Monday, June 29, 2009

Er, What Does A Mortgagee Sale Mean?

Source : The Sunday Times, June 28, 2009


Where do you see this?

In financial news articles, classified advertisements and auction houses' list of properties on offer.

What does it mean?

A mortgagee sale takes place when a bank force-sells a property after it has repossessed it, when the borrower cannot pay his mortgage. The repossessed property is usually sold via an auction by the bank - and often as a last resort - to recover the debt of the defaulted borrower.

Why is it important?

Such forced sales can throw up great bargains for investors.

A surge in the number of repossessed properties is a sign that the economy is not looking good. It signals a worsening property slump.

For instance, the number of such properties shot up at auctions during the economic crises of 1986 and 1998, when many homeowners struggled to pay their mortgage instalments.

But this time round, the number of mortgagee sales has not risen.

So you want to use the term. Just say...

'I have been monitoring auction houses' list of mortgagee sales to see if I can get my hands on a real bargain.'

Kampung Comfort

Source : The Straits Times, June 27, 2009

In the first of a four-part series on beautiful homes in Singapore, we look at a bungalow in River Valley

Some houses in Singapore scream for attention with their massive size or outlandish architecture.

This 9,000 sq ft bungalow in Cable Road shielded by lush greenery is hard to spot, making it a sanctuary. -- PHOTOS: ALBERT SIM KOON SENG, JEREMY SAN

But a two-storey bungalow off River Valley Road whispers discreet luxury as a $1.6-million modern interpretation of the humble kampung home.

It is a hard-to-spot yet huge house of 9,000 sq ft along the small enclave of Cable Road, shielded by lush greenery.

Echoing the design of traditional village houses, it boasts natural ventilation and lighting through louvres and lightwells (above) all around.

Drive past it and you are likely to see just a small portion of the front of the house with the garage. But there is much more to this home. The most interesting feature is that its design echoes that of kampung, or village, houses.

As with most such houses, it is in a rectangular shape, but with extensions in the form of a verandah and balcony.

From far, it appears like a box lifted from the ground, as if built on stilts.

Its architect, Mr Yip Yuen Hong, 50, a partner at local firm ip:li architects, describes the house as 'a derivative on the kampung house'.

In its hideaway location, shielded by bamboo trees, he says, the home is a sanctuary and a place of relaxation, so 'it is not visible'.

A shaded terrace on the ground floor looks out to the swimming pool.

The Cable Road House is one of 26 homes featured in a new book called Singapore Houses, which showcases works by 20 of Singapore's best architects. It is written by British architect and urban designer Robert Powell. Architectural photographer Albert Lim shot the homes.

The beautiful home is a 'Singapore home' not only because of its location but also because of its architecture.

There is no need for air-con with all the louvres that allow the breeze to enter (left).

Although he grew up living in a shophouse, Mr Yip has a soft spot for kampung houses as 'they are traditional homes that we are all familiar with'.

As well, it fits in with what is discussed at the beginning of Singapore Houses: Mr Powell writes that the houses in the book show a good grasp of the principles of designing with climate.

A shaded terrace on the ground floor looks out to the swimming pool.

'They are concerned with orientation in relation to the sun path and to wind,' he writes.

'Overhanging eaves are part of the vocabulary that most architects draw upon, as are high ceilings, louvred walls and the use of the 'skin' of the building as a permeable filter.'

The Cable Road House fits this description. Mr Yip makes use of glazed louvres around the home which, when opened, allow breezes to enter the home. The use of deep overhanging eaves blocks out direct sunlight by providing some shade and also helps to keep the rain out.

Bamboo trees shield the bungalow from sun and stares.

Mr Yip designed the home to be just 8m wide so that air can blow through the house freely. The use of glass folding doors encourages natural ventilation while allowing light to enter the home.

Even the choice of materials reflects this simple, natural approach.

Instead of opting for too much glass or steel, this home was constructed with concrete and lots of timber, such as native variety like balau for the walls and chengai for the flooring.

Rustic retreat

Mr Yip used specially treated steel for the roof. 'These materials look better with time, giving the home a timeless look,' he says.

The owners, who decline to be named, are a couple who live with the husband's mother.

There are two bedrooms on the ground floor. One is occupied by the owner's mother and the other is a guest room.

A shaded terrace on the ground floor looks out to the swimming pool, which also serves as a cooling device when the wind blows. The house took 16 months to build.

There are two more bedrooms on the second floor - a bedroom for the couple and another for the owner's sister when she visits.

A lightwell on the second floor just by the family room allows light to enter the home.

The couple hired Mr Yip after seeing a house in Sunset Way designed by him. It had a kampung look that they fell in love with.

However, unlike kampung houses which do not come with air-conditioning, the Cable Road house is fitted with it.

However, Mr Yip says proudly: 'The owners say the fans are enough to keep them cool.'

Auction Sales Surge In First Half To $72m

Source : The Straits Times, June 27, 2009

Figures show uplift in property market over the past few months

AUCTION sales have surged in the first half of this year, with the number of transactions dramatically higher than what was clocked up last year.

The numbers tell a story of a property market rapidly gaining in confidence, especially in recent months, according to consultancy Colliers International yesterday.

Sales in the first half reached $72.39 million. That is 61 per cent up on the $45 million recorded in the second half of last year, and 87 per cent higher than the $38.64 million racked up in the same period a year ago.

Much of the pickup happened in the second quarter, after the stock market rallied and sentiment improved. This month has seen strong sales of $24.7 million, compared with the miserable $3.6 million sales in January and $1.4 million in February.

Jones Lang LaSalle, which conducted the last auction for this month yesterday, said it sold four properties worth $11.29 million, including a $3.45 million Leonie Towers apartment.

Sales were lacklustre in the first quarter because buyers had bid very low and opportunistic prices, said Ms Grace Ng, Colliers' deputy managing director (agency and business services) and auctioneer.

The mood in auction rooms now is decidedly more upbeat, with sellers keen on repricing properties about 5 per cent to 10 per cent higher, said Knight Frank auctioneer Mary Sai.

But the increased expectations do not signal a clear price rise yet. 'Prices were lagging behind the market so the sellers were moving up to match the market,' Ms Sai said. 'Those that we sold were mostly the $800,000 to $1 million types. These are the safe buys as mass market homes aren't likely to retreat much.'

The buying mood has even carried over from mass market homes to some landed and high-end property, said Ms Ng. These include two apartments at The Clift worth $605,000 and $1.047 million.

Few mortgagee sales have occurred this year despite the weak economic climate. The 103 repossessed units on the block represented only about 23 per cent of total properties put up for auction in the first half. This compares with 28 per cent last year, 44 per cent in 2007 and 50 per cent in 1998.

The number is about half of what was put up during the Asian financial crisis in 1998.

In all, there were 54 homes sold through auction in the first half.

'The continued low number of mortgagee sales could be partly attributed to financial institutions attempting to manage their distressed asset portfolio by giving property owners the opportunity to dispose of the property of their own accord,' said Ms Ng. 'There will be less contention over the sale price, as the price is determined through a consultation process with the owner.'

Ms Ng expects to see more mortgagee sales in the second half of the year due to the general lag time of approximately six months or more.

Ms Ng also expects the buying momentum to persist in the next few months, possibly leading average monthly auction sales to surpass $30 million in some months. That could send auction sales over $160 million for the year, almost twice the $83.67 million achieved last year, she said.

$44m Bid Triggers Tender For New Bridge Road Site

Source : The Straits Times, June 26, 2009

A HOTEL site on New Bridge Road is up for public tender after an unnamed buyer put in a bid that matched or exceeded the Government's minimum price. This has triggered the tender process.

The site was on a reserve list and goes on sale only when developers indicate a certain level of interest. In this case, an undisclosed developer committed to a bid of at least $43.8 million.

The Urban Redevelopment Authority (URA) said yesterday that it will launch the tender for the 99-year leasehold site in about two weeks and the launch date will be announced later.

The land parcel has a site area of about 0.45ha and can generate a maximum permissible gross floor area of 15,687 sq m and is ideal for a boutique hotel, said the URA.

This site is in Chinatown and suitable for a three- or four-star hotel.

A recent survey conducted by the Asian Real Estate Association showed that the hotel sector was the least preferred segment this year compared with land for residential, retail, office and industrial uses.

But there will still be keen investors given the improved sentiment, said a property expert.

He said that some hotel investors may believe that the worst is behind them and that the market will improve by the time the project is completed.

They could also be banking on the integrated resorts to bring more tourists to Singapore, he added.

Industry watchers said the triggering bid for the New Bridge Road site is also another sign of increased optimism about the economy.

Earlier this month, a small Short Street hotel site received 15 bids with the winning tender offering 76 per cent above the trigger price.

Current Quarter Sees Big Jump In Property Investment Sales

Source : The Business Times, June 26, 2009

Investment sales of Singapore real estate so far this quarter have hit $953.9 million, a jump of 248 per cent from $273.8 million in the first quarter, says CB Richard Ellis (CBRE).

The increase came as residential investment sales quadrupled on the back of a growing number of high-end condo purchases, a pick-up in transactions of Good Class Bungalows (GCBs) and the acquisition of a few small residential sites.

The sale of three office blocks - Parakou and VTB buildings on Robinson Road, and Anson House - for a total of $259.6 million also helped breathe some life into the moribund office investment sales market.

Investment sales are a gauge of developers' and investors' medium to long-term confidence in the property sector. The pick-up in Q2 was against the backdrop of a dramatic stock-market rally that has led to an improvement in home buying.

CBRE defines investment sales as transactions with a value of at least $5 million, comprising government and private sales of land and buildings, both strata and en bloc. It also includes change of ownership of real estate via share sales.

With a tally of $1.2 billion so far in the first half, CBRE executive director (investment properties) Jeremy Lake reckons full-year investment sales could come in at $2 billion to $2.5 billion, 'depending on how long the burst of activity in the residential sector lasts'.

The figure for the whole of last year was about $18 billion, down from the record $54 billion in 2007.

As for the latest Q2 showing, 63.5 per cent or $605.6 million was from the residential sector.

This sum included 14 GCB deals, up from just three GCB transactions in the first quarter.

'For the Singapore investment market, the first movers are the Asian private investors who are willing to buy at current prices which they deem reflect an attractive discount from the peak,' Mr Lake said.

'Their sweet spot is $20 million to $85 million and their focus is office and/or residential investments.'

On the other hand, institutional investors are mostly adopting a wait-and-see strategy for Singapore, judging that the fundamentals are weak and better opportunities will arise in six to 12 months.

'For second-half 2009 there will be more investment deals, although most of the owners who wanted or needed to sell have already done so, and accordingly the choice of investment opportunities could be limited,' Mr Lake said.

Agreeing, DTZ's senior director for investment advisory services Shaun Poh said investment sales activity may ease slightly in Q3 because of a limited supply of small investment-quantum commercial properties available for sale.

'However, we may see some deals that are currently cooking being sealed in Q3,' he said.

'For the residential sector, some developers who have enjoyed strong sales at their showflats over the past few months are looking to restock their residential land bank selectively,' he added.

Take Two Reveals A Brighter Property Picture

Source : The Business Times, June 29, 2009

Credit Suisse revises downward its initial estimates for a foreigner exodus

Credit Suisse, which predicted in January that an astonishing 200,000 foreigners and permanent residents (PRs) might leave Singapore in 2009 and 2010 on the back of job losses, now thinks that the exodus may not be as bad as it had expected.

The evidence for this can be gleaned from the bank's forecasts for the property market.

Based on its economists' expectations of historically high job losses (up to 240,000) and an exodus of foreigners (up to 200,000) by the end of 2010, the firm's property analyst Tricia Song had previously assumed that 15,000 homes could be vacated by 2011.

But in a report dated June 19, she says she now believes that just 3,000 private homes will be vacant from 2009 to 2011 as foreigners leave the country.

'Anecdotally, we expect that the number of foreigners leaving Singapore will not be as high as we had expected,' said Ms Song in the report.

This also means that private home prices will not be as badly hit as the firm predicted just six months ago. Credit Suisse had expected private home prices to fall by as much as 60 per cent from the peak to 2005 levels, partly because of the projected 200,000-foreigner exodus.

However, in part due to the smaller-than-expected job losses and foreigner exodus, Ms Song now says home prices could dip 25 per cent in 2009 before recovering 10-15 per cent in 2010.

The main cause for the change of view is a recent update by economist Cem Karacadag, who was part of the team that in January predicted that some 200,000 foreigners and PRs might leave Singapore in 2009 and 2010.

Credit Suisse said then that the potential drop in employment and population would have far-reaching implications for the economy.

But in a recent report, Mr Karacadag said job losses have not been as large as he had feared.

'Singapore's labour market has held up remarkably well in this recession and much better than we had anticipated,' he said in a June 19 economics note.

Among various things, employers appear to have adjusted labour costs through salary cuts rather than cuts in headcount, he said.

Job losses so far this year have been surprisingly low against unprecedented job gains in 2007 and 2008, the note said. Net employment fell by only 6,200 in Q1 2009, although Singapore's real GDP was 10 per cent lower in Q1 2009 compared to Q1 2008.

Mr Karacadag also upgraded his forecast for Singapore's 2010 GDP growth to 4.4 per cent, from 3.9 per cent.

Slide In Top Grade Office Rent Slows: JLL

Source : The Business Times, June 29, 2009

Property consultants report a marked pick-up in leasing deals

The average monthly prime Grade A office rental fell 11 per cent quarter on quarter to $9.50 per square foot (psf) in the second quarter, slower than the 28 per cent quarter-on-quarter slide in Q1 2009, according to property consulting group Jones Lang LaSalle (JLL).

Silver lining: With the shakeup, Singapore could become more cost-competitive and regain its attraction as a hub for global banks and MNCs

The latest drop translates to an overall slide of 48 per cent from the peak of $18.40 psf in Q3 last year.

The vacancy level of Grade A space rose to 6.1 per cent as at end-Q2 2009, up from 5.4 per cent at end-Q1 and 2 per cent at end-2008. JLL's prime Grade A office basket covers the best properties in the Raffles Place area, and includes One Raffles Quay and One Marina Boulevard.

JLL expects office rents to continue falling for the rest of this year and into the middle of next year, albeit at a more moderated pace, as substantial physical supply and weak global demand continue to overshadow the market.

Property consultants point out that net demand remains in negative territory. And with around eight million square feet of new offices slated for completion between now and 2013, the office market isn't out of the woods yet.

But the silver lining is that Singapore will become more cost-competitive and regain its attraction as a hub for global banks and MNCs when they stabilise their headcounts, says JLL's head of markets, Singapore, Chris Archibold.

For now, the bright spot for the office market is a significant pick-up in leasing volumes lately. 'There has been a marked increase in the volume of leasing and inspection enquiries recently. A significant number of these tenants are looking at remaining within the CBD core area,' said Mr Archibold.

Said DTZ executive director (business space) Cheng Siow Ying: 'At least now, corporates are more willing to talk about their future real estate needs. There's recognition that a lot of good-quality office space is becoming available at competitive rents, presenting attractive leasing opportunities. Six months ago, most corporates were not even reviewing their space needs.'

CB Richard Ellis executive director (office services) Moray Armstrong, too, has seen a 'strong resurgence' of leasing activity in the past couple of months. 'But in truth, it's not representative of positive office demand. Rather what we appear to be seeing is the welcome transition to a phase of greater stability, which is allowing occupiers to re-visit premises planning. For the most part, the tenants that are active are chasing lower cost and better value - in some cases by relocating to newer buildings at the fringe of the CBD,' he added.

Giving some examples, Mr Armstrong noted that office developments such as 78 Shenton Way Tower 2 and Mapletree's The Anson - both of which are completing in the next two to three months - are attracting keen interest.

According to JLL, lease renewals continue to dominate deals in the current market where occupiers have generally cancelled if not deferred their expansion plans.

'While there has been more positive news of late, our domestic economic growth remains weak and this will likely continue to cast a shadow over the Singapore office property market over the next six to nine months,' says JLL's head of SEA research Chua Yang Liang.

Office leasing consultants say it's too early to declare a recovery. Projections of negative office take-up this year range from 500,000 sq ft to 1.5 million sq ft. Demand is expected to fall short of new supply in the next few years.

And that's not counting shadow space or excess space that companies try to sublet. In addition to some 400,000 sq ft of shadow space immediately available for occupation, JLL estimates there is a further 400,000 sq ft in the pipeline.

Summing things up, Mr Armstrong said: 'We can't really call a recovery in the office market until demand turns positive and vacancy rates reduce significantly. It's hard to imagine that will occur in the next 12-18 months, but there is a stronger case for the market turning 2011 onwards.'

Pickup In Private Homes Market

Source : The Sunday Times, June 28 2009

Sales remain strong; top-end rents rebound slightly but analysts say it may be just a small 'blip'

The Singapore private homes market has been seeing quite a bit of activity on improved sentiment, in contrast to the prevailing weak economic climate.

New home sales have remained strong, crossing the 1,000-unit mark every month since February, and the sentiment has spilled over to the resale market.

Last week's data from Jones Lang LaSalle showed that resale home deals had risen 71 per cent so far in the second quarter to 1,464 units, from 856 units in the first quarter.

Even the prime homes market - believed to be the worst-hit sector, with prices and rents dropping significantly from figures in the boom days of 2007 - saw higher rents lodged at the top end.

A few luxury home deals were done at higher prices, bucking a downward trend that began a year ago, said CB Richard Ellis (CBRE).

For instance, a furnished high-floor 2,885 sq ft unit at the posh Ardmore Park was leased out in April at $19,500 a month, and another similar unit there was renewed at $20,000 a month.

It was only a few months ago when Ardmore Park units were leased out for $15,000 to $17,000 a month.

Over at Grange Residences in Grange Road, a well-renovated 2,853 sq ft unit recently fetched $20,000 a month, even though there were other similar-sized units available at a lower rent, said CBRE.

Demand for rental homes so far in the second quarter came from new expatriates as well as existing ones who were renewing their leases or moving to new premises.

CBRE executive director (residential) Joseph Tan said that even as multinational corporations in the financial sector are still reducing their expatriate teams, the commodity, petrochemical and energy sectors have been bringing in more expatriates recently.

But not all leases are at higher levels. CBRE said rents for the lower-tier apartments in prime areas and the rest of Singapore are lower.

Explaining the slight rise in luxury home rents, it said some expatriates whose housing budgets have not been cut took the chance to upgrade to better or bigger units as rents have generally fallen in the past year. Also, traditionally, the second quarter sees a high level of leasing activity because expatriates are getting ready for their children's new school year at international schools here, experts said.

'New expatriates will always make a trip in May or June to search for a place,' said Savills' director of residential leasing, Mr Patrick Lai. 'Based on the leasing activity in May and June, top-end rents appear to have stabilised. There may be some downward rental movements for condos but I don't expect any dramatic upheavals in rents.'

Property consultancy Jones Lang LaSalle's head of residential, Ms Jacqueline Wong, said that rents for luxury apartments did bounce back slightly recently but it is just a 'slight blip'.

It is due to a temporary short supply, she added. Quite a lot of prime projects with large luxurious apartments were sold en bloc during the boom. But they will be replaced with additional new prime supply from perhaps next year, she said.

Also, luxury home landlords with holding power are unwilling to reduce their rents, said CBRE.

Analysts at research houses have recently highlighted falling prime rents as a key concern in the residential market, given the expected rise in completed condos in the central region. For instance, Credit Suisse recently said in a report that prime rental yields could fall to 2.4 per cent, from 3.4 per cent, though they would still be higher than bank deposit rates.