Tuesday, March 10, 2009

Huge Interest But Few Actual Sales

Source : The Straits Times, March 9, 2009


Two recent auctions see only one sale as buyers await further price falls

FEW people are buying at property auctions with most holding back in anticipation of further price falls, according to Singapore auctioneers.

This double-storey terrace house in Upper Serangoon Road was auctioned off for $820,000, despite an appeal for opening bids of $880,000. -- PHOTO: JOSEPH NAIR FOR THE STRAITS TIMES

Interest in the auctions held by DTZ and Jones Lang LaSalle recently was high, with people spilling out of the doors - but actual buys were thin on the ground.

Of the 23 properties up for grabs, most were withdrawn without any bids placed on them. Only one successful sale was made.

This was a double-storey terrace house in Upper Serangoon Road with a land area of 1,760sqft. The successful bidder, who refused to be interviewed, clinched it at $820,000, despite the auctioneer trying to kick off the bidding at $880,000.

Among the few properties that attracted bids, most received only one or two conservative offers. Even for the properties that proved more popular, all the bids were well below the reserve price.

Genuine buyers were said to form an estimated 60 per cent to 70per cent of the turnout at both auctions, but most of them were hoping to net a sale at bargain basement prices. Agents and gawkers made up the rest.

Ms Grace Ng, deputy managing director and auctioneer with Colliers International, said: 'Buyers are afraid to commit now in case prices haven't yet bottomed.'

Ms Mok Sze Sze, head of auctions and sales at Jones Lang LaSalle, said: 'The difference between the opening price and the counter-offer is very big - bidders are slashing 25 per cent or even 50per cent off the original prices. This is reflective of the market in general.'

Buyers and sellers are currently in a stand-off situation, with sellers refusing to offer deep discounts and buyers expecting such discounts to be forthcoming at some stage in the future.

The stand-off was reflected in the auction of a 7,610sqft industrial building in Paya Lebar. The opening price was $2.38 million, but the highest offer came up to only $1.8 million. The property was withdrawn from sale.

Ms Mok said one factor preventing bidders from meeting the sellers' asking price was financing. If a buyer agrees to a price above the asset's valuation, he will have to fork out the amount above the valuation as banks are likely to lend only a proportion of the valuation price.

Despite the poor sales at auctions so far this year, property consultants insist that underlying demand is strong, as evidenced by the many requests to view certain properties as well as the turnout at auctions.

'You need someone to start the ball rolling,' said Mr Shaun Poh, DTZ's senior director for investment advisory services.

'Once one or two people start buying (auction) properties at a certain price, other people will think that it might be a good time to start buying as well.'

Agreeing, Ms Ng said buyer sentiment was weak but could improve as property prices fall to attractive levels, as was the case in 1998 when falling prices led to a pick up in demand in 1999.

Property markets saw mainly owner sales being put up for auction in 2007 and last year. This year, however, consultants believe more new mortgagee sales may come onto the market.



'Buyers are afraid to commit now in case prices haven't yet bottomed.'

Heeren, Park Hotel Orchard Next In Line For Facelifts

Source : The Straits Times, March 9, 2009

Works follow recently completed spruce-up of Orchard Road

TWO Orchard Road landmarks - The Heeren and Park Hotel - will be given facelifts in the coming months, hot on the heels of a recent spruce-up of Singapore's main shopping strip.

The $40 million makeover of Orchard Road involved adding new street furniture, repaving pedestrian walkways and widening the walkway outside Wisma Atria and Ngee Ann City. The 10-month project was aimed at rejuvenating Singapore's main shopping strip. -- ST PHOTO: TERENCE TAN

The open-air area in front of The Heeren will be torn down by May and replaced with a 15m-tall, stand-alone glass structure, which will contain at least 3,500 sq ft of commercial space.

Two tenants have been confirmed: the cafe New York New York and fast-food outlet McDonald's, which will house their kitchens in the basement.

The proposed glass structure is a single-level, high-ceilinged one, but The Heeren's management hopes to get permission to make it a two-storey one to accommodate more food outlets.

The mall's marketing communications manager Roland Lim estimates that the project, to be completed by year end, will cost $20 million.

'Since so many new malls are coming up, it's time for The Heeren to refresh its facade. We attract a trendy, youth-oriented crowd, so we have to upgrade regularly to keep up with the times,' he said.

Park Hotel Orchard, a short distance away and diagonally opposite Ngee Ann City, also has renovation plans running into 'several' million dollars for the hotel and its space fronting Orchard Road.

The last of its six tenants, Swensen's and Party World KTV, will move out by the end of this month. Starbucks, HSBC, a jewellery shop and a Japanese restaurant have already done so.

In their place will come high-end boutiques that will take up the 83,000 sq ft in its retail podium. The list of new tenants has not been confirmed.

The Park Hotel Group declined to confirm the timeframe for the project, but industry sources said it would likely start by the end of this month and finish by next year.

The revamps of these buildings follow the now-completed $40 million makeover of Orchard Road, which added new street furniture, repaved pedestrian walkways, and widened the walkway outside Wisma Atria and Ngee Ann City.

Meanwhile, Paragon Shopping Centre recently underwent its own $45 million facelift, while works are still ongoing at the Meritus Mandarin hotel's retail arcade, Mandarin Gallery, to create 215,000 sq ft of retail space.

Elsewhere on the strip, shoppers are awaiting the opening of new malls Ion Orchard, 313@Somerset and Orchard Central, all due this year.

Industry observers had mixed reactions to the upgrading plans of The Heeren and Park Hotel Orchard.

Singapore Retailers Association executive director Lau Chuen Wei said timing may be an issue. 'We don't really know how long this recession will last. Landlords will have to offer very appealing rental rates to get tenants in.'

But Mr Steven Goh, spokesman for the Orchard Road Business Association, was more optimistic, saying the development plans showed 'a long-term view and commitment to Orchard Road'.

The proposed Scotts Square underground link to the Orchard MRT station was another example of this, he added.

As part of the residential and retail development in Scotts Road, the underground link is a step towards creating a pedestrian network below Orchard Road.

'Orchard Road brand' in the works

NOW that the $40 million Orchard Road makeover is done, the Orchard Road Business Association has big plans for the strip.

Chief among them is coming up with an 'Orchard Road brand', and running more streetwide shopping promotions.

The association is still in talks with the Singapore Tourism Board on these plans, but has already hired a consultant to start on the branding exercise.

Its spokesman Steven Goh told The Straits Times that the idea was to create an identity and logo that can be used for group events and the development of future marketing campaigns.

Plans are also afoot to add two more seasons to the shopping calendar.

Currently, the peak shopping seasons fall during the Chinese New Year at the beginning of the year, the Great Singapore Sale in the middle of the year, and the year-end Christmas season.

To make up for the cutback in consumer spending during this downturn, the association wants to perk up the in-between quiet periods with streetwide promotions in May and August.

The May promotion, to celebrate the recent makeover, will feature a fashion show on the longest catwalk here, which will stretch from Wisma Atria to Ngee Ann City. Shopping and dining offers, events and street entertainment are in the works.

The August promotion will see similar offerings and may be tied to the F1 season in September.

'Tourist numbers are down and we just hope that more Singaporeans can spend more here,' said Mr Goh.


'It's time for The Heeren to refresh its facade. We attract a trendy, youth-oriented crowd, so we have to upgrade regularly to keep up with the times.'

Gloom And Boom At International Schools

Source : The Straits Times, March 9, 2009

Expat schools in S'pore losing students while local ones are growing

TWO pictures have emerged among international schools here: The demand for places in schools run for expatriates' children - particularly the smaller ones - is shrinking, while those run by the local brand-name schools have become ever more popular.

The reasons for these trends differ.

Some schools for expatriates' children are losing their enrolments because their students' parents have lost their jobs in the downturn here, although premier ones such as the Singapore American School (SAS) are still mostly unaffected.

Of the 27 international schools here, which do not include kindergartens and supplementary schools, 10 say up to 20 per cent of their students have pulled out, leaving even in mid-term; 14 others say their numbers are stable, but are expecting more withdrawals at semester's end around June.

But 'local international' schools like ACS International and Hwa Chong International, which follow the national bilingual policy, have each grown their enrolments five to six times since 2005.

Both have added or will add facilities. ACS International, for instance, has new classrooms and soon, a sports complex, a medical centre and more classrooms.

Even the newer SJI International has expanded - it opened its primary school last year and an extension last December.

Meanwhile, the Nanyang family of schools plans to open a co-ed international school mainly for foreigners by next year, starting with primary-level classes on its kindergarten's Bukit Timah site.

International arms run by the brand-name schools here are now hot among local and foreign parents seeking for their children, among other things, smaller classes of about 25 students each.

Between 50 per cent and 70 per cent of the students at these schools are Singaporean, their parents unfazed by the higher fees - about $20,000 a student each year.

For marketing supervisor Carol Wong, 55, choosing ACS International for her son Joshua paid off.

Though he did well enough after Primary Six to get into St Andrew's Secondary School, she put him in ACS International, attracted by its smaller classes and departure from the mainstream curriculum.

Last year, this 'average pupil in primary school' topped the school with eight As in the International General Certificate of Secondary Education (iGCSE).

Ms Wong said he 'really soared in ACS'. With the smaller classes, he got more attention from his teachers. Tuition became unnecessary.

The Government gave the brand-name schools here the go-ahead to open international arms in 2005 to attract 150,000 international students here by 2012, and to give local students more choices in secondary school education.

Smaller classes aside, parents like the multi-cultural experience and the globally-recognised qualifications they offer, like the iGCSE, similar to the O levels at Secondary 4; and the International Baccalaureate diploma two years later.

Among the expatriate schools hardest hit by falling enrolments is the Global Indian International School Singapore, which went from over 600 students last year to about 500 now.

Avondale Grammar School, set up in 2007, has lost 15 to 20 of its 150 or so mostly-Australian students.

The Japanese School and the Singapore and Australian International schools are less badly hit, but expect a slowdown.

However, the top-choice SAS, Tanglin Trust and the United World College of South East Asia are still getting applications and still have waiting lists.

Dr Glenn Odland, head of the Canadian International School, said: 'We are getting a lot of last-minute arrivals because some big companies are moving operations to Singapore.'


Mixed Results

Smaller enrolments: 10 of the 27 international schools have lost up to 20 per cent of their students. They include the Global Indian International School Singapore and Avondale Grammar.

Er, What's An Interest Absorption Scheme?

Source : The Sunday Times, March 8, 2009

Where do you see this?

In property advertisements, brochures on developments and newspaper reports.

What does it mean?

This is a scheme that property developers offer in conjunction with banks at project launches.

It is similar to the deferred payment scheme, in that it allows you to defer the bulk of the purchase price until the project's temporary occupation permit period.

The big difference is that under the interest absorption scheme, you have to take a bank loan at the time of purchase. But the developer will absorb the interest payments on the loan until the project's completion.

The scheme may be offered at a premium. Some developers are now charging a 3 per cent premium over the buying price.

Why is it important?

This scheme allows genuine home buyers to commit to a purchase with just a small upfront payment.

More developers have been using this to help drive sales after the Government scrapped the deferred payment scheme in late 2007.

So you want to use the term? Just say...

'If I take up the interest absorption scheme, I won't have to worry about the monthly payments until the development is completed.'

Tampines 1 Will Make It Three

Source : The Sunday Times, March 8, 2009

Residents eagerly await new mall's opening, but tenants in the other two are wary of the competition

If you are a Tampines resident clamouring for 'mall, mall, mall' so as to enjoy greater shopping choices, you must be eagerly counting down the days to early next month.

That is when the $450 million Tampines 1 will open, with more than 170 tenants touting new brands and concepts.

It will join two other malls, Tampines Mall and Century Square, sited close to the Tampines MRT station.

In Singapore where one complaint is that too many malls pack in the same tenants, Tampines 1 is being pitched as the mall 'for the trendy shopper seeking all things new'.

That is the battle cry from Ms Stephanie Ho, general manager of AsiaMalls Management, which owns and manages the six-storey mall.

She cites international brand names such as Japanese fashion brand Uniqlo opening its first outlet here and Esprit setting up its flagship suburban store.

Other first-time fashion labels here include local brand Click! and French apparel brand Cache Cache.

And in a nod to the great Singapore pastime of eating, there is also Manpuku, a 13,000 sq ft space that will offer food in a Japanese street setting.

Tampines has a population of more than 200,000 residents living in 52,000 HDB flats.

Many of them are excited about the new mall. Said Mr Cruz Ely, 51, an accountant: 'There are not many shopping choices to choose from in the east. Now, with Tampines 1, we do not have to travel all the way to Orchard.'

For Ms Iris Ng, 29, an operations assistant, shopping in comfort is most important. 'The crowd is so big in the two existing Tampines malls that I avoid the area on weekends and public holidays. Tampines 1 will help spread out the crowd.'

The Sunday Times conducted a poll of 50 people and 86 per cent feel there is enough business to support all three malls.

Said Ms Amarit Kaur, 22, a student at the Singapore Institute of Management: 'Tampines can support three malls easily. Many students from Bedok or Paya Lebar are already flocking there to shop.'

Tampines Mall, managed by CapitaLand, attracts about 25 million shoppers a year. Century Square, which is also managed by AsiaMalls, drew 15.6 million shoppers last year.

While most are excited about the new entrant, more than half in the poll also said they still see themselves going most often to Tampines Mall as it offers most of the things they need.

As student Alicia Tan, 17, said: 'It has many shops that I like and I'm very used to the place.'

Tenants in Tampines Mall and Century Square are understandably wary about the new kid on the shopping block.

Ms Ang Chon Moy, 50, salesman at Cerisi, which sells children's apparel in Tampines Mall, said: 'We're scared of losing customers. People are naturally excited about new things. I'm sure the crowd here will be smaller when Tampines 1 comes up.'

Ms June Lee, 40, of Yellow Shop which sells bags, is worried too. 'It's already very quiet in Century Square. We're having sales promotions but they're meant to deal with the economic downturn, not the arrival of Tampines 1,' she said.

AsiaMalls' management said it will make sure the shops at Tampines 1 and Century Square are complementary.

For example, Century Square has family-oriented tenants such as department store BHG, an entire floor of home-furnishings stores and a cineplex.

Referring to the competition, a CapitaLand spokesman said: 'Tampines Mall has established brands, such as Isetan, NTUC FairPrice, McDonald's, Toys 'R' Us, Yamaha Music School and Golden Village, that cater to residents and office workers in the Tampines Regional Centre.'

'The new mall is expected to draw more crowds, further adding to the buzz in the area,' she added.

Rent Arrears Surge As Sales Plunge

Source : The Straits Times, March 7, 2009


Rental default cases hit unprecedented level as recession takes its toll

MANY small retailers face an unenviable cash crunch as the recession crimps sales - and this is fast taking a heavy toll.

At the prime mall Far East Plaza, rental default cases are already piling up.

At least five shops at Far East Plaza - out of about 600 - have been repossessed so far this year. The mainly small retailers and start-ups at the mall may be in a weaker financial position to ride out the crisis. -- ST PHOTO: LIM SIN THAI

Mr Charles Yue, a shop specialist who focuses on the Scotts Road mall, has already helped landlords repossess five shops since the start of the year, well up from 'one or two' for all of last year.

He is now handling an unprecedented number of cases of rental default at any one time - about 20.

This is where the tenant owes up to three months rent. The defaulting tenant must either pay up - or move out.

Far East Plaza is a strata-titled mall, which means it has multiple individual owners rather than one mall owner.

In regular economic times, about 50 cases of rental default crop up at the mall a year, as it attracts many first- timers trying their luck at opening a shop.

But Mr Yue, of Ginza Real Estate, said he has not seen rental default at the current levels.

'It has become more pronounced as the crisis deepened. After Chinese New Year, retailers experienced a drastic drop in sales,' he said. 'This round, more people have cash flow problems. Their sales have dropped and their income is less than their expenses.'

Strata-titled malls are likely to suffer more than single-

owner malls because of a lack of a central lease management to handle vacancies as well as to promote the mall, said Knight Frank deputy managing director Danny Yeo.

Also, they tend to draw small- and medium-sized enterprises and start-ups, which may be in a weaker financial position to ride out the crisis, he said.

A strata title gives an investor ownership of a small piece of a bigger property. Other strata-titled retail properties include Lucky Plaza, Orchard Shopping Centre and Sim Lim Square.

Mr Yue has not handled so many cases of rental default in such a short period. 'Now, we need to troubleshoot and do rental collection on behalf of the landlords,' he said.

He said his firm has a regular clientele of more than 100 landlords at Far East Plaza, which has about 600 shops.

Individual landlords are reacting differently: Some are giving rent cuts of 3 per cent because of the government tax rebate, others are giving more. Then, there are those who have yet to do anything.

Some tenants are doing fine. But landlords will have to act if the tenants start defaulting on their rent.

Ms Dee Dee Yue, 46, a supervisor at Bus Stop Apparels in Far East Plaza, said it has no problem paying the rent but sales have dropped by about 40 per cent to 50 per cent from last year.

At another shop in the mall, a salesgirl, who wanted to be known only as Ah Mei, said business was very bad. 'If we hadn't signed the contract to stay on, we would have closed shop long ago.'

The situation at Far East Plaza could get worse, said Mr Yue.

Going to court may not be the best solution due to the time and cost involved, he said. 'If tenants continue to default, it is sensible for the landlord to take back the shop and find another tenant.'

The current climate may attract start-ups keen to enter the market, said Mr Yue.

A 33-year-old landlord, who owns six shop units at Far East Plaza, said the defaults started last December. One of his tenants, a fashion retail start-up, moved out after Chinese New Year, after only several months of operations.

'If we drag on for a few months, our losses will be higher,' he said. 'Compared with other places, Orchard Road rents are high for start-ups. Some of them didn't expect the downturn to be so serious.'

He plans to cut rents for new leases by about 5 per cent for a start.

Rents at Far East Plaza can range from $20 to $40 per sq ft for fashion stores. For a tiny shop, this would amount to at least several thousand dollars a month.

Things will generally get tougher for retailers in the Orchard Road area after the new malls open, said Mr Yeo.

'There seems to be more vacancies now as some tenants are not renewing their leases. But it is not alarming.'

It is still early days.

'If the economy remains the same for the next six to nine months and consumer expenditures continue to dip, you can expect to see more vacancies,' said Mr Yeo.

Fairly Brisk Sales For New Condos

Source : The Straits Times, March 7, 2009

Attractive prices draw buyers to entry-level and mid-priced projects

THE show-flat crowd - that rarest of species these days - has been lured back into the market by two new developments that held soft launches this week.

Hundreds of people turned up at the Double Bay Residences showroom in Simei when its doors opened for a private preview yesterday.

Crowds at the Double Bay Residences showroom in Simei yesterday. UOL Group has so far released 250 of the condo's 646 units for sale. Developers are seeing a renewed interest in their entry-level and mid-priced projects from HDB upgraders and private home owners. -- ST PHOTO: AZIZ HUSSIN

Developer UOL Group said more than 80 units have been sold so far, at an average price of $600 per sq ft (psf) to $650 psf. The development's six retail units have all been sold as well.

Chief operating officer Liam Wee Sin noted that the response was strong ahead of the 99-year leasehold condominium's official launch next weekend.

UOL has so far released 250 of the 646 units in Double Bay for sale. One-bedroom units in the Simei Street 4 project start from $420,000, while four-bedders cost at least $930,000.

The crowds were also out for The Mercury in Shanghai Road, which was said to be more than 60 per cent sold since it started previews on Thursday.

The 67-unit freehold project is priced from about $1,040 psf. One-bedroom units at the River Valley estate start from $740,000, while two-bedders are going for about $1.1 million.

The fairly brisk sales for these projects come on the heels of a few successful launches recently, which appear to have boosted sentiment in the badly battered property market.

Last month, Frasers Centrepoint said it sold over 300 units in three days at its Caspian condominium in Jurong. To date, over 500 of the 712 units have been sold.

Caspian's success was mirrored at The Alexis in Alexandra Road, which sold out within a few days of its preview.

Property consultants say the main draw for these projects is their attractive prices, which, at well under $1 million, are affordable for HDB upgraders. Even mid-tier projects such as The Alexis and The Mercury feature smaller units to offset their higher per square foot prices.

'These days, it looks like the total quantum of price is more important than the price per square foot,' said Knight Frank director of research and consultancy Nicholas Mak. 'In some areas, prices have come down 20 per cent to 30 per cent from the peak, and there are probably people who see these buys as good bargains.'

Still, most of the sales activity are confined to the entry-level and mid-priced market. High-end projects are still facing a very challenging time, consultants say.

And while transactions are being steadily chalked up, there remain clear signs that not everything is fine and dandy in this economic recession.

At The Mercury, for instance, agents marketing the project said they had expected it to be fully sold within one day.

In Toh Tuck Road, off Upper Bukit Timah, boutique developer Hiap Hoe was said to have sold only a handful of units in The Beverly condominium, although news reports said more than 300 people turned up for its launch last weekend.

Hiap Hoe released 31 of the 118 units at an average price of $750 psf. The apartments are a bit bigger than average, starting from 1,120 sq ft for the smallest two-

bedroom units, which translates into somewhat higher prices per unit.

The developer is also not offering the interest absorption scheme for The Beverly, which was on offer for the Caspian and The Alexis and is available for Double Bay and The Mercury.

Under the scheme, buyers who take out a loan immediately on purchase pay only a down payment and defer remaining instalments until the project is finished.

Mr Liam of UOL, however, said more of Double Bay's buyers opted for the normal payment schemes rather than taking up interest absorption.

The buyers so far have been a mixed bag - HDB upgraders, private home owners and owner-occupiers, and investors.

On the whole, the smaller units have proven more popular, he said, underscoring the importance of affordability. But he said an 'encouraging' sign was that buyers were also going for units on higher floors, which are more expensive.

'We are seeing a flight to quality,' he told The Straits Times. 'If the price is within their budget, they will gun for the better units and the higher floors.'