Friday, July 17, 2009

Horizon Brightens For Property Groups

Source : The Business Times, July 17, 2009

THE outlook is more sanguine, as listed property developers get ready to announce their financial results for the six months ended June 30. The strong pick-up in private home sales in the past five months - and a nascent recovery in prices - is providing cheer, contrasting with the gloom that lasted until the early part of 2009 after the financial meltdown.

ION Orchard: An amendment to FRS 40 requiring investment properties under construction to be valued could have bottomline implications on developers of projects like ION Orchard

JP Morgan analyst Christopher Gee is tracking 'if developers' own outlooks and strategies have changed as a result of the upturn in home sales and general economic prospects'.

Against a brighter horizon, some concerns prevalent among property analysts six months ago have lessened. The pressure on developers to write down the values of their Singapore residential sites has abated. So too has the risk of buyers who bought on deferred payment schemes (DPS) not completing their purchases.

'The secondary market is getting more active, so it should be easier for DPS buyers to sell their properties before the projects receive Temporary Occupation Permit,' says DMG & Partners Securities analyst Brandon Lee.

Macquarie Securities research head Soong Tuck Yin says an interesting development to watch out for is an amendment to Financial Reporting Standard FRS 40 requiring that investment properties under construction be valued, and the increase or decrease be taken to the income statement.

The change took effect at the start of this year, and with many major listed companies doing valuations at half-year and full-year, there could be bottomline implications for the likes of CapitaLand for its ION Orchard mall and Vista Xchange at one-north for instance; and Keppel Land for its Ocean Financial Centre and Marina Bay Financial Centre projects, Mr Soong suggests.

Before the rule change, these companies were required to state only their completed investment properties at fair value. KPMG Singapore's head of real estate Yap Chee Meng explains: 'In the past, investment properties under construction were carried at cost unless there was impairment. Financial Reporting Standards now require these to be fair-valued where the fair-value model is used for investment properties, and where the fair value can be reliably determined.

'For Singapore, this was effective from Jan 1, 2009. I would expect property companies to start reflecting it in their income statements from this current reporting season (the quarter ended June 30), as property companies normally revalue their investment properties once or twice a year.'

Analysts say City Developments' bottom line is unlikely to be affected by the change to FRS 40 as it currently accounts for all its investment properties using the cost model.

For other listed developers that use the fair-value model, there is also the issue of how aggressively they will write down valuations of completed investment properties, particularly office blocks. 'Asset write-downs, especially for commercial assets, have not materialised in a meaningful way,' says CIMB-GK analyst Donald Chua. 'With rents and occupancies falling, it will be interesting to see if property groups devalue their assets more aggressively this reporting season.'

Mr Gee, however, notes that the policy of stating investment properties, completed or otherwise, at fair value affects a developer's accounting bottomline - but does not have any real cashflow impact.

As for profit from residential projects, Mr Soong says that strong home sales by developers lately will translate into profits to be recognised, although for projects in the initial stage of construction, earnings may be booked only in the current second half or next year.

CIMB-GK's Mr Chua expects developers' latest report cards to show declines in gearing ratios. Some of the bigger boys have recapitalised through rights issues, he says. Smaller players should also be able to use proceeds from strong home sales recently to pare debt.

A key thing to monitor in H2 is whether residential sales momentum continues. Mr Chua is keeping tabs on 'prices and take-up rates at the high end and the level of foreign demand, especially as we draw closer to the opening dates of the integrated resorts'. 'It may be interesting to see if projects on Sentosa Cove are released closer to the end of the year.'

Home buyers defaulting on purchases or returning options issued on high-end projects sold in the past month will also be on his watch-list.

DMG's Mr Lee expects developers to launch more mid and prime sector projects in H2 and to start buying residential sites again, 'especially those with drying land banks'.

JP Morgan's Mr Gee said stockmarket investors are looking out for sustained increases in physical property prices and upgrades in revalued net asset values for listed property groups.

Push To Certify Agents

Source : The Straits Times, July 17, 2009

THE real estate industry is stepping up the fight to get all the 30,000 or so property agents in Singapore properly trained and certified as soon as possible, in the aftermath of several highly-publicised 'rogue agent' cases.

The SAEA, one of the bodies that regulates property agents, is pushing for at least all "active" agents - about half the total number - to take an examination by the end of the year. --PHOTO: ERA REALTY NETWORK

The Singapore Accredited Estate Agencies (SAEA), one of the bodies that regulates property agents, is pushing for at least all 'active' agents - about half the total number - to take an examination by the end of the year.

There are two examinations: the Common Examination for Housing Agents (Ceha), which costs about $320, or the lower-level Common Examination for Salespersons (CES), which costs $200. The latter, introduced last year, is the basic exam for agents, while the former is for agents who 'have ambitions to become agency bosses', said SAEA's chief executive Dr Tan Tee Khoon.

As an incentive, SAEA has managed to get the Workforce Development Agency (WDA) to fund part of the course fees for the CES, which amount to about $350. WDA will pay about 80 or 90 per cent of the course fee, said Dr Tan in a press conference on Friday.

But the nine property agencies that are accredited by SAEA - which include big employers such as PropNex, ERA, HSR and Dennis Wee - have said they will try to get at least all their active agents to take the exams. Some, such as HSR, will subsidise the remaining course fees not paid by WDA.

For agents who want to go a step further, SAEA is also tying up with Ngee Ann Polytechnic to introduce a new Certificate in Real Estate Marketing. The six-month course is targeted to start in November this year.

SAEA's actions come after the Government expressed concern earlier this year about the unethical and ignorant practices of some housing agents in Singapore.

In March, Minister for National Development Mah Bow Tan said the current situation of self-regulation is 'not tenable'. Each property agency controls their own agents, and there is nothing preventing unaccredited agents from doing business.

The Government has also said it is considering tightening the rules governing property agents, including compulsory licensing of all individual real estate agents.

CDL Launching Balmoral Rd Condo Project

Source : The Business Times, July 17 2009

Preview of 437-unit Waterfront Key at Bedok Reservoir likely today too.

AFTER holding on to its Garden Hotel property at Balmoral Road for 10 years, City Developments Ltd (CDL) is finally launching an 85-unit condo project on the site.

A preview for staff and directors began yesterday, while sales to invited guests are slated to begin today.

Waterfront Key is a 99-year-leasehold condo with 437 units. Prices had not been finalised by last night, but market watchers reckon the cue will be taken from current pricing for Waterfront Waves next door, which they are selling at $680-$700 psf on average.

The average price of the 12-storey freehold condo Volari@Balmoral is understood to be about $2,000 per square foot (psf) for early birds. Market watchers say this is about 20-25 per cent below peak 2007 prices in the location.

The condo comprises two, three and four-bedroom units and penthouses. The two-bedders are about 1,325 sq ft, and based on the $2,000 psf average price, the lump sum investment would be about $2.7 million.

At Bedok Reservoir, Far East Organization and Frasers Centrepoint are expected to preview Waterfront Key today to staff, business associates and buyers who have registered interest.

Waterfront Key is a 99-year-leasehold condo with 437 units. Prices had not been finalised by last night, but market watchers reckon the cue will be taken from current pricing for the developers’ Waterfront Waves next door, which they are selling at $680-$700 psf on average.

The 405-unit condo, released early last year, is 78 per cent sold.

Back at Balmoral Road, it has been a decade-long wait for CDL, which bought Garden Hotel in June 1999 for $108 million from Kechapi Pte Ltd, controlled by the Chua family that once controlled Cycle & Carriage – now known as Jardine Cycle & Carriage. Garden Hotel comprises two four-storey wings. The original building was built in the early 1970s and the other wing was completed in 1983. The show suite for the Volari condo that CDL will develop on the site is on the fifth-floor rooftop of Garden Hotel, which is still operating but is likely to shut later this year. Garden Hotel has a site area of 102,200 sq ft.

Have Train, Will Reside

Source : The Straits Times, July 17 2009

Looking for flats with high resale value and rental potential? Check out these key considerations.

It doesn’t matter if you’re black or white. And it doesn’t matter if you reside in Neverland or Disneyland. (You probably won’t need to worry about property/financial issues if you own just a fraction of said places; but that’s another story.) As long as you’re based in Singapore, you should instead be asking this question when it comes to acquiring a house: is your dream abode located close to an MRT?

• The reason for this is because there is generally a greater demand for homes near MRTs & LRTs. These apartments can respectively cost five and 20 per cent more than those that are 15 minutes’ walk away.

• The price also goes up by another 5 per cent if the flat is located near interchange MRT stations that serve more than one line, such as Bishan MRT that serve the North-South and North-East directions (via the Circle Line). Units at the estate usually command the biggest premium as residents are paying more for the convenience, accessibility and shorter travelling time.

• In addition, when it comes to selling these units when the property market is soft, they will fetch a higher price as compared to those situated in outlying areas. The same applies to the rental market. A good location means that the value of the place will hold better in the long run.

But on the other hand, there are others who feel that such premiums are overrated.

• While some believe that living near an LRT is akin to living near a feeder bus stop and that as more stations are built; there could be a downward effect that balances out the premium and not all home-seekers will be keen to pay the extra sum after all.

• And for those who value quality of life, the construction of an MRT station – with dust, noise, detours and all - could take a few good years to complete. These people may not view the pot of gold at the end of the rainbow as an incentive if they have to face numerous storms prior.

It all boils down to what you value in a property.

The MRT aside, there are also other factors one should consider before putting down that deposit for a flat:

• Choose a higher floor. They are easier to sell because it's windier and usually has a better view.

• Avoid the afternoon sun. No matter what they say about how certain glass can reflect heat, the heat will still get into the flat.

• Look out for amenities nearby, such as markets, shops and schools.

• Choose a flat near the city or in a more matured estate. The premium for a location near Ang Mo Kio or Toa Payoh could outset one that’s near an MRT but in a far-flung area such as Boon Lay.

Use these points as a guide when you embark on your home search trail and may you locate your very own Neverland or Disneyland right here in Singapore.

For Them, A 25-Year Love Affair

Source : TODAY, Jul 16, 2009

And more than $1 million later, they wouldn't have it any other way

MR MASAMITSU Okada has been living in Singapore for the last 25 years. But instead of renting or buying a home, the Japanese expatriate has chosen to live in the same Ascott Somerset Liang Court serviced apartment for a quarter of a century.

Mr Masamitsu Okada and Mrs Okada, long-time residents of Somerset Liang Court.

Not that housing is paid for by his company, as this benefit ceased 12 years ago when he retired from auditing firm Deloitte. Since then, he has been running his own business consultancy here - and footing the bill for 13 years' worth of serviced apartment rates on his own. Seems like an eye-popping splurge? Mr Okada, 77, concedes just as much.

"I could've bought a house and be a millionaire now!" he told Today, laughing.

The fact is, he hadn't expected to remain in Singapore for so long when he first arrived in 1985. "I would've bought a home here if I had a long-term plan from the beginning - but I didn't."

For contractual reasons, his room rates cannot be disclosed. But according to the Singaporean company's website, a 30-day stay at Ascott Somerset Liang Court starts at well over $7,700 currently. At face value, this would amount to a total of over $1.1 million over the course of 12 years.

However, since it is not unusual for serviced apartments to give a discounted lease rate to long-staying guests, we can safely assume that Mr Okada paid less than $1.1 million - especially since current room rates are higher than they were years ago including during the property bull run of 2006 and 2007.

Even so, all that money could have helped Mr Okada own a piece of private property, and possibly in a prime location, here.

Any regrets? They didn't show. The Japanese professional is so taken with his Ascott lifestyle that he has no plans to move out of the comfortable two-bedroom apartment.

Equipped just like a regular apartment, with a kitchen and separate living and dining areas, serviced apartments aim to evoke a sense of home but without the hassle of cleaning, as housekeeping services are provided. It may even be better than home for the long-staying traveller, with its condominium-like facilities, such as swimming pools and playgrounds, and hotel-like services such as laundry and even babysitting.

"It's very secure and I feel very comfortable here, the people are friendly," said Mr Okada.

His wife also appreciates being able to go grocery shopping at a Japanese supermarket next door.

Watching their lifestyle, a few of their Japanese expatriate friends living in regular housing here have actually become converts to Ascott's serviced apartments over the years.

It is due to residents like the Okadas that the serviced apartment industry has been showing resilience amid uncertain economic times.

Ascott, which owns nine serviced apartments or 980 units in Singapore, reports an occupancy rate of about 90 per cent. "Travellers and companies increasingly prefer serviced residences," said Ascott Hospitality's chief executive Gerald Lee.

Similarly, competitor Frasers Hospitality has reported healthy occupancy despite the downturn and has its fair share of guests who stay for years on end.

Companies have taken a liking to the concept with the flexible leases and better value for money. "Instead of putting up their employees in a room at a hotel, more companies are choosing two- to three-bedroom serviced apartments," Mr Lee said. "In this way, their employees will still have the privacy of their own room within an apartment, at a fraction of the cost compared to staying at separate hotel rooms."

Then, there is the human touch. The Okadas are familiar to the Ascott employees. Likewise, Mr Okada tends to recognise staff who have relocated from Ascott Somerset Liang Court to other Ascott developments in other cities around the world.

He said: "I miss this place when I'm back in Japan."

Roxy-Pacific Takes A Wait-And-See Attitude

Source : TODAY, Jul 16, 2009

The chief executive of property group Roxy-Pacific, Mr Teo Hong Lim, seems unmoved by the ongoing bull run in the property market. He is not in a hurry to join in the fray with new project launches. "It seems very strong and has caught many industry players off guard, I don't know when this window of opportunity will close," he told Today.

Mr Teo Hong Lim, executive chairman of Roxy-Pacific Holdings.

So although the developer's strategy is to buy a plot of land and launch the property on it in six to nine months so as to ride on buying trends, it is now taking a wait-and-see attitude to new projects.

In fact, the Mainboard-listed developer has no land bank after launching nine residential projects since Jan 2008.

Some of the company's revenue drivers are its latest projects, Nova 48 and Nova 88 in Balestier, which sold out recently five-and-a-half months following its launch. The developer's units usually sell out three months after launch.

Roxy-Pacific usually sets a 15-per-cent profit margin for its developments and in this case both projects, Nova 48 and Nova 88, sold for an average price of $888 per square foot. "We do not have phased launches, we always price them right to sell 100 per cent so that we can take the profit in cash," said Mr Teo.

A project that "drags on" into phases also risks the scenario of buyers losing interest, he added.

Despite its reservations about the property market, Roxy Pacific said it will continue to look and to buy land "if the price is right" and the firm is regularly in talks regarding several plots of land.

A Recovery, Or A Bubble?

Source : TODAY, Jul 16, 2009

Speculators or upgraders behind June's record high

THE last time figures were anywhere near as high was the peak of the property boom in Aug 2007.

A surge in momentum in the stock and property market, already on an upward trend, last month saw private home sales by property developers hit a new high of 1,825 units.

But is this an accelerating recovery based on real fundamentals, or a developing bubble driven by speculative euphoria?

One sign that the confidence of the Singapore consumer has not returned in force is the continued weakness in the retail sector, where sales fell for an eighth straight month in May.

May's sales index dropped 10.3 per cent from a year earlier, after sliding a revised 11.4 per cent in April, said the Singapore Department of Statistics yesterday.

So, why the rush to spend on property - and by whom?

Market watchers believe speculators are back in force, akin to the situation during the heady days some two years ago, though whether they pose a risk to the market yet remains to be seen.

Colliers Ms Tay Huey Ying, director for Research and Advisory noted "elements of speculative purchases although this has yet to reach a level that warrants concern".

Industry veteran Nicholas Mak said it's too early to say, as the strong buying sentiments have just kicked in. "You can't tell if the buyers are holding onto the properties, are going to flip them or are going to live in them."

Generally, analysts attribute the strong sales in June to improved sentiment, growing risk appetite and pent-up demand from home-buyers.

The narrow price gap between non-prime private residential projects and HDB resale flats, too, is likely to have tipped the hand of many HDB upgraders, while PropNex chief executive Mohamed Ismail cites the factors of "developers pricing units attractively and a relatively low bank financing rate".

Jones Lang LaSalle's Head of Residential Jacqueline Wong noted the return of interest "from foreign buyers seeking opportunistic buys", with increased requests "to source for properties in prime areas from buyers in India, Hong Kong, Indonesia and Europe".

The star development last month with the highest sales transaction was mid-priced condominium 8@Woodleigh, which saw 330 units going for a median price of $804psf.

Notably, more expensive projects in prime districts also saw better take up rates.

CBRE Research's executive director Li Hiaw Ho noted the return of high-end transactions in excess of $2,000 psf.

"While there were only slightly over 20 such high-end transactions, compared to less than 10 in May, it is a sign that there are high-net-worth individuals out there who are prepared to buy investment-grade properties despite uncertainties in the economy," he added.

A unit in the Ritz-Carlton Residences, for example, was sold at $3,404 psf while another in The Orchard Residences was sold for $3,299 psf. And seven units at The Orchard Residences were sold within the price range of $2,700 psf-$3,299 psf, noted Mr Li.

Should the economy continue to strengthen, the overall take-up rate for the year could hit 12,000 to 14,000 new homes, just under 2007's record, said Mr Li.

Worst Seems To Be Over For Asia, Says Hng Kiang

Source : The Business Times, July 16, 2009

Minister's remarks come ahead of Apec meeting

The worst may seem to be over for economies across Asia, but a recovery in trade will be some way off, said Trade and Industry Minister Lim Hng Kiang.

'We don't expect trade flows to be restored to previous levels . . . until the later stages,' he told reporters yesterday, noting that trade tends to contract far more sharply than the general economy in a downturn.

He was speaking ahead of a two-day meeting here next week of Asia-Pacific Economic Cooperation (Apec) trade ministers. The meeting is one of several in the run-up to the main Apec ministerial conference in November which Singapore - as the current chair of the 21-member group - will be hosting.

The Apec trade ministers will review their responses to the economic downturn and see what else can be done to spur recovery. Another key job is to ensure - as far as possible - that protectionism does not rear its head and further impede trade.

It's 'very natural' that domestic pressures to protect local industry and save jobs mount during a downturn, Mr Lim said.

But Apec leaders at their Lima, Peru summit last year had come out strongly against protectionist sentiments, saying that there should be a standstill in measures that effectively thwart trade or investment flows.

'What we need to do is to shine the spotlight on some of these measures and put peer pressure on one another to abide by our leaders' exhortations not to succumb to protectionist pressures,' Mr Lim said.

But there could be 'grey areas' - for instance, if calls to 'buy local' are mere urgings without any clear discriminatory effect against imported goods.

There has to be a collective will not to embark on tit-for-tat measures, and a political will to resist domestic pressures, he said.

The Apec trade ministers will also focus their minds and efforts to restarting the stalled Doha Round of trade talks. World Trade Organization chief Pascal Lamy will be on hand to update the ministers on developments in this area.

Asked about his view on the US stance on free trade, Mr Lim said that he found, from a visit to Washington in June, that the Obama administration has a 'very ambitious, very crowded' domestic agenda, with big-ticket items such as healthcare reforms and energy initiatives, on top of dealing with a crisis.

In such circumstances, 'how do you sell the trade story?' Mr Lim said. There isn't a 'very natural constituency' that would rally behind calls to keep the trade borders open, yet the US must keep global free trade on its agenda, he said. 'This is something we're watching.'

Not least, the Apec trade ministers convening here next week will also seek to move forward on regional economic integration, which would be one solution towards overcoming the global economic crisis.

Apec has long explored as a long-term goal the prospect of a Free Trade Area of the Asia-Pacific (FTAAP).

US Foreclosure Rise 15%

Source : The Straits Times, July 16, 2009

WASHINGTON - THE number of Americans on the verge of losing their homes soared by nearly 15 per cent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.

A Florida home fallen into total disarray after foreclosure is seen in May 26, 2009. US foreclosure filings were up nearly 5 per cent from May. -- PHOTO: AP

The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released on Thursday by foreclosure listing service RealtyTrac Inc.

The data show that, despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out US$50 billion (S$72.7 billion) in subsidies, America's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.

Foreclosure filings rose more than 33 per cent in June compared with the same month last year and were up nearly 5 per cent from May, RealtyTrac said.

'Despite all the efforts to date, we clearly haven't got a handle on how to address the situation,' said Mr Rick Sharga, RealtyTrac's senior vice president for marketing.

More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm's report. That works out to one in every 380 US homes.

It was the fourth-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.

On a state-by-state basis, Nevada had the nation's highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.

The Obama administration in March launched a US$50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it's off to a slow start.

As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to US$18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn't having much of an impact. 'The plan isn't going well, at least not yet,' said Mr Mark Zandi, chief economist at Moody's 'It's a creative plan with lots of incentives, but it's very complex.' -- AP

BoA modifying 80,000 home loans

IN TESTIMONY prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren't in the three-month trial phase yet.

'We have achieved this level of success by devoting substantial resources to this effort,' Mr Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.

'They've been slow to make sure they understand it and put all the processes and people in place,' said Mr Joel Lewis, vice president of financial services at Convergys Corp, which runs call centers for the financial industry and other companies.

A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to 'devote substantially more resources to this program for it to fully succeed.' They also summoned mortgage executives to a July 28 meeting with top government officials.

Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Mr Bill Kelvie, chairman of Overture Technologies in Bethesda, Maryland.

'They need to automate the process, and they need better technology, and they need to do this quickly,' he said. -- AP