Thursday, July 10, 2008

S'pore Growth Slows In Q2

Source : The Business Times, July 10, 2008

Singapore's economy suffered its biggest contraction in five years in the second quarter as exports to the United States and Europe tumbled, leaving less room for the central bank to battle inflation at a 26-year high.

Singapore is the first Asian country to report quarterly GDP data and its heavy dependence on trade make the US$160-billion economy a good gauge of the impact of a slowdown in the United States and Europe on Asia

But economists said the annualised and seasonally adjusted 6.6 per cent contraction - much stronger than the forecast 1 per cent decline - was exaggerated by a slump in volatile drugs output, and the economy should avoid slipping into recession.

'It's a slowdown, not a slump. We do not think a technical recession is likely,' said Kit Wei Zheng, an economist at Citigroup. He said drugs output should rise marginally in the July-to-September period from the second quarter.

A recession in usually defined as two consecutive quarters of contraction.

Drugs production, which accounts for about a fifth of Singapore's total factory output, is volatile due to changing production cycles when manufacturers shut factories to change from one drug to the next.

Economists say activity generated by a Formula One Grand Prix motor race, which the island hosts in September, will help support the republic's economy.

That shrinking feeling?
Drugs output fell 58 per cent and 26 per cent respectively in May and April, after it more than doubled in March.

Singapore is the first Asian country to report quarterly GDP data and its heavy dependence on trade make the US$160-billion economy a good gauge of the impact of a slowdown in the United States and Europe on Asia.

The Singapore dollar weakened on the news and was trading at 1.3591 at 0159 GMT to the US dollar, compared with 1.3588 before the data. The benchmark Straits Times Index was down 1.3 per cent.

The advance estimate, largely based on the first two months of the quarter, is the worst since the second quarter of 2003 when the economy shrank 7.8 per cent. From a year ago, the economy grew 1.9 per cent.

Given that demand in the United States, Asia's top export market is likely to weaken in coming quarters, economists said the central bank is unlikely to further tighten monetary policy at its next meeting in October, barring a spike in oil prices.

'The government is still concerned about inflation so perhaps it will adjust the rate of appreciation of the Singapore dollar a little higher, but there probably isn't a need for that,' said David Cohen, an economist at Action Economics.

Singapore's central bank conducts monetary policy by managing the Singapore dollar within a secret trading band against a basket of currencies instead of setting interest rates.

It tightened policy at its last meeting in April to tame inflation which reached a 26-year high of 7.5 per cent in May.

Volatility in Singapore's drugs output has helped set off sharp swings in the overall economy, which shrank 4.8 per cent in the final quarter of 2007 before surging 15.6 per cent in the first quarter, aided by a recovery in the drugs sector.

The trade ministry said that while the electronics output fell due to weaker foreign demand, other industries such as transport engineering and chemicals continued to grow.

Asian economies, many of which rely on exports, are bracing for a slowdown this year, with healthy growth in the region's powerhouses such as China offering less of a cushion than earlier anticipated.

Singapore saw exports drop in May at its sharpest rate in more than two years. Shipments to Europe and the United States - which make up a third of all exports sold - were the hardest hit, but exports to other major markets, including China also fell. -- REUTERS

Cambridge Reit Expects To Be Sharia Compliant Soon

Source : The Business Times, July 10, 2008

HONG KONG - Singapore's Cambridge Industrial Trust expects to declare itself 'sharia compliant' early next week, sources familiar with the matter told Reuters, in an effort to draw investment from the Middle East.

The property trust has asked the Islamic Bank of Asia to conduct due diligence, and an initial report has shown that few of its 43 assets were not in line with sharia principles.

One of the sources said the bank's sharia board was due to meet in Kuwait over the weekend and would probably give the go-ahead for the trust to announce it is sharia compliant.

New investors have been lined up to buy stakes in the trust following the move, the source said.

A manager of Cambridge Industrial Trust declined to comment on the matter.

Asia's once-hot real estate investment trust (Reit) markets have slumped in the last year as the global credit crunch raised expectations that debt refinancing would be difficult and expensive.

Singapore-listed Reits, with a market capitalisation of US$19 billion, have fallen 35 per cent since a peak a year ago and are now yielding on average 6 per cent against 2008 dividend forecasts.

Units in Cambridge have also fallen 35 per cent since a peak in late June 2007, and are down 11 per cent this year.

Units in the trust were trading at S$0.63 on Thursday afternoon, down 1.56 per cent on the day.

In a note to clients on July 9, UBS analyst Alastair Gillespie said 'potential rebranding of Cambridge could bring the price closer' to the trust's net asset value of S$0.76 per unit. -- REUTERS

Property Transactions With Contract Dates Between June 23rd - 28th, 2008

Dubai Property Prices May Fall When Projects Are Completed

Source : The Business Times, July 10, 2008

(DUBAI) There will be an oversupply of Dubai property leading to a fall in prices if current planned projects are delivered on time, Fitch Ratings Ltd said.

There is a 'prospect of oversupply if current delivery plans are met, and the risk of being unable to stimulate demand in view of massive development projects in the pipeline', wrote Bashar Al Natoor, director in Fitch's corporate team, in an e- mailed statement. The UAE is the largest construction market in the Gulf Cooperation Council, which forecasts US$2 trillion worth of projects by the end of the first quarter, according to the Middle East Economic Digest.

Dubai, the second-largest UAE sheikhdom, became the first place in the Gulf to allow foreigners to own property in 2002, sparking the current real estate boom.

There is a 'high probability' of late delivery, and even project cancellation, because of shortages of labour and building materials, which would mean a better match between supply and demand, Mr Al Natoor said. -- Bloomberg

Chrysler Building Bought By Abu Dhabi Sovereign Fund

Source : The Business Times, July 10, 2008

M-E investors are most active buyers of commercial real estate in the US

(NEW YORK) New York's Chrysler Building, once the world's tallest skyscraper, was acquired yesterday by the Abu Dhabi Investment Council, a Middle Eastern sovereign wealth fund, for an undisclosed price.

Iconic: The Abu Dhabi fund was set to pay about US$800m for the Chrysler Building

The sale of the Art-Deco building at 405 Lexington Avenue was the second this year of a landmark Manhattan property to a group that includes Middle Eastern investors.

Boston Properties Inc, Goldman Sachs Group Inc and investment fund Meraas Capital LLC of Dubai paid US$2.8 billion last month for the General Motors Building on Fifth Avenue, a record for a US office tower.

'We're sending our money their way' to purchase Middle Eastern oil, 'and that money is coming back and buying our assets', said Dan Fasulo, market analysis director at Real Capital Analytics Inc, a New York-based property research firm.

Abu Dhabi Investment Council acquired the Chrysler Building from a fund managed by Prudential Financial Inc, said Theresa Miller, spokeswoman for the Newark, New Jersey- based insurer.

Rick Matthews, a spokesman for Tishman Speyer Properties LP, which owns a minority stake in the tower, declined to comment.

Abu Dhabi Investment Council is prohibited by law from discussing its investments, an official said when contacted by telephone yesterday.

The Abu Dhabi fund was set to pay about US$800 million for the Chrysler Building, said a person with knowledge of the transaction on June 11.

The 77-storey tower, designed by William Van Alen, was completed in 1930 on behalf of then-owner Chrysler Corp and its founder Walter Chrysler.

At 319 metres, the Chrysler Building was the world's tallest skyscraper before it was surpassed by the Empire State Building a year later. Silver-coloured hood ornaments jut out from its setbacks.

The Chrysler Building stake was acquired for US$300 million in 2001 by TMW Real Estate Group, an Atlanta-based investment company acquired by Prudential.

It was the final property sold by Prudential from a series of funds managed for German investors, mainly insurance companies, Ms Miller said.

Middle Eastern investors have been the most active foreign buyers of commercial real estate in the US this year, spending about US$1.8 billion of a total of US$5.1 billion invested by overseas firms, according to Real Capital.

German investors ranked second, buying US$1.1 billion of real estate. These numbers don't include the Chrysler Building.

Prudential has been selling New York buildings it owned with Tishman to take advantage of gains in property values.

Last year it sold 666 Fifth Avenue, a 1.5 million square-foot skyscraper for US$1.8 billion.

It also sold the Lipstick Building, an elliptical East Side tower designed by Philip Johnson, for about US$649 million.

While New York office building prices have dropped 10 per cent to 15 per cent from last year's market peak, Ms Miller said Prudential's clients are pleased with the price.

'Our clients got annual returns of about 20 per cent after taxes,' she said. -- Bloomberg

Chinese Developers May Win Relief From Falling Prices: ING

Source : The Business Times, July 10, 2008

Home prices rose 9.2 per cent in May, the slowest in eight months

(HONG KONG) Real estate developers in China may win relief from a shift in government policy towards stabilising property prices instead of depressing them, according to an analyst at ING Groep NV.

The People's Bank of China and government ministries held talks on stabilising the real estate market, the Economic Observer reported on July 5, citing a person it didn't identify.

Home prices rose 9.2 per cent in May, the slowest in eight months.

The CSI 300 Index of A shares traded on China's two exchanges lost 46 per cent this year, the second- worst-performing stock benchmark, data compiled by Bloomberg show.

'With recent corrections in A-shares and property prices, it's possible the government has begun to worry about the economic implications of crashing asset prices,' ING's Hong Kong- based analyst Steve Chow wrote in a research note on Tuesday.

Developers including China Vanke Co, Poly Real Estate Group Co, Gemdale Corp and Xinhu Zhongbao Co are raising funds selling yuan-denominated bonds and so-called trust loans that banks provide to companies with excess cash.

The China Securities Regulatory Commission allowed China Merchants Property Development Co to sell new shares.

Hong Kong-listed Agile Property Holdings Ltd has almost stopped buying land this year, recorded five billion yuan (S$995 million) of pre-sales in 2008, and raised 5.28 billion yuan selling a 30 per cent stake in a unit, ING's Mr Chow wrote.

Baida Group Co, a department-store operator, said on June 13 it agreed to lend 100 million yuan to Hangzhou-based real estate developer Cosmos Group Co for one year at an annual interest rate of 16 per cent.

Sunny Loan Top Co, another department-store operator in China, said in May it would provide 100 million yuan in a one-year loan to a developer in Jiaxing, eastern China, for 18 per cent interest.

Zhongshan, China- based Agile and Lai Fung Holdings Ltd, which is 20 per cent owned by Singapore's CapitaLand Ltd, are ING's top picks in the sector, the research note shows.

The spread, or extra yield investors demand above US Treasuries, to buy Agile's US$400 million 9 per cent bonds was down four basis points to 983, which is 31 basis points lower from the end of June, according to ING's prices.

A basis point is 0.01 percentage point. The stock advanced 7 per cent this month after losing 52 per cent in the first half.

The spread of Lai Fung's US$200 million 9.125 per cent securities maturing in 2014 has come down to 933 basis points from a record high of 1,201 on March 17.

Hopson Development Holdings Ltd has the tightest liquidity among developers rated from BB+ to BB-, three levels below investment grade, according to the ING report.

Hong Kong-based Hopson, whose 2007 profit more than doubled, recorded only three billion yuan of pre-sales this year while having an estimated nine billion yuan of land premiums to pay, Mr Chow wrote.

The spread of Hopson's US$350 million 8.125 per cent notes due in 2012 has risen 62 basis points this month, ING's prices show. -- Bloomberg

OCBC Investment Research On Singapore Property Sector 10th July 2008

Simon Says: Home Prices Have Hit Floor

Source : TODAY, Thursday, July 10, 2008

Head of property developer SC Global still bullish onthe local real estate market

JUDGING from recent transactions, property prices appear to have hit or are near the floor, according to Mr Simon Cheong, the president of the Real Estate Developers’ Association of Singapore (Redas).

As evidence, Mr Cheong, the head of high-end property developer SC Global, points to recent transactions of luxury apartments at Nassim Park and Goodwood Residences, which went for nearly $3,000 psf and $2,800 psf respectively.

“The high-end is the leading indicator. Why? Now you see the sophisticated investor coming in — people who spend $10 million, $20 million, $30 million (on a property) — these guys are no fools you know,” he says noting that during the 1997 financial crisis luxury flats like those at Ardmore Park were selling for just $1,000 psf.

Even mid-class units at developments like those at Dakota, Clover by the Park and Livia are enjoying brisk sales.

“Nett nett, property is still a great performer in the mid to long term. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received,” Mr Cheong says.

The property market is driven very much by sentiment, and not just by the laws of supply and demand — the “feel good” factor, he says.

According to Mr Cheong developers’ prices have fallen by 30 per cent in all sectors of the market since their peak last year, but are still double those before the sub-prime problem kicked in last August.

“The current situation is timely, as since 2005 the property market has been climbing relentlessly for eight straight quarters according to URA (Urban Redevelopment Authority) figures. So, it’s time it took a breather.

“We developers were getting concerned that it was climbing so fast. So the sub-prime crisis, in a way hit at the right time and took some of the steam off the market. In a way it came as a relief to developers who were afraid that the steep climb in prices could tempt the authorities to take measures to curb speculation,”Mr Cheong told Today.

He also pointed out that it was not in the interest of developers to see prices going up too fast: “There is no reason why developers would like to see an exuberant market and see the bubble burst.”

But he claims that his positive outlook for the property market is also driven by fundamentals as interest rates are at present so low and the inflation rate so high it does not make sense to keep your money in the bank.

“What do I do if I have a lot of money in my bank account earning 0.6-per-cent interest while inflation is 6 per cent or more, and my money gets smaller and smaller by the day?” he asked.

One answer is to put your money in property as in the long run it is a better hedge against inflation than equities.

Furthermore, property rentals currently provide yields of 2 to 4 per cent, again better than putting your money in the bank.

And there is plenty of money around for when Standard Chartered Bank, earlier this month offered a promotional deposit rate of 2.28 per cent, it was so swamped that it had to withdraw the offer in just two days.

Mr Cheong expects interest rates to remain low over the next two years or so.

The supply of properties is also not as high as many people think. He pointed to a recent Citibank report which said that the bank sees no oversupply of homes over the next two years.

The report estimated that only 60 per cent of the 30,000 units forecast by the URA, will be completed during this period as by end March there were 6,000 en bloc flats that had yet to be demolished.

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

High construction costs have also resulted in many projects being delayed. With the many building projects going on — both by the private (including the integrated resort projects) and public sectors — and high material costs caused by worldwide demand, constructions costs will remain for some years, Mr Cheong said.

He pointed out at the same time that construction costs here are currently higher than those of Dubai or Hong Kong.

“It takes three months to tear a building down but three years to put them up. Once you have taken it down, supply is taken off immediately but to put that supply back it will take three years,” he said.

Construction costs are now double what they were a year ago, with high end building costs between $600 and 800 psf and at the low end from $300 to $350 psf.

Sometimes Singaporeans also do not realise that market here being relatively small, it would take less than 1 per cent of the available global funds to see the market run up. So, it is not unreasonable to expect a strong turnaround when the sentiment improves, Mr Cheong said.:

He added that Singapore has also become a global city and price comparisons of property were now benchmarked against cities like London, Hong Kong, Shanghai and New York rather than against historical prices here.

“And contrary to market perception, funding is not an issue, There is no shortage of funding for end purchasers as evidenced by various bank packages (for mortgage loans),” he noted.

“My advice to potential buyers is that if you do not have high exposure to the property market, it is an opportune time to consider property”, he said.


Property is still a great performer in the mid- to longterm. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received.

On the returns of investing in property

My advice to potential buyers is that if you do not have high exposure to the property market, it is an opportune time to consider property.

On what would-be buyers should do

Home Price Rebound Could Take Time

Source : TODAY, Thursday, July 10, 2008

Continued weakness comes amid caution caused by inflation and bleak outlook

RECENT developments in the local property market have sent conflicting signals to investors. Several developers have indicated willingness to delay launches as residential property prices show signs of weakness, while others are pointing to still-strong demand. Meanwhile, market data from the Urban Redevelopment Authority (URA) has indicated that the pace of increase is slowing down. In fact, the second quarter increase is the slowest rate of increase since the third quarter of 2004.

Market analysts have also downgraded their ratings on property stocks in view of the slowing demand, with certain segments more susceptible to further downward price revisions. While the delay in property launches looks negative at first glance, it is actually a good move to regulate the supply of units coming onto the market and should not be viewed wholly as a negative move.

Residential property prices stayed resilient in the first quarter of 2008, with the property price index up 3.8 per cent from a quarter ago, but this eased to a growth of a mere 0.4 per cent quarter-on-quarter in the second quarter, based on the latest URA flash estimate, pointing to likely weakness.

Transaction volumes have been declining since the second quarter of 2007, plunging to a low of 762 transactions in the first quarter of this year. Such a trend points towards an inevitable correction in prices as historically, a price correction would follow about one to five quarters after transaction volume has peaked in a rising property market.

A sharp recovery in transaction volume over the near-term may avert a price correction, but is unlikely to occur in view of present global woes resulting from record high oil prices and high inflationary fears.

First, foreign interest in local properties is waning, as foreign buyers turn cautious over subprime issues and the credit crunch. Secondly, the recent en bloc fever, which fuelled part of the demand for housing by the displacement of en bloc sellers, has slowed in recent months. Lastly, the withdrawal of the deferred payment scheme has taken out the speculative transactions in the property market, as seen from the declining number of subsale transactions.

I would also caution against using property as a hedge against inflation, as there is no conclusive evidence of the correlation between inflation and property prices. Properties are cyclical in nature and are subject to market sentiment. As such, inflationary pressure is unlikely to have any positive impact on property prices, as buyers are likely to exercise greater caution in light of the weakening sentiment in the property market.

The recent release of the sites under the Government Land Sales programme for the second half of this year further confirmed the weakening sentiment in the residential property sector. The number of residential sites under the confirmed list for the second half of this year has been halved, from eight sites released in the first half of this year to four sites planned in the second. Recent bids for government sites had also came in below market expectations, another sign of cautiousness among developers.

Going forward, we expect to seefurther weakness in residential property prices. Sentiment is likely to remain cautious against the backdrop of a weaker economic outlook, tighter credit market and rising inflation. This should deter buyers from spending on big ticket items. With the prevailing cautious market sentiment, and if prices trend lower, smaller developers with comparatively lower holding power are likely to offload their units onto the market to reduce gearings and holding costs.

The high-end segment of the property market is also likely to be at risk to price correction, as this segment has been the driving factor for the run-up in property prices since the beginning of 2006. With foreign investors turning wary, this could result in lower demand. For the mass market, a surge in launches in the first quarter of this year may have caused buyers to be more cautious, but we expect the take-up rate for mass market properties to move up once concern of over-supply eases. In addition, prices for the mass market segment have not moved up as rapidly as those for the high-end segment.

The writer is head of research at OCBC Investment Research.

Prime Rents Poised To Ease Further

Source : The Straits Times, July 10, 2008

JLL sees more falls over next half year but rest of market should stay stable

THE surging rents in prime areas that have had expatriates screaming for the best part of a year look to be easing, with some condos already registering falls of up to 12 per cent.

DECLINE: The drop in prime rentals in projects such as Tanglin Park is due to new units on the market and a slowing economy. -- BT FILE PHOTO

The declines are expected to intensify over the next three to six months, reversing a trend that saw some rents double or treble during the property peak last year.

Consultant Jones Lang LaSalle (JLL) said increased supply from newly built condominiums and a weakening economy are behind the projected prime rent slide, although rents in other parts of Singapore should stay largely stable.

Expats have also been voting with their feet and abandoning pricey prime areas and moving to fringe locations - and nudging rents there up a little in the process, said Dr Chua Yang Liang, the firm's head of research (South-East Asia).

Rents in the East Coast area, for example, rose 1.4 per cent in the first quarter but are now tipped to grow at a slower pace or even stay unchanged.

This is in contrast to prime areas, where landlords are feeling the chill of the new economic headwinds.

For instance, at Cuscaden Residences in the Tanglin area, rentals have fallen 12 per cent, from $6.20 per sq ft (psf) a month in the fourth quarter of last year to $5.46 psf in the first quarter of this year, said JLL.

A 1,485 sq ft unit will now fetch about $8,100, down from $9,200 at the end of last year.

Over at Tanglin Park, rentals have fallen 3.1 per cent from $5.21 psf to $5.05 psf.

Islandwide, supply started creeping up from the third quarter of last year, said Dr Chua.

But not all owners are yet willing to lower their expectations, said market watchers.

'The rental market is a lot slower than last year,' said Ms Kavita Borglin, an agent with Premiere Realty, who said rents in prime areas will be hit by new supply, particularly smaller units.

'The availability of one- to three-bedroom apartments has increased so rents have softened,' she said.

At Robertson 100 in Robertson Quay, at least 10 two-bedroom flats are on the market but the owners were all reluctant to lower their asking rents of $5,000 to $6,000, she said.

Ms Borglin's client, an expat with a rental budget of $4,500, eventually settled for a Newton area apartment.

She added that owners with large apartments of four bedrooms or more could still keep the same rents, as such large flats are still hard to come by.

JLL said Singapore's rating as the 13th most expensive Asian city for expats, coupled with a slower hiring pace in the coming months, may lead to fewer leasing deals over the remainder of the year.

A lacklustre collective sale market and weakening housing prices will continue to hit sentiment in the non-landed rental home market, said Dr Chua.

Meanwhile, JLL said in a statement yesterday that it has put Goldhill Centre near Novena MRT station up for sale. The indicative price for the freehold commercial site is $315 million.

Second-Quarter Growth Falls To 5-Year Low

Source : The Straits Times, July 10, 2008

Economists cut full-year forecasts after dismal 1.9% April-June figure

ECONOMISTS have pared their forecasts for the year after growth in the second quarter slumped to the lowest level in five years.

Estimates have been reined in from the 5.5 per cent or more tipped early this year to as low as 3.5 per cent as analysts come to grips with yesterday's shock numbers.

The Singaporean economy grew at just 1.9 per cent year-on-year in the second quarter, well down on first-quarter growth of 6.9 per cent, according to flash estimates from the Trade and Industry Ministry (MTI). -- PHOTO: URA

The economy grew at just 1.9 per cent year-on-year in the second quarter, well down on first-quarter growth of 6.9 per cent, according to flash estimates from the Trade and Industry Ministry (MTI).

Its estimates are culled largely from data in the first two months of the April-June quarter and serve as an early indicator of growth.

The downbeat estimates stunned many economists, who responded by lowering their forecasts for this year and even 2009.

United Overseas Bank has trimmed its full-year forecast to 4.7 per cent and 5 per cent in 2009.

It cited 'weaker-than-expected second quarter figures, the vulnerability of Singapore's open economy to an external slowdown and the impact of a strong Singdollar on exports'.

CIMB-GK economist Song Seng Wun has cut his 2008 growth forecast from 5.7 per cent to 4.6 per cent.

Hong Kong-based Sun Mingchun of Lehman Brothers said: 'We expect GDP growth to slow sharply to 4.3 per cent in 2008 from 7.7 per cent in 2007.'

Standard Chartered's Alvin Liew, who had earlier predicted growth of 4.5 per cent, has slashed his forecast to just 3.5 per cent.

There may not be much help coming from the region either, with economists expecting other Asian countries to report plunging second quarter figures soon.

Read the full story in Friday's edition of The Straits Times

Goldhill Centre Up For Sale

Source : Channel NewsAsia, 09 July 2008

Goldhill Centre is up for enbloc sale by tender.

The freehold 70,177-square foot commercial site at Novena has a gross plot ratio of up to 3.0.

It can be redeveloped into a commercial building with a gross floor area of about 210,500 square feet.

The site currently comprises three blocks of three-storey walk-up commercial buildings with 87 shop and office units.

Goldhill Centre has an indicative price of S$315 million. That translates to about S$1,500 per square foot per plot ratio.

The tender will close at 3pm on August 19.

Goldhill Centre is the second full commercial collective sale site to be put up this year, after Katong Mall. - CNA/ms

Goldhill Centre Up For Tender

Source : The Business Times, July 10, 2008

AFTER 13 years in the making, the collective sale of Goldhill Centre - a three- storey walk-up building of shop and office units next to Goldhill Plaza and United Square in the Novena area - has finally been put up for tender.

On the block: The site can be redeveloped into a new project with a maximum gross floor area of 210,531 sq ft

The asking price is $315 million, which works out to $1,496 per square foot of potential gross floor area.

Jones Lang LaSalle (JLL), which is marketing the collective sale, says no development charge is payable because of the high historical development baseline for the 70,177 sq ft freehold site.

The plot is zoned for commercial use with a 3.0 plot ratio (ratio of maximum gross floor area to land area) under both the 2003 and 2008 (Draft) Master Plans.

This means the site can be redeveloped into a new project with a maximum gross floor area (GFA) of 210,531 sq ft, which would surpass the property's existing GFA, estimated at 112,283 sq ft.

'With provision for a basement connection to the Novena MRT station and nestled in an established residential estate, the site offers excellent opportunity for retail development,' JLL said. The tender for Goldhill Centre closes on Aug 19.

JLL's associate director (investments), David Batchelor, said some owners of strata units in Goldhill Centre have been trying to do a collective sale since 1995, but issues relating to titles of some of the units had held up the sale.

This was ironed out under an amendment to the Land Titles (Strata) Act passed last year.

Most of the units in Goldhill Centre have 999-year leases but the original developer (Goldhill Properties) retained the title certificates.

So, owners of such units could do an en bloc sale only with the unanimous consent and approval of the original developer, which owned the reversionary interest in the property, under the old rules.

But with the new amendment that took effect last year, such owners can now proceed with an en bloc sale by majority consent.

The original developer's consent will not be required, because if the Strata Titles Board approves an en bloc sale, it will lose all rights to the land.

Another factor that has held back Goldhill Centre's en bloc sale is that owners had been trying to seek a higher plot ratio for the site in line with those for surrounding commercial sites, Mr Batchelor explained. But these efforts were unsuccessful.

Owners controlling 80 per cent of share values as well as strata area in Goldhill Centre have consented to a collective sale, thus achieving the mandatory minimum consensus under the revised legislation.

Goldhill Centre comprises three blocks of walk-up buildings with a total of 87 units.

These comprise 29 shops ranging from 1,066 sq ft to 1,109 sq ft and 58 office units between 1,206 sq ft and 1,668 sq ft. Based on the $315 million asking price, owners will receive about $3.4 million to $3.9 million per unit.

Goldhill Centre is part of a bigger complex originally developed by companies in the Goldhill group.

Goldhill Centre was developed in 1969, Goldhill Plaza in 1973 and Goldhill Square (now known as United Square and owned by UOL Group), in 1982.

Seah Kim Bee, chairman of the sales committee of Goldhill Centre's en bloc sale, recounted: 'We were very close to getting the 80 per cent approval level under the old en bloc rules when the amended Act took effect on Oct 4 last year. So we had to start all over again. We held an extraordinary general meeting in November 2007 where the sales committee was set up and the members elected, as required under the new rules.'

The 79-year-old, a chartered town planner, has also been chairman of Goldhill Centre's management council for nearly 10 years.

Property Demand Strong In London's West End: Report

Source : THe Business Times, July 10, 2008

(LONDON) Demand for space in the world's most expensive office location, London's West End, remained strong in the three months to end-June, even as takeup in the nearby City financial district sank, a report said yesterday.

Popular: Property services firm Knight Frank said office takeup in the West End in the second quarter was broadly in line with year-ago levels

Property services firm Knight Frank said office takeup in the West End in the second quarter was broadly in line with year-ago levels and about 30 per cent up on the first three months of 2008 at 1.4 million square feet (130,100 sq metres).

'The fact that a year after the (outbreak of the) credit crunch we are still seeing rents in excess of 100 pounds per square foot and a robust level of take- up demonstrates the West End's resilience,' Tim Robinson, a partner in West End office agency, at Knight Frank, said in a statement.

The West End area of central London includes the hedge fund haunts of Mayfair and St James' and most of the UK capital's tourist attractions and is characterised by low-rise buildings due to strict planning guidelines.

That has tended to limit the potential supply of new office space and underpinned rents, although office markets in non-core areas of the West End such as Victoria, Paddington, and Marylebone are increasingly being developed.

James Roberts, Knight Frank's head of central London research, said in the statement a large letting deal with retailer Marks & Spencer had boosted the West End's second quarter office takeup but that demand from financial firms was holding up.

'Not as many fund managers have vacated offices post-credit crunch as initially feared, and a surprising number are still taking space,' he said, citing a 38,000 square foot deal involving hedge fund manager Brevan Howard Asset Management LLP.

Newspaper reports in April said Brevan Howard was mulling a move to Switzerland for tax reasons.

Knight Frank said 5.1 per cent of West End office space is currently vacant, up from 3.8 per cent a year ago.

In contrast, the office vacancy rate in the City was 8.5 per cent, compared with a low of 5.8 per cent in the third quarter of 2007, it said.

The two markets are historically correlated but the City is a more volatile market and is tipped by analysts to lead a sharp downturn in UK office rents.

Knight Frank declined to provide forecasts but other property services firms have said that the City office vacancy rate is likely to rise above 10 per cent as financial job losses mount and new office schemes come on stream.

According to Driver Jones, almost 11 million square feet of office space is under construction and available to let across central London - a large majority of that is in the City and most is scheduled for completion in 2008-2009.

Knight Frank said office takeup in the second quarter in the City market fell by 30 per cent to 1.1 million square feet, compared with the previous quarter, and was 60 per cent down on the same period of 2007.

Shares in West End property specialists such as Great Portland and Derwent London have fallen by more than 30 per cent so far this year - slightly more than leading City office developer British Land.

According to analysts at JPMorgan, the three are trading at discounts of 34-37 per cent to their expected end-2008 net asset value. -- Reuters

Investment Sales Fall In Q2 But Foreign Funds Still Looking

Source : The Business Times, July 10, 2008

Residential sector continued to soften, contributing 13% to the total

PROPERTY investment sales in Q2 2008 saw a significant decline due to increasing cautiousness from investors and tightening of credit.

In a report, DTZ Research also noted that in the quarter, total transactions fell 37 per cent quarter-on-quarter (QOQ) to about $5.2 billion.

Total sales for H108 amounted to $13.5 billion, 33 per cent of 2007's total sales and 54 per cent of 2006's total sales.

However, DTZ said that since 2007 was an exceptionally active year for property investment, '$13.5 billion is not a low figure compared with sales in 2006 which was the second most active year in the last decade'.

The residential sector continued to soften, contributing only 13 per cent to total investment sales, mostly from government sale of sites.

Transactions in the industrial and commercial sector amounted to $2.4 billion, 45 per cent of total investment in the quarter.

Of note were the transactions by foreign investors, including Commerz Real AG which acquired 71 Robinson Road and Morley Fund Management which acquired Commerce Point.

Boustead Hub at Ubi Avenue 1 was also sold to a unit of SEB Asset Management.

Shaun Poh, DTZ's senior director (investment advisory services and auction), said: 'Although pressure on Reits has made them less active purchasers, investor interest especially from private equity funds remains strong as the property market is supported by economic growth and occupier market fundamentals.'

DTZ's Investor Intention Survey also revealed that overall, investors expect to increase funds allocated to property investments by an average 4 per cent, with a comparable figure for Asia- Pacific investors of 10 per cent.

DTZ added that US investors are intending to shift asset allocation significantly away to Asia-Pacific while European pension funds are also waking up to the investment possibilities of the region.

Although European pension funds' exposure in the Asia-Pacific is minimal at the moment, DTZ estimated that as pension funds begin to target the region, they could allocate as much as 20-30 per cent of their real estate portfolios to the region.

DTZ said, however, that the survey does suggest that within Asia-Pacific, China remains the primary area of interest, while there appears to be some shift in focus away from Japan, Australia and Singapore in favour of emerging markets such as Vietnam and Indonesia.

CB Richard Ellis (CBRE) believes that Singapore's long-term prospects as a financial hub and popular business destination for MNCs will see Singapore continue to attract both local and foreign investors' interest.

In a recent report, CBRE said: 'The more active investors in the short to medium term would be the core and core-plus investors who have a lower risk appetite and are able to fund their acquisitions largely with equity.'

Future new office supply has threatened to undermine occupier fundamentals.

However, CBRE added: 'At face value, potential confirmed supply seems abundant, but it should be viewed in context with a strong take-up. Some 22 per cent of known supply from 3Q08-2012 is pre-committed, with around 9 per cent under offer.'

Bay Window Loophole Slammed Shut By URA

Source : The Business Times, July 10, 2008

Developers will now have to include planter boxes, bay windows in GFA

Here's some bad news for developers: a loophole that helped them sell in excess of the gross floor area (GFA) has been plugged.

The view changes: Till now, developers had been charging buyers for bay windows and planter boxes, even though these features were exempted from GFA calculations

Till now, bay windows and planter boxes, which often make up around 5 per cent of a condo's saleable area, had been exempted from GFA calculations. But in providing them to buyers, developers had been charging buyers for them.

This exemption will no longer apply from Oct 7, according to a circular issued by the Urban Redevelopment Authority (URA) on Monday.

The exemption has led to 'unintended and undesirable consequences' and 'unwittingly shifted market behaviours and negated the objective of the GFA exemptions for these building features', URA said in explaining why bay windows and planter boxes will no longer be exempted from GFA.

Explaining the impact of the new rules on residential developers, a property industry player said: 'Developers' profit margins will be reduced because they will no longer enjoy this benefit of not counting bay windows and planter boxes as part of their GFA and yet selling this space to home buyers. If the developers want to have these features, they will have to pay the full price since these will be included as GFA.'

The new rules apply to all residential developments - landed and non- landed - and are expected to lead to a rush of new development applications, especially from developers who have bought land recently.

URA said bay windows have been 'found to have contributed significantly to the building bulk, affect the design of buildings and generally do not encourage energy efficiency'. 'Often the provision of bay windows is intended mainly to increase the saleable strata area,' it noted.

Planter boxes were introduced to provide 'vertical greenery' in condos and create 'visual relief to our high-density living environment'. However, feedback and URA's investigations have revealed extensive unauthorised conversions of planter boxes within residential units for use as a balcony space or an extension of the living room instead. The planning authority said it has also received feedback that condo owners are unhappy that they are not allowed to convert planter boxes - which are part of their strata space and which they paid for when they bought their unit - to other uses.

'URA will leave it to the developers and building owners to decide if they wish to continue to provide bay windows and planter boxes for their residential developments so long as these building features are counted as GFA. The industry will have a free hand to design and provide these building features based on their commercial considerations as there will no longer be restrictions on the size of bay windows and planter boxes,' URA said.

Planter boxes within non-residential developments (like hotels and business parks), as well as those located within the common areas of residential developments like sky terraces, will continue to be exempted from GFA as these areas are typically well-planted and maintained by the management corporation for the benefit of all occupants in a development.

Only formal development applications (which exclude outline applications) with a valid provisional permission issued before Oct 7 will continue to be evaluated under the old GFA guidelines. For approved developments, bay windows and planters will remain GFA-exempted until the buildings are redeveloped, URA added.

Knight Frank managing director Tan Tiong Cheng had an alternative suggestion for URA. 'Instead of just removing GFA exemption for bay windows and planters, URA could have let the exemption continue but require developers to specify and identify these features in their sales brochures so that buyers know exactly how much of their strata area is taken up by bay windows and planter boxes. Buyers can then decide whether these features are as attractive to them.'

DTZ executive director Ong Choon Fah observed that bay windows can be a useable area - for sitting, keeping books or displaying photo frames, for instance. 'Planter boxes, on the other hand, often end up not being used for the purpose they were meant for,' she added.

Summing up the change, a seasoned industry observer said: 'This closes one loophole for developers. They've had a good run on it.'