Monday, June 30, 2008

HDB Launches 2 New BTO Projects In Punggol, Sengkang

Source : The Straits Times, June 30, 2008

THE Housing Board on Monday launched two new housing projects, Punggol Breeze in Punggol and Fernvale Residence in Sengkang, under the Build-To-Order (BTO) scheme.

They will comprise 1,587 premium flats - 55 three-room, 1,222 four-room and 310 five-room flats.

With these two new projects, HDB has launched a total of 4,524 units in 7 BTO projects in towns like Punggol, Sengkang, Yishun and Woodlands in the first half of 2008.

Punggol Breeze, bounded by Punggol Drive and Edgefield Plains, will have 778 units of four-room and 186 units of five-room flats.

Fernvale Residence, located at the junction of Sengkang West and Fernvale Road, offers 55 units of three-room, 444 units of four-room and 124 units of five- room premium flats.

Applications for the new flats can be submitted online from June 30 to July 14.

For enquiries, the public can e-mail hdbsales@hdb.gov.sg or call the Sales/Resale Customer Service Line at 1800-866 3066.

Buyers Snap Up 195 units In Bishan Condo

Source : The Straits Times, June 30, 2008

LEASEHOLD PROJECT

IN A welcome departure from the generally quiet market so far this year, the latest property launch - of the 616-unit Clover by the Park - has generated sales of 195 units so far.

Sim Lian Group, which is developing the condo, said that as at 8pm last night, it had sold 195 out of the 308 units that were released for sale since last Friday's official launch.

The 99-year leasehold condominium has large units, suites and penthouses.

The eight suites, of 3,057 sq ft each, were all snapped up, indicating that buyers were keen on larger units.

Buyers were mostly families upgrading from HDB flats. They picked up units priced between $907,000 and $2.68 million, or $599 per sq ft (psf) to $858 psf, said Sim Lian Land's executive director, Ms Diana Kuik.

The average price worked out to be about $750 psf.

Ms Kuik said potential buyers thronged the showflat and some stayed so late that the developer closed the showflat only at midnight on Saturday and around 10pm last night.

However, about 100 units had already been sold by Thursday, following the development's soft launch on Wednesday.

The property market has largely been quiet recently, as sentiment dipped drastically early in the year. Sales volume has plunged dramatically from the numbers registered during the boom times of last year. While the mood is still cautious, a few recent launches have registered encouraging sales.

Savills Singapore's director of marketing and business development, Mr Ku Swee Yong, said: 'Serious buyers were probably spoilt for choice this weekend, shopping among the few launches which are attractively priced.'

A week ago, the 99-year leasehold Dakota Residences in Dakota Crescent and the freehold The Amery in Telok Kurau were released for sale.

Construction Stocks: Keep The 3 S's In Mind

Source : The Business Times, June 30, 2008

Tiptoeing gingerly around the sector, think specialised, short and selective

THEY say there's no business like show business; right now, they are also saying there's no worse business than the construction business.

The construction industry is being battered from every angle: margins are being squeezed; sand, concrete and steel prices have been taking turns to take off; and residential property sales have turned anaemic.












Steel suppliers further tightened the screws by cutting the lock-in period for steel prices from six months to three months early this year, leaving contractors even more vulnerable to price fluctuations.

It isn't surprising then that some pundits are ironically predicting the destruction of the construction business.

'This is a very bad time to be looking for bargains in the construction industry. It's in bad shape and is the worst hit by inflation,' says an analyst who does not want to be identified.

Other analysts, however, are decidedly bullish on the industry and insist that all builders cannot be tarred with the same brush.

'Investors are not able to differentiate between specialised and integrated construction firms. The former have a lower risk profile,' explains CIMB analyst Lawrence Lye.

Investors should bear in mind the three S's when tiptoeing around the minefield of construction stocks: think specialised, short and selective.

Specialist companies involved in specific parts of a construction project may be better placed to stay out of the crossfire between suppliers and the main contractors that attempt to do everything.

'We would recommend investors reduce their exposure to integrated construction companies,' Mr Lye says. 'These companies have large order books and stand a higher risk of margin erosion.'

Instead, he suggests specialist firms with low exposure to construction material costs, like Tat Hong and Tiong Woon, both of which are crane-leasing companies.

With commodity prices being contractors' Achilles heel, firms with shorter- term contracts are better bets, like foundation engineering firm CSC Holdings, according to Mr Lye.

'CSC's average contracts are short at three to six months, which limits its exposure to fluctuating prices,' he says.

And while trite, it pays to remember the adage, 'location, location, location'. Selective locations, in particular.

'Wealthy buyers tend to be more discriminating, and they will be looking for property in areas like Districts 9, 10 and 11 which are not overbuilt,' says Mr Lye.

Contractors with projects in such areas will be safer bets, as prices are expected to remain relatively higher.

BBR, a contractor working on a development in Nassim Hill, would appear to fit the bill, especially since the estimated benchmark sale price of a similar unit was $2,200 per square foot in June, far exceeding BBR's breakeven price of $1,304 psf on the project.

One particular firm that has struck out on all three counts is Lian Beng Group, a main contractor saddled with a large order book of $800 million extending till 2010 and unsold residential properties.

Order books provide an indication of both future revenue and costs. The larger and longer a firm appears to be committed to an order, the larger and more risky its exposure to raw material price increases.

While Lian Beng's latest projects in Bukit Timah and Emerald Hill are estimated to have higher gross margins, its overall development portfolio remains a risky bet.

'We are cutting our FY08-10 forecasts for Lian Beng by 11-60 per cent to account for risks in its property development profits, which stem from projects such as Lincoln Lodge and Kovan Road, where benchmark transacted prices have fallen below breakeven costs,' Mr Lye said in a report this month that downgraded Lian Beng from 'outperform' to 'neutral'.

Kim Eng analyst Wilson Liew begs to differ on Lian Beng, citing the contractor's advantage in controlling raw material costs because it owns a batching plant for ready-mixed concrete, and maintaining a 'buy' recommendation.

Even so, the writing on the wall cannot be ignored. The valuation of the company has been lowered from $1.12 to $0.68 per share by Mr Liew, based on an expected shrinkage of all-important margins.

In addition to its three strikes, Lian Beng also falls into a category of firms that now fancy themselves as property developers as well.

This category also includes the likes of investment holding company Eastern Holdings and is dismissed by CIMB's Mr Lye as 'Johnny-come-lately firms that snapped up land in the middle of 2007 when property prices had peaked, right before the meltdown in July'.

'Reduce exposure to contractors that have turned opportunistic property developers late in the cycle,' he says. 'These are likely to be saddled with unsold inventory or expensive land.'

And if you must invest in a giant, go for one that has fluctuation clauses to manage raw material prices, like main contractor Chip Eng Seng.

'Gross margins for public projects are likely to remain stable at around 5 per cent, as increases in raw material prices will be protected by fluctuation clauses,' Westcomb analyst Wong Say Tian said in a report this month on Chip Eng Seng. 'We estimate that public projects account for about 60 per cent of the group's existing order book.'

While the bottom line may take a beating for some builders this year, it is still clear: investors should avoid construction companies built on sand if they want a solid portfolio.

Huh? What Are Plot Ratios?

Source : The Sunday Times, June 29, 2008

Where do you see this?

In articles about property. The term is often used by those engaged in collective sales.

What does it mean?

The plot ratio of a site is the gross floor area of the building divided by the site area.

The higher the plot ratio, the more gross floor area can be allocated to the site.

Why is it important?

It tells you the site's development intensity, or how much can be built on the site. This is of particular interest to those who are keen to sell their ageing homes en bloc.

If a site's allocated plot ratio is higher than that utilised by the existing building or if it is revised upwards, then more gross floor area can be allocated to the site.

This would raise the site's value because a developer could build and sell more homes on the site.

If the Government feels there is a need, it can revise plot ratios in its Master Plans - which are reviewed every five years - to cope with a growing population, for instance.

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

'Many developers were disappointed with the 2008 Master Plan as there were no major changes to the plot ratios.'

'Mickey Mouse Homes' Snapped Up Near Little India

Source : The Sunday Times, June 29, 2008

Buyers like these small apartments as they are close to the city and they seem more affordable

The area near Farrer Park MRT station in Little India - once largely shunned by developers - has become the playground of smaller property players.

These little-known companies have bought land there and launched projects that range in size from as few as 13 units to around 50.



























Recently, Suites 123 in Rangoon Road - which has 37 apartments - was largely sold out, despite weak market sentiment.

Before that, other small projects such as Citigate Residence, Suites@Owen and Soho@Farrer were also sold out. Some of these projects were sold at around $1,000 to $1,100 per sq ft (psf), which is not cheap, market watchers noted.

However, as the apartments are usually quite small, these 'Mickey Mouse units' appear to be priced at relatively low levels. Most of these projects have shop units as well.

Mr David Neubronner, the executive director of Savills Residential, noted that many of the one-bedroom units are just 400 sq ft and the two-bedroom units 700 sq ft.

He added: 'A two-roomer may cost $700,000.'

That, he said, is a 'very attractive entry point' for buyers looking to stay near the city.

At Suites@Owen, the 20 apartments range in size from just 366 sq ft for a one-bedroom unit to 1,044 sq ft for a two-bedroom penthouse.

The sizes shrink even further at the 13-unit Kent Residences on Kent Road. The smallest apartment is just 312 sq ft - roughly half the size of an average three-room HDB flat, or about the size of two Old Chang Kee kiosks.

The developer of Kent Residences, which is also behind Tyrwhitt 139 on Tyrwhitt Road, said the area is attractive because it is near an MRT station.

These projects target singles and small families. The buyers are mainly Singaporeans in their 30s but there are also some foreigners.

Mr Neubronner said the projects attract many end-users as the area is at the city fringe, which is getting more exciting.

Market watchers said Farrer Park's proximity to Little India might deter single females or families with kids, but not necessarily single men.

Still, there are many projects located north of Farrer Park MRT station, across the road from the buzz and chaos of Little India - and less savoury activities at Desker Road.

While many people also do not want to live near the Little India conservation area, some love living there, including artists and film-makers.

The area is full of history and character. Race Course Road, for instance, took its name from Singapore's first race course, built in Farrer Park in 1842. One of the country's oldest Buddhist temples, Leong San Buddhist Temple, is also in the vicinity.

And when some of the newer developments are completed, the residents might include a famous face or two. At least one local celebrity is believed to have bought a unit in a small development north of Farrer Park MRT station.

For buyers, the good thing about these small projects is that they are mostly either freehold or 999-year leasehold. With the MRT station only a short walk away, residents are basically two MRT stops away from town.

However, market watchers warn that buyers - those who bought off developer's plans - might not realise how small the units are until they see the completed apartments.

Nowadays, the space allocated for bay windows, planter boxes, air-con ledges and balconies can eat significantly into your living area.

'In some instances, they can make up as much as 20 per cent or more of the total. If you want more 'liveable' space, you should do a like-for-like comparision before you make your decision,' said Chesterton International's head of research and consultancy, Mr Colin Tan.

For instance, at the 56-unit Citigate Residence on Rangoon Road, the 441 sq ft and 517 sq ft advertised for its smaller units include the bay window, air-con ledge, planter and balcony.

Nevertheless, many buyers could still bite simply because of the seemingly low absolute prices and projected high rental yields, market watchers say.

'Consumers must be more prudent. The absolute value of such developments might be low, but investors have to consider whether they can find a buyer or tenant later,' said HSR Property Group's executive director, Mr Eric Cheng. 'They are suitable only for those who are comfortable with small units.'

He said that many buyers might not realise the units are too small to live in until the projects are completed.

'One of my friends who bought a 580 sq ft unit on Mackenzie Road told me it's like a bird's nest,' he added.


Hidden risks

Many are drawn in by the seemingly low absolute prices and projected high rental yields. However, the units aren't that cheap on a per sq ft basis. Also, some buyers might find the units too small to live in comfortably when they see the completed apartments. It might not be easy to find a buyer or tenant later.

UBS Investment Research On Singapore Residential 27th June 2008