Developer's Profits Up 245% Despite Gloom

Source : The Straits Times, Dec 16, 2008

DEVELOPER Low Keng Huat has defied the gloom in corporate Singapore by reporting that its third-quarter net profit surged 245 per cent to $13 million.

Low Keng Huat's gross profits were lifted by the completion of construction projects such as Domain 21 last year. PHOTO: KHENG LONG CO

Revenue for the three months ended Oct 31 nearly doubled to $52.2 million from $26.4 million last year, the company announced yesterday.

The nine-month numbers were equally impressive, with net profits up from $11.4 million last year to $23.4 million on the back of a 66 per cent jump in revenue to $148.1 million.

Low Keng Huat's robust bottom line was due to higher development profits from associated companies, lower construction losses that were offset by lower profits from its hotel and investment segments, and a higher taxation charge.

The group's construction segment, however, was its key driver, with revenue for the nine months hitting $60.6 million.

Gross profit for the same period rose by $9.1 million to $18.3 million, mainly due to ex gratia payments from partners for the Domain 21 condominium development, cost recovery for concrete due to the Indonesian sand ban, and the completion of construction projects like The Chuan, Novena Phase 3, Twin Regency and Domain 21 last year.

Two of its new projects - Meritus Mandarin Hotel and Hard Rock Hotel at Sentosa - have also started to contribute to the group's performance.

Earnings per share for the quarter rose from 0.51 cent to 1.75 cents, while net asset value per share was at 28 cents as at Oct 31, down from 54 cents as at Jan 31.

No dividend has been declared or recommended for the nine months ended Oct 31.

Managing director Low Keng Boon hinted in the group's financial statement that harder times are ahead. He said: 'There is no certainty on how long the recession is going to last.'

The firm secured a $295 million project last month to build a shopping mall with an integrated bus interchange at Serangoon Central. This took its total order book to about $900 million.

Mr Low was also quoted in the statement as saying that the group's remaining two hotels, in Perth and Ho Chi Minh City, are expected to continue to perform well despite the looming recession.

Low Keng Huat shares closed one cent, or 8 per cent, up at 13.5 cents yesterday.

New Private Home Sales 'Could Fall To 18-Year Low'

Source : The Business Times, December 16, 2008

Many of last month's 192 sales were made at just five developments

ONLY 192 new private homes were sold last month, sparking concerns that total sales this year could plunge to levels not seen since 1990.

CBRE Research tips a total sales figure of around 4,300 units - a striking plunge from the boom last year when a record 14,811 new private homes changed hands.












If the projection pans out, private home transactions this year will be the lowest in 18 years when 2,526 units were sold in 1990.

And there is not much cheer on the horizon either with the 'sluggish sales momentum' likely to persist as the economy is expected to weaken further, said CBRE Research executive director Li Hiaw Ho.

The Urban Redevelopment Authority (URA) data yesterday showed that last month's sales were up slightly on the 118 units shifted in October but down from September's 376.

The latest numbers add up to 4,200 private homes sold in the first 11 months.

Sales at a few projects held up reasonably well, probably due to competitive pricing, say experts. Developers launched 382 units for sale last month - up from 159 in October when the market was in shock - but half the 767 units launched in September. It was also below the 12-month average of 541 units, said Knight Frank.

'The increase in November signalled some hope for the private residential market, although general homebuying sentiments remained weak and possibilities for a recovery remained remote,' said its director of research and consultancy Nicholas Mak.

Many sales were made at just five developments with many projects not attracting a single buyer. Last month's top seller was Rosewood Suites in Woodlands, a 99-year leasehold project that moved 42 units at between $512 per sq ft (psf) and $687 psf.

Two prime projects also did relatively well. Newton Edge sold 34 units while 19 went at RV Suites in River Valley Road.

Mr Li said the two have mostly small units, which help contain the absolute price at $550,000 to $900,000 per unit, based on their median prices of $1,201 psf and $1,350 psf respectively.

Buyers snapped up 15 units at Evania in Upper Paya Lebar at between $612 psf and $650 psf after prices were apparently cut from above $800 psf at the launch in March last year, said Mr Li. 'Price remains a critical factor to move sales, as seen by the good response.'

And 11 houses at Andrews Terrace, a project in a new landed estate called Sembawang Greenvale, sold at prices starting from $1.3 million each.

Suburban homes accounted for 53 per cent of developers' sales last month, which shows that there is a pool of genuine buyers out there, said Ms Tay Huey Ying, director for research and advisory at Colliers International.

But prime properties dominated last month's launches. Developers have stepped up releases since August, a reversal of the first-half trend when they held back prime homes, she said. 'This could be an indication of weakening holding power among smallish and mid-tier developers with prime development sites.'

Homebuying sentiment and launch activity should remain subdued in the month ahead as the economy further contracts and the employment market is anticipated to tighten further, said Mr Mak.

'Buyers will remain very cautious, even if some re-pricing sets in.'


WEAK SENTIMENTS REMAIN

'The increase in November signalled some hope for the private residential market, although general homebuying sentiments remained weak and possibilities for a recovery remained remote.'

Knight Frank's director of research and consultancy Nicholas Mak

Developer Sales Perk Up With New Launches

Source : The Business Times, December 16, 2008

Launch momentum may continue; price becomes key factor to move sales

The launch of new developments helped pull up developer sales to 192 units in November, up from just 112 units in October.

The number of units launched by developers increased from 159 units in October to 382 units in November.

Urban Redevelopment Authority's (URA) monthly real estate data also revealed that the number of launch-ready units hit 6,512 units in November, a marginal rise over October but an increase of 3,840 units from a year ago.

Rosewood Suites in Woodlands by EL Development (ELD) sold 42 units in November, the most units sold, followed by Newton Edge (34 units) and RV Suites (19 units).

ELD is a unit of local builder Evan Lim & Co. Managing director Lim Yew Soon said that the pricing - at an average of $580 psf - 'may be on the low side' but added, 'We expect construction costs to come down next year so we took a bit of a risk with a lower margin'.

Still, Mr Lim conceded that, 'the price may not be sustainable in the long run', and ELD could begin to raise prices.

He also believes that a price war among developers is not likely because most developers bought sites at about the same price. 'And unless a developer goes bust, there is no reason for them to sell at a loss,' he added.

PropNex CEO Mohamed Ismail said that prices for existing developments in the same area such as Casablanca are going for between $500-$550 psf. He said that Rosewood Suites is 'extremely attractive in today's market' especially considering that new public housing flats are about $300 psf with Design, Build and Sell Scheme (DBSS) flats at about $450 psf.

PropNex was the marketing agent for Rosewood Suites and Mr Ismail added that most of the buyers were HDB upgraders.

Both Newton Edge and RV Suites are in the core central region (CCR) and Colliers International director for research and advisory Tay Huey Ying noted that more than half the 382 units launched were in the CCR.

She added: 'Developers have been stepping up launches of prime properties since August 2008, in a reversal of the first half's trend where developers tended to hold back launches of prime properties. This could be an indication of weakening holding power amongst smallish and mid-tier developers with prime development sites.'

Ms Tay believes developers are likely to continue with the current launch momentum and could launch some 450-500 new units in December 2008, bringing the total launch volume for 2008 to some 6,500 units, less than half of last year's launch volume of more than 14,000 units.

Ms Tay expects developers' sale volume to hover between 150-200 units. This would bring sales volume for the year to less than 4,500 units, or less than a third of last year's volume of more than 14,000 units.

Other developments that registered better sales in November were Evania at Upper Paya Lebar Road and a landed housing project at Andrews Terrace.

CBRE Research executive director Li Hiaw Ho said: 'Price remains a critical factor to move sales, as seen by the good response to these projects.' He also said that prices for units in Evania have apparently been reduced from above $800 psf when it was first launched in March to $610 psf-$650 psf.

Knight Frank director (research and consultancy) Nicholas Mak expects home-buying sentiments and launch activity to remain subdued until after the Chinese New Year in January.

'Buyers will remain very cautious even if some re-pricing sets in,' he added. 'Since the economic drag is expected to persist into 2009, developers may be increasingly open to considering creative marketing tactics and soft discounts to attract buyers,' he added.

Already, Knight Frank notes that the lowest priced non-landed unit sold in November was in Rosewood Suites at $512 psf while the highest priced non-landed unit is Orchard Scotts, which sold for $2,006 psf (The highest-priced unit sold in Orchard Scotts was $2,407 psf).

DTZ executive director Ong Choon Fah also reckons the market is seeking 'clarity' on the economy and could wait for the January Budget measures before moving.

And while some hope for the return of the deferred payment scheme, Mrs Ong believes that if it is brought back, 'It won't be in its former form'.

2008: The Year The Bubble Burst

Source : The Business Times, December 16, 2008

(LONDON) Property prices collapsed worldwide in 2008 as hyper-inflated housing bubbles finally burst, brutally punctured by the global credit crunch - and the slump could continue for two more years, experts say.

The strains had begun appearing in mid-2007 when overstretched US homeowners began to default on loans known as 'sub-prime', a term virtually unknown outside the United States until 2008 when it became a byword for the financial crisis.

These 'bad' loans had been re-packaged by banks and sold on. The number of institutions which had invested in them only became clear this year, and they started a chain reaction which led to banks refusing to lend to each other.

When in September the US government seized control of the giant mortgage companies Fannie Mae and Freddie Mac - which between them account for half of the US home-loan market - the depth of the combined effects of the credit crunch and the housing slump came sharply into focus. 'The system has gone into a really brutal reversal,' said Philippe Waechter, director of economic research at Natixis Asset Management. 'The financing of property has become much more traditional and a lot more cautious.'

Both the commercial and residential property markets are essentially caught in a 'perfect storm'. Potential buyers have been deprived of credit by banks which have become far more cautious about lending. And buyers are holding off because they expect prices to fall even further, or shying away from major purchases while unemployment is rising.

Aaron Guy, real estate analyst at investment bank Collins Stewart in London, said: 'Before the credit markets dried up, 70-80 per cent of the purchase of each building was financed by credit and the remaining equity was in plentiful supply. So if you take a 10-storey building, you can take away seven and a half storeys of its debt financing and 2.5 storeys of equity is also more scarce and expensive. Among the banks I speak to there is very little desire to lend to commercial property and many won't lend at all. We expect this will continue as far as we can foresee into 2009 and it could be more than two years before the property market recovers.'

The biggest falls in house prices came in countries where banks lent the most, especially the US and Britain. A global study by British estate agents Knight Frank showed US house prices plunged by 20.6 per cent in the third quarter of 2008, compared with their peak last year. In Britain, they were down 10.3 per cent over the same period.

While the slide in prices has been fastest recently in Britain, Norway, Canada and Lithuania, the study shows that more than half of all the countries surveyed showed falls in the third quarter compared with the preceding three months.

Nicholas Barnes, head of international research at Knight Frank, said: 'It is now clear that no part of the world is likely to escape the credit crunch as property prices start to fall in more and more parts of the globe.' While eastern Europe is resisting the trend better than some parts of the world, prestige projects are biting the dust amid the crisis - work on the 600-metre Russia Tower in Moscow was halted in November.

Asia has not been spared either. In Hong Kong, the third-quarter fall was 2.5 per cent and in China, house prices fell 0.1 per cent, prompting the government to exempt property transactions from stamp tax and value-added tax to boost the ailing market.

In Spain, property developers have been falling like dominoes. One of the biggest, Metrovacesa, had boldly bought the London headquarters of British bank HSBC last year. But the ailing company was forced to sell the building back to the bank at a loss of 290 million euros (S$577.8 million).

So when will the gloom lift? Mr Waechter, of Natixis, says it will not be soon. 'I don't think the property market will improve before 2011 or 2012,' he said. The Organisation for Economic Co-operation and Development agrees. 'The ongoing adjustment in housing markets still has a long way to go,' said Jorgen Elmeskov, the director of policy studies in the economics department. -- AFP

US Property Recovery To Start By Spring

Source : The Business Times, December 16, 2008

Mogul Sam Zell also sees demand for houses rising soon

(TEL AVIV) A revival in the US real estate market, key to a recovery in the world economy, should begin by next spring, property mogul Sam Zell told an Israeli business conference on Sunday.

Mr Zell: 'By spring 2010 the housing market in the US will look a lot better'

'I believe that in a country that continues to grow and where the population continues to grow, we will see the first signs of equilibrium in the housing market in the spring of 2009 and I will expect by spring 2010 the housing market in the US will look a lot better,' Mr Zell said.

Mr Zell is the owner of Tribune Co, publisher of the Chicago Tribune and the Los Angeles Times, which filed for Chapter 11 bankruptcy protection last week. He declined to comment on his plans to sell the Chicago Cubs baseball team and its Wrigley Field stadium.

Mr Zell said that with the US population continuing to grow and with fewer than 600,000 building starts in 2008, over a million fewer than in each of the past 10 years, demand for houses would soon rise.

He added that after the US housing market begins to stabilise over the next 12 months growth would return to other markets, as the balance of supply and demand evened out 'and the staggering amount of fiscal stimulation that has been enacted around the world will have its impact'.

Mr Zell said he currently saw four global areas with a chance for investments because demand was continuing - Brazil, China, the Middle East, and parts of eastern Europe. 'They have growth, they have political stability, they have natural resources ... and a relatively low cost of entry today,' he noted. -- Reuters

Growth Could Be Weaker

Source : The Straits Times, Dec 16, 2008

SINGAPORE'S trade minister said on Tuesday that economic growth this year could be weaker than forecast, as the trade-dependent country suffers from a slowdown in the global economy.

'We believe the growth for this year will come slightly below our earlier projections of 2.5 (per cent),' said Mr Lim Hng Kiang. -- ST PHOTOS: ALPHONSUS CHERN

'We believe the growth for this year will come slightly below our earlier projections of 2.5 (per cent),' Mr Lim Hng Kiang told reporters on the sidelines of an Asean trade meeting.

The government has cut growth forecasts several times this year as the financial crisis hurt demand for its exports.

The government pledged to spend $2.3 billion to help firms get credit and said it would run a larger budget deficit to support an economy that it said could shrink 1 per cent in 2009 and at best would expand 2 per cent.

Singapore fell into a recession in the third quarter and is poised to be emerging Asia's worst-performing economy next year, with an expected gross domestic product contraction of 1.1 per cent, a recent Reuters poll showed.

Mr Lim Hng Kiang (centre), together with other Association of South-east Asian Nation economic ministers, is expected to sign trade agreements on goods, services and investment on Tuesday.

'We are looking at a very difficult trade environment,' Mr Lim said.

The country's non-oil domestic exports, which accounted for about 70 per cent of its economy last year, fell sharply in October as trade with key export markets such as the United States and Europe slid.

The financial crisis may also blow off course South-east Asia's hopes for building an economic community of half a billion people.

Singapore's Mr Lim, together with other Association of South-east Asian Nation economic ministers, is expected to sign trade agreements on goods, services and investment on Tuesday. -- REUTERS

11月房市仍疲弱 仅192新私宅找到买家

Source : 《联合早报》December 16, 2008

环球经济前景不明朗，裁员消息又源源不断，购屋者选择观望，使11月份的房地产市场依然处于疲弱状态，仅有192个新私宅单位找到买家。

市场人士认为，本地房地产市场在农历新年以前料不会走出寒冬，成交量将持续凄凉，每个月售出的新单位可能维持在150至200个左右。此外，新私宅单位的售价预计在明年呈现较显著的下跌迹象，以高档私宅为最大受害者，身价缩水幅度最大。

市区重建局昨天公布的11月份新私宅销售数据，虽然比10月份的118个单位高出71％，但依然较今年首九个月的销售成绩逊色，平均少了约一半以上。

今年售出新单位 90年代初以来最少

世邦魏理仕(CB Richard Ellis)执行董事李晓和表示，过去两个月仅有310个新单位售出，预计今年第四季找到买家的新单位只有约500个，而全年售出的新私宅单位总数将为4300个左右，是自90年代初期以来的最低纪录。

相比之下，2007年全年总共有1万4000个新私宅单位售出，今年的销售成绩料不到去年的三分之一。

随着宏观经济进一步衰退，李晓和预测，本地房地产市场软而无力的情况将至少持续到明年初。

高力(Colliers)国际研究部主管郑惠匀则指出，市场将继续欲振乏力是因为买家在等待价格进一步退低才进场，加上年底学校假期和圣诞和新年等佳节，许多人都出国去了。

另外，银行过去一个多月缩紧腰带，谨慎放贷也是打压楼市的原因。第一太平戴维斯(Savills)行销与业务开发主管邱瑞荣指出，虽然新加坡银行同业拆息率(SIBOR)已下降至少于1％，但银行所收取的利息却附加高达1％或1.2％的加价幅度，而且只愿意借出60％至70％的款项。

不过，邱瑞荣预计，在新的一年银行可能会回复放贷，让楼市需求有所转机。他说，银行可能是希望在目前的非常时期有健康的负债和坏账比例，宁可牺牲一些贷款申请。

发展商上月开始活跃

尽管买家还未走出金融海啸的阴影，但发展商已在上个月开始活跃起来，在11月份推出的新单位较10月份的159个单位多出超过一倍，总共有382个单位。

莱坊(Knight Frank)研究部主管麦俊荣表示，许多原订10月推出的项目由于碰上爆发雷曼兄弟倒闭事件以及新加坡经济陷入技术性衰退的消息，而延后到11月才推出。

不过，他指出，11月推出的新单位只有9月767个单位的一半，较过去一年平均每个月541个新单位也少约29％。

邱瑞荣则指出，新推出的项目大多属于小型发展商，它们可能因为银行的贷款条件所需而被迫推出项目。此外，他认为，一些发展商也可能希望在目前推出，并在接下来六个月内售完，以便受惠于较低的建筑成本。

一些发展商可能 明年降价推动销量

随着建筑成本回落，邱瑞荣预计，一些发展商可能在明年降低售价以推动销量。他表示，高档私宅的价格调整空间较大，大众私宅的建筑成本则会保持在每平方英尺300元左右，售价的跌幅预计不大，最多为20元左右。

除了削价之外，麦俊荣表示，发展商在未来几个月里相信会以新颖的销售手法和其他折扣或优惠来吸引买家。

上个月成交的单位以新上架、代表大众化领域的中央区以外(OCR)项目居多。销售成绩最理想的项目是在上个月中旬新推出市场的Rosewood Suites，总共卖出42个单位，售价介于每平方英尺512元和687元，中位价则为606元。

位于兀兰地铁站附近的Rosewood Suites，共有200个单位，其中80个单位以每平方英尺580元推出。市场人士认为，这已比一年多前的行情便宜了大约10％，如果是去年中推出，发展商很可能把推出价格瞄准在每平方英尺650元。

排名第二的为纽顿一带的Newton Edge。这个位于麦克威道(Makeway Ave)的项目，总共在上个月售出34个单位，售价介于每平方英尺1053元和1372元，中位价则为1201元。

尺价最高的是以每平方英尺2006元成交的一个乌节史格士(Orchard Scotts)公寓单位。这比该项目在10月份的每平方英尺2407元成交价来得低。