Saturday, January 3, 2009

When A Price Fall Isn't A Price Fall

Source : The Business Times, January 3, 2009

SISV Services is fixing problem with caveats lodged for some subsale deals.

PRIVATE home prices have fallen but in some cases, the drop may not be as much as suggested by SISV Services' Realink database.

SEEING DOUBLE Savills Singapore has spotted more than 60 instances of 'duplicate caveats' listed at different prices for the same transaction on Realink -- STOCK.XCHNG

Savills Singapore has spotted more than 60 instances of 'duplicate caveats' listed at different prices for the same transaction and which give the impression of a unit changing hands within a span of a few months at a significantly lower price, when in fact it hadn't.

The common thread running through these cases is that they involved subsale deals transacted in the past six months for projects which either received Temporary Occupation Permit in 2008 or are nearing TOP.

For example, Realink shows a caveat for a 47th floor unit at The Sail @ Marina Bay sold in the subsale market in September for $508,024 or $858 psf, when actually the unit was sold for $1.45 million or $2,450 psf and which was caveated three months earlier (and also shown in Realink). The lower price was the price at which the developer first sold the unit back in 2005.

In another instance, Realink shows a caveat for a unit at Park Infinia at Wee Nam in November for $1.16 million or $868 psf, one-third lower than the $1.77 million or $1,325 psf caveat lodged for the same unit two months earlier. Actually, both caveats were lodged by the same buyer, who paid the higher price.

Rodyk & Davidson LLP partner Tang Woon Ee told BT that it was 'good practice' to advise clients who buy in the subsale market to lodge two caveats. The first is when the buyer exercises his subsale option and has to fully pay up the initial 5 per cent deposit; this caveat will reflect the actual transacted price.

Then, two or three months later, when this subsale transaction is completed and the buyer enters into a fresh sale and purchase agreement (SPA) with the developer, the buyer should lodge another caveat to protect his interest in the unit. This fresh SPA will reflect the original price at which the developer sold the unit, since this is the price it is entitled to collect.

'So if the developer originally sold the unit to Buyer 1 for $1 million and Buyer 1 later sells to Buyer 2 in the subsale market for $1.2 million, the fresh SPA issued by the developer to Buyer 2 will still reflect the $1 million price; the profit (or loss) made by Buyer 1 from his subsale transaction is not relevant to the developer,' Ms Tang explained.

As a result, the original sale price of the unit gets reflected in the second caveat lodged by the purchaser in the latest subsale deal. In this instance, two caveats will be lodged by Buyer 2 for the same transaction - the first at $1.2 million followed by another a few months later at $1 million.

SISV's Realink database, by listing both caveats, gives the impression that the price of the unit has fallen about 17 per cent in the past three months.

Said Ms Tang: 'A caveat is a legal claim against a property. When the developer issues a fresh SPA to a buyer who picked up his unit in the subsale market, it establishes a relationship between the buyer and the developer - that's a caveatable interest.'

SISV Services is in the midst of rectifying the problem, which has been caused by the service provider not eliminating 'duplicate caveats' lodged for subsale transactions which show the original price at which the developer sold the unit a few years ago (and which is listed in the fresh Sale & Purchase Agreement issued by the developer to the latest subsale buyer).

An SISV Services spokesman attributes the problem in Realink to an increase in subsale cases involving projects originally sold on deferred payment schemes (DPS) as the original buyers who may have picked up their units from developers a few years ago are now feeling the pinch from the economic downturn and facing difficulty getting bank loans.

This has led to an increase in subsales being registered and duplicate caveats showing up, according to him.

To fix the problem, SISV Services has added a 'history' button, next to transactions with two or more caveats lodged, for the professional version of Realink. 'Users can view the caveats' history and if they see the latest price is identical to the initial transaction in the primary market say a couple of years ago, they can disregard the latest caveat as being a 'duplicate',' the spokesman said.

'For the free version of Realink available to the public, we are in the process of devising a computer programme to help us identify the duplicates, so we may remove them.

'We didn't remove the duplicate caveats earlier because we could not determine readily that they were 'duplicates' as we do not have the buyers' names in the raw caveats data that we buy from SLA (Singapore Land Authority).'

Savills Singapore compiled a list of over 60 subsale transactions covering projects like The Sail, Cosmopolitan, The Esta, Park Infinia at Wee Nam, The Sea View, The Azure, Watermark, The Calrose and Parc Emily where Realink's database showed latest caveats at significantly lower prices than caveats lodged for the same units just a few months earlier. Typically, the latest caveated price was also the original transacted price for the unit a few years ago.

Savills did individual searches for a few of these cases using Singapore Land Authority's Inlis system and, in each instance, found two caveats being lodged for the property by the same buyer, just a few months apart - and with the second caveat at a lower price than the first.

Raw caveats data that SISV Services purchases from SLA does not contain information on the buyers' or sellers' identities to protect privacy.SLA confirmed that it provides identical data to both SISV Services and the Urban Redevelopment Authority.

Interestingly, URA's Realis system does not list these 'duplicate caveats' that do not reflect the latest transacted prices.

When asked how it sifts out caveats lodged when developers issue a fresh SPA based on original sale price, a URA spokeswoman said: 'If a caveat is lodged against a developer, we will ascertain whether it is a new sale or a fresh agreement arising from a subsale.

'We do this by checking whether a caveat for the same unit has been lodged against the sub-seller, whether a previous caveat has been lodged for the unit when it was originally sold and also against our database on new sales compiled from monthly surveys of developers. If the caveat is lodged against a developer arising from a sub-sale, we will not show the record in Realis.'

On the duplicate caveats in SISV Services' Realink database, Savills Singapore director for investment sales and prestige homes Steven Ming said: 'Analysts who do not distil the information carefully can come to very wrong conclusions of the market, thus further aggravating the already weak market conditions.

'Had end-users, investors and property owners relied on such data without first seeking a professional opinion, they can easily be making a misinformed decision as a result.'

There may also be a minority of rogue agents who may use such erroneous low-priced caveats to their advantage in convincing less savvy owners to close on low offers given market conditions, he added.

Q4 Private Home Price Slide Is Worst In Decade

Source : The Business Times, January 3, 2009

Some consultants notice yawning bid-ask gaps leading to distressed transacted prices

IN its worst showing since Q4 1998, the official private home price index slid 5.7 per cent in Q4 last year over the preceding quarter. For full-year 2008, the index fell 4.3 per cent, reversing a 31.2 per cent jump in 2007.

Property consultants are predicting a further decline of 10-20 per cent this year in the benchmark index, with upmarket homes continuing to be the worst hit, as in 2008. This sector was the most overheated during the run-up in 2006 and 2007.

'The bid-ask gap is very high; any buyer that comes in now wants to make sure he's buying at very attractive prices to cushion against future risk. As a result, most transacted prices are quite distressed,' said DTZ executive director Ong Choon Fah.

BT understands buyers are looking at prices at least 20 per cent below Q3 2008 levels before they are willing to commit.

URA's non-landed private home price index for Core Central Region (CCR) fell 6.3 per cent quarter-on-quarter in Q4, or a full-year drop of 5.5 per cent. CCR includes the prime districts, financial district and Sentosa Cove. In the Rest of Central Region, the price drop was 5.5 per cent for Q4, and 4 per cent for the full year. Outside Central Region, a proxy for suburban mass-market locations, suffered the smallest declines, of 4.7 per cent in Q4 and 1.6 per cent for the whole year.

The declines in URA's indices were far smaller than the price drops estimated by property consultants. CB Richard Ellis said that last year, average prices of new luxury homes under construction fell 30 to 35 per cent for prime districts 9 and 10, while those in Marina Bay and Sentosa Cove eased 10-13 per cent.

URA's price indices are weighted according to the moving average mix of transactions for the preceding 12 quarters, and this tends to make changes in the indices more muted during sharp market swings.

For this year, JP Morgan analyst Chris Gee said: 'The critical factor that will affect private home prices in 2009 - probably more importantly than the economy and jobs market - will be banks' financing of property. Banks seem happy to lend to the right type of buyers, but they're more conservative on valuations and tighter on loan-to-value.'

As for developers, smaller players have already started to chop prices. 'Among bigger developers, some are restructuring their portfolios and re-evaluating their risk positions,' DTZ's Mrs Ong noted.

A seasoned developer pointed to a diversity of strategies among developers, according to their financial strength, profit margin for each project and their view of when the recovery will take place. 'Some will cut and sell; some will package things that effectively give more discounts; some will lease instead of selling; some will just sit it out and wait for better times.

'Projects will be slowed down or delayed, stretching out the supply coming into the market, which in itself is a regulating mechanism,' he said.

In the public housing segment, the Housing & Development Board's (HDB) resale flat price index still inched up 1.5 per cent quarter-on-quarter in Q4 to scale a new peak. But this was slower than the 4.2 per cent rise posted in Q3.

ERA Asia Pacific associate director Eugene Lim said: 'We've been seeing more transactions with decreasing cash-over-valuations (COVs). The days of transactions with above $50,000 COVs are over.'

He is predicting a sub-1 per cent rise in the HDB resale flat price index for each of Q1 and Q2 this year. 'If the recovery takes longer, we may see the price index flatten in H2 2009 before decreasing, if the situation worsens.'

Knight Frank director Nicholas Mak predicted a 5 to 10 per cent correction in HDB resale flat prices this year, as the weakening economic conditions filter into the HDB market.

ERA's Mr Lim noted that 'in uncertain times, home buyers go for the 'safer' option of HDB flats to ease their financial burden'. He estimated 30,000 to 31,000 HDB resale transactions were done in 2008 - surpassing the 29,436 in 2007.

As for the private housing sector, CBRE predicted developers may sell 5,000-6,000 units in 2009, as falling prices boost take-up. It put the figure for last year at 4,300 to 4,400 units - just 30 per cent of 2007's record volume. Sales also slowed in the secondary market. CBRE estimated about 7,400 to 7,600 resale deals were done last year - against nearly 21,000 transactions in 2007. The 1,600 to 1,650 subsale deals it estimated for 2008 were also a far cry from the 2007's figure of 4,863.

Angry Buyers Clash With Developer Wing Tai Over Alleged Defects

Source : TODAY, Friday, January 2, 2009

AN UGLY spat — that has already resulted in a police report lodged against a homeowner — is brewing between listed property giant Wing Tai and some foreign investors of its three-year-old luxury condo near Orchard Road.

The development, which briefly set a record price of more than $2,000 per square foot when it was launched, has more than 130 units in all.

At least 15 unit owners — most of them foreigners who were buying their first Singapore properties — have come forward with a series of complaints claiming that poor workmanship has led to problems including cracked parquet flooring, chipped marble tiles, watermarks on walls and shattered glass panels on the balconies.

Some of these owners spoke to Today on condition of anonymity. They said they did not even want their condo to be named, for fear that it would drive down resale values.

The complainants said that the average cost of a two-bedroom unit had been more than $2 million; one investor had bought six such units for a total of $15 million, and one couple paid $7 million for a single four-bedroom apartment.

The latest incident on Monday morning — which happened as contractors were called in to rectify problems after similar incidents — saw a glass panel fall more than nine storeys from an unoccupied unit on to the swimming pool area. The impact shattered the panel and flung broken glass shards into the pool and as far as 20 metres away. No one was hurt.

According to residents, it is the fifth time a glass panel on a balcony had either shattered or fallen from a height.

When contacted, spokesman Clement Augustine from the property developer Winworth Investment — a subsidiary of Wing Tai Land — said the company takes a “serious view on safety on all our developments”.

Mr Augustine added that the glass panels used had met all industrial safety standards. In addition, each panel had been laminated with safety film to prevent them from shattering.

Winworth has lodged a police report over the latest incident, with Mr Augustine suggesting that the glass panel could have been tampered with.

Mr Augustine said that the owner of the affected unit had refused entry to Winworth’s representatives to investigate the latest incident. “From the pieces recovered (on the ground), we noticed that the safety film was broken. We cannot rule out the possibility that there may be wilful damage to the glass,” Mr Augustine said.

In response, the unit owner brushed off the fact that a police report has been lodged against him. He told TODAY that the condo’s management council - made up of some of the homeowners - that decided to ask an independent surveyor to assess the damage in his unit before the developer was allowed access.

The owner said he had told Winworth’s representatives they could enter his unit the next day. “It’s like when you have a car accident, you let the police do its investigation first, then you call the insurance before you go and repair the car,” he said.

The face-off was a development in a saga - already involving a lengthy exchange of emails and letters - simmering in the quiet and exclusive neighbourhood.

Disputing Winworth’s assertion that the defects were due to “wear and tear”, a handful of frustrated homeowners claimed they had spent thousands of dollars out of their own pocket on interior repair works.

One resident described the situation as “frustrating and insulting”. She said: “Most of the people living here are CEOs or managing directors. They can easily afford the repairs. The issue is having to take time off from running their companies to stay at home and supervise the repair and enhancement works.”

Conceding that some unit owners may not have inspected the apartments thoroughly before buying, she added: “When you pay that sort of money, you would assume the unit would be of the highest quality or at least a minimum standard. You don’t go into a Gucci or Hermes shop and check on every stitch in the bag that you have just bought.”

Mr Augustine said that the development had been granted its TOP (temporary occupation permit) in mid-2005. He denied that there had been shoddy workmanship and said that in any case defects which had been highlighted within the one-year liability period “have long since been addressed”.

Homeowners should channel their current grouses to the condo’s management corporation, which is responsible for its maintenance, he said.

The condo is now managed by Knight Frank Estate Management, which residents say took over at the beginning of last month from PSF.

Mr Augustine insisted that the units had been handed over their buyers only after each buyer had been given the opportunity of inspecting their homes and declaring themselves satisfied with the quality.

Even so, the developer had provided complimentary repair service for “genuine” complaints, Mr Augustine said.

He said: “There remain isolated incidences where a few owners may not have carried out diligent maintenance works, or have suffered willful damage to property, or whose property is the subject of wear-and-tear. Obviously, we are unable to address these matters because these owners should be responsible for their own repairs.”

S'pore Cuts 2009 Outlook As Recession Deepens

Source : The Business Times, January 2, 2009

Singapore on Friday cut its economic outlook for 2009 after reporting a worse-than-expected fourth quarter performance as manufacturing contracted and services sector slowed amid the global economic crisis.

Singapore's manufacturing sector shrank 9 per cent in the fourth quarter from a year ago, while construction grew 13.3 per cent and services rose 1.1 per cent

The government said it now expects gross domestic product this year to come in between a decline of 2 per cent and growth of 1 per cent, lower than the previous forecast of -1 per cent to +2 per cent made in November.

The latest forecast comes as Singapore said its economy shrank for a third consecutive quarter, contracting at a seasonally adjusted, annualised pace of 12.5 per cent in the October to December period following a revised 5.4 per cent decline in July-September.

'There is further downside risk to the latest forecast. We do expect the first quarter to be far worse than fourth-quarter GDP,' said Citigroup economist Kit Wei Zheng.

'Manufacturing will contract further, I think it will be double-digits, while services will likely contract from here,' said the economist, who added Singapore's first quarter GDP could shrink 6-8 per cent from a year ago.

Singapore's economy has contracted for three straight quarters as the global financial crisis pushed its major export markets, including the United States, Japan and the euro zone, into recession.

From a year ago, gross domestic product fell 2.6 per cent following a drop of 0.3 per cent in the third quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed.

The economy grew 1.5 per cent for all of 2008, compared with 7.7 per cent in 2007.

Singapore last reported three straight quarters of economic contraction in 2001 when the republic was hammered by the bursting of the dotcom bubble.

'The growth outlook for the regional economies has also deteriorated, with more economies now expected to register negative or flat growth next year,' the trade ministry said on Friday.

According to MTI, Singapore's manufacturing sector shrank 9 per cent in the fourth quarter from a year ago, while construction grew 13.3 per cent and services rose 1.1 per cent.

'Manufacturing has definitely been hit very hard by weakness in electronics. We have to see how much of that will spill over to the services sector,' said David Cohen of Action Economics.

'Tourist-related activities have seen some drag from the global slowdown.'

Prime Minister Lee Hsien Loong warned in his New Year message on Wednesday that the global financial crisis had hit the island hard and the economic outlook was uncertain.

'We must therefore prepare for a difficult year ahead, and especially the first half of 2009. Our economy will probably contract further,' he said.

Singapore reports advance GDP data based largely on information from the first two months of the quarter, and follows up with detailed GDP numbers for the period about five to six weeks later. -- THOMSON REUTERS

Home Prices Fall Again

Source : The Straits Times, Jan 2, 2009

PRIVATE home prices sunk 5.7 per cent in the fourth quarter of 2008, marking the steepest drop in a decade as the deepening economic crisis continues to dampen homebuyer sentiment.

Homes in prime areas registered the biggest price fall, with apartments in the core central region declining 6.3 per cent compared with a drop of 4.7 per cent in outlying areas. -- ST PHOTO: TAN SUAN ANN

Following a 2.4 per cent drop in the third quarter, home prices have now declined for two straight quarters, ending a four-year property rally in Singapore.

Prices fell 4.3 per cent in 2008 overall, compared to 2007, based on flash estimates released by the Urban Redevelopment Authority (URA) on Friday.

This is a dramatic turnaround from the 31.2 per cent spike in home prices in 2007 at the peak of the spectacular bullrun.

Despite the freefall in private home prices, new HDB data on Friday showed HDB flats continue to buck the trend, climbing 1.5 per cent in the fourth quarter - following a 4.2 per cent increase in the third quarter.

This means Housing Board (HDB) resale flat prices have reached a new peak since the last historical high in 1996.

Prices rose 13.8 per cent in 2008, adding to 2007's 16.5 per cent increase.

Analysts say the drop in private home prices - the largest since the last quarter of 1998 - is proof that 'fire sales' have started as sellers look to exit the market and raise cash flow amid an economic recession.

The Government warned on Friday that the economy may shrink by as much as 2 per cent this year, after posting a 12.5 decline in gross domestic product (GDP) in the October-December quarter - the third consecutive quarter of GDP decline.

Prices for apartments in the core central area dropped 6.3 percent in the three months ended Dec 31, and slipped 5.5 per cent in the rest of central region.

Outside the central region, prices slid 4.7 per cent.

URA Q4 Private Home Price Index Slips 5.7%, HDB Resale Flat Up 1.5%

Source : The Business Times, January 2, 2009

The official private home price index slipped 5.7 per cent in fourth quarter 2008 over the preceding quarter, following a 2.4 per cent quarter-on-quarter fall in Q3.

For the whole of 2008, the index slipped 4.3 per cent over the preceding year, according to flash estimates released by Urban Redevelopment Authority on Friday.

In the public housing segment, Housing & Development Board's resale flat price index rose 1.5 per cent in fourth quarter 2008 over the preceding quarter.

This was slower than the 4.2 per cent quarter-on-quarter rise in Q3 2008. For the whole of 2008, the resale flat price index posted a 14.6 per cent gain.