Wednesday, April 15, 2009

It's Not As Bad As It Looks: Economists

Source : The Straits Times, April 15, 2009


Grim figures reflect past trauma but latest export data looks encouraging

SINGAPORE yesterday released the worst set of economic data in the nation's history and slashed its growth projection for the year, after exports collapsed in the first quarter by more than expected.

Exports last month rose 11 per cent over February. The rise in exports stemmed mainly from an increase in shipments to China and Hong Kong, underpinning China's economic rebound. -- ST PHOTO: ALPHONSUS CHERN

But economists say these grim figures largely reflect past trauma and do not necessarily mean the current economic situation is worsening significantly.

The Ministry of Trade and Industry (MTI) yesterday said the economy shrank in the first quarter by a drastic 11.5 per cent over the previous year and 20 per cent over the previous quarter - both record declines.

On the back of these numbers, the Government also downgraded its growth forecasts as well as its trade projections for the full year.

However, the dismal first-quarter figures are advance estimates that were heavily weighted on numbers from January and February, which bore the brunt of the downturn, said economists.

They added that more recent data, including last month's export figures that were also released yesterday, actually show an encouraging trend of economic improvement.

Exports in March rose a better-than-expected 11 per cent over February, on top of a 1.6 per cent rise in February over January, according to International Enterprise (IE) Singapore.

Although exports last month were still some 17 per cent lower than a year ago, the month-on-month increase was 'staggeringly strong', said HSBC economist Robert Prior-Wandesforde.

'It is the first back-to-back monthly rise we've seen in exports since July-August 2007, and it's also the biggest two-month rise since December 2005.'

The rise in exports stemmed mainly from an increase in shipments to mainland China and Hong Kong, underpinning the 'nascent rebound' in the Chinese economy following Beijing's multibillion-dollar stimulus package, noted OCBC economist Selena Ling.

This export pick-up comes on the heels of recent indications from a key leading indicator, the Purchasing Managers' Index, that factory output has been stabilising and may soon turn the corner.

Around the world, pockets of optimism have also emerged in recent weeks that suggest the worst phase of the recession may be over, packed away with the first quarter of this year.

In the United States, major banks Wells Fargo and Goldman Sachs recently beat earnings expectations, while the decline in retail sales has stabilised and manufacturing is expected to improve.

In China, imports of oil, iron and other raw materials rose last month, as did sales of homes and cars.

Still, MTI is only cautiously optimistic at best. It has sharply pared its full-year growth forecast, saying the economy could shrink up to 9 per cent.

To put this in perspective, consider that Singapore's worst-ever full-year performance, in 1964, came in at -3.8 per cent. Even in 2001, during Singapore's worst recession since independence, the economy contracted only 2.4 per cent. Explaining its dismal projection, MTI made it clear yesterday that the outlook for the rest of the year remains grim.

'While there are tentative signs of some stabilisation in the housing, financial and manufacturing sectors in the US, they do not point to a clear turnaround in economic activity,' it said.

But economists mostly shrugged off the bleak projection, saying a contraction of 9 per cent is unlikely. Even if it happens, given the severity of the decline in the first quarter, it merely implies that quarterly growth will be flat for the rest of the year, said Mr Prior-Wandesforde.

'The magnitude of the...revision seems exaggerated, and is perhaps an insurance against frequent revisions to forecasts given the still-uncertain global economic backdrop,' said Mr Rajeev Malik, head of India and Asean economics at Macquarie Capital Securities. The revision was MTI's third in under five months.

Citigroup economist Kit Wei Zheng said that MTI's new forecast is 'largely a technical adjustment' to the worse-than-expected first-quarter data.

Some currency experts also took heart from the less-than-expected easing of the Singapore dollar by the Monetary Authority of Singapore (MAS) yesterday.

OCBC forex strategist Emmanuel Ng said he detected 'a hint of nascent bullishness' within the MAS statement, which said the rate of decline in economic activity around the world is expected to moderate after falling steeply since the end of last year.

Timing's Everything For Upgraders

Source : The Straits Times, April 15, 2009

HDB residents buying a condo unit have to do their sums carefully

IN THE midst of Singapore's worst recession, people are still buying property.
Private condominium sales reached a recent high of 1,323 units in February - the highest since the 1,731 units sold in August 2007, which was the peak of the recent property bull run.


And though official figures are not yet available, the buying frenzy seems to have continued into March.

According to a recent report by DTZ Research, seven out of 10 buyers in the first quarter of this year are HDB upgraders.

This is a jump from the 48 per cent registered in the fourth quarter last year, and the highest number since the 86 per cent achieved in the second quarter of 2002.

HDB upgraders are home buyers with HDB addresses looking to move up the property ladder. They typically buy into mass-market condos, usually in the suburbs.

Experts say the recent brisk sales indicate a 'pent-up demand' in the market, especially from buyers who held back during the recent property boom, when prices skyrocketed in 2006 to 2007.

They also point to a unique phenomenon that occurs in a property boom-and -bust cycle where the gap between the price of HDB resale flats and mass market condos has narrowed to an all-time low.

Private property prices fell a quarterly record of 13.8 per cent in the first quarter of this year, compared with the marginal 0.6 per cent drop for HDB resale flats.

This means that HDB flat owners own an asset that has appreciated to more or less record value, at a time when the prices of mid-tier condos have dropped to affordable levels.

Now, the jump from public to private home ownership has always been a tantalising proposition.

But is this really the right time for an HDB upgrader to buy?

The answer, say property experts, depends on two things - when the condo unit the upgrader is buying will be completed, and what view he takes of the Singapore property market over the next couple of years.

Let me explain.

Unlike an investor who is buying for rental yield, the HDB upgrader typically moves out of his HDB flat and into his new condo unit. This means that he sells his flat only when the new condo unit is completed and ready for occupation.

Therefore, it makes the most sense for an upgrader today to buy a completed unit - because he can sell his flat now for a relatively high price and buy the new private condo unit on the cheap.

The problem is that there aren't many completed suburban developments on the market. Most new condos approaching completion today are in the prime districts, which were the focus of the property boom two years ago.

And the handful of suburban developments that are close to completion aren't that attractively priced, so the HDB upgrader isn't getting that good a deal on them.

The fact is: The cheapest suburban condo units today are those being sold 'off plan', meaning that they will be completed only two or three years later.

For HDB upgraders who buy these types of condo units, the fact that they can currently can get a good price for their HDB flats is moot, because they will sell their flats only two or three years down the road.

That brings me to the second point that HDB upgraders must consider before signing on the dotted line.

What will the global economy and the Singapore property market look like in two or three years' time, when these projects are due for completion?

Home buyers today can no longer rely on the now-defunct deferred payment scheme introduced in 1997. This allowed buyers to pay a 10 or 20 per cent downpayment, and defer taking a bank loan until the project was completed.

Developers have replaced this with the 'interest absorption scheme'. Here, the buyer also pays an initial 20 per cent downpayment and defers the rest until the property is completed.

But the big difference now is that the minute buyers commit to a property, they have to take a loan with a bank which the developer has selected. The developer then foots the bill for the buyer in interest payments to the bank during the construction period.

This arrangement carries new risks for the home buyer.

Firstly, if a developer goes under, it will no longer be able to pay the regular interest payments and the bank will go to the buyer for these payments.

This seems quite an unlikely scenario in Singapore as developers who offer this scheme generally have the financial muscle to ride out the tough times. Still, the risk of this happening is higher with smaller developers.

Secondly, the bank reserves the right to revalue a property at any point during the construction, or when the project is completed.

So if the property market heads further south, a bank may revalue properties downwards. This means that it will likely reduce the sum it had earlier agreed to lend to the buyer, who will then have to stump up a hefty sum of cash to make up the difference.

On the one hand, experts say banks are unlikely to revalue properties as long as buyers are able to make the monthly payments. Unlike high-end properties where prices could crash in as little as three months, prices of suburban units are less volatile, say analysts.

But on the other hand, if the market really crashes, HDB upgraders could be hit by a double whammy. They will have to fork out more cash to top up their loans at a time when the values of their resale flats would most likely have crashed along with the general market. And if they back out of buying the new flat, they will lose a 20 per cent deposit.

In the worst-case scenario, they could be saddled with two mortgages for properties, both in negative equity.

Such an optimistic gamble on the future is not for the faint-hearted nor the financially prudent, especially when unemployment is hitting a record high.

But if an HDB upgrader truly has the financial strength to hold on to his properties indefinitely for the long term, it could be a gamble that will pay off when the market finally recovers.

These are sums that one must do carefully, no matter how beautiful and attractive floor plans and showflats now look.

Straits Trading Selling 10 Apartments

Source : The Straits Times, April 10, 2009

$3m asking price for each Gallop Gables unit comes with rental guarantee

INVESTORS are being offered 10 units in the 12-year-old Farrer Road district residential development Gallop Gables at the knock-down price of around $3 million each - complete with a rental guarantee.

Gallop Gables, a freehold four-storey 140-unit development, has seven low-rise blocks. Straits Trading is asking $1,156 psf for its 10 units there. -- PHOTO: GALLOP GABLES

The seller is Straits Trading, which has had a year to conduct a strategic review of its assets after Ms Chew Gek Khim's Tecity group took over as a controlling shareholder.

The firm's new executive vice-president Eric Teng told The Straits Times the sale is to enable it to invest in distressed assets that may surface locally and regionally - even though the sale itself is being done at a reduced price. 'This is just our financial discipline. Before you buy something, you should sell something,' said Mr Teng.

The average sale price per sq ft (psf) is about 23 per cent lower than what Straits Trading was seeking for the units last July.

Gallop Gables is a freehold four-storey 140-unit development near the Botanic Gardens. It has seven low-rise blocks.

For each of the 10 units, Straits Trading is offering a guaranteed rental yield of 7 per cent for two years. It will also absorb the maintenance fee for two years.

The units are fairly big, from 2,800 sq ft to 3,200 sq ft each. The firm said it is offering investors a 'rare opportunity' to invest in 'a solid piece of real estate, with an unprecedented yield of 7 per cent a year or 14 per cent for two years'.

At that kind of yield, the rent should be about $12,000 to $13,000 a month. But right now, the yield for the estate should be only around 4 to 5 per cent, said a property expert who declined to be named.

The firm's average asking price for the 10 units is $1,156 psf, slightly above the average $1,130 psf registered for two recent deals in the development.

Last July, the firm invited expressions of interest at $1,500 psf, or about $4.5 million each, for 38 tenanted units there. The property market has since deteriorated markedly.

That sale bid had come about three months after Tecity gained control of Straits Trading. Tecity is the parent of a group of investment companies built by the late Tan Chin Tuan, former OCBC Bank chairman - Ms Chew's grandfather.

He had helped OCBC acquire Straits Trading in the 1950s.

In the 1980s, Straits Trading's share price was more than $4, almost twice its price between 1995 and 2003. Tecity paid $6.70 a share for Straits Trading.

Yesterday, the shares closed five cents higher at $3.20 each.

In a separate announcement, Straits Trading said Mrs Victoria Tse will be retiring as the senior executive vice-president and group chief financial officer on July 7. She will be succeeded by Mr Eldon Wan, financial controller of Tecity, from yesterday.

It has also appointed Mr Iqbal Jumabhoy, who has more than 20 years of executive management experience, as chief executive of hospitality to oversee its hospitality management arm and hotel assets.

Mr Teng was named executive vice-president of property sales and leasing as well as adviser, corporate communications. He retains his role as adviser to Tecity and CEO of Tan Chin Tuan Foundation.

Mr Teng will oversee the sale of completed residential property owned by the group as well as the leasing of the Straits Trading Building in Battery Road. This office block will be ready by the end of the year and is now about 25 per cent leased.

Straits Trading was founded in 1887. Apart from hotels and property, its other business is in tin mining.

Developer Fails In 'Amanusa' Appeal

Source : The Business Times, April 15, 2009

Judge finds use of name by Novelty infringes Trade Marks Act

Justice Rajah said a trade mark need only be known to any relevant sector of the public here to be regarded as well-known in Singapore.

THE Court of Appeal has dismissed an appeal by a developer that called its Yio Chu Kang condominium Amanusa - the name of an exclusive Bali resort owned by Amanresorts.

The 124-page judgement, delivered last month by Justice VK Rajah, is said to be the first time that Singapore has recognised a 'well-known mark' since provisions were made in 2004.

'This case shows one cannot simply use a well-known name or mark, even though the name or mark is not registered in Singapore as a trade mark or company name,' said Alban Kang, of Alban Tay Mahtani & de Silva, who represented Amanresorts.

Amanresorts sued local property developer Novelty over its use of the Amanusa name and won in the High Court in 2007.

The judge found Novelty's action was likely to damage the goodwill of Amanresorts. Novelty appealed to the Court of Appeal.

Setting out the case, Justice Rajah said that Amanresorts, despite not having registered Amanusa for protection here, had succeeded in its claim of 'passing off' and its claim for protection from infringement under the Trade Marks Act.

The judge clarified the 'crucial and difficult area' of whether Section 55(3)(a) of the 2004 Trade Marks Act requires a plaintiff who is claiming infringement to show that besides damage, there may have been confusion between the plaintiff's goods and services and the defendant's.

Justice Rajah said that the section requires that a likelihood of confusion be shown because of 'the widespread availability' of trade marks 'well-known in Singapore'.

He said that a trade mark need only be known to any relevant sector of the public here to be regarded as well-known in Singapore - a fairly easy criterion to fulfil, for instance, with niche products.

'We do not think that trade marks which are merely well-known in Singapore should be given protection against the use of a similar or identical mark on dissimilar goods or services where such use does not give rise to confusion,' he said.

He made the distinction between such marks and trade marks which have the 'coveted status' of being 'well-known to the public at large in Singapore', for which action can be brought to protect the trade mark even if there is no likelihood of confusion - for instance, when the products offered are very different.

'These trade marks, which form a rare and exclusive class, are entitled to protection from use (by others) on dissimilar goods or services even in the absence of a likelihood of confusion,' he said.

Novelty's appeal was dismissed with costs.

Senior Counsel Tan Tee Jim, Christopher de Souza and Lim Ke Xiu of Lee & Lee were the lawyers for Novelty.

Glitches At Grangeford

Source : The Business Times, April 15, 2009

Sub-dividing of 140 apartments into 600 units runs into issues with URA

A mild controversy of sorts is developing at the Grangeford condo at Leonie Hill.

A fully owned subsidiary of Overseas Union Enterprise has signed a two-year lease with a master tenant for 170 apartments at the condo which OUE clinched through an en bloc sale.

The view inside: The sub-divided units at Grangeford condo have the distinct feel of a dormitory, leading to complaints being made to the authorities

Of the 170 apartments, master tenant Ideal Accommodation has just completed sub-dividing 140 apartments into a total of 600 units. It has found takers for about half of the units. Ideal Accommodation is asking monthly rents of $900 to $1,400 per unit. Each unit comes furnished with a bed, washing machine, an LCD TV and Internet connection.

However, the sub-division has left most of the units with unventilated corridors and without access to rubbish chutes. Owners of some units have to share toilets. The sub-divided units have the distinct feel of a dormitory, leading to complaints being made to the authorities.

When contacted, a spokeswoman for Urban Redevelopment Authority (URA) said: 'We have recently received feedback on an unauthorised change of use of the residential apartments (at Grangeford Apartments) to boarding house/dormitory use. This cannot be allowed as the Master Plan zoning for this site is for residential use only.

'URA has not received any application for the conversion of Grangeford Apartments to other non-residential use.'

The planning authority also said it has contacted the owner to seek clarification. 'URA (and) other government agencies will take the necessary enforcement action against the person responsible on any unauthorised use and for not complying with the requirements,' she added.

OUE's CEO Thio Gim Hock said: 'If URA says this cannot be done, we will comply with their requirements. If instructed by the authorities, Ideal may then have to remove the partitions and restore the units to their original apartment condition and they are then still free to rent out the entire apartments if they choose to do that.

'Alternatively, we may dissolve our master tenancy agreement with Ideal, take back the apartments and rent them out ourselves.'

Addressing the issue of sub-divided units not having access to rubbish chutes, OUE's executive vice-president (investor relations) Clement Wang said: 'Units without rubbish chutes will be provided with bins outside the units and these will be cleared once a day.'

BT understands that owners of apartments in other developments have also done similar sub-divisions. But the difference is one of scale - Grangeford now has 600 smaller units carved out of 140 apartments. Two-bedroom units were split into either three or four smaller units while the three-bedroom units were sub-divided into five to six units, Ideal Accommodation managing director Tang Yong, a Chinese citizen and Singapore PR, told BT.

The company provides rental housing accommodation, including student housing and serviced apartments.

It currently has more than 400 units/apartments for lease in 60 locations in Singapore. Its portfolio includes backpacker hotels in Geylang and the Lavender area.

Existing tenants of sub-divided units at Grangeford include expats and foreign students looking for lower-cost accommodation in District 9.

The $625 million collective sale of Grangeford to OUE was struck during the market peak in 2007. With the property downturn, OUE decided against redeveloping the project for the time being and opted to lease out the existing 193 units instead. It managed to rent out 22 apartments before it signed a master lease with Ideal Accommodation for 170 apartments.

Analysts say OUE will enjoy a significant saving in its property tax bill on Grangeford by sealing a master lease with Ideal Accommodation. Once it has leased at least 25 per cent of the apartments in Grangeford on tenancies of at least a year, Grangeford's annual value (AV) will be based on the estimated total annual rent that can be fetched by all the apartments in the development - which is a much smaller sum than if the AV were to be based on 5 per cent of the estimated freehold market value of the land. Property tax is calculated at 10 per cent of AV.

Government Flags 6-9% Contraction

Source : The Business Times, April 15, 2009

But economists hopeful the worst is over, even if GDP shrinks for next two quarters

Far from rebounding, the economy sank deeper in the first quarter and is now expected to contract by between 6 and 9 per cent this year. But private sector economists - who roundly expected an easing in the rate of decline in Q1 - remain hopeful that the worst is now past, even if the GDP figures stay in the red for another quarter or two.

Releasing flash estimates of Q1 growth yesterday, based only on two months' data, the Ministry of Trade and Industry zeroed in on the on-quarter (q-o-q) figures rather than the headline year-on-year (y-o-y) pace, though in this case, the slump is stark enough on both measures.

In its fourth consecutive fall, GDP shrank 19.7 per cent q-o-q in seasonalised, annualised terms in Q1. After a negative 16.4 per cent pace in the preceding quarter, economists had expected the momentum of contraction to ease, if not turn around altogether, in Q1.

Compared with a year ago, the Q1 contraction amounted to another record 11.5 per cent, though the decline may have been accentuated by base effects - Q1 2008 having been a relatively 'strong' quarter.

But the sectoral manufacturing and services figures, and the weak outlook ahead, prompted MTI to slash the full-year forecast, from a January estimate of 2 to 5 per cent contraction.

'The advance estimates indicate that actual (2009) GDP growth will under-shoot earlier expectations by a significant margin,' the ministry said.

The official forecast for Singapore's 2009 non-oil domestic exports (NODX) was also lowered yesterday - to between minus-13 and minus-10 per cent - and the Singapore dollar effectively weakened about 1.5 per cent, in the Monetary Authority of Singapore's latest policy review.

But economists - several of whom immediately cut their forecasts of Singapore's 2009 GDP pace to within the new official range - also saw in the March trade figures unveiled yesterday, as well as MAS's latest monetary policy statement, some hints that the economy could be bottoming out.

OCBC Bank economist Selena Ling said: 'Q1 GDP flash estimates were way below market expectations but may mark the trough for this current downturn. Essentially, the GDP and NODX growth downgrades were attributed to the larger-than-expected Q1 contraction.'

The 17 per cent y-o-y fall in March NODX actually beat market expectations, and against the preceding month, it rebounded for a second month, and strongly too, by 11 per cent.

DBS Bank economist Irvin Seah said: 'If NODX continues to post positive growth on a month-on- month (m-o-m) basis, we should start to see the economy bottoming out around the middle of this year before a gradual recovery towards the end of the year and going into 2010.'

Particularly as an economy approaches a turning point, changes in sequential terms - q-o-q or m-o-m - show up the underlying trend faster and better than the headline y-o-y numbers, which usually do not reveal a turn until long after the fact.

The flash Q1 sectoral figures show, ironically perhaps, construction to be the sole engine of growth: it expanded by a faster 25.6 per cent, supported by a strong pipeline of housing and infrastructure projects. The manufacturing sector, on the other hand, slumped 29 per cent as all key industries fell sharply. The decline in the services was also broad based.

In its monetary policy statement yesterday, MAS said considerable downside risks to growth remain, but also pointed to recent signs of pick-up in a number of leading indicators.

Citigroup economist Kit Wei Zheng, who yesterday cut his forecast of Singapore's 2009 GDP growth by 1.5 points to minus-6.4 per cent, said: 'We maintain our view that the most intense quarter of GDP contraction is probably behind us, even if the pace of sustainability of recovery remains in question, and a return to positive y-o-y GDP growth is expected in Q409.' But 'a relapse and a W-shaped scenario, though not incorporated in our base case forecasts, remains a risk', he added.

Noting that the economy has shrunk close to 10 per cent in the space of two quarters, HSBC economist Robert Prior-Wandesforde said: 'Ironically, it is actually looking more likely that Singapore GDP will register positive q-o-q growth in Q2 2009.'

URA Launches Tender For Hotel Site At Short Street

Source : The Business Times, April 15, 2009

The Urban Redevelopment Authority (URA) has launched the tender for a hotel plot at Short Street. The tender will close on June 10.

URA released the reserve list site following a successful application by an unnamed party that has committed to place a minimum bid at the tender of $8.8 million (US$5.9 million) or about $200 per sq ft of potential gross floor area (GFA)

The 12,535.6 sq ft site, being offered on 99-year leasehold tenure, can be developed into a maximum GFA of 43,884.4 sq ft and can be built up to 12 storeys.

URA has said that the site can accommodate between 90 and 100 hotel rooms.

Private Home Sales Hold Up

Source : The Business Times, April 15, 2009

Property developers sold 1,220 new private residential units in March, said the Urban Redevelopment Authority on Wednesday.

This is a slight dip from the 1,332 units sold in February but the number still exceeds the 108 units sold in January.

The launch of Double Bay Residences in Simei provided some support to March sales - 264 units were sold, the highest among the more than 400 projects listed.

In total, developers launched 832 units in March. This is lower than the 1,072 in February.

HDB Prices On Its Way Down

Source : The Straits Times, April 15, 2009

Source : The Straits Times, April 16, 2009

One-third of sales in the first quarter at or below valuation

GOOD news for home buyers eyeing the resale flat market: About one-third of HDB sales in the first quarter were struck at or below the flat's valuation price.

The level in some areas was far higher. In Sengkang, for instance, up to three in four five-room flats sold by ERA Asia Pacific were done at or below valuation.

This means those buyers did not need upfront cash to buy their dream home.

Analysts say the trend indicates HDB flat prices are now coming down at a quicker rate after holding up better than many private residential properties.

In the recent market boom, many sellers sought prices well above valuation - a figure set by an independent valuer.

Buyers can use Central Provident Fund savings to pay for a flat only up to its valuation amount. They must stump up cash for any premium they pay above valuation.

The property agencies surveyed by The Straits Times, HSR Property Group, PropNex, ERA Asia Pacific and C&H Realty - which together account for almost the entire HDB market - said a significant 30 per cent to 40 per cent of first-quarter sales were done at or below valuation.

The agencies' data showed prices crumbling for bigger flats such as five-roomers and executive flats. In Clementi, for instance, a five-room flat was sold for $70,000 below valuation at $500,000, while an executive flat in Tampines sold for $65,000 below its valuation at $515,000.

Industry observers say the HDB market, whose price trends typically lag behind those of the private sector, is finally reflecting the weakened economy.

Recent flash estimates showed HDB prices dipped 0.6 per cent in the first three months, compared with the fourth quarter of last year. It is the first fall since 2006.

Demand for resale flats has eased as the recession bites, while the HDB has been ramping up the supply of new flats, said Chesterton Suntec International head of research and consultancy Colin Tan. Home buyers also have more options now as prices of mass market condominiums are more affordable, he added.

ERA associate director Eugene Lim said home hunters were reluctant to pay more than $500,000 for HDB flats.

'The longer these highly priced flats stay on the market, the more over-exposed they become. Consequently, some had to be sold at big discounts due to buyer resistance,' he added.

The balance of power has now clearly shifted from sellers to buyers, with analysts saying this could be the time for buyers to do some bargain-hunting.

ERA's first-quarter data showed that in locations such as Sengkang, a whopping 74 per cent of transactions for five-roomers were done at or below valuation. In Tampines, they accounted for 55 per cent while, at Jurong West, it was 42 per cent.

Even for smaller flat types like three-roomers in Ang Mo Kio and four-roomers at Woodlands, 42 per cent to 44 per cent of sales were at or below valuation.

Experts point out that while more flats are now selling below valuation, this does not mean people are selling at a loss as HDB prices rose a hefty 31.2 per cent in the property boom of the past two years. But first-time buyers, priced out of the resale market during the boom, will now find the flats more affordable.

The current discounts to valuation will eventually diminish when valuations catch up, which usually takes three months, said Knight Frank director of research and consultancy Nicholas Mak.

But there is a possibility of valuations and price falls chasing each other, further eroding prices, he said.

Hotel Occupancies, Room Rates Expected To Drop: CBRE Hotels

Source : The Business Times, April 14, 2009

Additional supply of rooms is likely to result in further softening of market

SINGAPORE'S hotel industry will continue to see a downward trend as an additional supply of rooms is injected into the market.

Going by the Singapore Tourism Board's (STB) forecast of 9-9.5 million visitors this year, hotel occupancies are likely to drop to 71 per cent, while room rates will fall about 12.5-15 per cent, said Robert McIntosh, executive director of CBRE Hotels (Asia-Pacific). As such, revenue per available room (revpar) should decline 23 per cent, he added.

For 2008, the average occupancy rate was 81 per cent while the average room rate was $246. Revpar was $199.

Singapore has close to 10,000 rooms in the four and five-star categories expected to come onstream by the end of 2012, representing a 39 per cent jump in supply. 'With declining occupancy and revpar levels already apparent, the addition of new supply will likely result in a further softening of the market in the short term,' said CBRE Hotels senior consultant Alison Poore.

At the same time, Singapore's 'underlying market fundamentals' such as its infrastructure, steady stream of attractions and destination marketing initiatives are sound, placing it in good stead to respond swiftly when the economy starts to pick up. The launch of the two integrated resorts will also act as a driver.

In comparison, Bangkok will see over 6,000 four and five-star hotel rooms enter the market over the same time period, bringing the total supply of rooms in these categories to over 31,000. Faced with the double whammy of political upheaval and lower tourism demand on the back of the economic environment, hotels in Bangkok are likely to see further declining demand in the short term.

Mr McIntosh also pointed out that the increasing supply of hotel rooms can also lead to greater demand, thanks to factors such as additional marketing by individual hotels, reduced prices and new hotels catering for different segments.

'This has positive implications for employment, demand for airline seats and expenditure in restaurants and other tourism attractions,' he said, adding that extra supply can, however, affect existing hotels negatively as occupancies and room rates tend to fall.

Strong Demand For New HDB Flat Offer

Source : The Straits Times, April 14 2009

2,652 applications seen yesterday for 438 units in various estates.

Demand was strong on day one of the Housing Board’s latest sale of new flats – with more than five applicants for every flat on offer.

The HDB yesterday launched 438 new flats for its April half-yearly sale. By 5pm, a total of 2,652 applications had been received.

These flats are located in 23 HDB towns and estates islandwide, such as Sengkang, Yishun and Jurong West.

Most of the flats offered – 313 units – are four-room units.

There are 80 five-room units, 35 executive flats and just 10 units of three-room premium flats.

The greatest concentration of the new flats on offer is in Sengkang, Yishun and Jurong West, with 85, 61, and 46 units respectively.

The other towns, such as Punggol, Tampines and Woodlands, have about 30 units or fewer each to offer.

Some popular HDB towns such as Ang Mo Kio, Jurong East and Queenstown have just three units for sale.

Prices start from $143,000 for a 93sqm, four-room unit in Marsiling Rise, Woodlands.

In Sengkang, the 77 four-room flats on offer are going for $183,000 to $288,000 each.

But in the estate of Bukit Merah, four-room flats being offered at Telok Blangah Street 31 are in a much higher price bracket of $400,000 to $468,000 each.

As these are new flats, only households with gross monthly incomes of not more than $8,000 can apply.

Interested buyers can apply online from today until next Monday, said the HDB.

Balloting results will be released from May 13 at 2pm.

PropNex chief executive Mohd Ismail said: “I would expect demand to be extremely strong because, at the moment, new flat buyers have no choice but to go for the build-to-order or DBSS (design, build and sell scheme) flats.”

Most of the flats offered in the half-yearly sale have been completed, which means buyers can move in quickly.

Also, some of the flats are in mature estates, which are hard to find, he added.

Mr Ismail said some of the new flats on offer are priced about 20 per cent below resale prices.

HDB resale prices have started to fall, albeit slightly.

The previous half-yearly sale was launched in October last year, when HDB offered 683 new flats.

That particular sale saw more than 7,000 applications in the first couple of days.

连跌四个月 中国房价“渐回归理性”

Source : 《联合早报》Apr 14, 2009

















Investors Pick Up Higher-End Condos

Source : The Business Times, April 14, 2009

Value buys in prime areas available even though property market still weak

SOME high-end condominiums recorded sparkling weekend sales even though the overall property market was generally quiet in terms of new launches.

Of the two new previews, Illuminaire on Devonshire sold out its 72 units at $1,630 to $1,730 per sq ft (psf), while Verdure in Holland Road sold 14 units of 34 launched units at $1,400 psf.

PHOTO - Illuminaire on Devonshire.

The 12-year-old Gallop Gables saw far stronger than expected demand, with investors picking up 28 units, even though they are about $3 million or more each.

Previously, the new projects that have attracted fairly strong interest, given today's climate, were not in such prime areas. But some investors may be looking around now that the market has fallen quite a bit.

Mr Peter Ow of Knight Frank, which is marketing Verdure and Gallop Gables, said the response at these two sales showed individual investors are back.

'These buyers are savvy investors who are already staying in prime areas,' he said. 'Generally, the property market is still weak, but there are value buys around. And people are beginning to see value in well-located projects.'

Of 14 Verdure units that Bukit Sembawang has sold during the preview, a few are penthouses. While the overall project is priced at $1,350 psf on average, the 14 were sold at an average of $1,400 psf, or from $1.5 million to $2.8 million.

A scheme offering interest absorption was available without any extra charge. The project, which has 68 units, will be launched this weekend.

Over at Gallop Gables near Botanic Gardens, Straits Trading sold 26 units - 16 more than its target. It had offered only 10 units with a guaranteed rental yield of 7 per cent for two years. The rest were purchased without the 7 per cent guarantee, but mostly with existing tenancies offering a rental yield of 3 to 5 per cent.

The buyers paid between $3,075,200 and $3,840,000, or an average price of $1,220 psf for the units, which averaged about 2,800 sq ft.

The buyers were mainly residents ranging in age from the mid-30s to the late 70s who bought for investment purposes, said Straits Trading, which had earlier said the sales would generate cash to allow it to invest in distressed assets.

A few buyers, it added, said they may live in the apartments after the end of the two-year rental guarantee period.

At Illuminaire, the affordable price drew both investors and speculators, industry experts said. As it has only one- and two-bedroom units, ranging in size from just 441 sq ft to 721 sq ft, the total price was kept low - from $749,000 to $1.21 million.

EL Development managing director Lim Yew Soon said he had changed the design of the project from a 36-unit development to a 72-unit one last September. By then, a three-bedroom showflat had already been completed - and had to be reconfigured into a smaller unit.

'I realised the market would prefer small units,' he said.

Mr Lim, who bought one unit for himself and kept two for business associates, said most buyers were keen on the interest absorption scheme, which was offered at no additional cost.

Some buyers also liked the unusual automated car parking system. There are two car lifts that will store cars in an adjoining multi-storey carpark block.

Swift Response To Gallop Gables Units

Source : The Business Times, April 14, 2009

INVESTORS made a dash for high-end residential development Gallop Gables after The Straits Trading Company offered a two- year guaranteed rental yield of 7 per cent on 10 units there last week.

Not only did the company let go of all 10 units at the freehold Farrer Road estate in three days, it managed to sell another 16 without providing a rental guarantee. Prices of the 26 units ranged from $3,075,200 to $3,840,000, fetching an average of $1,220 psf.

The 'overwhelming response' was surprising because sales in the high-end property sector have been weak since the financial crisis erupted, said Straits Trading's executive vice- president Eric Teng.

Even though the rental guarantee applied on just 10 apartments, 'we were still able to sell more units because our prices were reasonable and competitive and we have an excellent well-maintained product', he said.

Located near the Botanic Gardens, asking prices at the 12-year-old Gallop Gables have dropped in the last few months. Straits Trading put up two blocks of apartments for sale in July last year with a price tag of about $1,500 psf.

'Feedback from prospects and buyers suggest that with less than one per cent per annum (from) fixed deposits in banks today, a yield of 3 to 4 per cent per annum and above in property rental is still an attractive proposition,' Mr Teng added.

According to him, buyers were mainly locals in their mid-thirties to late- seventies. Most bought the units for investment though a few said they might move in when the rental guarantee ends.

The situation indicates that well-located high-end properties can still sell with good advertising, said Chesterton Suntec International's head of research and consultancy Colin Tan.

'It shows what clever marketing and publicity can do . . . Of course, the property itself is good.'

Encouraged by the response, Straits Trading is ready to sell more units at Gallop Gables but it is raising prices by up to 10 per cent. The new prices are 'still reasonable' compared with those a year or two ago, said Mr Teng.

Units available for sale are 'limited' but the company prefers not to disclose the number as it is still monitoring the property market.

Property Valuers Feel The Buzz

Source : The Business Times, April 14, 2009

Recent strong home sales, refinancings help boost demand

Away from the glare of the market, valuations departments of property consultancy groups here have been quietly doing brisk business despite the property slump.

Valuers attribute this in part to a pick-up in sales at private residential property launches since February. Also contributing to demand are buyers who are getting loans for units bought earlier on Deferred Payment Schemes (DPS), and borrowers who are seeking better refinancing packages and switching banks.

Some property consultants say banks are requesting more frequent valuations of properties in their loans portfolio, given declining property values. 'It's not just for housing loans, but offices, factories, etc. I suppose banks have to monitor if the properties are in negative equity,' says DTZ Southeast Asia's CEO Ho Tian Lam.

Said Joseph Wong, OCBC Bank's group chief credit officer (consumer credit risk), group risk management: 'We conduct regular reviews on our loan portfolio which cover various factors including update of valuation of properties.'

Mr Ho said the volume of valuations at DTZ has risen more than 10 per cent in the past one or two months compared with the same year- ago period. The firm has redeployed two senior marketing executives from its investment sales department to its valuations department.

Knight Frank managing director Tan Tiong Cheng told BT the number of valuation instructions for private residential properties clinched by his firm has increased 36 per cent in Q1 this year compared with the preceding quarter. For March alone, the figure has gone up 59 per cent from the preceding month. These instructions, which are requested either by lending banks or borrowers, refer to paid valuations and not indicative ones, which are often provided to banks for free or for a token sum.

Jones Lang LaSalle's head of valuation advisory services Tan Keng Chiam said his firm has seen a 10-20 per cent rise in the number of weekly valuation enquiries since late March compared with the January-February period. 'But this has not translated to huge volumes of business,' he added.

Mr Tan said there have been 'more enquiries for refinancing purposes as well as a noticeable, though slight, increase related to home purchases'.

Despite higher business volumes, none of the firms, citing competition, has any plans to raise its valuation fees, which can be as little as $300 to $500 for valuing small apartments. Commercial buildings cost several thousands to tens of thousands of dollars to value, depending on the size and complexity of the valuation required, which also depends on the lender's profile. Package fees for valuing an entire portfolio of buildings for a property group or real estate investment trust (Reit) can run into hundreds of thousands of dollars.

'For Reits, in particular, valuations are a lot more meticulous. We have to go through individual tenancies and do more checks in general. And we don't just use the comparables method but also discounted cashflow to arrive at the property valuations,' Knight Frank's Mr Tan said.

Most valuers BT spoke to say a key reason they have been kept busier lately is the gush of private residential property launches of affordably priced mass- market and small-sized apartments. With fewer launches these days offering DPS, buyers have to sign up for a housing loan soon after their purchase - whether they are opting for interest absorption or taking a normal progress payment scheme.

For projects sold earlier on DPS that are nearing completion (when DPS expires), buyers need to get their home loans in place, and this has also led to more valuations required, explains Mr Tan of Knight Frank.

In addition, the increase in primary market home sales by developers has spilled over into the secondary market, and this has been another source of higher demand for valuations.

The head of another property consulting group told BT that some real estate funds have been asking for monthly valuations of their property portfolio to 'track the market more closely instead of relying just on annual valuations'.

DTZ's Mr Ho says Reits seeking refinancing have also contributed to an increase in valuation requests at the firm.

Valuers note that besides Reits, other property owners who have opted to refinance mortgages - for their homes, for instance - because of more attractive packages offered by rival banks have also raised demand for valuation services.

DTZ's Mr Ho said that the firm's professional services - which besides valuation include research and consultancy, property management and project/ facilities management - account for about 30-40 per cent of revenue in normal times, with agency activities like property sales, leasing and investment sales taking the lead.

Surprise All Round As Buyers Snap Up Units At Illuminaire

Source : The Business Times, April 11, 2009

3 units left after previews began on Thursday

NINETY-SIX per cent of units in the freehold luxury condominium Illuminaire on Devonshire have been sold at an average price of $1,700 per sq ft since previews started on Thursday, developer EL Development said yesterday.

SMALL IS GOOD - The freehold District 9 condominium consists entirely of one- and two-bedroom apartments

By 5pm yesterday just three units were left in the 72-unit, 19-storey project. They were all on lower floors, said the company's managing director Lim Yew Soon.

The quick sales took many - including Mr Lim - by surprise. 'We are a bit surprised at the results,' he said. 'We were expecting it to be about 50 per cent sold.'

While transaction volumes picked up in the first quarter of the year, most activity has been in the mass market segment.

CB Richard Ellis put the take-up of new homes in Q1 at between 2,000 and 2,200 units - the highest since Q3 2007. But no new high-end project was launched in Q1.

Analysts, as well as Mr Lim, attributed the success of Illuminaire to the small size of the units, which means the absolute amount a buyer had to fork out was not as much as with bigger units.

The project consists entirely of one- and two-bedroom apartments. One-bedroom units, which are 441 sq ft or 463 sq ft, all cost less than $800,000. And all the two-bedroom apartments, which are 635 sq ft or 721 sq ft, sold for under $1.25 million.

Small units are proving popular in the current downturn. In Q1, for example, shoe-box units in city-fringe locations were snapped up. Projects such as Alexis, Nova 88 and The Mercury sold well, at prices ranging between $900 psf and $1,200 psf for unit sizes of 340 sq ft to 750 sq ft. Most of these units were sold at an absolute quantum of less than $600,000.

The quick sales at Illuminaire could be due to investors wanting to own a property in prime District 9 without paying too much upfront, said Nicholas Mak, director of research and consultancy at Knight Frank.

'Traditionally, it has always been hard to find anything in District 9 for less than $1.3 million,' he said. 'With this project, investors had the opportunity. I won't say this points to a recovery in the high-end market.'

Most of the buyers at Illuminaire were Singaporeans or permanent residents, Mr Lim said.

EL Development offered buyers an interest absorption scheme. Illuminaire is expected to receive its temporary occupation permit by Q1 2012 at the latest, Mr Lim said.

The project was marketed by Huttons Asia.