Clear Skies Over Singapore For Now: Merrill Lynch

Source : The Business Times, August 12, 2008

US investment bank expects 2008 GDP to grow 5.2%, Sing dollar to stay strong

THE outlook for the Singapore economy is bright, according to Merrill Lynch. As improbable as the forecast sounds - with the government cutting expectations for GDP and raising them for inflation - Merrill reckons the economy will accelerate and the Sing dollar will remain strong.

In its latest Asian Weather Forecast, the US investment bank ranks Singapore the heaviest overweight in Asia ex-Japan in terms of country asset allocation. In Merrill's last country call in July, Singapore was ranked way down at eighth.

But Merrill now says it expects 2008 GDP growth of 5.2 per cent and 2009 growth of 6 per cent.

Calling Singapore the 'Miami of South-east Asia' and a magnet for regional high net worth individuals, it says: 'Unlike many other structural stories in Asia, Singapore has not faulted in any way, reflecting that Singapore offers First World governance for emerging market growth.'

Merrill qualified its assessment by saying: 'Holes can be poked in each of the large sector stories, if wanted.'

But of these sectors, it says property stocks, for one, already reflect lower land prices, while banks have reported 'good Q208 results with no sign of new non-performing loans'.

It also notes that Singapore's rig builders appear to be proxies for the oil price and 'the breakeven oil price for investment in a rig is well below where it stands today, at about US$60 per barrel'.

On top of this, Merrill expects the local currency to rise a further 4 per cent against the US dollar by the end of the year.

It should be noted that the Asian Weather Forecast 'stress tests' markets using metric foreign currency gains, real GDP growth, forward earnings, Merrill's own earnings revision ratio and valuations.

It should also be noted that the weather can turn quickly.

For instance, in the Asian Weather Forecast on July 3, Thailand was rated the top overweight, followed by China and the Philippines. In the latest report, Thailand has dropped to third position.

But just a month ago, Merrill highlighted Thailand was the only country in the region to show a positive correlation between crude oil prices and equities.

With the crude oil price up more than 30 per cent in Q2, Merrill's analysts markedly raised earning upgrades over downgrades for Thailand. 'As the earnings revision ratio is a key component of our asset allocation model, it contributes to weighing increase,' Merrill said in July.

This month, it says: 'Thailand's weighting would have been larger, but the model was overruled and the country's weighting reduced, due to political risks.'

The Merrill Lynch model for analysis contains no inflation variable. However, it includes an oil sensitivity analysis because 'oil is the most homogenous commodity across Asia Pacific economies, and the most visible representation of the inflation threat'.

In July, it found that markets least affected by rising oil prices were Malaysia, Hong Kong and China, while the most affected were the Philippines, Thailand and India, with Singapore near the mid-point.

Growth In Hotels Sector Slows As Room Lettings Fall

Source : The Business Times, August 12, 2008

The growth of hotels and restaurants here is slowing as room lettings fall, but hotels are still enjoying double-digit growth in room rates, the Ministry of Trade and Industry (MTI) said yesterday.

The hotels and restaurants sector grew 2.1 per cent year-on-year in the second quarter. Comparatively, it grew 2.9 per cent in Q1 2008 and 4.4 per cent in full-year 2007.

'The slower Q2 growth was largely due to the hotels segment of the sector,' MTI said in its quarterly economic survey review.

The catering index - a proxy for the performance of restaurants - continued to register strong growth. But room lettings by gazetted hotels - a proxy for the real growth of the hotels segment - have been in decline since Q4 2007.

Still, hotels are seeing double-digit growth in revenue per available room (RevPAR) across all segments.

In H1 2008, the average room rate (ARR) rose 30 per cent, which led to RevPAR growing 25 per cent. All types of hotels - luxury, upscale, mid-tier and economy - saw strong RevPAR growth.

As a result, the industry posted 22 per cent growth in first-half revenue to a record $1.1 billion.

But this was due to higher prices. Discounting for price increases would result in a decline in real value-added - consistent with the decline in room lettings.

The average occupancy rate (AOR) of hotels declined 3.4 percentage points in H1 to 83 per cent.

Looking ahead, the outlook for the hotel industry remains positive, according to MTI. According to a business expectations survey for the services sector, a net weighted balance of 37 per cent of hoteliers expect better business in the next six months.

The hotel industry will also benefit from major events such as the Formula One Grand Prix, the opening of the two integrated resorts and the Youth Olympic Games, MTI said.

Changi Campus For S'pore's 4th University

Source : The Business Times, August 12, 2008

THE sprawling plot of land near the Singapore Expo - which was to have housed the now-defunct University of New South Wales (UNSW) Asia campus - has found a new occupant at last.

Singapore's new publicly funded university will make its home at the vacant 22.6-hectare site along Upper Changi Road, with the first buildings set to be ready by 2013, said the Ministry of Education (MOE) yesterday.

Mr Ng : Might consider a 'garden university' concept for the new varsity

Students, however, need not even wait that long. The inaugural intake of 500 will begin classes much earlier at an interim campus in 2011, just three years from now.

Overseeing the establishment of the new university - Singapore's fourth publicly funded one - is Far East Organization's chief executive officer Philip Ng Chee Tat.

The well-known businessman is no stranger to the education field as he is currently a member of the Board of Trustees of the National University of Singapore (NUS), and was involved in the setting up of both the Singapore Management University (SMU) and Republic Polytechnic.

Outlining his plans during a press conference yesterday, Mr Ng, 49, said his main priorities are to develop a masterplan for the university's campus development, come up with a suitable curriculum model and, more immediately, to start a global hunt for its first president.

Members of his committee, who will be named by the end of the year, comprise leaders from academia, industry and the public sector, he said.

On what sort of shape the university might take, Mr Ng said things were still at the drawing board stage but he might consider a 'garden university' concept, similar to what UNSW Asia was to look like.

UNSW announced in May last year that it would close its Asia campus because of lower-than-expected enrolments and the financial risks involved in continuing the venture.

Said Mr Ng: 'What we want to do is build an institution with its own character and identity, with good quality accommodation, easy access to public transport, and look at possible synergies with the surrounding industries such as banking and IT.'

One key advantage of having a university just next to the Changi Business Park is the opportunity to expose students to high technology businesses and knowledge-intensive facilities of leading companies, he said.

Education Minister Ng Eng Hen said that the budget for setting up this university is likely to cost 'hundreds of millions of dollars', although no firm figure has been derived as plans are still being drawn up.

He added that the MOE and the steering committee would be closely studying the SMU example, which also took about three years of planning before opening its doors.

One of the chief reasons why the government is building this latest varsity is to increase the number of university places to 30 per cent of each year's cohort by 2015, up from 25 per cent currently.

That works out to about 2,400 more places, which will be equally split between polytechnic graduates and junior college students.

The new university will be able to take in a steady stream of up to 2,500 students a year and offer three main disciplines - business, design and engineering.

The public, meanwhile, can have their say in what they want the new university to be called. A consultation exercise is currently on until Nov 30, and those who want to submit their ideas can do so at www.moe.gov.sg/name-the-uni/ for the steering committee's consideration.

Ho Bee's Q2 Profit Falls 70% To $37m

Source : The Business Times, August 12, 2008

Revenue down 27%, due mainly to lower recognition from devt projects

HO Bee Group has announced a net profit of $36.96 million for Q2 2008, a 70.4 per cent fall from $125.1 million a year earlier.

Revenue was $116.8 million, a 27 per cent slide from $160 million previously. Ho Bee said this was mainly due to lower recognition of revenue from property development projects.

Another contributing factor was a $71 million fair-value gain on investment properties in Q2 last year. Excluding this, the drop in net profit would have been 32 per cent.

Property development revenue shrank 29 per cent in Q2 2008 to $110.4 million. Turnover in this segment accounted for 94.5 per cent of group turnover.

Ho Bee cited its policy of deferring recognition of income at various stages of completion for residential units sold under on deferred payment terms until Temporary Occupation Permits (TOPs) for developments are obtained.

It said TOPs for Quinterra and Vertis should be obtained by Q1 2009, while TOPs for Orange Grove Residences, The Coast and Paradise Island are expected by Q2 2009. Construction work on Turquoise has begun and is expected to completed by the end of Q2 2010.

Ho Bee said: 'Despite of current weak sentiment in the residential property market, contributions to revenue and earnings from projects that have been sold are expected to be significant over the next two years.'

Revenue from property investment increased 42 per cent year on year in Q2 2008 to $4.2 million. This was attributed to higher rental income from office space at Samsung Hub and industrial buildings at HB Centre II and One Tannery Road.

Revenue from Hotel Windsor increased 40 per cent to $2.2 million.

Q2 earnings per share were five cents, down from 17 cents a year earlier. Ho Bee has recommended a dividend of one cent per ordinary share for the quarter.

Ho Bee's share price ended a cent lower at 78.5 cents yesterday.

URA's 99-Yr Site Receives One Bid

Source : The Business Times, August 12, 2008

An Urban Redevelopment Authority tender for a 99-year leasehold condominium site at Tampines Ave 1/Ave 10 facing Bedok Reservoir closed on Tuesday receiving just one bid.

Boon Keng Development bid S$84.63 million or S$117.96 per square foot of potential gross floor area. The bid was way below market expectations.

MI-Reit's 1Q09 Distributable Income Up 67.8%

Source : The Business Times, August 12, 2008

MacarthurCook Investment Managers (Asia) Limited, the manager of MacarthurCook Industrial Reit(MI-Reit), on Tuesday announced a distributable income of S$6.6 million for the first quarter ended June 30, 2008 -- up 67.8 per cent or S$2.7 million higher than a year ago.

The distribution per unit (DPU) of 2.35 cents for the quarter outperforms the 1Q 2008 DPU of 1.52 cents by 54.6 per cent and exceeds the previous quarter's performance by 5.9 per cent.

The books closure date to determine the entitlement to the 1Q 2009 DPU of 2.35 cents is 20 August 2008 and the date payable is 22 September 2008.

The growth in distribution during the quarter was largely driven by rental contributions from the acquisitions of nine additional properties during the last financial year. In addition, pre-determined rental escalations for two of the properties have contributed to the organic growth of the portfolio.

The manager expects to deliver, for the coming year, a DPU that is in line with its recent performance.

Hersing's Q2 Net Profit Tumbles 79.5%

Source : The Business Times, August 12, 2008

HERSING Corporation, which owns the ERA real estate marketing franchise here, on Tuesday posted second quarter net profit of S$1.3 million, down 79.5 per cent from the same period last year.

Revenue for the quarter ended June 30, 2008, slid 36.4 per cent to S$38.2 million. For the first six months of this year, Hersing's net earnings fell 73 per cent year on year to S$2.6 million on the back of a 19.9 per cent drop in revenue to S$76.5 million.

Hersing shareholders will not be receiving a dividend for Q2 or H1 2008.

Chip Eng Seng H1 Net Profit Up 12%

Source : The Business Times, August 12, 2008

Construction and property group Chip Eng Seng Corporation reported S$21.7 million profit after tax for the six months ending June 30, 2008 - 12.2 per cent higher than the S$19.4 million a year ago.

This was attributable to S$7.3 million gross profit from its property development division, and S$16.7 million profit from joint development projects with strategic partners, mainly contributed by The Suites@ Central and Grange Infinite projects.

Revenue soared 69.3 per cent to S$147.3 million, driven by a 97.6 per cent increase in the group's construction division revenue to S$122 million for the period under review.

Earnings per share increased 3.1 per cent to 3.29 cents, while net asset value per ordinary share went up 3 per cent to 25.04 cents.

Chip Eng executive chairman Lim Tiam Seng said that the Group 'remains upbeat' as construction demand in Singapore continues to be buoyant.

'Excluding any new projects for which we will continue to tender for, our total outstanding construction order book stands at S$687 million as at June 30, 2008, which will keep us busy through to 2011,' he said.

UOL Sees 49% Drop In Q2 Earnings

Source : The Business Times, August 12, 2008

PROPERTY group UOL's second-quarter net profit fell 49 per cent to $145.0 million, from $286.3 million a year ago, as the group saw lower fair value gains on its investment properties.

Turnover for the three months ended june 30, 2008 rose 4 per cent to $209.3 million, up from $201.6 million in Q2 2007. The increase in revenue came largely from hotel operations, with improved performance of the UOL's hotels in Singapore, Australia and Vietnam.

Revenue from property investments also improved due to higher average rental and occupancy rates in UOL's investment properties, it said.

Separately, UOL's listed subsidiary Hotel Plaza also reported its second quarter results yesterday. Hotel Plaza's net profit for the three months ended June 30, 2008 increased marginally by 5 per cent to $16.2 million, from $15.5 million in the corresponding quarter of 2007.

Hotel Plaza's revenue in second quarter of 2008 increased 16 per cent to $79.9 million, from $69.2 million a year ago, as the company's hotels fared better.

UOL gained five cents to close at $3.26 yesterday. The stock has shed some 27.9 per cent since the start of the year.

Subsidiary hotel Plaza, on the other hand, lost three cents to close at a 52-week low of $1.49 yesterday. Hotel Plaza has lost 14.9 per cent in 2008.

NZ Home Prices Fall For First Time Since Feb 2005

Source : The Business Times, August 12, 2008

(WELLINGTON) New Zealand's house prices fell from a year earlier for the first time in more than three years in July as record-high interest rates eroded demand for property.

No takers: Soaring home-loan interest rates have forced buyers out of the market and require vendors to accept lower prices

Average prices dropped 2.2 per cent from a year earlier, Quotable Value New Zealand Ltd, the government valuation agency, said in a report released in Wellington yesterday.

That's the first decline since the monthly series began in February 2005.

Home-loan interest rates have soared the past year, forcing buyers out of the market and requiring vendors to accept lower prices.

Reserve Bank of New Zealand governor Alan Bollard said in June that house prices will fall 7.7 per cent this year and won't start rising until 2011.

'We expect to see more weakness in house prices over the coming months,' said Jane Turner, economist at ASB Bank Ltd. in Auckland. 'Housing turnover has been on a steady decline since mid last year.'

House sales fell for a fourth straight month in June, reaching a 16-year low, according to Real Estate Institute figures published last month.

Home-loan approvals in July fell 27 per cent from a year earlier, according to the central bank.

'Many sellers are accepting the state of the market and dropping their expectations accordingly,' said Blue Hancock, a spokeswoman for the government agency. 'The questions has now changed from when will prices stop rising to when can we expect to see them stabilise?'

Prices in Auckland, the nation's largest city, fell 3.6 per cent. Wellington prices dropped 1.6 per cent, the agency said.

Global turmoil in credit markets has prompted lenders to raise borrowing costs by about one percentage point the past year, even as the central bank kept its benchmark interest rate unchanged at a record high.

Mr Bollard cut borrowing costs last month for the first time in five years and said further declines are possible.

The decline in prices adds to signs Quotable Value's quarterly price index may fall for the first time in more than seven years. -- Bloomberg

Home Sales To Hit Record This Year, Says Megaworld

Source : The Business Times, August 12, 2008

Despite rising prices, Philippine builder says demand is not flagging

(MANILA) Megaworld Corp, the Philippine builder controlled by billionaire Andrew Tan, says that apartment sales will reach a record this year as the nation withstands a credit crisis that triggered a property slump in the US and UK.

'The world may be ending in other parts but not in the Philippines,' Kingson Sian, executive director of the country's second-biggest builder by market value , said in an interview. 'This isn't 1997.'

Banks continue to lend and the eight million Filipinos abroad are sending home cash in record amounts, softening the blows of commodities prices at records and a weakening of global growth, he said.

Megaworld shares, which has lost 57 per cent this year, dropped 89 per cent in 1997 when the Asian financial crisis eroded the peso and raised borrowing costs, hurting property sales.

'It's been a tough environment but the market hasn't dried up,' says Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc, which manages about US$5.9 billion in trust assets. 'Some home buyers are just delaying their purchases.'

Philippine consumer prices last month rose a faster-than-estimated 12.2 per cent and the central bank warned of more rate increases after raising borrowing costs twice since June. Yet Mr Sian said that demand isn't flagging and Megaworld will probably proceed with its plan to start a record 17 projects this year.

The Manila-based company booked 11.3 billion pesos (S$358.9 million) worth of orders from January to May, 71 per cent more than a year ago.

Mr Sian forecast 24 billion pesos in record reservation sales this year, 26 per cent more than in 2007.

The company's market value increased more than eightfold in the five years through 2007 as falling interest rates and record remittances from overseas Filipinos fuelled a building spree that included Megaworld transforming a block of warehouses into Eastwood City, an upscale residential and commercial development in the Manila suburb of Quezon City.

Projects such as Eastwood and Forbes Town Center in one of the Philippines' most expensive residential district have made Megaworld the nation's biggest builder of residential towers.

Still, investors shouldn't be rushing into Megaworld and other builders because of accelerating and rising interest rates, says Olan Caperina, who helps manage about US$6.7 billion at BPI Asset Management Inc in Manila. 'Property stocks are for those with strong stomachs for high volatility.'

While builders have raised prices by 5 per cent to 15 per cent this year and more increases may be forthcoming, Mr Sian says that the orders haven't stopped.

That's partly because of overseas Filipinos, who account for about 15 per cent of Megaworld's home sales. Cash from Filipinos abroad hit a record 14.4 billion pesos last year, helping boost economic growth to 7.3 per cent, the fastest in 31 years.

The central bank forecasts remittances, which make up a 10th of the country's economy, will reach US$16.45 billion this year.

Philippine banks are also 'liquid', and some have approached Megaworld about 'taking on our receivables,' Mr Sian said. 'So they're still willing to fund home purchases.'

Bank loans will probably grow 10 per cent this year, according to the central bank.

'There is pressure on banks to increase their loan portfolio if they want to grow,' said Jody Santiago, strategist at the Manila unit of UBS. 'The high-yielding government instruments where banks used to place their funds aren't there anymore.'

Megaworld's apartments, priced from 500,000 pesos to 10 million pesos, allows it to sell to a broad income group, Mr Sian said. This 'diversity' allows Megaworld, which sells units in 40 projects, to sell to buyers scaling back planned purchases, he added.

Ayala Land Inc, the nation's largest builder by market value, has a portfolio of 21 residential projects.

Most of Megaworld's projects are 'strategically located' in Manila, says Mr Santiago, who recommends buying the company's shares. 'Megaworld bought these properties when the market was at a bottom so it's not faced with inventory constraints in Manila as its rivals,' he said. -- Bloomberg

Russell To Double Asia Property Investments

Source : The Business Times, August 12, 2008

US-based Russell Investments, which manages over US$211 billion in assets, wants to boost its exposure to Asian real estate as it sees growing markets in China and India withstanding a global downturn.

The company, which raises money from institutions such as pension funds and invests them with other fund managers, said it expects to more than double its investments in Asia properties over the next three years, from about US$300 million currently.

'Our clients tell us they want to be in Asia property, and we go where our clients want to go,' said Martin Lamb, newly appointed Asia Pacific head of property for Russell, the funds and indices unit of Northwestern Mutual Life Insurance.

'Regardless of the downturn in the US and Europe, there is a strong domestic need particularly in India and China that continues to fuel demand for housing and retail,' said Mr Lamb, who is Russell's first property chief to be based within the region.

An increasing number of financial and property firms have set up funds to invest in Asia property in the past year, including the property investment units of Jones Lang LaSalle and Prudential, and Singapore developers such as CapitaLand and Keppel Land. -- Reuters

M'sian developer SDB Launches First Project Here; More To Come

Source : The Business Times, August 12, 2008

MALAYSIAN property developer Selangor Dredging Berhad (SDB) is making a foray into Singapore, and the company is not about to be put off by the slowing economic environment.

Ms Teh: Her company started marketing its Wilkie Road development, Jia, three weeks ago on both sides of the Causeway through private previews. Some 30-40% of the 22-unit development has been sold at around $1,600 psf.

SDB, which is listed on Bursa Malaysia, has started marketing one high-end residential project on Wilkie Road here and hopes to launch another project by the end of the year.

Managing director Teh Lip Kim admits that times are not good, but she believes that the projects will do reasonably well.

'Singapore stands to benefit from what is currently viewed as political instability in Malaysia, Vietnam and Thailand,' Ms Teh said.

SDB was incorporated in 1962 by Ms Teh's father, Teh Kien Toh. Originally a tin mining company, it began diversifying its business activities in the 1980s.

When the then 31-year- old Ms Teh took over the helm in 1998, Malaysia was in the midst of the Asian financial crisis. She was forced to re-evaluate and to restructure the company's business activities and dispose of non-performing assets.

This revamp led to the company changing its core business and since 2002, SDB has focused entirely on property. It has launched five residential projects in Malaysia so far, and also owns an office building and a hotel.

The company started marketing its Wilkie Road development, called Jia, about a month ago in both Singapore and Malaysia through private previews. SDB bought the site for between $21 million and $22 million in December 2006.

Some 30 per cent of the 22-unit development has been sold at prices of around $1,600 per square foot (psf) - mostly in Malaysia - SDB said. The project has two and three-bedroom apartments, as well as three penthouses.

Next up is SDB's 66-unit development on Gilstead Road in Newton. The company bought Gilstead View in a collective sale in May last year for $96.5 million - or $1,070 psf of potential gross floor area - in what was said to be a new benchmark in the Newton area.

The new development on the site will be launched in end-2008 or Q1 2009, Ms Teh said.

SDB also owns a commercial property in Balestier and is on the lookout for more opportunities, she added.

Most Malaysian developers baulk at entering the Singapore property market - mostly citing the off- putting high price of land here - but Ms Teh says that the high land prices are something that anyone who chooses to venture into a developed economy will have to live with in exchange for stability.

'If you want to go to a place that is more progressive, one has to accept the high prices,' she said. After all, margins for developers in both Malaysia and Singapore are similar - around 18-20 per cent - Ms Teh said.

Right now, SDB gets all of its revenue from Malaysia. But in five years' time, Ms Teh hopes that as much as 40-50 per cent of turnover will come from overseas, including Singapore.

Other markets SDB is looking at include Thailand, Vietnam and Australia, but the developer wants to 'gets things right' in Singapore first, Ms Teh said.

Will Falling Bids Lead To Tweaking Of GLS?

Source : The Business Times, August 12, 2008

Rising costs leave many developers with hands tied but govt retains options

WILL the Government Land Sales (GLS) Programme fizzle out because developers are offering low land bids in the face of rising construction costs?

Two suburban condo sites - at Woodleigh Close and Choa Chu Kang Drive - were sold at state tenders over the past few months at land prices below construction costs. The question is: Will the government still keep awarding Confirmed List sites if land bids continue to fall?

The problem with the Confirmed List system is that the government doesn't reveal the minimum or reserve price for sites in this list, which are released according to a pre-stated schedule regardless of demand. Reserve List sites, on the other hand, are launched for tender only if a developer undertakes to bid at a minimum price that is acceptable to the state. Since this minimum price is publicised by the government when the sites are triggered for release, developers that take part in the ensuing tender will know the minimum price they need to bid.

Given the uncertain environment, it was a good move on the part of the authorities to have leaned more towards the Reserve List for the current H2 2008 GLS Programme.

As for sites on the Confirmed List (where the minimum price is not made public), these too have by and large been awarded. But there has been the odd case here and there where the government could not award a site because the top bid was too low. Some market watchers are wondering if that could become more commonplace.

A BT story last month highlighted that land bids for 99-year suburban condo sites have fallen below construction costs. This is the first time in at least two decades this has happened. Examples include Confirmed List sites at Woodleigh Close and Choa Chu Kang Drive, which fetched top bids of $270 psf of potential gross floor area (GFA) and $203 psf of GFA respectively at state tenders that closed in June and May respectively this year. In both instances, the top bids were below construction costs. According to construction cost consultancy Rider Levett Bucknall (RLB), construction prices for medium-quality condominiums indicatively ranged from $280 to $350 psf of GFA for Q2 2008, up from the Q1 2008 figure of $260 to $320 psf of GFA.

The government awarded the two sites. But things may change in future.

Developers will have to allow a larger sum for contingencies for their projects because of the way prices of construction materials have been escalating. So there's not much else they can do but bid lower for land - especially since the outlook for home prices remains weak.

A recent Jones Lang LaSalle study pointed out that 'the unceasing escalation in building tender prices will definitely impact the profitability of residential developments'.

'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.

But will it reach a point where the bids are too low for the state to award Confirmed List sites?

A lot will depend on the Chief Valuer's assessment of reserve price, which might be adjusted lower if construction costs keep escalating.

So state land awards should still be possible as long as bids are reasonable, and not seen as opportunistic attempts by developers to get land on the cheap. After all, keeping land prices up has never been the objective of the GLS Programme. Rather, it has aimed to ensure a steady state of supply for the property market.

However, one could argue that land is a strategic resource of Singapore and should not be sold on the cheap, even if market conditions warrant it.

There are other dimensions to this discussion. Construction costs will not keep rising forever. Once oil prices are tamed and/or economic growth slows all over the world, construction material prices should also ease.

Meanwhile, if land bids slip further, perhaps one should be prepared for even fewer sites being released on the Confirmed List - unless they serve a strategic purpose.

Fortunately, there is still the Reserve List - which is not only a more market-driven approach but also takes guesswork out of developers' equation.

State Property At Changi On Offer

Source : The Business Times, August 12, 2008

The parcel has a land area of 104,044 sq ft and GFA of 54,864 sq ft

HOTEL operators can look forward to another state property to develop - this time at Changi.

The Singapore Land Authority (SLA) yesterday launched the plot - part of a former military camp - for public tender.

The tenancy, for an initial three years, is renewable up to 2018. The guide rental is $28,500 a month.

The parcel has a land area of 104,044 sq ft and a gross floor area (GFA) of 54,864 sq ft. It comprises two three-storey buildings and a shed.

'SLA is offering a number of vacant state properties for adaptive re- use, such as hotels and lifestyle attractions, in line with the government's vision for Changi Point as a seaview hotel, resort and recreational destination,' said Teo Cher Hian, SLA's director for land operations (private).

Since last year, SLA has awarded four state properties in the Changi area for adaptive commercial re- use. Two are now restaurants, while the former Changi General Hospital is being turned into a spa resort.

Groundbreaking takes place next month and the resort is expected to be ready by next year.

The Singapore Tourism Board (STB) says leading hoteliers have expressed keen interest in the latest property.

According to STB, mid- tier and economy hotels enjoyed average room occupancy rates of 85 and 87 per cent respectively in the first half of 2008.

Nicholas Mak, director of research and consultancy at Knight Frank, said the successful tenderer for the Changi plot will have to come up with a unique concept.

He said the hotel needs to play on Changi's laid- back character and is likely to be mid-tier.

The first state property to be converted for hotel use, at Chin Swee Road, is a boutique establishment with 140 rooms. It officially opened in mid-May, with an initial occupancy rate of about 50 per cent.