessmen who have made their fortunes on the back of a robust economy.
Some buyers have also benefited from the creation of new wealth following the listing of their companies on the stock exchange. High-flying professionals are another segment of GCB buyers. Then there are the beneficiaries of recent en bloc transactions who have enjoyed cash windfalls and are moving up the housing ladder to join the exclusive GCB club. However, they form a small proportion of GCB buyers.
Even before the recent surge in prices of luxury condos, the GCB market saw a strong run-up in mid-2004. Since then, prices in selected prime areas have surged by as much as 60 to 70 per cent. There were 118 transactions last year, up 13 per cent from the 104 transactions in 2005. The substantial price increase over the last 12 months has translated into a higher total value of transactions. This stood at $1.2 billion last year, a 42 per cent jump from 2005.
The growing affluence of buyers is probably the main reason for the increased number of large GCB transactions last year. We have also observed a rising trend of opportunistic buying and selling. We have seen several GCBs changing hands in a matter of months or even weeks, with each realising quite handsome capital gains. As rental yields from GCBs are relatively low, these investors would not be buying them for rental returns, but for potential capital gains.
Due to the limited number of GCBs available for sale, and their high demand, these fortunate investors would have easily made a sizeable profit over a relatively short period. There were at least 27 such buy and sell transactions that took place in the past six years, with sellers booking handsome gains. With the strong market, new owners may well be already sitting on paper gains.
With the bright economic outlook for Singapore, we expect to see continued demand for GCBs. Even recent 99-year leasehold bungalow land parcels on Sentosa Cove have crossed $1,100 per sq ft. We believe that the record prices there will only accelerate the price surge for GCB land. A recent Nassim bungalow plot has already achieved close to $1,000 psf. So it would not be too far-fetched to expect GCBs in other prestigious locations to quickly play catch-up. Average GCB land prices may surge to $650-$750 psf this year from $500-$600 a year ago.
This year looks set to be another good year for the GCB market with possibly more record-breaking prices.
The writer is director, Prestige Homes, at Savills Singapore
Source: The Business Times, 22 March 2007
No Comments » | Luxury Property, Real Estate Facts & Figures, Property Investment | Permalink
Malaysia scraps property gains tax; stocks soar
Malaysia scraps property gains tax; property gains tax
March 23rd, 2007
Malaysia has rolled out the red carpet to local and foreign investors by proposing to scrap the bumiputera equity requirement in six sectors in Johor’s new development region and removing the country’s 35-year-old property gains tax.
Analysts are excited by the slew of measures announced yesterday by Prime Minister Abdullah Ahmad Badawi at the Invest Malaysia Forum in the Malaysian capital.
The removal of the property gains tax from April 1 went down best - stocks of land-owning companies immediately jumped 8-15 per cent.
We believe these moves will lead to a very strong re-rating of the entire property sector, spilling over to the stock market,’ said Lim Beng Leong, a director of UOBKayHian in KL. ‘We expect land prices to surge 50-300 per cent within 2-3 years.’
The property tax was meant to discourage speculation, starting at 30 per cent of profit from a sale after the first year of ownership and sliding to zero after five years for locals.
Foreigners were hit harder, with a flat 30 per cent tax until the fifth year of ownership after which it became 5 per cent. Singaporeans are among the top three foreign buyers of Malaysian properties.
Carmen Chua, who is developing high-end condominiums opposite Kuala Lumpur City Centre, reckons the tax is the main reason Malaysia’s real estate prices lag their regional peers.
‘It’s a disincentive to foreign investment,’ she told BT. ‘That’s why condominium prices, for example, never took off. We are still about 50 per cent below our peak in 1997.’ Apart from the nationwide property fillip, Mr Abdullah gave the southern state bordering Singapore a major boost.
Top of the agenda is the plan to give long tax holidays and waive bumiputera equity conditions in six service clusters in Johor’s Iskandar Development Region (IDR) - an area three times the size of Singapore.
The clusters are creative industries, educational services, financial advisory and consulting, health care, logistics and tourism-related services. Qualified companies in these areas will be able to source capital globally and employ foreign employees freely.
More importantly, foreign investors can have full ownership and need not comply with Foreign Investment Committee rules. This is an effective suspension of the bumiputera policy, which generally sets aside 30 per cent equity for Malay and indigenous partners.
Johor Chief Minister Ghani Othman does not think this will be an issue for the Malays, who have enjoyed affirmative action under the bumiputera policy since the 1970s.
‘We agree with it,’ he said. ‘It is for defined activities in a very defined area.’
Earlier, former deputy prime minister Musa Hitam said the affirmative action policy should not apply to Johor because it put foreign investors off the IDR.
Mr Musa - part of a five-man IDR advisory panel that also includes ‘Sugar King’ Robert Kuok - suggested the award of contracts ‘on merit’.
To further attract foreign investors, Malaysia has thrown in 10-year exemptions from corporate tax and withholding tax on royalty and technical fee payments to non-residents.
But qualifying companies must start operations before 2015. Foreign knowledge workers in the IDR will also be allowed to import or buy a duty free car for personal use.
Malaysia provided similar incentives when it launched its Multimedia Super Corridor in Selangor in the late 1990s.
Yesterday’s initial package of incentives is expected to have a much bigger impact because it covers more sectors and a much bigger area of 2,217 sq km. Land in the IDR is also cheaper than in neighbouring Singapore.
To offset the waiver of FIC rules, qualified firms must contribute to a social development fund managed by the new Iskandar Regional Development Authority for social welfare development within the zone, including projects for the Malay community. Details are being finalised.
The Johor masterplan is being promoted as a regional metropolis-in-the-making - a Shenzhen of sorts to Singapore.
Over the next 20 years, it hopes to attract some US$105 billion of investments. The federal government and related agencies have agreed to commit an initial RM10 billion (S$4.4 billion).
All the measures announced yesterday should benefit developers like UEM World, which has been developing the Nusajaya township near the Second Link bridge connecting Singapore.
‘All these are very good and encouraging incentives,’ chief executive Ahmad Pardas Senin told Reuters. ‘That should spur a lot of interest in both the property development industry as well as from end-buyers.’
Source: The Business Times, 23 March 2007
No Comments » | Overseas Property | Permalink
March 23rd, 2007
Malaysia has rolled out the red carpet to local and foreign investors by proposing to scrap the bumiputera equity requirement in six sectors in Johor’s new development region and removing the country’s 35-year-old property gains tax.
Analysts are excited by the slew of measures announced yesterday by Prime Minister Abdullah Ahmad Badawi at the Invest Malaysia Forum in the Malaysian capital.
The removal of the property gains tax from April 1 went down best - stocks of land-owning companies immediately jumped 8-15 per cent.
We believe these moves will lead to a very strong re-rating of the entire property sector, spilling over to the stock market,’ said Lim Beng Leong, a director of UOBKayHian in KL. ‘We expect land prices to surge 50-300 per cent within 2-3 years.’
The property tax was meant to discourage speculation, starting at 30 per cent of profit from a sale after the first year of ownership and sliding to zero after five years for locals.
Foreigners were hit harder, with a flat 30 per cent tax until the fifth year of ownership after which it became 5 per cent. Singaporeans are among the top three foreign buyers of Malaysian properties.
Carmen Chua, who is developing high-end condominiums opposite Kuala Lumpur City Centre, reckons the tax is the main reason Malaysia’s real estate prices lag their regional peers.
‘It’s a disincentive to foreign investment,’ she told BT. ‘That’s why condominium prices, for example, never took off. We are still about 50 per cent below our peak in 1997.’ Apart from the nationwide property fillip, Mr Abdullah gave the southern state bordering Singapore a major boost.
Top of the agenda is the plan to give long tax holidays and waive bumiputera equity conditions in six service clusters in Johor’s Iskandar Development Region (IDR) - an area three times the size of Singapore.
The clusters are creative industries, educational services, financial advisory and consulting, health care, logistics and tourism-related services. Qualified companies in these areas will be able to source capital globally and employ foreign employees freely.
More importantly, foreign investors can have full ownership and need not comply with Foreign Investment Committee rules. This is an effective suspension of the bumiputera policy, which generally sets aside 30 per cent equity for Malay and indigenous partners.
Johor Chief Minister Ghani Othman does not think this will be an issue for the Malays, who have enjoyed affirmative action under the bumiputera policy since the 1970s.
‘We agree with it,’ he said. ‘It is for defined activities in a very defined area.’
Earlier, former deputy prime minister Musa Hitam said the affirmative action policy should not apply to Johor because it put foreign investors off the IDR.
Mr Musa - part of a five-man IDR advisory panel that also includes ‘Sugar King’ Robert Kuok - suggested the award of contracts ‘on merit’.
To further attract foreign investors, Malaysia has thrown in 10-year exemptions from corporate tax and withholding tax on royalty and technical fee payments to non-residents.
But qualifying companies must start operations before 2015. Foreign knowledge workers in the IDR will also be allowed to import or buy a duty free car for personal use.
Malaysia provided similar incentives when it launched its Multimedia Super Corridor in Selangor in the late 1990s.
Yesterday’s initial package of incentives is expected to have a much bigger impact because it covers more sectors and a much bigger area of 2,217 sq km. Land in the IDR is also cheaper than in neighbouring Singapore.
To offset the waiver of FIC rules, qualified firms must contribute to a social development fund managed by the new Iskandar Regional Development Authority for social welfare development within the zone, including projects for the Malay community. Details are being finalised.
The Johor masterplan is being promoted as a regional metropolis-in-the-making - a Shenzhen of sorts to Singapore.
Over the next 20 years, it hopes to attract some US$105 billion of investments. The federal government and related agencies have agreed to commit an initial RM10 billion (S$4.4 billion).
All the measures announced yesterday should benefit developers like UEM World, which has been developing the Nusajaya township near the Second Link bridge connecting Singapore.
‘All these are very good and encouraging incentives,’ chief executive Ahmad Pardas Senin told Reuters. ‘That should spur a lot of interest in both the property development industry as well as from end-buyers.’
Source: The Business Times, 23 March 2007
No Comments » | Overseas Property | Permalink
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