Saturday, March 28, 2009

Time To Invest In Stocks And Property, Says Li Ka-Shing

Source : The Straits Times, March 28, 2009

HONG KONG: - The oracle of Hong Kong has spoken. And his message: It's time to consider buying stocks and real estate.

The proclamation on Thursday by Mr Li Ka-Shing, the self-made billionaire who controls some of Hong Kong's largest companies and carries enormous sway among investors throughout Asia, was made at a rare public appearance.

Exuding confidence, he joked with reporters and looked anything but depressed about the sharp fall in profit his companies reported on Thursday.

Whether he is proved right about stocks and property - and he certainly has a lot to gain personally if he is right - his comments come at a time when stock markets have rallied on hopes that the economic slump may be bottoming out.

'If you have money in your pocket', consider buying into stocks, said the tycoon.

As for the property market in Hong Kong, he said: 'History tells us that if you buy in a slow market, in the medium term, you get good returns.'

He advised against borrowing to invest in what remains a shaky and volatile environment.

Even though they were couched with caution, Mr Li's comments were enough to echo around the investment world and helped send the Hang Seng Index up 3.6 per cent on Thursday.

Shares prices closed 0.07 per cent higher yesterday as investors traded cautiously after the recent bull run. - NEW YORK TIMES

Property Auction Sales Up In Q1

Source : The Business Times, March 28, 2009

More mortgagee properties going on the block, with trend seen deepening.

SOME $18 million worth of properties was transacted at auctions in the first quarter of this year, more than three times the $5.4 million notched up in the preceding quarter and also surpassing the $9.5 million in Q1 last year.

The market revved up in March after a muted start in January and February.

Colliers International figures also showed that while the number of repossessed properties put up for auction sales by banks and financial institutions (or mortgagee properties) rose 17.8 per cent quarter on quarter to 53 in Q1 2009, the number of properties put on the auction block by owners themselves slipped 15 per cent over the same period to 136.

The property consultancy group's deputy managing director and auctioneer Grace Ng is predicting only a slight increase in the number of mortgagee sale properties being put up for auction in the next quarter. However, with an expected increase in retrenchments, which would result in more defaults by borrowers on loan repayments, Ms Ng reckons the pace of mortgagee sale properties going under the hammer could pick up later this year or next year.

'There's generally a lag time of about six months or more between when a buyer defaults on his loan repayments and when the bank repossesses the property and puts it up for auction sale,' Ms Ng observed.

She recalled that during the Asian financial crisis, the number of mortgagee sale properties put up for auction rose markedly only in first-half 1999, although retrenchment numbers had begun to rise as early as Q4 1997.

However, she pointed out that some mitigating factors are also at play this round which may reduce banks' propensity to race to auction houses when borrowers default on mortgage payments. 'Financial institutions tend to be more sympathetic and flexible now compared with the Asian crisis days. For example, to help owners ride through this trying period, some financial institutions have provided options, like allowing borrowers in financial difficulty to service only interest payments. Such a move helps reduce or delay the number of properties being repossessed,' Ms Ng said.

DTZ's senior director for investment advisory services and auctioneer Shaun Poh said: 'This time, both banks and borrowers are better prepared than during the Asian crisis, when some people panicked and just handed the keys to their banks. Now, banks are more prepared to talk to the borrowers; that's partly why we don't see a lot of mortgagee properties put up for auction. Banks are trying to space out the properties a bit, restructure, renegotiate. And they're asking owners to try and sell their properties themselves first, whether it's by auction or private treaty.'

'It's also a value preservation strategy. Banks have learnt from the last round that if they pull the plug and take over a property, its value falls. Potential buyers' perception is that they can strike a bargain for mortgagee sale properties as they're like fires sales,' Mr Poh added.

Colliers' Ms Ng suggests another reason for banks not being in a hurry to foreclose on properties this round may be due to a rule change in 2002 that gave banks first claim to a mortgaged property - ahead of the Central Provident Fund Board - in the event of borrower default. 'The pressure to foreclose the property by banks/financial institutions is now lower, as their exposure to losses - due to unrecoverable outstanding loan amount - is reduced,' she added.

Colliers' analysis showed that 77 per cent or 41 of the 53 mortgagee properties that went on the auction block in Q1 were residential properties; 27 were apartments/condos while the remaining 14 were landed homes. These landed properties were mostly in District 19, which includes Serangoon Gardens, Hougang and Punggol.

'We can expect to see more apartments/condos surfacing at auctions as there are about 14,600 non-landed properties due for completion in the next two years,' Ms Ng said.

Just four properties were sold at auction for nearly $5 million in January and February this year but things started to hot up a bit in March, with eight properties transacted for $13 million. 'The price gap between sellers' asking price and buyers' offer price appears to have narrowed in March. The rallies in the stockmarket, together with the positive take-up rate at developers' launches in the past two months, seem to have spilled into the secondary market - resulting in buyers' commitment to purchase the units.

'Interestingly, owner occupiers constitute the bulk of buyers making commitments to purchase now,' Ms Ng said.

Number Of Mortgagee Properties On Auction Block Up In Q1

Source : The Business Times, March 27, 2009

The number of repossessed properties put up for auction sale by banks and financial institutions in Singapore has risen by 18 per cent - from 45 in fourth quarter 2008 to 53 in Q1 2009, according to Colliers International.

'This indicates an impending trend of continued growth in the number of properties put up for mortgagee sale, which is in tandem with the deteriorating economy and rising level of retrenchments,' the property consultancy said in a release issued on Friday evening.

Colliers deputy managing director and auctioneer Grace Ng said: 'We can expect to see a more significant number for repossessed properties in the later part of the year or in 2010. This is due to the general lag time of approximately six months or more - between when a buyer defaults on his loan repayments and when the bank repossesses the property and puts it up for auction sale.'

Expats' Recession Blues

Source : The Straits Times, March 28, 2009

IT WAS meant to be a holiday to see his elder sister but in the one week that Mr Filip Maes spent in Singapore last April, he managed to secure two job offers - and from top-notch global asset management firms too.

Ecstatic, the Belgian returned to New York, where he was working in hedge fund portfolio financing, turned in his resignation and packed his bags for Asia.

Shortly after he arrived in Singapore last August, however, he received a phone call from his prospective employer telling him that his services were no longer needed - even before his work contract had been signed.

Read the full report in The Sunday Times.

新推出519个四、五房式单位 榜鹅预购组屋比同区转售组屋便宜

Source : 《联合早报》March 27, 2009


这个名为“The Nautilus @ Punggol”的组屋项目位于榜鹅东和榜鹅域(Punggol Field)的交界处,附近有榜鹅生活聚场(Punggol Plaza),里头设有能满足居民日常所需的超级市场和食阁等设施。绿苑小学(Greendale Primary School)、绿苑中学和弥陀学校(Mee Toh School)等学府也近在咫尺。

组屋项目“The Nautilus @ Punggol”共建八座组屋,有413个四房式和106个五房式单位。


与去年底推出的榜鹅预购组屋项目“Punggol Arcadia”和“Punggol Regalia”比较,这批组屋的售价较便宜,因为它离榜鹅地铁站较远,地点不如之前推出的两个组屋项目适中。另外,这个项目所建造的是标准组屋,室内设施一般,整体设计感也不如前两个项目的优质组屋来得突出。 



博纳集团(PropNex)企业通讯及行销经理陈家扬相信,The Nautilus@Punggol应该会获得不俗的反应,因为其售价比该区的组屋转售价格低约20%至30%。他说,目前的经济走势低迷,榜鹅组屋的转售价格已自去年第四季起开始滑落,因此这批预购组屋的保守定价是务实的。




Designer Hotels The Next Big Thing

Source : The Business Times, March 27, 2009

Hotelier Ted Fang wants to create a new breed of hotels to target independent-minded travellers

THE next big thing in the hotel industry is something which will be coined 'designer hotels', or so believes hotelier Ted Fang. And that's exactly what he plans to do next.

Mr Fang: 'A designer hotel is a cross between a boutique and luxury hotel. Unlike a typical boutique hotel with about 50 rooms, we're aiming for at least 100 rooms with designer fittings created by international designers'

The Singaporean entrepreneur made his mark in the hotel industry when he acquired the master franchise of Day's Inn hotels in China (including Greater China) in 2003. With 58 hotels already in the chain, the Day's Inn brand is already the fastest growing three and four star hotel chain in China.

Now, though, he wants to go upscale, so Mr Fang - who runs the company Frontier Group with his brothers Harry and David Tan - is looking to create a new breed of hotels to target a growing breed of independent-minded travellers.

'Our idea of a designer hotel is a cross between a boutique and a luxury hotel,' says Mr Fang. 'Unlike a typical boutique hotel with about 50 rooms, we're aiming for at least 100 rooms with designer fittings created by international designers.

'But although it is designer, it won't be a six-star super luxurious offering. Instead our target market really would be a hip business traveller who doesn't want to live somewhere too staid and wants something that is comfortable yet fashionable.

'Imagine a W Hotel but less pricey and more functional and you pretty much get the picture.'

This new brand of hotels marks the company's first move to create a completely new brand separate from the already established name of Day's Inn.

He adds that the brand will be created by the brothers as an expansion to their hotel management business by buying over properties to gain more control over the hotels.

Through Tera Capital - an investment management company started and run by Mr Fang, the brothers are also looking to lease or purchase existing properties/projects in China.

Previous Day's Inn projects were franchise/ma nagement deals between Frontier and developers/owners in China. Frontier does not own any of the hotels outright, a situation Mr Fang says will change.

'In a short span of four years, from one Day's Inn hotel in China there are now 58,' says Mr Fang. 'Having done well, we think that now is the right time to take that step into actual ownership of hotels.'

Especially as he believes the hospitality market is on an upward trend.

He says: 'The hospitality market will continue to grow very rapidly and you will see a boom within the next five years in China's consumer market.

'As China becomes less reliant on export-oriented businesses, the domestic market and middle class will grow and expand very quickly in the coming years. And we are positioning ourselves to benefit directly from this by being the dominant player in our markets. We still have a very long road of growth ahead of us.'

Although the company has been looking into ownership for awhile, ironically it was the economic crisis that pushed them over the edge.

Muses Mr Fang: 'Previously, land and property prices were just too expensive. It didn't make economic sense to buy. Especially with the room rates of the Day's Inn (around US$50) and Day's Hotels (around US$90) so affordable, the numbers simply didn't add up.

'Now, with prices of property so much lower, our calculations show that it now makes economic sense to buy. In fact, with prices so attractive, I'm going to be bullish and say if we don't buy now, then when?'

HDB Launches Latest BTO Project In Punggol

Source : Channel NewsAsia, 26 March 2009

The Nautilus@Punggol is the Housing and Development Board's (HDB) latest Build-To-Order (BTO) project and the first in that area.

The Nautilus@Punggol

Prices for its 4- and 5-room units are about 20 to 30 per cent lower than the resale flats in that vicinity, signalling generous subsidies for these new flats.

The Nautilus@Punggol will have eight blocks comprising some 520 flats. Of these, nearly 80 per cent are 4-room flats and the rest are 5-room apartments. HDB said the prices of the new flats are affordable for first-time buyers.

Giving a comparison of resale flats about seven years old in Punggol, HDB said 4-room resale flats are currently going at between S$306,000 and S$350,000, while 4-room flats at The Nautilus will be sold at between S$228,000 and S$274,000.

Likewise, The Nautilus' 5-room flats are priced in the range of S$305,000 to S$357,000 against the resale price range of S$368,000 to S$428,888 for units in the Punggol area.

At such prices, analysts expect strong demand for the project.

Adam Tan, marketing manager, Propnex, said: "It will probably be about three times or more oversubscribed because they are releasing a rather small number of units for this project. Punggol is an up-and-coming estate. It's no longer a backwater estate – it's coming into its own."

HDB added that besides enjoying a generous market subsidy, eligible first-time buyers whose average monthly household income is S$5,000 or less can also qualify for an additional CPF Housing Grant of up to S$40,000. This grant can be used to offset the initial downpayment.

HDB also said that based on the income of flat applicants in the fourth quarter of last year, an applicant for The Nautilus@Punggol whose income is at the median level will not need to fork out cash to meet their monthly housing commitments, which would be fully covered by their monthly CPF contributions.

The Nautilus@Punggol is part of HDB's programme to remake the heartlands. For the whole of this year, HDB is planning about six BTO projects in Punggol, building some 3,000 new flats in that area.

Applications for The Nautilus@Punggol flats close on April 8.- CNA/so

HDB Launches New Batch Of Flats In Punggol

Source : The Straits Times, March 27, 2009

Units are smaller and cheaper due to design and location

The Housing Board (HDB) yesterday launched its first batch of new Punggol flats for the year.

Units are priced at 10 to 16 per cent below the launch of Punggol Regalia in December, primarily due to location and design features.

The flats are slightly smaller and 'further from the town centre and main transportation nodes', said an HDB statement yesterday.

The Nautilus @ Punggol is a standard project - essentially new flats with minimal frills and basic features.

On offer are 413 four-roomers of 90 sq m going for $228,000 to $274,000 and 106 five-roomers of 110 sq m priced from $305,000 to $357,000.

The Nautilus, consisting of eight blocks of 18 storeys each, is on the eastern side of the suburb and further from the Punggol town centre.

It is served by the Riviera and Coral Edge LRT stations.

In contrast, Punggol Regalia, located at a prime spot next to Punggol MRT station , is a premium project priced at $252,000 to $316,000 for a four-room unit and $342,000 to $428,000 for a five-room unit.

Premium flats come with enhanced architectural designs and better internal finishes.

PropNex chief executive Mohamed Ismail said he expected healthy demand for the Nautilus although it 'may not be as good as' the response to HDB's Woodlands project launched last month.

Called Champions Court, that development offered 815 units, ranging from studio apartments to five-room flats.

ERA Asia-Pacific's associate director Eugene Lim said the Nautilus is 'very attractively priced' although its location may not be as alluring as previous Punggol projects.

In the long term, however, Punggol's transformation into a waterfront town will draw first-time home owners, he said.

The Nautilus will be constructed under the HDB's build-to-order (BTO) scheme where flats are built only if a certain level of demand is reached.

The HDB has said it plans to launch about 3,000 BTO flats in the first half of this year.

These include 1,400 smaller units, from studio apartments to three-roomers.

Buyers are likely to see more new flats in Punggol this year as the HDB moves to build up the suburb's population.

A site called Punggol Residences, next to Punggol MRT station, was recently marked as being under construction on Singapore Land Authority maps.

By 5pm yesterday, the HDB had received 72 applications for the 519 Nautilus flats.

In contrast, Champions Court attracted 205 applications for 815 flats on the first day of its launch.

Punggol BTO Project Launched

Source : The Business Times, March 27, 2009

THE Housing & Development Board (HDB) yesterday launched a build-to-order (BTO) project at Punggol - the second of the year after one launched at Woodlands in February.

The 519-unit Nautilus @ Punggol, at the junction of Punggol East and Punggol Field, will have 413 four-room flats and 106 five-room flats.

Four-room flats will sell for $228,000-$274,000, while five-room flats will cost $305,000-$357,000. These prices are cheaper than those of similar flats in the market, which makes them affordable for first-time buyers, HDB said. Nautilus units are priced lower than recent BTO launches there mainly because of differences in location and design, it said.

Recent offerings Punggol Arcadia and Punggol Regalia are premium projects with enhanced designs and better internal finishes, while Nautilus is a standard project with more basic features. Nautilus is also further from the town centre and main transport than the other two BTO projects.

Nevertheless, analysts expect solid demand. 'Nautilus is expected to be popular,' said Propnex spokesman Adam Tan. The flats are 'very attractively priced'.

Recent BTO offerings by HDB have seen strong demand. The Woodlands BTO project launched last month was more than four times subscribed.

And two other projects launched late last year - one in Choa Chu Kang and the other in Punggol - also saw good take-ups.

HDB intends to launch about 3,000 flats in Punggol this year as part of plans to remake the estate.

Hard Rock Hotel To Open On Sentosa In 2010

Source : The Business Times, March 27, 2009

A HARD Rock Hotel will be one of four hotels to open at Resorts World at Sentosa (RWS) in the first quarter of 2010.

Collectively, the four hotels will provide about 1,350 rooms. The other three slated to open in Q1 2010 are Maxims Tower, Hotel Michael and Festive Hotel.

'The Hard Rock Hotel Singapore is a welcome addition to our portfolio,' said Hard Rock International's CEO Hamish Dodds.

The five-star, US$223 million hotel will have 360 rooms, conference facilities and a ballroom that can seat up to 7,300.

Room rates are likely to be 30 per cent dearer than hotels in the surrounding area, as is usually the case with hotels in other theme parks, said RWS chief executive Tan Hee Teck.

Mr Dodds acknowledges the travel slump sparked by the global economic downturn has hit hotel room rates and occupancy levels, but is confident the Hard Rock brand will outperform its competitors in the four to five-star category.

Hard Rock International, which now has 124 Hard Rock Cafes and nine hotels/casinos, is expanding in the US and overseas.

Major projects are on the way in Macau and Penang - scheduled to open this year - as well as in Palm Springs, Atlanta and Panama in 2010. Hard Rock Hotels will also open in Dubai in 2011 and Abu Dhabi the following year.

Despite the tough economic environment, Hard Rock International grew its top and bottom lines last year. Top line was up 7-8 per cent, said Mr Dodds, who declined to reveal figures.

The $6.59 billion RWS project will have a total of 1,800 rooms spread over six hotels, plus a casino and attractions such as South- east Asia's only Universal Studios theme park.

The project expects to generate more than 9,000 jobs by the end of this year and a total of 10,000 when it is fully up and running. It expects 15 million visitors in its first year.

Home Hunters Pack Showflats In Balestier

Source : The Straits Times, March 27, 2009

SOME home hunters have been packing showflats in the Balestier area and buying units, even as the general property market remains weak.

City Developments (CDL) said yesterday it has sold 'about 60 per cent' of the 100 units at The Arte@Thomson at an average price of $880 per sq ft since a hush-hush preview started last Friday.

The Arte has 336 fairly large units in two 36-storey blocks in Jalan Datoh, off Balestier Road.

The 60 or so units were transacted at $852,800 to $2.46 million, said a CDL spokesman.

Most of those sold were two- and three-bedroom units. The two-bedroom units are 1,055sqft, while nearly half of the project comprises three-bedroom units ranging from 1,399 sq ft to 1,625sqft.

CDL said it had extended the interest absorption scheme (IAS) to buyers during the preview at no extra cost, but could not yet say how many buyers had taken advantage of it.

'Buyers are given some time to decide if they wish to take up the IAS,' said the spokesman.

The scheme allows buyers to defer the bulk of the purchase price until completion on condition that they take up a loan at the point of sale.

The CDL spokesman said the $880 per sq ft price was being offered for a limited number of units only. 'We will be reviewing the price and adjusting it upwards progressively,' he said.

The encouraging sales at The Arte came amid a still-slow market as some other launches see relatively weak interest. Demand for high-end homes, in particular, remains poor.

New home sales in February were lifted to a relatively high level, but that was largely due to the strong sales at three mass to mid-end projects. Many buyers went for small units as their absolute prices were low, and hence affordable.

Just last week, Keppel Land deferred the construction of two yet-to-be-launched projects - Marina Bay Suites in Marina Bay and Madison Residences in Bukit Timah - because of the slumping market.

In the Balestier area, the new showflats benefited from spillover crowds from the various launches, said Savills Residential director Phylicia Ang, who is marketing the 104-unit Domus in the area.

Released for sale two weeks ago, Domus, in Irrawaddy Road, welcomed visitors who had initially attended The Arte preview.

So far, 33 units - out of the 59 launched at Domus - have been sold at an average of $900 per sq ft, or from $480,000 to $1.2 million, said Ms Ang.

The sales included 20 one-bedroom units of 474sqft.

Novelty Group's I-Residences, a 70-unit project in Irrawaddy Road, is about 50 per cent sold since its private preview late last year.

Nearby, on the former Ruby Plaza site, Soilbuild had a preview for The Mezzo, which offers a 6 per cent rental guarantee for two years. It did not comment on sales.

CDL Sells 60 Units In The Arte At Thomson

Source : The Business Times, March 27, 2009

CITY Developments Ltd (CDL) sold about 60 apartments at its 336-unit project The Arte at Thomson last weekend.

The Arte at Thomson: The freehold project comprises two-, three- and four-bedroom apartments, as well as penthouses

The developer said yesterday that the average selling price was $880 per sq foot (psf). It released 100 units during the 'private preview' and will release more this weekend.

The freehold project comprises two-, three- and four-bedroom apartments, as well as penthouses. Most of the units sold last weekend were smaller two- and three-bedders.

Unlike other recently launched projects, units at The Arte are large, which means buyers have to fork out more.

For example, two-bedders are 1,055 sq ft and three-bedders range from 1,399 sq ft to 1,625 sq ft. Assuming $880 psf for a two-bedder, the price of the smallest unit would be $928,400.

But according to CDL general manager Chia Ngiang Hong: 'The Arte offers superb value for a prime freehold property in the Thomson area. Buyers get a luxurious condo without paying a premium price.'

CDL is offering an interest absorption scheme.

Analysts expect more projects to be launched in coming weeks as developers try to capitalise on a recent surge in buying interest. They sold 1,323 new private homes last month - eleven times more than in January. Numbers are expected to be strong for March as well, on the back of sales at The Arte, and at UOL Group and Kheng Leong's Simei condominium Double Bay Residences, where more than 200 units were sold this month.

Amid the buying surge, BT understands that Far East Organization is set to launch its mass market project Mi Casa. The 457-unit development near Choa Chu Kang MRT is expected to be popular with HDB upgraders in neighbouring estates.

Separately, Tee International and Hup Soon Global said that they are teaming up with a Bangkok-based company for the Singapore launch of a freehold luxury condominium located in the Thai capital. The Surawong will be launched this weekend at the Grand Hyatt Hotel here.

Househunt 2009

Renewed Interest In UK Homes

Source : The Business Times, March 26, 2009

Sliding home prices and the weaker pound are wooing investors back to London.

ASIAN, Russian and other foreign buyers are back, tentatively examining potential investments in London's residential property market, according to agents. These investors are at an exceptional advantage over local residents and investors as sterling has depreciated considerably since its peak in the first half of 2008. Compared with last year, a Singaporean investor can buy sterling at a third lower than its peak levels.

Bursting of the bubble: House prices in London have fallen between 20 and 30 per cent, and economists caution that in the current depressed economic climate property prices could slip further in the coming months

The UK property market reached its bubble heights towards the end of 2007. Since London residential real estate prices have fallen between 20 and 30 per cent, according to agents, prices for Singaporeans and other investors are at 40 to 60 per cent discounts from the top.

'There will be many stages and regional variations in the future trajectory of apartment and house prices,' says Yolande Barnes, director of research at Savills. 'The market will test the nerves of both home owners and investors but the opportunities for those wanting income returns and the prospect of long-term growth are clearly in place now.'

UK investors will benefit from the sharply lower home prices and mortgage rates; however, they face the disadvantage of banks now requiring deposits of at least 30 to 40 per cent, whereas during the free-wheeling boom days, deposits could be 10 per cent and sometimes even lower.

Ms Barnes and other estate agents and economists thus caution that in the current depressed economic climate property prices could slip further in the coming months. But they believe there are potential bargains. They expect the market to bottom out in 2010 and begin rising in 2011 and 2012.

There are some economists, however, who fear that the market will remain depressed for several years. Roger Bootle, head of economic forecasting agency Capital Economics, predicts a rise in repossessions and an increase in those entering negative equity. His figures indicate that about 3.5 million UK households will fall into arrears - double the number seen in the early 1990s downturn. Repossessions could hit 90,000 this year, he says - much more than the Council of Mortgage Lenders' prediction of around 75,000.

Mr Bootle, who had predicted property price declines some time before the bubble hit its peak, now expects a further drop in UK house prices with a peak-to-trough fall of between 40 per cent and 45 per cent..

There is also the danger that a depressed, over-borrowed British economy is vulnerable to further sterling weakness and that the present currency rally won't last. Thus foreign investors need to proceed with caution and be highly selective, both with properties and locations, if they intend to go bargain-hunting in the London and broader UK real estate market. For example, property in the London Docklands surrounding Canary Wharf, where several stricken major investment banks are situated, is very depressed. Supplies of apartments are well in excess of demand, estate agents say. The same applies to Notting Hill Gate, a favourite with investment bankers.

Anecdotal evidence, however, suggests that interest from foreign and local buyers who don't require mortgages is already much higher, says Ms Barnes of Savills. The decline in values has raised gross rental yields of prime properties to 4.5 per cent from around 3 to 3.5 per cent during the 2007/2008 property bubble while net yields have risen from 2.3 per cent to 3.5 per cent. This compares with money market rates of around one per cent and long-term government bond yields of around 3 per cent.

Brendan Brown, head of research at Mitsubishi UFJ Securities International, believes that considering the illiquidity of property as an investment and the risk of 'voids', or vacant periods, the rental yields are still inadequate. The crisis in the financial sector has caused banks in the City to retrench employees. Foreign banks and other corporations thus need to rent fewer properties.

According to the Land Registry index of houses and apartments traded, average prices in Kensington and Chelsea have fallen from £pounds;856,000 at the end of 2007 (S$2.6 million at the exchange rate at the time) to £pounds;752,000 (S$1.65 million at the current rate), while in the City of Westminster they have fallen from £pounds;612,000 to £pounds;564,000. Tower Hamlets, near the financial centre of Canary Wharf, has seen prices fall from £pounds;376,000 to £pounds;329,000 and in favoured areas such as Richmond they have fallen from £pounds;455,000 to £pounds;383,000.

These prices, however, are averages of properties ranging from small apartments to semi-detached and detached houses. In truth, house prices in Chelsea and Kensington currently trade from around £pounds;2 million with prices of £pounds;1.5 million to £pounds;3.5 million for areas surrounding Hampstead, St Johns Wood, Islington, Richmond and Wimbledon. Prices of two-bedroom purpose-built apartments in these areas have dropped to between £pounds;350,000 and £pounds;600,000.

Although Ms Barnes expects the market to bottom out in 2010 and revive in the following two to three years, she agrees that London prices could decline by a further 10 per cent by the end of the year. In that event, the fall from the peak would be around 30 per cent.

Liam Bailey, head of residential research at Knight Frank, estimates that from peak to trough, the price fall for prime London property from March 2008 to date is 23 per cent. Activity levels are beginning to rise, albeit from a low base, with viewings up 28 per cent in February on a year-on-year basis. After an absence of six months, Russian buyers are back in the market, he says.

'After a period of sustained price falls in the central London market, it is rather early to suggest that we are seeing the beginning of a recovery,' says Mr Bailey. 'However with bad news seemingly all pervasive, even a slowing in the rate of price falls can be viewed positively.'

With prices for some new build properties falling by as much as 40 per cent, yields of over 10 per cent are possible, he contends. The proviso is that the properties can be let. There are reports that the rental supply of apartments and houses is increasing. Financially-stressed owners with large mortgages who cannot sell their properties are being forced to downsize. They are renting out their pricey properties and seeking lower rentals.

Window Of Opportunity Opens In Aussie Commercial Property

Source : The Business Times, March 26, 2009

THE Australian commercial property market is currently offering global investors with a medium-term horizon a combination of relative stability and increasingly attractive investment returns.

Sydney CBD: Australia enters this down cycle with a very low vacancy rate in the major CBD office markets - just 5.5 per cent in the fourth quarter of 2008

Jones Lang LaSalle recently undertook a number of investor briefings across Asian markets, including Singapore. It was apparent from these briefings that there is significant Asian interest in the Australian property market, due to its relatively stable fundamentals. This has presented a window of opportunity for investment in Australia - with commentators suggesting that these are the best conditions for foreign investment that we have seen in the past decade.

The fundamentals of Australian commercial property markets have deteriorated moderately in the face of a broad economic slowdown. Australian institutional property investors have not been immune from the effects of softening asset prices, rising debt levels and tighter credit markets.

The A-Reit (Australian real estate investment trust) index has lost about A$120 billion (S$125.1 billion) in value over the past 15 months.

The benchmark S&P/ASX 200 A-Reit Index is around 690 points, down 73 per cent from its high of 2,575.6 points in February 2007.

A-Reits require debt refinancing of around A$60 billion over the next three years. About A$26 billion has been lent by foreign banks, some of which have shown an inclination to repatriate these funds during this difficult period. Given the imminent debt expiry profile in the next three years, there are now realistic vendors willing to offer quality assets for disposal in an attempt to reduce funding pressure.

Furthermore, the pool of funds invested in superannuation will continue to be a force in the domestic property markets. While the pool accounts for A$1.1 trillion today, it is forecast to grow to over A$3 trillion by 2016. With an average 10 per cent of this pool, or A$23 billion per annum, allocated to real estate, a significant amount of capital is destined to seek out a home in property markets in the years to come.

A window of opportunity does exist for foreign investors to capitalise on a culmination of market forces that make investment in Australian property an attractive proposition in 2009.

What we are currently seeing is a number of Asian-based institutional investors taking advantage of these market forces. Australia is not immune from what is happening in the global property market, but we do compare favourably to the United States, Europe and Asia in terms of the impact of the global credit crisis.

Due to the impact of the global economic environment, there are superior Australian assets on the market that have traditionally been tightly held and have not been on offer for over a decade.

There are estimations that these assets probably won't be offered again for years to come, so now is the time for opportunistic cashed-up investors to act. It is a rare opportunity and we are seeing some prospective investors who are awaiting further falls in values of prime Australian assets, but they should be careful not to wait too long.

We are currently witnessing investors out of Asia with an appetite for Australian property. These are largely private equity firms or groups acting on behalf of institutional investors. Such investors are best characterised as opportunistic funds with a focus on income stabilised assets, with no immediate vacancy.

The Australian market is attractive to foreign investors due to its high level of real estate transparency, historically low interest rates, lower hedging costs and relatively stable returns. Australia has historically been an attractive market for investors seeking to lower volatility in their portfolio.

International investors are now spoilt for choice, with significant levels of stock available on both a local and international level. Property markets are increasingly competing on a global scale with increased investigation of country economic fundamentals, property cycle position, vendors' willingness to transact and other property market specifics. We believe the Australian market is well poised to meet such criteria.

Australia enters this cycle with very low vacancy in the major CBD office markets. Research figures for the fourth quarter of 2008 show that the vacancy rate across all CBD office markets that Jones Lang LaSalle monitors nationally was only 5.5 per cent.

Vacancy pressures are clearly increasing. However, the headline vacancy rate remains below the long-term average of 8-9 per cent. The future supply pipeline is moderate, much different from the previous down cycle in the 1990s. Over the next three years there is presently only 1.31 million square metres under construction in the CBD office supply pipeline, which compares favourably to the 2.52 million sq metres that was completed in the three years leading up to 1992.

The headwinds buffeting the global economy have continued in recent weeks and we know that 2009 will be a tough year. There are many factors to consider in this economic environment and owners and investors need to constantly monitor their portfolios to ensure they are positioned to take advantage of the market fundamentals.

The writer is director, international investments, Jones Lang LaSalle, Australia

M'sia Property: Waiting Out The Crisis

Source : The Business Times, March 26, 2009

Malaysia's property players expect the sector to consolidate this year following decent gains in the past few years.

THE Malaysian property market was relatively bullish at the start of last year, but as economic problems in the United States mounted and spread, interest headed south.

Many launches were put on ice. In the popular Klang Valley, for example, the launch of new residential units declined by 57 per cent from 2007 to 6,747 units in 2008. Holding back made sense given the over-supply - especially in the luxury and serviced condominium segments, noticeably in the prime Kuala Lumpur City Centre (KLCC) and Mont Kiara areas.

Holding steady: While the number of inquiries has 'definitely dwindled', Leisure Farm Resort in Johor has not lowered prices - currently about RM50 psf for land.

According to property consultants CH Williams Talhar & Wong (WTW), an additional 1,000 new luxury condos and 7,000 serviced apartments (some 10 per cent more) came on-stream last year, when occupancy rates were already inching down to around 80 per cent from 86 per cent in the first half of the year, even before all the new units were delivered.

On average, the developer selling price for units launched last year ranged from RM650 (S$270) per sq ft to RM1,180 psf for luxury condos, and RM800 psf to RM1,300 psf for serviced apartments.

Prices have generally held because they had not run up as much. But poorer sentiment and increasing supply have led to prices dipping in selected areas. In the KLCC area, which saw more feverish building over the past few years, prices have dropped by an estimated 15-20 per cent. In contrast, landed properties are holding firmer given the more limited supply.

But promoters with bigger wallets and risk appetites are taking advantage of lower commodity prices to push ahead. In the Klang Valley, the Four Seasons Place, located within a stone's throw of the Petronas Towers, is scheduled for completion in 2012.

Developed by businessman Syed Yusof Syed Nasir, together with his partners the Sultan of Selangor, Sharafuddin Idris Shah, and Singapore's Ong Beng Seng, piling works have been completed on the 65-storey tower mixed development comprising a hotel, apartments and a mall.

Design changes resulted in some delay but Mr Syed Yusof has said that contractors would proceed in the third quarter.

Property consultants had thought the Four Seasons Place apartments might set a new benchmark of RM3,000 psf for the city. But that was last year. Mr Syed Yusof recently indicated that the estimated 140 apartments would sell for about RM2,500 psf.

Another prestigious project within the KLCC vicinity is gearing up. Ground-breaking has begun on the 450-room Grand Hyatt hotel. The Brunei Investment Agency's 40-storey mixed development includes apartments and commercial offices, and is expected to be completed in three years.

The economic slump aside, property consultants say Malaysians have the buying potential but prefer to wait out the economic and political uncertainties. However, they might be tempted if attractive bargains come along - preferably at fire-sale prices.

According to a recent survey by, two-thirds of 137 respondents surveyed were of the view that there was a high likelihood that property prices would decline over the next six months. Ninety per cent of Singaporeans surveyed were of a similar view while in Hong Kong only 14 per cent agreed, the rest believing prices would not drop much further.

Website activity remains high, iProperty executive chairman Patrick Grove said. 'People are still buying, selling and renting, and are definitely on the lookout for great bargains and opportunities.'

In the main, property players are resigned to the sector consolidating this year following more than decent gains in the past few years - the last more applicable to the Klang Valley and Penang.

Leisure Farm Resort senior sales and marketing manager Koh Boon Teng told BT that the number of inquiries has 'definitely dwindled' but he is counting on the company's established name to continue to pull in buyers, nearly all foreigners, including Singaporeans. The Johor-located resort-style development has not reduced prices - currently about RM50 psf for land -'but if buyers are sincere we can consider giving construction rebates', Mr Koh said. Constructed bungalows start from RM1.5 million.

While Iskandar Malaysia has reportedly attracted RM47 billion in investments - a substantial chunk from Middle East investors - local businessmen complain that there has not been any discernible pick-up in business activity.

Mr Koh concedes the lack of activity, but believes the special economic zone will deliver in the longer term. For now it has rendered a new lease of life to infrastructure projects in Johor, WTW said, pointing to the start last year of infrastructure developments such as the 8.5 km Eastern Dispersal Link joining the Customs, Immigration and Quarantine (CIQ) complex to the North-South Expressway, the 15 km coastal highway linking Johor Baru and Nusajaya, the 9 km Second Pernas Bridge and road to Pasir Gudang, and the Ulu Tiram flyover.

But patience is crucial. Johor recorded the highest percentage change value per transaction last year - likely because of much higher prices obtained for some land transactions in Iskandar, WTW managing partner Goh Tian Sui said. However, he cautioned that the overall data indicated the state 'is not an interesting market at the moment'.

One state which did reasonably well last year, recording a 27 per cent increase in value per transaction over the previous year, was Penang. Its residential sector was the dominant driver on the island as well as the mainland.

The electronics slump has hurt industries in Penang and created uncertainty, but the state is one of the more, if not most, creative in Malaysia. A Unesco World Heritage Site listing last year for its capital Georgetown, together with Malacca, gave it a tremendous boost, while the on-going construction of the second Penang bridge will make the state more accessible in the future.

Developers are admittedly more cautious now, but there are pockets of interest. WTW noted that the shophouse and residential property sub-sectors are relatively resilient, sought more for owner occupation as well as for investment.

Check-Ins Dip, So Hotels Must Check Out Options

Source : The Business Times, March 26, 2009

The period of rapid and easy growth is over and the sector now faces the combined pressures of reduced demand and increased supply

HOTELS in Singapore have witnessed a spectacular performance over the past few years, reaching unprecedented highs in 2008. Singapore hotels reaped the benefits of strong tourism demand, achieving a record in average room rates at $246 in 2008, and garnering a record $2.1 billion in room revenue, a 12.1 per cent increase over 2007.

Hotel room rates (also called average daily rates or ADRs) have grown at an impressive pace since 2004, with a compounded annual growth rate of over 19 per cent. The strength of this performance is unmatched in many markets, and is testament to Singapore's image as a vibrant destination for both business and leisure. The result is that revenue per available room (RevPAR) grew from approximately $100 to $200 between 2004 and 2008.

But Singapore's record-breaking run was to end in mid-2008. Since June 2008, visitor arrivals have declined, and as the gravity of the current financial crisis began to unfold, changing consumer sentiment across the region saw travel budgets and plans cancelled or restricted, impacting hotel performance.

Recent indications suggest that performance in 2009 will continue to weaken. In January 2009, hotel rates declined by an estimated 11.7 per cent year on year, while occupancy levels dropped to 67 per cent (the lowest level since the Sars crisis).

While the decline in performance may in part be due to the occurrence of Chinese New Year in January, much of it is attributable to the deteriorating worldwide economy and poor consumer sentiment.

The extent to which falling demand for hotel rooms impacted on different hotel tiers is difficult to determine at this stage. However, in assessing the most recent data in January 2009 compared to January 2008, economy hotels in Singapore saw a 26.8 per cent decline in RevPAR while hotels in the luxury tier registered a drop of 32.4 per cent over the same period.

This suggests that while all hotels have suffered a considerable decline in RevPAR, the impact is less apparent in the economy sector vis-à-vis the luxury market.

Uncertain future

Looking forward, there are few signs of the global economic crisis abating, and a high degree of uncertainty regarding the future remains. Economists are revising market projections on a daily basis, superceding previous forecasts as the market continues to fluctuate.

The difficulty in forecasting hotel performance is that no one really knows how deep or how protracted the economic crisis will be. However, at a fundamental level, future hotel performance in Singapore will primarily depend on two key drivers: the demand for, and supply of, hotel rooms in the market.

In January, the United Nations World Tourism Organisation (UNWTO) projected international tourism to either stagnate or decline by up to 2 per cent this year. While tourism in Asia is expected to fare slightly better and retain positive growth rates, projections will likely be revised downwards if the global economy continues to deteriorate.

The Singapore Tourism Board (STB) has also adjusted previous forecasts for 2009, with visitor arrivals now expected to be nine to 9.5 million, a decline of between 5.9 and 10.9 per cent on 2008 figures.

In addition to shrinking demand, Singapore is expected to see the largest increase in room supply across South-east Asia in the next few years. According to CBRE Research, an estimated 32 new hotels with over 12,000 hotel rooms are expected to enter the Singapore hotel market by 2012. Assuming all projects proceed as planned, total room nights available will increase by 40 per cent to reach 15.2 million in 2012.

Impact of IRs

The largest contributors to future room supply are the two integrated resorts (IRs) which offer a combined 3,978 rooms. At the opposite extreme, conversions from historical buildings into creative boutique properties will provide diversity in the market.

In forecasting future supply in the current environment, it is inevitable that some projects will experience delays in construction, and the probability that a project will face postponements or even cancellations increases the later the hotel is expected to open. In the current economic climate, difficulty in accessing finance from capital markets may force some investors in the smaller projects to reassess their developments.

While the IRs will be the largest contributors to future supply, they will also generate significant additional demand for both the tourism industry, and more broadly, the economy.

In addition to the gaming facilities, the massive increase in conference and exhibition space will enable Singapore to host larger business and MICE (Meetings, Incentive Travel, Conventions and Exhibitions) meetings, and further build on the Republic's reputation as a venue for top international meetings. Furthermore, leisure visitors will be drawn to new attractions and events hosted in the new IRs, including Universal Studios, Marina Life Parks and the new ArtScience Museum.

So how will hotels perform in 2009? If STB visitor arrival forecasts hold true, and the fundamental ratios between arrivals, length of stay and visitor days remain stable, occupancy levels may decline to around 71 per cent in 2009.

However, CBRE Hotels believes demand will show a strong recovery in 2010, driven by additional attractions and, hopefully, increased stability in the global economy.

CBRE Hotels is of the opinion that the fall in occupancy will impact room rates which are likely to decline by 10 to 15 per cent in 2009, to reach an average room rate of between $209 and $221. This would still be above 2007 levels. RevPAR will then face the most significant decline, and it is likely to drop by 20-25 per cent, to reach an average of between $148 and $158. The decrease in RevPAR represents a downward revision from previous industry estimates and is due to declining performance and continued uncertainty in the global economy.

At present, it is difficult to predict what will happen in 2010 and beyond. While the additional supply will have a negative impact on room rates, this will be countered by the potential improvement in the economic environment and the new demand drivers. Nevertheless, occupancy levels appear likely to take several years before they recover to 2007 levels.

Fortunately, the underlying fundamentals in the Singapore market are extremely strong. In addition, the Singapore government has announced a variety of initiatives to support businesses in general, and the tourism industry specifically.

The recent $90 million BOOST (Building on Opportunities to Strengthen Tourism) package aims to generate demand through activities such as global marketing campaigns, value-focused packages, funding support and training.

Hoteliers should make sure that they participate and throw their support behind these proposals, as a way of helping to mitigate the adverse impact of the downturn. There will be changes and challenges over the short term. For example:

# Hotels will need to be more innovative by offering value-added packages and benefits such as free breakfast, wireless Internet, spa vouchers or complimentary transportation.

# Hotels will be looking to further develop and nurture their existing customer base, revisiting customer preferences and requirements and exploring other opportunities to provide value to loyal existing customers.

# Long-haul travel is also being sacrificed for short- and medium-haul destinations. This is particularly true for leisure travellers. Hotels will be exploring opportunities to attract regional demand and provide packages which offer a strong value proposition.

# Hotels will need to ensure that their product and services are clearly differentiated from competitors. A strong marketing strategy targeting both existing and new customers through a variety of channels is essential to ensure sufficient publicity during competitive times.

# Finally, downturns also present opportunities to focus on efforts which are often overlooked in busier periods. Hotels could go ahead with refurbishment and upgrading of facilities during quiet periods; this is less likely to impact overall performance and will ensure that they are well-placed for a market recovery.

In the short term, the hotel market is going to be under the combined pressures of reduced demand and increased supply. The extraordinary period of rapid and easy growth is over. The next few years will be challenging and this is when well-managed and branded hotels in strong locations will outperform the general market.

The writer is executive director, CBRE Hotels,Asia-Pacific

How To Participate In An Auction Sale

Source : The Business Times, March 26, 2009

# LOOK out for advertisements in the classified pages as auction houses usually advertise one to two weeks before the scheduled auction date.

# Alternatively, you can call the auction house and ask to be put on its mailing list so that you are kept posted of the auctions on a regular basis.

# Call the auctioneer to make an appointment for viewing.

# Obtain a copy of the property's particulars and conditions of sale, that is, whether it is to be sold with tenancy/vacant possession and the completion period for the sale.

# Do your homework. Check the valuation figure with the bank and the quantum it is prepared to finance. Some banks have mobile teams who can visit your home and are able to revert within three days with an in-principle approval for your loan.

# Determine the price that you are willing to bid for the property and discuss it with the auctioneer.

# Arrive early on the day of the auction to get a seat so that you can bid in comfort. Due to the overwhelming response, latecomers may not be able to get into the auction room.

# Bring your cheque book and identity card as you have to pay the deposit and sign the sale and purchase agreement immediately if you are the successful purchaser.

Going, Going ... To Sales By Auction

Source : The Business Times, March 26, 2009

Owner sales are outstripping mortgagee sales at auctions. Given the transparent process, the lively interest in property auctions and the high probability of a quick sale, this is hardly surprising

IT used to be that property auctions were where distressed assets wound up since banks used them for mortgagee sales, as was the case in the last two recessions of 1985 and 1998.

But things have changed since, as a growing number of property owners themselves approach auction houses to sell their properties. In fact, owner sales now outnumber mortgagee sales at auctions. The proportion of owner sales has increased from 50 per cent in 1998 to 72 per cent in 2008. In comparison, the proportion of mortgagee sales has declined from 50 per cent in 1998 to just 28 per cent in 2008.

During the property boom years of 2006/2007, developers like Sentosa Cove and Tuan Sing Holdings successfully conducted auctions on an international level to sell high-end land parcels in Sentosa and several residential units in Botanika, respectively. Not only did these developers achieve record prices, they also attracted a high level of foreign participation and gained good exposure for their projects.

Singapore's property market has matured over the years, mirroring markets such as Australia where auctions are the most popular method used by owners to sell their properties. Both sellers and buyers here have grown to accept the auction mode of sale as the open bidding system is transparent and efficient.

One can find a wide variety of properties at auctions today. Properties ranging from mass market apartments at Braddell View, Telok Kurau and Tiong Bahru to high-end bungalows on Sentosa, good class bungalows at Astrid Hill as well as prestigious apartments like St Regis Residences have been put up for auction by their owners.

Properties under construction, such as those in The Clift, Sky@eleven and The Oceanfront, have also featured at auctions.

Besides residential properties, owners and companies have also used auctions to sell shop units in prime locations such as Peninsula Plaza as well as shophouses in popular suburban towns like Ang Mo Kio, Clementi, Tampines and Toa Payoh.

With deteriorating economic conditions and an expected increase in job losses, the number of repossessed properties is likely to rise in the next six months. Attendance and interest at auctions will continue to be buoyant as buyers look to auctions to find their ideal property. Strong interest is expected in the mass market segment as well as for properties priced around $1 million as upgraders seek out opportunistic buys.

Despite the lull in the property market amid the global financial crisis, the market is seeing strong buying interest at auctions. However, the sales volume is low due to a mismatch between the expectations of sellers and buyers. A turnaround is likely to take place only when buyers start to perceive that the market has bottomed out.

Auction houses like Colliers International, DTZ, Jones Lang LaSalle and Knight Frank typically hold one auction a month, usually in the function room of a hotel. It is usual for these auction halls to be jam-packed with potential buyers and attendees, who often spill out to the corridor, with hardly any standing room.

Serious buyers are flocking to auctions in search of their dream home or to clinch an opportunistic buy from a distressed sale. From just one or two requests received per day from the public to be put on the mailing list last year, auction houses are now receiving an average of five requests a day.

The strong underlying demand presents opportunities to sellers and buyers alike.

A public auction ensures that the process is transparent as there is open competition which ensures that the best price is obtained for the property. In a soft market, determining the selling price of a property can be difficult. Hence, companies that want to dispose of their excess properties or re-organise their portfolio can do it through an auction as it satisfies the objective of shareholder accountability.

If you are an owner looking to sell your property in this lacklustre market, an auction could also be the answer. Auctions generally capture a wider target market given the auction houses' prominent advertisements and extensive database and mailing lists. The publicity and interest generated consequently increase the probability of a sale.

Moreover, auctions are a quick mode of sale as the sale date is fixed. This is good for owners who need to sell their property quickly to get their finances in order.

Those who choose to sell their property via auction can expect a higher success rate as the potential buyer would have done his homework and ascertained his financing prior to the auction date, whereas in a private sale, sellers can find themselves in a situation where a buyer has to terminate the purchase because he cannot get the required financing. That's because most buyers approach the banks after they have identified the property they want.

There's another factor that contributes to the higher success rate - buyers who purchase a property at auction are required to pay a 10 per cent deposit instead of just one per cent in the case of a private sale. And they sign the sale and purchase agreement as soon as the property is knocked down to them. These are deterrents to any buyer thinking of walking away from a sale by forfeiting the option.

Even if a property fails to sell on the scheduled auction day, the property owner can take the last bid price as the basis for negotiation. This is definitely a plus point compared to a private treaty sale as the seller may not get any offers since many buyers are hesitant to make a commitment.

Tips for owners wanting to sell in a weak market

# Be realistic in fixing your asking price. It should be as close to valuation as possible so that potential buyers will be encouraged to make an appointment for a viewing and consequently make a firm offer for it. On the other hand, if they think the asking price is high relative to comparable properties, they will not be interested to view your property.

Case in point: Seller A wants to sell his apartment in Bukit Timah and has set his asking price at valuation. He receives an offer, which is 8 per cent below the valuation price. After some negotiation, the seller manages to seal the deal at 5 per cent below the valuation price and he is now awaiting the completion of the sale. In this case, a buyer was found within a month of marketing the property.

On the other hand, Seller B has tagged an asking price that is 20 per cent above valuation for his apartment near Orchard Road. Despite marketing the property for three months, he was not able to attract buyers to view his property and there was no offer to purchase.

# Ask the auctioneer for advice on the valuation price, comparable asking prices, recent transactions and feedback on the viewing appointments before fixing your reserve price, that is, the minimum price below which you will not sell. This will increase the chances of success.

# Give the auction house at least three weeks' lead time so that there is enough time to organise the mailing list, advertisements and viewings before the scheduled auction date. The longer the lead time, the higher the chances of success.

# Determine whether you are selling your property with vacant possession or tenancy and decide on the completion period. Your lawyer will need your instructions to prepare the terms and conditions of the sale. A typical completion period is three months. If you require more time than that, you can discuss fixing a longer completion period with your lawyers.

Tips for buyers in a weak market

# Set a realistic budget.

# Understand that the prices of repossessed properties are still guided by valuation.

Case in point: An enthusiastic foreigner quipped that in his country, the banks will sell a repossessed property for anything. Failing to understand that the price of repossessed property in Singapore is guided by valuation, he rattled off his wish list for a bungalow in Bukit Timah Road as well as an apartment on Orchard Road and asked to be notified of such good buys.

# Give realistic counter-offers. Generally, auctioneers are not able to accept a counter-offer that is way below the opening price, for example, one that is 50 per cent below it. A reasonable gauge would be about 5 per cent below the opening price.

The writer is deputy managing director and auctioneer, Colliers International

What's Cool In Retail Mix

Source : The Business Times, March 26, 2009

As shop space multiplies, mall owners could take their cue from trends in more advanced markets to stay in the game

AFTER a lull of years, Singapore will see a spate of new shopping destinations opening for business from this year. First off the block will be Tampines 1 at Tampines Central and iluma at Victoria Street. This will be followed by the Orchard Road malls - Orchard Central, ION, 313@Somerset and Mandarin Gallery. Close on their heels will be the malls at integrated resorts Marina Bay Sands and Resorts World at Sentosa.

With tourist arrivals falling in the face of the global slowdown and increasing competition from the new kids on the block, existing mall owners and retailers are under immense pressure to remain relevant. To stand head and shoulders above the competition, they have to study consumer behaviour to know what makes shoppers tick. Increasingly, they have to design malls and offer products that cater to consumers' changing lifestyles.

Level One at Far East Plaza, The Heeren and Cathay Cineleisure are examples of malls that successfully cater to the young and trendy. Retailers there enjoy brisk sales and mall owners are reaping good returns.

F&B: Emerging trends

An emerging trend is the reconfiguration of retail space for food and beverage (F&B) use. Whether they are found inside shopping centres or in independent properties, these F&B outlets are drawing crowds and contributing to the changing lifestyles of Singaporeans.

Take Dempsey Hill, for example. It is not uncommon for friends to head there after work or on weekends to 'chill'. What attracts them are the abundant dining and wining options, new-to-Singapore F&B concepts, an atmosphere of laidback charm, a choice of dining indoors or al fresco, and quirky shops.

This trend isn't exactly new. Boat Quay was an early success. However, Boat Quay also shows that owners and operators have to be nimble and sensitive to consumers' changing needs or be overtaken by the competition. Clarke Quay, for instance, is now a more 'happening' place compared with Boat Quay.

This month, iluma, an urban entertainment mall in Victoria Street, opens for business. This development aims to be a unique attraction with a mix of entertainment, thematic dining as well as shopping spaces. Up to 60 per cent of the floor area will be dedicated to entertainment uses so Singaporeans can look forward to a new destination where they can shop, dine and play.

How should mall owners respond to the new malls and fresh trends?

Take the shift to F&B, for example. In older malls, F&B constitutes 10-15 per cent of lettable space. In more contemporary malls, the proportion is 20-30 per cent. Mall owners have to reconfigure their space to meet new demand. This could come from students looking for a place to hang out, young PMETs (professionals, managers, executives and technicians) gravitating to chill-out joints or families sitting down for a meal together.

Marina Square, Raffles City Shopping Centre and Level One @ Far East Plaza show the results when owners are willing to take a leap of faith, extensively repositioning their malls to create compelling concepts for target customers.

The concepts take into account interior design, ambience as well as the profile of existing retail tenants. The owners then invite suitable operators to implement the concepts. That these malls continue to be favourite shopping destinations are a testament to their success.

Going forward, the challenge is coping with the dramatic increase in retail space. As a comparison, from 1993 to the present, total retail space grew from 2.8 million square metres to 3.2 million sq metres. That's an increase of about 400,000 sq metres, or 14 per cent. But in the next two years, 531,000 sq metres of new retail space will come on the market - much more than the total added in the last 15 years.

In Orchard Road, ION,313@Somerset, Orchard Central and Mandarin Gallery will contribute 180,000 sq metres. The rest will come from Marina Bay Sands and Resorts World, City Square at Kitchener Road and Serangoon Central.

The challenge ahead for mall owners is addressing the downward pressure on rents. For the whole of 2008, overall prime retail rentals saw a rise of 0.8 per cent year-on-year. The retail sector performed impressively in the first half of 2008, with prime retail rentals growing by 13.9 per cent compared with 1H 2007. But the trend reversed in mid-2008 when the global financial crisis struck, resulting in a decline in retail rentals in the second half.

Internet generation

Given the circumstances, retail rents held up well in 2008. Going forward, however, it is imperative for mall owners and retailers to find creative ways to capture consumer attention and stay in the game. They have to look beyond current needs and prepare for competition of the future.

They could take their cue from trends in more advanced economies, like Japan and the US, which will shape lifestyles changes in Singapore. One of these changes will be propelled by the Internet generation. The other, as mentioned, is the changing F&B scene. Operators who capitalise on opportunities presented to them as rents face downward pressure may find themselves well placed when the recovery comes.

The writer is head of retail, Knight Frank Pte Ltd

A Good Time To Shop For Office Space

Source : The Business Times, March 26, 2009

What should tenants look out for in a market where prime rents slid 17.8% in the last quarter of 2008?

WE have barely turned the page on a turbulent 2008 and are already confronting a 2009 that is shaping up to be equally difficult. Indeed the unremitting flow of grim economic news in recent months has dashed hopes of a quick recovery. While the pain has been intense, there are signs that what we are currently feeling is the worst part of the downturn. Governments around the world have formulated strong stimulatory responses. We are hopeful that these actions will sow the seeds of a robust recovery for the global and Singapore economies.

Space to rent: 2 Havelock Road (the former Apollo Centre) has a typical floor plate of 25,000 sq ft

Mirroring the broader economic environment, Singapore's office market softened considerably towards the end of 2008. Statistics from the last quarter of 2008 indicated that we are firmly in a tenant's market.

Cushman & Wakefield (C&W) spot prime rents declined by a sharp 17.8 per cent in the last three months of 2008 to $12.20 per square foot per month while prime vacancy rates increased by 1.1 per cent to 3 per cent over the quarter. The rent drops were led by steep falls in our City Hall-Marina-Bugis and Orchard Road micro markets while the Raffles Place and Shenton Way micro markets fell by a comparatively smaller amount.

We believe that the sharp declines can be attributed partly to the decisive and pro-active response of landlords to the weakening external environment after the September 2008 financial market turbulence.

Moving into the new year, our January and February market read shows that the downward momentum in spot rents has not abated across all four of our micro markets. Our overall prime vacancy rate in February also crept up slightly to 4.25 per cent, a 1.25 percentage point increase from our fourth quarter 2008 figure.

As with the broader economy, we believe we are currently seeing the worst of the rent declines. As leasing activity picks up, we think rent declines will follow the contour of economic growth and show signs of moderation as we progress into the year.

Turning to supply, we expect a total of 2.4 million square feet of office supply this year and a further 2.6 million sq feet in 2010. A portion of the future supply has been pre-committed. However, some of the pre-committing tenants are either relocating from existing spaces or consolidating operations at the new sites. These pre-committing tenants will leave space behind in their wake.

On the flip side, we are also now forecasting potential deferments of up to four million sq ft of supply. The vast majority of our forecasted supply deferments were scheduled to come on stream between 2011 and 2013. This would potentially constrict new space choices for tenants starting from 2011. In aggregate, our latest projection calls for a total 7.8 million sq ft of office supply from 2009 to 2013.

Based on current trends, office rents are therefore likely to see meaningful declines in 2009 before alleviating in 2010. In the context of sharp rent increases in 2006 and 2007, these declines merely represent partial retracement of the gains made in those two years.

We also think that in view of our forecasts for a significantly lowered supply in 2011-2013, a more stable office market could emerge in 2011.

In the current tenants' market, what is our advice to tenants?

From a real estate perspective, this recession is good for tenants. Landlords are now more open to negotiations and prepared to offer concessions. This is, therefore, a good situation to be in for tenants currently looking for new space or renewing their leases. Nonetheless, we would temper rent expectations. Rent concessions would be provided primarily by landlords facing weaker take-ups or significant upcoming lease renewals.

A tenant wishing to take advantage of the situation must, therefore, be very flexible about location. This is usually not the case. Tenants typically have specific requirements which may justify accepting market or slightly above market rents. This is the reason why commercial real estate advisers usually undertake a detailed analysis of clients' business and business requirements to recommend optimal lease solutions.

Abundance of options

The other constraint that tenants face is timing. Leases that are negotiated for a certain time window would typically generate rents appropriate to those time windows.

The timing constraint also affects tenants whose lease expiries are happening next year but who are under pressure to cut costs immediately. We would suggest lease restructuring for these tenants. A mutually beneficial lease restructuring would see tenants receive immediate cost savings in exchange for providing landlords with greater certainty in the future.

Turning our attention to possible locations, we note that there will be an abundance of options for tenants in new and existing prime grade buildings both in the Central Area and outside it. Most of this space would be at very attractive rent rates compared to levels in 2007 or early 2008. It really is a good time for tenants to go shopping for office space.

Given the government's efforts to build up the Marina area as the new downtown, we think tenants looking for premium space should not ignore the Marina Bay Financial Centre development. But there are numerous other attractive options, each with its own unique selling points. We list a few below.

# 2 Havelock Road (the former Apollo Centre) is a mid-sized development with a typical floor plate of 25,000 sq ft and balconies on every floor.

# 51 Telok Ayer Street, a development converted from the former China Square Food Centre, has a crystal glass facade and a ceiling height of 3.2 metres, offering prime office space with a spacious feel.

# Mapletree Anson is a new development which is a two-minute walk from the Tanjong Pagar MRT station with nine-metre high lobbies.

# Another new development, Straits Trading Building, promises tenants exclusivity, with no more than two tenants per floor. Its location in Raffles Place is another key attraction.

Besides the non-exhaustive list of new buildings highlighted here, we also see many space options opening up in existing buildings. Apart from the usual turnover of tenants, a new source of space in the current climate is coming from existing tenants sub-letting space that they may have over-committed to in better times.

Overall, we advise tenants to adopt a longer-term strategic view and take this opportunity to plan their real estate needs in anticipation of the recovery that will inevitably happen.

Ang Choon Beng is Cushman & Wakefield's director, head of research services (Asia- Pacific); Kelvin Chiang is C&W's associate director, tenant strategies & solutions, transaction services; and Lee Peiying is C&W's research analyst (Singapore)

Likely Pitfalls In Getting A Housing Loan

Source : The Business Times, March 26, 2009

Problems can arise from changes in valuations, deferred payments and loan-approval criteria

IF YOU are looking to buy a property, beware of potential pitfalls, including those related to getting a housing loan.

In the past, most home buyers would pay the one per cent option to secure the property before looking for a housing loan. If you do this now, you might regret it and here's why.

Mitigating risks: Securing a housing loan has become more tricky with fast-changing circumstances in terms of property valuation, loan-approval criteria and one's financial situation. It is always safer to get a loan approved before committing to buying a property

It has been clear over the past few months that property prices in Singapore have turned down. And with global economies expected to weaken further, the trend for property prices is more likely to be down than up in the months ahead.

So, even before you put money down on your option, check the market valuation of the property. There have been instances where buyers checked the market valuation of a property with the bank only to get a nasty surprise some weeks later when they finally write out a cheque for the option. That's when they find out that the bank's valuation of their property has gone down.

Latest valuation

We know an instance where someone purchased a property for $2 million and then found out some months later that the valuation had fallen by about 10 per cent to $1.8 million. In other words, he ended up having to fork out an additional $160,000 in cash as the bank was only willing to grant a loan of $1.44 million, or 80 per cent of the revised valuation of $1.8 million, rather than the original loan of $1.6 million.

The buyer could have avoided this pitfall if he had gotten a mortgage broker to check the latest indicative valuation within a few days of buying the property.

Another problem can arise with deferred payments. In 2007, properties were selling like hot cakes and many people had bought them from developers under the deferred payment scheme. That's where buyers were only required to come up with 10-20 per cent of the purchase price and pay nothing more until the property obtains its temporary occupation permit (TOP) about three years later.

According to estimates, more than half the buyers who bought property under the deferred payment scheme have yet to apply for a housing loan. In the past year or so, many properties have seen their values fall by 10 per cent to 30 per cent, so when these buyers finally apply for a home loan, they are likely to have to cough up an additional 10-25 per cent of the purchase price.

For example, someone who bought a property for $1 million in 2007 would see the current valuation of the property drop to about $800,000. In other words, he would probably be able to get a maximum loan of 80 per cent of $800,000 - or $640,000. That's $160,000 extra that he would have to foot in cash or CPF savings. In effect, he is putting up 36 per cent of his purchase price upfront.

With global stock markets falling further in recent weeks as economic conditions deteriorate, property valuations might drop further. Thus, if you have bought a property under a deferred payment scheme but have yet to apply for financing, I strongly advise you to get financing as soon as possible.

There are housing loan packages out there which offer free loan conversions. If you apply for a housing loan now and a better loan package comes along when the property reaches TOP, you can always convert to a more attractive package without penalty.

Getting financing earlier is safer too, should there be any adverse change in a home buyer's financial position, such as a pay cut, or deteriorating credit standing due to delays in paying existing loans. Then, the home buyer might not be able to obtain any financing for his property at all!

To mitigate the risks of falling collateral value, banks have become more cautious in granting financing for properties. Very few banks are willing to offer 90 per cent financing, and if they do it would primarily be for first-time home buyers.

Banks are also more stringent in assessing the borrower's ability to service and repay debt. There are instances where property speculators might only obtain financing of 70 per cent for properties bought for investment purposes. For borrowers who have a slightly weaker credit profile, financing might even be capped at 60 per cent of the purchase price or valuation, whichever is lower.

Prudent step

To be prudent, property buyers should approach a mortgage broker to help secure a prior bank loan approval before committing to a property. By doing so, you would avoid the danger of being unable to obtain sufficient bank financing for your property.

The silver lining in all this is that interest rates are also dropping. Over the past year, the Singapore inter-bank offered rate (Sibor) - the interest rate at which banks borrow from one another - has fallen from over 2 per cent to about 0.7 per cent currently.

If you had taken a home loan one to two years ago, chances are you might be paying an interest rate of 3-4 per cent. It is possible for you to refinance your loan today and end up paying as low as 1.65 per cent, from say, 3.5 per cent. Assuming an outstanding loan of $300,000 and a remaining loan period of 20 years, by refinancing, you might save as much as $5,500 in the first year alone! Even after deducting the cost of refinancing of about $1,000, you are still $4,500 better off.

Thus, refinancing your existing housing loan now might be one of the best ways to 'create money' for yourself by cutting down on your interest expenses.

You can also take advantage of cheaper mortgage rates by borrowing more if your property has appreciated from its original price. If you had bought your property a few years ago, chances are its current valuation is still much higher than your purchase price.

Say, you had bought a property costing $1 million five years ago and have an outstanding loan of $500,000 on it. The current valuation might be $1.5 million. Thus, even if you take out an additional loan of $500,000, bringing the total loan amount to about $1 million, it works out to just 67 per cent of the property valuation and well within the 80 per cent financing limit for a property.

The good news is that the additional loan of $500,000 comes at a low interest rate of about 2 per cent, which is possibly the cheapest loan a typical consumer can obtain.

Securing a housing loan has become more tricky with fast-changing circumstances in terms of property valuation and loan-approval criteria. One's financial situation might also change due to pay cuts and threat of retrenchments. So to be safe, get your home loan approved before you commit to buying your property.

The writer is a Certified Financial Planner with 15 years of experience in bank lending. He co-founded an independent mortgage consultancy portal in 2003

Toasting To A Healthy HDB market

Source : The Business Times, March 26, 2009

The Housing Board market holds the key to the longer-term prospects of mass market private condominiums

NEW private home sales in Singapore surged in February to an 18-month high of more that 1,000 units, after hitting an all-time low of 104 units in January.

In demand: The top-selling HDB estates include Woodlands, Jurong West, Hougang and Punggol (above) where most resale flats sold are priced in the $250,000-$450,000 range

Some 80 per cent of the buyers who snapped up units in projects like Caspian and The Quartz have HDB home addresses, as ERA has observed. Of these buyers, 94 per cent are Singapore citizens and permanent residents. Typically, they are dual-income households earning $8,000 to $12,000 a month. Most of them are in the 35-45 year age group and have one or two children. These HDB upgraders are buying for their own occupation rather than for investment or speculation.

Indeed, this recent surge confirms the trend shown by data from the Urban Redevelopment Authority's Realis that HDB upgraders' contribution to total private home purchases rose from 22 per cent in 2007 to 36 per cent in 2008. That's the highest level in four years.

With some 80 per cent of Singapore's population living in HDB flats, the aspiration to upgrade to private residential property remains strong. The main reason for buying a private property is to upgrade their lifestyles.

Let's look at some contributing factors that are enabling the HDB homeowner to upgrade to private residential property.

Resale prices

From a modest 2 per cent increase in 2006, the HDB Resale Price Index went up by 17.5 per cent in 2007 and 14.5 per cent in 2008. That means prices have risen by some 34 per cent over the past three years.

After an average quarterly rise of 4.1 per cent in the first three quarters of 2008, HDB resale prices slowed to a 1.4 per cent increase for Q4 2008, primarily due to a temporary mismatch of price expectations between buyers and sellers. Nonetheless, with this moderate increase, the HDB Resale Price Index has hit a new peak at 139.4 points, and is now higher than the previous peak in Q4 1996 by 1.8 per cent. This means HDB homeowners who bought their flats during the last peak can now resell the flats at prices equal to, if not higher than, what they had paid for them.

Over the past three years, the rise in HDB resale prices was fuelled primarily by demand from a mix of upgraders, downgraders and the increasing population of permanent residents (PRs). Those who are financially stable upgrade to larger flats while those facing financial constraints have been downgrading to smaller flats. The government's push to raise the population to 6.5 million is steadily increasing the pool of PRs, and they typically buy their HDB homes from the resale market as they do not qualify to buy new flats directly from the HDB.

Most HDB upgraders to private condominiums tend to own four- or five-room flats. Currently, four-room flats account for 37 per cent of total resale transactions while five-room flats account for 26 per cent. Three-room and executive flats account for 29 per cent and 8 per cent respectively. We expect the proportion of four- and five-room flats sold in the resale market to remain constant for the rest of the year. However, the ratio for three-room resale flats may rise to 32 per cent while the market share for executive flats may fall to just 5 per cent should the current economic gloom be prolonged.

The median resale price of an HDB five-room flat is currently $380,000. Assuming the original purchase price from the HDB some five years earlier was $250,000, the homeowner can make a profit of $130,000 upon resale. Similarly, a four-room flat sold at a median resale price of $310,000 today and which had been bought for $190,000 would result in a $120,000 profit on resale. This profit would help the homeowner make the downpayment on a private property.

Going forward, HDB resale prices are expected to stabilise as sentiment may be affected by the gloomy economic environment. Also, buyers have been resisting high cash-over-valuation (COV) transactions and this trend is expected to continue as homebuyers rein in unnecessary cash expenditure. Median COVs for various flat types are now $15,000 (three- and four-room); $11,000 (five-room) and $12,000 (executive); quite a shade lower than the Q4 2007 market high of $18,900 (three-room); $22,000 (four-room); $26,000 (five-room) and $33,500 (executive).

Quarter-on-quarter, we may continue to see sub-one per cent price increases as the market finds its footing. If the current crisis worsens, buyer resistance may intensify and HDB resale prices could start to fall. During the 1997 Asian financial crisis, HDB resale prices fell by some 29 per cent over two years from the market peak in Q4 1996 before starting to recover.

For now, HDB resale prices are stable and we do not foresee any significant downward pressure on prices for the next two quarters, at least.

Resale volume

Over the past three years (2006-2008), the HDB resale volume has stabilised around an average of 29,000 units a year. That's an 11.3 per cent drop from the average of 32,700 units transacted a year between 2003 and 2005. This drop in volume is expected as buyers now have more new flats to choose from under the HDB's build-to-order (BTO) system and the Design, Build and Sell Scheme (DBSS) by private-sector developers.

During this period, the HDB intensified its BTO programme. In 2008 alone, the HDB launched a total of 7,793 units under the BTO system in towns like Punggol, Choa Chu Kang, Yishun, Woodlands and Bukit Panjang. This was the highest in recent years. Just this February, HDB launched another 815 units in Woodlands and will continue to offer more flats of different pricing, sizes, design types and locations to cater to the different needs and budgets of flat-buyers. BTO flats are entry-level public housing targeted primarily at first-time homeowners. They are generally priced between $120,000 and $350,000, depending on flat type and location.

So far, the HDB has awarded a total of six DBSS sites to private-sector developers, of which five have been launched. DBSS flats are priced higher at between $450,000 and $750,000. Another target segment would be those upgrading from flats originally bought from the HDB as buying DBSS flats exempts them from having to pay the resale levy. DBSS flats are thus in direct competition with mass market private condominiums as they are after the same target market. However, DBSS flats priced in the $650,000 to $750,000 range may prove to be more difficult to sell as their pricing would overlap with entry-level mass market condos that have more appeal due to their private property status.

Resale volume for HDB flats seems to have stabilised within the range of 28,000 to 30,000 units a year. As these flats are primarily bought by households that cannot wait for new flats to be completed or do not qualify to buy them, we do not foresee the volume dipping below 28,000 this year. The top-selling HDB estates are Woodlands, Jurong West, Tampines, Hougang, Sengkang, Punggol and Yishun where the majority of resale flats sold are priced in the $250,000 to $450,000 range. A stable HDB resale market provides a firm base for upgraders to private property.

An emerging trend

HDB rentals have been on the rise over the past three years. Current HDB policies have also made it easy for owners to sub-let the entire flat. Those who bought flats directly from the HDB can obtain approval to rent out the whole flat after they have occupied it for five years. Those who bought from the resale market can rent out their flats after living in it for three years.

As such, we are seeing a new trend of HDB dwellers upgrading to live in private condominiums while renting out their HDB flats. Currently, the median rent of $1,800 a month for a four-room flat and $2,000 a month for a five-room flat can give their owners a return of 6-7 per cent, based on median resale prices of $310,000 and $380,000 respectively.

The usual tenants are foreigners working or studying here who do not have a big enough budget to rent private property. Demand currently outstrips supply and those renting out their HDB flats would have an income stream that helps pay the mortgage on their condominium.

Many believe that the HDB market is 'recession-proof'. With 80 per cent of the population as its base, it has shown its resilience in these troubled times. With the resale transaction volume somewhat stabilised at about 29,000 units a year, resale prices are also expected to hold steady for the rest of the year.

Buyer resistance is likely to contain further price increases to marginal levels. Resale flats selling at below $500,000 are likely to form the bulk of transactions as those on a budget try to avoid having to stretch themselves financially. Those who can afford it will be looking to upgrade to competitively priced private condominiums, as we have seen recently. So HDB flats priced above $500,000 may take much longer to find buyers.

A stable HDB market is essential to support the private condominium market, but a healthy HDB market holds the key to the longer-term prospects of mass market private condominiums.

The writer is associate director, ERA Asia Pacific