Tuesday, June 23, 2009

US Housing Recovery Hinges On 'Echo Boomers'

Source : The Business Times, June 23, 2009

But limits on credit, income sustaining 3-year bust, says Harvard report

(NEW YORK) The children of baby boomers will eventually resuscitate the pummelled US housing market, Harvard University said yesterday, but in the meantime, limits on income and credit are sustaining the three-year bust.

The highest unemployment in almost 26 years, record foreclosures and rigid lending threaten to overcome emerging home sales progress despite unprecedented efforts by the Obama administration, Harvard's State of the Nation's Housing 2009 report said.

Echo boomers, the children of the post-World War Two baby boomer generation, offer a massive source of support for housing, the study said.

The generation is entering the peak home buying and renting ages of 25 to 44 and numbers over five million people more than did their parents' record-sized group in the 1970s.

'Echo boomers are larger than the baby boomer population. Couple that with immigration and you have the seeds, the possibility of a housing recovery,' Nicolas Retsinas, director of Harvard's Joint Center for Housing Studies, said in an interview.

The group will bolster demand for the next 10 years and beyond, supporting the sagging housing market even if immigration drops, the study said.

The challenges are myriad, however, said Mr Retsinas, a widely followed housing industry expert and former senior official in the Department of Housing and Urban Development.

'We have to find a way to stabilise housing finance in this country,' he said.

A healthy housing market is integral to a growing economy.

In the current cycle, the housing crash has propelled the economy into its longest recession since the Great Depression.

Jobs lost to the recession have derailed any housing recovery.

'Seedlings of the housing recovery have to come through this thicket of job losses and foreclosures,' Mr Retsinas said.

'The housing market has not seen these challenges for over 60 years.'

Mortgage rates have risen from all-time lows in the past two months despite massive government steps to keep them down.

Foreclosures escalate as federal efforts to keep borrowers in their houses cannot keep pace with loan failures caused by job losses or punishing home price erosion.

Home sales have started to pick up, thanks mostly to a first-time buyer tax credit this year of up to US$8,000 and demand for foreclosure properties at bargain-basement prices.

'While we do see some signs of stabilisation, you can barely see those silver linings,' Mr Retsinas said.

The lending pendulum swung vastly after the unsustainable five-year record home price surge early this decade.

Lenders clamped down after lax conditions spawned record home sales and then fuelled the torrent of foreclosures.

Now, more than 85 per cent of mortgage loans are created through the government and its agencies. Private lending companies either shut down or slammed on the credit brakes to prevent a repeat of major losses on flawed loans.

What happens to mortgage availability currently rests in the hands of the federal government, the report said.

But Mr Retsinas noted: 'Eventually you want a sustainable credit system, and that has to include private capital.'

The share of minority households, hurt most in the housing crisis, will rise to 35 per cent in 2020 from 29 per cent in 2005, the study projected. Those households typically have lower average incomes and wealth, and higher unemployment. -- Reuters

Simon Cheong Sells Village Centre, Again

Source : The Business Times, June 23, 2009

Property helps developer strike gold for second time

Developer Simon Cheong has pulled a rabbit out of his hat by making money from the same set of properties for a second time.

Mr Cheong's privately-held vehicle recently sold The Village Centre at Pasir Panjang and a site next door for $23 million.

The Village Centre: Mr Cheong's family vehicle sold it for $26m in 1996, bought it back for $10.8m in 2004 and sold it for $23m recently

This is double the $10.8 million he paid a NatSteel associate for the assets in 2004.

Mr Cheong's family vehicle had sold the freehold properties to NatSteel in 1996 for $26 million.

He is not the only one to have made two rounds of money from The Village Centre and the site next door.

Property consultancy group DTZ brokered the latest deal as well as the one in 2004.

In the latest transaction, Mr Cheong's Ridge Investments has sold the properties to Hume Homes Pte Ltd, a boutique property developer controlled by Ching Chiat Kwong, Low See Ching and Tee Wee Sien.

The Village Centre, at No 3 South Buona Vista Road, is a four-storey commercial and residential building comprising shop units on the first to third levels, seven apartments on the top level and 29 basement carpark lots.

The apartments are currently vacant while retail tenants include Cold Storage, Harry's Bar and Thai restaurant Lemon Grass.

About 92 per cent of the total 23,363 sq ft net lettable area for the shop units are currently leased.

The next door plot at No 7 South Buona Vista Road is currently a surface carpark with 30 lots.

The properties can be redeveloped.

Under Master Plan 2008, The Village Centre plot is zoned for commercial and residential use with a 3.0 plot ratio (ratio of maximum potential gross floor area or GFA to land area).

The next door plot, No 7 South Buona Vista Road, is zoned for residential use with a 1.4 plot ratio.

An estimated development charge (DC) of $7 million is payable to redevelop the two plots to their maximum potential.

However, there is a major road line sitting on the two sites, which means that Hume would have to make setback provisions if it redevelops the properties.

Assuming the properties are redeveloped to their maximum Master Plan 2008 potential, the $23 million purchase price reflects a unit land price of $351 per square foot of potential GFA inclusive of the $7 million DC.

There is at least one other instance in recent years of a property trader making profit from selling the same property twice.

Lippo group sold One Phillip Street, a 999-year leasehold office block, in early 1996 for $76.8 million to Kewalram Group.

Then Lippo unit Auric Pacific bought back the 16-storey office block from Kewalram in 2006 for $37.6 million.

Last year, Auric sold the asset to New Star International Property Fund for about $99 million.

CityDev Says S'pore Office Rents Stabilising

Source : The Business Times, June 23, 2009

* CityDev says launched about 500 homes for sale since Jan
* CityDev says residential market recovering well

City Developments (CityDev), Southeast Asia's second largest developer, said on Tuesday that office rents in Singapore have begun to stabilise and it had raised prices for some of its residential projects.

'We are quite optimistic the (residential) market is recovering well and we think there is lots of steam in this recovery,' Group general manager Chia Ngiang Hong said at the Reuters Global Real Estate Summit in Singapore.

Mr Chia said office rents have begun to stabilise after falling sharply in the fourth quarter of 2008 and first three months of 2009 as supply remained relatively tight.

He acknowledged there were many office projects in the pipeline but said most would only enter the market in 2011 and 2012.

Private home sales in Singapore have soared since February after a weak performance in 2008, mirroring developments in Hong Kong and China where residential markets have also recovered despite the weak economic outlook.

Mr Chia said CityDev has launched about 500 homes for sale since January, nearly double the 260 units it planned to sell in the first half of 2009. The firm also raised prices at some of its projects by 2-8 per cent because of strong demand.

According to government data, the number of units transacted in Singapore hit 1,668 units in May, just shy of an all-time high recorded in August 2007.

Mr Chia said property sales in Singapore in the five months to May have already exceeded the 4,000-plus units sold last year, and the total for 2009 should cross 10,000 units - a figure usually associated with years when the sector was booming.

Pent-up demand after last year's low volumes, an improvement in the stock market, and signs that Singapore's economy may have bottomed were all boosting interest in the residential market, he said.

Merrill Lynch, which has a 'buy' rating on CityDev, said in a report this week that Singapore's residential market has surpassed expectations and that it now expects a 'short and sharp V-shape recovery'.

CityDev is regarded as the best proxy to the Singapore property market, as it has the largest residential landbank among listed developers and owns offices and shopping malls.

The firm, which also has projects across the region as well as a 53 per cent stake in London-listed hotelier Millennium & Copthorne, posted a 50 per cent drop in net profit in the first quarter of 2009. -- REUTERS

New Projects Enjoy Strong Weekend Sales

Source : The Business Times, June 23, 2009

8@ Woodleigh drew mostly S'poreans, specu-vestors due to its location

There seems to be no let-up in home sales.

Frasers Centrepoint is said to have sold 302 of the total 330 units in its 8@Woodleigh condo since Friday. The average price of the 99-year leasehold project near Potong Pasir MRT Station is about $780 per square foot. Buyers who opt for an interest absorption scheme (IAS) offered by the developer have to pay 3 per cent more.

Selling like hotcakes: 302 of the total 330 units in the 8@ Woodleigh condo were sold between Friday and Sunday. The average price of the 99-year leasehold project near Potong Pasir MRT Station is about $780 per square foot

The 15-storey development comprises five blocks. About 40 per cent of the units are studios, two-bedders as well as apartments with two-bedrooms plus study. The remaining 60 per cent are three- and four-bedders.

The average price of a studio unit is around $400,000 while a two-bedder typically costs between $650,000 and $670,000.

The project drew mostly Singaporean buyers. In addition to attracting those who bought units for their own occupation, the project is said to have drawn a fair bit of specu-vestors.

8@Woodleigh's location next to the future Stamford American International School gives it a strong investment appeal.

'Some people bought with a view to leasing the units to expat families (for the bigger units) or to the single teachers at the school (for studios and two-bedders),' a market watcher said.

The Gale: A Facebook page for Tripartite Developers' project will be launched to help market it. It is expected to be launched to the public in July

The project is being marketed by DTZ and ERA.

Over at Devonshire Road, Allgreen Properties sold 130 units last week at One Devonshire, a 36-storey freehold condo with a total 152 units.

The average price of the units sold is understood to be $1,800 psf, assuming a normal progress payment scheme.

Allgreen is charging buyers a 2 per cent price premium for IAS. For those who opt for the deferred payment scheme, the price premium is 3 per cent.

Around 65 per cent of the 130 buyers have opted for normal progress payment. Knight Frank is marketing the development.

Chip Eng Seng group's Oasis @ Elias condo is expected to be released soon, as early as this week. The 99-year project has a total 388 units and should give some competition to City Developments' Livia condo nearby.

Over at Flora Road, in the Upper Changi area, Tripartite Developers is getting ready to launch its freehold condo, The Gale. A Facebook page for the project will be launched to help market the project.

The Gale comprises 329 units in nine blocks. The eight-storey project has a range of unit sizes, from one-bedders to four-bedroom apartments with a roof terrace.

Buyers will have the option of signing up for IAS. Buyers and current owners of a Tripartite property will enjoy a loyalty bonus (a 0.5 per cent price discount) if they buy a unit at The Gale, and a referral fee (0.5 per cent of purchase price) if they get a friend or family member to buy a unit in the condo.

Tripartite is a joint venture involving Hong Leong Holdings, City Developments and TID Pte Ltd. Hong Leong Holdings, which issued a press statement on the project yesterday, did not give an indication of pricing. 'The project is expected to be launched to the public in July,' it added.

Modest Rebound Seen In China Property

Source : The Business Times, June 23, 2009

(HONG KONG) A rebound in China's residential property market is set to continue but economic uncertainty means that sentiment will be cautious and prices nationwide will rise a modest 10 per cent between now and the end of 2010, a Reuters poll shows.

Property prices in bigger cities, where wealth levels and spending propensity are higher, will outperform second-tier cities with apartment prices in Shanghai, Shenzhen and Guangzhou set to rise by at least 10 per cent in the next 18 months.

The poll coincides with a Reuters global real estate summit.

Home sales in first and second-tier cities have jumped more than 20 per cent in the past three months, analysts said, after correcting in the second half of last year.

The market has been boosted by interest rate cuts and government measures such as stamp duty cuts and reduced mortgage down payment requirements, which are part of a broader economic stimulus plan.

'Policy is aimed at persuading people that property prices are not going to fall,' said Paul Cavey, China economist at Macquarie Securities here. 'The government is using property market reflation to boost economic growth. So it looks more likely that property prices will rise.'

Prices for some new developments in Shenzhen and other big cities are up 20-30 per cent after being discounted by as much in the second half of last year after a property bubble burst.

However, average property prices in Chinese cities in May were up 0.6 per cent from April, but down 0.6 per cent from a year earlier, according to the National Development and Reform Commission.

The market is benefiting from excess liquidity in China but analysts said that a repeat of the property bubble in 2007 - which saw some Shanghai apartment prices soar 40-60 per cent through 2007 and early 2008 - is unlikely. At that time, the economy was growing by 13 per cent annually and incomes followed suit.

This year, the economy will be hard pressed to meet the government's 8 per cent growth target - the World Bank forecasts 7.2 per cent growth - and that will make buyers cautious.

A faster-than-expected economic recovery could prompt the government to tighten monetary policy and repeal tax cuts and other incentives, while a slower economy would depress market confidence, analysts said.

'Our immediate concern is that if prices go up too sharply before the economy recovers, we could see a policy reversal and that could slow things down,' said Nicole Wong, property analyst at CLSA. 'The government wants steady (property) price gains. It doesn't want speculation.' The property market has benefited from a surge in credit this year, as the government encouraged banks to lend and spur economic activity.

However, Banco Bilbao Vizcaya Argentaria (BBVA) said that prices nationwide are overvalued by 5-10 per cent. It forecasts that nationwide property prices could dip by up to 5 per cent between now and the end of 2010.

Yields in some sectors are not that attractive: in Shanghai, for example, gross yields on mid-market flats are only 3-4 per cent, analysts said.

Still, Shanghai and southern cities Shenzhen and Guangzhou are likely to outperform because prices have fallen more than in smaller cities and supply is not so strong. Land sales in Guangzhou and Shenzhen have been limited in the past few years and auctions in the past few months have drawn record bids as the market upturn has prompted developers to snap up plots.

Prices in second-tier cities will gain about 5 per cent over the next 18 months, compared with double-digit gains in first-tier cities although Beijing is likely to lag due to a supply overhang in the capital, analysts said.

In Wuhan, Tianjin and Shenyang, ample supply will keep a lid on prices. However, analysts said that prices in Chengdu in western Sichuan province and nearby Chongqing have lagged and should see double-digit gains by the end of 2010 as they catch up. -- Reuters

UEM Land Says Property Sales Picking Up

Source : The Business Times, June 23, 2009

(KUALA LUMPUR) Malaysia's UEM Land has seen property sales picking up after a lacklustre first quarter but its goal to grow sales by 20 per cent this year remains challenging, its head said yesterday.

'It's challenging. I will not lead you elsewhere. It's tough but we have not given up,' UEM Land managing director Wan Abdullah Wan Ibrahim told Reuters in an interview.

He said that UEM Land is finalising a plan to raise RM354 million (S$146 million) via bank borrowings and is working on a phase two financing programme.

He declined to provide details or disclose the amount that the company plans to raise, saying that it is looking at various instruments. He added that UEM Land is in 'serious discussions' with four companies for development projects in Iskandar Malaysia, a government-sponsored economic zone in the southern Johor state near Singapore.

Mr Wan Abdullah's remarks came as Dubai-based Damac Properties last week confirmed that it had cancelled a RM396 million land deal with UEM Land in Iskandar.

Khazanah Nasional, the investment arm of the government, controls 77 per cent of UEM Land. -- Reuters

Techkon To Sell Units In Westech Building

Source : The Business Times, June 23, 2009

Techkon Investment is selling a new eight-storey light industrial building at Pandan Loop.

Marketing agent Colliers International said yesterday that the property - Westech Building - comprises 70 units, with sizes starting from 1,000 square feet. Prices start at $510 per sq ft (psf).

Most of the units have a column-free layout with a loading capacity of 7.5 kN per sq m to 15 kN per sq m and a floor-to-ceiling height of 4.5 m to 6.8 m.

The 999-year leasehold property has 120 parking lots and two loading bays with levellers.

Temporary Occupation Permit is expected in the first quarter of 2010.

Colliers said that the project is suitable for companies in the research and development, electronics, pharmaceutical and information technology sectors.

Ground-floor units, with full glass frontage, can be used as showrooms.

Units on the second to eighth storeys have windows that reach almost three-quarters of the way down from the ceiling.

Westech, in the West Coast area, has access to the Central Business District and other parts of Singapore via the West Coast Highway and Ayer Rajah Expressway, as well as the nearby Clementi MRT station and bus interchange.

It is also reasonably close to major business centres including International Business Park, Singapore Science Park and Jurong Industrial Park.

UK Home Prices Slip As Banks Scale Back Lending

Source : The Business Times, June 23, 2009

The cost of renting property in the country is also falling, survey shows

(LONDON) UK home sellers lowered asking prices in June for the first time in five months as banks scaled back lending and required buyers to stump up bigger deposits, Rightmove plc said.

Mortgage cost: The mortgage lenders' body cut its forecast for home repossessions this year, saying record low interest rates are helping property owners pay their bills

The average cost of a home slipped 0.4 per cent to £226,436 (S$542,380) from May, when it rose by 2.4 per cent, the operator of the biggest UK residential property website said yesterday.

Separately, business service companies will lose more than 300,000 jobs within five years, the Centre for Economics and Business Research (CEBR) said in a report.

While the Bank of England says the housing market has shown signs of stabilising, governor Mervyn King cautioned last week that the squeeze on lending may slow the economy's recovery from the worst recession in a generation. Unemployment, which rose to the highest since 1996 in the quarter through April, may also hamper a rebound in home values.

'We're very much bumping along the bottom,' said Miles Shipside, commercial director at Rightmove, in an interview with Bloomberg Television. 'Sellers are having to reduce prices to where they're getting interest. With the pick-up in sales activity, there's a narrowing of the gap between asking prices and what's actually being achieved.'

House prices fell 5.5 per cent on the year, Rightmove said. Values dropped the most on the month in East Anglia, the North and the Southeast. Prices slipped 0.1 per cent in London. They rose in the East Midlands, Wales and the Northwest.

Mortgage lenders are raising the cost of fixed- rate loans and asking for bigger downpayments. Nationwide Building Society and Lloyds Banking Group plc this month both increased the cost of their fixed-rate home loans after a jump in UK swap rates, used by banks as a benchmark for mortgage costs.

The cost of renting property is also falling, the Royal Institution of Chartered Surveyors (RICS) said in a separate report yesterday. The percentage of agents reporting declining rents exceeded those reporting higher rents by 55 points, the most in the survey's 10-year history, RICS said.

The drop in housing prices follows reports last week showing retail sales unexpectedly fell and manufacturers' export orders declined to the lowest level in a decade. Mr King said that the economy's recovery will probably be 'protracted'.

Business services in Britain such as consulting, legal firms and accountants will lose 311,000 jobs between 2008 and 2013, the CEBR said yesterday. Output in the industry will drop 5 per cent this year, the report said.

Still, more than half of UK companies said the country has reached the bottom of the economic cycle and business confidence is at the highest since 2008, a survey by KPMG showed in a separate report yesterday. A majority still said they face higher financing costs and tighter borrowing.

The Council of Mortgage Lenders yesterday cut its forecast for UK home repossessions this year by 10,000 to 65,000, saying that record low interest rates are helping property owners pay their bills.

There are other signs of a pick-up. Inflation slowed less than economists forecast in May, while surveys of manufacturing and services industries improved. Both Halifax and Nationwide Building Society reported that home values jumped last month.

UK homebuyers are clinching smaller discounts on property prices as the housing market stabilises, the RICS said on June 15.

Rightmove said yesterday that asking prices are still 6 per cent higher than in January.

'We're through the worst, but it will take a long time to recover,' Mr Shipside said. -- Bloomberg

Buyers Throng Showflats

Source : The Straits Times, June 23 2009

Frasers Centrepoint sells 302 out of 330 units at Woodleigh Close in 3 days.

BUYERS continued to throng showflats over the weekend as the craze to pick up a new home shows no signs of abating.

Within three days of its Friday launch, Frasers Centrepoint managed to sell 302 out of 330 units at its 99-year leasehold Woodleigh Close project 8@Woodleigh. The average transacted price of the mass-market project was $790 per sq ft.


The buyers' profile was overwhelmingly Singaporean - just 3 per cent were foreigners and permanent residents, said Frasers Centrepoint chief executive Lim Ee Seng.

He said the strong response took him by surprise, though he was quick to add that 8@Woodleigh had help from the improving market sentiment and strong project-specific attributes.

Apart from location - near Potong Pasir MRT station and the yet-to-open Woodleigh MRT station on the North-East Line - a major attraction was the small, affordable units, he said.

The developer had earlier tweaked the mix of bigger and smaller flats from a ratio of 60:40 to 40:60, which added an extra 30 units to the development. It also reduced the size of the larger units slightly.

About 60 per cent of the units were one- and two-bedders. Although the 400 sq ft one-bedders cost a seemingly high $930 psf to $1,070 psf, the absolute price worked out to a more appetising $370,000 to $440,000.

Buyers could be drawn to a 'speculative element', said Mr Lim, as 8@Woodleigh is next to the Stamford American International School and some buyers are hoping to rent out units to expatriate families.

Half of the buyers have HDB addresses. About a third of them are aged 30 to 39, another one-third aged 40 to 49, with 22 per cent in their 50s.

The response has been so positive that Frasers Centrepoint, which sold 50 units at a Friday special preview, will dispense with an originally planned main launch this coming weekend as under 30 - mostly three-bedders - are left.

'We will release everything to capitalise on the momentum,' said Mr Lim.

Another project, Parc Seabreeze in Marine Parade, also saw demand after it apparently brought forward its launch. It sold about 50 units over three days since Friday at prices ranging from $1,050 psf to $1,550 psf, said agents.

The price is down from $1,600 psf to $1,700 psf quoted at the preview in May last year, which drew a lacklustre response then.

Even as mass-market projects did well, the upper-mid market also appears to be flourishing.

Investors have been flocking to the 152-unit One Devonshire in the Killiney Road area, with 130 units sold so far at an average price of $1,800 psf since a special preview over a week ago.

The recession-defying market exuberance has led some analysts to question its sustainability.

HSR Property Group executive director Eric Cheng said the buying interest stems from those afraid to lose out. Some people also made money in the stock market, while HDB valuations have been rising, boosting confidence in the market, he said.

But 'it's still a buyers' market', said Mr Lim. Though there is demand, buyers are selective.

With more competition amid the financial crisis, developers have taken to working with more property agencies to market their projects.

Instead of just one as was the norm during the 2007 boom, they now work with two or three agencies to ensure a wider reach, said Mr Cheng.

Mr Lim said the company did a pre-marketing test or survey about three months before the launch of its Jurong project Caspian. The wider the reach, the greater the chance of success in getting buyers hooked.

And that is what Hong Leong Holdings hopes to achieve by launching a page on social networking site Facebook to market its 329-unit The Gale in Upper Changi. It said this will enable them to disseminate information to Web-savvy property watchers and to engage with a wider audience.


8@Woodleigh : 302 out of 330 units at the 99-year leasehold project sold since Friday. The average transacted price was $790 per sq ft.

Parc Seabreeze: Sold about 50 units over three days since Friday at prices ranging from $1,050 psf to $1,550 psf, said agents, down from $1,600 psf to $1,700 psf.

One Devonshire: 130 units out of 152 sold at an average price of $1,800 psf since a special preview over a week ago.