Sunday, January 30, 2011

Petition to MP over shortcut at Shunfu

Residents of Thomson Garden have petitioned the Government to ensure that the privatisation of neighbouring Shunfu HUDC estate will not take away a pathway shortcut that they have been using for 30 years.

According to these residents, the protem committee of the privatisation project is planning to build a boundary fence around Shunfu estate when it is privatised later this year.

The problem is that the proposed fence will cut off a path the residents currently use to reach amenities such as Marymount MRT station and Shunfu market. Without it, the journey on foot will be 10 minutes longer.

This is the second group of landed property residents to petition Bishan-Toa Payoh GRC Member of Parliament Hri Kumar Nair on impending changes to their neighbourhoods.

Just over a week ago, residents living in Jalan Kuak approached Mr Nair when it was announced that six terrace houses there would be affected by the construction of the proposed North-South Expressway.

The expressway will include a 15.9km northern section from Admiralty Road West to Toa Payoh Rise.

Both groups met Mr Nair yesterday in a closed-door dialogue session at Thomson Community Club to discuss the fate of the pathway and problems posed by the expressway.

Mr Nair said discussions on the pathway were still ongoing so he could not confirm what would happen with it.

'I am working with the ministries, including the Ministry of National Development, to address my residents' concerns,' he said.

He also said that the Land Transport Authority had clarified that a part of the expressway that is near the private estate will be a closed tunnel, and not a semi-tunnel as previously reported.

Retiree J.T. Lim, 78, said the pathway is a necessity for older residents like him.

'I've been using it since I lived here in the 1970s. At my age, it will be really tiring if they take the path away because I'll have to travel so much farther,' he said.

Saturday, January 29, 2011

Q4 new office demand surges to 3-year high

NET new office demand surged to 753,473 square feet in the fourth quarter of 2010, the highest quarterly take-up since Q1 2007, according to latest government numbers.

The fourth-quarter take-up was triple the 258,334 sq ft for the preceding quarter and took the total for 2010 to 1.65 million sq ft, a sharp reversal of negative demand of about 236,806 sq ft in 2009.

'This once again demonstrates the fast recovery in the office market and the voracious appetite of office occupiers for expansion space whenever the economy picks up,' said CB Richard Ellis (CBRE) executive director Li Hiaw Ho.

The Urban Redevelopment Authority's islandwide office vacancy rate, which had spiked to 13 per cent at end-Q3 2010 (from 12.3 per cent at end-Q2) eased to 12.1 per cent at the end of last year - as tenants moved into recently completed office projects.

Most of the new project completions last year took place in the first three quarters, such as Marina Bay Financial Centre (MBFC) Tower 1 in Q1, Mapletree Business City in Q2 and MBFC Tower 2 in Q3.

The islandwide stock of office space rose 2.6 per cent to nearly 76 million sq ft at the end of last year, from about 74 million sq ft at end-2009.

URA's office rental index rose 4.7 per cent quarter on quarter in Q4, slowing from the 6 per cent gain in Q3. For the whole of last year, the index appreciated 12.6 per cent, a marked turnaround from a drop of 23.6 per cent in 2009. The latest index, however, is nearly 20.2 per cent below its previous peak in Q2 2008.

According to CBRE's numbers, the average gross monthly rental value for Grade A office space climbed 22.2 per cent last year to $9.90 per square foot (psf) but is still 47.3 per cent shy of the recent high of $18.80 psf in Q3 2008.

Property consultants are generally predicting an increase of around 15 per cent in Grade A office rents this year.

Agnes Tay, Savills Singapore director (commercial leasing), said that over the next two years, there would be considerable secondary office stock being returned to the market as occupiers vacate existing premises to move to newly completed office developments.

'However, the impact of secondary stock is likely to be cushioned by a reduction in supply from demolition or refurbishment of a number of older office blocks. On the demand side too, a healthy 54 per cent of the new office space to be completed in the CBD in 2011-2012 has already been pre-committed.

'Savills has identified an inflection point appearing in late 2011 when the return of secondary stock will impact the market. At this point, we expect to see a greater spread in rents between the international Grade office space and the rest of the market.'

URA's shop rental index recovered 2.9 per cent last year, against a 7.4 per cent drop in 2009.

Amid Singapore's economic recovery, the rental indices for flatted factory and warehouse space appreciated 11.7 per cent and 17.7 per cent - against respective declines of 12.1 per cent and 15.6 per cent in 2009.

HDB resale prices up 2.5% in Q4

HDB resale prices rose by 2.5 per cent in the fourth quarter of 2010 - a tad higher than the 2.4 per cent climb estimated earlier this month - even as the number of deals and the cash-over-valuation (COV) amounts commanded by flats fell.

Data from the Housing & Development Board (HDB) released yesterday showed that the official resale price index climbed to yet another new high in Q4 2010. For the whole of 2010, HDB resale prices rose by 14.1 per cent.

Prices rose even as the median COV amount among all resale transactions fell by $7,000 (or 23 per cent) from $30,000 in Q3 2010 to $23,000 in Q4 2010.

But prices still rose as valuations of most types of HDB flats climbed in Q4, analysts said.

The number of resale transactions fell by about 21 per cent, from 8,205 in Q3 2010 to 6,454 in Q4 2010. The total number of resale transactions in 2010 fell to 32,257, a decline of 13 per cent over 2009's volume.

Analysts said that HDB flat valuations still increased in Q4 2010, in spite of a number of cooling measures introduced in August 2010, as there is usually a lag time of about six to eight weeks before price corrections would align with the actual sentiment in the market.

But resale prices could soon plateau, PropNex chief executive Mohamed Ismail said.

HDB's Q4 2010 data shows that median resale prices of 3-room, 4-room, 5-room and executive flats stood at $300,000, $385,000, $460,000 and $548,000 respectively, he said.

But PropNex's in-house data for deals done in January shows median resale prices of $298,000, $393,000, $466,000 and $538,000 respectively - a 1.8 per cent drop to 2.1 per cent increase from Q4 2010.

'It must also be highlighted that some of our data reflects transactions that took place before the additional cooling measures announced on Jan 13, 2011,' added Mr Mohd Ismail. 'Feedback from the ground has indicated that there is less movement among the current HDB dwellers due to the (new) 60 per cent loan-to-value (LTV) cap. Therefore, it is possible to see a further dip, though not drastic one, for median COVs and sales volume in Q1 2011.'

HDB plans to offer up to 22,000 new flats under the build-to-order (BTO) system if demand is sustained.

The BTO supply will also be supplemented by the upcoming supply of flats under the design, build & sell scheme (DBSS) and the executive condominium (EC) housing scheme. Four more EC developments in Punggol, Pasir Ris, Bukit Panjang and Tampines will be launched for sale in the coming months by private developers.

The charge of the bungalows brigade

IN a year fuelled by strong liquidity and economic growth, bungalows were the stars that led the surge in the Singapore property market in 2010. Latest data from the Urban Redevelopment Authority shows that its price index for landed homes climbed 30.8 per cent last year. The sub-index for detached houses, or bungalows, soared 37.6 per cent against a 5.6 per cent rise in 2009.

The index for non-landed private homes rose 14 per cent last year, following a 0.5 per cent gain in 2009. The biggest price hike in 2010 in this segment was for completed non-landed homes in Core Central Region, which climbed 19.5 per cent last year, although prices of uncompleted units in the same region rose at a much slower rate of 10.6 per cent in 2010.

URA's overall price index for private homes swelled 17.6 per cent last year, after posting a 1.8 per cent rise in 2009. It rose 2.7 per cent quarter on quarter in Q4 2010.

Knight Frank chairman Tan Tiong Cheng observed that the index has appreciated by about 65 per cent over the past five years, translating to an average annual increase of 13 per cent. 'This is a very significant increase considering that we had the biggest financial crisis during this period,' he added. Developers sold a record 16,292 private homes (excluding executive condos) last year, up 10.9 per cent from 2009 and busting the previous high of 14,811 units in 2007.

The other sectors of the property market also saw sharp turnarounds last year, according to the latest URA numbers. For instance, the office price index rose 18.9 per cent in 2010, against a 16.4 per cent drop in 2009. Flatted factory and warehouse prices, too, shot up 23.7 per cent last year, compared with respective declines of 14.2 per cent and 16 per cent in 2009.

Looking ahead, market watchers expect some wind to be taken out of the residential sector following the latest property cooling measures. Investors are channelling their money to the commercial and industrial property segments, which were not the target of the cooling measures announced on Jan 13.

DTZ's SE Asia research head Chua Chor Hoon is predicting a minus 5 per cent to 0 per cent change in URA's overall private home price index this year. Others are more sanguine. Colliers International director of research and advisory Tay Huey Ying forecasts a 5-8 per cent rise with the increase led by mid and high-end properties.

Prices of mass market homes are expected to stay relatively unchanged or ease by up to 2 per cent given the ample new supply in this segment, she said.

As for the landed segment, RealStar Premier Property managing director William Wong, who had earlier predicted an average 10 per cent rise this year in Good Class Bungalow (GCB) prices - the creme de la creme of landed homes on mainland Singapore, now expects prices to hold in 2011.

'Transaction volumes are expected to fall 20-30 per cent over the next 3-6 months. Owners are not prepared to adjust prices downwards while buyers are waiting for prices to go down. This may not happen.'

Another bungalow specialist, KH Tan, managing director of Newsman Realty, said that some sellers have started to withdraw GCBs from the market following the latest cooling measures as they would face longer holding periods on any replacement bungalows they may purchase because of the hikes in seller's stamp duties.

Nevertheless, he predicts an increase of about 10 per cent in GCB prices this year, following last year's appreciation of about 35 per cent, because of the limited stock of GCBs, wealth effect from new ultra high net worth citizens and low interest rates. On Sentosa Cove, where foreigners may buy landed homes, the price gain this year could be higher, about 15 per cent, as 'there are still a lot of rich Chinese foreigners coming in'. Bungalow prices on Sentosa climbed 30 per cent last year on average, he estimated.

On URA's numbers, CB Richard Ellis executive director Li Hiaw Ho observed that while the price index for uncompleted non-landed homes in Outside Central Region (where mass-market condos are located) has surpassed the peak in Q2 2008 by 19.1 per cent, the equivalent index for Core Central Region (which covers the traditional prime districts, financial district and Sentosa Cove) is still 7.1 per cent below its Q1 2008 high.

Meanwhile, the National University of Singapore's Singapore Residential Price Index (SRPI) flash estimate shows that prices of completed non-landed private homes in Singapore's Central region (postal districts 1-4 and 9-11) appreciated 7.8 per cent last year, while the sub-index for the Non-Central region rose 15 per cent. As a result, the overall SRPI increased 11.9 per cent in 2010. In 2009, the three indices posted respective gains of 27.3 per cent, 19.5 per cent and 22.2 per cent.

URA's data showed that 10,399 private homes were completed last year - close to the 10,488 units in 2009 and 10,122 units in 2008. The overall private residential rental index rose 17.9 per cent last year, a sharp reversal from the 14.6 per cent slide in 2009.

Savills Singapore director for residential leasing Patrick Lai said that overall residential rents may increase a further 5 per cent in 2011. 'We believe that the rental rates for super high-end condominiums and GCBs will remain robust and are likely to increase by 6-10 per cent as more top executives relocate to Singapore.

'For example, we have just leased out a 2,852 square foot unit at The Orchard Residences for $20,000 per month. We also recently handled the leasing of a GCB in the Peirce Villas/Swettenham Road neighbourhood for $40,000-45,000 per month.'

CCT gets provisional nod to redevelop Market Street Car Park

PLANS to redevelop Market Street Car Park into an office building could be back on track, now that its owner CapitaCommercial Trust (CCT) has obtained provisional permission for the project.

The Urban Redevelopment Authority (URA) gave the tentative nod in November last year. The new office building could have a gross floor area of around 854,400 square feet. There are no details on the number of car park lots that it may have.

Market Street Car Park, at 146 Market Street, has 704 car park lots. It also has retail and food and beverage outlets on the ground floor. Its lease expires in 2073. A number of industry watchers have been expecting CCT to trigger redevelopment plans for Market Street Car Park again, as it looks for ways to deploy capital this year.

Back in January 2008, the commercial real estate investment trust (Reit) said that it had gotten outline planning permission (OPP) to redevelop Market Street Car Park into a Grade A office tower.

The authorities granted the OPP on two conditions: there would be no extension of the present lease, and CCT would have to pay a development premium equal to 100 per cent of the enhancement in land value. CCT estimated then that the total project cost would be $1 billion to $1.5 billion.

The global financial crisis foiled CCT's plans. In January 2009, it said that it would drop the project because of its significant size, the high redevelopment cost, an uncertain market outlook and tight credit conditions.

CCT later divested two office buildings and prepaid a secured term loan. With the recovery of the office market, and an investment capacity of up to $1.6 billion, it is back looking for investment opportunities this year.

Several analysts have flagged the redevelopment of Market Street Car Park as a possible venture, given the difficulties of making yield accretive acquisitions in today's market.

Lower construction costs - compared with levels before the financial crisis - could also make the project more attractive.

'We continue to expect the redevelopment of Market Street into a Grade A office building,' said Standard Chartered research analysts in a Jan 20 report. 'We calculate that the project is likely to cost $1-1.07 billion, including $500-600 million of development charges.'

CCT might have to undertake the redevelopment with a joint venture partner as development projects cannot exceed 10 per cent of a Reit's asset size, said Macquarie Equities Research analysts in a Jan 19 note.

Cushman & Wakefield Singapore vice-chairman Donald Han said that he believes that it is an opportune time to revisit the project. Office rents have been recovering, and if redevelopment takes place in the next 12 months, the new building could be ready in 2013 or 2014 when the office market would be in 'full swing', he said.

However, 'a lot of the new buildings are now being built with tighter car park ratios', he said, adding that the potential removal of car park lots would affect the parking situation in the central business district.

8,430 new private homes set to be completed in 2011

CLOSE to half of the estimated 8,430 new private homes that are slated to be completed in 2011 will be in the upmarket core central region, according to fresh data released by the Urban Redevelopment Authority (URA) yesterday.

The government agency has also bumped up its estimate for the projected supply of private homes due to be completed this year by 25 per cent from three months ago. In October 2010, URA estimated that 6,766 new private homes will be completed in 2011.

Sources told BT that URA has been surveying developers more closely over the last few months in a bid to compile more accurate pipeline supply figures. The agency computes the estimated supply of private housing units in the pipeline through a quarterly survey of developers.

In response to a query from BT, URA said it will continue to work closely with developers to ensure that they submit up-to-date estimations of the expected completion dates of their projects.

'URA's survey of the developers' completion (for 2011) is only starting to increase. The increase from Q3 2010's forecast for 2011 completions to Q4 2010's forecast is a significant 25 per cent. Over the next few quarters, we expect to see further upward revisions,' said Ku Swee Yong, chief executive of real estate firm International Property Advisor.

Looking at the latest completion estimates, analysts once again warned that home-buyers need to brace themselves for a very large supply of private residential units due to be completed each year from 2011 to 2015.

URA currently estimates that 8,116 units will be completed in 2012; 17,111 units in 2013; 17,421 units in 2014; and 13,453 units in 2015.

In fact, 2010's number of newly completed private homes, which stands at around 10,400 units, is already higher than the historical average annual increase in housing supply of around 6,400 private units over the last decade, Mr Ku pointed out. For 2011, a total of 3,874 homes will be added to the housing supply in the core central region, which includes the prime districts 9, 10 and 11, Marina Bay and Sentosa Cove. This will make up 46 per cent of the islandwide housing supply of 8,430 new private homes.

Another 2,265 private homes will be completed in the rest of central region, while in the outside central region, 2,291 units will be completed this year.

URA also said that as at the end of Q4 2010, there was a total supply of 65,699 uncompleted units of private housing from projects in the pipeline. Of these, 32,776 units were still unsold.

Friday, January 28, 2011

ProLogis, AMB in merger talks as truce with GLP nears expiry

(SINGAPORE) A month to the expiration of the non-compete agreement between Global Logistic Properties (GLP) and US-based ProLogis that prevents the latter from re-entering the lucrative China market after its exit in 2008, ProLogis appears to be gearing up for a homecoming in the country.

The development could potentially revive questions on GLP's decision not to explicitly disclose its non-compete agreement with ProLogis in its prospectus when it sought a listing on the Singapore Exchange (SGX) main board last year. GLP has always stated that China is its key growth market.

ProLogis, the world's largest warehouse operator, confirmed yesterday morning that it was in merger talks with another big player, AMB Property Corp - a US-listed firm that is a major logistic facilities provider in China.

ProLogis and AMB said yesterday that their discussions involve a merger of equals, where the two companies would combine in an all-stock, at-market transaction based on trading prices of the two firm's stocks prior to media reports on the possible merger.

The talks were first reported by the Wall Street Journal before the US markets closed early yesterday morning. If successful, it could create a US$14 billion real estate investment trust (Reit) with US$23.7 billion of total assets - the most among office and industrial Reits tracked by Bloomberg.

When contacted about the possible merger between the two largest US-listed owners of logistics facilities and ProLogis' re-entry in China, a GLP spokesman said: 'We always monitor developments in the logistics property space.

'Scale and network are critically important in this business, so consolidation among the global logistics property players is par for the course.'

After news broke in December about the non-compete clause it has with ProLogis, GLP had repeatedly said that the information was 'not material' and did not need to be disclosed. It also said that it regarded ProLogis 'in the same manner as any other potential competitor with no presence in China'.

Sources close to GLP also told the media that the company had felt chances of ProLogis re-entering China when the non-compete clause expires next month was 'remote'.

Under the non-compete arrangement, ProLogis cannot acquire or build logistic facilities in China, and GLP in Japan. The clause stems from ProLogis' sale of all its China operations and property fund interest in Japan to GIC Real Estate (GIC RE) in late 2008 for US$1.3 billion.

GIC RE, the property investment arm of the Government of Singapore Investment Corporation, then rebranded the assets under the GLP name.

Much of GLP's current portfolio was acquired from ProLogis when it exited China amid a mountain of debt.

According to GLP's listing prospectus, AMB's completed portfolio in China amounts to 400,000 square metres. It is the fourth largest player in China, with GLP in No 1 position with 2.8 million sq m.

GLP was listed on the SGX in October last year, where it raised S$3.9 billion in its initial public offering - the largest since Singapore Telecom's listing.

Home sales: Volume to fall, not prices

HOME sales are expected to drop in the wake of the Government's recent cooling measures, although prices should hold up fairly well, according to a new report.

But DTZ Research pointed out that the substantial supply of new housing in the pipeline could outstrip demand in the next few years, leading to prices and rentals coming under pressure.

It also flagged the challenges posed by sluggish Western economies and the possibility of more cooling measures.

The property consultancy's report was focused partly on the possible effects of cooling measures introduced on Jan 13.

It tipped that sales volume would fall as short-term speculators would be weeded out of the market by the hefty seller's stamp duty of up to 16 per cent for homes sold within a year of purchase.

But not all investors will withdraw. Some may find the 4 per cent seller's stamp duty on homes sold in their fourth year of purchase to be surmountable.

They could shift their focus to buying unfinished units with completion dates three to four years ahead.

Prices this year are expected to be largely stable with a decline of not more than 5 per cent, said Ms Chua Chor Hoon, DTZ's research head for South-east Asia and one of the report's authors.

'(Prices are) underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar, and the inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong,' she added.

Landed homes, small units and high-end apartments are expected to be less affected by the measures.

Said DTZ executive director (residential) Margaret Thean: 'Small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units.'

She also said the seller's stamp duty will have little impact on landed homes as most are purchased for owner-occupation, while high-end apartments will continue to attract foreign interest.

Other challenges come in the form of a potential oversupply.

A spike in completed units is expected in the next two to three years, with the Government putting out a record number of homes through public housing and land sales programmes.

'There is also uncertainty over the strength of recovery of the major Western economies. If they recover well, interest rates will move up and reduce the affordability of mortgage payments,' the report added.

'On the other hand, if they continue to languish, this will have an effect on the Singapore economy and optimism in the property market eventually.'

With the residential market facing numerous challenges, investors are likely to identify opportunities in other property sectors and alternative investment products, DTZ said.

2 collective sales done at lower prices

TWO collective sales have been completed, although both were at prices lower than earlier indicated, perhaps showing that recent cooling measures have tempered demand a little.

Marine Point in Marine Parade Road has been acquired by CapitaLand at $101million. The owners wanted $110 million when the tender was launched in October.

If an estimated development charge of $12.8million is included, the price works out to $1,056 per sq ft (psf) per plot ratio (ppr), CapitaLand said.

It plans to redevelop the 51,185 sq ft freehold site into a 150-unit condominium of one-bedroom plus study and two-bedroom apartments.

This will bring CapitaLand's pipeline of homes here to more than 2,600 units.

Mr Wong Heang Fine, chief executive of CapitaLand Residential Singapore, said the firm plans to maximise the project's height to about 19 storeys and is confident that it will get strong interest from young families and professionals who have grown up in the area.

'This will give the majority of the apartments a good view of the surrounding skyline and the sea. We plan to have (it) ready for launch in the first half of 2012,' he added.

Bartley Terrace, near Bartley MRT station, was sold for $40million, which The Straits Times understands to be below its reserve price.

The tender was launched last year with an asking price of $48million.

Meadows Investment, a firm owned by Mr Neo Tiam Boon, executive director of local property and construction firm Tiong Aik Group, bought the site in a private treaty, said marketing agent Urban Front yesterday.

The price works out to about $760 psf ppr, inclusive of about $3million in development charges and a 10per cent balcony allocation.

The District 19 freehold site has a land area of about 40,482 sq ft with a plot ratio of 1.4.

The owners of the 32 units stand to reap $1.14million to $1.8million each, Urban Front said.

URA launches first Paya Lebar Central site for sale

THE Urban Redevelopment Authority (URA) yesterday launched a commercial land parcel in Paya Lebar Central for sale by public tender - the first site offered for sale in that area.

The 99-year leasehold site, which is at the junction of Paya Lebar Road and Eunos Road 8, has a site area of 159,870 square feet and a maximum gross floor area (GFA) of 671,450 sq ft.

In line with the plan for Paya Lebar Central to be a major commercial centre, the upcoming development on the site will have to set aside at least 80 per cent of the total GFA for office use. The remaining GFA can be allocated for additional office use or other uses permitted under the commercial zoning.

'The site is envisaged to be developed into a good-quality office development that would appeal to businesses that do not need to be located within the city centre, as it is a mere 10-minute drive from the central business district,' said URA.

The government's vision is for Paya Lebar Central to become a bustling commercial centre, with a mix of office, retail, hotel and public spaces. The precinct has about 12 hectares of land available for development and a potential commercial floor space of more than five million sq ft in total.

Analysts expect a top bid in the range of $500-600 per square foot per plot ratio (psf ppr) for the plot. The site is expected to draw good interest from developers as it offers a choice alternative for tenants who do not need to be in the central business district but find Tampines and the business park in Changi to be too far.

'This site is anticipated to receive warm interest from developers due to its strategic location and the promising outlook for the office property market, which is poised for an overall sustained gradual rental recovery supported by broad-based incremental business expansion plans,' said Ong Kah Seng, Cushman & Wakefield senior manager for Asia-Pacific research.

Observed DTZ South-east Asia research head Chua Chor Hoon: 'With the office market on the rise, the successful tenderer stands to benefit from higher rents when the development is completed in a few years' time.'

This land parcel is next to Paya Lebar MRT station, which serves the Circle and East-West MRT lines. The tender for the site closes at noon on April 21, 2011.

Connecting the dots in S'pore condo prices

WHEN property owners or investors make their decisions to buy or to sell, they usually form expectations of how prices of property are changing in general over time. These changes are driven by common perception of the scarcity of land, the number of developments in the pipeline and estates under construction; by shifts in the rate of interest or inflation; and by political measures.

Such factors put property as an asset class in bright sunshine, or at times, in dim light. But concluding whether a particular real estate object is to be considered cheap or expensive requires a second line of reasoning.

In Singapore, like in all other countries, property is a heterogeneous asset class. Although condos can have up to a thousand units, the units differ in size, view, and other characteristics. Among the many estates in Singapore, their heterogeneity refers to the location, to the age, the reputation of the developer and other features of the condominium. Such particularities are mirrored in relative prices.

Relative prices, for example, consider the multiple of the per square foot (psf) of a condo in the central business district to the psf in suburban areas. Likewise, relative prices reflect the relation between the psf of a freehold condo to one having a 99-year lease or the typical relation of the price of a condo in walking distance to a MRT station, to the psf of a condo that is further away from public transport facilities.

Thus, a prospective owner or investor should also take note of whether the condo under consideration looks cheap or expensive with respect to the typical relative prices. Relative prices appear to remain stable over a longer period of time, although they might be different in Hong Kong or London from Singapore.

Relative prices can be determined with hedonic models, which were developed by American economists 30 years ago. Although hedonic models are regularly used to explore particularities of the real estate markets in America, England, Hong Kong and other markets, we can present a few new insights by adopting the model to Singapore.

Our model considers structural attributes such as the age, project characteristics such as tenure and facilities, the type of sale (at launch or subsale), and characteristics of accessibility and neighbourhood such as the distance to the Central Business District (CBD), to schools and shopping centres.

All 9,029 transactions (2009) of 470 different condominium projects, reported by the Real Estate Information System (Realis), have been used as inputs to the hedonic model.

The study confirmed that distance to the CBD is among all other factors the most important characteristic in influencing the price of a condominium. Based on the results, the price of a condominium (in psf) increases by 3 per cent for every 1km closer to the CBD.

In addition, prestige of the neighbourhood, age and tenure of a condominium are found to be major determinants in explaining condominium prices. An interesting finding is that for every 10 per cent increase in percentage of private properties in the neighbourhood, the price of a condominium increases by about 4 per cent.

In other words, buyers are willing to pay 4 per cent more for a condominium if the percentage of private properties in the neighbourhood increases by 10 per cent.Buyers might perceive a neighbourhood with high concentration of private properties as a form of prestige or they take this as a signal of more lifestyle facilities being nearby.

Launch discount As expected, the price of a condominium decreases by about 1.5 per cent per year on average as it ages. This could be due to depreciation of the condominium such as its design and electrical systems, thus incurring higher maintenance, renovation and repair fees. The difference between freehold or 99-year leases accounts for 8 per cent.

Our study also revealed the magnitude of the price discount associated with buying at launch. In Singapore, it amounts to 7 per cent.

A person who is buying later in a subsale has the advantage of selecting condos with successful launches. Thus, the price discount of 7 per cent compensates the early bird for the uncertainty of how a development will be accepted during the several launches.

Our research also looked at proximity to premier primary schools. The price of a condominium located within 1km radius of at least one primary school is on average 3.9 per cent higher than one without close proximity to a top primary school.

A subject of many discussions in Singapore is low-rise versus high-rise. The model shows that the ground floor condominium is subjected to a price discount, meaning that home buyers on average are less willing to pay for a ground floor condominium compared to other floors. Furthermore, home buyers are willing to pay more for high-floor units (16th floor and above), compared to middle floor units (7th to 15th floor). We also confirmed that superstition for unlucky floor units is capitalised into the price of condominiums.

The number four is commonly known as an unlucky number among the Chinese. The price discount could also be explained by the fact that home buyers avoid staying on an unlucky floor as they are worried that it may harm the future resale price of the unit.

There is only weak empirical confirmation of the hypothesis though, that selling a unit on the eighth floor yields a hefty extra premium in a subsale. If you are not superstitious and plan to sell in a subsale, don't pay a fee for the eighth floor when you visit a launch event.

The writers are, respectively a professor at the University of St Gallen and an analyst at Goldman Sachs

Thursday, January 27, 2011

Booklet of Mah Bow Tan's thoughts on housing

THE Ministry of National Development (MND) is publishing a booklet containing the musings of its minister, Mah Bow Tan, in a bid to reach out to more Singaporeans and explain housing policies.

In response to a query from BT, Mr Mah said that the booklet will contain nine commentaries that encapsulate his thoughts on Singapore's public housing programme over the past five decades.

This should give readers an insight into the thinking behind the policies that shape the system Singapore has today.

Said Mr Mah: 'Today, eight in 10 Singaporeans stay in HDB flats, and nine in 10 of them own the flats they live in. This is the highest home-ownership rate in the world. No other country comes close.

'But, public housing is not just about putting roofs over people's heads. It is also about building inclusive homes and communities.

'This has not been an easy effort. There is a finite budget to work with, and policy trade-offs to be made.

'With this booklet, I hope to reach out to more Singaporeans, to tell them about our ongoing housing story, and to enhance their understanding of the policy considerations behind this success story,' he added.

The booklet will be released in either February or March this year.

MND plans to distribute the booklets to relevant entities such as HDB branch offices, town councils, public libraries, and academic institutions.

In addition, the booklet could be sold in selected bookstores.

It might also be available in a Mandarin version, sources said.

CRCT distribution inches up in Q4

INCOME to be distributed by CapitaRetail China Trust (CRCT), a CapitaLand unit, for the fourth quarter of 2010 inched up 2 per cent to $12.97 million - from $12.72 million in Q4 2009 - as it recorded higher rental revenue from its malls.

Distribution per unit (DPU) for the October-December quarter rose 1.5 per cent to 2.07 cents from 2.04 cents a year earlier.

CRCT, which owns eight retail mall properties in China, reported better distribution even as net property income fell year-on-year. This is because for 2009, there was a net retention of income. But for 2010, it is paying out all of its distributable income.

The trust also said its performance was affected by the stronger Singapore dollar, which appreciated against the yuan in 2010.

In renminbi terms, gross revenue for Q4 2010 grew 6.3 per cent year-on- year to 153.5 million yuan (S$29.8 million) due to occupancy and rental growth in some of its malls following asset enhancement works. Net property income fell 1.4 per cent in renminbi terms to about 97 million yuan mainly due to increases in marketing and utility expenses, and higher provision for staff-related costs.

But in Sing dollar terms, CRCT's performance was worse. Gross revenue rose 1.6 per cent y-o-y to reach $30.2 million in Q4 2010. Net property income fell 6.1 per cent to $19 million.

For the whole of 2010, CRCT's total income to be distributed rose 3.1 per cent to $52.2 million. Total DPU for 2010 is 8.36 cents, an increase of about 2.7 per cent over 2009.

As at end-December 2010, CRCT's total borrowing was $402 million, while its gearing stood at 31.1 per cent.

Looking ahead, CRCT said it remains optimistic about its growth prospects in China. 'With the rapid emergence of China's middle class, increasing income levels and continuing urbanisation, consumer spending is expected to remain robust,' the trust said in a statement. 'China's strong economic growth momentum, especially when contrasted with the lacklustre growth prospects in the developed markets, will continue to entice retailers to further expand into China. CRCT, with its geographically diversified portfolio of eight malls, is well positioned to tap into China's growing consumer market.'

CRCT shares gained three cents to close at $1.27 yesterday.

M'sian gallery here chalks up RM21m sales

AROUND RM21 million (S$8.8 million) worth of Malaysian properties were sold in Singapore in October and November 2010 through a newly-opened sales gallery, said the chief executive of a government-led initiative to promote Malaysia as a real estate investment destination.

Malaysia Property Inc (MPI), a collaborative effort between the public and private sectors, opened an office-cum-sales gallery at SGX Centre 1 along Shenton Way last October.

The gallery provides space to Malaysian developers and government agencies that wish to promote their investments in Singapore.

In the first two months of the sales gallery's operation, some RM21 million worth of mainly residential homes were sold, said MPI chief executive Kumar Tharmalingam. Sales data for December is not available yet.

'The response has been very encouraging,' said Mr Kumar. 'Most of the buyers (around 90 per cent) are Singaporeans looking for either second homes or for properties for investment that they can rent out.'

About 80 per cent of the buyers picked up properties in Kuala Lumpur, Mr Kumar said.

According to him, completed condominium properties in Kuala Lumpur can get rental yields of around 5-6 per cent.

In addition, investors could also benefit from another 4-5 per cent appreciation in the capital value of their properties.

In addition to Kuala Lumpur, Penang and Johor's Iskandar area are also drawing interest from buyers in Singapore, Mr Kumar said.

In December 2010, more than a dozen homes in Johor were sold through the sales gallery.

Malaysia could appear to be a comfortable market for some investors as it does not have the highs and lows of Singapore's more volatile property sector, he added.

MPI was set up in 2008 as a joint venture between the Malaysian government's Economic Planning Unit and the private sector.

Banks roll out flexible home loans

BANKS here are providing an unprecedented degree of flexibility when granting loans to home buyers who are moving from one home to another.

They are agreeing to grant loans of up to 60 per cent of the property's value first, and raising them to 80 per cent later.

The move is helping property upgraders save time and money as they navigate tricky timelines created by new property financing rules first introduced last August.

To recap, the rules stipulate that home owners with an existing home loan can obtain only 70 per cent financing for a second home they wish to buy. The limit was reduced further to 60 per cent this month. The usual loan limit is 80 per cent.

This makes it hard for home buyers, particularly those in the Housing Board market, who simply want to move from one property to another. They now have to prove they have sold their existing flat before qualifying for 80 per cent financing.

The problem is that the proof of sale is a letter of approval from the HDB, which is issued two weeks after what is known as the 'first appointment'. This appointment, part of the HDB buying process, takes place six to eight weeks from when the deal is struck.

What this means is that an HDB upgrader or downgrader would have to sell his unit first and wait about two months before he can get 80 per cent financing from a bank for his next home. Otherwise, he will get only 60 per cent.

Logistically, he will also have to move out of his existing flat way before he can move into his new one.

This has translated to hundreds of property buyers moving to an interim location. Some even ask for an extension of stay at their existing homes beyond the legal completion of the sale, which is technically illegal under HDB rules.

Most banks here say they are prepared to grant these buyers 60 per cent financing on a new home, and then restructuring the loan to 80 per cent financing when the buyer proves he has sold his home.

HSBC personal financing services head Greg Zeeman said: 'We are flexible about reviewing loan quantums, as we understand customers sometimes need more time to sell their existing property or decide on the proportion of loan and CPF savings used to finance their new property.'

This is a radical departure from past practice. Previously, once the letter of offer from a bank was accepted by a borrower, the terms could not be changed, said Dennis Wee Group director Chris Koh.

United Overseas Bank (UOB) loans division head Chia Siew Cheng said UOB also offers this flexibility, but added that it also takes into account 'current market regulations and guidelines, customers with good credit records, stable income and the ability to service the loan'.

Private property owners who are buying and selling their homes in back-to-back transactions also potentially benefit from this increased flexibility. But the problem is less acute for them because in the private property market, home sellers can stipulate a longer period of time for a sale to be completed.

The stamp duty certificate - the proof needed for 80 per cent financing for private property - is also obtained earlier in the sale process.

One home owner looking to move is housewife Koh Lay Hua, 55, who cheered the new flexibility offered by banks. 'I'm glad some banks are allowing this... I definitely would have to sell my flat to pay for the next one.'

Unclear outcome in several en bloc tenders

AN UNUSUAL quiet has come over the closing of several mega collective sale tenders that were launched amid much fanfare with $500 million-plus reserve prices.

New launches for collective sales, however, have continued unabated.

The lack of news on the closed tenders has stirred talk among some residents that developers' bids, if any, may have fallen short of reserve prices.

Recent reports, for example, have suggested that Tulip Garden - whose tender with a reserve price of $650 million was launched early last month and closed last Thursday - had received no bids.

A resident The Straits Times spoke to said he understood three parties had expressed interest but no bids were made.

Mr Karamjit Singh, managing director of marketing agent Credo Real Estate, however, said the firm was 'still in discussion with developers'.

If Tulip Garden gets sold for $650 million, it would be the third-largest collective sale by value here and the first freehold one above $500 million in three years.

Similarly, on the commercial front, no news is out yet on Tanglin Shopping Centre, whose tender with a reserve price of a hefty $1.25 billion closed on Tuesday.

City Developments (CDL), however, said in a statement yesterday that it had expressed interest in negotiating for the purchase of the development. Millennium & Copthorne Hotels, CDL's hotel arm, owns 85 retail and office units and 325 parking spaces there.

Ms Jean Goh, senior marketing director of marketing agent ERA Realty, declined to comment further, saying the firm was still in the midst of negotiations.

Hawaii Tower in Meyer Road, with a $700 million reserve price and whose tender closed yesterday, also got no bids.

Mr Jeremy Lake, CB Richard Ellis' executive director for investment properties, said the firm is following up with four parties that had expressed interest.

Experts say the collective sale market is being tested again with the Jan 13 property cooling measures leaving the market in flux as many were caught by surprise.

Tanglin Shopping Centre might be affected as ERA had earlier said it could be redeveloped to include homes.

The collective sale market had picked up last year with more than 30 sales totalling about $1.7 billion recorded as home prices surged. The strong rebound had been expected to continue this year.

Tenders launched before the latest property measures, and closing since, may have struggled to meet ambitious reserve prices, experts suggest, though they say it is too soon to draw conclusions.

Mr Alwyn Low, director of Deans Realtors, said even if bids with no special conditions came in above the reserve price for a collective sale, they would still take about a week to be finalised. There is also 10 weeks after the tender closes for private treaties to be ironed out.

Mr Donald Han, vice-chairman of property consultancy Cushman & Wakefield, said developers are more cautious. 'Deals of more than $500 million can still happen, but vendors might need to consider more realistic pricing in the light of the new measures.'

Some developers are also often more inclined to pursue government land sites as the sale process is faster and fuss-free, experts said.

Market watchers will be awaiting news on an expression of interest that closed on Jan 12 for strata offices and retail units at 1 Finlayson Green.

Credo's Mr Singh said the tender closing date for the Whitley Heights apartments has been pushed back to March 2, owing to requests from developers to look into the more complex nature of developing strata-landed homes.

The collective sale momentum, however, has carried on to this year. At least 10 collective sale tenders have been launched this year. These include Holland Tower, Newton View and Ying Mansions.

Wednesday, January 26, 2011

Fortune Reit Q4 DPU up 10.7%

FORTUNE Real Estate Investment Trust (Fortune Reit) saw its fourth-quarter payout rise 10.7 per cent year-on-year, helped by higher occupancy and rental rates.

The Reit, which is listed both in Hong Kong and Singapore, reported yesterday, after the market closed, that distribution per unit (DPU) rose to 6.32 HK cents, from 5.71 HK cents. Distributable income for the October-December period climbed 11.3 per cent to HK$105.7 million (S$17.4 million) from HK$94.9 million a year earlier.

Total revenue for Q4 rose 9.1 per cent year-on-year to HK$217.7 million, while net property income climbed 10.7 per cent to HK$152.4 million.

Reit manager ARA Asset Management (Fortune) Ltd said yesterday that it will continue to drive revenue growth by embarking on asset enhancement initiatives.

And with leases that account for more than 30 per cent of its leased gross rentable area and gross rental income expiring this year, it will 'continue to implement effective leasing and tenant repositioning strategies'.

In particular, it will focus on Ma On Shan Plaza and The Metropolis Mall, where around 50 per cent of tenancies will be up for renewal this year.

'Leveraging on a strong balance sheet and capital structure, the manager will continue to look for acquisition opportunities in line with addressing the long-term interests of Fortune Reit's unit-holders,' it added.

Fortune Reit holds 14 retail properties in Hong Kong under its portfolio such as City One Shatin Property, Ma On Shan Plaza, Metro Town, The Metropolis Mall and Waldorf Garden Property. Together, the 14 properties provide two million sq ft of retail space and 1,660 car parking lots.

The occupancy rate of its properties climbed to a record high of 98.7 per cent at the end of last year, while passing rent also hit a record HK$28.7 per sq ft as at Dec 31.

For the year, distributable income jumped 20.3 per cent to HK$406.5 million. But DPU dropped to 24.35 HK cents from 30.20 HK cents in FY2009 because of an enlarged unit base as a result of a rights issue. Fortune makes distributions on a half-yearly basis. The full-year DPU, which comprises an interim DPU of 12.27 HK cents and a final DPU of 12.08 HK cents, works out to a yield of 6.1 per cent based on the unit's average closing price of HK$4.01 as at Dec 31, 2010.

Full-year total revenue increased 19.4 per cent to HK$837.3 million. Net asset value per unit at Dec 31, 2010, was HK$6.18, up from HK$5.32 a year earlier.

Fortune Reit units closed unchanged at HK$4.05 yesterday.

Flats for seniors at Bt Batok: Will buyers bite?

HOMEBUYERS seeking homes in Yishun and Bukit Batok now have more options.

The Housing Board yesterday launched 1,728 build-to-order (BTO) flats in these two areas, the first batch of up to 22,000 new BTO flats in the pipeline this year if demand is sustained.

Industry watchers said the three projects - Orchid Spring @ Yishun, Vista Spring @ Yishun, and the seniors-friendly Golden Daisy in Bukit Batok - are expected to attract modest sales, due to their distance from MRT stations.

Strong demand for new flats and those in the resale sector led the Housing Board to roll out 16,000 flats last year, the highest number since the BTO system was launched in 2002. It allows flats to be built according to demand.

Some 95 per cent of the new flats will be reserved for first-time buyers.

Orchid Spring in Yishun Avenue 11 will have eight 13-storey blocks housing 948 two-, three- and four-room flats.

Vista Spring in Yishun Avenue 1 will also have eight 13-storey blocks, featuring 504 four- and five-room flats. The project also has 96 three-room flats which are reserved for sale in the future.

Prices in the Yishun projects range from $93,000 to $112,000 for a two-room flat, and from $292,000 to $353,000 for a five-room unit. More than half the Yishun flats on offer are four-room homes.

Golden Daisy, in Bukit Batok Street 21, will offer two sizes of studio apartment for residents aged 55 and older. They will be fitted out with essentials like built-in furniture. Apartments of 398.3 sq ft in size will cost between $83,000 and $94,000, while 505.9 sq ft ones will cost between $105,000 and $118,000.

PropNex corporate communications manager Adam Tan said Golden Daisy may not see high sales due to the modest popularity of studio apartments. 'While the development is situated near a park and neighbourhood centre for the residents' enjoyment, they would still have to take a bus to nearby Bukit Batok MRT station.'

Mr Tan said the three-room flats in Yishun are expected to see stronger demand due to their price, which is 40 per cent lower than current median resale prices in the neighbourhood.

The Yishun offerings feature amenities like childcare centres in the block as well as close proximity to parks and Lower Seletar Reservoir. However, Yishun MRT station is a few minutes away by bus.

HDB said the construction of Orchid Spring is expected to be completed in the fourth quarter of 2014, and Vista Spring in the third quarter of the same year.

Golden Daisy is expected to be ready in the first quarter of 2014.

S'pore investors upbeat on markets

SINGAPORE investors are optimistic about markets and returns, as a newly launched investor sentiment index shows, and they are likely to take a more aggressive stance in their investments.

JP Morgan Asset Management yesterday launched the JP Morgan Investor Sentiment Index, which it believes is a first here. The index is based on a half-yearly survey, the first of which was conducted in December. The index has been launched in other Asian markets since 2006.

Andrew Creber, the firm's business head, is hoping the index will be 'a sustained and useful barometer of investor sentiment in Singapore'.

The maiden reading for the index for January is 134, which reflects 'strong levels of optimism'. The result is largely driven by 80 per cent of investors expecting the Straits Times Index to rise in the next six months.

There were about 500 respondents, with annual incomes of more than $60,000 and five years of continuous investment experience.

The survey consists of six questions relating to an increase in the STI; the economic environment; market environment; global economic environment; appreciation of personal portfolio; and an increase in investments.

The major findings were that 63 per cent of investors expect a better economic environment; 67 per cent expect a better investment market; and 66 per cent expect their personal portfolios to appreciate.

Ninety-one per cent of investors believe the Singapore economy has recovered from the global financial crisis. The top three factors leading to recovery were the goverment's monetary policies, the recovery of global markets and of real estate markets.

Two-thirds of respondents expect the job market to improve. But 86 per cent of investors also expect inflation to grow by an average 4.3 per cent by the end of June, mainly due to the price of oil, housing and food.

Some 44 per cent aim to be more aggressive in their investment strategy over the next six months while one third plan to make some asset allocation shifts. ' . . . investor risk appetite is increasing. We expect to see continued potential in emerging market related investments as growth in these markets is set to outstrip growth in the developed world,' said Mr Creber.

Mapletree Industrial Trust's DPU beats forecast

MAPLETREE Industrial Trust's first set of financial results since its listing on the Singapore Exchange have surpassed forecasts, its manager said yesterday.

The Singapore real estate investment trust (Reit) achieved a distribution per unit (DPU) of 1.52 cents for the period from Oct 21 (listing date) to Dec 31 last year, 13.4 per cent above the forecast of 1.34 cents disclosed in its initial public offering prospectus.

Distributable income for the period came in at $22.3 million, 13.6 per cent above its forecast, thanks to higher gross revenue and lower property expenses.

After its widely anticipated IPO was 38 times subscribed last year, MIT surged on its first day of trading to close at $1.16, up from its offer price of $0.93. Yesterday, MIT slipped one cent to close at $1.09, before its results were announced.

Higher rentals and a one-off rent collection back-dated to the start of a tenant's lease lifted gross revenue to $41.5 million, 4.8 per cent above the forecast.

Lower utility costs thanks to energy saving initiatives, lower maintenance expenses and a one-off recovery of bad debts previously written-off, all lowered MIT's property expenses to $11.9 million, 3.8 per cent below what was initially forecast.

Excluding the one-off effects on revenue and property expenses though, Mapletree Industrial Trust Management (MITM) said yesterday that the DPU would have been 1.46 cents, still 9 per cent above the forecast.

With the manufacturing sector expected to grow in tandem with Singapore's economy, the manager expects demand for industrial properties to remain stable this year and sustain MIT's performance.

'Improving demand for industrial space is reflected in the healthy occupancy rate of 92.3 per cent and average monthly rental rate of $1.45 per square foot per month, for the third quarter,' said Tham Kuo Wei, CEO of MITM.

MIT retained 81 per cent of leases due for renewal in Q3, (the three months ended Dec 31, 2010), and the rentals were renewed at an average of 21.9 per cent above previous rates. For the rest of its financial year which ends on March 31, only 2.6 per cent of MIT's portfolio is still due for renewal.

Meanwhile, renovation has begun at its Redhill 2 cluster to convert the 7th floor of a flatted factory into e-business space, which commands higher rentals than conventional flatted factory space. It is expected to meet strong demand from enterprises and start-ups in e-business, and is slated for completion by the end of March.

MIT has committed to distributing 100 per cent of its adjusted taxable income from the listing date till March 31, 2012. Unitholders can expect to receive their first distribution on Feb 28.