Saturday, September 13, 2008

Global Easing In Monetary Policy Soon: OCBC

Source : The Business Times, September 13, 2008

THE global economy will likely end this year on a weak note and the weakness is expected to spill over into 2009, which may soon push central banks to ease monetary policy, says OCBC Bank's head of treasury research and strategy, Selena Ling.

While the US has skirted a technical recession, Europe, Japan and other key Asian countries including Singapore have become more vulnerable after marking quarter-on-quarter declines in their second quarter GDP.

'We are seeing a synchronised slowdown. It is not just the US - we are seeing it in Europe and Asia,' Ms Ling said at the OCBC Global Treasury Regional Economic and Business Forum yesterday.

She does not rule out a possible technical recession in Singapore, which may already have marked a negative quarter-on-quarter GDP growth in Q2, when GDP fell 6 per cent from a quarter earlier. 'If you ask me the possibility of that happening, I would say 40 per cent,' she told BT. 'That said, we are still looking at 3 per cent for the full year.'

After two rounds of monetary tightening, an easing by Singapore's central bank at its next policy meeting in October cannot be ruled out, she said. She expects the Monetary Authority of Singapore to flatten the slope of the exchange rate policy band, after having re-centred the band in April this year and steepening its slope in October last year.

Elsewhere, the eurozone is likely to enter a technical recession in Q3, which may prompt the European Central Bank to cut interest rates from 1.8 per cent to 1.2 per cent between 2008 and 2009, Ms Ling said. In China, while a post-Olympic crash is unlikely, the central bank may launch a fiscal stimulus package to boost the economy.

But Asia is still in a better position, as it is correcting from above-trend growth in past years. The current slowdown should therefore be 'taken with a pitch of salt' and not as a final capitulation point, Ms Ling said.

Home Prices Near Replacement Cost

Source : The Business Times, September 13, 2008

So they are unlikely to fall by much, argues Redas chief

REAL Estate Developers Association of Singapore (Redas) president Simon Cheong says private home prices are unlikely to drop much from current levels as selling prices are close to replacement costs, inclusive of construction costs.

FESTIVE CHEER - At the Redas Mid-Autumn Festival Celebration at Orchard Hotel are (from left) MND permanent secretary Tan Tee How, Redas president Simon Cheong; Law Minister K Shanmugam, former Redas president Kwee Liong Keng and Singapore Land Authority chairman Greg Seow

Also, developers had a good year last year and 'a lot of buffer', he added, suggesting that they will be under less pressure to lower prices to chalk up further sales. 'So I don't anticipate that the drop will be too severe if there is one,' Mr Cheong told reporters on the sidelines of Redas' Mid-Autumn Festival Celebration yesterday.

However, some market watchers point out that developers are not uniform in financial strength.

DTZ senior director (research) Chua Chor Hoon agreed that the established developers who have made supernormal profits in the last few years have more holding power. 'However, some new players who bought sites at high prices last year may not have enjoyed big profits. And there are smaller developers who may need to roll projects one after another to generate cashflow,' she said.

Analysts say weaker players may be more inclined to trim prices if necessary to dispose of their projects. Another factor affecting price levels is the secondary market, including subsale transactions.

The median subsale prices of Citylights and The Sail @ Marina Bay eased about 2 and 14 per cent respectively in the second quarter of 2008 from the preceding quarter, according to a recent caveats analysis by DTZ.

Mr Cheong also said that high-end home prices have peaked but will probably achieve a new high 'eventually when the sentiment improves, the economy improves, come 2010 when the integrated resorts come into play and with Singapore being a successful wealth management centre'.

Mr Cheong also said he continued to be upbeat about the Singapore property market in the long term, citing the Republic's political stability and strong fundamentals, as well as upcoming projects/events that will further position Singapore as a global city. 'I think when the whole storm blows over, the market should be able to accept the situation better and hopefully by next year, say 12 months' time, we will be in a better state than now,' he said.

Despite the generally upbeat tone of Mr Cheong's comments, there is no denying the uncertainty in the short term.

Frasers Centrepoint CEO Lim Ee Seng, when quizzed on where the property market is headed in the next six months, said: 'I don't know. I hope that the market will be better. It's all sentiment-driven. But I believe if there is good news in the market, the good sentiment will come back very quickly.'

Gwee Lian Kheng, group chief executive of UOL Group, said that there may be a tendency for some developers to slow down on the construction of their projects given that holding cost (interest cost) is 3 to 5 per cent, much lower than the 30 per cent rise in construction costs in the past nine months. 'So there's an advantage by slowing down.' On a more positive note, Mr Gwee noted that prices of some construction materials like steel have started to stabilise.

Others like City Developments can ride on the advantage of having a diverse residential landbank comprising low-, mid- and high-end sites, said the company's group general manager Chia Ngiang Hong. 'We can pull out projects for which there is demand in the market. For the time being, the low- and mid-ends are still quite resilient,' he added.

Some Developers Want GFA Incentives Restored

Source : The Business Times, September 13, 2008

WITH profit margins already looking slimmer these days, some developers have decided to appeal to the Urban Redevelopment Authority (URA) to reinstate GFA (gross floor area) incentives for providing planter boxes and bay windows in condominiums.

However, while sources say this is unlikely, an extension of the deadline for the approval of projects based on the old planning guidelines on planter boxes and bay windows may be given.

In July, the URA announced that from Oct 7, bay windows and planter boxes, which can contribute up to around 5 per cent of a condominium's saleable area, will no longer be exempt from GFA calculations.

Until now, developers were nevertheless able to charge home buyers for this extra GFA. But most developers do not see the GFA exemption as an incentive. City Developments group general manager Chia Ngiang Hong explained that it is common practice for developers to price in the exemption of GFA for planter boxes and bay windows when calculating the residual land value, especially for public tenders of state land. 'With the GFA exemption, most developers would have been able to allow for a wider margin,' he added.

It is understood that developers were not consulted before the change in the planning guidelines on planter boxes and bay windows was revised, with many of them taken by surprise.

That developers who bid for and were awarded land parcels based on prices that took into account the GFA incentive should now feel they could have overpaid, is likely to be a sore point.

Still, design of future condominiums is also an issue.

The guidelines on bay windows and planter boxes were first introduced in 1989 and 1993 respectively, ostensibly to encourage interesting designs for condominiums.

United Overseas Land (UOL) has built award-winning developments, such as 1 Moulmein, that feature bay windows. And its Group COO, Liam Wee Sin, feels that the guidelines have had a positive impact on the 'articulation of facades'.

One of the winning design features of 1 Moulmein - designed by WOHA Architects - is the introduction of a 'monsoon window' which operates on a horizontal plane to allow natural ventilation even during a storm.

'We need to have some flexibility so that architects can experiment,' said Mr Liam.

Mr Liam concedes that some developers may have exploited the GFA exemption by maximising planter boxes and bay windows without pure architectural intent, but added that this could be addressed in ways that did not sacrifice the incentive. 'Such guidelines can determine a whole generation of architecture,' he said.

On the rationale for the change in guidelines, URA said that its checks on some completed developments had shown that on average, only about 10 per cent of the approved planter boxes within residential units were used for planting.

It also said that many bay windows were now designed to be used no differently from the rest of the floor space of a residential unit and for all intent and purposes, were 'part and parcel of room space'.

'Over time, the bay window designs have become a predominant feature for majority of the newer residential developments,' it added.

Singapore Institute of Architects president Tai Lee Siang says that it is still not clear how the change in guidelines will affect the design of condominiums but 'standardisation' inevitably sets in after time.

Architecture, however, needs to be responsive, so Mr Tai believes that it may be useful to 're-visit' the guidelines if these prove useful in addressing aspects of tropical architecture in the future.

Frasers Centrepoint In Rebranding Move

Source : The Business Times, September 13, 2008

It wants a new name and fresh look to gel better with its increasing push overseas

A MAINSTAY on the Singapore property scene, Frasers Centrepoint is going for a new name and a fresh look as it moves to conquer markets abroad. The company is reviewing its brand to reflect its global perspective.

PREPARED FOR THE WORST - Mr Lim says that Frasers Centrepoint will just hold onto its landbanks, where market sentiment is bearish, until recovery

'We want to continue to push overseas,' says chief executive Lim Ee Seng. 'In future, more and more of our revenue will come from overseas.'

In 2006, the then-Centrepoint Properties was renamed Frasers Centrepoint to better reflect the link to parent company Fraser & Neave, one of Singapore's biggest conglomerates. But when Frasers Centrepoint grew its assets abroad, it found that the Centrepoint name was far from unique.

'There were always other companies called Centrepoint - in Sydney, in Bangkok, in the UK,' says Mr Lim. In the UK, for example, Frasers Centrepoint shared the Centrepoint name with a coal-mining company and a security firm.

The solution? Frasers Centrepoint has rebranded itself Frasers Property.

'For now, the main challenge is finding the right talent. We have to find the right people in each country to take charge, to work independently. Property is a very local business, so the people on the ground in each country should also be locals whenever possible.'
Mr Lim

According to Mr Lim, the continuing rebranding exercise and the name change underscore how serious the company has become about building its overseas presence.

The numbers speak for themselves. In the first half of its 2008 financial year, 39 per cent of the developer's assets were abroad. Some 15 per cent of Frasers Centrepoint's $8.3 billion portfolio was parked in China, the biggest overseas market. Australia and New Zealand together accounted for 12 per cent of assets, while 9 per cent were in the UK. The remaining 2 per cent were in various countries, including Thailand, Vietnam, Malaysia and the Philippines.

By contrast, in 2005, just 22 per cent of total assets were overseas. Back then, the company had total assets of $4.4 billion.

There is no doubt that Frasers Centrepoint has become the most important unit in Fraser & Neave's stable. For F&N's third quarter ended June 30, 2008, property development accounted for 60 per cent of net profit before exceptional items. This was despite the food & beverage business being the largest contributor to the top line.

To build on this strength, Frasers Centrepoint has been quietly working to consolidate its overseas presence in the past three years. In the UK and Australia/New Zealand, it has set up holding companies and built up its teams. These steps were taken for 'tax reasons' and to allow the units to function more effectively.

Yet, for all his bullishness, Mr Lim is well aware of the challenges that Frasers Centrepoint and its fledgling overseas spin-offs face amid the current global slowdown.

The main problem is poorer liquidity from banks, he says. And perhaps more immediately, many overseas markets are gripped by poor buyer sentiment. 'This is a problem even in markets where the problems are not serious, where all the fundamentals are actually okay - such as Australia,' says Mr Lim.

In light of this, Frasers Centrepoint will take a step back in some foreign markets. In the UK, the company has a pipeline of 2,700 homes that were supposed to be delivered in the medium term through direct development or via joint ventures. Some of these projects will now be put on hold until the market turns.

In Australia and New Zealand, on the other hand, Frasers Centrepoint will go ahead with projects because prospects don't look as bad. 'The financial markets have been hit but interest rates have come down,' says Mr Lim. 'There is also a shortage of apartments in Australia, especially in Sydney.'

Frasers Centrepoint has a pipeline of about 5,000 residential units and about one million square foot of commercial space to be delivered over the medium term in Australia and New Zealand.

Things are murkier when it comes to China, where the company has a pipeline of close to 12,000 homes and about six million sq ft of commercial space in the medium term.

But in any case and in all the markets where Frasers Centrepoint is present, 'if worst comes to worst, we will just hold onto our landbanks until recovery', Mr Lim says.

For now, Frasers Centrepoint's main problem is finding the right people to staff its offices as it expands.

'We have to find the right people in each country to take charge, to work independently,' says Mr Lim. 'Property is a very local business, so the people on the ground in each country should be locals whenever possible.'

China Property Meltdown Feared

Source : The Straits Times, Sep 13, 2008

Morgan Stanley analysts say prices are cracking in major cities, demand down by half

HONG KONG: China's property market could be headed for a 'meltdown' as home prices and sales slump, Morgan Stanley analysts said.

'Property prices are already cracking in China in major cities,' the investment bank's analysts, led by Mr Jerry Lou, wrote in a note yesterday.

'We believe the likelihood of a property sector meltdown is high.'

Property demand in Chinese cities has dropped by as much as half since the government last year raised minimum down payment requirements and increased rates on some mortgages to cool home prices, said CSC Securities HK analyst Liu Bin. A 60 per cent drop in the stock market this year and concerns that China's economic growth is slowing have contributed to the slump in demand.

Mainland developers, including China Vanke and Poly Real Estate Group, have reported falling sales as government lending curbs deterred home buyers.

Vanke, the nation's biggest publicly traded real- estate developer, said this week that last month's sales fell 35 per cent from a year earlier, the third monthly drop.

The firm said yesterday it has rejected demands from buyers for compensation on homes bought before the company cut prices to boost sales.

One such buyer was Shenzhen resident Li Zhiwei, 38, who paid about 900,000 yuan (S$190,000) last May with 30 per cent down for his 72 sq m home.

After tripling in some districts since 2005, property prices in the city have fallen to earth with such a thud that Mr Li's apartment is now worth less than the 600,000 yuan mortgage he took out.

Mr Li, who pays 7,000 yuan a month, or half of his income, to service his mortgage, blames the real-estate developer for his negative equity.

'I want to be refunded, or they must pay for my loss,' he said.

Mr Li, along with 67 other owners in his complex, is putting pressure on the developer by threatening to swallow a 300,000 yuan loss and walk away from his home - a common occurrence in the United States sub-prime mortgage crisis but still very rare in China.

The spectre of mortgage defaults is hanging over the southern boomtown of Shenzhen as China's property market loses altitude.

By the end of June, 3,612 people in Shenzhen had fallen 90 days behind on their mortgage payments since 2006, causing 1.7 billion yuan of loans to turn sour, according to state media reports.

'Most mortgage defaults come from professional investors who have no intention to hold property for long,' said Ms Hou Liying, a professor at Shenzhen University who specialises in China's property market. 'When prices start to head south, they try everything possible to halt their losses.'

It was precisely in order to tackle such speculative excesses that Beijing introduced a raft of curbs over the past 18 months.

Still, analysts are confident that banks will avoid the big home-loan losses suffered by US lenders.

Mortgages made up just 10.5 per cent of total Chinese bank lending at the end of June, according to the central bank, and house buyers must make minimum down payments of 20 or 30 per cent, reducing the risks that banks run.

But a prolonged drop in prices would be a major worry for the government, which regards housing as a crucial motor of economic development and wealth generation. - BLOOMBERG, REUTERS

Architects & Their Homes - Angle Management

Source : The Straits Times, Sep 13, 2008

A slanted design for architect Rene Tan's home turned the terrace house into a light-filled one

Terrace homes, with neighbours sharing common walls on either side, can be dark places as windows can be put only at the front and back.

Large floor-to-ceiling windows help to let light into Mr Tan's home. -- ST PHOTOS: NG SOR LUAN

Not so at the home of architect Rene Tan, who thought outside the box when he designed it. Light streams into his twostorey-plus-attic terrace house, thanks to an ingenious slanted design.

Rather than being a rectangular box, the house is bent at an angle, hence enabling light to enter from the side. There are fewer common walls to share as well.

To make it look brighter, the entire interior is painted in variations of white.

Mr Tan, a partner at RT+Q Architects which he founded with architect T.K. Quek, admits that he treated designing his home like an experiment, testing out unusual designs that he would normally not do for clients' homes.

'This was something more unusual,' says the Penang-born permanent resident here. 'The shape was an instinctive response to the site.'

The 44-year-old shares the threebedroom Bukit Timah home with his wife Chuah Woei Woei, a vice-president at a bank, and their four-year-old daughter, Lara.

They moved in only about two months ago, after seven months of construction. They were previously living in a shophouse in Everton Road. He declined to disclose how much he paid for the 2,300 sq ft land, plus construction.

He says the conventional way to introduce light into a terrace home is to create a courtyard. But by slanting the house, light can enter from the side. The many large floor-to-ceiling windows also allow plenty of light to enter.

'Demanding' clients at home, too

His 'experiment' also includes the interiors. Visitors are amazed by how white the home is - from the walls and ceiling to the cabinets, shelves and flooring.

'There are 20 shades of white here,' he says with a laugh.

Another experiment involved the doors for two bedrooms on the second floor - they do not have frames. 'The doors now look like part of the walls,' he says. A doorstopper prevents them from swivelling too much.

He jokes that while experimenting with the home, he also had to satisfy the desires of his two most difficult clients - his wife and daughter.

Lara wanted a swimming pool, so he created a 10m by 2m by 1m lap pool on the ground floor. Entry is via a side passageway near the living room or by opening a sliding door in the room.

Ms Chuah wanted a big kitchen and lots of storage space. She, too, got her wish: There is a dry kitchen in the dining area with a marble-top island kitchen and a spacious wet one at the home's rear.

Instead of having numerous cupboards, he created plenty of built-in storage with sliding doors throughout the home, from the kitchen to the living room to the bedrooms. Having such storage saves space and also gives the home a cleaner look.

A spiral staircase in the 3,900 sq ft home links the two floors and the attic.

Another feature that links the attic to the first floor is a three-storey-high bookcase filled with books on architecture, literature and travel books. MrTan affectionately calls it the wall of knowledge.

Although he designed his home, he does not think it is perfect. 'If I could, there would be areas I would do differently, such as building a straight staircase.'

He was juggling various other projects while building his home and says 'my own home was the most neglected job'.

Not that anyone can tell.


Source : 《联合早报》September 13, 2008











Developers Appeal To Govt Over Bay Window Ruling

Source : The Straits Times, Sep 13, 2008

THEY might look innocuous, but bay windows and planter boxes have become a hot topic of discussion between property developers and the Government.

The talks centre on a controversial decision by the Urban Redevelopment Authority (URA) to include the area of such design features in gross floor area (GFA) calculations.

Bay window and planter boxes, which often make up about 5 per cent of a condo’s saleable area, used to be exempt from GFA calculations. But buyers paid developers for this area as it was provided with the unit.

The URA caught the industry by surprise on July 7 when it stated that the revised guidelines would take effect from Oct 7. It was reported at the time that the move would close a ‘loophole’ that developers had been exploiting.

Planter boxes were originally introduced to provide greenery and visual relief to high-rise condos.

However, the URA said feedback and its own investigations found extensive unauthorised conversions of planter boxes into balcony space or extensions of the living room - which defeated the original purpose.

This also led to the buildings being less energy efficient, said the URA.

But developers said yesterday it was a ‘misconception’ that they were profiting from it.

UOL Group chief operating officer Liam Wee Sin told The Straits Times that contrary to general perception, developers did not ‘have it free’.

‘There’s a reason why it’s there in the first place,’ he said. ‘It costs money to construct these features, and it is not given to us free.’

It is part of the ‘residual land value’ and developers factor this when bidding for a site, he said.

A Lianhe Zaobao report quoted market sources who suggested the change might lead developers to pay less for land.

It cited the sale of a site next to Tanah Merah MRT station that was awarded recently at $282 per sq ft per plot ratio (psf ppr). This was 11 per cent less than the $318.50 psf ppr attained by a neighbouring site before the GFA change was announced.

The president of the Real Estate Developers’ Association of Singapore (Redas), Mr Simon Cheong, said he could not comment further because talks were ‘in process’.

Mr Cheong, who was speaking at Redas’ annual Mid-Autumn Festival celebration, said that developers were cautious in their short-term outlook due to high construction costs.

‘Hopefully in 12 months’ time, we’ll be in a better state than now,’ he said.

He cited Singapore’s low interest rates and upcoming events such as the Formula One race and Youth Olympics for his bullish outlook.

On the price of real estate, he said that ‘if it drops, it will not be much more’.

The replacement cost of apartments, including cost of construction, is very close to selling prices already, he added.

Mass market home prices are dependent on local demand and ‘this is subjective to how the economy is’.