Friday, February 20, 2009

Avoiding Property Tussles

Source : TODAY, Thursday, February 19, 2009

Reduce risk of bargains turning into legal liabilities:

IN THE current recession, people with ready cash are looking to pick up good bargains. However, tread with care.

Reported cases that I took on over the years showed that property investors unwittingly fell into costly legal tussles because they failed to take the necessary safeguards before putting down their money.

What seem like simple and standard procedures in a property transaction can lead to expensive, drawn out legal battles. Here are four tips for minimising your risks.

Tip 1: Do on-site approval checks

The year was 1991, just after the Gulf War. Property values had dived sharply here.

My client, who owned a Lornie Road home, was faced with a lawsuit from a buyer wanting to back out of the deal.

The buyer claimed that the seller had not disclosed substantial unauthorised additions and alterations to the property, which affected its title.

At stake was the recovery of a $250,000 deposit from the buyer.

Fortunately for my client, the Appellate Court was persuaded that a seller’s obligation to disclose in a conveyance did not extend to unauthorised structures where no order or notice had been issued by the Building Control Division, as that relate only to an issue of quality and not title.

In a sale and purchase of property containing unauthorised alterations and additions, caveat emptor *applies.

This means it is for the buyer to protect himself by checking that the property is free of illegal additions and alterations before buying the option, or to include in the option to purchase, a clause enabling the buyer to exit the purchase before completion if there are illegal or unauthorised alterations and additions.

Tip 2: As a buyer, ensure you have exit or compensation clause

Last year, I represented a couple that had contracted to sell their Changi terrace house, which had an unauthorised second storey.

The buyers wanted the couple to restore the unauthorised structure, claiming they would suffer huge financial damages if they were to buy a property which required regularisation of unauthorised works.

They further argued that if the works could not be regularised, and had to be removed, this would reduce the built-in area.

It seemed like a case that was plainly in favour of the buyers.

As it turned out, the couple won the case on the argument that the contract was inadequate and did not provide for an exit or compensation clause for the buyers, where there were unauthorised works on the property.

Tip 3: Think carefully before SIGNING ON THE DOTTED LINE

Beware of buying on a whim and then changing your mind.

A caveat cannot be filed willy-nilly and unless a party has an interest in the property, he can be liable for damages and costs for wrongful filing.


In a case where a developer was suing an architectural firm for professional negligence, the claim failed because it was not filed within six years from the act of negligence.

An injured party must pursue a claim with diligence. Otherwise, it may fail because of the time bar.

The writer is director of Bernard & Rada Law Corporation. She has 22 years’ experience in property and commercial litigation.

Cairnhill Heights Sale: Would-Be Buyer Pulls Out

Source : The Straits Times, Feb 20, 2009

Developer cites poor market conditions for 11th-hour decision

A DEVELOPER has backed out of a planned $44 million purchase of an enbloc sale site in the prime Cairnhill area at the 11th hour - sparking anger from some of the home owners.

Owners of Cairnhill Heights will now get their share of the forfeited deposit, after deducting for expenses. -- ST FILE PHOTO

The firm, Jewel 1, blamed 'difficult, uncertain and deteriorating market conditions' for its decision to pull out of buying Cairnhill Heights.

The move came just 20 days before the deal to buy the 19-unit condo was due to have been completed on Feb 24, the condo's sales committee said yesterday. The developer, wholly owned by one shareholder, will have to forfeit its 5 per cent deposit of $2.2 million.

'This really feels like a stab in the back. Where is the good faith?' said one owner, also a sales committee member, who declined to be named.

The decision came despite a protracted legal battle in which Jewel fought for the right to buy the site.

The developer outlined its decision in a letter to the lawyer involved in the proposed sale.

Three sale committee members told The Straits Times they felt let down by the developer, as they regarded the firm as a partner in a deal that they had robustly defended against all challenges, believing it was a reputable property developer.

Jewel 1, which was registered in 2006, has only one shareholder and director - Mr Cheong Sim Lam. He was not available for comment.

Mr Cheong's family owns Hong Fok Realty, and he is the uncle of SC Global chief Simon Cheong.

He had agreed to buy Cairnhill Heights in May 2007, at the height of the property boom and amid a frenzy of collective sale deals.

The Strata Titles Board granted the sale in March last year. An objector at Cairnhill Heights then took the case to the High Court but lost the appeal in November.

A sale committee member who wished to remain anonymous said: 'Having been on the same side for almost two years now, sometimes fighting shoulder-to-shoulder to secure the sale, the last thing you would have expected is for your contracting party to turn around and leave you in the lurch.'

The sale committee said it has reserved all options in terms of possible legal recourse.

Owners of the 19 units will get their share of the forfeited deposit, after deducting for expenses, which are still being calculated.

If the sale had gone through, each owner would have received $1.97 million to $2.5 million, apart from the sole penthouse owner, who would have pocketed $5.5 million.

About half of the owners have rented out their units. One of the owners lives there but also own properties elsewhere in Singapore.

At least one owner is believed to have already bought a replacement property - assuming the full sale price would soon be paid - and is now stuck with two homes.

One owner, businessman Georg Mechtler, said: 'We felt aggrieved, having committed for more than two years to sell this property while the market kept climbing. Now, we have missed all our selling opportunities of this cycle. And the buyer only forfeits a miserable 5 per cent.'

Still, not all owners are upset. One said she is happy that an architectural icon has been preserved. Cairnhill Heights was designed by Singapore- based architect Geoff Malone.

'We should keep evidence of our architectural heritage,' she said.

Sentosa, Marina IRs Get Pricier

Source : The Straits Times, Feb 20, 2009

Both are revising costs upwards for 2nd time

SINGAPORE'S two integrated resorts (IRs) are getting increasingly expensive, with both developers revising their cost estimates upwards for a second time.

Construction in progress at Marina Bay Sands, certain section of which are expected to open by year's end. It was announced last week that the IR project is now estimated to cost US$5.4 billion, up from previous estimates of US$3.6 billion and US$4.5 billion. -- ST PHOTO: ALPHONSUS CHERN

An additional $590 million will need to be pumped into the kitty for the Sentosa project, while the price tag for the Marina Bay Sands development has gone up by US$900 million.

Resorts World at Sentosa yesterday revised the cost for the 49ha resort in its earnings call, bringing it up to $6.59 billion. This is the second time the budget has been revised: It was bumped up from $5.2 billion to $6 billion in November 2007.

Marina Bay Sands will cost more as well. At last week's earnings call, Las Vegas Sands Corp announced its Singapore IR is estimated to cost US$5.4 billion, an upward revision from previous estimates of US$3.6 billion and US$4.5 billion.

No explanations were given by Sands for the increase in cost, but it raised US$2.1 billion last November in a rights issue to cover its projects, including the one in Singapore.

Resorts World at Sentosa chief executive officer Tan Hee Teck said yesterday that additional funding would come from operating cash flows when the casino resort opens next year.

The extra money was needed for improvements to the design of the casino project, he said. Areas which were tweaked included pedestrian flow, the monorail stop at the resort and adjustments to the 24 attractions.

He said: 'We want to make sure each and every attraction is up to standard. We found we needed more money to bring the attractions up to a superlative level.' Moreover, construction costs had risen sharply in the last few years, he added. Steel, for example, rose from $800 per tonne in 2007 to $1,800 last year.

CIMB-GK Song Seng Wun said it was simply bad timing that the IR projects were awarded at the peak of the construction boom, which led to costs spiralling upwards.

Construction projects awarded earlier do not benefit from prices softening since the global financial meltdown, as they had locked in materials at a higher rate, Resorts World's Mr Tan said.

Despite the revision in budget and the ongoing global recession, Mr Justin Tan, managing director of parent company Genting International, said he is 'still as confident' in the success of the project.

As travellers trim their budget to take in short-haul travel, visitors from China and India who may have splurged on trips to Las Vegas or Europe would head to Singapore instead, he added.

Resorts World at Sentosa is slated to open on schedule by March next year.

One section of the resort is due for completion next week when its first 11-storey hotel, the Maxims Tower, is topped off. It will be the first development to be completed at either of the IRs.

Marina Bay Sands is expected to open in the fourth quarter of this year. However, it is uncertain which parts of the resort will be ready as Las Vegas Corp said only 'certain features' are targeted to be ready by December.

The resort has applied to the Government for a staggered opening, but has yet to receive official approval.

Sibor Dives, But Home Loan Rates Go Up

Source : The Straits Times, Feb 19, 2009

Most banks have raised their spreads to make up for increased risk and higher capital costs


A KEY interest rate that sets the cost of interbank lending has plunged in recent weeks, but those taking out new mortgages will be no better off.

The three-month Singapore Interbank Offered Rate, or Sibor, dived to 0.68 per cent this month, bringing it near the all-time low of 0.63 per cent reached in June 2003.

The rate at which banks lend to one another has been dropping since September last year, and is expected to stay low.

But new home buyers expecting interest rates for Sibor-linked housing loans to fall in tandem will be disappointed.

To compensate for increased risk and the higher cost of capital, most banks have upped the spreads that they charge above Sibor, making Sibor-pegged home loans more expensive.

At DBS Bank, a home buyer taking a loan of 80 per cent of his property's value in July last year would have paid a rate of Sibor plus 1.25 percentage points. Now, a new buyer has to pay Sibor plus 1.75 percentage points.

Even though Sibor fell from 1 per cent to 0.68 per cent between last July and now, the rate charged has actually risen from 2.25 per cent to 2.43 per cent.

The margin on HSBC's standard Sibor-pegged package now stands at 1.25 points, up from 0.7 point last July. The rate has effectively risen to 1.93 per cent, from 1.7 per cent.

However, at least one bank - Citibank - has not raised its spreads on Sibor-linked loans. A customer applying for a loan now would get the same rate as last July's.

The bank's head of secured finance solutions, Ms Vibha Coburn, said it has remained consistent in the pricing of spreads on Sibor-linked packages.

Its range of spreads is still between 0.8 percentage point and 1.25 percentage points, 'depending on the extent of the customer's relationship with the bank and the type of home loan package', she added.

Rising spreads will affect a growing number of borrowers as Sibor-linked loans have become increasingly popular after banks introduced them about two years ago.

One reason for their popularity is their transparency when compared to loans pegged to banks' own board rates.

However, although new loan applicants will feel the pinch of the higher rates, home buyers who locked into the more competitive Sibor-pegged mortgages last year are seeing their monthly instalments fall steeply in line with the nosediving Sibor.

Loans pegged to the Singapore dollar Swap Offer Rate (SOR) - another popular benchmark interest rate - have also been hit by the increasing spreads.

OCBC Bank is now charging SOR plus 1.75 points for its home loan, compared to plus 1.25 points just two months ago, according to a news report last December. This means its rate has increased from 2.25 per cent to 2.43 per cent.

Banks said they have raised their spreads because the credit crunch has made lending more expensive and riskier.

'Unlike the period of robust property markets in 2006 and early 2007, banks now have to contend with higher capital costs and increased credit risks, given the current financial turmoil and economic crisis,' said Mr Gregory Chan, OCBC's head of consumer secured lending.

Mr Dennis Ng from mortgage broker agreed: 'Property values have fallen, so default risk has definitely gone up. It's natural for banks to increase the interest margin to cater for this higher risk of lending.'

The higher margins are also being introduced because banks are seeing fewer home loan applications as the property market softens.

'If banks reduce rates, they face not only a decline in loans growth but also a decline in margins, which could affect them quite badly,' said Mr Ng. 'So they may increase their margins to make sure revenue doesn't drop that much.'

No update was available from two other banks here that offer Sibor- or SOR-linked home loans: Standard Chartered Bank could not respond by press-time while United Overseas Bank declined to comment.

Office Rents May Slide Until 2012

Source : The Straits Times, Feb 20, 2009

Rents of prime space to drop as supply outstrips demand, says Savills

AFTER two years of being squeezed by soaring rents, office tenants are finally seeing the market turn in their favour.

Rents of top-tier offices downtown are predicted to drop 30 per cent to 40 per cent this year, and a further 20 per cent to 25 per cent next year, according to property consultancy Savills. -- ST PHOTO: ALPHONSUS CHERN

Up to four years of falling or flat rents are in store for them as a wave of upcoming office space outstrips lacklustre demand, according to a new report by property consultancy Savills.

Its Asia-Pacific regional commercial head Chris Marriott expects top-grade office values here to halve from last year's peak by the end of next year, and not start to recover until 2012. Top-tier buildings downtown such as One Raffles Quay and Republic Plaza offer Grade A space.

Rents of such offices are predicted to drop 30 per cent to 40 per cent this year, and a further 20 per cent to 25 per cent next year, he said at a briefing yesterday.

The expected falls are due to the huge volume of new office space to be completed by 2011: 5.5 million sq ft, or about 30 per cent of all existing Grade A space.

At the same time, demand for new offices - which far exceeded supply recently when firms were still expanding - has become anaemic, due to the global economic slowdown, said Mr Marriott.

'Office rents have generally come off by 10 per cent from the peak last year, although for new lettings we've seen more like a 25 per cent drop,' he said.

Average Grade A rents peaked at $15.10 per sq ft (psf) last year and fell to $13.70 psf by the year end. Savills believes they will drop to $6 to $7 psf next year, leaving prime office space here some 20 per cent cheaper than in Hong Kong. Singapore's office market will see a more severe adjustment, partly because the proportion of new space in relation to existing space is bigger, Mr Marriott said.

Other property experts agree that office landlords are in for a tough time.

Cushman & Wakefield managing director Donald Han is tipping a 20 per cent decline in rents this year and another 20 per cent fall next year, although he said the drops may be bigger if Singapore's economic outlook continues to worsen.

In the past three months, most Grade A office landlords have cut rents by up to 10 per cent to 15 per cent, he said. 'Landlords...are becoming more aggressive in trying to keep their tenants happy.'

Still, he notes that even if rents bottom at $7.50 psf - his own forecast - they will remain higher than during the last downturn, when they touched $5 psf.

CB Richard Ellis executive director Moray Armstrong is not expecting rents to correct by so much. 'We have seen in previous cycles that when demand picks up, the available office supply is often very swiftly absorbed,' he said. 'Cycles here have been very short in the past, quite often in the order of two to three years.'

But now, landlords are 'very much prepared to negotiate', said DTZ Debenham Tie Leung's senior director Shaun Poh. 'Some of the landlords have stopped quoting actual prices; now they just ask tenants to make them an offer,' he said.

Existing tenants are also trying to cash in on the recession, Mr Poh said. 'Some tenants who have already settled on a price are asking to renegotiate or to get longer rental holidays.'

But not all landlords are worried. CapitaCommercial Trust, which owns 11 prime properties here, said it is 'not true' overall rents are down sharply, compared to trends in previous downturns. A spokesman said the trust charges $15 to $17 psf for Grade A space, while its overall average rent is 'only $7.44 psf'.

'We...expect to see positive rental reversions for leases renewed in 2009.'

Tenants rethink pre-booked space

THE credit crunch is forcing major tenants in Hong Kong to scale down ambitious plans to take up more office space there.

Property consultant Savills said yesterday at a press conference at SGX Centre1 that these tenants are unlikely to proceed with all the space they have booked.

The global credit crunch has battered many major financial institutions in the past year.

The firms mentioned by Savills included big names such as Credit Suisse, Deutsche Bank and Morgan Stanley. They had been due to move into the Hong Kong International Commerce Centre upon its completion next year.

Consultants say this hesitancy to take up pre-committed space has yet to occur in Singapore but it may happen in the months ahead.

Mr Moray Armstrong, executive director at property consultancy CB Richard Ellis, said: 'It's not a stretch to expect that to happen here, given that many of the pre-commitments were made by financial institutions.' He also said these institutions may choose to sublet space they cannot occupy.

This might be seen at the new Marina Bay Financial Centre, set to be ready in 2012. All three towers of prime GradeA office space have been at least partially pre-leased. Tenants include American Express, BHP Billiton, DBS Group Holdings, and the Macquarie Group.

Office Rents May Plunge 30-40% In 2009: Savills

Source : The Business Times, February 20, 2009

Rental recovery here can be seen from 2012 onwards

Grade A office rents here could fall 30-40 per cent this year and another 20-25 per cent in 2010, based on new research from Savills.

Rents here fell 1.9 per cent in 2008, the property firm said. Savills' research, which also forecasted rents at competing markets Hong Kong and Shanghai, shows that Singapore will be the worst-hit - in terms of rental declines for Grade A office space - in 2009 and 2010.

Grade A office rents here stood at $13.70 per square foot per month (psf pm) at end 2008, Savills said. This is expected to fall to $8-9 psf by end 2009, and $6-7 psf by end 2010.

Grade A rents in Hong Kong are forecast to fall by a smaller 30 per cent this year and 10 per cent in 2010. In 2008, Grade A office rents in Hong Kong grew 3.3 per cent.

Savills' data showed that Grade A rents were around HK$59.80 psf pm at the end of 2008. Savills forecasts that this will fall to HK$42 psf by end 2009 and HK$38 psf by end 2010.

As a consequence, Grade A office rents here are likely to be about 20 per cent lower than in Hong Kong by end-2010. In the second half of 2007 and early 2008, Grade A office rents in Singapore were higher than in Hong Kong as rents shot up here in 2007 and 2006.

Property firms have said in December 2008 that Singapore's Grade A office rents nearly doubled in 2007 after growing by more than 50 per cent in 2006.

But now, rents in Hong Kong are higher again as rentals here took a big hit in 2008. According to CB Richard Ellis, for example, Grade A rents fell to an average $15 psf pm in Q4 2008 - a fall of 12.5 per cent from end-2007. CBRE and Savills use different baskets of properties to calculate market rents. But both firms expect rents to fall further in 2009 and 2010 on the back of new supply.

Singapore and Hong Kong rushed to develop offices for their rapidly expanding financial services sectors in the last few years. Now, with the global downturn, an excess of unwanted space is depressing rents.

But Hong Kong's rents are expected to take less of a hit as new office supply there was rolled out earlier than in Singapore.

'With a minimum of a four year lead time for any significant office development, Hong Kong's core supply arrived in the nick of time to satisfy the burgeoning demand whilst Singapore has been caught by the unforeseen credit crisis,' said Chris Marriott, Savills Asia-Pacific's regional head of commercial.

Some 5.5 million square feet of new prime office space is due to come up in Singapore from 2009 to 2011 - about 30 per cent of existing supply, Savills said.

By contrast, Hong Kong has a smaller 4.52 million sq ft of office space coming up, which will add 6 per cent to the total stockpile.

Mr Marriott expects Hong Kong to see the quickest recovery among the three markets studied. For Singapore, rental recovery could be seen from 2012 onwards, he said. But investor interest is expected to pick up by early 2010.

There are a number of new funds with allocations for Asia which are already targeting assets regionally. Mr Marriott said: 'These institutions are already focusing on prime assets in core markets at discounts.'

In particular, they are looking at Australia, Japan, Korea, Hong Kong and Singapore, and will start buying once vendors reduce their prices, he said.

Jakarta May Let Expats Own Homes

Source : The Business Times, February 19, 2009

(JAKARTA) Indonesia is considering allowing expatriates to have their own houses in the country, The Jakarta Post reported yesterday. It quoted President Susilo Bambang Yudhoyono as saying he would ask the National Land Agency, the home minister and the state minister for people's housing affairs to conduct an in-depth study into granting expats home ownership rights.

'The government has no objection to this, provided it will benefit the people and make the country's climate more conducive to foreign investment,' Mr Yudhoyono said on Tuesday.

A 1996 government regulation states expats may only have house utility rights for 20 years, which may be extended for another 20 and 25 years consecutively.

Indonesian Real Estate chairman Teguh Satria called on the government to revise the regulation to grant expatriates a 70-year home ownership right, in an effort to make the country more competitive and conducive to foreign investment.

'If the government regulation is revised to allow expats to own homes, the prices of our apartments and other properties will rise sharply,' he said. -- Xinhua

Property Buyers Hit A Bump On Sliding Valuations

Source : The Business Times, February 19, 2009

Banks slash loan amounts before disbursing them

The rapid slide in property prices has resulted in some banks slashing the loan amount to borrowers just before it is disbursed. This has put property buyers in a quandary, forcing them to either top up the difference or pay a penalty for backing out of the loan offered.

And valuers have become the latest 'villains' as borrowers find it harder to get home loans to match their purchase prices. 'I don't tell people I'm a valuer,' sighed Lydia Sng, Knight Frank executive director.

Bankers agree that the time lag between the loan offer and disbursement can result in a final smaller loan. The loan offer, while based on an indicative valuation, contains a clause that it is subject to a formal valuation.

But borrowers who want to cancel the loan are hit with a punitive 1-1.5 per cent cancellation fee. Also, by this time, it would be hard to back out because they would have already committed to the purchase of the property.

The wobbly market is not helping. A Citigroup report last month said that, in the high-end segment, properties have seen price corrections of about 35 per cent from a year ago and they could fall by another 30-40 per cent this year.

Ms Sng said the problem is with the valuation process. 'They'll give us a call with the address, we'll give a range as we've not seen the property. It's a bit like calling the doctor and telling him your symptoms and asking for a diagnosis,' she said.

Gregory Chan, OCBC Bank head of secured lending, said: 'It is possible to receive a lower formal valuation on a property compared to the initial indicative valuation. To mitigate this, as well as to ensure valuations are realistic, OCBC Bank does not rely solely on a single valuer for indicative valuations,' said Mr Chan.

A DBS spokeswoman said the indicative value will be based on the information declared by the customer in the home loan application form.

'In the event that the formal valuation is lower due to the wrong details provided on the property, the bank will have to take the lower of either the purchase price or valuation as per regulatory stipulations. As such, the buyers will be required to top up the difference between the purchase price and valuation in cash. If the borrowers decide to abort the purchase and cancel the loan at any point after loan acceptance, a cancellation fee will apply,' said the DBS spokeswoman.

'We monitor our panel of valuers regularly to ensure that valuations are always fair and based on current market values,' said a United Overseas Bank (UOB) spokeswoman.

Jerry Tan, managing director of Jerrytan Residential Pte Ltd said his beef is that valuers sometimes look to non-comparable transactions to determine the price. But it could be comparing a five-star development to a three-star one, he said.

DTZ executive director Poh Kwee Eng said that if they were valuing a unit and there had not been a transaction in the same building for some time, they would look nearby, in similar developments. If the five-star unit was priced 20 per cent higher during last year's red hot bull market compared to a three-star one, similar premiums would still hold.

'Say, last year, your unit was sold at $1,000 per square foot and next door a unit went for 800 psf, there was a 20 per cent difference. So if the next-door unit is now selling at $500 psf, I would adjust your unit by 20 per cent upwards,' explained Ms Poh.

Some banks are said to be staying clear of certain developments where there is a wide range of valuations such as The Sail with 1,111 units and Sentosa Cove.

UOB head of loans Kevin Lam declined to comment on specific projects but offered general observations about mortgages. 'We have been conservative all along. With the recent further fall in prices, we have become even more careful,' he said.

Knight Frank's director of research and consultancy Nicholas Mak said valuations vary widely among the 1,111 units at the 63-storey The Sail. As for Sentosa Cove, 'newer developments have better views or better designs. Some earlier projects didn't have sea views,' he said.

Some ground-floor condos sited between the landed homes with the sea front were not very different to condos on the mainland, said Mr Mak. 'The value of a sea view alone is difficult to pin down,' he said.

Credo Real Estate managing director Karamjit Singh said that The Sail and Sentosa Cove, as new markets which targeted foreigners, provided their own challenges. 'The Sail was part of a new market that emerged as part of the development for the new downtown including the integrated resorts,' said Mr Singh.

He said it takes time for prices to find their equilibrium, and they have not stabilised yet. 'It's a challenge everyone faces, including banks.'

Luxury Condo Prices Dive In KL

Source : The Business Times, February 19, 2009

Foreigners cash out as they feel better times are not around the corner

PRICES of luxury condos in the Kuala Lumpur City Centre (KLCC) area have dived 15-20 per cent as the economic downturn bites and foreigners try to cash out for the best they can get, says a real estate consultant.

Oversupply: An estimated 1,760 units will be completed in the KLCC area this year, adding to 1,200 in the past two years

Malaysian buyers were the first to sign up for the high-end condos in 2004 during the onset of recovery after the 1998 Asian financial crisis, Rahim & Co managing director Robert Ang said on Monday. They bought at a half the price of foreigners who went into the market in 2006-07.

'Most foreigners bought at appreciated levels, so they are flexible about asking prices,' he said. 'But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.' The only bright spot is that so far there have been no forced or fire-sales, Mr Ang told a news conference.

Rahim & Co's executive chairman Abdul Rahim Rahman said he believed prices in the KLCC area would have softened anyway because of oversupply.

An estimated 1,760 units will be completed in the area this year, adding to 1,200 in the past two years.

Mr Ang said: 'The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent.'

At the peak, top KLCC apartments were edging towards RM3,000 (S$1,254) per sq ft. But most projects are now selling at RM1,000 plus psf in the resale market, though developers are still asking about RM2,000 psf for premium units under construction, such as at OneKL.

It is highly unlikely that better times are around the corner. Sellers and buyers know the market has yet to feel the full impact of the global economic slide.

Just on Monday, Malaysia's Deputy Prime Minister Najib Razak said the government's 2009 economic growth target of 3.5 per cent may not be achieved, as exports and production figures collapse.

Although property players claim the overall market is still liquid, fear of the unknown has led to a near-collapse in demand for luxury condos.

Mr Ang said Rahim has advised clients to defer new launches of luxury developments to the second half or third quarter. On the brighter side, landed property prices have held up so far, he said.

In the past three years, many foreigners went into Kuala Lumpur real estate, buying as many as a third of the units in some KLCC projects. They were attracted by the weak ringgit and a market that had not run up as much as others.

But now, some of them may be about to pay the price. After Malaysia's last recession in 1998 the property market took about four years to recover. Mr Abdul Rahim reckons things could move faster this time - if the economic decline can be swiftly arrested.

HK's Peak Residential Prices At Decade Low

Source : The Business Times, February 19, 2009

(HONG KONG) Property prices on The Peak, most expensive residential area on the Hong Kong Island, experienced the biggest drop since the Asian financial crisis 10 years ago, according to local media yesterday.

The prices slumped 41.4 per cent in the final three months of last year compared with the previous quarter. The fall was the biggest on record in Hong Kong's luxury real estate market, underscoring the seriousness of the global economic slump, the South China Morning Post reported.

In the final three months of 1997, prices on The Peak fell only 16 per cent, property consultant CB Richard Ellis said, though it cautioned that a slump in sales meant one big transaction could skew its figures.

'Prices on The Peak have increased most rapidly over the past few years and that's why they dropped the most once the market entered a down cycle,' said Margaret Ng, a senior director at the firm.

Ms Ng said prices on The Peak rose 27 per cent between the last quarter of 2007 and the second quarter of last year, to an average of about HK$327,373 (S$64,555) per square metre.

'The economic outlook is still uncertain. The effect of the economic rescue packages may be seen in the second half of this year. We have to wait and see,' she said.

Simon Lo Wing-fai, a director at property consultant Colliers International, said fewer than 10 homes priced at HK$15 million or more had been sold citywide each week since the onset of the global financial crisis. He said that 30 to 40 luxury homes were being sold every week before the start of the crisis.

Average luxury residential prices fell to about HK$118,611 per square meter in December, returning to September 2007 levels, he said, expecting that prices will drop 15 to 20 per cent this year.

Adrian Ngan Wai-hung, an executive director of research at CCB International Securities, believes property prices will drop a further 5 to 10 per cent in the short term but that they will stabilise in the second and third quarters of the year. -- Xinhua

Harlem Complex May Be Put Up For Auction

Source : The Business Times, February 19, 2009

(NEW YORK) Riverton Apartments, a high-rise complex in Manhattan's Harlem neighbourhood, may be auctioned off this Friday because owners Rockpoint Group LLC and Stellar Management have been unable to modify loan terms, according to Trepp LLC, a commercial real estate data company.

In trouble: A recent appraisal valued the property at US$196million, down from US$340 million in a December 2006 valuation. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29million plus expenses

The mezzanine lender is holding a public sale to foreclose on all of its pledged collateral, Trepp said, citing documents from the servicer of the loan. The lender is not identified. A recent appraisal valued the property at US$196 million, down from as much as US$340 million when the complex was last appraised in December 2006, Trepp said.

The Riverton loan was packaged into bonds as part of a US$6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc and Deutsche Bank AG, according to Bloomberg data. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29 million plus expenses, according to Trepp estimates.

'The sale of the property, should it take place, will be closely watched by the CMBS market as investors try to get a sense of what properties like the Riverton are worth,' Trepp said. 'The value of the Riverton in foreclosure would give the market a new benchmark.'

Foreclosure proceedings were filed in court this month, according to the loan documents. The documents do not disclose the location of the court or the exact date of the filing. 'We continue to work with the mortgagee in a cooperative manner and are hopeful for a good result,' Larry Gluck, a principal of Stellar Management, said.

Riverton has 1,230 apartments, according to Trepp. Its addresses are 2171-2200 Madison Ave, 2225-2265 Fifth Ave, 10 East 138th St, 45 East 135th St.

Delinquencies on commercial mortgages bundled and sold as bonds may triple by late this year as large real estate loans default, Standard & Poor's said on Tuesday.

Late payments on commercial mortgages reached 1.10 per cent during the fourth quarter of last year, and have been climbing since the low of 0.27 per cent in March 2007, S&P said. The commercial real estate market is in the early stages of a correction, and delinquencies may reach 3.5 per cent this year, the New York-based ratings company said. Yields on commercial real estate securities rose to near-record highs relative to benchmarks last August when a trustee report showed Rockpoint and Stellar would likely miss their September payment.

Loans against the Riverton were financed using income projections that assumed rent-stabilised apartments in the complex would be converted to market rate faster than they have been. Tishman Speyer Properties LP and BlackRock Realty relied on similar projections when they purchased Stuyvesant Town and Peter Cooper Village, Manhattan's largest apartment complex, for US$5.4 billion in 2006.

A reserve fund for Stuyvesant Town and Peter Cooper may run dry in six months unless it is replenished, New York-based Fitch Ratings said in a Jan 23 report. -- Bloomberg

URA To Auction Parking Sites At Old Toh Tuck Rd

Source : The Business Times, February 19, 2009

The Urban Redevelopment Authority (URA) said yesterday it will auction two sites at Old Toh Tuck Road to meet growing demand for heavy vehicle parking.

Trailers, buses and other vehicles with a maximum laden weight exceeding five tonnes will be allowed to park on the sites.

The bigger site, at 11 Old Toh Tuck Road, covers 10,844sqm, while the smaller site, at number 9, covers 9,765sqm.

The sites are being offered on 10-year leases.

The public auction takes place on March 17 at 2pm at the URA Centre's third-storey theatrette.

Developer's packets can be bought on line or at the URA Centre for $52.50.