Thursday, November 1, 2007

Citigroup Moves S'pore Back Office As Rents Soar

Source : The Business Times, November 1, 2007

Citigroup, Singapore's top bank by staff numbers, on Thursday announced plans to spend $220 million (US$152 million) to move its Singapore-based back office to the country's edge amid soaring rents in central areas.

The move comes as office rents in the business district, where all of the local and most of the foreign banks are based, have surged on the back of fast growth in Singapore's financial industry and a booming economy.

Citigroup said in a statement that around 3,000 of its 8,500 staff in Singapore would transfer to the 37,160 sq m building close to the airport in two phases beginning in 2009.

The new building, owned by Singapore's Ascendas Real Estate Investment Trust , will have room for up to 4,000 people and will house Citi's International Technology Office, Citi Markets & Banking Operations & Technology for Asia Pacific, as well as Citi Asia Pacific Technology Infrastructure.

Citigroup's Country Officer Piyush Gupta said that paying rents of $15 per square foot in Singapore's central business district 'doesn't make sense'.

Office rentals in central Singapore jumped 41 per cent in the first nine months of 2007 after climbing 30 per cent in 2006, following an average increase of just 1.9 per cent in the three years before that, according to Singapore's central bank.

Mr Gupta said Citi's exposure to such increases was limited because most of its lease contracts ran for another five to seven years. -- REUTERS

Singapore Needs Foreign Workers

Source : The Business Times, November 1, 2007

SOME Singaporeans want foreigners kept out of their neighbourhoods. It's hardly the first time that rants against foreigners - usually in private, when they occur - get a public airing. But to have the Prime Minister note that perhaps there is a growing 'unease' among some Singaporeans, and call for accommodation and understanding, says much about closed minds here.

Of course, Singaporeans aren't generally xenophobic. Neither is it only the more cosmopolitan, well-travelled Singaporeans with foreigner friends who aren't bigots about 'outsiders' in their midst. There are civic groups of Singaporeans who go out of their way to protect the interests of foreign domestic maids and other foreign workers.

And Singaporeans from all walks of life have responded when the plight of the needy and the calls for help tugged at the heartstrings, regardless of ethnicity or nationality. That said, the same cosmopolitan, professional (and pragmatic) Singaporean is apparently not above railing against foreigners for competing with locals for school places, university admissions, academic honours and, not least, jobs.

The citizens' privilege and priority - particularly in basic services and amenities -can and is to be expected. But if the right of entitlement spills over into a siege mentality about foreigners in their midst, it gets troubling.

Singaporeans who say they can put up with encountering the growing hordes of foreigners in the supermarkets, shopping malls or Botanic Gardens, but not in the void decks of their blocks of flats, come close. They should brace themselves: With the economy chugging along at near-8 per cent (likely higher) growth this year, and probably faring better than the current conservative 4-6 per cent official estimate in 2008, and with the labour market fully stretched out and unemployment back at record lows, they should expect to see even more foreigners in the foreseeable future.

Singaporeans in the heartlands may not be fully aware, but the Shenton Way set should know better: The main, if not quite only, reason why the Singapore economy has been able to grow so robustly in recent years - almost 8 per cent a year in the last three years - is a more liberal policy that has brought an influx of foreigners to town, across the skills spectrum. And whether Singapore lives up to its potential - which economists estimate has risen above trend range to 6-8 per cent growth over the next several years - hinges on, apart from a supportive growth environment, its ability to garner its share of foreign talent and skills.

The bankers and scientists that Singapore needs have no lack of choice. And if the building projects downtown stall for labour shortage, Singaporeans won't have to worry and whine about workers (aren't they housed in their own quarters?) mucking up their void decks.

Property Transactions With Contract Dates Between Oct 8tht-13th, 2007

Source : The Business Times, November 1, 2007

UK Counting Cost Of Housing Ills

Source : The Business Times, November 1, 2007

Run on Northern Rock signals boom may be ending

(LONDON) Nick Collins, an independent London real estate broker who has had record profits every year since 2003, took a hit in September - and that may be bad news for a UK economy built on a housing bubble. Five of his 50 buyers pulled out of purchases, spooked by a run on mortgage lender Northern Rock plc that left it £2 billion (S$6 billion) poorer.

Any takers? With mortgage lending cooling and house prices falling, the economy may start to slow down

'It's undermined people's confidence,' says Mr Collins, 38, who sells homes worth as much as £5 million. 'The market's not as frothy and competitive as it was.'

Northern Rock, which cratered after investors baulked at buying its debt, is one of several signs that the UK's property boom may be ending. The average home almost tripled in value in the past decade, helping to fuel the country's 15-year economic expansion - the longest in two centuries - and buoying the governments of Tony Blair and Gordon Brown.

Now, with mortgage lending cooling and house prices falling for the first time this year in September, the economy may be in the early stages of a slowdown.

'UK house prices are significantly overvalued and extremely vulnerable to a correction,' says Danny Gabay, a former Bank of England economist and a director of London-based Fathom Financial Consulting Ltd. 'The downside risks to economic growth over the next 12 months are significant.'

The UK economy had been the envy of Europe, outpacing Germany and France almost every quarter from 2001 through 2005. Germany surged past the UK last year, and for 2008, Europe's largest economies are forecast to run in a pack. The UK will probably grow 2.3 per cent next year, while Germany and France will each expand 2 per cent, the International Monetary Fund said on Oct 17.

Britain's expansion has been spurred by a borrowing spree, thanks to interest rates at 40-year lows from 2001 to 2006. By the end of 2006, the British owed £1.37 trillion, or 1.61 times their income - the highest rate in the Group of Seven nations, according to the London-based National Institute of Economic and Social Research. By June 30, the ratio had grown to 1.66. The US rate remained at 1.42 during that period.

Britons poured the borrowed money into housing - and then used their new homes as collateral to take on even more debt. Residential property prices soared 189 per cent in the past 10 years, almost twice the increase for single-family homes in the US, according to HBOS plc, the UK's biggest mortgage lender, and US government figures.

Consumers have spent some of these gains and loans on goods such as new kitchens and cars they otherwise could not afford, said Alan Clarke, a London-based economist for BNP Paribas SA, France's biggest bank.

'The only thing that has been supporting consumer spending growth is wealth gains from house price inflation,' Mr Clarke says. 'This is about to disappear.'

Lehman Brothers Holdings Inc economists in London predicted in 2005 that the surge in housing prices would begin to sputter that year. The housing deflation may have just begun.

In September, banks approved the fewest mortgages in 26 months. The decline came after the Bank of England raised its benchmark lending rate to a six-year high of 5.75 per cent in July.

The average cost of a home fell 0.6 per cent in September after growing at an average monthly rate of 0.89 per cent in 2007, according to HBOS. Banks foreclosed on 14,000 properties in the first half of the year, the highest number since 1999.

David Miles, Morgan Stanley's chief UK economist in London, says shocks to confidence like the run on Newcastle-based Northern Rock may cause house prices to fall further.

'Optimism about rising house prices has been an important driver of value in the UK,' Mr Miles says. 'Those expectations are potentially quite volatile and can turn round.' In October, the average cost of a home in England and Wales dropped 0.1 per cent to £176,100 from September. -- Bloomberg

Two 99-Year Sites Up For Collective Sale

Source : The Business Times, November 1, 2007

Chancery Court, Thomson View tenders likely to close in early Dec

Chancery Court and Thomson View Condo, both 99-year leasehold properties, are being put up for collective sale, with respective guide prices of $468 million and $550 million.

For sale: Chancery Court, a privatised HUDC estate along Dunearn Road, has been launched for tender with a guide price of $468 million

Chancery Court, a privatised HUDC estate on a choice location along Dunearn Road, has been launched for tender.

The guide price of $468 million indicated by its marketing agent CB Richard Ellis works out to about $1,614 per square foot of potential gross floor area inclusive of two payments to the state.

These are a differential premium of about $65.5 million (for intensifying the site's use) and a lease upgrading premium of $52 million for topping up the site's lease to 99 years from a remaining term of about 73 years.

The breakeven cost for a new condo on the site will work out to around $2,075 psf based on the guide price, according to CBRE.

Chancery Court has a 259,137 square feet land area and can be redeveloped into a new condo with about 242 units with an average size of 1,500 sq ft. Chancery Court, which is near Anglo-Chinese School (Barker Road), is designated a 1.4 plot ratio (ratio of maximum potential gross floor area to land area) and a five-storey height limit.

Owners controlling more than 87 per cent of share values in the development have signed the collective sale agreement, before the latest en bloc legislation kicked in on Oct 4. Chancery Court's tender closes on Dec 5.

Thomson View Condo, along Upper Thomson Road, is being marketed by First Tree Properties and Huttons Real Estate. The indicative price for the 540,314 sq ft site is $550 million, which works out to $652 psf per plot ratio inclusive of an estimated differential premium of $110 million and a lease-upgrading premium of about $80 million. First Tree managing director Alvin Er said that it may be possible to amalgamate the site with a strip of state land of about 39,000 sq ft along Bright Hill Drive subject to approval for its sale by the authorities.

'If this is allowed, then the total unit land price to the buyer of Thomson View will be lowered to $620 psf ppr,' he said.

The Thomson View site is designated for residential use with a 2.1 plot ratio and 24-storey maximum height. The plot can be redeveloped into a new condo with about 950 units averaging 1,200 sq ft. 'Because the property is on elevated ground, the new project will boast 270-degree views of MacRitchie Reservoir, surrounding nature reserve as well as Singapore Island Country Club,' Mr Er said.

Thomson View's collective sale agreement has received approval from owners controlling at least 82 per cent of share values before the new en bloc laws kicked in. The tender is expected to be launched next week and is likely to close in early December, Mr Er added.

Park Hotel Group Opens Kunming Hotel Today

Source The Business Times, November 1, 2007

SINGAPORE-BASED Park Hotel Group has added the five-star Harbour Plaza hotel in Kunming, China to its portfolio.

The hotel, one of the best in Kunming, has been renamed Grand Park Hotel Kunming and begins operations today. It has a total of 300 rooms and suites, all with broadband access.

Facilities at the hotel, which is five minutes from the city centre and a 20-minute drive to the airport, include a gymnasium, sauna, spa and outdoor swimming pool. It also has a revolving restaurant on the 21st floor with a clear view of the famous Green Lake, a Kunming landmark.

Park Hotel Group director Allen Law said: 'The acquisition of Grand Park Hotel Kunming is a strategic move. It marks the start of our operations in China and affirms our goal of providing luxurious hospitality in the Asia-Pacific.'

Park Hotel Group yesterday also announced the appointment of Michael Lew Weng Sung as the Kunming hotel's general manager. He will oversee the hotel's operations and development.

Park Hotel Group will host a reception tomorrow to celebrate Grand Park Hotel Kunming's entry to the group. Besides China, the group has hotels in Singapore and Hong Kong. Its Singapore hotels include the Grand Plaza Park Hotel City Hall and Park Hotel Orchard. In Hong Kong, it runs the Park Hotel Hong Kong.

Australian Building Approvals Rise In Sept

Source : The Business Times, November 1, 2007

The number of approvals gained 6.8% to 13,710 from August

Australia's home-building approvals rose almost seven times as much as forecast in September as a housing shortage and rising rents encouraged investors to buy property.

Sold: A housing shortage and rising rents encouraged investors to buy property, causing home-building approvals to rise more than expected

The number of approvals to build or renovate houses and apartments gained 6.8 per cent from August to 13,710, the Bureau of Statistics said yesterday in Sydney. The median estimate of 23 economists surveyed by Bloomberg News was for a one per cent increase.

Australia's lowest jobless rate in 33 years and rising wages are driving an economy that is expanding at the fastest annual pace in three years. Rents in Australia's largest cities have climbed after a construction slowdown last year cut the supply of housing just as rising immigration spurred demand.

'We still have quite a lot of investors going into the property market, as opposed to first-time buyers,' Helen Kevans, an economist at JPMorgan Chase & Co, said in Sydney before the report was released. 'They are less affected by the affordability crisis.' The Australian dollar rose to 92.30 US cents at 11.35 am in Sydney from 92.08 US cents immediately before the report. The yield on the benchmark 10-year government bond was unchanged at 6.13 per cent.

Building approvals fell a revised 1.8 per cent in August. Approvals were 4.2 per cent higher in September than a year earlier, yesterday's report showed.

Rental yields are rising amid 'historically tight vacancy rates', according to the Real Estate Institute. The cost of renting a two-bedroom apartment in Darwin rose as much as 36 per cent in the 12 months ended June, while vacancy rates have fallen below 1.5 per cent in Sydney, Melbourne and Adelaide, the institute said.

'Rent increases offer the prospect of improved yields for investors, thus attracting more investors back into the housing market,' Graham Joyce, president of the Real Estate Institute, said last month. Still, 'first- home buyers will face even greater difficulty accumulating a deposit for a home purchase, with rents increasing'. Higher mortgage repayments, coupled with rising labour and material costs, pushed housing affordability to a record low in the third quarter.

The Reserve Bank of Australia raised its benchmark overnight cash rate target a quarter point to 6.5 per cent in August. That increased the average monthly payment on a mortgage to A$2,606 (S$3,480) last quarter, from A$2,506 in previous three months, according to the Commonwealth Bank of Australia and the Housing Industry Association.

The central bank will raise its key rate again on Nov 7 by another 25 basis points to 6.75 per cent, according to all 24 economists surveyed by Bloomberg News this week.

Approvals to build private houses rose 2.5 per cent to 9,041 in September, the biggest increase in a year, yesterday's report showed. Approvals for apartments or renovations jumped 13.8 per cent to 4,091.

Boral Ltd, Australia's biggest seller of building materials, this week forecast profit will decline for a fourth consecutive year because of the housing slowdown. Its building products unit derives about 80 per cent of sales from Australian home building.

'Activity levels in New South Wales housing construction are the lowest they have been over the past 35 years and they are approximately 40 per cent below the levels of longer- term underlying demand,' the company said in a statement. 'The first quarter of this new financial year has seen some softening in Western Australia.' - Bloomberg

Brisk Sales At Newly-Launched Suburban Projects

Source : The Business Times, November 1, 2007

Analysts looking to see effect of scrapping of deferred payment

UIC Ltd is launching its 192-unit Park Natura development across from Bukit Batok Nature Park, and market watchers will be eager to see how sales will be affected by the US sub-prime mortgage crisis or by the withdrawal of the deferred payment scheme (DPS).

Park Natura: More than 100 units have been sold, priced at an average of $1,000 psf

So far, sales look good. Priced at the higher end for a suburban condominium at an average of $1,000 psf, more than 100 units have already been sold at the private soft launch. UIC group general manager Vito Koh said: 'The demand shows that the pricing is right.'

Mr Koh said he did not have a breakdown of the profile of buyers but added that Park Natura was not the type of development to attract speculators.

UIC received approval to offer deferred payment to buyers before the end of the DPS, but whether this alone is attracting buyers is hard to say.

Still, Mr Koh said that the withdrawal of DPS from future developments could affect buyers' confidence, especially for HDB upgraders hoping to enter the private property market.

Mr Koh also pointed out that the withdrawal of the DPS has come at a time when prices in the high-end segment appeared to have levelled off. 'Market prices have already adjusted themselves so withdrawing DPS is not necessary,' he said.

Another development that was recently launched is the CGH Group's 72-unit Esta Ruby in the Katong area. Already, 25 per cent of the units have been sold at an average price of $1,160 psf.

CGH sales director Alex Chng said that recent events have affected the property market, with some potential buyers changing their minds. 'But our feeling is that the buyers are still there.' The good news seems to be that more foreigners and Singapore permanent residents appear to be buying units in suburban developments.

At Esta Ruby, Mr Chng estimated that 30 to 40 per cent of the buyers were non-Singaporean. 'What is interesting is that the buyers are mainly from China, Indonesia and even Vietnam,' he added. The remaining buyers are mainly those displaced by en-bloc sales, with 20 to 30 per cent of buyers being HDB upgraders.

Another development that has been selling through private previews is the 196-unit Aalto in the East Coast by Hong Leong Holdings. Units there are also selling fast with about 60 per cent - about 120 units - sold so far.

A spokesman for Hong Leong also said that transacted prices ranged from $1,500 to more than $2,500, or roughly the transacted prices for new developments in the area even before the US sub-prime mortgage crisis.

Atrium @ Orchard Could Fetch Over $1b: Analysts

Source : The Business Times, November 1, 2007

Govt expected to put property up for sale with fresh 99-year lease

SINGAPORE Land Authority is putting up The Atrium @ Orchard for sale, BT understands.

Atrium @ Orchard: With 359,000 sq ft of office space and 16,000 sq ft of retail space, it has tenants like HSBC, Barclays, MTV

Market watchers say the property is expected to fetch over $1 billion. They reckon the Orchard Road property, which will be sold with a fresh 99-year lease, could fetch up to $3,000 psf of net lettable area (NLA).

At $1 billion, the price works out to $2,667 psf based on the building's NLA of about 375,000 sq ft. 'I think it can fetch anything from $2,500 to $3,000 psf. The building has big-name tenants like Temasek, HSBC, Barclays and MTV, good-sized floor plates plus a prime location above Dhoby Ghaut MRT Station,' one market observer said.

BT understands that agents were recently approached by SLA to handle the sale of the property, and it is believed that CB Richard Ellis has been selected for the job.

Most of the space in the building, which has two blocks, of 10 storeys and six storeys, is for offices but there is also some retail space. The building was completed in 2002 when Singapore was still experiencing a glut in office space.

The Atrium @ Orchard was built by the Land Transport Authority as a model planning project integrating land use and town and transport planning, and handed to SLA for management on behalf of the state.

The development has about 359,000 sq ft of office space and 16,000 sq ft of retail space, according to an earlier report in The Straits Times.

Market watchers expect The Atrium to attract strong demand from overseas as well as local real estate investors. Interest in Singapore's office market, which is currently experiencing a supply crunch and soaring rents, has been sizzling.

In August, a Goldman Sachs real estate fund bought the leasehold Chevron House at Raffles Place for $730 million or a record $2,780 psf of NLA. Goldman Sachs group is also said to be finalising a deal to buy the next door Hitachi Tower, a 37-storey office tower on a 999-year leasehold site facing Collyer Quay, at about $3,000 psf.

Another major overseas investor in the local office market is Macquarie Global Property Advisors (MGPA). In September, it put in a record bid of $2.02 billion, or $1,409 psf of potential gross floor area, for a 99-year leasehold site slated for a mostly-office development behind the One Shenton project.

In March, an MGPA fund bought Temasek Tower in the Anson Road area for $1.04 billion or $1,550 psf of NLA. Later, MGPA sold 12 floors at Springleaf Tower, also in the Anson Road area, for $225 million to a unit of German pension fund manager SEB, making a neat profit as it had bought the floors for $134 million only in January.

SEB also bought SIA Building in April for about $526 million or $1,783 psf from TSO Investment, a fully-owned subsidiary of a property fund managed by CLSA Capital Partners. TSO had purchased the office block from Singapore Airlines in June last year for $343.88 million or about $1,165 psf.