Source : The Business Times, February 19, 2009
Banks slash loan amounts before disbursing them
The rapid slide in property prices has resulted in some banks slashing the loan amount to borrowers just before it is disbursed. This has put property buyers in a quandary, forcing them to either top up the difference or pay a penalty for backing out of the loan offered.
And valuers have become the latest 'villains' as borrowers find it harder to get home loans to match their purchase prices. 'I don't tell people I'm a valuer,' sighed Lydia Sng, Knight Frank executive director.
Bankers agree that the time lag between the loan offer and disbursement can result in a final smaller loan. The loan offer, while based on an indicative valuation, contains a clause that it is subject to a formal valuation.
But borrowers who want to cancel the loan are hit with a punitive 1-1.5 per cent cancellation fee. Also, by this time, it would be hard to back out because they would have already committed to the purchase of the property.
The wobbly market is not helping. A Citigroup report last month said that, in the high-end segment, properties have seen price corrections of about 35 per cent from a year ago and they could fall by another 30-40 per cent this year.
Ms Sng said the problem is with the valuation process. 'They'll give us a call with the address, we'll give a range as we've not seen the property. It's a bit like calling the doctor and telling him your symptoms and asking for a diagnosis,' she said.
Gregory Chan, OCBC Bank head of secured lending, said: 'It is possible to receive a lower formal valuation on a property compared to the initial indicative valuation. To mitigate this, as well as to ensure valuations are realistic, OCBC Bank does not rely solely on a single valuer for indicative valuations,' said Mr Chan.
A DBS spokeswoman said the indicative value will be based on the information declared by the customer in the home loan application form.
'In the event that the formal valuation is lower due to the wrong details provided on the property, the bank will have to take the lower of either the purchase price or valuation as per regulatory stipulations. As such, the buyers will be required to top up the difference between the purchase price and valuation in cash. If the borrowers decide to abort the purchase and cancel the loan at any point after loan acceptance, a cancellation fee will apply,' said the DBS spokeswoman.
'We monitor our panel of valuers regularly to ensure that valuations are always fair and based on current market values,' said a United Overseas Bank (UOB) spokeswoman.
Jerry Tan, managing director of Jerrytan Residential Pte Ltd said his beef is that valuers sometimes look to non-comparable transactions to determine the price. But it could be comparing a five-star development to a three-star one, he said.
DTZ executive director Poh Kwee Eng said that if they were valuing a unit and there had not been a transaction in the same building for some time, they would look nearby, in similar developments. If the five-star unit was priced 20 per cent higher during last year's red hot bull market compared to a three-star one, similar premiums would still hold.
'Say, last year, your unit was sold at $1,000 per square foot and next door a unit went for 800 psf, there was a 20 per cent difference. So if the next-door unit is now selling at $500 psf, I would adjust your unit by 20 per cent upwards,' explained Ms Poh.
Some banks are said to be staying clear of certain developments where there is a wide range of valuations such as The Sail with 1,111 units and Sentosa Cove.
UOB head of loans Kevin Lam declined to comment on specific projects but offered general observations about mortgages. 'We have been conservative all along. With the recent further fall in prices, we have become even more careful,' he said.
Knight Frank's director of research and consultancy Nicholas Mak said valuations vary widely among the 1,111 units at the 63-storey The Sail. As for Sentosa Cove, 'newer developments have better views or better designs. Some earlier projects didn't have sea views,' he said.
Some ground-floor condos sited between the landed homes with the sea front were not very different to condos on the mainland, said Mr Mak. 'The value of a sea view alone is difficult to pin down,' he said.
Credo Real Estate managing director Karamjit Singh said that The Sail and Sentosa Cove, as new markets which targeted foreigners, provided their own challenges. 'The Sail was part of a new market that emerged as part of the development for the new downtown including the integrated resorts,' said Mr Singh.
He said it takes time for prices to find their equilibrium, and they have not stabilised yet. 'It's a challenge everyone faces, including banks.'
Friday, February 20, 2009
Luxury Condo Prices Dive In KL
Source : The Business Times, February 19, 2009
Foreigners cash out as they feel better times are not around the corner
PRICES of luxury condos in the Kuala Lumpur City Centre (KLCC) area have dived 15-20 per cent as the economic downturn bites and foreigners try to cash out for the best they can get, says a real estate consultant.
Oversupply: An estimated 1,760 units will be completed in the KLCC area this year, adding to 1,200 in the past two years
Malaysian buyers were the first to sign up for the high-end condos in 2004 during the onset of recovery after the 1998 Asian financial crisis, Rahim & Co managing director Robert Ang said on Monday. They bought at a half the price of foreigners who went into the market in 2006-07.
'Most foreigners bought at appreciated levels, so they are flexible about asking prices,' he said. 'But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.' The only bright spot is that so far there have been no forced or fire-sales, Mr Ang told a news conference.
Rahim & Co's executive chairman Abdul Rahim Rahman said he believed prices in the KLCC area would have softened anyway because of oversupply.
An estimated 1,760 units will be completed in the area this year, adding to 1,200 in the past two years.
Mr Ang said: 'The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent.'
At the peak, top KLCC apartments were edging towards RM3,000 (S$1,254) per sq ft. But most projects are now selling at RM1,000 plus psf in the resale market, though developers are still asking about RM2,000 psf for premium units under construction, such as at OneKL.
It is highly unlikely that better times are around the corner. Sellers and buyers know the market has yet to feel the full impact of the global economic slide.
Just on Monday, Malaysia's Deputy Prime Minister Najib Razak said the government's 2009 economic growth target of 3.5 per cent may not be achieved, as exports and production figures collapse.
Although property players claim the overall market is still liquid, fear of the unknown has led to a near-collapse in demand for luxury condos.
Mr Ang said Rahim has advised clients to defer new launches of luxury developments to the second half or third quarter. On the brighter side, landed property prices have held up so far, he said.
In the past three years, many foreigners went into Kuala Lumpur real estate, buying as many as a third of the units in some KLCC projects. They were attracted by the weak ringgit and a market that had not run up as much as others.
But now, some of them may be about to pay the price. After Malaysia's last recession in 1998 the property market took about four years to recover. Mr Abdul Rahim reckons things could move faster this time - if the economic decline can be swiftly arrested.
Foreigners cash out as they feel better times are not around the corner
PRICES of luxury condos in the Kuala Lumpur City Centre (KLCC) area have dived 15-20 per cent as the economic downturn bites and foreigners try to cash out for the best they can get, says a real estate consultant.
Oversupply: An estimated 1,760 units will be completed in the KLCC area this year, adding to 1,200 in the past two yearsMalaysian buyers were the first to sign up for the high-end condos in 2004 during the onset of recovery after the 1998 Asian financial crisis, Rahim & Co managing director Robert Ang said on Monday. They bought at a half the price of foreigners who went into the market in 2006-07.
'Most foreigners bought at appreciated levels, so they are flexible about asking prices,' he said. 'But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.' The only bright spot is that so far there have been no forced or fire-sales, Mr Ang told a news conference.
Rahim & Co's executive chairman Abdul Rahim Rahman said he believed prices in the KLCC area would have softened anyway because of oversupply.
An estimated 1,760 units will be completed in the area this year, adding to 1,200 in the past two years.
Mr Ang said: 'The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent.'
At the peak, top KLCC apartments were edging towards RM3,000 (S$1,254) per sq ft. But most projects are now selling at RM1,000 plus psf in the resale market, though developers are still asking about RM2,000 psf for premium units under construction, such as at OneKL.
It is highly unlikely that better times are around the corner. Sellers and buyers know the market has yet to feel the full impact of the global economic slide.
Just on Monday, Malaysia's Deputy Prime Minister Najib Razak said the government's 2009 economic growth target of 3.5 per cent may not be achieved, as exports and production figures collapse.
Although property players claim the overall market is still liquid, fear of the unknown has led to a near-collapse in demand for luxury condos.
Mr Ang said Rahim has advised clients to defer new launches of luxury developments to the second half or third quarter. On the brighter side, landed property prices have held up so far, he said.
In the past three years, many foreigners went into Kuala Lumpur real estate, buying as many as a third of the units in some KLCC projects. They were attracted by the weak ringgit and a market that had not run up as much as others.
But now, some of them may be about to pay the price. After Malaysia's last recession in 1998 the property market took about four years to recover. Mr Abdul Rahim reckons things could move faster this time - if the economic decline can be swiftly arrested.
HK's Peak Residential Prices At Decade Low
Source : The Business Times, February 19, 2009
(HONG KONG) Property prices on The Peak, most expensive residential area on the Hong Kong Island, experienced the biggest drop since the Asian financial crisis 10 years ago, according to local media yesterday.
The prices slumped 41.4 per cent in the final three months of last year compared with the previous quarter. The fall was the biggest on record in Hong Kong's luxury real estate market, underscoring the seriousness of the global economic slump, the South China Morning Post reported.
In the final three months of 1997, prices on The Peak fell only 16 per cent, property consultant CB Richard Ellis said, though it cautioned that a slump in sales meant one big transaction could skew its figures.
'Prices on The Peak have increased most rapidly over the past few years and that's why they dropped the most once the market entered a down cycle,' said Margaret Ng, a senior director at the firm.
Ms Ng said prices on The Peak rose 27 per cent between the last quarter of 2007 and the second quarter of last year, to an average of about HK$327,373 (S$64,555) per square metre.
'The economic outlook is still uncertain. The effect of the economic rescue packages may be seen in the second half of this year. We have to wait and see,' she said.
Simon Lo Wing-fai, a director at property consultant Colliers International, said fewer than 10 homes priced at HK$15 million or more had been sold citywide each week since the onset of the global financial crisis. He said that 30 to 40 luxury homes were being sold every week before the start of the crisis.
Average luxury residential prices fell to about HK$118,611 per square meter in December, returning to September 2007 levels, he said, expecting that prices will drop 15 to 20 per cent this year.
Adrian Ngan Wai-hung, an executive director of research at CCB International Securities, believes property prices will drop a further 5 to 10 per cent in the short term but that they will stabilise in the second and third quarters of the year. -- Xinhua
(HONG KONG) Property prices on The Peak, most expensive residential area on the Hong Kong Island, experienced the biggest drop since the Asian financial crisis 10 years ago, according to local media yesterday.
The prices slumped 41.4 per cent in the final three months of last year compared with the previous quarter. The fall was the biggest on record in Hong Kong's luxury real estate market, underscoring the seriousness of the global economic slump, the South China Morning Post reported.
In the final three months of 1997, prices on The Peak fell only 16 per cent, property consultant CB Richard Ellis said, though it cautioned that a slump in sales meant one big transaction could skew its figures.
'Prices on The Peak have increased most rapidly over the past few years and that's why they dropped the most once the market entered a down cycle,' said Margaret Ng, a senior director at the firm.
Ms Ng said prices on The Peak rose 27 per cent between the last quarter of 2007 and the second quarter of last year, to an average of about HK$327,373 (S$64,555) per square metre.
'The economic outlook is still uncertain. The effect of the economic rescue packages may be seen in the second half of this year. We have to wait and see,' she said.
Simon Lo Wing-fai, a director at property consultant Colliers International, said fewer than 10 homes priced at HK$15 million or more had been sold citywide each week since the onset of the global financial crisis. He said that 30 to 40 luxury homes were being sold every week before the start of the crisis.
Average luxury residential prices fell to about HK$118,611 per square meter in December, returning to September 2007 levels, he said, expecting that prices will drop 15 to 20 per cent this year.
Adrian Ngan Wai-hung, an executive director of research at CCB International Securities, believes property prices will drop a further 5 to 10 per cent in the short term but that they will stabilise in the second and third quarters of the year. -- Xinhua
Harlem Complex May Be Put Up For Auction
Source : The Business Times, February 19, 2009
(NEW YORK) Riverton Apartments, a high-rise complex in Manhattan's Harlem neighbourhood, may be auctioned off this Friday because owners Rockpoint Group LLC and Stellar Management have been unable to modify loan terms, according to Trepp LLC, a commercial real estate data company.
In trouble: A recent appraisal valued the property at US$196million, down from US$340 million in a December 2006 valuation. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29million plus expenses
The mezzanine lender is holding a public sale to foreclose on all of its pledged collateral, Trepp said, citing documents from the servicer of the loan. The lender is not identified. A recent appraisal valued the property at US$196 million, down from as much as US$340 million when the complex was last appraised in December 2006, Trepp said.
The Riverton loan was packaged into bonds as part of a US$6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc and Deutsche Bank AG, according to Bloomberg data. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29 million plus expenses, according to Trepp estimates.
'The sale of the property, should it take place, will be closely watched by the CMBS market as investors try to get a sense of what properties like the Riverton are worth,' Trepp said. 'The value of the Riverton in foreclosure would give the market a new benchmark.'
Foreclosure proceedings were filed in court this month, according to the loan documents. The documents do not disclose the location of the court or the exact date of the filing. 'We continue to work with the mortgagee in a cooperative manner and are hopeful for a good result,' Larry Gluck, a principal of Stellar Management, said.
Riverton has 1,230 apartments, according to Trepp. Its addresses are 2171-2200 Madison Ave, 2225-2265 Fifth Ave, 10 East 138th St, 45 East 135th St.
Delinquencies on commercial mortgages bundled and sold as bonds may triple by late this year as large real estate loans default, Standard & Poor's said on Tuesday.
Late payments on commercial mortgages reached 1.10 per cent during the fourth quarter of last year, and have been climbing since the low of 0.27 per cent in March 2007, S&P said. The commercial real estate market is in the early stages of a correction, and delinquencies may reach 3.5 per cent this year, the New York-based ratings company said. Yields on commercial real estate securities rose to near-record highs relative to benchmarks last August when a trustee report showed Rockpoint and Stellar would likely miss their September payment.
Loans against the Riverton were financed using income projections that assumed rent-stabilised apartments in the complex would be converted to market rate faster than they have been. Tishman Speyer Properties LP and BlackRock Realty relied on similar projections when they purchased Stuyvesant Town and Peter Cooper Village, Manhattan's largest apartment complex, for US$5.4 billion in 2006.
A reserve fund for Stuyvesant Town and Peter Cooper may run dry in six months unless it is replenished, New York-based Fitch Ratings said in a Jan 23 report. -- Bloomberg
(NEW YORK) Riverton Apartments, a high-rise complex in Manhattan's Harlem neighbourhood, may be auctioned off this Friday because owners Rockpoint Group LLC and Stellar Management have been unable to modify loan terms, according to Trepp LLC, a commercial real estate data company.
In trouble: A recent appraisal valued the property at US$196million, down from US$340 million in a December 2006 valuation. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29million plus expensesThe mezzanine lender is holding a public sale to foreclose on all of its pledged collateral, Trepp said, citing documents from the servicer of the loan. The lender is not identified. A recent appraisal valued the property at US$196 million, down from as much as US$340 million when the complex was last appraised in December 2006, Trepp said.
The Riverton loan was packaged into bonds as part of a US$6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc and Deutsche Bank AG, according to Bloomberg data. If the property were to sell for US$196 million, the commercial mortgage bond trust would take a loss of US$29 million plus expenses, according to Trepp estimates.
'The sale of the property, should it take place, will be closely watched by the CMBS market as investors try to get a sense of what properties like the Riverton are worth,' Trepp said. 'The value of the Riverton in foreclosure would give the market a new benchmark.'
Foreclosure proceedings were filed in court this month, according to the loan documents. The documents do not disclose the location of the court or the exact date of the filing. 'We continue to work with the mortgagee in a cooperative manner and are hopeful for a good result,' Larry Gluck, a principal of Stellar Management, said.
Riverton has 1,230 apartments, according to Trepp. Its addresses are 2171-2200 Madison Ave, 2225-2265 Fifth Ave, 10 East 138th St, 45 East 135th St.
Delinquencies on commercial mortgages bundled and sold as bonds may triple by late this year as large real estate loans default, Standard & Poor's said on Tuesday.
Late payments on commercial mortgages reached 1.10 per cent during the fourth quarter of last year, and have been climbing since the low of 0.27 per cent in March 2007, S&P said. The commercial real estate market is in the early stages of a correction, and delinquencies may reach 3.5 per cent this year, the New York-based ratings company said. Yields on commercial real estate securities rose to near-record highs relative to benchmarks last August when a trustee report showed Rockpoint and Stellar would likely miss their September payment.
Loans against the Riverton were financed using income projections that assumed rent-stabilised apartments in the complex would be converted to market rate faster than they have been. Tishman Speyer Properties LP and BlackRock Realty relied on similar projections when they purchased Stuyvesant Town and Peter Cooper Village, Manhattan's largest apartment complex, for US$5.4 billion in 2006.
A reserve fund for Stuyvesant Town and Peter Cooper may run dry in six months unless it is replenished, New York-based Fitch Ratings said in a Jan 23 report. -- Bloomberg
URA To Auction Parking Sites At Old Toh Tuck Rd
Source : The Business Times, February 19, 2009
The Urban Redevelopment Authority (URA) said yesterday it will auction two sites at Old Toh Tuck Road to meet growing demand for heavy vehicle parking.
Trailers, buses and other vehicles with a maximum laden weight exceeding five tonnes will be allowed to park on the sites.
The bigger site, at 11 Old Toh Tuck Road, covers 10,844sqm, while the smaller site, at number 9, covers 9,765sqm.
The sites are being offered on 10-year leases.
The public auction takes place on March 17 at 2pm at the URA Centre's third-storey theatrette.
Developer's packets can be bought on line or at the URA Centre for $52.50.
The Urban Redevelopment Authority (URA) said yesterday it will auction two sites at Old Toh Tuck Road to meet growing demand for heavy vehicle parking.
Trailers, buses and other vehicles with a maximum laden weight exceeding five tonnes will be allowed to park on the sites.
The bigger site, at 11 Old Toh Tuck Road, covers 10,844sqm, while the smaller site, at number 9, covers 9,765sqm.
The sites are being offered on 10-year leases.
The public auction takes place on March 17 at 2pm at the URA Centre's third-storey theatrette.
Developer's packets can be bought on line or at the URA Centre for $52.50.
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