Don’t Blame ‘House Lust’ For US Property Funk

Source : The Business Times, April 8, 2008

DID McMansion fever cause the US housing bust? Now that the home crisis finger-pointing season is in full swing, it’s a good time to take a look at how ‘house lust’, as author Daniel McGinn calls it, affected the property market.

Crumbling market: Realtors inspecting a foreclosed house in Leesburg, Virginia, placed back on the market for more than US$1 million last December. Status- seeking has been described as a root cause of the US housing crisis. But it likely went much deeper than that, as a combination of the American Dream and a mass amnesia of economic reality took hold

McGinn, who recently published a book on the topic, points to a convergence of personal economics and good old-fashioned status-seeking as one of the root causes of the crisis. More likely, it went much deeper, as a combination of the American Dream and a mass amnesia of economic reality took hold.

Identifying ‘primary drivers’ for what caused house lust, McGinn cites the revolution in home finance. Many homebuyers, whose only qualification for a mortgage was a human pulse, qualified for large loans. As rates dropped in the last decade, homeowners also operated like ‘mini-CFOs, deciding just how much of their wealth to keep in their houses’, he writes.

Millions figured if home prices were going to keep climbing at double-digit levels, whatever they pulled out of their homes in refinancing or home-equity loans would be replaced by appreciation.

As we know now, that didn’t happen and far too many homeowners ended up with more debt and almost no equity.

Those that took the equity-gain bet with little or no downpayment are looking at a losing hand as home prices and sales continue to fall in most US markets. Even Manhattan apartment sales, which were until recently immune from the slump, dipped 34 per cent in the first quarter - the most in 18 years.

Slide in equity

The massive vacuuming of home equity has been huge in recent years and is a far cry from the way Americans saved after World War II.

Home equity fell to about 48 per cent of total household real-estate holdings in the fourth quarter of 2007, the lowest level since the Federal Reserve began keeping records in 1951.

Americans used to store equity in their homes like a well-stocked larder. In 1952, American homeowners maintained more than 80 per cent of the value of their homes in equity, according to Michael Rizzo, a senior economist at the American Institute for Economic Research, based in Great Barrington, Massachusetts.

Homeowners have ‘taken on larger debt to buy their homes and increasingly spend down their equity via home-equity loans’, Rizzo says.

A generation or two ago, McGinn says, ‘the average family took out a 30-year mortgage, which they intended to pay off one day. There were no home-equity lines of credit, refinancing was unusual and whatever wealth a homeowner built up in the house stayed there until it was sold. No more.’ During the housing boom, homeowners became speculators, making double wagers on the bond market maintaining or providing low rates and properties delivering guaranteed appreciation.

This Las Vegas attitude towards homeownership was aided and abetted by the built-in cultural bias that homeownership was a solid investment, not a gamble. Is the irony lost that the state with the highest foreclosure rate through February was Nevada? Not only was home gambling legal in Nevada, it was permitted in every state as mortgage brokers, banks and Wall Street got in on the action.

Hypnotised by the dual mantras ‘buy as much house as you can afford’ and ‘your home is your retirement plan’, Americans were sold on the home-as-investment mythology.

Home investors also stopped or slowed their investing in non-real-estate assets as the nation’s savings rate turned negative in 2005. Why squirrel away money in stocks or bonds when your house is a veritable cash machine? Since financing was cheap and popular optimism irrational, the participants in the boom felt like they were on a run at the craps table. So they upped the ante by buying bigger houses.

The average new-home size is more than 2,500 square feet, according to the National Association of Homebuilders, a Washington-based trade group.

That compares with 1,600 square feet in 1973. The number of single-family homes with three bathrooms or more has doubled in that period.

Almost 40 per cent of new homes have at least four bedrooms, compared with less than 25 per cent in 1973. Twice as many houses have three bathrooms or more compared with 1987.

Status was a powerful force in the building of ever-larger homes. Those who wanted to make their neighbours envious leveraged up to build three- and four-car garages, master suites and commercial-quality kitchens that would make Wolfgang Puck jealous.

Moving up into fancier digs didn’t get the housing market into its current morass, though.

Homes aren’t investments

Since McGinn focused on the nation’s physical obsession with home amenities, I was disappointed he didn’t explore more of the economic maladies. The long-term reality is that homeownership in non-bubble times is unlikely to beat inflation once you subtract maintenance, taxes and financing costs.

Yale economist Robert Shiller estimates that homes gained an average of 0.4 per cent annually from 1890 to 2004.

With the exception of rental properties, residential real estate produces no earnings or dividends. It doesn’t split like profitable stocks. The cost of ownership always goes up. If this is a love affair gone sour, then a new focus on building equity and the laws of supply and demand will make for a quicker housing rebound. — Bloomberg

John F Wasik, author of ‘The Merchant of Power’, is a Bloomberg News columnist. The opinions expressed are his own

When Doing Good May Worsen The Home Crisis

Source : The Business Times, April 8, 2008

IN AMERICAN politics, it is imperative to be seen as ‘doing good’. The present housing crisis is a case in point, as Congress now seems increasingly intent on aiding millions of homeowners who can’t easily pay their mortgages and may face foreclosure. This sort of rescue looks good, even though it is a bad idea and might perversely delay the housing recovery.

Estimates of defaults in 2008 run up to two million. If realised, that would be roughly twice the 2006 level and about 2.7 per cent of the nation’s 75 million owner-occupied homes. It would be the highest rate since World War II but well below much higher rates during the Great Depression, says economist Kenneth Snowden of the University of North Carolina at Greensboro.

The best-known congressional proposal comes from Barney Frank, chairman of the House Financial Services Committee. It would authorise the Federal Housing Administration (FHA) to guarantee US$300 billion of new home loans to strapped homeowners, allowing them to refinance their existing mortgages at lower rates and lower outstanding amounts. Under it, homeowners who borrowed from Jan 1, 2005, to July 1, 2007, would be eligible for new loans if their monthly payments of interest and principal exceeded 40 per cent of their income.

Existing lenders would have to take a sizeable writedown to qualify for having their loans repaid by the government. The FHA would pay the existing lender no more than 85 per cent of the property’s present appraised value; the FHA would then charge the homeowner for a loan at 90 per cent of the appraised value. The extra 5 per cent is a cushion against losses. (Example: A US$200,000 home with a 100 per cent mortgage has already declined by 10 per cent to US$180,000. The FHA loan repays the existing lender 85 per cent of that, about US$153,000. The existing homeowner’s new loan is at 90 per cent of that, or US$162,000.)

Everyone wins from this arrangement, say its supporters. Homeowners stay in their houses. Neighbourhoods don’t suffer the potential blight of numerous foreclosures. Housing prices don’t go into a free fall, depressed by an avalanche of foreclosures. Although lenders take a loss, the losses are lower than they would be if homes went into foreclosure. That’s a costly and lengthy process that could involve losses of 50 per cent or more.

The Frank proposal and others like it put politicians on the barricades, trying to protect needy homeowners. The imagery is flattering. But there are two glaring problems: one moral, the other economic.

About 50 million homeowners have mortgages. Who wouldn’t like the government to cut their monthly payments by 20 or 30 per cent? But the Frank plan reserves that privilege for an estimated 1-2 million homeowners who are the weakest and most careless borrowers. With the FHA now authorised to lend up to US$729,750 in high-cost areas, some beneficiaries could be fairly wealthy. By contrast, people who made larger down payments or kept their monthly payments at manageable levels would be made relatively worse off.

Government punishes prudence and rewards irresponsibility. Inevitably, there would be resentment and pressures to extend relief to other ‘needy’ homeowners.

The justification is to prevent an uncontrolled collapse of home prices that would inflict more losses on lenders and postpone a revival in home buying and building. This gets the economics backwards. From 2000 to 2006, home prices rose by 50 per cent or more by various measures. Housing affordability deteriorated, with home buying sustained only by a parallel deterioration of lending standards. With credit standards now tightened, home prices should fall to bring buyers back into the market and to reassure lenders that they’re not lending on inflated properties.

If rescuing distressed homeowners delays this process, the aid and comfort that government gives some individuals will be offset by the adverse effects on would-be homebuyers and overall housing construction.

Of course, there are other ways for the economy to come to terms with today’s high housing prices: a general inflation, or mass subsidies for home buying. Neither is desirable. None of this means lenders and borrowers shouldn’t voluntarily agree to loan modifications that serve the interests of both. Foreclosure is a bad place for most creditors or debtors. Although the process is messy, promising to lubricate it with massive government assistance may retard it as both wait to see if they can get a better deal from Washington, which would then assume the risk for future losses. — The Washington Post Writers Group

The Fine Line Between Confidence, Complacency

Source : The Business Times, April 7, 2008

THERE’S a fine line between confidence and complacency and markets are currently treading dangerously close to it - the US Federal Reserve’s actions may have calmed some nerves for now, but there is the very real likelihood that Wall Street has moved too far into a complacency zone and may not have fully appreciated the magnitude of the slowdown ahead.

One sign of this, for example, is that experts including Fed chief Ben Bernanke himself are still debating whether the US is in recession, as if there is any doubt. At last week’s Senate testimony, Mr Bernanke said the US economy ‘may contract’ in the first half, clearly reluctant to admit present reality.

Research house Ideaglobal, however, has no qualms calling a spade a spade: ‘The US economy saw some unequivocally bad news on Friday. Non-farm payrolls revealed that the US economy shed 80,000 jobs in March, versus a loss of 76,000 in February and 76,000 in January. The February and January numbers were revised upwards from 63,000 and 22,000 respectively which add up to -67,000 in back-to-back revisions…

‘The data clearly confirms that the US economy is in recession. As a result, expectations for a 50 basis point cut by the FOMC (Federal Open Market Committee) at its April 30 meeting rose to 36 per cent from 20 per cent on Thursday.’

Ideaglobal also expects more downward revisions in the months ahead. ‘The recession that has yet to enter its most intense phase will continue to extract a painful price in terms of overall output and productivity… we expect the shape of the recession will see one trough reached in spring 2008 and another in the early winter of 2009.’

Either confident or complacent - readers should judge for themselves - is BCA Research, which said in its second-quarter strategy outlook that the bear market has ended and that investors should start buying now. ‘Our sense is that monetary reflation may be slowly winning the battle against deflationary pressures coming from the housing meltdown, financial de-leveraging and retrenchment in banking activity,’ said BCA.

It used various indicators to arrive at this conclusion, including sentiment indicators like insider buying/selling and the spread between the two-year Treasury and federal funds rate. In its haste to call a market bottom, BCA may have forgotten that the end of a bear market does not necessarily herald the start of a new bull market.

DBS Bank recognises this important point in its second-quarter regional equities strategy in which it said ‘we remain cautious about the second quarter because of the buildup of risks in the US credit market and economy. We expect earnings forecasts and downgrades to bite, leading to further adjustments in stock prices globally’.

It added that although expectations are that the US will recover in the second half, it believes the negative news flows have yet to run their course as risks increase.

‘The conviction for a second-half recovery now is not as high as compared to the first quarter. Risks we are seeing now include: 1) magnifying of US credit rick, 2) balancing of US inflation risks that could lead to a lack of relief from rate cuts, 3) little bearishness in terms of growth and earnings forecasts, implying room for downward revisions, 4) a potential Europe slowdown that has not been priced in, 5) high correlation between US and Asian equity markets, 6) a slowdown in Asia’s growth on its own cyclical dynamics.’

A best-guess is that the ‘confidence’ in stocks over the past fortnight has come solely because short-covering has helped to keep the upward momentum going, aided no doubt by hedge funds which have had an awful first quarter and are looking to quickly redeem themselves.

In other words, markets know that the excesses built up over six years cannot be purged in a few months but are riding the momentum for the time being, in the hope that the Fed’s actions have bought them enough time to make some quick money.

DBS is probably right in saying that investors should ‘go defensive’ in the second quarter because it’s unlikely that markets can continue to shrug off repeated doses of bad news as they seem to have done in the past week, nor can they cope when below-par earnings start to be reported.

四美路一地段 将兴建私人组屋

《联合早报》Apr 8, 2008

建屋发展局推出四美路一个地段供私人发展商在设计、兴建和销售计划（Design, Build and Sell Scheme，简称DBSS）下投标发展组屋。这是建屋局推出供兴建私人组屋的第五个地段，前四个地段位于碧山24街、淡滨尼6道、文庆路及宏茂桥52街。

四美地段面积有1万6826平方公尺，总建筑楼面约3万5334平方公尺，楼高限制在49公尺（约等于16层楼组屋的高度）。

同前三个地段一样，建屋局规定发展商必须建造至少三成的四房式（面积95平方公尺）或更小型单位，以确保有足够小型单位供选购。

建屋局文告说，新地段位于完全发展组屋区，毗邻四美地铁站和东福坊购物中心。附近有不少学府，也有多种消闲设施。

博纳集团（PropNex）总裁伊斯迈说，新地段距离地铁站只有1公里，加上位于完全发展的组屋区，相信会吸引发展商热烈竞标，也会吸引不少人选购。

他透露，四美地铁站附近一些五房式组屋目前的转售价平均是每平方英尺300元，因此，他估计这一批私人组屋的价位应该在每平方英尺450元左右。

莱坊（Knight Frank）研究部主管麦俊荣预计，新地段将吸引中型发展商和建筑财团竞标，标价将介于4900万至7000万元左右。他估计新地段可建320至360个单位，新婚夫妇和组屋提升者会是主要买家。

文庆路私人组屋已售72.8％

文庆路私人组屋City View@Boon Keng推出时吸引大批人抢购，后来却剩下250个单位卖不出，ERA房地产公司副总裁林东荣认为是因售价偏高所致。他相信标得四美路地段的发展商在开价时将趋于保守，不会将售价定得过高。他说，目前四美的五房式组屋转售价为40万至50万元，因此他估计新私人组屋的五房式单位售价将介于60万至70万元左右。

City View@Boon Keng已决定将选购活动延迟至所有单位卖完为止。据指出至今已售出72.8%组屋。

四美路私人组屋地段的招标工作从今天开始，截止日期是6月3日中午12时。地段地契期限为103年，成功得标的发展商必须在四年内完成建筑工程，然后以99年地契出售。

S’pore Home Prices Make 2nd Highest Jump Globally

Source : The Business Times, April 8, 2008

Bulgaria, with 33.7% surge, tops world index, beating S’pore’s 31.3% rise

THE average price of private housing in Singapore surged 31.3 per cent between Q4 2006 and Q4 2007 - the second-biggest jump in a world index topped by Bulgaria at 33.7 per cent.

Knight Frank tracks average prices worldwide via its Global House Index, which is based on an assessment of price changes in the mainstream housing markets of countries covered.

According to the index, Russia, Poland and Hong Kong, with respective hikes of 30, 22.4 and 22.3 per cent, ranked third, fourth and fifth.

However, price growth across the markets covered in the index fell year on year in the final quarter of 2007.

Knight Frank said price inflation globally during the year was 8.2 per cent, compared with 9.7 per cent the year before.

Knight Frank’s head of residential research Liam Bailey said that while property prices in Europe and America appear to be, ’suffering from the downturn in economic conditions’, prices in Asia and elsewhere, notably Singapore and Hong Kong, are performing well. Besides Singapore and Hong Kong, other Asian countries where home prices increased last year include China and Indonesia, which ranked 12th and 17th in the index with respective increases of 10.5 and 4.7 per cent. Knight Frank said prices in Singapore rose steadily for all types of property, especially apartments.

It said that in Hong Kong, almost half of the growth in prices happened in the last quarter of 2007 alone.

In China, home prices in 70 cities rose 10.5 per cent in 2007, with Shanghai’s 10.8 per cent growth marginally exceeding the national average.

Figures for December 2007 showed prices in Beijing fell as policies aimed at cooling speculative investment were introduced.

Shenzhen also saw a fall in prices towards the end of the year after credit was tightened in mid-2007.

Of Knight Frank’s list of top-30 countries with price movements, only five countries registered falls - the US, Germany, Latvia, Ireland and Estonia.

Underscoring the volatility of certain markets, Mr Bailey noted: ‘The most outstanding feature in this index in Europe is Bulgaria’s continued strong showing against the astonishing reversal of fortune witnessed in the three Baltic countries.’

Two of the three; Latvia and Estonia, suffered negative growth of -7.1 and -14.5 per cent, while prices in Lithuania grew only one per cent.’

He said that a year earlier, these countries saw respective price increases of 66.6, 23.8 and 23 per cent.

Home Leases Stagnant For 2 Years, Still Looking Soft

Source : Tne Business Times, April 8, 2008

Foreigners could be switching from leasing to buying property, says Savills Singapore

Residential leasing transactions have stagnated in the past two years after falling from a recent high of 33,874 in 2005.

According to an analysis of Urban Redevelopment Authority data by Savills Singapore, transactions were about 15 per cent lower at 28,928 in 2006 and 28,893 in 2007, versus 2005.
















Savills Singapore director of marketing and business development Ku Swee Yong said that as leases are generally renewed on a two-year basis, the drop between 2005 and 2006 should imply a rise in 2008.

But figures for the first two months of this year indicate that residential leasing is not likely to pick up. Indeed, Savills’ analysis reveals only 3,495 transactions.

The lowest number of quarterly transactions since the start of 2000 was 4,024 in Q1 2003, while the high of 9,917 was recorded in Q3 2005.

Mr Ku, who reckons foreigners make up about 90 per cent of the leasing market here, said it will be important to watch the figures over the next few quarters.

He thinks fewer financial-sector expatriates may relocate here due to the global credit crunch.

But according to some foreign business associations, there has been no let-up in the influx of expatriates so far.

American Chamber of Commerce executive director Dom LaVigne said: ‘Due to the strong business conditions in Singapore and based on what we’ve heard from our members hiring more employees, we think that the number of American expats living here will continue to rise in the coming years. Two years ago, there were 14,000 Americans in Singapore. Today there are 15,000 Americans and more than 3,000 US businesses here.’

The number of British expatriates here has also increased over the past two years, with the British Chamber of Commerce (BCC) saying about 20,000 British nationals now live in Singapore.

BCC spokesman Roman Scott, who is also managing director of the Calamander Group, said: ‘Although everyone is moaning (about rents), it’s mourning the end of a particularly good deal, not complaining that the recent sharp rises are unfair.’

BCC, which tracks the cost of housing and offices, believes the rise in rents is a function of market forces and a ‘long-overdue cyclical correction from artificial lows’.

Pointing out that rents fell sharply 10 years ago, Mr Scott said: ‘Given that real wages and wealth have actually risen in those 10 years in Singapore, this means rents are still cheaper in real terms than the previous high 10 years back, and affordable compared with other global cities, particularly Hong Kong and Tokyo.’

Rents, however, have been increasing rapidly. Based on Savills’ basket of properties, rents for high-end homes increased about 30 per cent year on year in Q4 2007. Savills noted that a 2,885-sq-ft unit at Ardmore Park was recently leased for $20,000 a month or about $7 per square foot (psf) a month.

For high-end properties, Savills says the quarterly average rent is now $6.68 psf a month.

January saw a particularly low number of new leases, with just 1,474 transactions. District 10, the most popular district, suffered a 42.2 per cent drop to 203 transactions, compared with 351 a year earlier.

Other districts in the top five, including districts 15, 9, 14 and 16, saw transactions fall 39.2, 50, 19.8 and 43.2 per cent respectively.

A shrinking pool of leasing properties due to collective sales could have exacerbated the drop in numbers, especially in the prime districts. But as Savills’ Mr Ku points out, demand should have spilled over into other districts, keeping the overall number of transactions up.

He believes foreigners could be simply switching from leasing to buying property.

‘This was helped by the attractive low cost of mortgages in Singapore and also the favourable tax advantages foreigners from certain countries enjoy from owning properties in Singapore,’ he said. ‘We certainly saw many tenants convert from leasing to owning in 2006-2007, starting with a change in US Federal Tax on US nationals’ housing benefits overseas.’

A separate analysis of property data by Chesterton International seems to support this assertion.

Comparing data from 1995 - during the run-up to previous property market peak - and 2007, Chesterton’s head of research and consultancy Colin Tan notes that while the percentage of foreigners, including permanent residents (PRs), buying non-landed private property increased from 17.9 per cent in 1995 to 29 per cent in 2007, the percentage of acquisitions by PRs alone doubled from 6.7 per cent to 14.4 per cent.

The relevance of this, according to Mr Tan, is that PRs tend to buy for owner-occupation while foreigners are more likely to buy for investment.

He said: ‘In recent years we have seen many purchases by Indian and Chinese nationals who are buying for owner-occupation, not investment. These people eventually become citizens. I personally know a number of them.’

S’pore Grade A Office Rents Continue To Rise In Q1

Source : The Business Times, Apr 8, 2008

8.4% surge driven by banks with eye on private wealth management in Asia

OFFICE rents in Singapore continued to power ahead in the first quarter of this year, despite a slowdown in the US economy and possible fallout for Asia.

According to a Jones Lang LaSalle (JLL) report, the CBD core Grade A gross effective office rent now stands at $17.35 per sq ft per month - an increase of 8.4 per cent from $16 psf per month in Q4 2007.

Landlord's market: With an excess of demand over available space, landlords are able to increase rates on lease renewals. Grade A office vacancy rate remained below one per cent in the first quarter

JLL said: ‘Amid a slowdown in the US economy, the Singapore office market remains positive with sustained rental growth recorded island-wide.’

Chris Archibold, JLL’s national director and head of commercial markets, said he was ‘quite surprised’ by the 8.4 per cent increase in Grade A rents, especially as it represents almost half of JLL’s projected rental increase of around 18 per cent for full-year 2008.

JLL says demand for CBD core office space continues to be driven by the banks and financial institutions, ‘many of which have set their sights on the burgeoning private wealth management in Asia’.

CBD core Grade B office rents rose by a more sanguine 11.2 per cent to $13.80 psf per month in Q1 2008 from Q4 2007. Noting the rise, Mr Archibold said CBD core Grade B office rents are ‘catching up’.

‘While Singapore office rental growth in Q1 2008 is some cause for optimism in this uncertain market, the increase in rental value is largely a spillover from the previous quarters,’ he said.

‘The supply environment will remain in the landlord’s favour for a few more quarters before any significant increase in supply tilts the balance towards the occupiers.’

Supply of office space here remains tight.

According to a report by CB Richard Ellis (CBRE), the Grade A vacancy rate remained below one per cent in the first quarter of the year, even though at 0.6 per cent it was slightly higher than the 0.2 per cent rate in Q4 2007.

CBRE executive director (office services) Moray Armstrong said: ‘There is currently an excess of demand over available space and landlords will still be able to achieve high rents on rent and lease renewals due to the absence of alternatives for occupiers. Further rental advancement is likely in selected buildings that enjoy full occupancy.’

According to CBRE, prime rents averaged $16 psf per month while Grade A rents averaged $18.65 psf per month in Q1 this year, reflecting respective increases of 6.7 per cent and 8.7 per cent from the preceding quarter.

CBRE noted that the rate of increase in Q1 2008 moderated compared with the four quarterly increases in 2007.

It also estimates that 10.3 million sq ft of office space could be completed between 2008 and 2012, the bulk of which will come on stream in 2010 and 2011.

Mr Armstrong said: ‘The overall volume of confirmed office supply does not appear excessive, but we believe the government needs to be sensitive to the forces of demand and supply - prudence in future Government Land Sales programmes is required.’

Growth Seen In Asia Office Rentals In ‘08

Source : The Business Times, April 8, 2008

But analysts say some cities, including S’pore, may see slowing rental growth

BUOYED by limited office supply in some cities and high GDP growth, all major office markets in Asia are expected to see rental growths in 2008, but the pace of growth will vary from city to city, property analysts say.

Upside trend: Data from Cushman & Wakefield shows rents at Raffles Place in Singapore (above) have risen 100 per cent in the last year as against Hong Kong's 15 per cent. According to some reports, it is now more expensive to take up office space in Singapore than in Hong Kong

‘Across the board, we still see positive demand for office markets across Asia,’ said Megan Walters, director of research and business analytics for Asia Pacific at Cushman & Wakefield (C&W). ‘But obviously the problems in the financial markets in the US have not been played out yet, and we have yet to see how it will affect investment markets in the region.’

The firm expects all offices markets in key cities across Asia to record increasing rents in 2008. However, about half the cities profiled - Singapore, Beijing, Shanghai, Chengdu, New Delhi, Mumbai, Kuala Lumpur and Bangkok - are expected to see slowing rental growth. The other cities - Hong Kong, Tokyo, Seoul, Taipei, Bangalore and Ho Chi Minh City - are still seeing accelerating rental growths.

Industry players here will perhaps be most interested in what is happening in Singapore and Hong Kong - long been seen as rivals in the region as a centre for international office services. The slowing rental growth in Singapore will be welcomed by many on the back of fears that the Singapore office market was overheating.
















Rents here have been pushed up over the last few years mainly by expansion in the financial services sector owing to factors such as domestic growth, economic restructuring that resulted in the expansion of the service industries as well as the influx of both regional and global jobs into the market.

Rentals are not just climbing - they are climbing at a pace faster than ever seen before. Industry veterans have expressed fears that this could make Singapore less competitive compared with Hong Kong, where rents are rising at a more sedate pace.

For example, data from C&W shows that rents at Raffles Place in Singapore’s Central Business District (CBD) have risen 100 per cent in the last year unlike Hong Kong’s more moderate 15 per cent. And according to some reports, it is now more expensive to take up office space in Singapore than in Hong Kong.

Data released by Jones Lang LaSalle (JLL) yesterday shows that CBD core Grade A gross effective office rent in Singapore for the small space category (less than 10,000 square feet) stands at $17.35 per square foot per month (psf pm), up 8.4 per cent quarter on quarter from the $16.00 psf pm seen in Q4 2007. This is marginally higher than the quarterly rental growth of 7.4 per cent registered in Q4 2007, JLL said.

‘In comparison with Hong Kong, the current gross effective rent of Grade A offices in Hong Kong Central - equivalent to Raffles Place in Singapore - stands at US$15.10 psf pm,’ said JLL’s report. ‘This is some 21 per cent higher than Singapore’s CBD core prime Grade A gross effective rental value of US$12.50 psf pm (or $17.35 psf pm).’

However, things should even out with more supply coming onstream in Singapore. Market watchers say that the rate of rental growth will slow and occupancy rates will fall this year. ‘The growth in rental values is expected to moderate this year after a record increase in 2007,’ said Cheng Siow Ying, DTZ Debenham Tie Leung’s executive director.

Chris Archibold, head of commercial leasing at JLL, similarly noted that the rapid rental increase seen in Q1 2008 is mainly due to spillover demand.

He said: ‘While Singapore office rental growth in Q1 2008 is some cause for optimism in this uncertain market condition, the increase in rental value is largely a spillover from the previous quarters.’

And a new report by DTZ says that islandwide office occupancy dipped in the first quarter of 2008, easing half a percentage point quarter on quarter to 97.1 per cent. The dip followed a 0.1 point drop in Q4 2007 from Q3.

The average occupancy of office buildings at Raffles Place dropped half a percentage point to 97.8 per cent in Q1, while that at Marina Centre rose 0.7 percentage point to 99.8 per cent.

DTZ attributed the slight dips in occupancy partly to two office buildings coming onstream. Together, The Central and VisionCrest Commercial added some 538,100 sq ft of new office space - raising islandwide office stock one per cent quarter on quarter to 56.6 million sq ft. Both buildings are not even fully leased yet.

Some occupiers are beginning to exercise caution in their medium-term leasing requirements, DTZ’s Ms Cheng said. Going forward, the demand for CBD core office space in Singapore is expected to continue to be strong on the back of more demand from banks and financial institutions, many of which have set their sights on the burgeoning private wealth management in Asia.

But there will be some moderation for both rents and capital values. ‘Although the financial and business sector is still expected to remain robust, the more modest economic growth projected will see companies limiting their expansion of office space requirements,’ Knight Frank noted in a recent note. ‘Some landlords would also be more accommodating of tenants in order to attract or retain these users of office space.’

And for the rest of Asia, a lot depends on how the sub-prime crisis in the US plays out, property analysts said. The region’s investment markets - including for the office sector - are expected to emerge from the credit crunch better than their US or European counterparts.

Tulip Garden En Bloc May Be Called Off

Source : The Business Times, April 8, 2008

Buyer Bravo will ‘accept costly missed opportunity’ if it’s not granted payment extensions

The owners of Tulip Garden met over the weekend and BT understands that most of them have taken the view to rescind the $516 million collective sale to an associate company of Bravo Building Construction - if the second 5 per cent instalment due to them is not paid by the deadline of midnight yesterday.

BT understands the owners could not accede to the Bravo unit’s request for another extension to pay up the second 5 per cent instalment which was to have been paid yesterday, to June 7, as well as to extend the completion date of the transaction, which is when it would have to pay up the remaining 90 per cent of the purchase price, from May 28 to Aug 7.

However, Tulip Garden’s owners, through their lawyers, are understood to have informed Bravo yesterday that the payment deadline will not be extended and that they reserve their rights to rescind the sale.

A Bravo spokeswoman said yesterday the consortium buying Tulip Garden is seeking an ‘unconditional extension of time’ for making the two payments, that is, it is not prepared to make any further payment to the sellers in exchange for the extensions, until June 7.

If the sale is rescinded, Tulip Garden owners will keep the $25.8 million or 5 per cent of the purchase price they had been paid so far, BT understands.

‘If these extensions are not obtained, the consortium will accept this costly missed opportunity to develop a stunning 350-unit condo with unmatched features in a prominent Holland Road corner,’ Bravo said in a statement.

Bravo has a minority stake in the consortium buying Tulip Garden. The en bloc sale of Tulip Garden was approved by Strata Titles Board in February.

In its statement, Bravo said that it and its majority consortium partners for the purchase of Tulip Garden intend to complete the purchase. Bravo did not identify the consortium partners. ‘Since December 2007, major foreign institutional investors and a few local investors have expressed strong interest to form the consortium. The current turmoil in financial and stock markets matched with sporadic bad news have caused unforeseen delays in securing ultimate approvals to commit funds,’ Bravo said in its statement.

Bravo also indicated that approval for Tulip Garden’s sale from Strata Titles Board in February came earlier than anticipated. ‘Coupled with the consortium’s strategic decision to significantly increase equity to balance the current cautious lending by banks, the current deadlines for next payments have become too constricted and no longer practical,’ it added.

BT understands that Tulip Garden owners declined to further extend the completion date of the sale of Tulip Garden as the STB had already given its order for the sale, binding all owners to a sale, and the sales committee does not have the powers to vary the completion date of the sale beyond the originally agreed May 28. The date was based on three months from receiving the STB order for sale, as stipulated in the sale and purchase agreement for Tulip Garden inked last year.

Assuming Tulip Garden’s sale is rescinded, it may be a while before the prime District 10 site is back on the en bloc bandwagon. If owners wish to do a fresh en bloc sale, they would have to do it under revised collective sales rules that took effect in October last year and which are more stringent.

The $516 million deal for the property worked out to a unit land price of $1,018 psf per plot ratio. No development charge is payable.

Last month, the $162.8 million collective sale of Makeway View in the Newton area to another associate of Bravo was rescinded. BT reported that one per cent of purchase price paid by Bravo so far was forfeited.

Simei Site For Condo-Like HDB Flats

Source : The Straits Times, Apr 8, 2008

MORE condo-style Housing Board flats will soon be offered to home buyers looking to live in Singapore’s east side.

The HDB yesterday released a plum 181,108 sq ft site in Simei Road for tender - the fifth under its Design, Build and Sell Scheme (DBSS), which is open to private developers.

The 99-year site has a gross floor area of about 380,327 sq ft - enough for 360 homes.

Market watchers said developers will be keen on the plot due to its attractive location in a mature, established HDB estate just 10 minutes’ walk from Simei MRT station.

Knight Frank director of research and consultancy Nicholas Mak said the site, which could have residential blocks going up to 15 storeys, was likely to attract bids from medium-size developers and construction companies. He projected offers ranging from $49 million to $76 million, or $130 to $200 per sq ft per plot ratio.

The new site tender comes after National Development Minister Mah Bow Tan said recently that HDB will cater to buyers with different aspirations by providing a range of housing options. But the minister also stressed that standard flats built by HDB will continue to be the main stock of new supply.

A further two DBSS sites - in Toa Payoh and Bedok - are expected to be released soon. These and the Simei site could mean up to 1,500 new public condo-like flats coming on to the market.

That figure is 4,000 if flats earmarked for the four sites already released - Tampines, Boon Keng, Ang Mo Kio and Bishan - are included.

Flats at City View @Boon Keng, comprising three- to five-room units, were offered at between $349,000 and $727,000 - about $520 psf. The Simei tender closes at noon on June 3.

HDB Launches Fifth DBSS Site At Simei

Source : The Business Times, April 8, 2008

THE Housing and Development Board (HDB) has launched a fifth Design, Build and Sell Scheme (DBSS) site at Simei Road for sale.

According to Nicholas Mak, director of consultancy and research at Knight Frank, the site may fetch between $49 million and $76 million, or $130 to $200 per square foot per plot ratio (psf ppr), and is likely to attract bidders such as medium-sized developers and construction companies.

The Simei site is the first to be offered under the scheme this year and has a site area of 16,825.5 square metres, with an allowable gross floor area of 35,333.55 sq m.

Property consultants considered the site attractive as it is located in a mature estate with comprehensive facilities. The site is a short walk from Simei MRT station and East Point Mall, and is also close to schools such as Anglican High School.

Director of marketing and business development at Savills Singapore, Ku Swee Yong, noted: ‘Demand should be strong with recent announcements by the MNCs and foreign banks that they are pushing backroom services into Changi’s office and industrial parks.’

He estimated that the Simei site may fetch between $57 million and $60 million, or $150 to $160 psf ppr.

On the supply side, Mr Mak pointed out: ‘As there has not been any major launch for a mass-market residential project in the Simei and Tampines areas, flats in the DBSS development at Simei Road will be more appealing to purchasers.’

He expected the site to take about 320 to 360 units.

The tender will close on June 3 at noon.

Under the DBSS, private developers undertake the design, construction and sale of public housing. Flats sold under the scheme come with a 99-year lease and buyers have to meet HDB eligibility conditions similar to those set for HDB-developed flats.

HDB awarded the fourth DBSS site in Bishan to Qingdao Construction Group in February, which put in a bid of $135.9 million or $237 psf ppr.

HDB plans to launch another two DBSS sites in Toa Payoh and Bedok.

Royalville Back With Lower En Bloc Price Tag

Source : The Business Times, Apr 8, 2008

New asking price of $1,106 psf per plot ratio is 10-15% less than before

ANOTHER en bloc sale property is back on the market with a lower asking price.

Royalville in Bukit Timah, off Sixth Avenue, has been relaunched - this time with a 10-15 per cent lower asking price than in October last year.

Second chance: Royalville is now being marketed together with adjoining drainage reserve, with a combined asking price of about $305 million. Some 140 units of an average size of 2,000 sq ft each can be built on the sites

However, the property is still being launched based on last year’s collective sale agreement signed under the old rules and the reserve price is believed to be the same.

Last year, Royalville’s asking price was $330-350 million, which worked out to $1,235 to $1,305 per square foot (psf) of potential gross floor area, including development charges (DC) at the time.

This time, the 174,176 sq ft freehold Royalville site is being packaged with an 8,420 sq ft adjoining drainage reserve being sold by the Official Receiver.

The two properties, which are being marketed by Credo Real Estate, have a combined asking price of about $305 million.

This reflects a unit land price of $1,106 psf per plot ratio inclusive of $6 million DC for the two sites.

The site can be developed into a new condominium with about 140 units of an average size of 2,000 sq ft each.

Based on a land price of $1,106 psf ppr, the breakeven cost for a new condo on the site should be about $1,700 psf, Credo said.

‘New residential developments nearby such as Duchess Residences are transacting in the price range of above $2,000 psf,’ it added.

Last week, Jones Lang LaSalle relaunched Pinetree Condominium located in the Balmoral area at an indicative price of about $1,700 psf ppr, about 20 per cent lower than the previous indicative price of $2,100 psf ppr seven months ago.

Royalville: For Sale Again, But Cheaper

Source : TODAY, Tuesday, Apr 8, 2008

In what could be another sign of the cooling en bloc market, a site off Sixth Avenue has been put back on the market at a discount, after it did not attract a single bidder at first go.















The reserve price for Royalville has been cut to $305 million - down 13 per cent from the minimum $350 million asked last October.

This new price works out to $1,106 per square foot (psf) per plot ratio after development charges. Credo Real Estate, which is managing the sale, says developers should now be able to break even at $1,700 psf. Other new developments in the area, like Duchess Residences, have been selling for above $2,000 psf.

Credo executive director Tan Hong Boon said: “With the reputable schools nearby, the new development should be popular among expatriates and families with school-going children.”

Royalville currently comprises 93 residential units and 11 shops. It can be redeveloped into a five-storey complex holding 140 apartments of around 2,000 sq ft each.

A record $12.5 billion worth of collective sales were transacted last year, but the market appears to be cooling, with some failing to attract bidders.

Other unsuccessful tenders have included Dunearn Gardens, Cavenagh Gardens, The Village, Amber Glades, Grange Heights, Thomson View Condominium and, most recently, Makeway View.

U.S. Financial Crisis: Why The Fed Rushed To The Rescue

Source : The Straits Times, Apr 8, 2008

Timothy Geithner, president and chief executive officer of the Federal Reserve Bank of New York, testified before the US Senate Banking Committee last week on the US financial crisis. Below is an excerpt of his testimony.

THE intensity of the crisis we now face in United States and global financial markets is a function of the size and character of the financial boom that preceded it.

This was a period of rapid financial innovation - particularly in credit risk transfer instruments such as credit derivatives and securitised and structured products. There was considerable growth in leverage, greater reliance on ratings on structured credit products and a marked deterioration in underwriting standards.

The innovation in financial products was accompanied by a dramatic increase in the amount of financial intermediation occurring outside the core banking system. The importance of securities broker-dealers, hedge funds and mutual funds in the financial system rose steadily. Off-balance-sheet vehicles of various forms proliferated, and increased concentrations of longer-dated assets were held in funding vehicles with substantial liquidity risk.

The deterioration in the US housing market last summer precipitated a sharp rise in uncertainty about the value of securitised assets. Demand for these assets contracted dramatically and the securitisation market for mortgages and other credit assets stopped working. This increased funding pressures for a diverse mix of financial institutions. Uncertainty about the magnitude and the level of losses for financial institutions fuelled concern about credit risk in exposure to those institutions.

Part of the dynamic at work was that banks were forced to provide financing for - or take over - the assets in a range of structured investment vehicles and conduits financed by asset-backed commercial paper. As some investors attempted to liquidate their holdings of these assets, many of the traditional providers of unsecured funding to banks pulled back from their counterparties in anticipation of the potential withdrawals of funds by their own investors.

Market participants’ willingness to provide term funding even against high-quality collateral declined dramatically. As a result, the cost of unsecured term funding rose precipitously and the volume shrunk. Banks were funding themselves at shorter and shorter maturities. As unsecured term funding markets deteriorated, the premium on liquid marketable collateral - such as Treasury securities - rose considerably.

Even with the dramatic actions by the Federal Reserve and other central banks to address these liquidity pressures, the strains in financial markets persisted. In many respects, conditions worsened in February and last month.

Credit spreads on financial institutions widened, equity prices declined and market functioning deteriorated. By the early part of last month, the threat of a disorderly adjustment was growing.

What we were observing in US and global financial markets was similar to the classic pattern in financial crises. Asset price declines - triggered by concern about the outlook for economic performance - led to a reduction in the willingness to bear risk and to margin calls.

Borrowers needed to sell assets to meet the calls; some highly leveraged firms were unable to meet their obligations and their counterparties responded by liquidating the collateral they held. This put downward pressure on asset prices and increased price volatility.

Dealers raised margins further to compensate for heightened volatility and reduced liquidity. This, in turn, put more pressure on other leveraged investors. A self-reinforcing downward spiral of higher haircuts forced sales, lower prices, higher volatility and still lower prices.

This dynamic poses a number of risks to the functioning of the financial system. It reduces the effectiveness of monetary policy, as the widening in spreads and risk premiums worked to offset part of the reduction in the Fed funds rate. Contagion spreads, transmitting waves of distress to other markets, from sub-prime to prime mortgages and even to agency mortgage-backed securities, to commercial mortgage-backed securities and to corporate bonds and loans. In the current situation, effects were felt in the municipal and student loan markets.

The most important risk is systemic: If this dynamic continues unabated, the result would be a greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole. This is not theoretical risk, and it is not something that the market can solve on its own. It carries the risk of significant damage to economic activity.

Absent a forceful policy response, the consequences would be lower incomes for working families; higher borrowing costs for housing, education and the expenses of everyday life; lower value of retirement savings; and rising unemployment.

I believe that the Federal Reserve System’s response has helped reduce the risk of systemic damage to the financial system, and thereby helped mitigate a potential source of downside risk to growth. This in turn has helped mitigate the risks to the broader economy.

It is important to recognise that a substantial adjustment, recognition of losses and reduction in risk have already taken place. And a range of different prices of financial assets now reflects a very cautious view of the future.

The severity of the pressures in markets evident over the last few months is in part a reflection of the speed and force with which markets and institutions in our financial system adapt to fundamental changes in the outlook. This capacity to adjust and adapt is one of the great strengths of our system.

Nevertheless, we still face a number of challenges ahead. The seeds of this crisis took a long time to build up, and they will take some time to work through.

Financial Transparency: Controlling The Private ‘Locusts’

Source : The Straits Times,Apr 8, 2008

THE full repercussions of the financial crisis triggered by bad mortgages in the United States are still unclear. But the unforeseen effects already include a demand for greater transparency in financial markets and better regulation.

One part of the financial markets not subject to the disclosure rules that apply to banks is hedge and private equity funds. Once small, the five biggest private equity deals now involve more money than the annual budgets of Russia and India. Assets in private equity and hedge funds stand at US$3 trillion (S$4.1 trillion) today and are expected to reach US$10 trillion by the end of 2010. The funds rely heavily on investment from pension funds, and on money borrowed from banks and other non-private sources.

Indeed, these private funds account for about two-thirds of all new debt. In short, they are a major challenge to financial stability. Unless regulated, they are likely to contribute to future crises.

The big private equity funds have proven to be a menace to healthy companies and to the European Union’s Lisbon Agenda, which aims to make Europe the world’s most competitive economy. Typically, they take over companies with borrowed money - often more than 80 per cent of the price. These ‘leveraged buy-outs’ leave the company saddled with debt and interest payments. A once profitable and healthy firm is milked for short-term profits, benefiting neither workers nor the real economy.

In Denmark, telecommunications company TDC was taken over by a group of private equity firms in 2005, with 80 per cent of the purchase financed by borrowing. The company’s debt-to-asset ratio leapt from 18 per cent to 90 per cent as company reserves for long-term development - essential in the telecoms industry - were used to service the loan.

These funds are also largely tax-exempt, often because they are registered offshore, although they operate from the world’s major onshore financial centres. One fund manager admitted that he paid less tax than his cleaning lady. In the US, it has been calculated that the funds cost between US$2 billion and US$3 billion in lost tax revenues - an amount three times that of the EU’s budget for humanitarian aid.

Trade unions in Britain, Germany, Canada and elsewhere have long pointed to the damage caused by leveraged buy-outs. So have such senior politicians as former German vice-chancellor Franz M�ntefering, who described private equity funds as ‘locusts’, as well as leading Democrats in the US Congress. The European Parliament’s Socialist Group, Britain’s House of Commons and the Australian Parliament have all investigated these private funds.

At the EU’s autumn summit, British Prime Minister Gordon Brown, German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed in a joint statement that more transparency is needed in financial markets. In a separate move, Mr Brown promised to close any legal loopholes that enable hedge fund managers to exempt themselves from paying taxes.

Both the private equity and hedge fund industries reacted by publishing voluntary codes of conduct. Mr Paul Marshall, a hedge fund chairman, told the Financial Times that he hoped voluntary action by the industry ‘will take the pressure off’. At least that was transparent.

Nobody wants to demonise or unnecessarily restrict private equity and hedge funds. Venture capital’s investment in innovative and high-risk new companies highlights their potentially useful role. But this accounts for only a minor part (5 per cent) of the private equity industry. Given that the largest part of the industry (60 per cent) is based on leveraged buy-outs and extreme debt, it seems only reasonable to demand that they honour the transparency and tax rules accepted by everyone else.

Ultimately, private funds should be regulated globally. We can enact measures in each EU member state, but coordinated action by the EU and the US would be a realistic start. Private funds cannot operate without these two giant markets, and would have to comply with their requirements. The will to act exists in the EU. The White House’s current occupant is a more formidable obstacle to reform, but change is coming.

Even so, ensuring transparency and disclosure cannot fully address heavily debt-laden leveraged buy-outs, which would still be objectionable. There is a need to set a limit on the amount of debt that a company can accumulate, and change acquisition and merger legislation to include leverage. There is also a need to protect pension savings, which are now heavily invested in private equity. In short, we need a proper supervisory system for financial services.

There is still a lot of talking to do. Serious discussions are needed to reach EU-wide and inter-governmental agreements, and to encourage the US to move in the same direction. But, for the sake of our pensions, our savings, our jobs and our welfare states, the sooner change comes, the better.

By Poul Nyrup Rasmussen, president of the Party of European Socialists and a former Danish prime minister.

S$300m Warehouse Store Big Box To Open In Jurong East By 2009

Source : Channel NewsAsia, 07 April 2008

A S$300 million warehouse store will be open in Jurong East in the last quarter of 2009. The company behind the Big Box project, TT International, said the Jurong warehouse will be its flagship store.

Sitting on a 5.6-hectare site near the Jurong East MRT station, the outlet will be as big as 27 football fields put together with a total gross floor area of 120,000 square metres.

About 30 per cent of the space (34,000 square metres) will be set aside for retail, and the rest will be used for warehousing and offices.

The mega store will house a wide range of consumer electronics products, furniture and a hypermarket. It will also provide renovation and interior design services.

TT International said being mega will translate into savings for consumers.

Director of TT International Julia Tong-Sng explained: "We are an international trader, importer and distributor, so we have the advantage in costing."

When completed, the Big Box outlet is expected to generate over 600 jobs, which the company said will mostly go to Singaporeans.

TT International added that it hopes to tap into the pool of people living in Jurong, including housewives and semi-retired individuals, to overcome the problem of manpower shortage.

Up to three million people are expected to visit the store each year. TT International said it plans to organise exhibitions and cultural shows to draw the crowds in.

The company also aims to work with SPRING Singapore and retail institutions to help HDB shops around the area level up.

Ms Tong-Sng said: "We intend to organise, at least twice a year, (an event) to provide free space for the HDB shop owners... to display their products and make some sales, so that they can also participate in this kind of big-box concept. At the same time, we will also work with SPRING to provide training."

TT International, which has operations worldwide, also hopes to bring the concept of big-box store to Vietnam and Cambodia. - CNA/ac

Analysts Say Private Home Sales Have Peaked

Source : Channel NewsAsia, 07 April 2008

Sales of private properties have been sliding amid a standoff between buyers and sellers, say market watchers.

In February, sales for new launches were only one tenth of the record numbers seen in August last year.

Analysts also say that residential property prices may have finally peaked, although the fundamentals still support long-term growth.

URA's latest flash estimates showed private home prices rose 4.2 percent in the first quarter this year, much slower than the 6.8 percent pace in the last quarter of 2007.

Last year, property launches drew a crowd despite the extravagant price tags. But now, the market is paying for it in more ways than one. Prices are coming off their highs, leaving some buyers with significant losses.

Chesterton's head of research & consultancy, Colin Tan, said: "What has happened over 2007 is that prices have risen quite rapidly....Part of the reason prices have gone up (is) because people are valuing properties not for the moment but maybe 2, 3 years down the road. In that sense, prices have raced ahead of fundamentals."

Seen in that light, a correction was perhaps waiting to happen. Right now, few are willing to pay a premium for homes, and fewer still are willing to sell for less.

Chesterton's Colin Tan said: "There's a standoff between buyers and sellers. The question now is, of course, (for) how long can the sellers hang on. It all depends on the economy. If things get a lot more worse, you may find that some investors may have to give up their properties and so prices will start to correct."

"For the short term, home prices in high-end (places), especially districts 9, 10, 11 will remain flat or go through turbulence because they have gone up sharply. Some homes, which have gone up to $4,000 psf, will need the rest of market to catch up before they find further support," said Knight Frank's director, Nicholas Mak.

While URA flash estimates showed private property prices increased 4.2 per cent in the first quarter, the rise was only for a handful of properties.

Chesterton's Colin Tan said: "I'd say the market is healthier if prices only rose 2 per cent and on a stronger sales volume, like 5 or 6 times the current volume."

Still, the longer-term outlook appears to be positive.

Knight Frank's Nicholas Mak said: "(Sales) volumes could remain thin for another six or nine months, but I think that after that.....market prices and rentals will start to grow at a gradual pace. The Singapore property market has all the factors necessary for it to continue to grow."

Residential property prices grew by over 30 per cent last year. Analysts said the pace is too fast to be sustainable. A more palatable rate, they said, is 10 per cent. - CNA/ir

Royalville Condo Relaunched For Sale By Tender

Source : Channel NewsAsia, 07 April 2008

The owners of Royalville, a freehold mixed development along Bukit Timah Road, are giving the collective sale market another try.

They have relaunched the property for sale by tender, with an asking price of S$305 million. Including a development charge of S$6 million, this works out to a land rate of about S$1,106 per square foot of gross floor area.

Royalville is made up of 93 residential units and 11 shop units. Some 85 per cent of the owners had agreed to the collective sale before new laws on such sales took effect in October 2007.

Royalville has a land area of 174,176 square feet. Based on the 2003 Master Plan, the site is zoned for residential use, with a gross plot ratio of 1.4. The new development can be up to five storeys high.

The winning developer may incorporate an adjoining drainage reserve of about 8,420 square feet into the site, enlarging the land area to 182,596 square feet.

The drainage reserve is currently under the charge of the official receiver who has also appointed Credo Real Estate to act in the sale.

The new development on site could accommodate a condominium project with a gross floor area of 281,198 square feet. This will yield 140 apartment units with an average size of 2,000 square feet each.

The tender closes on 9 May. - CNA/vm

Owners Say Enbloc Sale Of Tulip Garden Has Been Called Off

Source : Channel NewsAsia, 07 April 2008

The enbloc sale of Tulip Garden, a freehold development in District 10, appears to be off.

Tulip Garden was sold in July 2007 in a collective sale valued at S$516 million. The property is along the prime Holland Road and Farrer Road area.

Channel NewsAsia understands that owners are now waiting to hear more details from the developer.

Bravo Building Construction bought Tulip Garden at more than S$1,000 per square foot and the sale was scheduled to be completed by May.

However, earlier reports stated that Bravo Building Construction was delaying the completion date and there was some talk that it was trying to arrange for alternative financing.

Some owners of Tulip Garden have already received their share of the deposit for the sale.

According to earlier reports, Bravo Building Construction has called off another enbloc sale - that of Makeway View in the Newton area and is also said to be delaying the completion date of the sale of Pender Court off West Coast Highway. - CNA/vm

HDB To Sell Simei Site Under Design, Build And Sell Scheme

Source : Channel NewsAsia, 07 April 2008

The Housing and Development Board (HDB) has launched the sale of a new site in Simei under its Design, Build and Sell Scheme (DBSS).

Analysts said the plot of land near the Simei MRT station should attract medium-sized developers and construction companies to bid between S$49 million and S$76 million.

With an area of over 16,000 square metres, an estimated 320 to 360 units can be built there.

A higher portion of bigger flats is expected to be built at the site, and analysts said they anticipate a healthy demand from new families and HDB upgraders.

This is the fifth plot of land offered under the DBSS.

One attraction of the site is the presence of many schools nearby, including Griffiths Primary School, Anglican High School, Tampines Junior College and Temasek Polytechnic.

Developers who are interested in the site have until 3 June to submit their tender.

Other recent developments under the DBSS include City View@Boon Keng, which costs S$520 per square foot on average. - CNA/ac

Simei Site For Condo-Style Flats Released

Source : The Straits Times, Apr 7, 2008

MORE condo-style Housing Board (HDB) flats will soon be offered to home buyers looking to live in Singapore's east side.

The HDB on Monday released a plum 181,108 sq ft site in Simei Road for tender - the fifth under its Design, Build and Sell Scheme (DBSS), which is open to private developers.

The 99-year site has a gross floor area of about 380,327 sq ft - enough for 360 homes.

Market watchers said developers will be keen on the plot due to its attractive location in a mature, established HDB estate just 10 minutes' walk from Simei MRT station.

Knight Frank director of research and consultancy Nicholas Mak said the site, which could have residential blocks going up to 15 storeys, was likely to attract bids from medium-size developers and construction companies.

Read the full story in Tuesday's edition of The Straits Times.

MORE condo-style Housing Board (HDB) flats will soon be offered to home buyers looking to live in Singapore's east side.

The HDB on Monday released a plum 181,108 sq ft site in Simei Road for tender - the fifth under its Design, Build and Sell Scheme (DBSS), which is open to private developers.

The 99-year site has a gross floor area of about 380,327 sq ft - enough for 360 homes.

Market watchers said developers will be keen on the plot due to its attractive location in a mature, established HDB estate just 10 minutes' walk from Simei MRT station.

Knight Frank director of research and consultancy Nicholas Mak said the site, which could have residential blocks going up to 15 storeys, was likely to attract bids from medium-size developers and construction companies.

Read the full story in Tuesday's edition of The Straits Times.

Office Rents Moderate In First Quarter Of This Year

Source : The Straits Times, Apr 08, 2008

Figures expected to stay strong due to high demand, tight supply, says CBRE

THE verdict is in: prime office rents - which shot up last year - have slowed down in the first three months of this year.

Like residential property, office rentals did appreciate in the first quarter but at a slower pace than in the four quarters last year, said property consultancy CB Richard Ellis (CBRE).

But unlike homes, offices will still be able to achieve high rents due to strong demand and a lack of supply, said CBRE in a report released yesterday.

Prime office rents were up 6.7 per cent at an average of $16 per sq ft (psf) per month in the first quarter, while Grade A office space - the best grade of space - climbed 8.7 per cent to average $18.65 psf.

By comparison, quarterly rises for Grade A space last year ranged from 13.7 to 23.6 per cent and 10.3 to 25.6 per cent for prime office rents.

CBRE said rising rents coupled with the lack of space in the Central Business District (CBD) led some companies to relocate to refurbished state properties such as 991 Alexandra Road and the Phillip Investors Centre at the former Moulmein Community Centre.

Supply remains tight with occupancy levels at 97.6 per cent in the core CBD and 97 per cent in decentralised areas.

Grade A vacancy remained below 1 per cent, but increased slightly from 0.2 per cent in the fourth quarter of last year, to 0.6 per cent in the first quarter of this year.

CBRE estimated that about 10.3 million sq ft of office space could be completed by 2012, with the bulk coming online in 2010 and 2011.

On the supply side, a transitional office site that could yield 180,000 sq ft at Mountbatten Road was awarded in January. Also, two sites at Scotts Road and Anthony Road, comprising 243,191 sq ft in total, were launched by the Urban Redevelopment Authority in late February but have yet to be awarded.

Government agencies are also slated to relocate from the CBD, freeing up 212,000 sq ft of office space.

CBRE's executive director of office services, Mr Moray Armstrong, said given the significant supply to come in the next few years, 'we expect some landlords may start to moderate rental expectations'.

The office market 'is likely to stabilise' and the supply does not seem excessive, but Mr Armstrong added that the government needs to be 'sensitive to the forces of demand and supply' and exercise prudence in future land sales.

He also added that pre-leasing activities are strong, especially in decentralised areas such as Tampines, Changi, Alexandra and HarbourFront due to cost-cutting measures taken by multinational companies.

Tulip Garden Sale Off? How The Deal Went

Source : The Straits Times, Apr 8, 2008

Condo owners likely to call off $516m en bloc deal after developer misses payment deadline

THE $516 million collective sale of Tulip Garden condominium near Holland Road seems to be dead in the water after the developer missed a payment deadline yesterday.

The condo owners appear poised to formally call off the deal and pocket a cool $25.8 million - the original 5 per cent deposit paid by developer Bravo Building Construction.

LOSS AND GAIN: Bravo will forfeit its $25.8 million deposit if the Tulip Garden sale is axed. Each owner could pocket over $100,000.

Bravo would forfeit the sum if the deal is scrapped. That would mean each of the 164 unit owners could pocket more than $100,000 on average.

The cancellation of a collective sale because of a cash crunch is a rare event. Bravo and its partners say they have had trouble raising the necessary funds.

Earlier this year, the $162.8 million collective sale of Makeway View in the Newton area was ditched by an associate of Bravo. The firm said a higher-than-expected development charge was the reason for backing out. A deposit of $1.63 million was reportedly forfeited.

Last Saturday, Tulip Garden owners held a meeting and indicated in an informal show of hands that they wanted to cancel the sale if Bravo missed the latest payment, also $25.8 million. This payment had already been delayed at Bravo's request from the middle of March.

By late yesterday, no payment had been made. Bravo was putting on a brave face but it was, in effect, accepting that the deal appeared to have been lost.

The developer had asked for more payment extensions - to make the next 5 per cent payment by June 7 and then complete the deal by Aug 7.

But based on last Saturday's meeting, the owners appear unlikely to agree.

Almost all the owners at the meeting indicated that they wished to call off the sale and keep the deposit if Bravo did not pay up by yesterday, according to the people present.

A Bravo spokesman said yesterday that the firm is now seeking an 'unconditional' extension of time.

'If these extensions are not obtained, the consortium will accept this costly missed opportunity to develop a stunning 350-unit condo with unmatched features in a prominent Holland Road corner,' she said. The condo is on the corner of Holland Road and Farrer Road.

Bravo inked a deal to buy the freehold site in July last year. It was due to have been completed late next month.

The Bravo spokesman said the firm has been seeking partners since November last year.

'The current turmoil in the financial and stock markets matched with sporadic bad news have caused unforeseen delays in securing ultimate approvals to commit funds,' said Bravo. It added that the Tulip Garden owners had consented to the sale earlier than anticipated.

'Coupled with the consortium's strategic decision to significantly increase equity to balance the current cautious lending by banks, the current deadlines for next payments have become too constricted and no longer practical,' it said.

Bravo added that it has tied up with two local and two foreign parties to buy Tulip Garden. But unless an extension is given, they will not be offering more money, said the spokesman.

She said that if Tulip Garden owners still want to attempt to sell en bloc, they may face an 'unwelcome lower bid price' given weaker market conditions.

Tulip Garden sold for about $1,018 per sq ft (psf), more than its earlier guide price of $900 psf in January last year. The development has 164 units comprising 96 flats, 66 maisonettes and two shophouses.

If the sale works out, flat owners stand to reap $2.5 million to $4.2 million while maisonette owners would receive about $3.4 million each. The shop units would get about $1.1 million each.

Amid last year's booming market, Bravo also made two other fairly large collective sale deals: Pender Court, off Telok Blangah Road, at $80 million in July last year, and Makeway View.

Bravo has postponed the completion of Pender Court's sale until late this month.

Given the slower market, more sellers are now open to lower prices. Yesterday, Royalville, a freehold mixed development off Sixth Avenue, was relaunched for sale en bloc at a lower indicative price of around $305 million.

It was offered for sale in a Nov 9 tender, which failed to attract bidders at its earlier guide price of $330 million to $350 million.


How the deal went

July 2007: Bravo Building Construction decides to buy Tulip Garden en bloc for $516 million. It later pays a 5 per cent deposit of $25.8 million.

February 2008: The Strata Titles Board approves the sale. The sale completion date is set for May 28.

March 13: Bravo is due to pay another $25.8 million, but asks for - and is granted - an extension of time until yesterday.

March 18: Bravo asks to extend the payment deadline from yesterday until May 5. It also asks to set back the sale completion date from May 28 to July 23.

March 24: Before agreement for its earlier requests can be given, Bravo asks for further extensions of time to pay by June 7, instead of yesterday, and to complete the sale by Aug 7, instead of May 28.

April 5: Owners indicate in an informal show of hands to cancel the sale and take the $25.8 million deposit if Bravo misses the payment deadline yesterday.