Tuesday, December 23, 2008

It's Not That Hard To Get A Renovation Loan

Source : The Sunday Times, Dec 21, 2008

No change in loan criteria despite tough times; contractors also have not raised prices

Want to renovate your home? You will be glad to know that getting a renovation loan is not any tougher these days.

According to the Monetary Authority of Singapore's notice for unsecured credit facilities, it has not lowered the maximum cap of six times the monthly salary of the borrower, or $30,000, whichever is lower, for renovation loans since 2003.

A DBS Bank spokesman confirmed that the number of applications for renovation loans has remained relatively constant, and there has not been any change in the criteria for the approval of such loans.

'As renovation loans are governed by regulatory guidelines, the bank has to abide by these guidelines when processing these applications,' the spokesman added.

DBS and Standard Chartered set their minimum loan amounts at $5,000. RHB Bank's minimum loan amount is $10,000. There is usually an administrative fee of 1 per cent of the approved loan.

A check with five banks showed that interest rates can start from 3.88 per cent per annum for RHB Bank, to OCBC Bank's range of between 6.25 per cent and 10.5 per cent per annum.

The rates are subject to change and depend on the choice of interest rate packages.

The interest rates are also usually based on monthly rest, which means that each monthly repayment reduces the loan amount and interest charges.

Applicants have between one and five years to repay a loan.

On the renovation contractors' side, the Singapore Renovation Contractors and Material Suppliers Association said contractors have not increased prices over the years.

Mr Gerald Mark, director of Wing Khiong Construction, said this was because of fierce competition.

'If we increase prices too much, we will lose customers,' he said.

He added that the market practice is such that contractors are reluctant to raise or cut prices too much. As a result, prices remain more or less the same and any increase is 'marginal'.

According to the association, a new three- or four-room HDB flat costs about $15,000 to renovate, although it was quick to clarify that all prices quoted were a rough guide and varied from contractor to contractor.

Mr Mark said the price includes flooring, kitchen cabinets, painting and plumbing works, curtains and cornices.

For the higher-end renovation of HDB four-room flats, prices can go up to between $80,000 and $100,000, he said.

'This is because of the owners asking for design carpentry works, such as the construction of false panel walls,' he added.

Still, the current downturn has led some home owners to tighten their belts. Contractors said that in these tough times, customers are either forgoing renovation works if they have a choice, or cutting down on renovation budgets.

Mr Richard Soon, manager of Luck Ann Construction and Renovation, said in Mandarin: 'If nothing is wrong with your home, you wouldn't do any renovation.

'People are thinking of their rice bowls. Even if they need to renovate, they will do so only at a lower price and not go for the full works.'

Mr Mark agreed, saying: 'What makes it obvious is that usually, the stretch from September up until January, Chinese New Year, is our peak period. So we can see clearly that there is not as much activity now as there was in the year before.'

HSR Property Group executive director Eric Cheng noted that not many people want to renovate their properties, so business has dropped.

'With lower demand come lower prices. You can negotiate for lower prices as companies would be more willing to give a better price,' he said, adding that one might be able to get discounts of between 10 and 15 per cent.

'After Chinese New Year, the rates could be more attractive.'

Dempsey Hill - Lifestyle Enclave To Get Bigger

Source : The Straits Times, Dec 19, 2008

THE popular lifestyle enclave of Dempsey Hill is set to get even bigger.

Country City Investment, the team that developed the zone in Tanglin Village, has won the bidding for a new plot of land from the Singapore Land Authority (SLA) that will add to its restaurants, bars and gourmet grocers.

The firm offered to pay rent of $378,300 on a three-year lease, renewable to 2018.

Country City general manager Nicholas Ng said the firm would spend '$2 to $3 million' on redeveloping the 20,000 sq m plot, which includes Blocks 13, 14, 15, 16 and 26 on Dempsey Road.

The main tenants now comprise a few furniture stores, which Country City plans to use as the basis for boosting Dempsey Hill's retail mix.

Mr Ng hopes to launch the new sector by the end of April next year.

To woo businesses in these difficult economic times, Country City said it will 'not only be offering competitive rents to new and current tenants', but also 'support them with various marketing activities'.

Mr Ng said that while Dempsey Hill's food and beverage tenants are 'still doing okay' in the downturn, the furniture retailers have reported that sales are 'down some 30 per cent'.

But he remained 'very confident' that the development will be launched within the next two quarters.

Country City already rents a cluster of seven buildings on a one-ha plot from SLA on a three-year lease renewable up to 2015.

Last year, it transformed the buildings, many of them former barracks for the British army, into various food and drink outlets, such as Ben & Jerry's ice cream shop, Harry's bar and Mexican restaurant Margarita's.

This was done in two phases. Dempsey Hill was launched in July last year and boasts about 20 restaurants, cafes, gourmet delis and bars.

Dempsey Hill Green, launched last December, is an extension of the original concept, with tenants including Samy's Curry, Long Beach Seafood and RedDot Brewhouse.

About $3 million was poured into developing Dempsey Hill, and a further $1 million to $2 million into Dempsey Hill Green.

Mr Ng said: 'It was natural for Country City to tender for the new blocks... because we already have two clusters and this one falls in between. It's good if we can manage the whole area.'

Big Drop In Building Activity

Source : TODAY, Weekend, December 20, 2008

THE value of projects under construction in Singapore is expected to be slashed next year, with the biggest impact to be felt in the central business district.

The value of construction activity in Singapore is likely to fall 32 per cent to US$17 billion ($24.6 billion) next year from US$25 billion this year, said BCI Asia Construction Information, a construction industry research company that undertook a study of the region’s building sector.

“The greatest impact in 2009 and 2010 will be felt in the CBD, in Singapore and Hong Kong,” said Mr Thor Kerr, managing director of BCI Asia.

As funding becomes scarce and rents start to soften, the high-end commercial and residential sector is likely to see more deferred construction activity next year, compared to projects in infrastructure and in the industrial space.

BCI Asia’s prediction is in line with forecasts from the Building and Construction Authority, which expects construction demand here to reach $30 billion this year, and slow down in the next two years.

“But in past crises, we see in these urban areas, at least Singapore and Hong Kong tend to bounce back very quickly. They bounce back slower in Indonesia and in other places,” said Mr Kerr. He added that Government spending on housing and other projects will help mitigate the slowdown.

Mr Kerr said that the decline in construction activity next year should not be taken as grim news because the value of these projects are not slipping to the levels seen during the Asian financial crisis.

“You’ve got to put it in context; US$17 billion gets you back to where you were in 2006. We’re getting back to a more reasonable level,” said Mr Kerr.

Bleak Times Ahead For Region's Building Sector

Source : The Straits Times, Dec 20, 2008

Report sees value of projects shrinking but analysts say situation here will be better

THE construction sector in South-east Asia and Hong Kong faces bleak times next year, a new report by information provider BCI Asia has found.

The value of projects under construction in the region would contract by at least 16 per cent next year and, in a worst-case scenario, would shrink by a hefty 32 per cent - or about one-third.

The preliminary forecast is part of a major study on the construction industry to be released by the firm next month.

'All the data indicates that construction spending in this region peaked in 2008. The value of projects at design and documentation phases has contracted 2 per cent this year and we have seen major projects abandoned for lack of finance,' said BCI Asia's managing director Thor Kerr.

'There will be far fewer new industrial facilities and utilities being constructed from 2009. As local economic conditions deteriorate further, developers will postpone the construction of new offices, hotels, recreation facilities and downtown retail centres,' he said.

BCI Asia reported that the value of projects under construction leapt from US$107 billion (S$154 billion) last year to US$140 billion this year. It estimates that this will decline to US$118 billion next year in a best-case scenario.

In the most pessimistic recession scenario, the value of the projects under construction would slump to US$96 billion.

Despite the grim predictions, some analysts say Singapore will not be as badly hit as the region as a whole.

Mr David Cohen of Action Economics said: 'I think the situation in Singapore would not be as severe. There is still a substantial backlog of projects to go through.

'The growth might slow down next year and we might see some job losses, but there would not be a major impact on the economy.'

Mr Cohen predicted that there would be a contraction of less than 5 per cent in the construction sector here next year.

Mr Ng Yek Meng, assistant secretary-general of the Singapore Contractors Association, agreed that things were still looking stable for the year ahead.

'In general, the trend is that the construction industry is slowing down.

'But in the next 11/2years, most contractors should have enough jobs and work in hand. When they signed on for jobs in 2008, they signed two-year contracts,' he said.

'We also haven't seen any major retrenchments yet.'

He added that major construction projects such as that of the SMRT Downtown Line would continue to help boost the local industry.

But he warned of impending uncertainties for the industry in 2010, after the two integrated resorts have been constructed, and when contracts come to an end.

'After contractors have finished their jobs, there might be no new jobs and some might have to go overseas to search for new projects,' Mr Ng said.

'No one knows what's going to happen in the future for now.'

D-Day For Homebuyers

Source : TODAY, Weekend, December 20, 2008

7,100 units ready in next two years, buyers may face difficulties: Analysts

JUST how vulnerable is Singapore’s :souring economy to a wave of defaults from private home buyers who had made use of the popular Deferred Payment Scheme (DPS)?

It’s a question that continues to split analysts, even as the Urban Redevelopment Authority (URA) on Friday released, for the first time, data on private homes sold under the DPS, a decade-old plan scrapped in October last year.

To “provide transparency”, the agency revealed that 10,450 uncompleted private homes had been sold under the scheme as at end-November.

As the DPS tends to be used by speculators, the data breakdown reflects the potential number of homes that could be returned to developers, should buyers fail to secure financing by the time a project is completed and receives the Temporary Occupation Permit (TOP).

For many, D-day approaches Most of the units — 4,560 — will be ready next year, followed by another 2,540 units in 2010.

With these two years likely to be weighed down by a global economic slump, buyers with shallow pockets will have difficulty coughing up the bulk of the price tag by the TOP date, especially as banks have become tight-fisted. If the purchase falls through, units will return to the market, possibly depressing prices.

To Chesteron Suntec International research director Colin Tan, the statistics paint a grim picture.

“If we assume all the people buying under DPS meant to flip, the 4,560 units represent one year of supply for a bad year. It’s bad,” Mr Tan told Today.

Only 4,000 to 5,000 new private homes are expected to be sold this year, he said, way below last year’s 14,800.

Under the DPS, the downpayment is only 10 to 20 per cent of the unit’s price and the customer makes no other payments during the construction period — typically two to three years — until completion. The arrangement appeals to speculators who, during boom time, made just a small payment upfront and managed to “flip” the unit for a quick buck before the TOP date.

Some feel the DPS may create a local version of a sub-prime meltdown. Will the market soon be flooded with desperados cancelling purchases or defaulting? Developers are putting up a brave front.

“We note that DPS cases will peak in 2009. These units would have been purchased in 2005/6 before property prices peaked in late 2007. As the purchase prices of these units are likely to be below current market price, we are confident that such property purchasers will want to proceed with completion of their sale, upon their unit’s grant of the TOP,” the Real Estate Developers’ :Association of Singapore (Redas) said in a statement.

Redas also stressed that buyers have no right to cancel sale-and-purchase agreements; only the developer does. So if the buyer fails to adhere to the contract, the developer could not only keep the downpayment but also demand claims and resell the property.

Redas did not say if their members were witnessing an increase in customers asking to repudiate contracts.

According to Knight Frank director of consultancy and research Nicholas Mak, people who bought units outside the Core Central Region – plum areas including Orchard and Sentosa – are “less at risk of default because a relatively higher proportion of these homes were bought for owners’ occupation”.

Two-thirds of the unfinished homes bought on DPS are outside the Core Central Region.

In the first place, said Savills Singapore director of marketing and business development Ku Swee Yong, DPS customers do include genuine home buyers, not just speculators.

Mr Mak said even if the property market weakened further next year, homebuyers collecting their keys “could either lease out the homes at relatively good returns or sell the homes at their breakeven level or with a profit”.

As for those taking delivery in 2010, they are unlikely to be pressured to sell at distress prices as “we expect the property market to stabilise in 2010 and may show some signs of recovery”.

10,450 Deferred Payment Homes Weigh On Prices

Source : The Straits Times, Dec 20, 2008

Cash-strapped buyers may sell low if they can't get sufficient loans

PRICES in the the already fragile property market could be battered even more from next year if some of the 10,450 homes bought on deferred payment are dumped by cash-strapped buyers.

The danger is that when final payments are due at completion stage, buyers faced with falling values may just sell at fire-sale levels, putting even more pressure on prices.

And a key reason for buyers to dump units is that in today's tight credit markets, risk-averse banks will demand that buyers put in more of their own cash before they will agree to lending the balance.

Take a flat that was bought for $1 million with a deposit of $100,000. The buyer must provide $900,000 on completion but if prices have fallen too far, the bank will not come to the party with a loan for the full amount.

So the buyer either dips into his own pocket or cuts his losses and sells - likely into a falling market.

The numbers, revealed for the first time by the Urban Redevelopment Authority (URA) yesterday, are sobering.

Two-thirds of the 10,450 uncompleted homes will come on stream in the next two years - 4,560 in 2009 and 2,540 in 2010.

They were sold from 2005 to this year. That includes a period when many properties were being snapped up by eager buyers with little regard for price.

Deferred payment was introduced during the Asian financial crisis to boost the market, but scrapped late last year. It was blamed for encouraging speculation, as buyers could secure a property for little cash down and then flip it for a profit before a brick had been laid.

Down payments are 10 to 20 per cent with the rest deferred until completion a few years down the track.

To make things worse, the URA said that the 10,450 new homes include sub-sale units.

They were likely bought at even higher prices from speculators, who had already flipped the units for a profit.

The figures also show that the homes are spread far and wide - about 4,000 each in the core central and city-fringe areas and the rest in the suburbs.

Analysts say that the real danger lies in the 1,270 prime units in the core central region that will be completed in 2010. These were boom-time buys.

Knight Frank managing director Tan Tiong Cheng said possible defaults will likely come from people who bought at the height of the market last year.

'It is cause for concern but it is not a big problem when you look at it in percentage terms,' he said.

In contrast, projects slated for completion next year were bought in 2005 and 2006 when prices were not that high, so chances of defaults are slim, added Mr Tan.

Prime area projects in Orchard Road, Sentosa Cove and Marina Bay like Marina Bay Residences, One Shenton and The Orchard Residences were known to have lured the speculators.

Some of these projects also attracted consortia, which bought one floor at a time, but yesterday's data did not offer any insight into such buyers.

'This is the 'high-risk' group, particularly as banks have become cautious and demand has fallen,' said Standard Chartered economist Alvin Liew.

Jones Lang LaSalle's South-east Asia research head, Mr Chua Yang Liang, said: 'The 10,450 number seems large but...if buyers can get loans, the problem won't be as severe as some people think.

'But psychologically, buyers may see it as a reason to bring prices down.

Responding to the news, the Real Estate Developers' Association of Singapore said the figures released by the URA underscored the popularity of the scheme.

It maintained that the scheme was beneficial to the market and reminded buyers that although they can sell their units to other buyers on the market, they cannot easily repudiate sales contracts and return the homes they bought to developers.

Priced For The Market

Source : TODAY, Friday, December 19, 2008

Increased supply of flats in Yishun a response to demand, says HDB

BUOYED by demand for its previous Build To Order flats (BTO), the Housing and Development Board (HDB) announced yesterday the launch of its latest BTO project — Dew Spring@Yishun.




















“The previous BTO launch in Yishun — Jade Spring Phase One and Two was five times subscribed, and therefore, we feel that there could be demand for flats in Yishun, which is why we’re putting out this contract,” said the Board’s deputy chief executive Tan Poh Hong.

A total of 864 standard flats will be built, comprising 144 two-room, 216 three-room and 504 four-room units, with Dew Spring@Yishun having the largest number of two- and three-room flats — 170 more than Senja Green, a BTO project launched in August.

Located at the junction of Yishun Ring Road and Yishun Street 41, prices for the two-room units start at $76,000, the three-room flats at $120,000 and four-roomers at $197,000.

With the latest release, the Board has launched a total of 833 units of two- and three-room flats, and there are plans to offer another 280 similar units soon.

In all, the HDB plans to offer 4,000 smaller flats over the next two years.

When it was pointed out that 90 per cent of BTO flats are reserved for first timers and that the remaining 10 per cent may not be sufficient to meet the demand of downgraders forced to monetise their flats during bad economic times, Ms Tan assured: “If there is a need for more, we will build more.”

This is in line with National Development Minister Mah Bow Tan’s statement to Parliament last month that lower-income families and those who need to downgrade could look forward to a steady supply of smaller flats.

Property firm, PropNex’s chief executive Mohamad Ismail called HDB’s launch of the smaller units “timely” amidst the current economic uncertainty.

“These flats are priced very attractively,” he said. “The smaller units are actually going at below $200 per square foot, which is very much below the median resale prices for that area in the last quarter.”

As the units are situated not far from the Orchid Country Club and the Sungei Seletar Reservoir, Mr Ismail expects an over-subscription for these units. He also commended HDB for reaching out to the lower-income bracket with more affordable units.

In pricing the new flats, HDB said it considers several factors, such as prevailing market conditions and the resale prices of similar units in the vicinity, making adjustments for differences like location, amenities, design of the project, age and orientation.

It added that when comparing prices of flats it should be like-for-like.

Said Ms Tan: “It is not correct to compare a flat in Yishun and Sengkang, because they are two different towns, having different attributes. When we do comparisons, we use comparables within the same vicinity.”

She was responding to media reports which compared the prices of new BTO flats to resale flats, and to criticisms that new HDB flats were not affordable.

The Board also clarified that construction costs do not affect prices of HDB flats as HDB adopts a market-pricing approach which reflects the true value of flats — how much Singaporeans are willing to pay for such flats in the open market.

It also ensures the optimal use of public resources.

Said HDB’s acting deputy director of marketing and projects, Mr Ignatius Lourdesamy: “If it’s too high, there will be no demand for new flats. If it’s too low, it diminishes the market value of existing flats and we will be over-spending public funds on housing.”

10% Fall Seen In UK Home Prices Next Year

Source : The Business Times, December 23, 2008

(LONDON) UK house prices will decline 10 per cent next year as a shortage of mortgage finance limits new sales, according to Hometrack Ltd.

Fewer deals: Sales volumes of houses in the UK will fall 12 per cent next year after dropping 45 per cent in 2008, according to Hometrack

Values will drop a further 3 per cent in 2010 after dropping 9 per cent this year, the London- based property researcher said in a report yesterday.

Home lending will increase by just £15 billion (S$32 billion), down from £39 billion in 2008 and a peak of £107 billion last year.

Bank of England deputy governor John Gieve said in a BBC interview that the bank knew the rate of house-price growth was unsustainable and underestimated the severity of the problem.

After prices tripled in a decade, policymakers now are struggling to revive the market for home finance, with Prime Minister Gordon Brown pushing banks to revive lending.

'Prices will remain under downward pressure for the foreseeable future,' Richard Donnell, Hometrack's director of research, said in the statement.

'The onset of recession and rising unemployment is set to act as a major constraint on demand compounding the level of price falls in the near term,' he added.

Sales volumes will fall 12 per cent next year after dropping 45 per cent in 2008, while repossessions will climb to 70,000 from 45,000, Hometrack said.

The global credit squeeze has pushed the UK into its first recession since the early 1990s.

Unemployment rose at the fastest pace since 1991 in November, with the number of people claiming jobless benefits climbing above one million.

Mr Gieve said using interest rates to tame asset prices may have limited growth in other areas of the economy.

He made the remarks in a BBC interview which was to be broadcast on its Panorama programme last night.

Mr Brown has partly suspended a tax on house purchases, and the government has created a £50 billion rescue package for UK lenders stung by credit losses. -- Bloomberg

Tapping Market Indices To Signal Office Rental Swings

Source : The Business Times, December 23, 2008

DTZ system predicts chance of office market correcting or recovering

In Singapore as well as Hong Kong, stock market indices lead official office rental indices between two and five quarters before correction or recovery sets in, property consultancy DTZ observes in a report issued yesterday.









Office vacancy rates in these two Asian cities also led office rent correction and recovery by a few quarters. Guided by this finding, DTZ has developed an in-house early warning system to predict the probability of office markets in both cities entering correction or recovery phase within the next three to six months.

This will use the stock index and vacancy rate as leading predictors. These indicators are based on the probability concept and expressed in percentage terms.

Figures exceeding 50 per cent indicate that the probability of entering the correction phase in the next three to six months is high, and vice-versa.

As at end-Q3 2008, the Singapore office probability indicator reached 65 per cent while that of Hong Kong hit 63 per cent. 'The risk reflected for Singapore matched the official pronouncement by the Urban Redevelopment Authority,' DTZ says.

The URA office market rental index for Q4 2008 will be released only in late January.

DTZ, in its report, does not give latest Q4 office rents for Singapore.

However, BT reported recently that, according to latest estimates by rival property consulting group CB Richard Ellis, average Grade A and prime office rental values in Singapore have slipped about 20 per cent in the fourth quarter of this year over the preceding quarter - after rising steadily for nearly four years.

The rents for these two categories of office space peaked in Q3 this year. DTZ evaluated the quarterly movements of the STI against URA's office market rental index as far back as 1993.

For Hong Kong, it mapped the official office rental index against the Hang Seng Index as far back as Q1 1997.

'The results . . . clearly show that such a delayed effect is not a one-off event. It had occurred in the past during the Asian financial crisis in 1998 and the tech bubble crisis in 2001,' DTZ says.

The Straits Times Index peaked at 3,900 points on Oct 10, 2007, while the Hang Seng Index peaked at 32,000 on Oct 30 last year, DTZ notes.

Rents To Hold Steady Despite En Bloc Influx

Source : The Strait Times, Dec 23, 2008

Supply limited and not all are fit to be rented out, say consultants

MORE units at developments sold enbloc are expected to be released onto the rental market, as developers look to ride out the market downcycle by renting them out, instead of leaving them empty.

Airview Towers at St Thomas Walk in River Valley is one of a number of collective sale developments that would be put back onto the rental market next year. -- PHOTO: DTZ

But the additional supply of apartments from these developments should not weigh heavily on an already falling rental market, property consultants said.

Several developments that were sold en bloc last year and intended for demolition and redevelopment were put back onto the rental market this year, following the deterioration of market sentiment.

There has been a thin but regular stream of such developments since early this year. They are typically leased out at rents that are at least about 20 per cent below market level, said Knight Frank director of research and consultancy Nicholas Mak.

More will follow next year as some developers have yet to take possession of their collective sale properties. For instance, Airview Towers in the River Valley area will be leased out from February next year, for a one-year period.

Units there will be rented out at more than $2,000 to less than $4,000 a month.

An owner there said their rent-free period will end in February, but a few units are already being leased out to quite a number of foreigners on work permits.

Two other developments, Spottiswoode Park and Oakswood Heights, on Spottiswoode Park Road are also likely to be put on the rental market early next year, said a market watcher.

Mr Mak said these developments are unlikely to add much downward pressure on rents as there are not many of such developments, which come with just basic facilities and a short lease.

Secondly, they are mostly rented out to existing tenants or ex-owners of the development, he said. 'Thirdly, not all the units in the developments are fit for rental. One reason why these developments went for en-bloc sale is because they are rundown,' said Mr Mak.

Also, as the projects are meant for redevelopment eventually, developers are unlikely to spend a lot of money to spruce them up, consultants said.

'Rents in general, like capital values, reflect the physical condition of the stock, the tenure, location et cetera,' said Jones Lang LaSalle's South-east Asia research head, Dr Chua Yang Liang.

As the reported rents must also account for the transient nature of the leases, the depressive effect of such rents on the general market is marginal, he said.

Rents of private residential properties here have fallen and are expected to fall further next year. Average prime rents are now at $4 to $4.40 psf, slightly down from $4.20 to $4.60 psf in the third quarter, according to CB Richard Ellis.

Other collective sale developments being leased out include Fairways in Telok Blangah, Grangeford at Leonie Hill, Lucky Tower in Grange Road and even Merlin Mansion in the East Coast Road area.

Fairways is offering a one-year lease at rents from $1,900 a month while rents at Grangeford start from about $3,500 for a two-bedroom unit. Both were bought around the middle of last year.

Developments that have already been in the rental market for months include Leedon Heights off Holland Road, Sophia Court in Adis Road and Lincoln Lodge off Newton Road.