Thursday, April 3, 2008
Key Trends In China Property Sector
Source : The Business Times, April 3, 2008
Despite slower economic growth and uncertainty over Beijing’s austerity measures, China’s residential, retail and office markets still offer attractive investments, says KENNY HO
THIS is the year of the Beijing Olympics and all eyes will be on China as it celebrates its arrival as a major global power.
Politically, this is the first full year of President Hu Jintao’s second five-year term. Having consolidated his power following the 17th Party Congress, Mr Hu will likely push forward with reforms over the next five years as he builds his political legacy. And with the US economy moving closer to a recession, we expect China to enlarge its prominence as a growth engine for the world economy.
This article provides an overview of the key trends affecting residential, retail and office property markets across China and our advice to the individual and institutional property investors.
Office supply and demand
By mid-2008, the completion of the Shanghai World Financial Centre, one of the world’s tallest buildings, will mark the official beginning of the second office supply boom in Shanghai (the first one was from 1996 to 2001). In fact, all across China, we are in or will soon be entering a five-year supply cycle. Cities across China are trying to copy the Pudong model in creating new central business districts (CBD), though we are alarmed to see various Tier III cities, such as Yantai, trying to promote themselves as international financial centres.
The obvious question is: ‘Will there be enough demand?’ Our answer is yes and no.
Yes, there will be demand, but it will not be enough to fill all of the new space. In the medium term, office demand should continue on an upward trend in major Tier II commercial hubs as companies eagerly try to tap into China’s growing domestic market. But while cities such as Shanghai will be able to absorb most of the 800,000 square metres of new supply this year, we expect office supply in most Tier II cities to outpace demand over the next 12 months, and in some cases by a wide margin.
The good news for investors is that good quality buildings will still achieve a significant rental premium over the market average while attracting the most prestigious tenants.
Therefore, as an office property investor, it is crucial that a) the quality of your building can withstand a rapidly evolving market, and b) you have a solid grasp of the competition in your particular market segment.
Hot retail locations
As revealed in our recently published 2007 Retailer Sentiment Survey Asia, retailers will continue to expand their China presence in 2008, and are optimistic on both revenue and profit margins.
Nevertheless, it is important to keep in mind that while the retail scene in Tier I cities such as Shanghai and Beijing is rapidly diversifying and maturing, most Tier II and III markets remain much less sophisticated.
The reality of these markets is that the majority of consumers in China still prefer to save a significant portion of their income and spend it on necessities, child education and quality of life items such as homes and cars.
When Chinese consumers do spend on luxury items, their choices are often guided by their need for identity, social status and bragging rights. It is no wonder that well-established brands such as Louis Vuitton and Gucci are hugely popular in Tier II markets while lesser known brands trail them by a wide margin.
We expect retailers to invest heavily in marketing their brands to the Chinese consumers. This means that highly visible retail space in prime locations will continue to be the hottest commodity, whether in Beijing, Chongqing or Foshan.
Outside of the best locations, mall owners must work hard to attract and maintain a winning roster of retail tenants, and by doing so create an irreplaceable retail destination for shoppers.
Affordable housing
Over the last few months, we have often been asked: ‘Will further policy tightening lead to a major correction in residential prices?’
In short, the answer is no. Contrary to popular belief, the government’s policy goal is not to lower prices in the existing market. Instead, it is working hard to ensure the future availability of affordable housing in three ways:
Increase effective land supply, either by releasing new land plots or repossessing dormant land plots from the hands of developers;
Lower land prices, by introducing more land supply and limiting the ability of developers to bring capital from offshore sources (such as foreign funds or the Hong Kong stock market) and use it to capitalise their onshore project companies.
Discourage investment demand in the residential market, by increasing the downpayment requirement (from 30 to 40 per cent) and raising the mortgage rate (from 6.6 to 8.6 per cent) for second-home buyers.
On the demand side, owner-occupier demand remains strong as the population’s standard of living continues to improve. However, markets such as Shenzhen, where prices have been driven largely by speculative buyers from Hong Kong, are experiencing a slowdown, and in some cases, significant price drops.
It is best to confine purchases to areas where demand is visible and easily understandable - CBDs, traditional high-end residential clusters or areas near mass transit stations.
For residential investors, it is important to keep in mind that with current taxes and mortgage rates, your total transaction cost adds up to over 20 per cent of your purchase price. While we are comfortable with a steady 10 per cent annual growth in residential prices given that urban income rises at around the same rate, a 20 per cent transaction cost will eat up most of your profit if you hold the property for less than two years.
In conclusion, while we expect slower economic growth, a large amount of new office supply and continued uncertainty around government austerity measures in 2008, the long-term demand outlook remains positive for all three property sectors in China. For patient investors, 2008 may turn out to be a good year to look for bargains and to start building long-term positions in your China portfolio.
The writer is head of research - China, Jones Lang LaSalle
Despite slower economic growth and uncertainty over Beijing’s austerity measures, China’s residential, retail and office markets still offer attractive investments, says KENNY HO
THIS is the year of the Beijing Olympics and all eyes will be on China as it celebrates its arrival as a major global power.
Politically, this is the first full year of President Hu Jintao’s second five-year term. Having consolidated his power following the 17th Party Congress, Mr Hu will likely push forward with reforms over the next five years as he builds his political legacy. And with the US economy moving closer to a recession, we expect China to enlarge its prominence as a growth engine for the world economy.
This article provides an overview of the key trends affecting residential, retail and office property markets across China and our advice to the individual and institutional property investors.
Office supply and demand
By mid-2008, the completion of the Shanghai World Financial Centre, one of the world’s tallest buildings, will mark the official beginning of the second office supply boom in Shanghai (the first one was from 1996 to 2001). In fact, all across China, we are in or will soon be entering a five-year supply cycle. Cities across China are trying to copy the Pudong model in creating new central business districts (CBD), though we are alarmed to see various Tier III cities, such as Yantai, trying to promote themselves as international financial centres.
The obvious question is: ‘Will there be enough demand?’ Our answer is yes and no.
Yes, there will be demand, but it will not be enough to fill all of the new space. In the medium term, office demand should continue on an upward trend in major Tier II commercial hubs as companies eagerly try to tap into China’s growing domestic market. But while cities such as Shanghai will be able to absorb most of the 800,000 square metres of new supply this year, we expect office supply in most Tier II cities to outpace demand over the next 12 months, and in some cases by a wide margin.
The good news for investors is that good quality buildings will still achieve a significant rental premium over the market average while attracting the most prestigious tenants.
Therefore, as an office property investor, it is crucial that a) the quality of your building can withstand a rapidly evolving market, and b) you have a solid grasp of the competition in your particular market segment.
Hot retail locations
As revealed in our recently published 2007 Retailer Sentiment Survey Asia, retailers will continue to expand their China presence in 2008, and are optimistic on both revenue and profit margins.
Nevertheless, it is important to keep in mind that while the retail scene in Tier I cities such as Shanghai and Beijing is rapidly diversifying and maturing, most Tier II and III markets remain much less sophisticated.
The reality of these markets is that the majority of consumers in China still prefer to save a significant portion of their income and spend it on necessities, child education and quality of life items such as homes and cars.
When Chinese consumers do spend on luxury items, their choices are often guided by their need for identity, social status and bragging rights. It is no wonder that well-established brands such as Louis Vuitton and Gucci are hugely popular in Tier II markets while lesser known brands trail them by a wide margin.
We expect retailers to invest heavily in marketing their brands to the Chinese consumers. This means that highly visible retail space in prime locations will continue to be the hottest commodity, whether in Beijing, Chongqing or Foshan.
Outside of the best locations, mall owners must work hard to attract and maintain a winning roster of retail tenants, and by doing so create an irreplaceable retail destination for shoppers.
Affordable housing
Over the last few months, we have often been asked: ‘Will further policy tightening lead to a major correction in residential prices?’
In short, the answer is no. Contrary to popular belief, the government’s policy goal is not to lower prices in the existing market. Instead, it is working hard to ensure the future availability of affordable housing in three ways:
Increase effective land supply, either by releasing new land plots or repossessing dormant land plots from the hands of developers;
Lower land prices, by introducing more land supply and limiting the ability of developers to bring capital from offshore sources (such as foreign funds or the Hong Kong stock market) and use it to capitalise their onshore project companies.
Discourage investment demand in the residential market, by increasing the downpayment requirement (from 30 to 40 per cent) and raising the mortgage rate (from 6.6 to 8.6 per cent) for second-home buyers.
On the demand side, owner-occupier demand remains strong as the population’s standard of living continues to improve. However, markets such as Shenzhen, where prices have been driven largely by speculative buyers from Hong Kong, are experiencing a slowdown, and in some cases, significant price drops.
It is best to confine purchases to areas where demand is visible and easily understandable - CBDs, traditional high-end residential clusters or areas near mass transit stations.
For residential investors, it is important to keep in mind that with current taxes and mortgage rates, your total transaction cost adds up to over 20 per cent of your purchase price. While we are comfortable with a steady 10 per cent annual growth in residential prices given that urban income rises at around the same rate, a 20 per cent transaction cost will eat up most of your profit if you hold the property for less than two years.
In conclusion, while we expect slower economic growth, a large amount of new office supply and continued uncertainty around government austerity measures in 2008, the long-term demand outlook remains positive for all three property sectors in China. For patient investors, 2008 may turn out to be a good year to look for bargains and to start building long-term positions in your China portfolio.
The writer is head of research - China, Jones Lang LaSalle
Office Occupancy Dips For Two Consecutive Quarters: Report
Source : The Business Times, April 3, 2008
Two new office buildings added 538,100 sq ft of office supply in Q1
ISLANDWIDE office occupancy dipped in the first quarter of 2008, easing half a percentage point quarter-on-quarter to 97.1 per cent. The dip followed a 0.1 point drop in Q4 2007 from Q3.
A report by DTZ Debenham Tie Leung also shows that the average occupancy of office buildings in Raffles Place dropped half a percentage point to 97.8 per cent in Q1 this year, while that in Marina Centre increased by 0.7 percentage point to 99.8 per cent.
DTZ attributed the slight dip in occupancy in Q1 2008 partly to the completion of two office buildings. The Central and VisionCrest Commercial added 538,100 sq ft of new office space that raised islandwide office stock one per cent quarter-on-quarter to 56.6 million sq ft.
It is understood that the new buildings are not fully leased yet.
The drop in occupancy is corroborated by data from the Urban Redevelopment Authority, which shows vacancy rates in the office sector - both private and public - remained at 7.3 per cent in Q3 and Q4 2007 after falling steadily since Q4 2003, when the rate hit 17.9 per cent in the wake of the Sars crisis.
Office rents have, however, continued to increase, with fresh record highs of $20 and $21 per square foot per month (psf pm) registered at 6 Battery Road and Republic Plaza in the first quarter of this year.
For prime office space in Raffles Place, average monthly gross rent was up 13.9 per cent quarter-on-quarter to $18.80 psf pm.
DTZ executive director Cheng Siow Ying said: ‘Although some occupiers are beginning to exercise caution in their medium-term leasing requirements, demand continued to be supported (in Q1) by occupiers requiring space in the immediate near future.’
But she added: ‘Growth in rental values is expected to moderate this year after a record increase in 2007.’
With an estimated 615,500 sq ft of space coming on stream, DTZ says 64 per cent has been pre-committed.
It notes that potential supply between 2008 and 2012 is forecast at 10.2 million sq ft of net lettable area, with 23 per cent having been pre-committed. This excludes an estimated 484,000 sq ft of space that will be demolished for redevelopment.
The impending supply will likely have an impact on occupancy rates.
Cushman and Wakefield (C&W) said the prime office vacancy rate was 1.1 per cent at end-2007 based on its basket of properties. It projects overall occupancy rates for 2008, 2009 and 2010 of 93.5 per cent, 95 per cent and 93 per cent respectively.
C&W managing director Donald Han said he has noticed that ‘take-up is not as fast’. However, he reckons that the outlook will remain positive until after the first half of 2009, with Grade A office rents rising a further 16.5 per cent this year.
After that, he believes ‘there will be more anticipation with tenants signing leases at moderated rents’.
Two new office buildings added 538,100 sq ft of office supply in Q1
ISLANDWIDE office occupancy dipped in the first quarter of 2008, easing half a percentage point quarter-on-quarter to 97.1 per cent. The dip followed a 0.1 point drop in Q4 2007 from Q3.
A report by DTZ Debenham Tie Leung also shows that the average occupancy of office buildings in Raffles Place dropped half a percentage point to 97.8 per cent in Q1 this year, while that in Marina Centre increased by 0.7 percentage point to 99.8 per cent.
DTZ attributed the slight dip in occupancy in Q1 2008 partly to the completion of two office buildings. The Central and VisionCrest Commercial added 538,100 sq ft of new office space that raised islandwide office stock one per cent quarter-on-quarter to 56.6 million sq ft.
It is understood that the new buildings are not fully leased yet.
The drop in occupancy is corroborated by data from the Urban Redevelopment Authority, which shows vacancy rates in the office sector - both private and public - remained at 7.3 per cent in Q3 and Q4 2007 after falling steadily since Q4 2003, when the rate hit 17.9 per cent in the wake of the Sars crisis.
Office rents have, however, continued to increase, with fresh record highs of $20 and $21 per square foot per month (psf pm) registered at 6 Battery Road and Republic Plaza in the first quarter of this year.
For prime office space in Raffles Place, average monthly gross rent was up 13.9 per cent quarter-on-quarter to $18.80 psf pm.
DTZ executive director Cheng Siow Ying said: ‘Although some occupiers are beginning to exercise caution in their medium-term leasing requirements, demand continued to be supported (in Q1) by occupiers requiring space in the immediate near future.’
But she added: ‘Growth in rental values is expected to moderate this year after a record increase in 2007.’
With an estimated 615,500 sq ft of space coming on stream, DTZ says 64 per cent has been pre-committed.
It notes that potential supply between 2008 and 2012 is forecast at 10.2 million sq ft of net lettable area, with 23 per cent having been pre-committed. This excludes an estimated 484,000 sq ft of space that will be demolished for redevelopment.
The impending supply will likely have an impact on occupancy rates.
Cushman and Wakefield (C&W) said the prime office vacancy rate was 1.1 per cent at end-2007 based on its basket of properties. It projects overall occupancy rates for 2008, 2009 and 2010 of 93.5 per cent, 95 per cent and 93 per cent respectively.
C&W managing director Donald Han said he has noticed that ‘take-up is not as fast’. However, he reckons that the outlook will remain positive until after the first half of 2009, with Grade A office rents rising a further 16.5 per cent this year.
After that, he believes ‘there will be more anticipation with tenants signing leases at moderated rents’.
100m Biopolis Phase III Starts Taking Shape
Source : The Business Times, April 3, 2008
The 41,500 sqm complex will be ready by Q4 2009
CONSTRUCTION of the $100 million Biopolis Phase III project began yesterday, and its developer hopes to achieve a take-up rate of at least 50 per cent by the middle of June. Said Patrick Teo, CEO of Crescendas Bionix, at the groundbreaking ceremony: ‘We are optimistic that the response from the biomedical industry will be positive.’
A member of the Crescendas Group which bagged the development project, Bionix is already in talks with prospective tenants. Some of them require large space and may occupy entire floors.
On the positive outlook, assistant CEO of JTC Corporation Philip Su said: ‘With Biopolis Phases I and II fully taken up, the launch of Phase III is both timely and necessary in meeting the increasing demand for biomedical R&D space.’ JTC Corp is the master developer for one-north, the focal point for research and technopreneurial activities.
Scheduled for completion by 4Q 2009, Biopolis Phase III will add another 41,500 sq m to the research park. The complex will consist of two buildings, and will house private and public research institutes, incubator research activities, medical technology research centres and clinical research centres.
Crescendas Bionix hopes to achieve a take-up rate of at least 50 per cent by the middle of June, said Mr Teo.
The growth of the biomedical sciences industry is likely to place greater demand on space, and JTC Corp plans to expand the Biopolis cluster further. In fact, BT understands that it may launch Phase IV at the end of this year to yield another 30,000 sq m. Asked if Crescendas will also bid for the Phase IV project, Mr Teo said that ‘as a developer, we will be interested’.
Rental rates for the Biopolis Phase III complex have not been finalised, but according to Mr Teo, they will be market-driven, and will factor in construction costs.
‘Construction costs have gone up by 30 per cent from a year ago,’ he said. For larger tenants, Crescendas is prepared to offer more attractive rental rates.
Crescendas is the first privately owned Singapore company to clinch a major development project on Biopolis.
The 41,500 sqm complex will be ready by Q4 2009
CONSTRUCTION of the $100 million Biopolis Phase III project began yesterday, and its developer hopes to achieve a take-up rate of at least 50 per cent by the middle of June. Said Patrick Teo, CEO of Crescendas Bionix, at the groundbreaking ceremony: ‘We are optimistic that the response from the biomedical industry will be positive.’
A member of the Crescendas Group which bagged the development project, Bionix is already in talks with prospective tenants. Some of them require large space and may occupy entire floors.
On the positive outlook, assistant CEO of JTC Corporation Philip Su said: ‘With Biopolis Phases I and II fully taken up, the launch of Phase III is both timely and necessary in meeting the increasing demand for biomedical R&D space.’ JTC Corp is the master developer for one-north, the focal point for research and technopreneurial activities.
Scheduled for completion by 4Q 2009, Biopolis Phase III will add another 41,500 sq m to the research park. The complex will consist of two buildings, and will house private and public research institutes, incubator research activities, medical technology research centres and clinical research centres.
Crescendas Bionix hopes to achieve a take-up rate of at least 50 per cent by the middle of June, said Mr Teo.
The growth of the biomedical sciences industry is likely to place greater demand on space, and JTC Corp plans to expand the Biopolis cluster further. In fact, BT understands that it may launch Phase IV at the end of this year to yield another 30,000 sq m. Asked if Crescendas will also bid for the Phase IV project, Mr Teo said that ‘as a developer, we will be interested’.
Rental rates for the Biopolis Phase III complex have not been finalised, but according to Mr Teo, they will be market-driven, and will factor in construction costs.
‘Construction costs have gone up by 30 per cent from a year ago,’ he said. For larger tenants, Crescendas is prepared to offer more attractive rental rates.
Crescendas is the first privately owned Singapore company to clinch a major development project on Biopolis.
Leng Beng Urges Nimble Feet In Shifting Landscape
Source : The Business Times, April 3, 2008
CDL chief suggests review of land sales, rethink on deferred payment scheme
The uncertainty surrounding the local property market will last at least another six months and stakeholders must stay nimble to deal with the changing tides, says property tycoon Kwek Leng Beng.
Speaking to BT, he said that the standstill in the local property market would end only after the US sub- prime crisis clears. ‘I believe it will take another six months - if not more,’ the executive chairman of listed City Developments Ltd (CDL) added.
But any restoration of confidence in the property market will also hinge on stakeholders - in both the private and public sectors - remaining nimble and reviewing their strategies and policies to meet changing market conditions swiftly, Mr Kwek stressed in a recent interview with BT.
‘You have to cut your coat according to your cloth. As a developer, if I said last year that I was planning to launch five projects this year, but you know this year the market is quiet, it would be unwise for me to say ‘because I decided last year to launch five projects this year, I must still go ahead’.’
He urged the government to likewise review its current land sales programme. The programme was fixed last year, when the market was buoyant, compared to conditions today.
Mr Kwek says the government may have been too quick to scrap the deferred payment scheme last October. He suggests the authorities should reconsider the scheme.
The Government Land Sales Programme is announced every six months. The current H1 2008 slate of sites was announced early last December, which means that some of the decisions were probably made even earlier, property consultants say.
‘It’s been proven in the past that the Singapore property market is a very important pillar that is closely linked to other markets - for example, financial markets, and the construction sector - and is in part driven by sentiment. So it’s vital for stakeholders in the private and public sectors in the property industry to remain nimble. They can do this by reviewing and modifying their practices quickly to stay relevant. By doing this, we can minimise potential problems and address them ahead of time,’ argues Mr Kwek, 68, who has about four decades of experience in the property business.
He also advocates a free-market approach to policy at Singapore’s current stage of development. ‘As Singapore competes in the race among global cities, Singapore must not be perceived as a city that interferes unduly in market forces. We should instead allow market forces to prevail in the property market - unless the situation gets out of hand,’ Mr Kwek says.
‘A global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s important is that you have to create an environment where businesses can make money.’
He also says that the government may have been too quick to scrap the deferred payment scheme last October. Mr Kwek suggests the authorities should reconsider the scheme, which was started around 2002 to help stabilise the weak property buying sentiment at the time.
Under the scheme, private property buyers could buy units in uncompleted developments with just a 10 or 20 per cent downpayment, with the payment for the rest of the purchase price in some cases postponed until the completion of the project. In contrast, under the normal progress payment scheme, buyers have to pay regular instalments to the developer, based on the stage of the project’s construction.
‘If I am a developer and I want to offer deferred payment schemes to my home buyers, perhaps the developers’ bankers may be in a better position to assess the viability of the scheme even whilst staying prudent. The assessment will take into account the project, as well as the developers behind the scheme,’ Mr Kwek argues.
Many analysts had blamed deferred payment for fuelling property speculation. Mr Kwek, while acknowledging this, argues that the scheme also served a useful function: it enabled buyers of new residential properties to dispose of their existing properties at a gradual pace, instead of being forced to sell them.
The deferred payment scheme could be revived again - but this time with a higher initial payment of 30 per cent instead of 20 per cent, suggests Mr Kwek, who is also chairman and managing director of listed Hong Leong Finance.
He praises the government’s handling of the office crunch. The Urban Redevelopment Authority’s introduction of transitional office sites - allowing temporary low-rise office blocks to be built quickly on 15-year leasehold sites - was a swift response to increase office supply for businesses that don’t need to be in a posh CBD office block.
‘But a global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s just as important is that you have to create an environment where businesses can make money.
‘Don’t forget, there are many cities fighting for investments. They can all copy Singapore. It’s very easy to duplicate. So to get ahead of the pack, we have to think of something different - something that nobody has done. This boils down to being nimble,’ Mr Kwek suggests.
CDL chief suggests review of land sales, rethink on deferred payment scheme
The uncertainty surrounding the local property market will last at least another six months and stakeholders must stay nimble to deal with the changing tides, says property tycoon Kwek Leng Beng.
Speaking to BT, he said that the standstill in the local property market would end only after the US sub- prime crisis clears. ‘I believe it will take another six months - if not more,’ the executive chairman of listed City Developments Ltd (CDL) added. But any restoration of confidence in the property market will also hinge on stakeholders - in both the private and public sectors - remaining nimble and reviewing their strategies and policies to meet changing market conditions swiftly, Mr Kwek stressed in a recent interview with BT.
‘You have to cut your coat according to your cloth. As a developer, if I said last year that I was planning to launch five projects this year, but you know this year the market is quiet, it would be unwise for me to say ‘because I decided last year to launch five projects this year, I must still go ahead’.’
He urged the government to likewise review its current land sales programme. The programme was fixed last year, when the market was buoyant, compared to conditions today.
Mr Kwek says the government may have been too quick to scrap the deferred payment scheme last October. He suggests the authorities should reconsider the scheme.
The Government Land Sales Programme is announced every six months. The current H1 2008 slate of sites was announced early last December, which means that some of the decisions were probably made even earlier, property consultants say.
‘It’s been proven in the past that the Singapore property market is a very important pillar that is closely linked to other markets - for example, financial markets, and the construction sector - and is in part driven by sentiment. So it’s vital for stakeholders in the private and public sectors in the property industry to remain nimble. They can do this by reviewing and modifying their practices quickly to stay relevant. By doing this, we can minimise potential problems and address them ahead of time,’ argues Mr Kwek, 68, who has about four decades of experience in the property business.
He also advocates a free-market approach to policy at Singapore’s current stage of development. ‘As Singapore competes in the race among global cities, Singapore must not be perceived as a city that interferes unduly in market forces. We should instead allow market forces to prevail in the property market - unless the situation gets out of hand,’ Mr Kwek says.
‘A global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s important is that you have to create an environment where businesses can make money.’
He also says that the government may have been too quick to scrap the deferred payment scheme last October. Mr Kwek suggests the authorities should reconsider the scheme, which was started around 2002 to help stabilise the weak property buying sentiment at the time.
Under the scheme, private property buyers could buy units in uncompleted developments with just a 10 or 20 per cent downpayment, with the payment for the rest of the purchase price in some cases postponed until the completion of the project. In contrast, under the normal progress payment scheme, buyers have to pay regular instalments to the developer, based on the stage of the project’s construction.
‘If I am a developer and I want to offer deferred payment schemes to my home buyers, perhaps the developers’ bankers may be in a better position to assess the viability of the scheme even whilst staying prudent. The assessment will take into account the project, as well as the developers behind the scheme,’ Mr Kwek argues.
Many analysts had blamed deferred payment for fuelling property speculation. Mr Kwek, while acknowledging this, argues that the scheme also served a useful function: it enabled buyers of new residential properties to dispose of their existing properties at a gradual pace, instead of being forced to sell them.
The deferred payment scheme could be revived again - but this time with a higher initial payment of 30 per cent instead of 20 per cent, suggests Mr Kwek, who is also chairman and managing director of listed Hong Leong Finance.
He praises the government’s handling of the office crunch. The Urban Redevelopment Authority’s introduction of transitional office sites - allowing temporary low-rise office blocks to be built quickly on 15-year leasehold sites - was a swift response to increase office supply for businesses that don’t need to be in a posh CBD office block.
‘But a global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s just as important is that you have to create an environment where businesses can make money.
‘Don’t forget, there are many cities fighting for investments. They can all copy Singapore. It’s very easy to duplicate. So to get ahead of the pack, we have to think of something different - something that nobody has done. This boils down to being nimble,’ Mr Kwek suggests.
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