Source : TODAY, Thursday, March 27, 2008
Land above station will feature an amphitheatre and a F&B pavilion
THE vacant state land above Dhoby Ghaut MRT station will soon offer more than just a convenient access point for pedestrians making their way from the station to the surrounding malls.
The Urban Redevelopment Authority (URA) has unveiled plans for the site to be home to a new open space that will play host to community events and performances.
It will feature an outdoor amphitheatre and a food and beverage (F&B) pavilion.
The development of this open space, which is in line with the URA’s Public Spaces and Urban Waterfront Master Plan, is slated for completion by the first quarter of next year.
The design for the space was conceptualised by SCDA Architects’ Chan Soo Khian, who clinched the “Designer of the Year in Architecture and Urban Design” title in 2006.
Mr Chan said the 300-seat amphitheatre will have several unique features.
“We’ve sunken the amphitheatre down and the user actually walks down gentle descending ramps, and in the evening, this will be dramatically lit.
“And from an exterior point of view, I think the flaring, spiralling screens reach out towards the landscape and provide a visual barrier to the heavy traffic along Penang Road,” he added.
The URA will implement the construction plans for the open space and the National Parks Board will oversee its maintenance and programming.
Thursday, March 27, 2008
Fund Tops Serangoon Site Tender With $801m Bid
Source : The Straits Times, Mar 27, 2008
Located above MRT station, it will be used for a mall and new bus interchange.
THE sleepy Serangoon area received a huge vote of confidence yesterday when a fund bid a sky-high $800.9 million for a land site, which will be used for a mall and a new bus interchange.
Six hopefuls lined up for the 99-year leasehold plot above Serangoon MRT station with four bidding over $660 million - well above the figure some people in the property industry thought the plot would attract.
The $800.9 million bid came from Pramerica Real Estate Investors (Asia) but was submitted under the name Gold Ridge. It reflects a price of $850 per sq ft (psf) of gross floor area.
This was 10 per cent above the second bid of $727 million from Serangoon Community Developments. Another bid came in at $401 million and one was a distant $215 million.
The site - launched by the Land Transport Authority - is destined to be a hub with Serangoon MRT serving as a junction station for the new Circle Line. Any development must include a new bus interchange integrated with the enlarged North-East and Circle Line stations.
The strategic location also offers enormous retail opportunities, say property experts.
‘Serangoon Central is not a heavy residential area but there are no major malls within a 3km to 5km radius,’ said Mr Danny Yeo, Knight Frank’s deputy managing director.
‘A mall can be a regional centre. The only tricky situation is that there can only be slightly over 200 carpark lots.’
Pramerica intends to build a full retail centre. It manages the Asian Retail Mall Fund I and II, which own several malls here, including Liang Court in River Valley, White Sands in Pasir Ris and Century Square in Tampines.
The Serangoon mall could have a net lettable area of around 600,000 sq ft, said CBRE Research executive director Li Hiaw Ho.
That would make it of similar size to Parkway Parade in Marine Parade and IMM in Jurong.
The plot is designated a white site, meaning it can be used for different functions, such as residential or commercial, but a full retail mall would bring the highest profit margin, said Savills Residential director Ku Swee Yong - and the highest risk in terms of cash flow.
The site has a gross floor area of 87,527 sq m. Consultants said a mall could probably bring average gross rent of up to $14 psf.
Assuming rent of $12 psf to $13 psf, the developers could expect a net income yield of about 5.5 per cent on a stabilised basis, said Mr Li.
Those who placed the lower bids were probably looking at a residential component, which could eventually sell for $800 psf to $900 psf, consultants said.
While the residential space would help with cash flow, proceeds from apartment sales should not be used to fund the retail mall, said an industry expert.
This is to avoid paying heavy taxes when the developer eventually sells the mall.
Meanwhile, the Urban Redevelopment Authority made available two 99-year leasehold sites yesterday. Interested developers can apply to have these reserve list sites put up for tender.
One is a 0.55ha plot at the junction of Clemenceau Avenue and Havelock Road, which is designated for a hotel of up to six storeys.
Another is a 3.07ha residential plot in Upper Changi Road North.
Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said the first site could accommodate a three- to four-star hotel with up to 270 rooms. If it is put up for tender, its land price is estimated to be $75 million to $81 million, or $600 psf to $650 psf of gross floor area.
The second site could have up to 400 condo units and fetch between $83 million and $111 million, with new units commanding $650 psf to $720 psf.
Located above MRT station, it will be used for a mall and new bus interchange.
THE sleepy Serangoon area received a huge vote of confidence yesterday when a fund bid a sky-high $800.9 million for a land site, which will be used for a mall and a new bus interchange.
Six hopefuls lined up for the 99-year leasehold plot above Serangoon MRT station with four bidding over $660 million - well above the figure some people in the property industry thought the plot would attract.
The $800.9 million bid came from Pramerica Real Estate Investors (Asia) but was submitted under the name Gold Ridge. It reflects a price of $850 per sq ft (psf) of gross floor area.
This was 10 per cent above the second bid of $727 million from Serangoon Community Developments. Another bid came in at $401 million and one was a distant $215 million.
The site - launched by the Land Transport Authority - is destined to be a hub with Serangoon MRT serving as a junction station for the new Circle Line. Any development must include a new bus interchange integrated with the enlarged North-East and Circle Line stations.
The strategic location also offers enormous retail opportunities, say property experts.
‘Serangoon Central is not a heavy residential area but there are no major malls within a 3km to 5km radius,’ said Mr Danny Yeo, Knight Frank’s deputy managing director.
‘A mall can be a regional centre. The only tricky situation is that there can only be slightly over 200 carpark lots.’
Pramerica intends to build a full retail centre. It manages the Asian Retail Mall Fund I and II, which own several malls here, including Liang Court in River Valley, White Sands in Pasir Ris and Century Square in Tampines.
The Serangoon mall could have a net lettable area of around 600,000 sq ft, said CBRE Research executive director Li Hiaw Ho.
That would make it of similar size to Parkway Parade in Marine Parade and IMM in Jurong.
The plot is designated a white site, meaning it can be used for different functions, such as residential or commercial, but a full retail mall would bring the highest profit margin, said Savills Residential director Ku Swee Yong - and the highest risk in terms of cash flow.
The site has a gross floor area of 87,527 sq m. Consultants said a mall could probably bring average gross rent of up to $14 psf.
Assuming rent of $12 psf to $13 psf, the developers could expect a net income yield of about 5.5 per cent on a stabilised basis, said Mr Li.
Those who placed the lower bids were probably looking at a residential component, which could eventually sell for $800 psf to $900 psf, consultants said.
While the residential space would help with cash flow, proceeds from apartment sales should not be used to fund the retail mall, said an industry expert.
This is to avoid paying heavy taxes when the developer eventually sells the mall.
Meanwhile, the Urban Redevelopment Authority made available two 99-year leasehold sites yesterday. Interested developers can apply to have these reserve list sites put up for tender.
One is a 0.55ha plot at the junction of Clemenceau Avenue and Havelock Road, which is designated for a hotel of up to six storeys.
Another is a 3.07ha residential plot in Upper Changi Road North.
Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said the first site could accommodate a three- to four-star hotel with up to 270 rooms. If it is put up for tender, its land price is estimated to be $75 million to $81 million, or $600 psf to $650 psf of gross floor area.
The second site could have up to 400 condo units and fetch between $83 million and $111 million, with new units commanding $650 psf to $720 psf.
Luxury Home Prices To Fall 32% By 2010: Nomura
Source : The Business Times, March 27, 2008
It says sector has risen too fast relative to rental expectations.
TAKING a bearish stance on Singapore’s residential sector, Nomura Research expects luxury home prices to slide a staggering 32.3 per cent from their 2007 peak between now and 2010.
Average prices in the luxury segment will fall 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010 as rental growth slows and yields are reappraised, Nomura says in a report.
Luxury residential prices have risen too fast relative to rental expectations, the report says.
‘Sentiment in the market has deteriorated rapidly - asset prices look to have fallen by about 5 per cent over the first two months of the year, with falls of up to 15 per cent in some non-prime locations,’ Nomura analysts Tony Darwell and Daniel Raats say.
‘We see asset prices being driven lower by marginal speculative sellers amid low transaction volumes and higher unsold pre-sale inventories.’
These factors will add up to a major correction - but not a crash - with a 2010 average price of $1,847 per square foot, marginally higher than $1,811 psf in the 1996 peak and 22.4 per cent above the 2001 peak of $1,508 psf. The mass market will not be immune from falling prices amid rising new supply, Nomura believes. ‘Mass residential prices appear on a firmer footing, supported by rental growth and prevailing yields,’ its analysts say.
‘However, the advent of new supply and the resultant increase in rental availability in prime locations is likely to see demand that was once displaced to ‘non-core mass market’ locations returning to prime districts, hurting non-core rents and ultimately mass market prices.’
As a result, mass residential prices will remain flat in 2008, climbing just 0.5 per cent, Nomura believes. And as new supply is completed in the prime districts, it expects prices to fall 10.3 per cent in 2009 and 10.1 per cent in 2010 - a total fall of some 19.4 per cent from the 2008 peak.
In view of this, the firm is maintaining its bearish stance on Singapore residential property and says the market will move swiftly from a ’state of denial’ to the realities on the ground.
Residential rents are likely to remain firm in the short term, given the low vacancy rate, Nomura reckons. But rising new supply is likely to cap rental gains from the second half of this year. Nomura forecasts that the vacancy rate will rise from 5.7 per cent at end-2007 to 8.2 per cent at end-2010.
Average rents are expected to peak in 2008, rising five per cent year-on-year to $3.64 psf per month, after rises of 14.1 per cent year-on-year in 2006 and 41.2 per cent year-on-year in 2007, Nomura says. But with supply on the rise, rents will ease 10.3 per cent year-on-year in 2009 and 15.7 per cent year-on-year in 2010.
It says sector has risen too fast relative to rental expectations.
TAKING a bearish stance on Singapore’s residential sector, Nomura Research expects luxury home prices to slide a staggering 32.3 per cent from their 2007 peak between now and 2010.
Average prices in the luxury segment will fall 16.9 per cent in 2008, 10.3 per cent in 2009 and 9.3 per cent in 2010 as rental growth slows and yields are reappraised, Nomura says in a report.
Luxury residential prices have risen too fast relative to rental expectations, the report says.
‘Sentiment in the market has deteriorated rapidly - asset prices look to have fallen by about 5 per cent over the first two months of the year, with falls of up to 15 per cent in some non-prime locations,’ Nomura analysts Tony Darwell and Daniel Raats say.
‘We see asset prices being driven lower by marginal speculative sellers amid low transaction volumes and higher unsold pre-sale inventories.’
These factors will add up to a major correction - but not a crash - with a 2010 average price of $1,847 per square foot, marginally higher than $1,811 psf in the 1996 peak and 22.4 per cent above the 2001 peak of $1,508 psf. The mass market will not be immune from falling prices amid rising new supply, Nomura believes. ‘Mass residential prices appear on a firmer footing, supported by rental growth and prevailing yields,’ its analysts say.
‘However, the advent of new supply and the resultant increase in rental availability in prime locations is likely to see demand that was once displaced to ‘non-core mass market’ locations returning to prime districts, hurting non-core rents and ultimately mass market prices.’
As a result, mass residential prices will remain flat in 2008, climbing just 0.5 per cent, Nomura believes. And as new supply is completed in the prime districts, it expects prices to fall 10.3 per cent in 2009 and 10.1 per cent in 2010 - a total fall of some 19.4 per cent from the 2008 peak.
In view of this, the firm is maintaining its bearish stance on Singapore residential property and says the market will move swiftly from a ’state of denial’ to the realities on the ground.
Residential rents are likely to remain firm in the short term, given the low vacancy rate, Nomura reckons. But rising new supply is likely to cap rental gains from the second half of this year. Nomura forecasts that the vacancy rate will rise from 5.7 per cent at end-2007 to 8.2 per cent at end-2010.
Average rents are expected to peak in 2008, rising five per cent year-on-year to $3.64 psf per month, after rises of 14.1 per cent year-on-year in 2006 and 41.2 per cent year-on-year in 2007, Nomura says. But with supply on the rise, rents will ease 10.3 per cent year-on-year in 2009 and 15.7 per cent year-on-year in 2010.
Debt Reprieve For Allco Reit - But At A Much Higher Cost
Source : The Business Times, March 27, 2008
Market cheers news the firm has secured extension of loans.
Allco Commercial Real Estate Investment Trust (Allco Reit) earned a reprieve in its debt repayment obligations last week - but at a much higher cost.
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Allco (Singapore) Limited, the manager of Allco Reit, had announced last Thursday that the trust had received in-principle approval to extend the due date of S$550 million in debt from July 31, 2008 to Dec 31, 2009. It had not detailed the terms and conditions of the extension, saying only that it was currently reviewing them.
When asked by BT yesterday about the terms of the refinancing, Nicholas McGrath - CEO and managing director of Allco (Singapore) Limited - did reveal that, while the terms were largely the same, the refinancing was ‘a lot more expensive’.
He declined to state the exact quantum of the increase in the cost of refinancing, that is the change in interest rate charged by creditors for the extension of the loan - explaining that such matters are confidential.
Refinancing of loans is typically a pricier matter for most debtors, with creditors choosing to charge more for the extension or relief in debt obligations.
Mr McGrath could, however, reveal to BT the blended margins for Allco Reit’s total debt obligations. The trust currently has S$620 million in Sing-dollar debt and another S$260 million in debt denominated in Japanese yen. The blended interest rate for its total is 3.8 per cent for 2008 and 3.95 per cent for 2009 - with the interest rate being higher for the Sing-dollar debt than the Japanese-yen portion.
‘But the margins are still lower than what our properties are yielding,’ Mr McGrath explained.
Allco Reit’s key properties include China Square Central and 55 Market Street in Singapore, and Central Park in Perth, Australia.
S$70 million of its Sing-dollar debt will mature in November 2008, which Allco Reit will repay in full with the proceeds from the sale of the assets of Allco Wholesale Property Fund. The rest of its debt obligations are long-term ones.
Mr McGrath also told BT that the trust intends to decrease its leverage over the next 12 months - from 43 per cent currently, to about 30 per cent in a year’s time.
Allco Reit’s debt repayment concerns had been the subject of a fierce legal tussle last week. The trust had sought a court injunction to head off a credit ratings downgrade by Moody’s Investors Service, concerned that the downgrade would hurt its attempts to refinance its debt. But Moody’s had battled the injunction, saying it should not be stopped from going ahead with its independent credit reviews.
The injunction was set aside by the High Court last week, and Moody’s had gone ahead with the ratings downgrade - lowering the trust’s corporate family rating to ‘Ba2′ from ‘Ba1′ and retaining the ratings on review for further possible downgrade.
Despite the downgrade, Allco Reit still succeeded in refinancing its debt - announcing a day after Moody’s ratings revision that it had managed to secure an extension of its loan obligations.
And the market has reacted favourably to Allco Reit’s announcement, with its share price having climbed steadily since. Allco Reit shares closed at 80.5 cents yesterday - up 11 per cent from its close of 72.5 cent last Thursday, after the ratings downgrade.
Market cheers news the firm has secured extension of loans.
Allco Commercial Real Estate Investment Trust (Allco Reit) earned a reprieve in its debt repayment obligations last week - but at a much higher cost.
.gif)
Allco (Singapore) Limited, the manager of Allco Reit, had announced last Thursday that the trust had received in-principle approval to extend the due date of S$550 million in debt from July 31, 2008 to Dec 31, 2009. It had not detailed the terms and conditions of the extension, saying only that it was currently reviewing them. When asked by BT yesterday about the terms of the refinancing, Nicholas McGrath - CEO and managing director of Allco (Singapore) Limited - did reveal that, while the terms were largely the same, the refinancing was ‘a lot more expensive’.
He declined to state the exact quantum of the increase in the cost of refinancing, that is the change in interest rate charged by creditors for the extension of the loan - explaining that such matters are confidential.
Refinancing of loans is typically a pricier matter for most debtors, with creditors choosing to charge more for the extension or relief in debt obligations.
Mr McGrath could, however, reveal to BT the blended margins for Allco Reit’s total debt obligations. The trust currently has S$620 million in Sing-dollar debt and another S$260 million in debt denominated in Japanese yen. The blended interest rate for its total is 3.8 per cent for 2008 and 3.95 per cent for 2009 - with the interest rate being higher for the Sing-dollar debt than the Japanese-yen portion.
‘But the margins are still lower than what our properties are yielding,’ Mr McGrath explained.
Allco Reit’s key properties include China Square Central and 55 Market Street in Singapore, and Central Park in Perth, Australia.
S$70 million of its Sing-dollar debt will mature in November 2008, which Allco Reit will repay in full with the proceeds from the sale of the assets of Allco Wholesale Property Fund. The rest of its debt obligations are long-term ones.
Mr McGrath also told BT that the trust intends to decrease its leverage over the next 12 months - from 43 per cent currently, to about 30 per cent in a year’s time.
Allco Reit’s debt repayment concerns had been the subject of a fierce legal tussle last week. The trust had sought a court injunction to head off a credit ratings downgrade by Moody’s Investors Service, concerned that the downgrade would hurt its attempts to refinance its debt. But Moody’s had battled the injunction, saying it should not be stopped from going ahead with its independent credit reviews.
The injunction was set aside by the High Court last week, and Moody’s had gone ahead with the ratings downgrade - lowering the trust’s corporate family rating to ‘Ba2′ from ‘Ba1′ and retaining the ratings on review for further possible downgrade.
Despite the downgrade, Allco Reit still succeeded in refinancing its debt - announcing a day after Moody’s ratings revision that it had managed to secure an extension of its loan obligations.
And the market has reacted favourably to Allco Reit’s announcement, with its share price having climbed steadily since. Allco Reit shares closed at 80.5 cents yesterday - up 11 per cent from its close of 72.5 cent last Thursday, after the ratings downgrade.
A Time For Reflection And Planning
Source : The Business Times, March 27, 2008
No panic mood this time round and developers are financially stronger unlike during the Asian crisis, but a lot depends on Singapore’s growth, construction bottlenecks and costs, and investors’ pricing power.
AFTER two years of exuberant growth, Singapore’s private housing market has come to a virtual standstill. Property launches and sales have slowed as local buyers adopt a wait-and-see attitude while foreign buyers, including institutional investors, are taking a similar approach in the wake of the sub-prime crisis.
Despite a paucity of transactions, prices have not weakened. Ask most industry players and they will say that the fundamentals of the local property market are still intact. Veteran developer Kwek Leng Beng, executive chairman of City Developments, says: ‘Today, the mood is not one of panic, unlike during the Asian financial crisis in 1997. We are not in recession today, but rather, we are the victims of our own success. Because we did not anticipate that our economy would be firing on all cylinders, we have a shortage of almost every type of property today.’
Not only is the Singapore economy still growing, but the remaking of the Singapore story is still intact. Singapore’s transformation into a global city and its evolution into the mother of all hubs - financial/wealth management, tourism, education, healthcare, research & development, etc - are coming along nicely.
That and the development of two integrated resorts with casinos and the Republic hosting the Formula One race have served to boost Singapore’s profile among overseas investors, keen on parking some money in Singapore, including in its property sector.
Most developers appear to be keeping their cool despite the current lack of activity in the property market. After all, the established players have made nice profits in the past couple of years and have strong balance sheets. Most have stopped buying high-end residential sites for some months.
The effective cost of borrowing for developers today is 3-5 per cent, nowhere near the highs of almost 20 per cent seen during the darkest days of the Asian crisis a decade ago.
These days, developers reckon they can hold off new property launches, for some months at least. The strategy is that if they don’t launch projects, then they don’t need to drop prices to entice potential buyers. Thus, developers hope they can keep their hold on pricing.
Analysts say one major factor that could weaken developers’ pricing power is specu-vestors who bought multiple units in projects on deferred payment schemes earlier. The deferred payment schemes typically run out when the projects are completed, which is when buyers have to cough up big instalments. To avoid facing such a situation, and be forced to run around town looking for multiple housing loans - which they may or may not get - specu-vestors who bought multiple units may seek to offload their units, at below market prices if necessary, as the projects near completion. If significant numbers of specu-vestors dispose of units at lower than market prices, that may set lower price benchmarks for the overall market.
Another factor that could potentially cause weaker prices could be smaller and newer developers, who may prefer to price their projects more competitively to draw buyers - rather than wait.
Confidence will also hinge on macro factors - for instance, whether Singapore’s economic growth remains in positive territory and employment is secure. Construction bottlenecks and higher construction costs are also eating into developers’ margins.
Already, some private investors are understood to have formed informal ‘consortiums’ among friends, hoping to scoop up some good buys when property prices fall.
Some developers last month were saying the sub-prime crisis could clear by the first half of this year and that things will pick up in the local property market in the second half. Now, that view sounds optimistic, given the ongoing carnage in global financial markets, with no end in sight to the US sub-prime debacle. The staring match between buyers and sellers in the residential property market will continue. Who will blink first?
In the office market, prime office rents nearly doubled last year after rising about 50 per cent in 2006. Despite tight office supply in the immediate term, resistance from occupiers to higher rents is expected to put the brakes on landlords’ ability to achieve steep rental hikes this year. As well, the various projects on 15-year leasehold transitional office sites are expected to be completed within the next 12-15 months and should provide some short-term relief to the office crunch. If major financial institutions scale down their operations in Singapore, demand could take a hit. Post-2010, supply of completed Grade A office space will start increasing again. All these point to more competitive office rentals in Singapore in future.
Investment sales of office blocks have slowed, on the back of tighter bank financing. Even for residential development sites, relatively unseasoned players are finding it tougher to secure funding, because of tighter liquidity brought about by limited appetite in capital markets. With developers sated with prime freehold sites and given weak home sales, the collective sales market has also gone into slumber. Hopefully, there will be fewer en bloc fights among neighbours. Singapore property investment sales this year are expected to come in at about half of last year’s record $54.5 billion, CB Richard Ellis estimates.
All in all, we look set to have a quieter year in the property market. After the heady growth in the past two years, a consolidation will hopefully provide a time for reflection - and for planning the next move.
No panic mood this time round and developers are financially stronger unlike during the Asian crisis, but a lot depends on Singapore’s growth, construction bottlenecks and costs, and investors’ pricing power.
AFTER two years of exuberant growth, Singapore’s private housing market has come to a virtual standstill. Property launches and sales have slowed as local buyers adopt a wait-and-see attitude while foreign buyers, including institutional investors, are taking a similar approach in the wake of the sub-prime crisis.
Despite a paucity of transactions, prices have not weakened. Ask most industry players and they will say that the fundamentals of the local property market are still intact. Veteran developer Kwek Leng Beng, executive chairman of City Developments, says: ‘Today, the mood is not one of panic, unlike during the Asian financial crisis in 1997. We are not in recession today, but rather, we are the victims of our own success. Because we did not anticipate that our economy would be firing on all cylinders, we have a shortage of almost every type of property today.’
Not only is the Singapore economy still growing, but the remaking of the Singapore story is still intact. Singapore’s transformation into a global city and its evolution into the mother of all hubs - financial/wealth management, tourism, education, healthcare, research & development, etc - are coming along nicely.
That and the development of two integrated resorts with casinos and the Republic hosting the Formula One race have served to boost Singapore’s profile among overseas investors, keen on parking some money in Singapore, including in its property sector.
Most developers appear to be keeping their cool despite the current lack of activity in the property market. After all, the established players have made nice profits in the past couple of years and have strong balance sheets. Most have stopped buying high-end residential sites for some months.
The effective cost of borrowing for developers today is 3-5 per cent, nowhere near the highs of almost 20 per cent seen during the darkest days of the Asian crisis a decade ago.
These days, developers reckon they can hold off new property launches, for some months at least. The strategy is that if they don’t launch projects, then they don’t need to drop prices to entice potential buyers. Thus, developers hope they can keep their hold on pricing.
Analysts say one major factor that could weaken developers’ pricing power is specu-vestors who bought multiple units in projects on deferred payment schemes earlier. The deferred payment schemes typically run out when the projects are completed, which is when buyers have to cough up big instalments. To avoid facing such a situation, and be forced to run around town looking for multiple housing loans - which they may or may not get - specu-vestors who bought multiple units may seek to offload their units, at below market prices if necessary, as the projects near completion. If significant numbers of specu-vestors dispose of units at lower than market prices, that may set lower price benchmarks for the overall market.
Another factor that could potentially cause weaker prices could be smaller and newer developers, who may prefer to price their projects more competitively to draw buyers - rather than wait.
Confidence will also hinge on macro factors - for instance, whether Singapore’s economic growth remains in positive territory and employment is secure. Construction bottlenecks and higher construction costs are also eating into developers’ margins.
Already, some private investors are understood to have formed informal ‘consortiums’ among friends, hoping to scoop up some good buys when property prices fall.
Some developers last month were saying the sub-prime crisis could clear by the first half of this year and that things will pick up in the local property market in the second half. Now, that view sounds optimistic, given the ongoing carnage in global financial markets, with no end in sight to the US sub-prime debacle. The staring match between buyers and sellers in the residential property market will continue. Who will blink first?
In the office market, prime office rents nearly doubled last year after rising about 50 per cent in 2006. Despite tight office supply in the immediate term, resistance from occupiers to higher rents is expected to put the brakes on landlords’ ability to achieve steep rental hikes this year. As well, the various projects on 15-year leasehold transitional office sites are expected to be completed within the next 12-15 months and should provide some short-term relief to the office crunch. If major financial institutions scale down their operations in Singapore, demand could take a hit. Post-2010, supply of completed Grade A office space will start increasing again. All these point to more competitive office rentals in Singapore in future.
Investment sales of office blocks have slowed, on the back of tighter bank financing. Even for residential development sites, relatively unseasoned players are finding it tougher to secure funding, because of tighter liquidity brought about by limited appetite in capital markets. With developers sated with prime freehold sites and given weak home sales, the collective sales market has also gone into slumber. Hopefully, there will be fewer en bloc fights among neighbours. Singapore property investment sales this year are expected to come in at about half of last year’s record $54.5 billion, CB Richard Ellis estimates.
All in all, we look set to have a quieter year in the property market. After the heady growth in the past two years, a consolidation will hopefully provide a time for reflection - and for planning the next move.
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