Office Rents In Singapore On Upward Climb: Property Firms

Source : The Business Times, February 22, 2008

THE occupancy cost for office space in Singapore is now higher than in Hong Kong, according to a new report.

Data from property firm CB Richard Ellis (CBRE) show that total occupancy cost here hit US$10.42 per square foot per month (psf pm) at the end of 2007.













By comparison, total occupancy cost for Hong Kong was US$9.74 psf pm at the end of last year.

Total occupancy cost reflects base rents as well as other property-related expenses such as management fees and property tax, according to CBRE.

Prime office rents in Singapore rose 19.1 per cent in just the fourth quarter of 2007, CBRE's report said. For the entire year, office rents rose a staggering 92.3 per cent.

'Competition for pockets of vacant space in the central business district (CBD) remained intense, and several expansion transactions towards the end of the (fourth) quarter suggested that demand may be sustained,' CBRE said.

In response to the report, the Urban Redevelopment Authority (URA) pointed out that CBRE represents just one viewpoint.

A recent Cushman & Wakefield (C&W) report, for example, said that office occupancy cost for prime office space in Singapore was US$10.80 psf pm in end-2007, much lower than the US$19.90 psf pm in Hong Kong.

The discrepancy between the two sets of data was due to the fact that CBRE considers office space in Hong Kong's CBD as well as other areas outside the city centre when compiling office occupancy cost data for Hong Kong - while C&W only considers Hong Kong's CBD. Both firms look only at Singapore's CBD when calculating occupancy cost here.

Separately, property firm Savills - which said that office rents in Singapore are close to Hong Kong's at present - predicted that rents here could increase by another 15-20 per cent this year.

Office rents in Hong Kong, on the other hand, are expected to rise by a slower 5 per cent in 2008, said Simon Smith, Savills' head of research and consultancy. He expected rents in Singapore to overtake rents in Hong Kong sometime this year.

Mr Smith also said that luxury home prices in Singapore will climb 8-12 per cent this year, after jumping about 50 per cent in 2007.

Quieter Property Market But Outlook Favourable In Long Run

Source : The Straits Times, Feb 22, 2008

THE real estate roller coaster that developers have ridden in recent years has taken a sharp turn, thanks to United States sub-prime woes, and left the industry wondering what is coming next.

'Six months ago, we were concerned about the market exuberance,' said Mr Simon Cheong, the president of the Real Estate Developers' Association of Singapore (Redas), yesterday. 'These coming six months, we will be wondering when the market will turn around.'

After an exceptional year of strong prices and sales, the sector has slipped into the doldrums, with buyers and sellers taking cover from the onslaught of a global economic uncertainty, America's sub-prime mortgage crisis, stock market turmoil and escalating building costs.

Mr Cheong told a Redas Chinese New Year lunch: 'Though Asia's economy has a strong buttress - China - the temporary effect of weak sentiment from sub-primes will affect buying for at least the first half of this year.'

Sellers are also lying low, with developers delaying launches and pushing back project completion dates amid the construction squeeze.

Building costs have climbed at an 'unprecedented rate', added Mr Cheong, who is also chairman and chief executive of SC Global Developments. 'What is clear is that developers are bearing the brunt of higher construction costs. Something's got to give eventually.'

Developers will have to factor in high construction costs when they replenish their land bank, he said.

However, in the longer run, the market outlook is favourable, considering the Singapore economy's sound fundamentals.

'Rental yields will eventually dictate and underpin what capital values will be for property,' said Mr Cheong. The expected slowdown in supply will support the rental market.

Minister of State for National Development Grace Fu told the media during the lunch that the market may be quiet, but prices are firm while demand for commercial property is still resilient.

Those sentiments were echoed by consultancy Savills Singapore, which expects the office sector to stay buoyant.

Deputy managing director Simon Smith told a press conference that average prime rents should match Hong Kong's by the second quarter and surpass them by year-end.

This is because Hong Kong will see a lot of new supply coming onstream this year while Singapore's supply will remain tight in the short term, he said.

But higher rents in Singapore may not be enough to push businesses to Hong Kong. 'Many clients we see switching between the cities tend to do so because of strategic reasons rather than cost reasons,' said Mr Smith.

Property Sector Braces For Tougher Times In 2008

Source : The Business Times, February 22, 2008

Players feel squeeze from more credit woes and soaring construction costs

THE property market in Singapore is set to face a challenging year ahead as it continues to take hits from the sub-prime crisis in the United States and rising construction costs, industry body Real Estate Developers' Association of Singapore (Redas) said.

'Unfortunately, the sub-prime woe continues to hog the headlines,' saidRedas president Simon Cheong, during Redas' annual Chinese New Year celebration yesterday. 'Six months' ago, we were concerned with the market exuberance. This coming six months, we are wondering when the market will turn around.'

Construction cost is also spiralling upwards at an unprecedented rate, Mr Cheong said.

The property market's expected slowdown comes on the back of an exceptionally good 2007. Last year, a record-breaking 14,800-plus residential units were sold, the office occupancy rate hit 93 per cent and the hotel sector saw a occupancy rate of 87 per cent.

But this year, with more write-downs for sub-prime exposure expected from major financial institutions - which could affect home prices and demand here - and high construction costs affecting margins, developers are bracing themselves for tougher times ahead.

'We are concerned that construction costs have gone up so sharply and squeezed (developers') profit margins so much that a small decline in the the final selling price will affect developers severely,' said CB Richard Ellis' chairman for Asia, Willy Shee. 'A small increase in construction cost and a small decline in selling price will put developers in a very difficult situation.'

Minister of State for National Development Grace Fu, who was guest-of-honour at Redas' event yesterday, similarly said that the property market's prospects are dependent on how the sub-prime crisis is going to affect sentiment in the region.

Mr Cheong believes that the market will 'get some traction back' in the second half of this year.

Interest rates in Singapore are at a record low, which will encourage home ownership, he said. And the influx of expatriates at all levels coming to Singapore - on the back of an anticipated office supply of 15 million sq ft over the next three to four years - will also provide a boost to the property market, Mr Cheong said.

'Removal of estate duty also helps,' said Chia Ngiang Hong, Redas' first vice-president and group general manager of City Developments. 'The super-rich will focus on Singapore again.'

Analysts, worried about developers' prospects for this year, are already starting to recommend that investors put their money into the more diversified property companies and/or switch to real estate investment trusts (Reits).

'In the current volatile market environment, we recommend stocks of listed property companies with strong balance sheets offering multiple-sector presence and geographical diversification,' said UOB Kay Hian analyst Vikrant Pandey. Citigroup analyst Wendy Koh said: 'In the light of the current uncertainties, we retain our preference for Reits over the developers.'

Maybank's Home Loan Promotion Creates A Buzz

Source : The Business Times, February 22, 2008

Other banks won't get into price war, says OCBC's chief executive

Maybank's promotional home loan package has apparently drawn massive interest from new home buyers and home owners looking to refinance.

But at least one bank here has come out to say that this is unlikely to spark a mortgage price war in Singapore.

Maybank told BT that since the launch on Tuesday till end of Wednesday, the bank had received more than 1,500 inquiries at its call centre and branches. 'We have received close to 200 applications just for one and a half days,' said Helen Neo, head, consumer banking, Maybank Singapore.

She added that there is an equal split of applications for refinancing and new purchases and most of the applications are for private property home loans.

However, she said the promotion is not likely to be extended.

The low rates apply to those taking a loan amount of $300,000 and above and for owner-occupied properties.

On Tuesday, the Qualifying Full Bank slashed its three-year fixed home loan rates from 3.58 per cent for all three years to 1.68 per cent for the first year, 2.68 per cent for the second and 3.38 per cent for the third year. Maybank's new first-year interest rate is about 40 per cent lower than similar packages being offered in the market.

'We expect this promotional package to bring in new home loan customers. With this very attractive package, we do expect to meet the target we set,' said Ms Neo.

In response to Maybank's mortgage rate cut - which he referred to as a 'fire sale' - David Conner, OCBC Bank's chief executive, said banks are unlikely to be dragged into undercutting each other on rates.

'We're not likely to see a big price war with the mortgage portfolio,' said Mr Conner at yesterday's OCBC results briefing. 'We should see pricing firming and not deteriorating.'

He noted that most big multinational banks are strapped for capital and that credit spreads are rapidly rising. 'We have to be more careful with our pricing,' he said, adding that Singapore still remains one of the cheapest places to get a mortgage.

He noted that Singapore's interest rates are low today because the strengthening of the Singapore dollar - designed to stave off inflationary pressure - has attracted liquidity into the market.

He said the strengthening of the currency should slow down in the second half of the year, and liquidity will ebb as people move to other foreign currencies. This will bring down interest rates.

He added: 'Banks do better if interest rates are in the 3, 4 or 5 per cent range.'

DBS Bank had earlier said it has 'no plans to adjust rates' for now, while United Overseas Bank and HSBC both said they would monitor the situation before making a decision.

Citibank and Standard Chartered shied away from saying if they will review rates, but pointed to their Sibor packages, which they say give customers control in repricing loan packages.

Meanwhile, banking industry insiders said that fundamentals of the property market are still there, and that even with talk of the industry demand softening there was no panic selling.

They added that valuations for home prices have not come down and that there is still buying activity among the middle markets.

Singapore's Olympic Dream Comes True

Source : The Business Times, February 22, 2008

It wins right to host YOG 2010; SMEs poised to ride branding boom

Shortly after 7pm yesterday, the Padang erupted.

The two-horse, Moscow-versus-Singapore race to host the very first Youth Olympic Games (YOG) in 2010 had just seen Singapore breast the tape first, and everyone - from the Prime Minister to the other VIPs present to the business community and the thousands of schoolchildren - let their emotions show.

'We dared to dream, we worked hard to pursue our dream despite the odds. Now that dream will become a reality,' said Prime Minister Lee Hsien Loong to the cheering crowds who had seen the announcement broadcast 'live' on a giant screen.

'It will be the first time that the Olympic flame will be in South-east Asia and in Singapore. We will be the focus of a new era for sporting development for South-east Asia and Singapore,' PM Lee added.

Small and medium-sized enterprises (SMEs), in particular, can stand to benefit from the hosting of the YOG.

Parliamentary Secretary for the Ministry of Community Development, Youth, and Sports, Teo Ser Luck, emphasised that the YOG would be a platform to help local companies, possibly through second-tier sponsorship.

'Olympics is a big brand name. The main sponsors of the Olympics are global brands. What I hope to do is to have the YOG to bring up the brand awareness of our local companies, especially the SMEs,' he said.

The win comes after seven months of stiff competition. The initial list of 11 cities was whittled down to two before Singapore pipped Moscow thanks to its top-notch infrastructure, strong governance and security.

The next step for Singapore is to set up an organising committee, which is expected to include people from both the government and private sector. Ng Ser Miang, the International Olympic Committee member from Singapore, is expected to chair the committee.

Elim Chew, president and founder of 77th Street, who has been rallying business associates to show their support, told BT that she had been confident that Singapore would win. 'We reflect what Olympism is about - youth, spirit and community. The whole nation played a part. In the last one month, the atmosphere really built up,' she said, adding that the economy would reap rewards. 'It is important to build up Singapore businesses as it goes back to the economy.'

In recent months, over 700 companies have come forward to back Singapore with whole-hearted support and raise awareness through banners, videos, websites and car decals.

The YOG, which will be held in August 2010, is expected to welcome some 5,000 athletes and officials and will offer contests in 26 different sports.