Thursday, August 7, 2008

Occupancy Level Of JTC Ready Built Facilities Hits New High

Source : The Business Times, August 7, 2008

Business park segment contributed to 51% of total RBF net allocation in Q2

THE net allocation for JTC ready-built facilities (RBF) in Q2 2008 reached 84,100 sq m, 2.2 times higher than the 38,300 sq m in the previous quarter.

This boosted the occupancy level by one percentage point to a new JTC record level of 94.9 per cent.

JTC said the performance was supported by a strong gross allocation of 159,100 sq m, the highest level since 2004.

Of the total RBF net allocation, 50.8 per cent was contributed by the business park segment. Gross allocation increased from 5,800 sq m in Q1 '08 to 45,400 sq m in Q2 '08 due to the newly available business park space at Fusionpolis, which accounted for 93 per cent (42,116 sq m) of the gross allocation for business park space in Q2 '08.

For the business park segment, related and supporting services industries contributed to a gross allocation of 44,200 sq m.

As a result of new supply coming on-stream at Fusionpolis, the occupancy level for business park space declined marginally by 0.4 per cent from the last quarter to 94.3 per cent.

Termination at 2,700 sq m remained largely unchanged in Q2 '08.

Stack-up factory space contributed 31 per cent to RBF net allocation. However, termination level increased to 75,000 sq m in Q2 '08, higher than the 51,200 sq m in Q1 '08.

The demand for flatted factory space fell by 1 per cent quarter-on-quarter (qoq) to 1.22 million sq m in Q2 '08, with corresponding supply remaining unchanged at 1.399 million sq m.

JTC said that negative net allocation for flatted factory space in Q2 '08 of 6,900 sq m marked the first negative quarter since Q2 '07.

This was driven by a 15 per cent lower (qoq) gross allocation to 53,400 sq m and a 62 per cent higher (qoq) termination to 60,300 sq m in the quarter.

According to JTC's report, the electronics sector accounted for the highest termination of flatted factory space at 33,100 sq m in Q2' 08, up from 5,000 sq m in the previous quarter.

The net allocation of JTC prepared industrial land (PIL) fell to 34 ha in Q2' 08 from 114.9 ha in the previous quarter.

Gross allocation of 64.1 ha in the quarter was lower compared with 120.4 ha registered in the previous quarter.

PIL also saw a higher termination level of 30.1 ha in Q2' 08 compared with 5.5 ha in Q1' 08.

The manufacturing sector accounted for 54 per cent of the Q2' 08 total PIL allocation. Within the manufacturing sector, the biomedical manufacturing segment was the highest taker of PIL at 57 per cent.

The net allocation for the JTC generic land segment dropped to 26.7 ha in Q2 '08 from 81.8 ha in Q1 '08, a fall of 67 per cent.

The net allocation for JTC specialised parks declined to 7.3 ha in the quarter, an 80 per cent drop from 33.1 ha in the preceding quarter.

Asian Prime Office Prices May Fall 10%

Source : The Business Times, August 7, 2008

Asian real estate prices may fall further and prime office values decline 10 per cent before year's end, Singapore-based property investor Pacific Star Group said.

'Most markets are peaking over the next 12 months, or even trending downwards,' said Frank Vaessen, president of fund management at Pacific Star, which manages US$3 billion of assets globally. 'Broadly speaking, the bottom could come sometime in late 2009 or early 2010.' Faltering economic growth and the global credit contraction may ease demand for office and retail space in Asia. Rising inflation and falling equity markets may also dampen sales of homes in the region.

The price declines will bring valuations to a more 'normal' level after markets rose rapidly the past year, Mr Vaessen said yesterday.

Japan and South Korea's office markets are expected to have the best performance in Asia as they benefit from a supply shortage, Mr Vaessen said. Both markets are set to offer property investors returns of as much as 13 per cent over the next five to seven years, he said.

Retail space in Beijing and Shanghai may also offer higher investment returns, Mr Vaessen said. Investors should stay away from Vietnam, Thailand and Malaysia, he added, citing Vietnam's accelerating inflation and volatile currency and political instability in Thailand and Malaysia. -- Bloomberg

Property Transactions With Contract Dates Between July 21st - 26th, 2008

Ascott Raffles Place Makes 50 Units Available First

Source : The Business Times, August 7, 2008

THE plush Ascott Raffles Place, the former Asia Insurance Building (AIB), had a soft opening yesterday, with its owner, the Ascott Group, making 50 units available.

National heritage building: The 146-unit premium serviced residence, the former Asia Insurance Building, will be officially launched in October

The remaining units of the 146-unit premium serviced residence project will be ready by its official launch set for October.

An Ascott press statement yesterday said the property, a national heritage building and South-east Asia's tallest tower in the 1950s, was restored at a cost of $60 million.

It will be equipped with meeting rooms, WiFi connectivity, an infinity pool, jacuzzis, a fully equipped gymnasium, a fitness studio, a lounge bar and a fine-dining restaurant by award-winning Julien Bompard.

Ascott Raffles Place, situated within walking distance of the Raffles Place Mass Rapid Transit (MRT) station, is also close to a wide range of restaurants, cafes, pubs, shopping outlets and the upcoming Marina Bay Sands integrated resort.

The property is the latest addition to The Ascott Group's seven serviced residences in Singapore, including Citadines Mount Sophia, which will open in 2009.

AIB was the first modern highrise office building erected in Singapore after World War II. It symbolised Singapore's development as an important financial hub, and is one of the few remaining highrise buildings from the 1950s.

The property was designed by Dr Ng Keng Siang, the first Singaporean member of the Royal Institute of British Architects. The 52-year-old landmark was gazetted as a conservation building by the Urban Redevelopment Authority in April 2007.

UK Property Brokers Fear Bank-Style Jobs Cull

Source : The Business Times, August 7, 2008

Rumours that big players plan 5,000 redundancies as demand tanks, but some analysts dispute that figure

(LONDON) With much of the European real estate market on its knees, the painful death of job security is now haunting property brokers as well as investment bankers.

Tougher times ahead: An estate agent in London. Market professionals say property firms will have to adapt to more difficult market conditions and manage costs accordingly because it is unlikely that the capital markets will recover in 2009

High-flying real estate dealers are leaving their favourite tables at expensive London restaurants vacant, awaiting a purge that will have much in common with the one that has rocked Britain's banking sector this year.

Property booms fed and were fed by the global credit boom that ended abruptly last year when US mortgage defaults began to mount, and investment demand in the UK and US property markets has crumbled in the credit crunch that followed. Now other European markets are wilting fast and job losses may not be confined to those frontline bear markets.

'Property is a cyclical business and contraction will be inevitable as firms look to be more streamlined,' warned British Property Federation chief executive Liz Peace.

Rumours abound that some of the biggest employers in real estate are bracing for a phase of redundancies which could cost up to 5,000 property professionals their jobs across their European, Middle Eastern and African (EMEA) operations.

Not everyone agrees headcounts are under such strain.

'Markets like Eastern Europe, Russia, Ukraine, Turkey are still growing, so it would be ludicrous to downsize European businesses anywhere near that figure,' said Paul Bacon at property consultant Cushman & Wakefield, referring to the rumours of 5,000 job losses.

'We have absolutely no plans for wholesale redundancies in the UK,' said Mr Bacon, who is head of EMEA business.

Major emerging markets have so far escaped the worst of the credit crunch. However, the credit boom that preceded it fed foreign investors' appetite for property as well as other assets in emerging markets.

'There are a number of markets where (property) prices have risen very quickly,' said Robert Maciejko, managing director for Central and Eastern Europe at global management consultancy Oliver Wyman. 'The issue is when the Brits or the other foreign investors are no longer investing, or even looking to sell, and that's when prices can really go down.'

According to data from Cushman & Wakefield, European property trading volumes have slumped 63 per cent year-on-year to 25.6 billion euros (S$54.7 billion), leaving many brokers in Spain, Ireland, Germany and France fearing redundancy.

One market analyst, who did not wish to be named, said a flurry of corporate takeovers executed in the twilight of the property cycle had left titans like CB Richard Ellis (CBRE) and Jones Lang LaSalle 'thick around the middle' - with too many support staff playing piggy-back on fewer high fee-earning brokers.

'We have grown market share considerably in recent years, partly due to organic growth and partly through acquisitions,' said Alastair Hughes, head of EMEA at Jones Lang LaSalle (JLL). 'These acquisitions were either to expand our geographic coverage or to strengthen existing business areas. None were predicated on a continued capital markets boom.'

Figures posted last week showed sinking second-quarter profits at both firms but overall revenues in JLL's EMEA division were 20 per cent higher than the corresponding period in 2007 as the firm racked up lower- margin advisory business to offset an abrupt halt in building sales.

'Property services firms are all having to adapt to more difficult market conditions,' said Mr Hughes, who described the rumoured threat of 5,000 job cuts as excessive. 'The industry will have to manage costs accordingly because it is unlikely that the capital markets will recover in 2009, and likely that the leasing markets will continue to soften.'

London-listed global consultancy Savills told Reuters it had embarked on a cost-cutting programme that included some redundancies but it would not discuss details.

Mr Bacon said Cushman was still keen to make strategic appointments. 'Our European business has expanded rapidly in the last five years but the quid pro quo was we couldn't grow as fast in the UK. This gives us a chance to address that,' he said.

CBRE, the world's largest property consultancy, said it was 'naturally focused' on cost cuts that would provide 'meaningful bottom-line benefit' and that it had shed a modest number of jobs in business areas hardest hit by the market downswing.

Paul Soothill, head of property and facilities management recruitment at Joslin Rowe, said property firms hoped to redeploy staff to areas like outsourcing, which can help UK corporates to manage their real estate more cost-effectively.

Average UK commercial property values have tanked by almost a fifth since the collapse of Britain's white-hot commercial property market in June 2007.

In the same way Britain starts sniffling when the United States catches a cold, where the UK real estate market goes, many European property markets tend to follow.

'Many of the big firms have been here before,' said the British Property Federation's Ms Peace. They 'know what they need to do to weather the storm'. -- Reuters

The Pivotal Jewel In The Crown

Source : TODAY, Thursday, August 7, 2008

Even as much work remains, its ‘catalyst developments’ are nearing completion

TOUTED as the key driver of Malaysia’s Iskandar project, Nusajaya — a 23-minute-drive from Senai International Airport and 15 minutes from Singapore’s Jurong Port — is the pivotal jewel in the crown that foreign investors would be closely watching.

Which is why no amount of political drama will derail its development into a 24,000-acre regional city, assured Mr Zamry Ibrahim, general manager of strategic marketing for Nusajaya’s master developer UEM Land.

Said Mr Zamry: “The government, irrespective of the political leadership, will always be supportive of economic activities that will generate value and economic growth of the country and attract foreign investments.”

Since its launch in February last year by Malaysian Prime Minister Abdullah Ahmad Badawi, sceptics have wondered whether Malaysia’s latest national project will be just a pipedream, especially at a time when Mr Abdullah’s political star has been on the wane amid political turmoil.

Yet Nusajaya’s progress so far provides the perfect riposte: Even as much work remains, its “catalyst developments” are nearing completion. By the end of the year, high-rollers on swanky yachts can sail into the Public Marina’s 75 berths and enjoy the harbourfront view at the Puteri Harbour Clubhouse and Promenade. By then, a clubhouse and 18-hole golf course exclusive will also be ready for residents of Horizon Hills, a high-end private residential village.

While Singapore’s big-name developers have yet to come onboard, Mr Zamry pointed to the heavyweights from the Middle East: The Mubadala consortium from the Gulf Cooperation Council countries, and Limitless LLC and DAMAC Properties of Dubai.

The Middle Eastern influence — and its “the grander the better” mantra — isapparent. Just check out the lavish230-acre, RM400 million ($167 million) Johor State New Administrative Centre.

Pointing out how Nusajaya’s land value continues to appreciate, Mr Zamry told Today: “Other foreign investors recognise the value and potential of Nusajaya and have invested ... the early investor would obviously see more upside potential.”

And worries over how the crime rates in Johor could put off buyers of residential properties appear to be overblown, at least going by the official take-up rate, with Singaporean buyers snapping up the upmarket villas and bungalows.

The average price for the semi-detached houses and bungalows has been between RM180 and RM230 per square foot.

Of some 2,000 units launched for sale so far, around 80 per cent have been taken up, of which more than half were sold to foreigners. Around 80 per cent of the foreign buyers are either Singaporeans, working in Singapore or Malaysians married to Singaporeans.

Further inland, about 10 per cent of Nusajaya’s 1,300-acre industrial park, the Southern Industrial and Logistics Clusters, SiLC, has been sold for around RM114.6 million in total.

Among the Singaporean firms investing there so far are advanced technology firms such as Yong Nam Holdings, HG Metal Manufacturing and Jurong Technologies.

Mr Zamry stressed that Nusajaya — which he described as a “new area of regional growth adjacent to Singapore” — will complement the Republic’s economic activities. Still, with developments including a mega tourist resort and an educity that will house the world’s leading universities — which are driven separately by Khazanah Nasional Bhd, the investment arm of the Malaysian government — a fully up-and-running Nusajaya will certainly give Singapore a run for its money.

And one wouldn’t bet his last dollar against it, going by the quiet determination — particularly discernable from the private sector — driving the project thus far.

“The rapid pace of development at Nusajaya would speak for itself and eventually build the confidence of sceptics,” said Mr Zamry.

Sunny Outlook For Sentosa Resort Homes?

Source : TODAY, Thursday, August 7, 2008

Analysts decipher clues from recent rental data

EARLY investors in Sentosa Cove homes must have possessed a large appetite for risk.

Although the idea of developing the 117-hectare Sentosa Cove into an idyllic waterfront enclave was mooted as early as the ’80s, the first land parcel was sold to the private sector for development only in 2003. As such, the rental market in Sentosa Cove was non-existent at the launch of earlier projects. Earlier investors had to bet their money solely based on their outlook for this exclusive marina community.

The situation is different today. Five years on, 99.6 per cent of parcels in Sentosa Cove have been successfully sold to private developers and individuals. These could yield over 2,000 condominium units and 400 bungalows and terraces. Of these, an estimated300 homes have received Temporary Occupation Permits and so the Sentosa Cove leasing market is slowly taking form.

In fact, according to the Urban Redevelopment Authority, some 51 leasing contracts were recorded for Sentosa Cove homes between January last year and April this year. The leasing market for non-landed homes appeared to be more active than for landed homes. With 46 leases recorded for The Berth by the Cove, the only completed condominium development accounted for the lion’s share of the 51 leases signed.

This translates to a 23-per cent-tenancy rate for the 200-unit development assuming that the 46 leases are signed for typical two-year terms. This is a feat given the remaining 2,200 homes under construction. Activity in Sentosa Cove peaked in the July to Sept quarter last year in which 30 leasing contracts were recorded, representing more than half of the 51 leasing contracts signed so far.

But, mirroring the larger market, Sentosa Cove’s leasing market appears to have been affected by the weak sentiments due to the ailing United States economy and global markets stemming from the sub-prime mortgage crisis. Leasing activity slowed sharply, with just 10 deals concluded in the first four months of this year. Median monthly rents in The Berth by the Cove weakened to $6.89 per sq ft in April this year. So, those who bought at the launch at an average price of $8601psf enjoy rental yields of 5.5 per cent.

But as the prices of Sentosa Cove units surged in tandem with the general market, investors who purchased last year at an average price of $1,520psf have to contend with lower rental yields averaging 3.5 per cent. Nevertheless, they enjoy a higher return compared to those who recently bought freehold luxury apartments on the mainland since the latter generate yields of roughly 2.3 per cent.

If investors in The Berth by the Cove are reaping healthy returns, will the same be said of those who bought Sentosa Cove apartments still under construction? Will rental rates hold in the face of increased supply?

Investors should bear in mind that Sentosa Cove will be kept at 2,500 units in size to preserve the exclusive resort ambience. Also, some owners will occupy their own properties, further limiting the rental supply.

With Singapore’s growing status as a global city, homes in Sentosa Cove will be in demand by the rising population of expatriates opting for an oceanfront resort lifestyle. So, the investment value of Sentosa Cove homes will be preserved for a long time to come.

Tay Huey Ying is the director of research and advisory at Colliers International. Audrey Tan is a research analyst at Colliers International.

Over 2,300 Vie For 578 Condo-Like Flats In AMK

Source : The Straits Times, Aug 7, 2008

MORE than 2,300 hopeful homebuyers have applied for one of the 578 condo-style units being built for the Housing Board in Ang Mo Kio.

HOT PROPERTY: Park Central @ AMK, in Ang Mo Kio Street 52, is the HDB's third Design, Build and Sell project. -- PHOTO: UNITED ENGINEERS

The showflat was a hot ticket, with 23,000 visitors since the project's mid-July launch, said developer United Engineers (UE) yesterday.

Applications have now closed for the estate, Park Central @ AMK, which is being developed under the HDB's Design, Build and Sell Scheme (DBSS).

The four- and five-room units have condo-style fittings and finishes such as built-in wardrobes, kitchen cabinets and air-conditioning systems, and are priced from about $400,000 to just under $700,000, or $490 to $500 per sq ft.

Park Central @ AMK is the third DBSS project. Under the scheme, private developers set prices but are bound by HDB rules, including the key proviso that flats can be sold only to households earning no more than $8,000 a month.

Past launches had been plagued by applications from buyers who were not serious or overqualified but UE believes most of its applicants are eligible buyers who have a genuine interest in buying the units.

It said showflat visitors were asked to go through a simple questionnaire to determine their eligibility for public housing.

'However, how the applications will eventually translate into real sales figures greatly depends on the market conditions (when) the selection process begins,' said managing director David Liew of UE's property development division.

A ballot will be held, with the selection process starting in the middle of next month.

The previous DBSS project, City View @ Boon Keng, attracted 3,500 applications for 714 flats early this year. But only 460 deals were sold right after the selection process in March. Some applicants were apparently overqualified.

The first project in Tampines saw nearly 6,000 applicants vying for 616 units in late 2006.

Over 2,300 Applications For AMK Condo-Style HDB Flats

Source : The Business Times, August 7, 2008

UPCOMING Design, Build and Sell Scheme (DBSS) project Park Central @ AMK received over 2,300 applications - or four times the 578 units on offer - when submissions closed at midnight on Tuesday, developer United Engineers (UE) said yesterday.

But this does not mean that the project will definitely be fully sold, analysts said. For the previous DBSS project City View @ Boon Keng, some 3,500 applicants vied for 714 flats, but only 460 homes were sold after the first round.

Under the Housing Board's DBSS scheme, the developer has flexibility in designing and pricing the flats.

The average selling price for units in Park Central @ AMK is $490-$500 per square foot (psf), said UE. Four-room flats will go for $433,000-$567,000, while five-room apartments will sell for $534,000-$689,000.

Park Central will fare better than City View as the pricing is more attractive, analysts said. 'At City View @ Boon Keng, the majority of the flats were priced higher than $600,000, which was an obstacle for buyers,' said Eugene Lim, assistant vice-president of property agency ERA Asia-Pacific. 'At this price ($490-$500 psf) you should be able to sell.'

City View also faced the problem of applicants who in the end did not meet the required criteria to buy HDB flats.

But for Park Central, UE believes that most of the applicants are eligible buyers with genuine interest.

'We have tried our best to minimise non-eligible applications that could distort application numbers and delay processing time,' said David Liew, managing director of UE's property development division. 'However, how the applications will eventually translate into real sales figures greatly depends on the market conditions at the point where the selection process begins.'

Developers and analysts here are more upbeat about the HDB and mass market private home segments compared with the rest of the residential market.

Right now, the key seems to be pricing. Developers who price homes below their competitors' and those willing to drop prices seem to be clearing units.

For example, local developer Roxy-Pacific Holdings on Tuesday said that it has launched six projects since Chinese New Year. To date, some 114 - out of a total 165 offered - have been sold.

'The market is of course challenging,' said Teo Hong Lim, chief executive of Roxy-Pacific. His company's advantage, he said, was in the pricing. Apartments in the six projects were mostly sold for $800-$1,100 psf - even though they are located in the more central areas of Singapore. Roxy-Pacific hopes to push out another three developments by the end of this year.

Rising Building Cost Squeezes Mass Market Projects More

Source : The Business Times, August 7, 2008

Developers' margins for prime projects less affected: Jones Lang LaSalle study

A 20 per cent rise in construction costs will shrink developers' profit margin for a mass-market private condo by 55 per cent; but for a project in the prime districts, the profit margin will contract by 25 per cent, according to a Jones Lang LaSalle (JLL) study on the impact of rising construction costs on the property market.

The sensitivity analysis assumed land cost of $1,600 per square foot (psf) of potential gross floor area (GFA), base-case construction cost of $500 psf of GFA and selling price for the condo of $2,520 psf for a prime condo project. For a mass-market project, land cost and base-case construction cost were each assumed at $300 psf of GFA, and a selling price for the condo of $720 psf was imputed.

In both cases, a 20 per cent base-case developers' profit margin was worked into the model, and the effects of construction costs rising by 10, 15 and 20 per cent respectively on profit margins studied.

'As construction costs are usually at a bigger proportion to suburban land costs compared with the high land prices transacted in prime residential projects, any increase in construction costs will present a greater change in the profit margins in a mass-market project than that in a prime residential project,' the study observed.

Given current weak outlook for home prices, 'the unceasing escalation in building tender prices will definitely impact the profitability of residential developments', JLL argued. 'This will affect developers' sentiments, which will be evidenced in their future land-bidding strategies,' it added.

'Rising construction costs, coupled with a ceiling selling price, will put downward pressure on land tender prices,' the study predicted.

A BT story last month highlighted that, for the first time in at least two decades, construction costs for some 99-year leasehold condo sites bought at state tenders are actually higher than land costs. This is taking place against the backdrop of soaring construction costs and a weak home price outlook, resulting in developers lowering their land bids.

JLL's study pointed out that pricing of mass-market condos, typically built on 99-year leasehold suburban sites bought at Government Land Sales (GLS) tenders, tends to be more illiquid. Prices of such entry-level private housing is often benchmarked against public housing prices as this market appeals to public housing upgraders. 'For affordability reasons, developers are also resistant to push the prices of such mass market projects beyond a certain level at the risk of being priced out of the market,' the study said.

Going forward, with concerns of weakened market sentiments and rising construction costs, it will be interesting to see how many 99-year leasehold residential sites will be triggered for release from the GLS Programme's reserve list, as well as whether bids put in for the residential sites on the confirmed list will still be as competitive and will meet the government's reserve price, JLL said.

'Another question posed will be whether the government will be ready to accept tender bids that will fall below market expectations,' it added.

The government launches reserve list sites for tender only upon successful application by a developer that undertakes to offer a minimum price acceptable to the state, while confirmed list sites are launched according to a prestated schedule regardless of demand.

This year, the government did not award the Ten Mile Junction site in Choa Chu Kang (which was to have a residential component) and a landed housing plot at Westwood Avenue in Jurong, as the respective top bids were too low.

In the private land segment, the en bloc sales market has been weak because of a 'price misalignment between developers and collective sale site owners' arising from developers being less willing to match the asking prices, JLL noted.

The Building and Construction Authority's Building Tender Price Index rose 23.7 per cent last year and market watchers expect it to continue increasing this year.

High construction demand and competition for limited resources, insufficient tendering capacity among contractors, sub-contractors and suppliers, as well as volatile commodity prices, have contributed significantly to the increase in building tender prices.

Rising construction costs will lead to diminishing profits for developers as well as bearish land strategies, JLL said.

JLL also highlighted other implications of rising construction costs. With the government announcing the delay of $4.7 billion of public sector projects to ease pressure on construction demand, the potential benefits from these public sector projects, especially from public health care, will be delayed, JLL said. The construction of the new complex that will house the Communicable Disease Centre as well as a new hospital in Jurong, are among the projects delayed.

'In addition, rising construction costs have also been a concern for the public housing sector, especially issues on whether increased costs will be passed on to the public,' JLL's report said.

Maison Royale Put Up For Collective Sale

Source : The Business Times, August 7, 2008

MAISON Royale, a freehold residential site in Newton, has been put up for collective sale.

Maison Royale: Asking price for the 20-unit project is at least $50m. Some 40 units of about 1,000 sq ft each can be built on the condo site in Newton

Owners of the 20-unit project are asking at least $50 million. Including an estimated $300,000 development charge (DC) and taking into account a plot ratio of 2.8, the price works out to $1,273 per square foot per plot ratio (psf ppr).

In contrast, nearby Lincoln Lodge was sold for $243 million, or $1449 psf ppr including an estimated DC of $413,000 in June last year at the height of the en bloc frenzy.

The project was bought by a consortium comprising Koh Brothers, Heeton Holdings, KSH Holdings and Lian Beng Group. Their offer was the highest of several bids then. The developers have yet to tear down Lincoln Lodge to put up a new development, and have instead allowed occupants to keep renting for at least six months from the sale completion date in July this year.

The comparatively lower price for Maison Royale is in line with current weaker market sentiment, said Charles Chua, head of investment sales at PropNex Realty, which marketing the project.

'Maison Royale is priced at a level where developers can feel that it is still worthwhile for them to go in,' he said.

Maison Royale is on 14,107 sq ft of land. It is located at the junction of Newton and Surrey roads, a three-minute walk from Novena MRT station. Some 40 units of about 1,000 sq ft each can be built on the site, PropNex said.

If the site is sold for $1,265 psf ppr, the breakeven cost will be around $1,665 psf, it said. The successful developer could launch the apartments in the new development at around $1,915 psf, the firm added.

The tender for Maison Royale closes on Sept 9.

Housing Agent Fees: How Low Can They Go?

Source : The Straits Times, Aug 7, 2008

With guidelines axed next month, rates will come under pressure but big fall unlikely, say experts

PROPERTY experts expect agents to feel the pinch once fee guidelines are abolished next month, but the big question in the industry is just how low fees can go.
Real estate insiders concede that fees will come under pressure with buyers and sellers free to haggle, but dismiss the notion that rates could plummet to zero.

'In a buyer's market, perhaps, buyers can get away without paying. But agents also need their salaries and ultimately consumers will get the service they pay for,' said PropNex chief executive Mohamed Ismail.

Agents spend about 40 per cent of their commission on the marketing, transport and operational costs of selling a flat. Active agents earn about $5,000 a month, said Mr Ismail, so how low rates go will depend on the individual.

Those who aim for a large turnover of properties might be willing to slash rates but this could be at the cost of service quality, he added.

Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, does not see rates falling drastically as the current rate is one of the lowest in the region.

Fees will be negotiable next month, thanks to a decision by the Competition Commission of Singapore, which told the Institute of Estate Agents to axe its guidelines on commissions.

The 1999 guidelines were based on a 1974 Government Gazette that stipulated a 2 per cent fee payable to agents from sellers. In the past, when Housing Board prices were relatively low, agents began charging buyers a further 1 per cent.

The Consumers Association of Singapore is advising people not to be held to old guidelines and to avoid giving exclusive rights to agents. It also said agents should not collect fees from both buyers and sellers, due to conflict of interest.

The new playing field will offer plenty of scope for buyers, sellers and agents to negotiate, but agency boss Albert Lu of C&H Realty pointed out that the real estate market is 'already very competitive'.

For private property sales, for example, agents are known to cut their commission charges from the recommended 2 per cent to 1 per cent for sellers.

'It's not in the interest of agencies to start price wars, as we end up hurting ourselves,' said Mr Lu. But he suggested that agencies might devise ways to entice buyers and sellers, such as bundling home services.

Industry leaders do not rule out a 'one-stop shop' concept where agencies could offer agent and legal services along with loans, for example.

Analysts believe consumers will be quick to take advantage of the new system and start haggling, but given the slow market, it is unclear who has the upper hand. Prices have eased in favour of buyers but many sellers are not budging, so with volumes down, agents may see an incentive to give discounts.

Homebuyer Vivian Wong, 25, said she will bargain harder while agents vow to fight and justify commissions. HSR Property Group's Mr William Tan, 43, said he was confident of retaining the 2 per cent commission.

'In this new landscape, the better agents will survive because they will offer quality service consumers will pay for.'