Thursday, March 27, 2008

HDB Resale Buzz Set To Continue

Source : The Business Times, March 27, 2008

But increasing buyer resistance and and an expected surge in supply may take away some sheen, says EUGENE LIM

HDB resales prices accelerated their climb in the second half of 2007 for a full-year gain of 17.5 per cent, on the back of a strong economy, brighter job prospects and supply-demand factors. The HDB Resale Price Index (RPI) rose 6.6 per cent in the third quarter and 5.7 per cent in Q4, after 1.3 per cent and 3 per cent increases for the first and second quarters.

The 17.5 per cent jump in resale prices last year was dramatic compared to just 2 per cent in 2006. But it was still much less than the 34.3 per cent surge seen in 1996. At 121.7 points, the RPI at Q4 2007 is just 11 per cent shy of the peak of 136.9 points recorded in Q4 1996. As the economy improved, more buyers were upgrading to larger flats. The government's target for an eventual population of 6.5 million has seen increasing numbers of permanent residents (PRs) in Singapore. The latter typically buy their HDB homes from the resale market as they do not qualify to buy new flats directly from the HDB.

The surge in private property prices last year priced out a segment of would-be upgraders, who had no choice but to buy their homes from the HDB resale market. Also, the booming stock market and the spate of collective sales in the private property market have unleashed a group of cash-rich house hunters, many of whom are opting for high-end resale HDB units. This group is willing to pay top dollar for flats that fit their criteria.

The increased demand, coupled with the stronger purchasing power of some of these buyers, helped steepen the resale market price curve in the second half of 2007.

In November 2007, it was reported in the media that a 32-year-old five-room flat in Marine Parade with a full sea view was sold for $730,000. That trumps the previous record of $720,000, set in June by a fairly new five-room flat in Kim Tian Place. Apparently, the buyer did not even bother to wait for the flat's valuation and bought it simply because he liked it.

In January this year, a 20-year-old 'penthouse' executive maisonette in Bishan changed hands for almost $100,000 cash over valuation (COV). The buyers, who had been house-hunting for almost nine months, were willing to pay top dollar because there are limited numbers of such flats. There are no more than two dozen of these units in Bishan. On top of making the large cash outlay, the buyers are planning extensive renovations to create their ideal lifestyle home.

Such highly publicised transactions have kept the HDB resale market in a state of euphoria since the middle of last year. Many hopeful sellers hiked asking prices overnight, with some demanding as much as $200,000 COV.

The COV is the amount that is paid over and above the valuation of a flat and cannot be paid from a home loan or monies from the Central Provident Fund (CPF). The higher the COV demanded by sellers, the more cash is required of the buyers.

Cash component

With the high COV demanded by sellers of centrally located HDB resale flats, buyers who do not have or are not willing to part with so much cash have been turning to outlying HDB estates like Sengkang and Punggol. These areas, which were shunned several years ago, have become increasingly popular among those looking for better value. According to HDB's Q4 2007 numbers, the median COV for a five-room HDB resale flat in Sengkang was $23,000; compared to $79,000 for a similar flat in centrally located Queenstown.

To avoid having to pay high COV in the resale market, many buyers who are not in urgent need have been attracted to new flats that are built or marketed by the HDB and private developers. This is because these buyers would have to foot at most 5 per cent of the purchase price if they are taking a bank loan to finance the purchase. Those who qualify for an HDB loan would be fully financed by CPF monies together with the loan from the HDB. Very little cash, if any, is needed; hence, these flats are crowd pullers whenever they are put on sale.

Centrally located projects - those in established estates under the recent HDB bi-monthly sale of surplus flats and privately developed City View @ Boon Keng - saw overwhelming response. Recent HDB Build-To-Order (BTO) projects, mainly in Sengkang and Punggol, are also seeing good response although they have yet to be fully taken up.

With the increased demand, the HDB's unsold stock of surplus flats, currently estimated at 2,000 units, is depleting. The HDB is now stepping up its building programme via the BTO scheme and will be launching some 4,500 units in the first half of this year. However, as the new flats will take several years to build, the BTO programme is a longer term solution and will not be able to cater to those with immediate housing needs.

As such, in the interim, we can expect continued strong demand in the resale market. However, as the majority of resale flat buyers depend on financing, there is a limit to how high COV transactions can go. Sellers that demand more than $50,000 cash may find it difficult to secure buyers. In January, it was reported by the HDB that 25 per cent of resale transactions were completed at prices no higher than $10,000 above valuation.

Resale volume

Though sentiment was good in 2007, the total resale volume of 29,436 units was a shade lower than the 29,723 units closed in 2006. However, the number of five-room and executive flat transactions increased in 2007 over 2006.

There were 7,275 five-room resale transactions in 2007 compared to 6,421 units the previous year. This represented a 13.3 per cent increase. Similarly, for executive flats, there were 2,627 transacted in 2007 as compared with 2,229 in 2006; or a 17.9 per cent increase in transaction numbers.

Five-room and executive resale flat transactions now account for 25 per cent and 9 per cent of total transactions; up from 2006's 21 per cent and 7 per cent respectively. This preference for larger flats is likely to continue for the rest of the year. That will be good news for the developers of mass market condominium projects as the support for their projects has traditionally come from buyers staying in the larger HDB flats.


Despite worries of a US-led global recession hitting Singapore, our economic fundamentals remain strong. The buzz in the HDB resale market is expected to continue in 2008. However, with the increased number of new flats coming on stream, some demand will be taken away from the resale market. As such, we may see resale volume stay at around 30,000 units for the whole year.

Resale prices are expected to continue to rise but possibly at a more measured pace of 5-8 per cent in the coming months due to increasing buyer resistance and more new supply coming on stream.

Eugene Lim is assistant vice-president, ERA Realty Network Pte Ltd.

Changing Home Investment Scene

Source : The Business Times, March 27, 2008

Non-landed residential market most likely to gain from influx of foreign talent, say CHUA YANG LIANG and JACQUELINE WONG

SINGAPORE'S non-landed residential market put in a strong performance last year, sub-prime notwithstanding, driven by the luxury and prime segments whose resale capital values saw stunning year-on-year growth of 51.7 per cent and 50.6 per cent respectively.

Lights, camera, action: Key projects and events, including the Marina Bay Sands integrated resort (above), the Singapore Formula One Grand Prix and the Singapore Youth Olympics in 2010, will push Singapore up a notch on the tourist destination list and also increase the expatriate work force and demand for housing

The buoyant buying sentiment coupled with high global liquidity helped propel high-end condominium prices beyond the $4,000 per square foot mark, with one new development reportedly closing at $5,000 psf - a historic milestone.

Spurred by the large gap of around 35 per cent between resale and new residential launch prices in prime districts (9-11), investor interest was at a crest in 2007. There was $8.5 billion worth of collective sales transacted by institutional investors and developers. This is 18 per cent more than the value of en bloc deals done in 2006 and 2005 put together ($7.2 billion).

With the new en bloc regulations introduced last October, overall costs of collective sale deals have risen and coupled with the overall cautious sentiment, the level of en bloc transactions will be more moderate in 2008.

The euphoria in the non-landed residential market is an unexpected by-product of an enlarged foreign population that catapulted leasing demand to a new level and changed the residential investment climate. While the clouds brought on by the US sub-prime debacle remain in the short term, the long-term outlook is positive.

Shifting buyer demographics

As the birth rate of the indigenous population is below replacement level, immigration is necessary to sustain the continued growth of the local economy. In 2007, the total population stood at 4.59 million with foreigners making up well over a million. This is an increase of 33 per cent from the 750,000 foreigners recorded in 2000.

Naturally, the residential market feels the impact of this sudden influx. The ratio of Singaporean buyers in the Core Central region today is less than half while foreigners of non-resident status have edged up to a quarter of the total buyers. Although less pronounced in the Outside Central region, foreign ownership (excluding companies) has also increased by some nine percentage points.

Continual government efforts to attract foreign investments and immigration-friendly policies to support this long-term economic growth will benefit the residential market tremendously.

Last year, the Economic Development Board brought in more than $16 billion worth of commitments in fixed-asset investment. These are expected to create some 28,600 new jobs and add $11.6 billion per year to Singapore's GDP. This strong job creation benefited both locals and foreigners - local employment grew by 92,100 while foreign employment jumped by a remarkable 144,500. As a result of the slower growth in Singapore's indigenous work force and a faster increase in employment opportunities, one out of three of the 2.73 million people employed in Singapore is a foreigner.

Continual population growth is essential to fuel our economic engine. The estimated population of 6.5 million is projected to be met in 40 to 50 years' time, predominantly through immigration. These foreigners do not qualify for subsidised public housing and require ministerial approval for the purchase of any landed properties. So the non-landed residential market is likely to feel the bulk of this demand.

Just in 2007 alone, foreigners and permanent residents (PRs) chalked up 8,884 units in sales (some 77.8 per cent higher than 2006), which accounts for 29.1 per cent of total private non-landed residential transactions. This sales figure is the highest in 13 years and is likely to rise further over time.

While foreign purchasers are still predominantly from our neighbouring countries - Indonesia, Malaysia and Thailand - the buyers are increasingly becoming more diversified. The next emerging groups are South Koreans (7 per cent), mainland Chinese (7 per cent) and Indians (12 per cent). Notable countries making their first foray into the Singapore market include Myanmar, the Middle East, Russia and Ireland.

Return of corporate buyers

Another rising trend is residential investments made by property funds and financial institutions since 2003. Attracted by yields above 4 per cent between 2003 and H105, these foreign institutional investors snapped up residential units to inject into their yield-focused investment portfolios. In the last 12 months, although yields have compressed to below 4 per cent, interest from Middle Eastern funds and opportunistic funds has been strong.

Out of the total $2.6 billion worth of non-landed residential developments, 42 per cent was transacted by these funds, and included anything from several units to whole condominium blocks and even development sites. These investors include Macquarie Global Property Advisors, Kuwait Finance House and US-based Wachovia Development.

Institutional investors remain optimistic about the upside potential of the Singapore residential market. Many of these investors are looking at total return, that is, including capital appreciation rather than just income yield. The majority of the investors have pumped these projects into their investment portfolio.

The minority have exited by riding on local capital growth or price differential when these properties were marketed in the home country of these foreign funds. This trend of institutional buyers in the residential market is likely to remain. Their interest is fuelled by the remaking of Singapore where several new developments and initiatives have been slated to transform it into a global city.

New lifestyle

With tourism a key component of GDP, two massive integrated resorts are now under construction - Marina Bay Sands, located at Marina South (completion in 2009) and Resorts World at Sentosa (completion in 2010). Other key projects and events include the Singapore Formula One Grand Prix and the Singapore Youth Olympics in 2010. The completion of these projects and events will push Singapore up a notch on the tourist destination list and also increase the expatriate workforce and demand for housing.

Pro-business environment

Singapore's strength lies in its corruption-free government, socially and politically stable climate, sound economic fundamentals, favourable tax policies, and a well-regulated and robust financial sector. Singapore has always been perceived as a safe, pro-business environment that is supported by a well-respected government with transparent and consistent policies that protect companies' physical and intellectual property (IP) investments.

Investors can also enjoy the benefits of an extensive global network of free trade agreements, avoidance of double taxation agreements and investment guarantee agreements. No longer seen as a little red dot on the global stage, Singapore has transformed itself into a global hub for business and investment. In the 2007 World Competitiveness Yearbook, Singapore was ranked second to the US as the most competitive economy globally.

While the banking and insurance-related services still constitute the largest component of financial sector GDP, several emerging financial clusters have contributed increasingly to its growth. These include the sentiment-sensitive industries of wealth advisory, brokerage and treasury clusters. Collectively, these sectors all contribute towards the growth of Singapore as an internationally competitive financial centre.

Singapore's multicultural and racial base also offers the corporate world a platter of business platforms conducted in a choice of languages other than English.

The network and cultural connections that the indigenous population has with its neighbouring countries make Singapore the ideal melting pot where deals are made between Asia and the rest of the world. Coupled with a well-educated and highly skilled work force, and a world-class network of air, sea and IT infrastructure, it is not surprising that capital, enterprise and talent have been attracted to this island city-state.

Consequently, more than 26,000 international companies have made Singapore their base camp as well as a gateway to the region.

Hubs of hubs

Singapore is also recognised as one of the premier asset management centres in the Asia-Pacific. Its pro-business regulatory framework and competitive tax framework also spearheaded its success as a Reit hub.

The operation of Changi Airport's Terminal 3 along with the proposed Seletar Aerospace Park has enabled the city state to consolidate its status as a regional aviation hub as well as an aerospace maintenance, repair and overhaul (MRO) hub.

Ranked the best in Asia by the World Health Organisation, Singapore has also established itself as a multi-faceted medical hub serving Asia and the world and is earning a global reputation as a medical convention and training centre.

More than 400,000 international patients visit Singapore for a whole range of healthcare services annually. It has also attracted many world renowned medical professionals to work in the internationally accredited hospitals and specialty centres located here.

Besides priding itself on an international standard education system, Singapore has also attracted world-class institutions with strong industry links to set up centres of excellence in education and research. They include respected names such as Insead and University of Chicago Graduate School of Business.

To meet the rising demand for quality schools for expatriate children, the list of international schools has also been growing. The NPS International School, part of a pioneering group of educational institutions headquartered in Bangalore, India, opened its Singapore campus in January 2008, while United World College of South-east Asia has announced plans to set up a second campus.

With such accolades and continual developmental growth in each economic sector, Singapore continues to attract a global pool of investors and talent. Incoming talent will not only bring their unique expertise but also put demand on the housing market. Eventually, some of them will bring their families and possibly even consider permanent residency.

All these developments have collectively positioned Singapore high on the list of many global investors and given them the confidence to continue investing in the Singapore residential market.

A global city in the tropics

With Singapore being a base for many regional and international conglomerates, it is also now home to a myriad of global talents and their families. Singapore is indeed transforming itself into a global city in the tropics, possibly close to being on par with London and New York in the West.

The economic rise of Asia, especially China and India, has filtered through to a buoyant economy in Singapore, resulting in a surge in demand for both office and housing space. Both office rents and housing prices have escalated over the past year. Nonetheless, prices remain highly competitive when compared to global cities such as London, New York and Hong Kong.

Singapore's strategic placement between two rising global economic engines of India and China makes it a popular choice of relocation, if not as a base for a second home for expatriates.

The non-landed residential market will continue to benefit further from the influx of these foreigners. The demand pool for the non-landed residential market, which traditionally came from the local population and residents of neighbouring countries - Malaysia and Indonesia - will become ethnically more diverse with buyers from China, India, Korea and corporate entities increasing their share.

Its multiculturalism and tolerance of diverse ethnicities support the quick and smooth assimilation of new immigrants into the larger society - a sociological strength that favours Singapore greatly. This attribute will continue to attract expatriates as well as residents of other Asian cities to Singapore.

In the longer term, the foreign ownership of residential properties in Singapore will become increasingly more cosmopolitan than that of Hong Kong, which is likely to remain dominated by mainland Chinese. The level of foreign ownership will continue to rise and eventually resemble what is found in London today - making Singapore the first global city of the tropics.

Chua Yang Liang is head of research, South-east Asia, Jones Lang LaSalle; and Jacqueline Wong is head of residential, Singapore, Jones Lang LaSalle

Househunt 2008: Your Guide To Major Projects Islandwide

Source : The Business Times, March 27, 2008

Residential Rents Seen Rising Further

Source : The Business Times, March 27, 2008

En bloc sales and population increase caused by influx of foreigners will continue to fuel demand, writes LEONARD TAY

RESIDENTIAL rents bottomed out in 2004, recovering until 2007 when they staged an extraordinary rise, surging by more than 40 per cent within the year. This was the highest rate of increase in Urban Redevelopment Authority's private residential rental index since the index started in 1990.

And 2008 is likely to see continued strength in rentals, although growing at a more modest pace of 5-10 per cent.

Rents rose a negligible 0.2 per cent in 2004, and then a stronger 3.1 per cent in 2005, according to the URA private residential rental index. But as the residential sector recovered strongly from 2006 onwards, rental values rose more steeply.

The non-landed residential segment, which forms the bulk of the leasing market, chalked up rental growth of 15 per cent in 2006 before sky-rocketing 43.1 per cent in 2007.

A key reason for the supernormal growth in rents was the population increase as a result of immigration. Singapore's total population rose from 4,401,400 in 2006 to 4,588,600 in 2007, an addition of 187,200, of which Singapore residents made up 57,200 while foreigners constituted 130,000. This is a 14.8 per cent rise year-on-year and is the largest increase in the number of foreigners seen in over seven years. The foreign population refers to professionals, workers, students and their family members. This is the first time the total has crossed the one-million mark. The increase in 2006 was 9.7 per cent.

Main attractions

The positive run in the economy, growth prospects for the country and an attractive living environment brought many here, leading to the surge in demand for housing accommodation. The foreigners chose Singapore because of the job opportunities here and its connectivity to other major cities in Asia. Generally, they formed the bulk of the tenant pool and the prime districts (Orchard, Holland and Bukit Timah areas) were their favourite locations. However, due to the recent escalating rents, more expatriates have opted to move out of the prime districts for cheaper accommodation elsewhere. Some have even gone ahead to buy their own homes instead of renting.

The swelling demand was further fuelled by the number of residential projects that were sold on the collective sale market. A number of displaced home owners have rented in the interim while waiting for their new replacement homes to be completed.

While rents have increased islandwide, some regions are ahead of the pack. Rents in the Core Central Region (districts 9, 10, 11, Downtown Core and Sentosa) lead the market with a median rent of $3.86 per sq ft per month, going by URA's median rent numbers at end-2007. This is followed by the Rest of Central Region with a median rent of $2.74 psf per month and the areas Outside of Central Region with a median rent of $2.01 psf per month.

Using CBRE Research's basket of properties for the luxury, prime and island-wide segments of the leasing market, average rents have reached even higher levels. The average rent for luxury residences ended 2007 at $6.10 psf per month, having risen 36 per cent during the year. Properties in this luxury class include the top 10 to 15 completed condominiums located in the prestigious areas around Orchard Road.

Average rents for prime residential properties were $4.50 psf per month, having increased by 55 per cent in 2007, while islandwide rents were $2.65 psf per month, after rising 33 per cent in the same period.

As rentals at prime and popular locations become more expensive, both local and foreign residents have been moving further out; first to the city fringe and eventually along the east-west axis of the MRT lines to the suburban areas. A comparison of non-landed median rents from the URA's Realis system in December 2006 and December 2007 shows that the most significant increases have not been restricted to the central areas, but have been seen in the eastern and western parts of the island.

It should be noted that although districts 9 and 10 remain the most popular among expatriates, these districts have a range of old and new residences, leading to a relatively lower median rent compared with those in district 4. The residential landscape in district 4 (Telok Blangah/Harbourfront) is generally more homogenous and comprises newer developments that can fetch a premium.

Outlook for 2008

The leasing market is expected to remain firm in 2008 and rents will continue to rise, albeit at a more moderate pace in line with the less aggressive growth projected for the economy. The same phenomenon experienced in 2007 will continue into 2008 as fringe and suburban areas become more sought after by occupiers who find the higher rents in the prime central areas prohibitive. The spillover from the central area would cause rents to rise in other parts of the island and lead to overall growth in the leasing market.

At the same time, as Singapore continues to attract the well-heeled from around the world, rents for luxury and city living condominiums in the popular areas around Orchard Road and the CBD will continue to move upwards. Average residential rents are expected to increase by about 5-10 per cent this year.

Leonard Tay is a director of CBRE Research

Don't Overpay For Your Home Loan

Source : The Business Times, March 27, 2008

With over a hundred home loan packages available in Singapore, DENNIS NG discusses how to pick the right one

WHAT interest rate are you paying on your housing loan? If you are paying 3.5 per cent or more, you might be overpaying. With the US Federal Reserve cutting interest rates, the Singapore Inter-bank Offered Rate, or Sibor, has been on a downward trend. Sibor is the rate at which banks lend to one another. Currently, the three-month Sibor has fallen to about 1.4 per cent, down from about 2.5 per cent last year.

If consumers hold the view that interest rates are likely to fall, choosing a housing loan package pegged to Sibor would enable them to automatically enjoy lower interest rates as Sibor moves lower.

Banks have started lowering interest rates offered on housing loans to as low as 2.08 per cent. Thus, if you're paying an interest rate of 3.5 per cent or more, it might make sense for you to refinance your housing loan to enjoy interest savings.

For example, if your outstanding loan is $500,000 and you're currently paying 3.5 per cent interest with a remaining loan period of 20 years, the total interest savings for the next three years from refinancing can work out to $13,831.38. After factoring in the cost of refinancing, the net interest saving still works out to $13,331.38. Thus, by refinancing, you can be 'richer' by over $10,000.

Floating rate vs Sibor/SOR pegged packages: Each bank will usually set its own board rate and after deducting a 'discount factor', arrive at the floating (adjustable) interest rate charged to clients. The problem is that each bank will set its own board rate arbitrarily and there might be occasions when Sibor rates fall, and banks don't reduce the interest rates charged on floating (adjustable) rate packages. Thus, in a bid to increase the transparency, some banks have recently introduced housing loan packages with interest rates pegged to Sibor or Swap Offer Rates (SOR).

The advantage of such packages is that as and when inter-bank offer rates move up or down, your interest rate would be adjusted as well - it would not be at the bank's discretion. Currently, Sibor/SOR have fallen below 1.4 per cent and interest rates charged on such loans can be as low as 2.08 per cent.

With the US expected to continue cutting interest rates in the next few months, Sibor is expected to remain low or even fall further in the next six to 12 months. Thus, if consumers hold the view that interest rates are likely to fall, choosing a housing loan package pegged to Sibor would enable them to automatically enjoy lower interest rates as Sibor moves lower.

Beware: Fixed rate packages typically come with lock-in periods. Some banks recently also adjusted interest rates charged on their fixed rate packages downwards to an average of 2.58 per cent for the first three years. However, such packages come with a penalty period of three years. Thus, such packages might not be suitable for consumers who intend to sell their property within the next three years, as they are liable to a penalty fee.

Should you apply for a housing loan now for properties purchased on a deferred payment scheme? You might have purchased a property on a deferred payment scheme and only need to take a loan when the project gets its Temporary Occupation Permit (TOP), which might be in 2009 or 2010. Should you apply for a housing loan now?

By applying for a loan now, you eliminate the risk of loan rejection should there be any adverse change in your financial situation in future, for instance, a pay cut or job loss when the property is ready. You also eliminate the risk of banks granting a lower loan quantum should the property market turn and prices fall. To safeguard your interests, you can choose a loan package that allows you a free loan conversion so that you can switch to a better package should one be available nearer TOP.

Cash in on your property without selling it: With property prices having gone up in the past three years, you might now own a property whose value has doubled. In that case, your current debt-to-asset ratio might have fallen considerably.

For instance, say you bought a $1 million property three years ago and took an 80 per cent loan, or $800,000. Currently, the loan outstanding is about $750,000, while the current value of this property might have gone up to $2 million. This means your current debt-to-asset ratio is only 37.5 per cent.

How can you benefit from the rise in the property price without selling your property? You can consider taking an equity loan on the property. For instance, in the above example, subject to your credit score, banks might grant you an additional equity loan of up to $850,000. To be conservative, you can consider taking up a lower equity loan of, say, $450,000, bringing your debt-to-asset ratio to a comfortable 60 per cent. You can use the $450,000 equity loan granted by the bank to start a business, or even to invest in another property. The interest rate on equity loans in Singapore is very low and can be as low as 2.2 per cent currently.

Should you pay off or reduce your housing loan?: The Singapore government has projected the inflation rate in 2008 to be about 5 per cent. On the other hand, the interest rate on housing loans is about 2.2 per cent. Thus, we have a rare scenario of negative interest rates, that is, a person who takes a housing loan is actually ahead of someone who saves money in bank deposits because of the shrinkage of money from inflation.

On the other hand, interest rates on bank deposits have fallen to about 1.5 per cent. With inflation at 5 per cent, it means that a consumer is losing 3.5 per cent a year by putting money in bank deposits.

Instead of paying down your housing loan which charges low interest rates of less than 3 per cent, you can consider investing your cash in a stable investment that is not subject to large price fluctuations and offers higher returns than fixed deposits. One example is UK-traded endowments, which have a guaranteed cash value and generate annual returns of 6-8 per cent.

How to choose a suitable housing loan?: There are over 113 different housing loan packages available in Singapore at any one time. Each package has its own unique features, with its own pros and cons and different terms and conditions. Consumers might be confused by the wide array of choices. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.

Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages suitable to your needs. You typically do not have to pay for the service of a mortgage broker as banks pay them a fee.

In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly. In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness.

Dennis Ng is a Certified Financial Planner with 15 years of experience in bank lending. He co-founded an independent mortgage consultancy portal in 2003.

Prices And Rentals Of Landed Homes Set To Rise

Source : The Business Times, March 27, 2008

Land scarcity in Singapore should ensure sustainable capital growth in landed housing in the medium to long term, write STEVEN MING and AVIN SEOW

LANDED homes saw their strongest price rise last year since 1994 but they have yet to catch up with their non-landed counterparts, leaving room for more capital as well as rental growth in 2008. Prices of landed homes rose 23.4 per cent last year, going by the Urban Redevelopment Authority's (URA) index of landed private residential property island-wide. This growth rate reaffirmed the upward trend, especially compared with the negligible growth in previous years - 0.6 per cent in 2004 and 2.4 per cent in 2005.

For landed homes in the suburban areas, average prices rose to $636 per sq ft, an increase of 45.1 per cent year-on-year. Landed homes in the prime districts of 9, 10 and 11 enjoyed healthy capital growth of 24.3 per cent to reach $961 per sq ft in 4Q 2007.

Good Class Bungalows (GCBs) were the star performers in 2007. According to URA numbers, average prices of GCBs surged 58.7 per cent year-on-year to $763 psf from $539 psf in 2006. The average cost of a GCB stood at $13.8 million in 2007, compared to $10.3 million in the preceding year. The trend of some GCBs being sold and resold within 12 to 18 months continued into 2007.

An example of this trend is a GCB at First Avenue that was sold for $10 million in September 2007, only to be resold at $12.5 million in October 2007, and then resold again at $16 million in December 2007. This is a whopping increase of 60 per cent in just four months.

Boasting a unique waterfront lifestyle, new 99-year leasehold homes on Sentosa Cove have redefined luxury landed living since their emergence in 2004. Expatriates and overseas investors have since lent much support to the capital growth in this segment. Average prices climbed 20.8 per cent to $1,463 psf by end-2007.

Another trend which we have observed is the increasing popularity of cluster housing. Since it resurfaced in 2000, this lifestyle concept has become ever more popular, especially among younger home owners and permanent residents. Cluster houses, offering shared facilities, blend the elements of landed property with condominium style living. Known as strata landed housing, these developments may be bungalows, terraced or semi-detached homes. Some developers have added more exclusivity to their projects by including a private swimming pool in each house. Notable launches last year were Dunsfold 18 and 8 @ Stratton in Stratton Green, both of which received good sales response.

There are several reasons for optimism across all landed housing segments this year. We believe that more capital gains can be expected this year since the price index of landed homes remains some 25 per cent below the peak of 2Q 1996. Landed homes have yet to see the sharp price rises of their non-landed counterparts. Emerging from a relatively low base, landed properties may be more appealing to investors this year.

Secondly, landed housing will always be considered a luxury in land scarce Singapore. This inherent scarcity should continue to lend support to the landed housing market. As such, GCBs look poised for yet another good year of capital value growth. It would not be surprising to see average GCB land prices cross $900 psf in 2008, due to the scarcity of such bungalows (there are an estimated 2,500 of them) coupled with the rising transacted prices on Sentosa Cove.

Similarly, landed homes on Sentosa Cove should continue to trend higher. Unlike those on the mainland, these houses have a broader market. There are no restrictions on foreign ownership of landed homes on Sentosa Cove. The continued influx of expatriates, together with the growing appetite of the rich for something unique and exclusive, is likely to fuel prices of these luxurious homes.

Rental yields are an attractive component of property investments, providing landlords with regular and stable income. Landed properties have become increasingly popular with tenants, with rents rising at their fastest pace in seven years. As at 4Q 2007, average rents of terrace houses and semi-detached houses climbed to $1.87 and $2.22 psf per month respectively, up 52 per cent year on year, while rents for detached houses rose by 23 per cent to $3.09 psf per month.

Rental growth is clearly outpacing capital growth for landed homes, and with the expectation that landed home prices will catch up this year, landed properties could offer an investor both healthy rental and capital gains in 2008 and beyond.

Given the above factors, the landed housing market should be able to attain capital gains of 10 to 20 per cent this year, notwithstanding the continued US credit turmoil. Singapore's property market remains fundamentally sound, backed by a robust job market and an expanding economy. Perhaps the most fundamental fact is the scarcity of land in Singapore which should ensure sustainable capital growth in landed housing in the medium to long term.

Steven Ming is director at Savills Prestige Homes and Avin Seow, analyst, Savills Research & Consultancy.

Home Prices Surpass 1996 Levels

Source : The Business Times, March 27, 2008

Even if the US sub-prime problem drags on, mid and mass market homes would still see price increases this year, says HAN HUAN MEI

RESIDENTIAL property prices in Singapore saw phenomenal growth in 2006-7. Robust economic growth of about 7-8 per cent in the past three years, a growing number of millionaires and anticipated spinoffs from the integrated resorts ignited the high-end segment before finally filtering down to the mid and mass markets in the second quarter of 2007.

By the end of 2007, prices in dollar terms had surpassed the levels in 1996, although the Urban Redevelopment Authority (URA) private residential price index had yet to hit the peak of 181.4 points achieved in Q2 1996. This is especially the case for new projects. For example, units in luxury projects like Cliveden at Grange, Hilltops and The Orchard Residences were selling at above $3,500 per sq ft compared with those in Ardmore Park, which were selling above $1,800 psf in 1996.

In the mid-tier segment, units in projects like Aalto, Jardin and Zenith were selling above $1,600 psf in 2007, compared to 1 King Albert Park and Trellis Tower, which were sold at $900-$1,100 psf in 1996. As for mass market projects, 2007 saw units in projects like Fontaine Parry, Hillvista and Oasis Garden being sold at $850-$1,000 psf while in 1996, units in Hazel Park, Ballota Park and Sherwood Condominium were sold at $680 psf-$850 psf.

In the last two years, the URA price index showed that prices of landed homes rose by 32 per cent while those of non-landed homes (apartments and condominiums) rose by 47 per cent. Furthermore, within the non-landed segment, prices of uncompleted homes (mostly new launches and developers' sales) grew by 53 per cent whereas those of completed homes (existing stock, resale transactions) rose 45 per cent.

Based on URA price indices by region for uncompleted non-landed properties, the Core Central Region (CCR, districts 9, 10, 11 and Downtown Core and Sentosa) took the lead with a 67 per cent growth followed by the Rest of Central Region (RCR, Central Region outside the core region) with a 41 per cent growth and the Outside Central Region (OCR), with a 35 per cent growth.

For non-landed homes in the resale market, the price increase was 45 per cent over the last two years, driven mostly by transactions in the CCR. Prices there rose by 43 per cent, followed by 31 per cent for those in the RCR and 28 per cent for those in the OCR.

A comparison of median prices in Q4 2007 showed an interesting geographical shift across the island from Q4 2006. For simplicity, we have confined our analysis to non-landed homes.

For the new homes sold as at Q4 2006, the highest price band was $1,500-$2,000 psf for properties in districts 1, 2 and 4. Examples of new projects in these districts in 2006 would include Marina Bay Residences, Lumiere, and The Coast and The Oceanfront at Sentosa Cove.

Properties in the lowest band - below $700 psf - were found in districts 5, 8, 12, 13, 14, 16, 17, 19, 22, 23, 6 and 27. Examples of new launches at that time included Ferraria Park, One St Michael's, The Infiniti, The Quartz and The Stellar. Most of these are 99-year leasehold projects catering to the mass market. However, by Q4 2007, the highest price band moved up to over $3,000 psf for properties in districts 9 and 10 for projects like 8 Napier, Cliveden At Grange, Scotts Square and The Orchard Residences. Similarly, the lowest band was raised to $700 psf to $1,000 psf for projects in districts 3, 5, 8, 12, 13, 17, 19 and 22, reflective of prices of Casa Fortuna, Fontaine Parry, Oasis Garden and The Lakeshore.

As for properties in the popular East Coast area, their prices have moved up from $700-$1,000 psf to $1,000-$1,500 psf for district 15. In district 16, they moved from below $700 psf to $700-$1,000 psf over the same period.

In the resale market, there was a lag in price growth because this sector involved basically older properties which lacked the aesthetic appeal and quality of new properties. As at Q4 2006, among the properties that were sold, only those in district 9 made it to the top of the range for the price band of $1,000-$1,500 psf. These included properties like Aspen Heights, Cairnhill Crest, The Claymore and The Pier At Robertson. However, a year on, the price band moved up to $1,500-$2,000 psf. Transactions in district 10 joined this category, involving units in Ardmore Park, Draycott Eight and The Tessarina.

With the exception of districts 4, 9, 10 and 11, resale transactions in the rest of the island were largely below $700 psf in Q4 2006, the price band for mass market properties. Similarly, in Q4 2007, property prices in the more popular districts (1, 2, 3, 5, 7, 8, 12, 15, 16 and 21) moved up to the $700-$1,000 psf price band.

Notably, prices of properties in districts 1 and 3 as well as 11 moved up to the $1,000-$1,500 psf band in Q4 2007 from previous price bands of below $700 psf and $700-$1,000 psf respectively.

Last year ended on a cautious note as the sub-prime mortgage crisis in the US had a somewhat negative effect on global financial markets and the economy. Most home buyers have been infected by the current mood and have turned cautious. Should the US enter a mild recession in the first six months of 2008 and the sub-prime problems clear up so that sentiment improves after June this year, the private residential market should continue where it left off in the third quarter of 2007.

Luxury prices would remain firm, mid-market homes would be expected to rise by 5 to 10 per cent while mass market home prices could grow by 10 to 15 per cent in 2008, once the situation becomes more positive.

In the worst case scenario, where the US sub-prime problem drags on to the end of the year and beyond, prices of luxury properties may ease marginally, while mid- and mass market homes would still see price increases, albeit at one to 2 per cent and 3 to 5 per cent respectively.

Han Huan Mei is an associate director, CBRE Research, CB Richard Ellis.

Seven Tips For Buying A Second Home

Source : The Business Times, March 27, 2008

There are still pockets of new developments in Singapore that are priced below $1,000 per sq ft, writes PETER OW

HOUSE hunting can be challenging at a time when sellers are holding firm despite a quieter property market while buyers are expecting a steeper discount based on weaker sentiment from the US sub-prime woes.

Those on a strict budget should note, however, that the record prices were achieved mainly by new launches in the first 10 months of 2007. This is also true in suburban locations as buyers pay more for new developments under construction. Nonetheless, there are still pockets of new developments in selected parts of Singapore that are priced below $1,000 per sq ft such as Bedok and Jurong.

Well, it may be the right time to start looking for a second home as an investment. Given the more cautious economic climate and rising inflation, price naturally becomes the most significant factor for a property purchase as that would have an impact on initial cash outlay and the long-term mortgage financing of the property. Here are seven key tips to note when shopping for a second residential property for investment. Before buying, ask yourself the following questions:

# Is the price reasonable?

# What are the prospects of getting a tenant?

# Can you possibly stay there yourself?

# Can you get financing and service the monthly instalments?

# What is the expected return on the investment?

# How long will you hold your investment?

# Is the tenure important?

Price: While price is a key consideration, nobody can predict when prices will hit rock bottom. Thoroughly research the locations you are interested in, walk around the area and check out the resale values. This is probably the best time to negotiate when nobody is interested in buying as there will be less competition.

Location: Location, location, location, that's what property is all about. We have to ask ourselves: Is this a location where expatriates like to stay? Districts 9, 10 and 11 will readily satisfy the criteria of convenience and proximity to the CBD. Outside these districts, a development near an MRT station, suburban shopping centre, or good views of the sea or waterway have great potential. For such locations, regardless of good times or bad, one will be able to find a tenant. Getting the wrong location might result in vacant periods when the economy is not doing well.

Returns: When buying primarily for investment, yield or return on investment is the key thing to consider. If the financing cost is low and the returns are much higher, then the second residential property purchase will, indeed, be an asset and a financial nest egg. A savvy investor might find that investing in equities offers higher returns. But equities are also riskier. Any property that gives you a gross return of 4-5 per cent is considered fair, while 6-7 per cent is good. Rentals are usually fixed for two years which gives you security of tenure.

Under current conditions, an investment in property will be better than putting money into bonds or fixed deposits, where yields are relatively low. However, when shopping around do not get the notion that high-end or luxury properties always give better returns. Keep in mind that not many expatriates have a rental budget of $30,000 to $40,000 a month. You may be surprised to find that an HDB flat near an MRT station will give you a higher return (possibly 10 per cent) than most private properties.

Financing: Look for a financing package that suits your needs. Most banks offer packages without a lock-in period at higher interest rates while those with lock-ins have a lower rate. However, early redemption or refinancing can be costly. If you are an investor with a long-term view, go for a package that offers the lower interest rate so as to reduce your costs as much as possible.

You must also consider how affordable your monthly repayments are. As a guide, they should not exceed 30 per cent of your disposable income. Most of us use our CPF to pay part of the purchase price or the monthly instalments. The prudent approach is not to do that. One should keep enough money in the CPF to pay instalments for a one-year period. This is a defensive strategy so that should you be out of work for a year, the loan can still be serviced.

Time frame: Property is an illiquid asset - it takes time to get in as well as to sell out. Thus, we should look at a longer time frame for property investment, preferably a three- to five-year holding period. Property prices go up and down, but if you look back over 30 years, the new peak has always been higher than the previous one. This leads us to the next consideration.

Can you stay in the property?: It is good to take this into consideration because if there is a need you can move into the property, be it for downgrading or upgrading. So if you have a family of four, it is advisable to buy a three or four-bedroom apartment. You will also have a choice of which property to rent out and which to occupy. You may want to rent out the unit that gives you the better return.

Tenure: Is a freehold property better than a 99-year leasehold? The answer is no because the rentals of both will be the same since the tenant will not bother about the tenure. Leasehold properties, being cheaper, will give a comparatively higher yield. Every investor has his own criteria for investment, thus a property suitable for one might not be suitable for another. However, bear in mind that the less risky the investment, the lower the likely return. Also, with any property investment, it is best to take the long-term view.

Peter Ow is executive director (residential) at Knight Frank

Dhoby Ghaut Set To Turn Super Hip

Source : The Business Times, March 27, 2008

COME early 2009, the vacant space above Dhoby Ghaut MRT Station may just be the hippest spot in town, playing host to flea markets, soccer matches, buskers and community performances.

Unveiling a plan to transform the area, the Urban Redevelopment Authority (URA) said yesterday it will spend an estimated $4 million on a sculptured outdoor amphitheatre and a cafe pavilion on the yet-unnamed open space.

Architect Chan Soo Khain, winner of the inaugural President's Design Award for Architecture and Urban Design, has been commissioned to handle the project.

According to Mr Chan, the amphitheatre will be the centrepiece that invites people into the space. Designed to 'melt back into the landscape', the partly-sheltered theatre will have a spiral design with woven aluminium louvres inspired by a rattan basket.

It will be built into the ground, with a structural height of no more than 4-5 metres. 'We wanted to create a unique arrival experience, that of walking down a ramp into the theatre,' Mr Chan explained.

The interlocking curves of the amphitheatre will divide the land into three zones: a paved plaza area at the western end; an open field at the eastern end; and the amphitheatre itself, which will house a stage and associated amenities such as changing rooms.

When completed, the 1.3 hectare space will be open to the public at all times, functioning like a neighbourhood park in the city centre. The land will serve the community for at least 10-20 years as there are no plans to develop it in the medium term.

URA said open spaces enhance and enrich community life and add more vibrancy to the city. It is hoped this new project will add variety to existing public parks and open spaces in the city centre.

'We hope this new open space will reinforce a sense of belonging to the city,' said URA chief executive Cheong Koon Hean.

多美歌地铁站上方 将出现“两个逗点”

《联合早报》Mar 27, 2008



绿地上的两个逗点建筑由铝片交互纺织而成,夜里亮起灯来,就好像一盏大篮子灯笼。(SCDA Architects提供)


范秀玲说:“市建局在过去几年已陆续售出乌节路的三块地皮。ION Orchard所在地以前是一大片草地,很多人以为是公园,很多人在那里聚会。未来的ION Orchard仍然会有一大片广场。义安城也有一个广场。我们的人口在增加,前来新加坡的游客也在增加,所以我们必须看看哪里可以多开辟一些绿地。”








KL Office Sector Continues To Shine

Source : The Business Times, March 27, 2008

WITH Kuala Lumpur office rentals still hovering at 1995 prices, it's little wonder that the Malaysian capital remains one of the cheapest places in Asia to base an office.

It costs employers just US$3,120 annually to establish a workstation per employee, according to a DTZ survey on global costs. That's five times less than in Singapore where it costs US$16,220, and nearly nine times less in Hong Kong where US$27,540 is needed.

While inflation has taken its toll on just about everything else, there has hardly been any change in Kuala Lumpur's prime rental values for more than a decade.

In 1995, new office space amounted to 2.7 million square feet. Given that it was the go-go years of the 1990s, the take-up rate was strong at 2.58 million sq ft. Data compiled by real estate consultants Williams Talhar & Wong (WTW) shows almost full occupancy as the vacancy rate then was a mere 2.38 per cent. The average rent was RM5.60 (S$2.45) per sq ft.

The strong economy prompted a heady rush of development and in 1997 an additional six million sq ft of office space was added. A total of 13 office buildings were completed that year, including Kuala Lumpur's iconic twin towers. Because the take-up rate was 2.8 million sq ft, or less than half the supply, the vacancy rate shot up to 12 per cent.

When the Asian financial crisis hit in 1998, rents dropped sharply as many multinational companies shuttered their offices while some local set-ups scaled down by moving to cheaper shop lots. Rentals in Kuala Lumpur fell to RM4.30 psf, declining the year after to RM3.90 psf.

By 1999, the take-up rate had contracted significantly; consequently, the vacancy rate rose to over 17 per cent, prompting the Kuala Lumpur City Council to impose a building freeze which was only lifted a few years later.

That helped ease oversupply problems and rentals rebounded in 2000. Over the next seven years, rents gradually inched up, breaching RM5 psf in 2007 - with premium buildings fetching as much as RM7.80 psf.

Currently, the Kuala Lumpur Central Area (KLCA) has an estimated 37.24 million sq ft of office space, some 16.48 million sq ft of it in the Golden Triangle.

An additional 3.45 million sq ft of investment grade office space was added last year, with another 3.78 million sq ft to be completed this year, according to statistics compiled by WTW. Over the next three years, Kuala Lumpur can expect another 9.69 million sq ft to come onstream.

WTW managing director Goh Tian Sui does not consider the coming supply as too much - at least in the coming year. The additional supply last year was well absorbed, with the vacancy rate in the KLCA hovering under 11 per cent, and below 8 per cent in the Golden Triangle. With rentals rising and take-up rates still strong, demand continues to be healthy. More liberal policies have also been a boost.

Mr Goh said the commercial sector is becoming increasingly important because of the demand for Real Estate Investment Trusts (Reits), as well as for existing Reits to continue to expand their portfolios.

The growth of Reits continues to have a positive impact on the industry. In a recent poll of CEOs by WTW, 72 per cent said the expansion of Reits was expected to impact the industry this year while 65 per cent said it would impact price movement. Only 21 per cent believe the commercial sector has peaked.

Over the three years from 2005 to 2007, Reits accounted for 35 per cent of the RM6.07 billion in major office transactions. Locals made up 37 per cent and foreigners the remaining 28 per cent. There are now some 13 Reits in Malaysia with a market capitalisation of RM4 billion to RM5 billion.

Last year, foreign buyers made up 44 per cent of total major office transactions valued at RM2.33 billion. That's a far higher percentage than in 2006, when they accounted for 17 per cent of total transactions worth RM2.75 billion.

Interest in Malaysian real estate assets is high given its relative cheapness. The expected strengthening of the ringgit is another pull factor for foreigners.

The two major office transactions so far this year have been foreign. German-based Union Investment Real Estate AG bought en bloc an uncompleted 41-storey office tower in the city from Bandar Raya Development for slightly more than RM439 million. The other was by Kuwait Finance House, one of the most aggressive foreign players in the Kuala Lumpur property market. It agreed to buy half of the yet to be built 45-storey Menara YNH from YNH Property for RM920 million, setting a new benchmark of RM1,230 psf. The deal with Kuwait Finance comes on the heels of aborted talks between YNH and CapitaLand, after the latter baulked at the RM1,000 psf asked for by the Perak-based developer.

'Investors are still actively looking to buy into Malaysian assets,' Mr Goh said, but with so much capital chasing so few assets, yields are expected to dip from about 6 per cent net at present - still decent by most standards. But even at current returns, building owners are holding out for more.

An example is YNH. So confident is its founder and chairman Yu Kuan Chon of the allure of his development - considered prime owing to its location in the Golden Triangle - that he believes he can dispose of the remaining parts of Menara YNH to two other foreign buyers he is in talks with - but for some 20 per cent more.

Demand will continue to be fuelled by booming commodity prices and a strong services sector. 'People have to put their money somewhere,' Mr Goh observed, adding that in the smaller towns, incomes have doubled owing to the windfall from rising commodity prices.

Zerin Properties chief executive Previndran Singhe agrees. Malaysia's economy grew 6.3 per cent last year and he believes new businesses - particularly those in financial services, oil and gas, and oil palm-based firms - will be looking to come in.

Also, Malaysia is one of the few countries in Asia that allows foreigners to acquire freehold land, and its property laws are transparent, he said. 'Moreover, we don't have a peaking problem. Malaysian real estate is more sustainable - it doesn't drop much and increases are more incremental on a year-to-year basis.'

In light of the stunning inroads made by the Opposition coalition at the recent general elections, which handed it control of five out of 13 states including the industrialised states of Selangor and Penang plus the national capital of Kuala Lumpur, Mr Singhe believes more equitable policies 'will drive more investments into the country'.

En Bloc: Importance Of Being Earnest

Source : The Business Times, March 27, 2008

New rules can't prevent fights led by greed but tussles should be less explosive, writes KARAMJIT SINGH

THE year 2007 will go down as the most spectacular in the 13-year history of Singapore's en bloc market. It was a story of massive fortunes made and lost. A record number of deals changed hands at a frenetic pace. Prices shot through the roof as it was a period when the perception of Singapore's prospects had changed dramatically and local property prices appeared cheap relative to the major global cities that Singapore started being associated with. Funds and investors from overseas poured in, and developers and local speculators bought feverishly.

To be precise, it was the first half of 2007 that was truly phenomenal for the en bloc market. In just those six months, 58 en bloc deals involving 5,500 owners took place at a staggering value of $10.8 billion. That amount was close to the value of deals in the previous four years put together!

In 2007, several other records were broken too. Farrer Court created history by being the biggest en bloc deal ever sold. It was the first and only transaction to cross $1 billion. The 618 units at Farrer Court also made the largest pool of en bloc sellers to be successful. Fittingly, Singapore's largest listed developer, CapitaLand, led the consortium that purchased it. They are proposing to build possibly Singapore's largest condominium project comprising 1,500 units. (The current record stands at just over 1,200 units at Melville Park in Simei.)

The Westwood Apartments deal set the benchmark for being the most expensive residential site traded. It was sold in November 2007 at a land rate of $2,525 psf per plot ratio (ppr) to Malaysian developer YTL Corporation. As an indication of the extent to which prime land rates have surged, just 18 months before Westwood was sold, the nearby Beverly Mai was bought for less than half its rate - at $1,184 psf ppr. If Westwood had been sold 36 months earlier, chances are that it would have fetched only a quarter of the price it secured.

Amid all the exuberance were negative voices raised against en bloc sales, as well as legal tussles between owners and purchasers involved in collective sale developments. There were calls to restrict or ban such sales, especially for projects with heritage or architectural value.

There were also numerous complaints about how the process was handled, claims of bad faith and the railroading of minority interests. Above all, there were several high-profile legal tussles involving the purchasers, consenting sellers, non-consenting owners, and some owners who had consented but sought ways to rescind their sales agreement.

The vigour with which legal tussles were fought in some cases seemed to be correlated with how quickly property prices shot up after their sales took place. Many relied on technicalities as potential loopholes, while others were simply a case of minority owners being dead set against the sale.

The dissenting voices of the minorities in many en bloc projects - sold or not, irrespective of their motives - created the impression that the en bloc laws that had worked well for eight years needed an overhaul. On one hand, there are certainly areas where the rules could have more clarity. On the other hand, the voices were not totally representative, as the vast majority tend not to be vocal.

Recognising this and balancing various views, the government introduced a new set of laws in October last year that raised the standards on governance and disclosure. At the same time, some redundancies in the application process to the Strata Titles Board (STB) were removed and STB's powers were enhanced to disregard non-prejudicial technicalities.

The market largely welcomed the new laws. Some, however, wondered if certain new provisions were really needed, like allowing owners who sign a collective sale agreement to withdraw their consent within five days. It also increases costs for en bloc sellers and makes the exercise more long drawn out.

By this time last year, 25 deals had taken place. So far this year, only one small deal has been reported. Such is the extent to which the en bloc market has slowed with the onset of the US sub-prime crisis in August last year. This points to the cyclical nature of such deals.

En bloc sales take place when developers are confident of the market, and the prospects of profits are high. When the outlook is cautious or uncertain as it is now - or worse, bearish - developers refrain from buying land or en bloc sites. Moreover, with tidy gains made in the bull market of the past two years, developers here can afford to sit on their land stock for a while longer until market sentiment improves.

This market lull will remain as long as the mood is cautious or there is no confidence in the health of the market. However, the expected growth in population due to immigration and the withdrawal of housing stock through last year's en bloc sales mean demand and supply are still out of sync and it could take a while before they find equilibrium again.

Then there is the slew of exciting projects taking shape like the integrated resorts and hosting of the Youth Olympics. This points to latent activity in the Singapore property market.

When the sub-prime cloud clears, demand for land from developers should pick up and en bloc sales will be back on track. Activity in this round is unlikely to mirror 2007, as it would be taking off from a higher price base.

En bloc sales are the main source of prime freehold land. They will continue to play an important role in urban renewal in Singapore as they help revitalise the property market by stimulating demand.

Disputes in such sales are not likely to go away, even with the introduction of the new laws, as no amount of legislation can prevent disagreements or actions led by greed or dishonesty. However, the market is unlikely to see a repeat of the spectacular price rise of 2007 anytime soon. As such, tussles should be less explosive.

Karamjit Singh is the managing director of Credo Real Estate.

Last Year's Boom In Investment Sales Likely To Continue In '08

Source : The Business Times, March 27, 2008

IT was an eventful 2007 for the Singapore property investment sales market, which hit a record $55.29 billion in volume of transactions. This was 81 per cent higher than the previous record of $30.59 billion in 2006. The robust momentum in the investment market was largely driven by active acquisition of development sites by developers in both the private and public sectors. The office sector was also very active.

The investment market was exceptionally active last year for the following reasons:

# A reversal of the 'perfect storm' - a combination of factors that allowed Singapore's property market to hit the sweet spot.

# Strong economic growth of 7.7 per cent in 2007.

# Office and residential market property booms.

# Strong interest from foreign real estate investors, both corporate and individuals.

# Emergence of Singapore as a service centre hub for Asia, for example private banking, back offices, medical centre and education.

# Feel-good factors such as the Formula One and integrated resorts.

The private sector investment sales market took the lead in 2007, accounting for 79 per cent of total investment sales or $43.63 billion. Public sector sales contributed the remaining 21 per cent or $11.66 billion.

Altogether, 39 government sites were bought by developers during the year, made up of three 'white' sites, 12 residential sites, eight commercial sites, six hotel sites and 10 industrial sites.

In addition, five residential sites at Sentosa Cove were sold for a total of $1.11 billion in 2007.

Significant public land sales in 2007 included a prime 'white' site at Marina View (Land Parcel A), which was awarded to Macquarie Global Property Advisors (MGPA) for $2.02 billion, and a commercial site at Beach Road, which was sold to a consortium comprising City Developments, the Istithmar Group and the Elad Group for $1.69 billion.

By sector, the residential sector took the lead in investment sales in 2007. Total residential investment sales amounted to $34.43 billion in 2007, representing 62 per cent of total investment sales and an increase of 118 per cent year on year.

A total of 116 collective sales were transacted in 2007, generating investment sales of $13.64 billion, exceeding the $8.2 billion from a total of 79 collective sales concluded in 2006 and is the highest ever.

Interestingly, many, including a number of overseas institutions and individuals, were observed to have purchased bulk apartments in residential projects before or after each project was officially launched for sale.

There was the purchase of 16 units at The Orchard Residences by a Thai investor for $135 million and a fund linked to MGPA acquired 162 units at The Cascadia for a total of $280.36 million. Also, a joint venture between US-based Wachovia Group and City Developments acquired 44 units at Cliveden at Grange for $432.43 million.

Investment activity in the office sector remained strong throughout the year, with increasing foreign investor participation, supported by strong market fundamentals.

Total office investment sales generated $14.19 billion worth of sales or 26 per cent of the year's total investment sales. This was nearly triple the $4.79 billion recorded in 2006. On the back of an upbeat office market, prime office properties continued to be highly sought after by Reits and foreign funds as they expanded their investment reach in Singapore.

About $4.86 billion worth of private en bloc office buildings and strata-titled office properties was acquired by these investors which in turn gave them a 54 per cent share of the $8.97 billion in total private major office transactions in 2007. The most significant transaction was the acquisition of Temasek Tower by MGPA at $1.04 billion.

Other notable office sales included the sale of Chevron House to a US fund for $730 million and the sale of 78 Shenton Way to Commerz Grundbesitz Investmentgesellschaft (CGI), a German fund, for $650.78 million. The deal was CGI's first foray into the Singapore property market.

Another German fund, SEB Asset Management, displayed strong interest in office properties by acquiring the SIA Building, 12 floors at Springleaf Tower and 10 floors in 79 Anson Road for a total of $965.91 million in 2007.

In addition, New Star Asset Management, a UK fund, acquired Parakou Building for $128 million and One Phillip Street for $99.02 million.

Reit-related office sales in 2007 included Keypoint at Beach Road which was acquired by Allco Commercial Reit for $370 million, inclusive of income support of up to $10.5 million for two years to be provided by the vendor. Both Keppel Land and Cheung Kong Holdings divested their one-third stakes in One Raffles Quay to K-Reit and Suntec Reit respectively, for $941.5 million each.

Looking ahead, strong office demand and potential for further rental escalation will lead to more buying of quality office properties in 2008. The sustained influx of foreign investors should continue to lead to brisk activity in the office investment market and provide strong support to prices.

Despite some volatility resulting from the global credit crunch and the slowing down of the US economy, investment sentiment will remain positive albeit a little cautious in 2008, due to the healthy economic forecast for Singapore.

Mounting inflationary pressure, the divergence of the weakening US dollar, the high level of liquidity in the investment market and the perception of promising returns have combined to make Singapore real estate an attractive investment alternative.

Investment activity in the office sector is likely to continue to outperform other property sectors given the limited supply coming on stream in the short term.

Foreign funds and Reit-related parties will also continue to lend support to the investment market, showing keen interest particularly in offices, retail and industrial assets.

The writer is executive director, investment properties, at CB Richard Ellis

Show Time At Dhoby Ghaut

Source : TODAY, Thursday, March 27, 2008

Land above station will feature an amphitheatre and a F&B pavilion

THE vacant state land above Dhoby Ghaut MRT station will soon offer more than just a convenient access point for pedestrians making their way from the station to the surrounding malls.

The Urban Redevelopment Authority (URA) has unveiled plans for the site to be home to a new open space that will play host to community events and performances.

It will feature an outdoor amphitheatre and a food and beverage (F&B) pavilion.

The development of this open space, which is in line with the URA’s Public Spaces and Urban Waterfront Master Plan, is slated for completion by the first quarter of next year.

The design for the space was conceptualised by SCDA Architects’ Chan Soo Khian, who clinched the “Designer of the Year in Architecture and Urban Design” title in 2006.

Mr Chan said the 300-seat amphitheatre will have several unique features.

“We’ve sunken the amphitheatre down and the user actually walks down gentle descending ramps, and in the evening, this will be dramatically lit.

“And from an exterior point of view, I think the flaring, spiralling screens reach out towards the landscape and provide a visual barrier to the heavy traffic along Penang Road,” he added.

The URA will implement the construction plans for the open space and the National Parks Board will oversee its maintenance and programming.

Fund Tops Serangoon Site Tender With $801m Bid

Source : The Straits Times, Mar 27, 2008

Located above MRT station, it will be used for a mall and new bus interchange.

THE sleepy Serangoon area received a huge vote of confidence yesterday when a fund bid a sky-high $800.9 million for a land site, which will be used for a mall and a new bus interchange.

Six hopefuls lined up for the 99-year leasehold plot above Serangoon MRT station with four bidding over $660 million - well above the figure some people in the property industry thought the plot would attract.

The $800.9 million bid came from Pramerica Real Estate Investors (Asia) but was submitted under the name Gold Ridge. It reflects a price of $850 per sq ft (psf) of gross floor area.

This was 10 per cent above the second bid of $727 million from Serangoon Community Developments. Another bid came in at $401 million and one was a distant $215 million.

The site - launched by the Land Transport Authority - is destined to be a hub with Serangoon MRT serving as a junction station for the new Circle Line. Any development must include a new bus interchange integrated with the enlarged North-East and Circle Line stations.

The strategic location also offers enormous retail opportunities, say property experts.

‘Serangoon Central is not a heavy residential area but there are no major malls within a 3km to 5km radius,’ said Mr Danny Yeo, Knight Frank’s deputy managing director.

‘A mall can be a regional centre. The only tricky situation is that there can only be slightly over 200 carpark lots.’

Pramerica intends to build a full retail centre. It manages the Asian Retail Mall Fund I and II, which own several malls here, including Liang Court in River Valley, White Sands in Pasir Ris and Century Square in Tampines.

The Serangoon mall could have a net lettable area of around 600,000 sq ft, said CBRE Research executive director Li Hiaw Ho.

That would make it of similar size to Parkway Parade in Marine Parade and IMM in Jurong.

The plot is designated a white site, meaning it can be used for different functions, such as residential or commercial, but a full retail mall would bring the highest profit margin, said Savills Residential director Ku Swee Yong - and the highest risk in terms of cash flow.

The site has a gross floor area of 87,527 sq m. Consultants said a mall could probably bring average gross rent of up to $14 psf.

Assuming rent of $12 psf to $13 psf, the developers could expect a net income yield of about 5.5 per cent on a stabilised basis, said Mr Li.

Those who placed the lower bids were probably looking at a residential component, which could eventually sell for $800 psf to $900 psf, consultants said.

While the residential space would help with cash flow, proceeds from apartment sales should not be used to fund the retail mall, said an industry expert.

This is to avoid paying heavy taxes when the developer eventually sells the mall.

Meanwhile, the Urban Redevelopment Authority made available two 99-year leasehold sites yesterday. Interested developers can apply to have these reserve list sites put up for tender.

One is a 0.55ha plot at the junction of Clemenceau Avenue and Havelock Road, which is designated for a hotel of up to six storeys.

Another is a 3.07ha residential plot in Upper Changi Road North.

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said the first site could accommodate a three- to four-star hotel with up to 270 rooms. If it is put up for tender, its land price is estimated to be $75 million to $81 million, or $600 psf to $650 psf of gross floor area.

The second site could have up to 400 condo units and fetch between $83 million and $111 million, with new units commanding $650 psf to $720 psf.

Luxury Home Prices To Fall 32% By 2010: Nomura

Source : The Business Times, March 27, 2008

It says sector has risen too fast relative to rental expectations.

TAKING a bearish stance on Singapore’s residential sector, Nomura Research expects luxury home prices to slide a staggering 32.3 per cent from their 2007 peak between now and 2010.

Average prices in the luxury segment will fall 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010 as rental growth slows and yields are reappraised, Nomura says in a report.

Luxury residential prices have risen too fast relative to rental expectations, the report says.

‘Sentiment in the market has deteriorated rapidly - asset prices look to have fallen by about 5 per cent over the first two months of the year, with falls of up to 15 per cent in some non-prime locations,’ Nomura analysts Tony Darwell and Daniel Raats say.

‘We see asset prices being driven lower by marginal speculative sellers amid low transaction volumes and higher unsold pre-sale inventories.’

These factors will add up to a major correction - but not a crash - with a 2010 average price of $1,847 per square foot, marginally higher than $1,811 psf in the 1996 peak and 22.4 per cent above the 2001 peak of $1,508 psf. The mass market will not be immune from falling prices amid rising new supply, Nomura believes. ‘Mass residential prices appear on a firmer footing, supported by rental growth and prevailing yields,’ its analysts say.

‘However, the advent of new supply and the resultant increase in rental availability in prime locations is likely to see demand that was once displaced to ‘non-core mass market’ locations returning to prime districts, hurting non-core rents and ultimately mass market prices.’

As a result, mass residential prices will remain flat in 2008, climbing just 0.5 per cent, Nomura believes. And as new supply is completed in the prime districts, it expects prices to fall 10.3 per cent in 2009 and 10.1 per cent in 2010 - a total fall of some 19.4 per cent from the 2008 peak.

In view of this, the firm is maintaining its bearish stance on Singapore residential property and says the market will move swiftly from a ’state of denial’ to the realities on the ground.

Residential rents are likely to remain firm in the short term, given the low vacancy rate, Nomura reckons. But rising new supply is likely to cap rental gains from the second half of this year. Nomura forecasts that the vacancy rate will rise from 5.7 per cent at end-2007 to 8.2 per cent at end-2010.

Average rents are expected to peak in 2008, rising five per cent year-on-year to $3.64 psf per month, after rises of 14.1 per cent year-on-year in 2006 and 41.2 per cent year-on-year in 2007, Nomura says. But with supply on the rise, rents will ease 10.3 per cent year-on-year in 2009 and 15.7 per cent year-on-year in 2010.

Debt Reprieve For Allco Reit - But At A Much Higher Cost

Source : The Business Times, March 27, 2008

Market cheers news the firm has secured extension of loans.

Allco Commercial Real Estate Investment Trust (Allco Reit) earned a reprieve in its debt repayment obligations last week - but at a much higher cost.

Allco (Singapore) Limited, the manager of Allco Reit, had announced last Thursday that the trust had received in-principle approval to extend the due date of S$550 million in debt from July 31, 2008 to Dec 31, 2009. It had not detailed the terms and conditions of the extension, saying only that it was currently reviewing them.

When asked by BT yesterday about the terms of the refinancing, Nicholas McGrath - CEO and managing director of Allco (Singapore) Limited - did reveal that, while the terms were largely the same, the refinancing was ‘a lot more expensive’.

He declined to state the exact quantum of the increase in the cost of refinancing, that is the change in interest rate charged by creditors for the extension of the loan - explaining that such matters are confidential.

Refinancing of loans is typically a pricier matter for most debtors, with creditors choosing to charge more for the extension or relief in debt obligations.

Mr McGrath could, however, reveal to BT the blended margins for Allco Reit’s total debt obligations. The trust currently has S$620 million in Sing-dollar debt and another S$260 million in debt denominated in Japanese yen. The blended interest rate for its total is 3.8 per cent for 2008 and 3.95 per cent for 2009 - with the interest rate being higher for the Sing-dollar debt than the Japanese-yen portion.

‘But the margins are still lower than what our properties are yielding,’ Mr McGrath explained.

Allco Reit’s key properties include China Square Central and 55 Market Street in Singapore, and Central Park in Perth, Australia.

S$70 million of its Sing-dollar debt will mature in November 2008, which Allco Reit will repay in full with the proceeds from the sale of the assets of Allco Wholesale Property Fund. The rest of its debt obligations are long-term ones.

Mr McGrath also told BT that the trust intends to decrease its leverage over the next 12 months - from 43 per cent currently, to about 30 per cent in a year’s time.

Allco Reit’s debt repayment concerns had been the subject of a fierce legal tussle last week. The trust had sought a court injunction to head off a credit ratings downgrade by Moody’s Investors Service, concerned that the downgrade would hurt its attempts to refinance its debt. But Moody’s had battled the injunction, saying it should not be stopped from going ahead with its independent credit reviews.

The injunction was set aside by the High Court last week, and Moody’s had gone ahead with the ratings downgrade - lowering the trust’s corporate family rating to ‘Ba2′ from ‘Ba1′ and retaining the ratings on review for further possible downgrade.

Despite the downgrade, Allco Reit still succeeded in refinancing its debt - announcing a day after Moody’s ratings revision that it had managed to secure an extension of its loan obligations.

And the market has reacted favourably to Allco Reit’s announcement, with its share price having climbed steadily since. Allco Reit shares closed at 80.5 cents yesterday - up 11 per cent from its close of 72.5 cent last Thursday, after the ratings downgrade.

A Time For Reflection And Planning

Source : The Business Times, March 27, 2008

No panic mood this time round and developers are financially stronger unlike during the Asian crisis, but a lot depends on Singapore’s growth, construction bottlenecks and costs, and investors’ pricing power.

AFTER two years of exuberant growth, Singapore’s private housing market has come to a virtual standstill. Property launches and sales have slowed as local buyers adopt a wait-and-see attitude while foreign buyers, including institutional investors, are taking a similar approach in the wake of the sub-prime crisis.

Despite a paucity of transactions, prices have not weakened. Ask most industry players and they will say that the fundamentals of the local property market are still intact. Veteran developer Kwek Leng Beng, executive chairman of City Developments, says: ‘Today, the mood is not one of panic, unlike during the Asian financial crisis in 1997. We are not in recession today, but rather, we are the victims of our own success. Because we did not anticipate that our economy would be firing on all cylinders, we have a shortage of almost every type of property today.’

Not only is the Singapore economy still growing, but the remaking of the Singapore story is still intact. Singapore’s transformation into a global city and its evolution into the mother of all hubs - financial/wealth management, tourism, education, healthcare, research & development, etc - are coming along nicely.

That and the development of two integrated resorts with casinos and the Republic hosting the Formula One race have served to boost Singapore’s profile among overseas investors, keen on parking some money in Singapore, including in its property sector.

Most developers appear to be keeping their cool despite the current lack of activity in the property market. After all, the established players have made nice profits in the past couple of years and have strong balance sheets. Most have stopped buying high-end residential sites for some months.

The effective cost of borrowing for developers today is 3-5 per cent, nowhere near the highs of almost 20 per cent seen during the darkest days of the Asian crisis a decade ago.

These days, developers reckon they can hold off new property launches, for some months at least. The strategy is that if they don’t launch projects, then they don’t need to drop prices to entice potential buyers. Thus, developers hope they can keep their hold on pricing.

Analysts say one major factor that could weaken developers’ pricing power is specu-vestors who bought multiple units in projects on deferred payment schemes earlier. The deferred payment schemes typically run out when the projects are completed, which is when buyers have to cough up big instalments. To avoid facing such a situation, and be forced to run around town looking for multiple housing loans - which they may or may not get - specu-vestors who bought multiple units may seek to offload their units, at below market prices if necessary, as the projects near completion. If significant numbers of specu-vestors dispose of units at lower than market prices, that may set lower price benchmarks for the overall market.

Another factor that could potentially cause weaker prices could be smaller and newer developers, who may prefer to price their projects more competitively to draw buyers - rather than wait.

Confidence will also hinge on macro factors - for instance, whether Singapore’s economic growth remains in positive territory and employment is secure. Construction bottlenecks and higher construction costs are also eating into developers’ margins.

Already, some private investors are understood to have formed informal ‘consortiums’ among friends, hoping to scoop up some good buys when property prices fall.

Some developers last month were saying the sub-prime crisis could clear by the first half of this year and that things will pick up in the local property market in the second half. Now, that view sounds optimistic, given the ongoing carnage in global financial markets, with no end in sight to the US sub-prime debacle. The staring match between buyers and sellers in the residential property market will continue. Who will blink first?

In the office market, prime office rents nearly doubled last year after rising about 50 per cent in 2006. Despite tight office supply in the immediate term, resistance from occupiers to higher rents is expected to put the brakes on landlords’ ability to achieve steep rental hikes this year. As well, the various projects on 15-year leasehold transitional office sites are expected to be completed within the next 12-15 months and should provide some short-term relief to the office crunch. If major financial institutions scale down their operations in Singapore, demand could take a hit. Post-2010, supply of completed Grade A office space will start increasing again. All these point to more competitive office rentals in Singapore in future.

Investment sales of office blocks have slowed, on the back of tighter bank financing. Even for residential development sites, relatively unseasoned players are finding it tougher to secure funding, because of tighter liquidity brought about by limited appetite in capital markets. With developers sated with prime freehold sites and given weak home sales, the collective sales market has also gone into slumber. Hopefully, there will be fewer en bloc fights among neighbours. Singapore property investment sales this year are expected to come in at about half of last year’s record $54.5 billion, CB Richard Ellis estimates.

All in all, we look set to have a quieter year in the property market. After the heady growth in the past two years, a consolidation will hopefully provide a time for reflection - and for planning the next move.

Church Puts Up Telok Kurau Site For Tender Sale

Source : The Business Times, March 27, 2008

Marketing agent CBRE pegs guide price at $40m

THE Presbyterian Church in Singapore has put up for sale a large 9,445 square metre (101,662 square foot) site in the Telok Kurau area.

The church said in a statement yesterday that the sale by tender is part of its strategy to unlock the value of selected properties to support the financial needs of the church, as well as its missions and school ministries.

CB Richard Ellis has been appointed marketing agent for the site which is at 116 Lorong J, Telok Kurau and 119 Lorong K, Telok Kurau. The legal owner is the Trustees of the Presbyterian Church in Singapore Registered.

The Urban Redevelopment Authority has granted an Outline Permission for the construction of a five-storey condominium development with a plot ratio of 1.4.

The development site is located a short drive away from Parkway Parade, East Coast Park and education institutions such as Tao Nan School (Primary) and Victoria Junior College.

Developers have the option to purchase the site with a leasehold tenure of 105 years or 999 years commencing Jan 26, 1939.

CBRE pegged the guide price at $40 million or about $607 per square foot per plot ratio.

Development charge is estimated at $46.44 million for a condominium development.

Under the Master Plan 2003, the site is zoned civic and community institution. Other potential uses are strata landed housing development or civic, community and cultural development. These uses incur a lower development charge.

Potential uses will, however, be subject to evaluation by the competent authority.

But for a condominium development, the developer can build about 118 units assuming an average size of 1,200 square feet each. The tender exercise closes at 3 pm on April 30, 2008.