Tuesday, December 30, 2008

DTZ Expects 2009 To Echo Property Price Plunge Of 2008

Source : The Business Times, December 30, 2008

Prime district property prices fall by 20%; similar decline seen in 2009

Prices of condominiums and apartments in the prime districts have fallen by more than 20 per cent in 2008 on a year-on-year basis, says DTZ.

DTZ is also forecasting a further decline of 15-20 per cent for this segment of the market in 2009.

Based on its preliminary analysis of official data, DTZ said that prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter (qoq) in the fourth quarter of 2008.

This follows two consecutive quarters of declines of around 4.5 per cent each.

The prime districts include District 9, 10 and 11.

Overall average prime prices fell 21.6 per cent year-on-year (yoy) to $1,160 per square foot (psf), below the level of $1,200 psf registered in Q207.

Freehold non-landed homes outside the prime districts fell in Q408 but at a lower rate of 9.3 per cent qoq or 10.5 per cent yoy.

Landed housing prices also fell 5.7 per cent qoq, or 2.9 per cent yoy, islandwide in Q408.

The fall in prices follows dismal developer sales in October and November with only 112 and 192 units sold in the primary market respectively, compared to the monthly average of 444 units sold in the first nine months of the year.

DTZ said that based on caveats lodged, preliminary data from URA's REALIS showed that the number of transactions in the year is only about 35 per cent of last year's 38,100 units.

On the upside, the percentage of HDB upgraders continued to grow. In 2008, a higher proportion of purchasers with HDB addresses was registered with 37 per cent of all buyers expected to be HDB upgraders in 2008 compared to 22 per cent in 2007.

Based on available caveats in URA's REALIS, the number of buyers with HDB addresses in Q408 is 582. While this is a preliminary number, it represents 43 per cent of total caveats lodged so far in the fourth quarter. DTZ noted that this is higher than the 41 per cent in Q308, 36 per cent in Q208, and 28 per cent in Q108.

'HDB upgraders buy mainly for owner occupation, so falling private home prices is a good opportunity for them to upgrade with greater affordability,' said DTZ senior director (research), Chua Chor Hoon.

But DTZ said that the downturn in the economy will deter buyers from committing to property purchases and sales are expected to continue to remain low in 2009.

Lower rental returns will not help either.

DTZ said that average monthly rents of prime non-landed homes decreased in Q408 by 9.4 per cent qoq or 9.2 per cent yoy to $4.36 psf.

Outside the prime districts, rents held up better with an increase of 2 per cent yoy, despite a fall of 1.2 per cent qoq.

The extent of price corrections is still uncertain but Nomura has already adjusted its forecasts. In March, it forecast average prices in the luxury sector to fall by 32.3 per cent from the 2007 peak over 2008-2010 - 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010.

It now expects luxury prices to fall 43.8 per cent from the peak, and mass residential prices to fall 32.1 per cent as yields move out by an additional 25-50 basis-points.

OCBC analysts also believe that high-end property prices could decline by 15-20 per cent in 2009 due to weak sentiment, unsold inventories and potential risks of buyers' default and fire-sales.

OCBC expects mass market property prices to remain resilient, supported by the stability in HDB prices. For the mid-market properties, it expects prices to fall further in 2009, with a projected decline of 5-10 per cent.

JTC To Bulk Up Space At Jurong Business Park

Source : The Business Times, December 30, 2008

Area to be increased by 20%; some parts to see plot ratios raised

The economy may be slowing but the government has already set its sights on riding the recovery. To meet future demand for space, JTC Corporation plans to expand the International Business Park (IBP) in Jurong by 20 per cent and will raise plot ratios for some areas in the park.

For the future: An artist's impression of the expanded International Business Park. JTC will be adding five parcels or around 5 hectares of land along the IBP's southern boundary. With a plot ratio of 2.5, this will generate some 125,000 sq m of new business park space.

Property consultants generally welcomed the news and believe that the new supply, which will enter the market only in the mid to long term, will have little impact on the weakening property market.

First established in 1992, the IBP now consists of 21 land parcels spanning 25 hectares, and JTC has fully allocated these plots. The park is home to several global technology firms such as Creative Technology, Acer and Dell.

'We are expecting a surge in demand for business park land in this area in the next economic upturn, which land intensification on existing IBP land alone would not be able to address,' said a JTC spokesman yesterday.

To prepare 'land supply in advance to meet investors' needs, we are planning to develop land parcels adjacent to the IBP for its expansion'.

JTC will be adding five parcels or around five hectares of land along the IBP's southern boundary. With a plot ratio of 2.5, this will generate some 125,000 square metres of new business park space.

JTC has also been receiving requests from existing IBP lessees to intensify land use. The overall occupancy rate for multi-tenanted buildings at the park has been high, at around 90 per cent.

To meet these needs, plot ratios for around 14.8 hectares of land will be increased from 1.4 to 2.5.

In line with the redevelopment, the government is looking to improve the area's road network by creating two road linkages to direct traffic from the IBP to the Ayer Rajah Expressway and the Pan Island Expressway.

It could take another 3-4 years for the IBP's revamp to be completed, estimates JTC. The redevelopment will complement the Urban Redevelopment Authority's (URA) 2008 Master Plan to create a suburban commercial hub in Jurong.

'There is potential to create synergy between the IBP and the proposed developments in Jurong Gateway, the commercial precinct of the Jurong Lake District,' said the JTC spokesman.

JTC's announcement comes amid a cooling economy and a softening property market - consultants are predicting a fall in demand for industrial space and rents in the coming year. But some whom BT spoke to remain sanguine about prospects for the extra IBP space coming up.

'Business park space is still a good alternative for those looking at office space outside the Central Business District (CBD). As long as rentals in the CBD are considered high, interest in business parks will be healthy,' said Knight Frank's head of industrial business space, Lim Kien Kim. 'I don't think this new supply will significantly affect rents for business parks in general.'

According to its website, JTC charges a land rent of around $60.57 per square metre (psm) per annum, or a land price of $913 psm on a 30-year lease for IBP sites with a plot ratio of 2.5.

DTZ's executive director Ong Choon Fah also believes that the new IBP supply will not pose a big concern. 'This is long-term . . . There will always be market cycles, so we must not lose sight of the long- term goals . . . Announcing this now also allows market players to be aware of what is happening in the future, so they can start to plan.'

Cushman & Wakefield Singapore managing director Donald Han says that the new IBP plots could also be put on the reserve list if they are released in a subdued market. Reserve list sites are launched for tender only upon successful application by a developer with an undertaking of a minimum bid acceptable to the state.

'I don't think (the government) will force feed the market,' he said.

Alongside JTC's redevelopment plans for the IBP, URA also released other updates to its 2008 Master Plan for the Jurong Lake District yesterday. They include the rejuvenation of Teban Gardens and Pandan Gardens, and road improvement works for Faber Terrace and Faber Hills.

HK Mortgage Lending Falls For A Fourth Month

Source : The Business Times, December 30, 2008

38% plunge in Nov comes as home prices slide a quarter from five-year high

(HONG KONG) Hong Kong mortgage loans fell for a fourth month in November as banks tightened lending amid the economic slowdown and as property prices slumped.

The writing on the wall: A property agent at his office in Hong Kong. The outlook for mortgage lending in the city will likely worsen as unemployment rises and banks raise interest rates on home loans

Banks in Hong Kong approved HK$8.5 billion (S$1.57 billion) of new mortgage loans last month, 69 per cent less than a year earlier, figures from the Hong Kong Monetary Authority (HKMA) show. Loans fell 38 per cent from October, the HKMA said yesterday.

House prices in the city have slumped almost a quarter from a five-year high in March as the global credit crisis drives up unemployment and threatens more loan defaults. Existing home sales for the full year may fall almost 18 per cent to 75,160 units, according to a Dec 20 report by Centaline, one of the city's biggest real estate agencies.

'Banks are not willing to take on this business as margins don't amount to much and housing prices will adjust in this climate,' Yuk Kei Lee, a Hong Kong- based analyst at Core Pacific-Yamaichi International, said before the HKMA's announcement.

The outlook for mortgage lending will likely worsen as unemployment rises and banks raise interest rates on home loans. HSBC Holdings plc, which has the biggest bank network in the city, earlier this month raised mortgage rates as much as 75 basis points to maintain loan profitability.

The proportion of new loans approved at more than 2.5 per cent below the best lending rate fell to 15 per cent in November, from 90.9 per cent a year earlier and 51.7 per cent in October, HKMA figures show.

Hong Kong lending in October posted the first month-on-month decline since December 2007, the HKMA said. Total lending climbed 7 per cent to HK$3.41 trillion, the slowest growth since May 2007, from HK$3.19 trillion a year earlier, figures from the HKMA showed last month.

Hong Kong Chief Executive Donald Tsang said on Dec 8 a recession in 2009 is 'inevitable' because of the global financial crisis, and forecast the economy will recover in 2010.

The city's economy last month entered its first recession since the outbreak of the deadly Sars epidemic in 2003. The seasonally adjusted unemployment rate in the city of seven million people rose to 3.5 per cent in the three months ended Oct 31, the highest level in almost a year.

The number of homeowners with apartments worth less than the mortgages they borrowed - negative equity - almost doubled in the third quarter to an estimated 2,568 cases worth HK$6 billion, the HKMA said on Nov 21. -- Bloomberg

London Residential Prices Slide 10.1%

Source : The Business Times, December 30, 2008

Prices seen to fall a further 10% in 2009, 3% more in 2010

(LONDON) London house prices fell more than in any other UK region this year and probably will decline further in 2009 as the economy sinks deeper into a recession, Hometrack Ltd said.

Residential property prices dropped 10.1 per cent in the capital, more than the 8.7 per cent average across the country, the property researcher said in a report yesterday. London house prices fell one per cent in December alone, compared with a 0.9 per cent drop across Britain.

'The onset of recession and the prospect of rising unemployment over 2009 will continue to damp confidence and in turn demand, which will inevitably lead to further house price falls over the next 12 months,' Richard Donnell, Hometrack's director of research, said in a statement.

Banks are rationing credit as they rebuild their balance sheets and brace for the recession, hurting the ability of consumers to afford moving.

Prime Minister Gordon Brown's government will announce new measures next month to revive lending after institutions failed to pass on the full impact of Bank of England interest rate reductions.

Hometrack, which surveyed 1,809 real estate agents and surveyors, said that many homeowners are choosing not to move as unemployment rises and companies including Woolworths Group plc and MFI Group Ltd tip into bankruptcy. Consumer spending shrank in the third quarter, triggering the biggest contraction in economic growth since 1990.

British consumers stepped up repayments on loans made against their homes in the third quarter, retiring £5.7 billion pounds (S$12.2 billion) of so-called housing equity withdrawal debt in the three months to September.

That compares with £2 billion in the quarter ending at the end of June, which was the first time in a decade that repayments exceeded new borrowing, the central bank said yesterday.

Bank of England policymakers have indicated that they may cut the benchmark rate further after trimming it to the lowest level since 1951. The key rate, now at 2 per cent, has declined by 3.75 percentage points in the past year.

House prices in London fell more sharply than the 9.5 per cent decline in East Anglia and 9.2 per cent in the south-east, the report showed.

Hometrack expects prices to fall a further 10 per cent next year and 3 per cent more in 2010, the researcher said on Dec 22. Rightmove plc and the Royal Institution of Chartered Surveyors have also forecast a 10 per cent decline for 2009.

The number of home sales fell 45 per cent this year and will probably drop another 12 per cent in 2009, the Hometrack report said. On average, homeowners will move once every 31 years in 2009, double the rate during the last decade.

Home loan approvals plunged 61 per cent to 17,773 in November from a year earlier, the British Bankers' Association said last week. -- Bloomberg

New Shanghai Measures To Boost Property Market

Source : The Business Times, December 30, 2008

(SHANGHAI) Shanghai, China's financial hub, has issued new measures to make it easier for people to buy their second homes in a bid to help its ailing property market.

Shanghai citizens will now be allowed to buy second homes on the same preferential mortgage terms enjoyed by those buying their first homes, the city government said in an announcement posted on its official website (www.shanghai.gov.cn) on Sunday.

It did not place any restrictions on what kind of families can enjoy the favourable terms - a further relaxation from a State Council announcement earlier this month, which said that the lower rates would be given only to families whose per capita living area is smaller than the local average.

Just last year, China had made it more costly for homebuyers to obtain mortgages for their second homes, worried about then-rocketing property prices swelling into a bubble.

But with the real estate market losing steam quickly, China has shifted gears and is now attempting to prop it up.

Shanghai is the first city to further loosen rules after the State Council announcement, which cut property transaction taxes and encouraged banks to lend more to developers for acquisitions.

The Shanghai government also said that families could borrow up to 600,000 yuan (S$127,200) from the local housing fund to buy a second home - an increase from the 200,000 yuan previously allowed.

China has unveiled a slew of measures in recent months to stimulate domestic housing demand as part of its campaign to support economic growth amid the global financial crisis. -- Reuters

Rejuvenation For Jurong Residential Areas

Source : The Business Times, December 30, 2008

Better connectivity and more housing choices are on the cards

MORE residential areas in Jurong are to be rejuvenated as part of the Urban Redevelopment Authority's (URA) 2008 Master Plan to develop commercial hubs outside the Central Business District.

Supporting the growth of the Jurong Lake District, Faber Terrace, Faber Hills, Teban Gardens and Pandan Gardens will soon enjoy better connectivity and more housing choices.

Various infrastructure plans in the region will proceed 'notwithstanding the current economic downturn', said URA in a release yesterday.

The government will be enhancing roads at Faber Terrace and Faber Hills. Not only will this improve the area's traffic situation, it will also allow more low and medium-density housing fronting Sungei Ulu Pandan to be built in future, said URA.

Noting that traffic along the Ayer Rajah Expressway in the area can be heavy, DTZ's executive director Ong Choon Fah agreed with the plans. 'If you build up the Jurong Lake District, you will also need to find an accessible way to get there,' she said.

According to URA, new residences at Faber Terrace and Faber Hills will be private and could include landed property as well as low- and medium-density condominiums. The area could be suitable for cluster housing, said Cushman & Wakefield Singapore managing director Donald Han.

Teban and Pandan Gardens will also undergo rejuvenation. Two public housing sites at Teban Gardens are already under the selective en-bloc redevelopment scheme, and PUB's ABC Waters programme for the Pandan Reservoir will further enhance waterfront living in the area.

There are also plans to improve Teban and Pandan Gardens' connectivity with the Jurong Lake District.

The district - comprising a commercial centre at Jurong Gateway and a leisure hotspot at Lakeside - could attract more large and global companies and the redevelopment of the International Business Park would further support this. As JTC Corporation also said yesterday, it plans to add another five hectares of land and raise plot ratios for some areas in the park.

Knight Frank director of research and consultancy Nicholas Mak pointed out that multinational corporations do pay attention to where the workforce is when they pick a site for their headquarters or factories. 'To know that (workers) are all living around is good, there is a ready pool of labour,' he said.

The announcements are also 'a signal to potential developers and investors that there is still land around the Jurong Lake area available,' he added.

URA also provided more updates on the development of Jurong Lake District yesterday.

For instance, dredging works to deepen the Jurong Lake for more water-based activities are already underway.

黄金地段高档公寓价大跌 有地私宅价也终于“失守”

Source : 《联合早报》December 30, 2008













在第四季推出的一些私宅项目包括纽顿一带的Newton Edge,这个永久地契项目在推出所有的104个单位时,平均尺价是每平方英尺1060至1370元。位于兀兰地铁站附近的99年地契租约的Rosewood Suites,也以每平方英尺520至680元的价格,推出200个单位中的80个。位于里峇峇利路(River Valley)的永久地契项目RV Suites,则是以每平方英尺1140至1400元的价格推出所有96个单位。






Source : 《联合早报》December 29, 2008







Global Growth Seen Weak

Source : The Straits Times, Dec 30, 2008

LONDON/SINGAPORE - GLOBAL growth will be very weak next year, a senior European banker warned on Tuesday, while Japan reportedly considered a US$110 billion (S$158 billion) scheme to buy bad loans from banks, the latest in a series of government moves aimed at fighting the worst downturn since the 1930s.

Analysts forecast more pain for consumers and investors in 2009 as bleak economic news continued to flood in from around the world. -- PHOTO: REUTERS

Japanese stocks finished modestly higher on their last trading day of 2008, capping a grim year which saw the Nikkei index plunge 42 per cent, the biggest loss in its 58-year history, as recession fears battered global markets.

In Europe, the main stock markets were on track for a 46 per cent loss over the year when trading ends on Wednesday.

'Problems in financial markets are affecting the real economy across the world and global growth is expected to be very weak in 2009,' European Central Bank Governing Council member John Hurley said in an article for the Irish Times.

He did not give a global figure but the ECB has already cut its forecast for the euro zone, predicting a 1 per cent fall in gross domestic product next year.

The head of the German exporters' association, BGA, forecast exports will fall next year for the first time since 1993.

Analysts forecast more pain for consumers and investors in 2009 as bleak economic news continued to flood in from around the world, but said hopes of more government rescue packages were helping to shore up financial markets for now.

'Everyone's pinning their hopes on economic stimulus policies by the United States and possibly China,' said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

'But people aren't watching things like company results as closely as they should be. We can't say for sure that the market's bottomed out until we see these next spring.'

The US government expanded its bailout of the auto industry late on Monday, pumping US$5 billion into General Motors' auto and mortgage financing arm GMAC and lending an additional US$1 billion to GM to help it buy shares in GMAC, which is considered crucial to GM's survival.

The loan to GM, the biggest US automaker, would come on top of assistance it was given earlier this month.

The US government agreed on Dec 19 to rescue GM and Chrysler LLC with up to US$17.4 billion in loans to stave off a collapse that would have cost hundreds of thousands of jobs and dealt a severe blow to an economy already in recession.

GMAC has lost US$7.9 billion over the last five quarters as the global credit crunch lifted its borrowing costs sharply and the value of many of its assets plunged.

Japan's government may also be weighing fresh moves to keep the country from sliding deeper into recession.

The daily Sankei Shimbun reported on Tuesday that the government and central bank hope to launch a US$110 billion scheme by the end of March to buy bad loans and other financial assets from banks using public money to ease the corporate credit crunch.

The move would theoretically free up banks to lend more money to companies which are struggling to raise funds through more traditional means such as selling bonds or new shares. But banks worldwide are growing more reluctant to lend as they brace for more bad loans as economies turn sour.

Analysts also doubted whether any such plan would be as effective today as in the late 1990s, when Japanese banks were saddled with a much bigger pile of bad loans.

The global crisis has shut many firms out of credit markets and slashed their earnings, forcing companies to postpone expansions, reduce production and cut staff, further undermining economic growth and impeding recovery.

South Korea pledged on Tuesday to ramp up support for its banks next year as more grim economic news flooded in.

South Korea's industrial output fell 10.7 per cent in November, the biggest monthly decline since 1987, as domestic and export demand slumped. Some analysts say Asia's fourth-largest economy will shrink next year for the first time in 11 years, putting pressure on its central bank to cut interest rates further.

In New Zealand, data showed household borrowing fell for the first time in 17 years in November as consumers cut spending in the face of recession.

Many forecasters believe the downturn will continue well into mid-2009, with more layoffs and bankruptcies to come, but investors are hoping battered stock markets will rebound sooner in anticipation of a recovery.

'2008 was the year of the serpent, everyone got bitten,' said fund manager Paul Biddle with Souls Funds Management in Australia.

'Next year has got to be better than this year. It's going to be a tough year ... but there will be some come back in the market,' he said. -- REUTERS

More Biz Space In Jurong

Source : The Straits Times, Dec 30, 2008

Expansion of business park will position Singapore for recovery

THE economic outlook is all gloom but the Government is already positioning Singapore for the next upturn by unveiling plans to beef up the supply of business park space in Jurong.

Industrial landlord JTC Corporation said yesterday it will develop 5ha south of the existing International Business Park. -- PHOTO: JURONG TOWN CORPORATION

Its ambitious move comes even as demand in the property sector has fallen dramatically in recent months while office rents have dipped.

Industrial landlord JTC Corporation said yesterday it will develop 5ha south of the existing International Business Park. This will yield 125,000 sq m, or about 1.35 million sq ft, of rentable space.

The development will help JTC 'secure investments and anchor key companies' in an effort to better place the economy for the next upturn, it said.

Site surveys will start next month and infrastructure work, including improvements to the park's road networks, will begin in March. Two new road linkages to the Ayer Rajah Expressway and Pan-Island Expressway will be created.

Companies can lease space in the business park from 2011, said JTC.

Market watchers told The Straits Times that the Government is stimulating economic activity with the development while also seeking to avoid the kind of office space crunch that has hit businesses in recent years.

The economic boom that preceded the financial crisis saw prime office rents double to almost $19 per sq ft last year. This sparked a scramble to build more office space, including government moves to release transitional office sites to relieve pent-up demand.

While this has now led to concerns that Singapore could face an office space glut over the next two years, some analysts feel that early preparation of sites enables the market to respond faster when the economy does pick up.

Colliers International's research and advisory director, Ms Tay Huey Ying, said she did not think there would be a glut, and that this 'will help in ensuring a U-shape recovery instead of a V-shape one when the global economy recovers'.

CIMB-GK economist Song Seng Wun said government investment in public infrastructure like Jurong Island or Changi Airport during downturns has traditionally 'worked well for Singapore'.

Even though the impact on economic output 'will not be massive', such work will benefit local firms, added Mr Song.

The International Business Park - 21 land parcels of about 25ha - is Singapore's first such park. Established in 1992, it has drawn renowned tech firms such as Dell and Acer to set up shop.

JTC said a review of the park's masterplan was timely as the Urban Redevelopment Authority had recently announced a dramatic makeover for Jurong in its 2008 Masterplan.

The industrial town is to be redeveloped into Jurong Lake District - a 360ha mini metropolis of homes, hotels, shops, eateries and offices linked to the MRT via walkways and waterways.

It will consist of Jurong Gateway, the up-and-coming commercial hub of the West, and Lakeside, which is being developed as a destination for young families, with tourist attractions and parks complemented by water activities.

JTC said 'there is potential' for synergy between the expanded business park and the rejuvenated Jurong Gateway.

Collier's Ms Tay agreed that more business park space will add critical mass and 'aid in the realisation of the Government's vision for the Jurong Lake District'.

To complement the commercial developments, the surrounding housing estates will be rejuvenated by various statutory boards. This will mean upgrades to Teban and Pandan Gardens and the Faber Terrace areas in the next few years.

Govt To Proceed With Jurong Lake District Development

Source : Channel NewsAsia, 29 December 2008

The Singapore government is proceeding to put in the infrastructure to facilitate the growth of Jurong Lake District. This follows the unveiling of the area's development blueprint in April this year.

Artist's impression of Lakeside Village, Jurong Lake District

Giving an update on Monday, both the Urban Redevelopment Authority (URA) and JTC said the measures include constructing a new spinal road, expanding the Jurong East MRT station and redeveloping the bus interchange.

There will also be upcoming developments at the International Business Park (IBP), Teban and Pandan Gardens.

The existing business cluster in the IBP will be expanded to maximise its potential in the next economic upturn.

Given IBP's proximity to industrial estates in the west and to the major commercial hub at Jurong Gateway, it remains an attractive location for many industrialists to site their headquarter operations.

JTC envisaged that this strong demand for business park space in IBP will continue into the next economic upturn.

It is planning to develop the land parcels along the business park's southern boundary, generating about 5 hectares of land and 125,000 square metres of business park space.

There will also be improvements to the road network in the IBP which was the first business park established in Singapore in 1992.

Teban and Pandan Gardens will be rejuvenated as well to provide attractive waterfront housing and to enhance their connectivity.

On top of that, there will be road improvement works at Faber Terrace and Faber Hills. This will improve current traffic situation in the area and allow more quality low and medium density housing fronting Sungei Ulu Pandan.

All these are part of Master Plan 2008 to develop new growth areas outside the city centre. - CNA/so

Medium- To Long-Term Prospects For S'pore Property Sector Still Strong

Source : Channel NewsAsia, 29 December 2008

Singapore's commercial and residential property sectors will remain attractive to investors in the medium to long term.

Property watchers told Channel NewsAsia that is because of Singapore's status as an international financial hub.

2009 looks set to be a difficult year by all accounts, but market watchers said property investment fundamentals here remain strong.

As global financial institutions cut costs, they are likely to move operations out of expensive cities in the US and Europe to Asian countries such as Singapore, where the cost of doing business is cheaper.

For example, Singapore's corporate tax rate is 18 per cent, compared to 29 per cent in the UK and 40 per cent in the US.

And this could spur demand for office space in financial centres like Singapore, presenting investment opportunities for the commercial property sector.

Christopher Fossick, managing director, Southeast Asia, Jones Lang LaSalle, said: "Financial institutions are growing, in many cases from hundreds to thousands of jobs here in Singapore. The bigger these institutions become, the more real estate they need."

But there are opportunities in the residential market as well. The closing gap between debt servicing and rentals, as well as falling valuations in 2009, could see many investors looking for a good deal.

Eugene Lim, associate director, ERA Asia Pacific, said: "For example, those in district 9, 10, and 11, they tend to be more elastic, the prices. So when the economy is not doing too well, the prices come down quite a lot, especially amongst those who have, for example, bought from the developer and then now need to sell to raise cash flow. They are prepared to cut losses."

Observers said Singapore's property market will offer rich pickings to investors who have their eyes on long-term returns. - CNA/ms

Don't Be In A Hurry To Reinstate DPS

Source : The Business Times, December 27, 2008

Uncertainty in the market being caused now by the scheme should not be treated lightly.

THE deferred payment scheme (DPS) was scrapped over a year ago but it has left a lingering uncertainty in the market that may not clear for some time yet - a fact that should not be taken lightly in examining the merits of reviving the scheme, as some developers are urging the authorities to.

Developers say bringing back DPS will stimulate property demand and point out the scheme did help genuine home buyers tide over temporary cashflow issues.

However, DPS has also been blamed for creating excesses during the recent property bull run. It fuelled speculative buying, since buyers needed to pay only 10-20 per cent of a property's purchase price to the developer, with the rest only upon the project's completion.

Amidst the current property slump, DPS has also created a 'time bomb' that is ticking away as projects sold on the scheme near completion, which is when buyers have to pay the chunk of their purchase price to the developer. Buyers who have not secured a housing loan yet may find it difficult to get one, with the current tight lending regime being practised by financial institutions.

Without a housing loan, these buyers may not be able to meet their payment to the developer to complete their purchase. This will have consequences.

The government recently revealed that 10,450 private homes sold in uncompleted projects were under DPS as at Nov 30, 2008 and has even given a breakdown of this figure by location and expected year of completion. Of course, not all DPS buyers are speculators. Nevertheless, the debate continues to rage on how big an impact there will be on Singapore's property market from buyers failing to complete their purchase when projects receive Temporary Occupation Permit (TOP).

Predicting the size of the blast from the DPS 'time bomb' is tricky.

For one thing, no one knows how many of these buyers who purchased on DPS have already secured a housing loan. For those who have, paying that big instalment to the developer at TOP may not be an issue. Those without a loan may start to panic.

Other factors affecting the magnitude of the problem created by DPS include: how buyers are affected by the ongoing recession, prospects for their jobs or businesses, the economic and property market outlook at the time, and whether banks relent on their current tight lending policy.

So the impact of DPS is unclear. And the fate of buyers and developers remains uncertain.

Much has been said about DPS buyers defaulting on their purchases by walking away and returning units to developers. The reality is not so simple. The right to repudiate the sale-and-purchase agreement lies with the developer, not the buyer. Even so, some foreign buyers may get away with absconding from the deal and limiting their damage to the 10 or 20 per cent deposit paid.

However, local buyers who fail to complete their purchase risk being sued by developers to either complete the transaction or to compensate the developer for the shortfall between the original contracted purchase price and what the developer manages to sell the unit for later.

On the other hand, if buyers try to offload their units in a weak market, this may accelerate the tailspin in property prices. Another point to note is that those who sell their units at a loss in the subsale or secondary market will still have to cough up the difference and pay the developer.

For instance, if a buyer had picked up a $1 million property on DPS, has paid the developer a 20 per cent or $200,000 deposit and manages to sell his property to another buyer for say, $700,000 in the downmarket, the first buyer has to pay the developer the $100,000 shortfall before it agrees to transfer the title to the second buyer.

Developers too will have to count the cost of this whole episode, including the damage to their image if they drag financially strapped buyers to court.

The global financial crash has already dealt a big blow to sentiment in the Singapore property market. This is being exacerbated by the uncertainty over the likely fallout from DPS.

Defusing the time bomb

What can be done to defuse this time bomb? If buyers say they can't secure housing loans or sufficient loan quantums from banks to complete their purchase of properties bought on DPS, some of the stronger developers may be game to provide second mortgages for buyers - if the authorities allow that.

Alternatively, developers could record the outstanding payments from problem DPS buyers as debt owed to them. So these buyers become debtors to the developers, who may charge them interest on the unpaid amount until the sum is settled by buyers, as allowed under the sale-and-purchase agreement. Developers may, however, be deluged with buyers taking refuge in such arrangements. And these arrangements can only be made with the support of the developers' banks. Already, many mid-sized and smaller developers are highly geared.

Whichever way you look at it, somebody will have to pay the price for the problems created by DPS - be it buyers having to sell their units at a loss or being sued by the developer, or developers ending up financing buyers to help them complete their purchase.

Sentiment is so weak now that reviving DPS alone probably won't do the trick in jumpstarting private home sales.

Banks are tight-fisted now, but it is a matter of time before they have to relax on home mortgages. The business of financing will then be best left to them. In the months gone by, some banks had even devised novel schemes like zero instalment and interest absorption that mimicked DPS - and served the needs of genuine home buyers with temporary cashflow problems, just as well as DPS did.

The good thing about this approach is that banks will have to do checks on borrowers to ensure they are credit worthy - to minimise the risk of non-performing loans manifesting later from giving loans to poor-quality borrowers dabbling in properties beyond their means.

Developers, on the other hand, are not in the business of assessing the creditworthiness of potential buyers. Their business is to sell homes - to as many people as possible and at as high a price as possible. If developers are again allowed to offer DPS in its old form to home buyers, it may once more draw speculators with weak credit standing and create another round of excesses.

Some have suggested ways to temper DPS. For example, buyers could be required to pay an additional 10 per cent - say 18 months after they have paid the initial 20 per cent to the developer. The idea is that buyers would need to apply for and draw down a housing loan, bringing banks into the picture earlier. That may help to sift out financially weaker speculators.

DPS helps HDB upgraders to buy private property, as they don't have to sell their existing HDB flats immediately to make progress payments on their new home. But the problems being caused by DPS should not be treated lightly amidst calls to reinstate the scheme.

The Singapore property market will eventually recover after the dust from the global financial crash settles and the Remaking Singapore Story takes centre stage once again. In future, high-net worth individuals from overseas and other investors looking for places to park their monies may develop a distate for places brimming with excesses. After all, buying a property is a long-term commitment, best made within one's means.

Singapore's Private Home Sales, Prices & Rents Fall Sharply In Q4

Source : Channel NewsAsia, 29 December 2008

Private home sales in Singapore have taken a sharp fall in the fourth quarter of this year.

According to a report released Monday by property consultant DTZ, only 112 private homes were sold in the primary market in October, and 192 units sold in November.

This, compared to the monthly average of 444 units sold in the first nine months of the year.

The October sales volume is the lowest since the release of official monthly sales data by the Urban Redevelopment Authority (URA) in June 2007.

For the full year, DTZ estimated that the number of home sales in the primary and secondary markets will only make up about 35 per cent of last year's sales, which saw some 38,100 units sold.

The figure is based on caveats lodged with the URA so far.

At the same time, the fall in private home prices have started to gather pace in the fourth quarter, with prime non-landed properties the hardest hit.

Prices of non-landed freehold private homes in the prime districts fell by 14 per cent quarter-on-quarter in the three months ended December, according to DTZ Research.

Overall, average private home prices have fallen 21.6 per cent year-on-year to S$1,160 per square feet, below the level of S$1,200 per sq ft in the second quarter of 2007.

Meanwhile, average monthly rents of prime non-landed homes have fallen 9.2 per cent to S$4.36 per square feet.

DTZ expects home sales to remain low next year as the recession takes its toll and homebuyers are concerned over job security. - CNA/yb

Prices Of Private Homes Falling

Source : The Straits Times, Dec 28, 2008

Developers offer soft discounts, for example, by absorbing legal fees

Private home prices are falling - and they will fall even more next year.

Property developers may disagree, but there is no question about it, if you ask industry observers.

The economy has slowed considerably and there have been retrenchments and wage cuts.

The Novelty Group has cut its price for the 75-unit Luma at River Valley Grove from $2,800 psf to $1,450 psf to tempt buyers. -- BT PHOTO: JOSEPH NAIR

Sales volume of new homes looks set to reach an 18-year low this year, while supply is far from lacking.

'In every bear market, no matter what the developers say, it will happen,' Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, said of the price falls.

The only unknown, he added, is the extent of the fall.

Manpower Ministry data already shows that average monthly real earnings - pay minus the effect of inflation - fell by 17 per cent from $3,982 in the first quarter to $3,307 in the third quarter.

Also, on an annualised quarter-on-quarter basis, gross domestic product growth in the third quarter declined by 6.8 per cent, continuing the 5.3 per cent contraction experienced in the second quarter.

'All these will filter through to the property market,' said Mr Leong.

Right now, most buyers are remaining on the sidelines. New launches are few, and there are not many desperate sellers out there yet.

'Most are not feeling any pain from the recession yet. In the secondary market, many sellers are still hoping to do sub-sale at a profit,' said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

The result? There are no major price reductions yet, he said.

Going forward, though, there could be more speculators desperate to get rid of their properties because they do not want to be saddled with huge loans, experts say.

These are people who bought properties when the market was booming under the deferred payment scheme, which means they will have to pay the full sum for the property upon completion.

The Government has said some 10,450 units of private homes sold under the deferred payment scheme have yet to be completed. Some 2,540 units - largely bought during last year's boom - will be completed in 2010.

In the new homes market, there will be more new property launches or re-launches after Chinese New Year late next month, consultants say.

Frasers Centrepoint, for one, has plans to release Caspian, its 700-unit condo near the Lakeside MRT station.

'The smaller projects or those in less attractive locations will likely need to offer more discount,' said Mr Mak.

'Others may offer soft discount, so that the prices reflected in the caveats will not be reduced.'

Soft discounts can take the form of furniture vouchers or the absorption of legal fees or stamp duty.

There could be price cuts in some mid-tier or prime developments where prices are 'fairly toppish', Mr Mak said. 'They would, thus, have to adjust their prices to a more reasonable level.'

Novelty Group, for one, last month cut its price for the 75-unit Luma at River Valley Grove from $2,800 per sq ft (psf) to $1,450 psf.

Recently, City Developments adjusted its price for the 77-unit Shelford Suites in Shelford Road to $1,400 psf from a preview price of $1,600 psf on average in June. The price then was already lower than expected, as two units were sold in March at $1,869 psf and $1,905 psf.

Those seeking information on new launches can check out the Urban Redevelopment Authority's (URA's) website, which offers monthly sales and price data on the 15th of every month.

It shows the number of units sold in the past month, as well as the median, lowest and highest prices done.

The URA website also has information on individual caveats lodged for properties sold, so you can find out the prices done at a particular condo.

The problem here is that the information is not very up-to- date because deals take time to complete and caveats take time to lodge.

The price data can easily be two to three months old, which can be a long time in today's fast-moving market.

Potential buyers should check with their agents to ascertain the previous price levels done or check classified advertisements for the latest asking prices, experts say.

They should also try to get a bank valuation on the property they are eyeing, said HSR Property Group executive director Eric Cheng.

Those who want to buy a resale property now can bid below individual sellers' asking prices. They could aim for 5 per cent to 8 per cent below asking levels, said Mr Cheng.

Also, buyers should look for tenanted resale properties that can offer a 4 per cent to 5 per cent rental yield for at least the next year, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

'In today's market, it is wise to buy something that you can see and profit from immediately,' he said.

The risk with new projects is that they could be delayed or their prices could fall from today's levels, he said.

But, be prudent and patient, warned Mr Cheng. 'Don't buy on impulse.'

Buying opportunity

Those who want to buy a resale property now can bid below individual sellers' asking prices. They could aim for 5 to 8 per cent below asking levels, said HSR Property Group executive director Eric Cheng.