An Elite Investment Gets Its Day In The Sun

Source : The Business Times, August 13, 2009

Sales of Good Class Bungalows gather steam, with some predicting healthy price rise

The Good Class Bungalow (GCB) market has sprung to life with high-net-worth individuals stepping up their purchases.

July was an especially action-filled month which saw about 20 GCB transactions worth a total of more than $300 million. To put this in perspective, the entire first quarter of this year saw GCB deals worth only $27.5 million.

The action picked up in April, when $56 million worth of GCBs were transacted. It gathered pace in May and June, each month seeing deals amounting to around $188 million. In July, the market went ballistic.

So far this year, around 50 GCB deals have been transacted, according to caveats data compiled by property consultants and information on the latest transactions obtained by BT.

The year-to-date tally of over $800 million is healthy, considering that the whole of last year saw just 51 deals worth $830 million.

GCB agents expect the sales flow to continue in coming months. CB Richard Ellis's director, luxury homes, Douglas Wong said: 'It's likely that a total of 60-65 GCBs will be sold in the whole of 2009 - more than the 51 GCBs sold in 2008. The total quantum is likely to be around $1.1 billion to $1.2 billion, about 35-45 per cent higher than the quantum of $830 million in 2008.'

Savills Singapore director of investment sales & prestige homes Steven Ming says that 'although we do not expect the spike in GCB sales that was seen in May to July to be sustained, we do expect to still see healthy buying activity continue for the rest of the year'. He expects 60-70 transactions for the whole of 2009.

Apart from the general feeling that the worst of the financial crisis is over, he cites the low mortgage and deposit rates as reasons for the GCB market revival.

Agreeing, Newsman Realty managing director KH Tan notes that high-net- worth individuals prefer GCB investments to letting their cash idle in banks. They are also wary of investing in financial products following the Lehman debacle, he said.

'Another group of GCB buyers are foreigners who have become Singapore PRs and PRs who have become citizens,' adds Mr Tan, who recently brokered the $38 million sale of a Cluny Park bungalow.

BT understands the property was sold by former Kim Eng Securities managing director Douglas Ooi to a buyer who also picked up No 3 Cluny Hill earlier this year.

'When the IRs (integrated resorts) are ready, even more rich people from overseas will come to Singapore and become citizens. Some would be interested to invest in the GCB market,' said Mr Tan.

Typically, one has to be a Singapore citizen before one can own a GCB. However, PRs are known to have been given permission by the government on a case-by-case basis to buy small GCBs with land areas of about 15,000 sq ft, depending on their contribution to Singapore, according to Mr Tan.

Major GCB deals in recent months include a site at Dalvey Road said to have been sold by a certain Thomas Chan Ho Lam, for $27.01 million. Interestingly, a person with the same name is also understood to have bought a bungalow at Belmont Road for $30.5 million last month from Ong Kok Thai, managing director of Vanguard Interiors and the Peranakan Place Group.

Meanwhile, GuocoLand chairman Sat Pal Khattar is believed to be the seller of a bungalow at Rochalie Drive, which fetched $18.32 million. BreadTalk founder and chairman George Quek is reported to have sold his 2 Swettenham Road bungalow for $29.2 million to developer Simon Cheong.

The GCB market peaked in 2006 with $1.23 billion of transactions involving 119 deals. The following year saw 87 deals for a total $1.15 billion, according to CBRE figures. In the first seven months of this year, 47 deals totalling $710 million took place, CBRE said.

However, BT has learnt there are about six other transactions not yet captured in caveats, located in places like Belmont and Leedon roads, Maryland Drive and Astrid Hill. If these were to be included, the year-to-date tally would cross $800 million.

GCBs are the creme de la creme of Singapore's housing market, with stringent planning requirements.

There are only about 2,400 such bungalows in Singapore's 39 gazetted GCB Areas.

Mr Tan estimates GCB prices could increase about 20 per cent on average over the next 12 months.

Says Savills' Mr Ming: 'GCBs, being limited in availability, are a highly sought-after investment among the well heeled. As more rich are created, demand for these exclusive bungalows will gradually outstrip available supply for sale.'

Prepared Industrial Land Allocation Falls In Q2

Source : The Business Times, August 13, 2009

Negative 32.2 ha compares with net allocation of plus 14ha in Q1

Net allocation of prepared industrial land went into negative territory in the second quarter for JTC Corporation, as the downturn continued to take a toll.

Coming soon: Phase 2A of Fusionopolis is under construction and is expected to be finished by 2013

JTC's Q2 facilities report shows net allocation was negative 32.2 hectares, compared with a net allocation of plus 14 ha in Q1 and 34 ha in Q2 2008.

Gross allocation in Q2 this year slid to 5.4 ha. And termination jumped to 37.6 ha, from 16.7 ha in Q1. Almost half of total terminations stemmed from the electronics segment. And almost a quarter of terminations was due to companies consolidating operations.

Net allocation of generic land and specialised parks also moved into negative territory in Q2.

Net allocation of generic land was negative 7.1 ha, down from plus four hectares in Q1 and significantly lower than 26.7 ha in Q2 2008. As gross allocation fell 77 per cent quarter-on-quarter to 2.5 ha, termination rose 37 per cent to 9.6 ha in Q2. The manufacturing sector accounted for 74 per cent of gross allocation.

Net allocation of specialised parks dropped to a negative 25 ha versus plus 10 ha in Q1 and 7.3 ha in Q2 2008. This was also due to lower gross allocation and higher termination. Gross allocation plunged 85 per cent quarter-on-quarter to 2.9 ha, while termination rose three-fold to 28 ha.

Wafer Fab Park accounted for 65 per cent of termination within specialised parks, with 18.3 ha in Q2, which widened net allocation for Wafer Fab Park from negative 6.5 ha in Q1 to negative 18.3 ha in Q2.

In JTC's ready-built factory (RBF) segment, net allocation remained negative in Q2 but improved slightly, climbing to negative 7,800 sq m versus negative 8,900 sq m in Q1, thanks to a 64 per cent increase in gross allocation to 17,800 sq m. Higher gross allocation was partly offset by higher termination, which rose by 30 per cent to 25,600 sq m in Q2.

The RBF occupancy rate was 0.3 percentage points lower at 97.4 per cent.

Meanwhile, Phase 2A of Fusionopolis is under construction and is expected to be finished by 2013, JTC said yesterday.

Consultants See Slower Slide In Office Rents

Source : The Business Times, August 13, 2009

But most are conservative about the strength of space absorption for the rest of 2009

Some property consultants reckon the worst is over for falling office rents. And one even expects net take-up of space to turn positive by the fourth quarter of this year if the economy does reasonably well.



























Cushman & Wakefield's mid-Q3 analyses show the decline in prime office rents has slowed. For instance, Raffles Place Grade A office rents fell 18 per cent from $10.61 in Q1 to $8.70 in Q2. But since then, they have dipped just 2.9 per cent to $8.45.

The same trend is showing up for prime office rents in the Shenton area. They have dropped 5.8 per cent from Q2 to $6.32 - a smaller decline compared with the 17.9 per cent drop from $8.17 in Q1 to $6.71 in Q2.

The prime office vacancy rate at mid-Q3 is 6.1 per cent, up 0.4 of a percentage point from Q2.

'As economic conditions continue to stabilise, we will see the flow-through to improved space absorption happening over the next few months,' said Cushman & Wakefield research director Ang Choon Beng.

'On a more optimistic note, if Singapore's GDP performance comes in at the better end of current estimates, we could potentially see positive space absorption by Q4 2009.'

Singapore's Q2 GDP jumped 20.7 per cent quarter-on-quarter but the government remains fairly guarded, keeping its GDP forecast for the year at a contraction of 4 to 6 per cent.

Net take-up of office space here has been negative for three consecutive quarters since Q4 2008 - a result of weakening demand for office space and rising supply.

Other consultants that BT spoke to agree that office rents have fallen at a slower pace, but are more conservative about the strength of space absorption for the rest of the year.

'It's probably a little bit early to forecast positive take-up over the second half,' said CB Richard Ellis's executive director for office services Moray Armstrong. For one thing, some companies may have introduced downsizing plans that will only take effect in the months ahead, he said.

There could still be downward pressure on rents in the next few quarters and positive take-up of space might not emerge until next year, he added.

Jones Lang LaSalle's head of markets in Singapore Chris Archibold is also cautious about where net take-up could head in Q4. 'There are little bits of expansion here and there but they are very few and far between at the moment . . . and we're still seeing some organisations downsizing,' he said.

All three consultancies reckon a game of musical chairs is going on in the office market - leasing activity has been dominated by companies relocating for better propositions, such as more competitive rents or more efficient floor plates. As BT reported last week, several firms are moving to new buildings such as Mapletree Anson and Straits Trading Building.

Hotel Royal Family Offering Guillemard Apt Block For Sale

Source : The Business Times, August 13, 2009

Fragrance Group picks up freehold site at Changi Road for $33.56m

Melodies Limited, controlled by the Lee family of Hotel Royal, is selling a 20-storey freehold apartment block in Guillemard Road which it developed 11 years ago.

Cassia View, which received Temporary Occupation Permit in 1998, comprises a total of 72 units

The price is about $70 million, reflecting $783 per sq ft based on existing strata area of 89,362 sq ft.

Colliers International, which is marketing the property, Cassia View, through an expression-of-interest exercise, says that the buyer could either spruce up the 72 units and sell them individually or tear down the property and redevelop it.

Cassia View is understood to have utilised the maximum gross floor area (GFA) allowed for the site based on a 2.8 plot ratio under Master Plan 2008. The site is zoned for residential use.

Nevertheless, Colliers executive director (investment sales) Ho Eng Joo reckons the buyer could redevelop the property, given its age, as there may be scope for improving the layout to better suit current tastes.

Based on Cassia View's GFA of 105,823 sq ft, the $70 million price reflects a land cost of $661 psf per plot ratio if the new owner chooses to redevelop it.

Some 28 of Cassia View's existing 72 units are currently let on short-term leases of up to a year.

Dakota Residences, a 99-year leasehold condo nearby, is now selling for about $900 psf on average.

The expression-of-interest exercise for Cassia View closes on Sept 2.

Separately, Fragrance Group last week picked up a freehold site in Changi Road for $33.56 million.

The deal was brokered by DTZ. The land area is 28,545 sq ft.

Fragrance said that it plans to develop the site into a five-storey mixed development comprising commercial space and apartments.

It intends to start construction and sale of the project in the second half of financial year 2009.

Kaki Bukit Industrial Site Attracts 18 Bids

Source : The Business Times, August 13, 2009

An industrial site along Kaki Bukit Road 2, put up for sale by the government, drew an impressive 18 bids by the close of tender yesterday.

The Urban Redevelopment Authority (URA) said that the highest bid received for the 30-year leasehold site was $12.1 million, more than double the minimum bid price of $5 million.

That highest bid, which works out to just under $105 per square foot per plot ratio (psf ppr), was placed by Kng Development, whose shareholders include Ng Teng Yeng, brother of property tycoon Ng Teng Fong; Kim Chan Wah and Ng Hock Lye.

Kng's bid is 16.5 per cent above the second highest bid of $10.4 million, or $90 psf ppr, submitted by Lee Siaw Ling, Low Khoon Huat and Ang Lai Huat.

It is also higher than the $72 psf ppr which Eastpoint Development paid for a 30-year leasehold industrial site along Kaki Bukit Road 3 in August 2007.

This latest site, offered from the government's reserve list, has an area of 1.07 ha and a gross plot ratio of one. CBRE Research says that the breakeven cost for Kng Development is likely to be $250 psf.

'The robust response to the tender reflects the prevailing improving business sentiment,' said Li Hiaw Ho, executive director at CBRE Research.

He noted that the top six bids were all above $75 psf ppr and 'could be reflective of the bidder's expectations that Singapore's manufacturing sector will improve in the near future'.

Colliers International director (industrial) Tan Boon Leong said that the large number of bids received was not surprising as the 'quantum amount is small'.

He thinks that the good response reflects greater confidence in the economy, as well as the fact that the plot lies within a mature industrial estate and is zoned for a Business 2 development, which means that it can be developed for a range of clean, light and general industrial uses.

Mr Tan also said that some of the bids were placed by contractor developers 'who are probably more competent in judging their construction costs, and with prior experience, may thus be bolder when it comes to putting in bids'.

URA's decision on the award of the tender will be made after the bids have been evaluated, and disclosed at a later date.