Complete Property Market Updates of Singapore

October 31, 2007

Analysts see no property bubble

Filed under: Genius Thoughts,Market Watch — Propertymarketupdates @ 8:31 pm

They’re mum on whether it’s a good time to buy, but agree Singapore fundamentals are pretty robust.

PROPERTY: boom or bust? This was the intriguing question to which a capacity turnout of about 170 investors recently sought answers, at a dinner hosted by financial advisory firm ipac. The good news is that the experts at the evening’s panel do not foresee a bubble in the offing, based on three presentations – albeit with some concern expressed by Jones Lang LaSalle’s head of research, Chua Yang Liang.

The not-so-good news is that the experts shied away from the multi-million-dollar question of whether this was a good time to buy. What is more, over the past weekend, the surprise news of a halt to the popular deferred payment scheme for uncompleted properties appears to have cast a cloud over residential property’s upward trajectory.

In a deferred payment scheme, developers effectively extend free financing to buyers of uncompleted properties. Buyers need only pay an initial deposit of 10 to 20 per cent, with the balance due when the property is completed in a couple of years.

Thanks to this form of free credit, a sizeable number of speculators have rushed in to new home launches, as a rising market gives them a window to sell their units at a substantial profit in a short period.

The base case of one panellist, HSBC senior Asian economist Robert Prior-Wandesforde, is that there are few obvious triggers for a sharp deceleration in prices.

‘If we’re in a bubble, we’re in the early stages. The fundamentals are pretty robust. The mass market is just starting to see a recovery and that’s probably the safest area for investment,’ he told the audience. The supportive factors include the expected growth in employment and personal incomes.

The cost of servicing mortgage debt also remains relatively low at just about 14 per cent of household income, compared to 50 per cent in mature markets like London.

Contacted yesterday, he said: ‘I think the measure (to halt deferred pricing) will take a little bit of froth out of the market, but with employment booming, wages soaring and the real mortgage rate at its lowest level since 1990, the outlook still looks very promising.

‘We should also bear in mind that valuations are still way below the levels of the previous boom. When adjusted for the growth in incomes, the private residential property price index is little more than half of what it was in 1996.’

At the discussion, Dr Chua of JLL expressed concern over the price gap between new and resale homes in the prime districts. The gap has widened sharply this year, reaching a peak of 60 per cent, against a medium to long-term premium gap of 32 to 38 per cent. The resale market, he says, reflects true demand better, as deferred payment schemes in the new home market have inflated prices.

In terms of rental yields, rentals in the luxury prime segment have edged below the 10-year Singapore bond yield. The clampdown on deferred payment schemes should remove the speculative froth, he says. ‘Generally prices will take a breather in the next two to three years with the sheer volume of (new) stocks coming on stream. We expect some kind of softening, not a correction, but a softening.’

Sing Tien Foo, deputy head of the National University of Singapore’s department of real estate, pointed to property’s ability to help diversify a portfolio, thanks to a low correlation with stocks and bonds.

Prof Sing’s research has shown that property provided a positive hedge against inflation between 1992 and 2007, a period in which stocks and bonds did not provide such a hedge.

While all types of property offered a more-than perfect hedge against inflation, the best hedge was that offered by detached housing, followed by semi-detached homes.

Meanwhile, advisers are sounding caution. Roy Varghese of ipac says: ‘If you’re looking to invest, be very careful. You need to have an investment objective and that includes looking into the IRR (internal rate of return). You should be able to hold it for seven to 10 years. If you bought your property at a peak, your IRR will be low.’

Joseph Chong of New Independent expects the price gap between new uncompleted homes and resale homes to narrow. ‘The market should see a more moderate ascent in prices – instead of 20 per cent, perhaps 10 per cent in line with nominal GDP.

‘You should see more upside…But if your portfolio is not big enough, I don’t think you should bet on investment property in Singapore.’

Those with modest resources are better off investing in a global property fund or Reit, he adds.

Analysts, however, remained mostly sanguine over the medium-term outlook. Merrill Lynch’s property team wrote in a paper market that sentiment will be weak over one to two months. ‘However, we are of the view that genuine buyers do not buy houses on innovative purchase schemes by developers alone. We believe the more important considerations will be where Singapore is heading, will they be able to keep their jobs or businesses and will their salaries/profits increase.’

The firm’s economics team recently wrote that Asian property prices were not high relative to per-capita income, and advances have been modest compared to those in the UK, the US and Australia. The drivers include low real interest rates and positive demographics.

Citigroup analyst Wendy Koh said that while sentiment will weaken in the short term, residential prices are supported by strong fundamentals. In a note on Friday, she said: ‘We believe the current price increase is well supported by strong fundamentals such as the extremely tight physical supply and economic and wage growth.

‘We maintain our view that rental rates for residential units will continue to climb on the back of the relative net increase in housing stock due to low completion and relatively high demolition due to en blocs. The rise in rental rates will likely continue to support further price appreciation.’

Source : Business Times – 31 Oct 2007


URA property auction attracts $37m of bids

Filed under: Auction,Regulators — Propertymarketupdates @ 8:31 pm

THE mood continued to be buoyant at two property auctions yesterday held by the Urban Redevelopment Authority (URA) and DTZ Debenham Tie Leung.

The URA auctioned 12 sub-divided landed housing plots near Sembawang Beach which can be developed into a total of 57 landed homes.

The auction fetched a total sum of $37.09 million, working out to about $285 per square foot of land area on an average basis.

The bidders included mostly smaller developers, contractors and engineering firms but also some individuals, like local advertising guru Lim Sau Hoong.

The chief executive of Singapore-based advertising agency 10AM Communications clinched the sole bungalow plot of 4,477 sq ft for $940,000.

Market watchers expect Ms Lim to spend a further $1.5 million on construction costs and fees, bringing her likely all-in investment for her bungalow at about $2.5 million.

Mecbonn Engineering, whose office is at International Plaza and which is controlled by a Tew family, walked away with the biggest plot, a 43,687 sq ft site slated for development into 23 terrace houses, for $14.3 million or $327.33 psf of land area.

The plot attracted a total of 107 bids from about eight parties.

A property consultant estimates Mecbonn’s break- even cost works out to about $1.3 million per terrace house.

The company also bought two smaller plots for semi-detached homes.

Fragrance Group unit Fragrance Homes bought two plots. It paid $9.2 million or $294 psf for a plot designated for 14 terrace houses and $1.76 million or $270 psf for a smaller plot for three terrace homes.

Fragrance Group boss Koh Wee Meng and his wife Lim Wan Looi too bought a semi-detached plot for $289 psf.

The 99-year leasehold land plots auctioned by the URA yesterday form the first phase of Sembawang Greenvale.

URA’s director of land administration, Choy Chan Pong, was pleased with the auction result, noting that it drew ‘wide participation and competitive bidding’.

‘We can consider releasing the next phase of Greenvale in the H1 2008 Government Land Sales Programme,’ he added.

DTZ Debenham Tie Leung’s auction at Amara Hotel saw a strong turnout of about 100, including spectators, with three mortgagee sale properties changing hands, including a ground floor shop unit at the freehold Grandlink Square at Guillemard Road selling for $226,000 or $1,102 psf of strata area.

The other two properties sold were a two-storey linked semi-D factory at 67E Tuas South Avenue 1, which fetched $1.3 million or about $139 psf of strata area, and a two-storey, freehold corner terrace house at 34 Maria Avenue in Opera Estate that was sold for $1.4 million, or $392 psf of land area.

Source : Business Times – 31 Oct 2007

Acer Building in Jurong for sale

Filed under: Commercial,Property Deal — Propertymarketupdates @ 8:30 pm

ACER Computer International is selling its building at International Business Park in Jurong East.

The property is said to be worth about $75-80 million, or $337 to $360 psf of existing net lettable area (NLA).

The property, a high- tech business park development, was completed about 10 years ago on a site leased from JTC Corp for 30 years with an option to renew for a further 30 years.

Acer is paying JTC an annual land rent of $715,469, with an escalation of 4 per cent a year (as at Q3 2007). Acer Building’s new owner will likely pay JTC a slightly higher land rent each year.

Acer Computer (Singapore) will lease back 51,548 sq ft in the building – about 23 per cent of the property’s 222,510 sq ft NLA – from the new owner.

BT understands that the net property yield to the new owner can work out to around 6 to 7 per cent, based on a $75-80 million price.

DTZ Debenham Tie Leung is marketing Acer Building through an expression of interest exercise.

Source : Business Times – 31 Oct 2007

View showflat? Hand over blank cheque first

Filed under: Community Voices — Propertymarketupdates @ 8:30 pm

I AM writing to highlight what may be the start of a trend that property buyers need to be aware of.

Recently, I wanted to view a newly built showflat near Upper Bukit Timah Road but I was not allowed in.

The reason was that I had to present a signed blank cheque with the intention of booking a unit before I would be admitted into the showflat.

Is such a practice allowed and are there any watchdog organisations that regulate the sale practices of developers or agents assigned to market properties?

Prospective buyers should not be coerced into buying a property costing a million dollars, though this may be a small sum in today’s property market.

Source : Straits Times – 31 Oct 2007

Get tough with rogue property agents

Filed under: Community Voices — Propertymarketupdates @ 8:29 pm

IT IS stated on the website of the Institute of Estate Agents (IEA) that an agent should not accept any commission from both vendor/seller and purchaser/buyer in the same transaction … (Section 2.2.1 on page 3 on website). It is also stated that the professional fee is 2 per cent from the seller and 1 per cent from the purchaser if each of them is represented by the agent.

I would like to highlight a few points:

1) What is the recourse to the buyer without an agent if the seller’s agent insists that the potential buyer pay a 1 per cent commission, failing which the agent won’t go through with the transaction to sell the HDB flat to the buyer? The buyer is pressured by the agent because if he/she doesn’t pay the 1 per cent commission, the seller’s agent will not entertain the buyer upon signing the Option to Purchase. If the buyer decides to use legal recourse (which would take months), the property will be bought by other buyers who are willing to pay the 1 per cent commission. How does this benefit the seller as the agent is acting on his/her own interests rather than the seller’s? How is the buyer’s interest protected in this case? Is there any way to report the rogue agent to the authorities?

2. Are professional fees highlighted on the IEA website regulated or enforced? I am asking this because an agent can flout the rules by not letting any potential buyer view the property if he/she insists on not paying the 1 per cent commission to the agent although the agent is already paid 2 per cent by the seller. Any buyer who insists on not paying the 1 per cent commission will have considerably fewer chances to view flats. And the seller will, in turn, get fewer sales opportunities because his/her agent wants to pocket commissions from both the buyer and the seller.

3. Agents who flout the rules are punished lightly. If fired, they will simply join rival agencies. Because of the light punishment, agents are not afraid of breaking the rules. Lawsuits are out of reach for the common people, and rouge agents are using this knowledge to their advantage. How are property buyers/sellers protected from rouge agents?

4. The regulating authority should use ‘mystery shoppers’ (or ‘buyers’ in this case) to make spot checks on agents. Those found guilty should be banned or punished severely. This is to protect genuine agents who play by the rules.

Sentosa Gani

Source : Straits Times – 31 Oct 2007

Horizon Towers: Majority owner raises fresh objections before STB

Filed under: Collective Sale,Legal Ground,Regulators — Propertymarketupdates @ 8:29 pm

If there’s one thing that has characterised the Horizon Towers saga, it’s the number of twists and turns that have emerged – and yesterday’s hearing before the Strata Titles Board (STB) was no exception.

The session marked the start of the resumption of a previous hearing, which had stalled on Aug 3 when STB decided Horizon Towers’ application for a collective sale order was defective. The High Court subsequently overturned the board’s decision and sent the application back to STB.

Yesterday’s sitting, however, was anything but a straightforward continuation of that earlier session.

Instead, it saw one majority owner, Susanna Rusli – represented by Cheong Yuen Hee from JS Yeh – raising fresh objections and saying she did not wish to be represented alongside the other majority owners, whose legal counsel are Tan Rajah & Cheah.

Mr Cheong, on behalf of his client, questioned the validity of Horizon Towers’ collective sale application after it was thrown out by STB on Aug 3.

He also argued that the sale & purchase (S&P) agreement – signed between Horizon Towers’ majority owners and the buyers, Hotel Properties and its partners – had expired, as it was not extended before the deadline.

After STB threw out their collective sale application, the majority owners did not extend the Aug 11 deadline for the S&P agreement – despite repeated requests by the buyers to do so – until Sept 24. Mr Cheong is arguing that this invalidates the S&P agreement.

It’s also a point taken up by some of the minority owners who are objecting to the sale. Tan Kok Quan Partnership – which represents one group of minorities – is arguing that STB does not have the jurisdiction to hear the application as a consequence of the majority owners’ failure to extend the S&P agreement.

BT understands the other minority owners objecting to the sale also intend to take up this argument.

Such a move will, however, run counter to what transpired in the High Court earlier this month – when the majority sellers appealed against STB’s dismissal of their application. In that session, the buyers’ lawyers – Allen & Gledhill (A&G) – argued that the appeal could be heard only if the S&P agreement was still in existence and the deadline extension was not disputed.

A&G Senior Counsel K Shanmugam asked the various parties to state before the court if they were challenging the existence of the contract, adding that they could not then go back to STB after the appeal and say the contract had expired. No one challenged the existence of the contract then.

Yesterday’s session before STB also saw the minorities raising queries over the role played by the sales agent for the en bloc deal, Alvin Er. They argued that Mr Er’s decision to accept a sales commission from the buyers for the deal posed a conflict of interest – in that he could have been motivated by the commission rather than the need to secure the best offer for Horizon Towers.

STB has asked the various parties to submit these applications over the next few days. The hearing will resume next Tuesday.

Source : Business Times – 31 Oct 2007

Wing Tai bullish despite end of deferred payment scheme

Filed under: Developer News,Financing — Propertymarketupdates @ 5:06 pm

THE scrapping of the deferred payment scheme for new homes has failed to dampen the optimism of property group Wing Tai Holdings.

It can still offer the scheme on two yet-to-be-launched condominiums as it had obtained approval before the Government withdrew the scheme last week. The scheme allowed homebuyers to postpone most payments on uncompleted property.

The move to end the scheme was aimed at deterring speculators and forcing people to be more prudent when committing to pricey real estate.

Wing Tai chief operating officer Tan Hwee Bin told The Straits Times yesterday that ending the scheme was a good idea as it would create a basis for strong, sustainable market growth in the long run.

‘There will be a short-term impact for the market as a whole as buyers will have to manage their cash flows better.’

But she did not believe that Wing Tai itself would be affected, given its portfolio of largely upmarket developments.

‘About 80 per cent are located within districts 9, 10 and 11, and many of our clients are high net-worth individuals and serious investors as opposed to speculators.’

Wing Tai still has approval to offer deferred payments for its L’VIV condo in Newton Road and Belle Vue Residences in Oxley Walk – both set to be launched in the first half of next year.

Mainboard-listed Wing Tai yesterday said net earnings for the three months ended Sept 30 doubled to $61.8 million due to higher contributions from its VisionCrest and Casa Merah projects.

Revenues fell to $100.2 million from $164.8 million previously. Earnings per share rose to 8.58 cents from 4.29 cents while net asset value per share went up to $2.14 as at Sept 30, from $2.07 as at June 30.

Wing Tai also intends to increase its stable of retail and lifestyle brands next year. These businesses now contribute more than 10 per cent of revenues.

It currently has 18 brands in 129 outlets in Singapore, including well-known names such as Topman and Warehouse, sports giants Nike and Adidas, and mass market labels such as G2000, and Japanese restaurant chain Yoshinoya.

Ms Tan said Wing Tai is in talks with several mid- to high-end brands from Europe, Asia and the United States about coming to Singapore, but declined to reveal details.

Source : Straits Times – 31 Oct 2007

Horizon Towers battle returns to Strata Titles Board

Filed under: Collective Sale,Legal Ground,Regulators — Propertymarketupdates @ 5:06 pm

Majority sellers start second attempt to get STB’s approval for the $500m sale By Joyce Teo, Property Correspondent

THE saga of the botched $500 million collective sale of Horizon Towers moved a step closer to possible resolution when it returned to the Strata Titles Board (STB) yesterday.

Owners who support the bitterly contested sale to developer Hotel Properties and its two partners are battling it out with those opposed to the sale, first inked in February.

An earlier STB hearing ended abruptly on Aug 3, when the board threw out Horizon Towers’ application to approve the collective sale on technical grounds, because three pages were missing.

On Oct 11, the High Court overturned the STB’s decision and threw the case back to the board for the hearing to be continued.

The fight over Horizon Towers erupted in April when a group of owners decided the estate’s sale price was insufficient in view of the rising market.

The buyers have launched a lawsuit against the owners for alleged breach of contract. They want to claim lost profits of up to $1 billion.

That legal battle will be averted if the condo owners finally win the STB’s approval for the sale.

Lawyers from Allen & Gledhill, representing the buyers,

had wanted to take part in the STB hearing but their application for permission to do so was dismissed recently.

That leaves a battle between the majority owners, represented by Senior Counsel Chelva Rajah of Tan, Rajah and Cheah, and the minority owners, represented by various lawyers.

An otherwise unexciting hearing yesterday offered one surprise, when a lawyer turned up unannounced and was asked to leave the lawyers’ table.

He had been appointed by an owner who had agreed to sell Horizon Towers en bloc.

But before he left, the lawyer – Mr Cheong Yuen Hee of J. S. Yeh & Co – was allowed to outline his client’s key points of contention.

He was then asked to file a written submission.

Mr Cheong alleges there is a ‘frustrated’ collective sale agreement as well as sale and purchase agreement.

He said his client does not accept the new sales committee or its authority to extend the condo’s sale deadline to Dec 11.

The new committee recently stretched the deadline as part of its efforts to avert the buyers’ lawsuit.

A lawyer who has been following the case said Mr Cheong’s statement was significant.

‘It’s dramatic because it’s the first time a majority owner has come out to say the deal is dead, under the hammer of a lawsuit,” he said.

Yesterday was the first of several days of hearings scheduled until mid-November.

The next session is on Tuesday.

In coming sessions, to be held at a court room in City Hall building, lawyers will call witnesses to support their respective positions.

Source : Straits Times – 31 Oct 2007

Orchard Road headed for $40m facelift

Filed under: Commercial,Property Add Value,Regulators — Propertymarketupdates @ 5:06 pm

ORCHARD Road is set for a $40 million facelift that will include state-of-the-art lighting, additional spaces for arts and cultural events and a more engaging pedestrian mall, in a bid to attract more local and foreign visitors.

The rejuvenation plans, which was initially outlined in 2005, were rolled out yesterday by the Singapore Tourism Board (STB), ahead of a tender for the main mall enhancement construction work. The tender will be called early next month.

Orchard Road already attracts more than seven million foreign visitors each year and the STB is confident that the makeover will push up the number of visitors. ‘Amid a rapidly changing global landscape, Orchard Road needs to go one notch up in order to boost its standing as Singapore’s prime shopping and lifestyle hub,’ said Margaret Teo, assistant chief executive (Leisure) for the STB.

The Orchard Road enhancements are the collective work of the STB, the National Parks, Land Transport Authority (LTA) and the Urban Redevelopment Authority (URA), which worked with Cox Group (Australia) to create the designs and plans. The Orchard Road Business Association and several stakeholders of Orchard Road were also consulted.

Three zones have been identified – Tanglin, Orchard and Somerset – which will feature flower, forest and fruit themes respectively. All three zones will boast enhanced road and pedestrian mall lighting to emphasise the trees and foliage. In addition, multi-functional lampposts and street furniture such as granite benches, stainless steel-clad waste bins and bollards will be installed.

A short stretch of the pedestrian mall outside ION Orchard and Wisma Atria will be widened through a one-lane reduction. ‘The section of Orchard Road before the Scotts Road junction has only three lanes of traffic moving forward into a four lane road segment.

‘This does show capacity for smooth traffic movement. Likewise, there is a two-lane right-turn movement from Paterson Road into Orchard Road. A two-lane right-turn movement into a four-lane road will not lead to unnecessary delays.

‘From a lane-balancing concept, the suggested lane reduction can be supported,’ said Mr Chandrasekar, director of community partnerships for the LTA.

Preliminary work to divert underground cables and telecommunication lines began last month, but work on the pedestrian malls will kick off after Chinese New Year next year. The work is expected to be completed by April 2009.

Source : Business Times – 30 Oct 2007

Coming soon: cineplexes run by Cathay in Dubai

Filed under: Commercial — Propertymarketupdates @ 5:05 pm

CATHAY Organisation has teamed up with Emaar Malls Group LLC, a wholly owned subsidiary of Dubai’s Emaar Properties PJSC, in a major joint-venture deal that could see the local cinema chain operating cineplexes in as many as 150 shopping malls across the Middle East and beyond.

This deal makes Cathay – which also operates cinemas in Malaysia – the first Singapore exhibitor to expand beyond South-east Asia. It was picked from several international contenders to take up a 25 per cent stake in Reel Entertainment LLC, which will design and manage cineplexes in the 150 shopping malls that Emaar Malls Group plans to open across the Middle East, North Africa and the Indian subcontinent.The first two cineplexes are scheduled to open late next year.

The first will be Dubai’s largest cineplex, with 22 screens, in The Dubai Mall – a shopping complex in Emaar’s US$20 billion Downtown Burj Dubai development, which will also house the world’s tallest tower.

When it opens, The Dubai Mall will also be one of the world’s largest malls, with a floor area of 12.1 million square feet – about eight times the size of VivoCity.

The next one will be an eight-screen cineplex in the Dubai Marina Mall. That makes it a total of 30 screens and a ‘total investment of US$30 million’, said Choo Meileen, Cathay’s executive director, in an exclusive interview. ‘Our share is 25 per cent – US$7.5 million.’

There will also be a management contract, in which Cathay will take care of the day-to-day running of the cinemas.

Ms Choo says the partnership with Emaar – the largest property developer in the Middle East – paves the way for the Cathay group to expand into areas it would not have been able to penetrate on its own. ‘It gives us an opportunity to make use of the expertise we have gained over the years, which is what I’ve always wanted to do – that is, manage cinemas for people,’ she said.

Even if not all 150 malls have cineplexes, the scope is still amazing, said Ms Choo. ‘When we did our research, we found that there was no one big chain throughout the Middle East. That is because many of the cinemas are stand-alone (single- screen), mom-and-pop operations. So the potential for the cineplex is very great. This joint venture will change the way cinemas are run in the Middle East.

‘This deal plays a significant role in Cathay’s long-term investment, added Ms Choo. ‘The Singapore market is already saturated – it’s a very mature industry in terms of cineplexes. But in the Middle East it’s like being in the 1980s, or 20 years before cinemas became cineplexes.’

Rashid Zakaria Doleh, chief executive officer of Emaar Malls Group LLC, said: ‘This joint venture supports Emaar’s overall Vision 2010 to become one of the world’s most valuable companies through aggressive expansion strategies. The ultimate goal of the joint venture is to be the biggest and best provider of world-class lifestyle and entertainment across the region.’

Mr Doleh said that the company has plans after The Dubai Mall. ‘We are currently developing Cairo Gate, the largest mall in Egypt, in addition to two other developments: Uptown Cairo and New Cairo City. All three malls will have cinemas upon completion in the next five years. Beyond Egypt, key markets on the horizon with a cinema operation are Morocco, India, Pakistan, Syria, Saudi Arabia and Turkey.’

Currently, Cathay manages 41 cinema screens in Singapore and 33 in Malaysia. Ms Choo said that, thanks to the partnership with Emaar, ‘Reel Entertainment could become one of the biggest cinema exhibitors in the world’.

Source : Business Times – 30 Oct 2007

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