Wednesday, May 21, 2008

DP Architects Wins Viet Design Contest

Source : The Business Times, May 21, 2008

DP Architects has beaten nine Vietnamese and international architectural firms to win a design competition for the Sabeco World Trade Centre in Ho Chi Minh City. This follows its winning design for the Bank for Investment and Development of Vietnam last year. The WTC design complies with current Singapore standards, regulations and codes of practice where applicable.

- Picture : -TODAY

Honoured For High Standards Of Excellence

Source : The Business Times, May 21, 2008


THE recipients of last year's inaugural Singapore Business Events Awards were already winners in their own fields (see full list on the right). That they were eventually chosen pointed to the high standards of excellence attached to the awards and the benchmarks set by industry players.

Ringing endorsement: The awards have enhanced the credibility of Suntec Singapore (left) and placed Novotel Clarke Quay (next) as one of the top deluxe hotels in SingaporeThe winners told BT that the awards had bestowed on them prestige and international recognition, especially as the endorsement came from an international panel of esteemed judges who were themselves leaders in the business events industry.

'Winning the top award for the Singapore Business Events Awards has further cemented Kingsmen's good reputation in providing clients with innovative designs and excellent service,' said Anthony Chong, executive director of Kingsmen.

The firm, which won the Service Partner Excellence award, said the award would further propel it to achieve world-class standards.

'It helped us gain the trust of new global clients as it reflects on the capabilities of the company as one of the leading communications design and production group in the Asia-Pacific and the Middle East,' said Mr Chong.

Suntec Singapore, which won awards for both Business Event Venue Excellence and Most Innovative Marketing Initiative, said the awards have been enhancing its credibility and value in a competitive environment.

'These awards have helped and in the long term, will help raise the profile of Suntec Singapore to a new level, with enhanced visibility and added business value,' said its chief executive, Pieter Idenburg.

Both Kingsmen and Suntec Singapore are already heavyweights in the region. Kingsmen has, over the years, been involved in prominent projects such as aerospace exhibitions in Singapore, Malaysia, Thailand, Indonesia, India and South Korea, including Asian Aerospace, one of the world's largest airshows. Suntec Singapore has hosted world-class events, including the mega IMF-World Bank annual meetings in 2006.

Propelling Singapore-based companies and events onto the global stage has been one of the aims of the awards. Singapore has consistently ranked as Asia's top convention city and is among the top three cities in the world. It's no secret that competitors in Asia and elsewhere have emulated Singapore's business events strategies. Being headquartered in a top MICE (meetings, incentives, conventions and exhibitions) capital has given Singapore-based business events players the edge in winning business overseas. An award on top of that is indeed a feather in the cap of these winners.

'The awards have successfully highlighted the high standards of the various segments within the business events industry in Singapore, from the organisation of events and venues to business suppliers and marketing initiatives,' said Stephen Tan, chief executive of Singapore Exhibition Services, which received the Exhibition of the Year award for its Food&Hotel Asia 2006 show.

Mr Tan said that by focusing on these world-class achievements, 'the awards have certainly heightened Singapore's profile as a global MICE hub'.

Last year's award recipients certainly added to the buzz about Singapore as an ideal business events destination. In fact, that aspect will now provide bonus points to those vying for this year's awards.

One winner who splashed the colours of Singapore during its award-winning event was Novotel Clarke Quay Singapore.

The relatively new hotel took home the Corporate Meeting of the Year award for its Accor Asia General Managers Conference held in 2006.

It used the umbrella theme 'Textures of Asia', branding all aspects of the event as Asian as possible - from food and costumes to activities and themed events.

'Winning that award really puts us at the forefront of being one of the top deluxe hotels in Singapore. It's really a demonstration and a clear distinction of how good Novotel Clarke Quay can be in terms of delivering a world-class meeting event,' said Heinz Colby, general manager of the hotel.

Switch To S-Reits For Their Defensive Nature: Analysts

Source : The Business Times, May 21, 2008

AGAINST the backdrop of uncertainty facing property developers, analysts advocate taking defensive positions in real estate investment trusts (Reits).

While there have been concerns about Reits as the credit crunch dried up their acquisition activity in the past six months, these worries now pale in the face of weightier concerns about slower home sales and falling home prices surrounding developers.

'We believe the Singapore residential property sector could see a bursting of a bubble that has been created from exuberant expectations and liquidity over the past two years,' Credit Suisse analysts said in a report this month. 'We advocate switching from riskier residential exposure to S-Reits.'

Echoing these views are CIMB-GK analysts Donald Chua and Janice Ding. In a report yesterday, they said: 'We remain confident in S-Reits for their defensive nature and attractive yields of 6.2 per cent on average and general positive outlook for property rents in the medium term.'

In particular, CIMB-GK prefers Reits with larger asset portfolios that can provide sustainable and stable income streams, experienced management teams with established track records and strong sponsors with quality assets to inject into the Reits.

'We are also more inclined towards Reits with material Singapore-based assets in view of the strengthening Sing dollar,' the CIMB-GK analysts said.

This makes industrial and retail Reits the brokerage's top picks, given their defensive and stable income, and hospitality Reits in view of rising demand and rents.

Even though industrial rents rose some 32 per cent last year, they are still about 30 per cent below their peak in 1996. Hence, the analysts reckon there is still room for stronger catch-up in industrial rents as Singapore's manufacturing moves towards knowledge-based industries such as research and development and the biomedical sector.

In addition, the longer weighted average leases for industrial space and the lower likelihood of industrial tenants terminating their leases before expiry give industrial Reits further defensiveness in their income stream.

Elsewhere, retail rents have shown the greatest resilience during economic downturns, and tenants also showed the least propensity for cutbacks in demand for space in poor economic conditions, the CIMB-GK analysts said. Efforts by the government to boost Singapore as a financial and tourism hub also bode well for the retail sector.

They noted that between the last rental peak in 1996-1997 and the rental trough in 2003-2004, retail rents fell the least - by 34 per cent, compared with 45 per cent for industrial rents and 54 per cent for office rents.

'Furthermore, the retail segment also has the greatest potential to grow organically via enhancements to facades, layouts and tenant mixes,' they added. 'This trait further enhances the defensive nature of retail Reits, particularly when prices may not be conducive and funding for acquisitions may not be readily available.'

Credit Suisse analysts also favour retail Reits for their more defensive nature, particularly CapitaMall Trust and Frasers Centrepoint Trust.

For investors with a higher risk appetite, CIMB-GK analysts recommend hospitality Reits, which hold growth potential from expected increases in business and leisure travel but are seen to be most vulnerable to external risks.

In contrast, the outlook for property developers is more clouded. CIMB-GK said its models have factored in 10-20 per cent declines in property prices in the mid-luxury segment, but it has upgraded its rating on the sector to 'neutral' from 'underweight' due to current low valuations.

Genting Says S'pore IR Costs Under Control

Source : The Business Times, May 21, 2008

KUALA LUMPUR - Malaysian casino operator Genting does not expect further cost over-runs for the integrated resort (IR) it is building on Singapore's resort island of Sentosa, the company's chief executive said on Wednesday.

Resorts World at Sentosa, a wholly owned unit of the Singapore-listed arm, Genting International, is building the IR at a cost of up to $6 billion (US$4.4 billion), about $800 million, or 15 per cent, above its initial budget, due mainly to higher construction expenses.

'At this point, we are staying at $6 billion. Concerns about cost over-runs for the project are unsubstantiated,' Lim Kok Thay, Genting's chairman and CEO, said on the sidelines of a tech conference.

'Costs are under control despite high oil prices,' he added.

Genting unveiled the higher price tag for the casino project last November and said it would cover the additional expenses through project financing at the resort level.

The raised budget covers the cost of six new attractions as well as improvements to transportation and access infrastructure, with higher building costs accounting for half of the increase.

Mr Lim said there was no need to raise any more funds for the project.

'The recent financing we announced has catered for the increase in construction costs. All the financing are in place, there is no need for further financing,' he said.

In April, Resorts World at Sentosa said it had obtained a $4 billion syndicated loan to fund the IR project.

In December last year, Genting International and sister company Star Cruises won the right to build and operate Singapore's second IR resort.

The 49-hectare project will include a Universal Studios theme park, a giant oceanarium with 700,000 aquatic creatures, and six hotels with more than 1,800 rooms. The resort is scheduled to be completed in 2010.

Singapore's first IR site, a 20.6-hectare piece of waterfront land at Marina Bay near the financial district, was awarded to Las Vegas Sands in May 2006.

The republic legalised casino gaming in 2005 as part of its ambitious plans to double visitor arrivals to 17 million by 2015. -- REUTERS

Loopholes That Hold Back India's Real Estate Growth

Source : The Business Times, May 21, 2008

PROPERTY developers in India, analysts agree, need to raise large sums of money to ease the shortage of everything from office towers, warehouses and shopping malls to apartments, multiplex cinemas and hotel rooms.

The financing itself shouldn't prove very difficult. At US$400 billion a year, domestic savings in India now represent a significant source of funds for any profitable enterprise, including construction. There's also ample interest globally, including from hedge funds and buyout specialists.

High-rise: Office rents in Mumbai's central business district rose 14per cent from the previous three months in the first quarter of 2008

Lenders such as ICICI Bank Ltd are seeking billions of dollars from investors in North America, Europe, Japan and the Middle East to invest in property projects in India.

Yet, Indian real estate can absorb a lot more capital than is currently flowing into it - if only policymakers can fix a few basic loopholes in the laws governing property titles, taxation and creditor rights.

Failure by lawmakers and regulators to set clear rules on property rights and ownership will only widen the demand-supply gap that's pushing rents to an intolerably high level.

Office rents in Nariman Point, Mumbai's central business district, rose 14 per cent from the previous three months in the first quarter of 2008, Cushman & Wakefield Inc, a real estate services firm, said recently in a research report.

At 550 rupees (S$18) per square foot per month, Nariman Point is already as expensive as Singapore's financial district.

And even then, there's no shortage of demand: The average vacancy rate in Mumbai's central business district was as low as one per cent last quarter.

The shortage isn't limited to office space: Industrial property rents in Mumbai rose at the fastest pace in the world in 2007, New York-based Cushman said last month.

Among the bottlenecks affecting the flow of debt capital into Indian real estate is the absence of a good bankruptcy code.

A developer who takes a loan from a state-run bank would typically mortgage the property to the lender and agree to deposit part of the rents paid by tenants - or a share of the purchase price paid by the buyers - into a special account.

The money held in escrow is to be used only to service the debt.

Such an arrangement, foolproof as it may appear, doesn't truly secure the interest of the lender. If the builder bungles an unrelated project and fails to meet its obligation to another creditor, the latter can get a court to appoint a liquidator who has the power to release the insolvent company from any onerous contracts. The liquidator may not exercise such a power to nullify an escrow, but the threat itself is a damper.

'It's conceivable that an escrow agreement may be set aside by the liquidator on the grounds that it is onerous,' Moody's Investors Service and its Indian affiliate ICRA Ltd noted in a joint study this month.

One way to give creditors greater comfort would be for the developer to sell the property that it wants financed to a special purpose vehicle, which the liquidator can't touch even if the builder becomes insolvent. This presents another hurdle: very high stamp duties on property sales.

Stamp duties, a legacy of British rule, are a transaction tax. They vary from one Indian state to another and range from 3 per cent to 15 per cent of the property value.

Among other challenges, property titles in India aren't guaranteed and lenders face difficulties enforcing mortgages.

Banks in India have gained from a 2002 law that allows them quick possession of the asset in case the borrower fails to repay its loan; however, this fast-track route to debt recovery isn't open to mutual funds and insurance companies, which have to go through the normal, lengthy judicial process to get any of their capital back, the Moody's/ICRA report said.

This narrows the potential investor base for mortgage-based debt securities.

Only a diversified group of investors can meet the financing requirement of the real estate industry.

After growing rapidly in the past few years, bank financing of property projects has hit a plateau, thanks to the monetary authority's efforts to rein in credit growth.

Real estate loans by Indian banks amounted to 539 billion rupees on Feb 15, a 27 per cent increase from a year earlier.

This represents a marked slowdown from the 79 per cent annual pace at which bank loans to property companies grew in February 2007.

The property stock in India is too small and too dilapidated to serve the demands of a rapidly modernising economy.

Developers need access to stable, long-term financing from a variety of sources, including real estate investment trusts (Reits).

This will lead to judicious risk-sharing. Transparency in funding will eventually reduce the scope for bribery and corruption, which are endemic to the real estate industry. Fixing the legal loopholes will be the quickest way to reach both these goals. -- Bloomberg

Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own

Worst May Be Over For US, Say Analysts

Source : TODAY, Tuesday,May 20, 2008

WASHINGTON — A growing number of analysts are expressing confidence that the worst may be over for the United States economy, even if it struggles for some time due to weak housing, tight credit and high energy costs.

Latest data suggests that the world's largest economy may have averted a calamitous downturn and could even escape recession.

"The US economy continues to labour under the averse effects of three powerful shocks: The housing slump, the credit crunch and the spike in energy prices," said Mr Josh Feinman, chief economist of Deutsche Bank's DB Advisers.

"Remarkably, the economy has been able (barely) to keep its head above water despite all the negative shocks — a testament to its underlying resiliency, an aggressive policy response and the relative strength of global growth."

Mr Feinman predicts that the US economy, which saw sluggish growth at a 0.6-per-cent pace in the past two quarters, will see a pickup to a 1-per-cent pace in the second quarter and 2 per cent in the July-September quarter.

He sees a softening to 1.5-per-cent expansion in the fourth quarter and then a return to 2-per-cent growth in the first quarter of next year.

Some of the recent economic reports have defied forecasts of a sharp decline in US growth.

Retail sales fell 0.2 per cent in April, but, excluding vehicle sales, were up 0.5 per cent, suggesting resilience in consumer spending, which is the backbone of US economic activity.

Spending should get a further lift as the government sends out tax rebates of about US$107 billion ($146 billion) in the coming weeks as part of a US$168-billion economic stimulus package.

The labour market has also held up better than expected and increased exports helped by a weak dollar have underpinned growth.

The broad US stock market has rebounded some 10 per cent since the middle of last month, when the Federal Reserve helped support a rescue of investment giant Bear Stearns. It was widely seen as a turning point for the credit crisis and market confidence.

Mr Nigel Gault, economist at Global Insight, said the US economy has shown resilience but it is "still too early to turn our thoughts away from recession and towards recovery".

Global Insight is predicting a contraction of 0.9 per cent in the second quarter. Largely due to the impact of tax rebates, it sees 2.3-per-cent growth in the third quarter and overall yearly growth at a tepid 1.2 per cent.

"The worst of the financial turmoil may be behind us, but the impacts on the economy will linger," Mr Gault said. — AFP

A Gallant Move, South Of Singapore

Source : TODAY, Tuesday, May 20, 2008

SINGAPORE-LISTED Gallant Ventures is making another effort to add more buzz to its Bintan projects by announcing a slew of new investments, including infrastructure, worth some $500 million.

This time around it’s not only the well-heeled it’s trying to draw to its pristine beaches, but also the middle-income investors. It has been talking to Singapore’s Housing Development Board and National Trades Union Congress (NTUC) to try and get them to set up shop on the island, which is a third bigger than Singapore.

This would be to develop and sell lower-cost housing for profit.

Gallant announced that it has so far sold close to 300,000 sq m (about 300 hectares) of land on its 1,300 hectare Lagoi Bay Development for about $45 million for a variety of resort, private residential and retail projects. The new investors range from property developers in the region to private developers looking to build their own dream homes.The company has a total land bank of 18,000 hectares — one third the size of Singapore — there.

And another three hotel groups — Alila Hotels and Resorts, which has a collection of exclusive resorts in Maldives, Bali, Thailand, Laos and Oman; the Ritz Carlton and Mandarin Oriental Hotels — have announced plans to establish their brands on the island.

“Lagoi Bay’s spectacular shoreline, coupled with its growth potential arising from its strategic location from Singapore, makes it a natural choice for us when identifying the location for our next resort. With its well-maintained and comprehensive infrastructure and secure environment, we are confident that our project in Bintan will be well-received,” said Alila president and CEO Mark Edleson.

The existing resorts and golf courses in Bintan are reporting better crowds and occupancy levels. Annual visitor arrivals which slipped after Sept 11 in 2001 and the Bali bomb blasts the following year have now returned to the former level of about 340,000, and are expected to reach a million in 2012. Bintan is also riding on the success of Singapore in attracting tourists — the Republic is expecting over 17 million visitors by 2015 when its two integrated resorts are up and running.

The $500-million infrastructure development plans include expenditure of $150 million on the Lagoi Bay development, $150 million on a new coal-fired power plant, $100 million on a new airport next to the industrial park and another $100 million on new high-speed ferries to cut the travelling time between Singapore and Bintan to less than 45 minutes from about an hour now, upgrading of the domestic and international ferry terminals, and a new education and training campus for Bintan’s resorts and employees of its industrial park.

Taking a leaf from the success of Singapore’s Sentosa Cove, Gallant is offering more bite-size plots ranging from 700 sq m to 2,000 sq m. Although land prices are 1 to 2 per cent of Sentosa’s, total costs, including construction, will set one back about $1 million.

But as former Singapore permanent secretary Tan Chin Nam noted: “I recently heard that a Russian paid $21 million for a 700-sq-m plot at Sentosa. Here a similar plot costs only $200,000 and it’s less than an hour from Singapore.”

Mr Tan is now a consultant to Indonesia’s Salim group which owns just over 50 per cent of Gallant.

The group’s chief financial officer Choo Kok Kiong is well aware that Bintan’s development depends on attracting not only the superrich but also the middle class. He disclosed that plans are afoot to build several budget-class hotels and also more affordable housing to cater to those less well-off.

“So, we talked to the Housing Board and NTUC, and tried to get them interested in Bintan. We want to rival Phuket or Bali as the destination of choice for the beach tourist,” Mr Choo said.

But Gallant is not only looking at Singaporeans to purchase its land, increasingly it has been enticing mainland Chinese, Indians and Russians. Another market it is eyeing is education. With Singapore’s schools for expatriates having long waiting lists, Gallant thinks it could provide an alternative site for such institutions and is in discussions with several parties.

“The kids could go to boarding school in Bintan while the parents work in Singapore. And perhaps they could have a weekend home in Bintan as well,” said Mr Choo.

HDB: Buy A Flat Within Your Means

Source : The Electric New Paper, May 21, 2008

WHEN contacted, HDB said Mr Dave Tan and his fiancee had approached the loan counters at the Design, Build and Sell Scheme (DBSS) site for an estimate of their loan eligibility.

The estimates given were based strictly on the verbal information provided and not verified with supporting documents.

Those seeking an estimate were informed of this.

And when quoting his income, HDB said Mr Tan did not indicate that his income was based on director's fees.

However, based on documents submitted in the actual loan application, Mr Tan's income was based on fees derived from his role as a director in a company.

Futhermore, Mr Tan's fiancee had started work in a new company for less than three months.


A HDB spokesman said: 'Directorfees are specifically listed as income not considered for credit assessment as they are not considered a steady source of income.

'In addition, applicants are required to have three month's income from their employment before their pay can be used for purpose of credit assessment to ensure that they are able to sustain regular instalment payments.'

HDB's guidelines on income that can be considered for credit assessment are on the HDB InfoWEB at

HDB said that flat buyers should exercise financial prudence and buy a flat within their means as the purchase of a flat is a major financial commitment.

The necessary information and aids to help home-buyers with their financial planning are provided on the HDB InfoWEB.

Added the spokesman: 'Mr Tan could consider buying a more affordable flat from the resale market if they are in urgent need of one, or apply for one under the HDB's Built-to-Order exercises.'

Search For Dream Home Turns Into Nightmare

Source : The Electric New Paper, May 21, 2008

Couple can't buy flat and may forfeit $8,000 in fees because they can't get housing loan

AFTER several failed attempts to get a new HDB flat, he was ready to give up and pay more for a private property.

Then, home-buyer Dave Tan had a stroke of luck - or so it seemed. He found a new five-room HDB flat at City View @ Boon Keng.

A preview of CityView @ BoonKeng, which will be ready in 2011. -- ST File picture

This is the second public housing project to be built and sold by private developers. Hoi Hup Sunway Development is the developer.

Even though it cost a whopping $675,000 - not cheap for a new HDB flat - Mr Tan was okay with the price.

But his happiness was short-lived.

The 30-year-old and his fiancee, who are getting married next year, found out that they may not be able to finance their new home.


They are having difficulties securing a home loan and may even have to pay a penalty to give up the flat.

The couple's combined income is about $6,000, said Mr Tan.

They put up an option fee of about $33,000 for the flat two months ago.

But the Housing Development Board (HDB) rejected their loan application for 90 per cent of the cost of the flat last month.

This is because Mr Tan's director's fee can't be used for credit assessment, and his fiancee didn't have the pre-requisite three months of continuous employment for the same company.

Mr Tan runs a serviced office business.

His fiancee quit her last job in February and started work as a personal assistant last month.

Upon appeal, HDB said they will be willing to give the couple a loan of about $150,000, but rest will have to be paid in cash and out of their CPF.

Mr Tan said: 'Where can I find so much money to pay for the flat?

'We were very happy when we managed to get the flat. But with this loan issue, I really doubt we can afford to get the place now.'

The 714-unit condo-like development will be ready only in2011.

Mr Tan said he and his fiancee had tried balloting for a new flat three times last year.

On two occasions, the flats they wanted were already taken up. On another occasion, they didn't get a chance to choose a unit because all were taken up.

Mr Tan said he had approached afew banks for loans, but the maximum they would lend was about $400,000, still about $270,000 shy ofthe purchase price.

To make matters worse, if he defaults on this flat purchase, he'll have to pay a penalty of about $8,000 to the developer. This is about 25 per cent of the option fee which he paid for the place.

'The developer said that since the sale didn't go through, we have to forfeit part of the option fee,' he said.


'My girlfriend is so upset that she cried and lost so much sleep over the penalty. She said she has never lost so much money before in her life.'

The couple had borrowed the money to pay the option fee from their relatives.

A very frustrated Mr Tan thinks that it's unfair to be penalised because it wasn't a case of them not wanting to proceed with the deal.

Rather, they can't accept the deal now because of loan problems.

A spokesman for Hoi Hup said that in cases where the applicants do not meet the eligibility requirements for the flat, there will be a full refund of the option to purchase fee.

But if the withdrawal to buy the flat is due to other reasons, such as loan issues, the applicants face the prospect of forfeiting 25 per cent of their option fee.

The spokesman declined to comment on the above case and would only say they are reviewing MrTan's appeal to waive the penalty.

Thakral To Give Up Electronics To Focus On Real Estate

Source : The Business Times, May 21, 2008

Repositioning of its principal business will be subject to shareholders' nod

AFTER years of suffering heavy losses, dealing with growing competition and fighting an uphill battle against rampant piracy, Thakral Corp appears to have finally thrown in the towel.

In a surprise announcement posted on the Singapore Exchange last night, the company said that it plans to move away from its principal business of consumer electronics distribution, and move into the real estate industry instead.

The board believes that the current volatile market conditions can throw up opportunities which might deliver attractive returns.

Its board of directors, which met yesterday, will look to tap the 'significant expertise and deal flow of its key shareholders, who have extensive expertise in real estate and infrastructure not only regionally, but also globally'.

The repositioning of Thakral's principal business will be subject to shareholders' approval.

Without elaborating, Thakral added that going into real estate and related infrastructure investment in the pan-Asian region 'is expected to offer attractive returns to shareholders in the foreseeable future'.

It was also decided that Thakral could divest those assets that would no longer form part of the company's core activities, including listed securities it currently holds.

While it prepares for this major transition, Thakral assured that its high-end consumer electronics distribution business would continue as normal. The board promised to achieve the best value possible for the company's shareholders in divesting the core business.

Efforts to reach Thakral's management at their Upper Circular Road office were unsuccessful.

In the issued statement, the Thakral board said that it had appointed a committee of directors - comprising vice-chairman Natarajan Subramaniam and non-executive directors Lee Ying Cheun and Andrew James Schwartz - to submit proposals and recommendations on how best to move forward with the proposed change of business.

An extraordinary general meeting of shareholders will be convened, although no time frame was specified.

'The board believes that the current volatile capital market conditions could throw up significant opportunities which could potentially deliver attractive returns to shareholders,' said the statement.

Thakral's latest financial results for the three months ending March 31, 2008 saw it suffer a net loss attributable to shareholders of $535,000 versus a net profit of $217,000 a year ago. This is despite its revenue for the first quarter rising 85 per cent to $88.9 million.

In 2006, Thakral announced its exit from the flagging home entertainment business segment, which was continually held hostage to piracy in China.

And back in 1999, the company was badly hit by a $220 million loss that was then largely blamed on over-hedging against the Japanese yen.

Banks See Plunge In Home Prices In Next Two Years

Source : The Straits Times, May 21, 2008

New homes, rising vacancy rates, unsold condos and fewer rental deals cited as reasons

THE slowdown in the Singapore housing market has prompted two banks to predict a dramatic plunge in home values in the next two years.

In two starkly bearish reports, Barclays Capital and Credit Suisse have forecast drops of up to 40 per cent in home rents and prices, as demand and supply dynamics move in favour of buyers.

The reports, issued in the last two weeks, pointed to the malign cocktail of a flood of new homes coming on the market, climbing vacancy rates, a rising number of unsold condominiums and fewer rental transactions.

They also raised concerns about the possible dumping of units by speculators. Barclays said that should this happen, private home prices could slide 28 per cent to 30 per cent by 2010.

Credit Suisse predicted a possible 40 per cent drop in rents and prices. Its analysis showed that sub-sale prices recently started to dip at several developments.

Both banks also noted that developers were now more generous with price cuts, stamp duty rebates and agent commissions in an effort to move units. They warned that smaller developers were likely to 'break' first.

'Just six months ago, City Developments and a few others gave zero commissions to agents,' Credit Suisse said. By March, most were giving 1 per cent to 5 per cent, an increase of three to 10 times in just six months.

'When Singaporean developers start to reach out to agents with higher commissions, you know they are feeling the pain,' it said.

The pain is coming from slower growth in home rents and prices, as the effects of the United States sub-prime mortgage crisis takes its toll on market sentiment in Singapore.

Private home prices rose a smaller-than-forecast 3.7 per cent in the first quarter. Even then, Barclays analysts said this could have been boosted by a handful of high-priced transactions and 'may not reflect the depth of pessimism in the market'.

Sales and launches of new homes also fell sharply last month, extending the slump.

Mr Colin Tan, the head of research and consultancy at Chesterton International, agreed with the Barclays report about a correction in prices.

As more new homes are completed over the next few years, he said, rents will feel the pressure and prices will start to fall.

Not all property analysts, however, have such a gloomy take on the housing sector.

Kim Eng analyst Wilson Liew believes the oversupply situation may be overstated. While there are 32,000 units being built and 42,000 more in the pipeline, current market sentiment could help slow the rate at which the planned units come onstream.

'It is likely that most of these units would be deferred indefinitely until sentiment returns or when construction resources ease,' he said.

Developers could also keep lands in their landbank rather than develop them if there is no demand, suggested Macquarie Securities' head of Asean research, Mr Soong Tuck Yin.

Both he and Mr Liew believe the upcoming integrated resorts will give Singapore a boost and, while there may be a temporary weakness, home prices are unlikely to collapse.

Mr Soong also said developers had stronger balance sheets now than in previous market troughs, and the current low interest rates and high inflation could lead people to buy properties as a hedge against inflation.

The Credit Suisse report, however, said negative real interest rates - often touted as a driver for property purchases - had not historically helped home sales. It also said that even with construction delays, actual completions had usually come in higher than forecast.

Seletar's Colonial Houses In Demand As Bulldozers Roll In

Source : The Straits Times, May 21, 2008

Rentals have soared for the 131 units that will remain even after area's development as aerospace hub

WHEN it was a verdant oasis of calm and tranquillity, not many people wanted to live in the former Seletar airbase.

But now that the bulldozers have rolled in to turn the area into Singapore's key aerospace hub, monthly rentals for the colonial houses sitting on streets with quaintly English names have shot through the roof.

TRANQUIL ABODE: Residents have so far been paying under $3,000 for such homes. -- ST PHOTO: FRANCIS ONG

In some cases, they have just about doubled.

Never mind that the din and dust will be a fixture until 2018, when the 300ha Seletar Aerospace Park - including the existing airport and runway - is ready.

The higher rents reflect the current market conditions, said a spokesman for the Singapore Land Authority (SLA), in response to queries from The Straits Times.

Of the 378 Seletar houses, 204 will be retained, and 174 demolished. Of those to be left standing, 131 will be retained as homes, and the remaining 73 redeveloped for non-residential use - for example, to house aerospace training schools and food and beverage outlets.

Two-year leases for the properties have all either expired or will expire soon.

Those living in the units to be demolished or redeveloped must move out by year-end.

If their leases expire before then, these residents have the option to extend them for these last few months - but they will have to pay between 16 and 33 per cent more in rent.

The SLA spokesman said: 'For each of such renewals, the rental rates will have to be revised to reflect market rates, as advised by professional valuers.'

Islandwide, rental rates jumped 69 per cent between the first quarter of 2006 and the first quarter of this year, she noted.

Rental hikes for the units unaffected by the development are a lot steeper - more than 100 per cent in some cases, residents said.

The SLA did not provide data on this, but said the increases were 'still lower than the bids which we have received for the units'.

As and when leases have expired for units whose residents have opted against renewing them, the properties have been put up for public bidding.

In one such case, a two-storey terrace house recently attracted a bid of $5,000 - more than three times the recommended rent of $1,500 set by the SLA, its spokesman said.

Seletar residents, some of whom have lived there for more than 20 years, paying under $3,000 for a house with a garden, have been taking the impending changes in their stride.

But they are sorry to leave behind what they admit is a great deal.

Ms Edith Kraayeveld, 39, an airline marketing and sales manager and mother of two preschool children, pays $2,650 a month for her three-bedroom house with a garden.

She said: 'Yes, we realise we have been incredibly lucky all these years. But it is not quite our fault that nobody wanted to live here. We just managed to find the deal and saw the opportunity.'

She and her husband, the managing director of a sports company, have to move by year-end, after 14 years there.

She said: 'It is a great community of people who live here and everyone is so upset about leaving. I have two golden retrievers and two young children who have grown up amid the lush greenery and fruit trees.

'If need be, we will move across the Causeway after moving out of Seletar.'