Thursday, March 31, 2011

Bungalow-buying foreigners throng to a new address

(SINGAPORE) They are buying fewer bungalows in other prized locations in the rest of the city - but more at Sentosa Cove.

Foreigners (including Singapore permanent residents) have seen their share of bungalow purchases in Districts 10, 11 and 21 - home to many Good Class Bungalow areas - fall last year from the preceding year.

In absolute numbers too the number of detached houses bought by foreigners in these three districts in the past couple of years was generally much smaller than in 2006/2007 - the peak years of foreign buying of Singapore property.

However, in District 4 (which includes Sentosa Cove), both the percentage share of bungalows bought by foreigners as well as the absolute number of bungalows they purchased scaled fresh highs last year, according to a caveats analysis of bungalow transactions by CB Richard Ellis.

Knight Frank chairman Tan Tiong Cheng attributes the divergent trends in foreign buying of upmarket bungalows on mainland Singapore versus Sentosa Cove to the fact that fewer were granted PR status last year compared with 2009.

Last year, the government granted only 29,265 permanent resident passes, fewer than half of the 59,460 passes given out the year before. This number was the lowest PR intake in at least the last five years.

'One of the criteria for a foreigner to be granted approval to buy a landed home on mainland Singapore is that he or she has to be a Singapore PR (making adequate contribution to Singapore's economy). And even those who are PRs may have faced stricter criteria in getting approval to buy landed homes last year,' suggests Mr Tan.

'On the other hand, for Sentosa Cove a foreigner does not have to be a PR to get approval to own a landed home. So it's easier for foreigners to buy bungalows there.'

A spokesperson for Singapore Land Authority said: 'The government has been and will continue to be strict in granting approval for non-Singaporeans to purchase landed residential properties in Singapore. We assess very carefully the merits of each application. Permanent Residents today own less than 4 per cent of landed residential properties in Singapore. We intend to continue with the strict approach we have taken.'

'The number of applications received (from non-Singaporeans to buy landed homes) generally reflects the prevailing property market sentiment and is not reflective of the number of (landed) properties eventually bought by non-Singaporeans as some may not proceed further to purchase the property after getting approval.'

According to Newsman Realty managing director KH Tan, in the past, the SLA's Land Dealings (Approval) Unit had in some instances allowed PRs to buy GCBs with land areas slightly larger than the 15,000 sq ft maximum size set for foreigners buying landed homes. 'However, since late-2009, LDAU has turned down applications by PRs seeking to buy bungalows with over 15,000 sq ft in land area,' he said.

Most GCBs would be in this category and this could account for the decline in foreigners' share of bungalow purchases in Districts 10, 11 and 21.

He also said that he has come across some PR clients from the West who were previously looking at buying a GCB in Singapore but last year decided there was more value in overseas property markets like New York and London.

On the other hand, at Sentosa Cove, foreign buying continued to strengthen because it is the only place in Singapore where foreigners who are not PRs may own a landed home. And cash-rich mainland Chinese prepared to pay the high asking prices are fuelling foreign buying, says Mr Tan.

CBRE's analysis of URA Realis caveats data shows that the percentage of bungalows in District 4 (including Sentosa Cove) bought by foreigners swelled to a record 49.3 per cent last year - from 37.3 per cent in 2009. The number of such homes they purchased also surged from 9 in 2006 and 23 in 2007 to 33 last year.

District 10 - which includes GCB areas like Nassim Road, Cluny Park, Chatsworth Park, Queen Astrid Park and Leedon Park - saw the percentage of bungalows picked up by foreigners fall from 13.3 per cent in 2009 to 10.4 per cent in 2010. In absolute numbers, the number of bungalows foreigners have bought in this district has declined from 25 in 2006 and 20 in 2007 to 15 in 2009 and 14 in 2010.

It was a similar trend in District 11 - which covers GCB areas like Swiss Club Road, Raffles Park, Eng Neo Avenue, Camden Park, Chee Hoon Avenue and Caldecott Hill Estate. The foreign buying share slipped from 4.7 per cent in 2009 to 3.9 per cent in 2010; it used to be 18.5 per cent in 2006. The number of foreign buyers has also dwindled from 17 in 2006 and 16 in 2007 to 3 each in 2009 and 2010.

Over in District 21 - home to GCB areas like King Albert Park, Kilburn Estate and Binjai Park - the number of foreigners acquiring bungalows has slid from eight in 2006 to three each in 2009 and 2010. Foreigners made up 10 per cent of bungalow buyers last year, down from 11.5 per cent in 2009 and 17.8 per cent back in 2006.

Foreigners need LDAU's approval before they can own landed property in Singapore. On mainland Singapore, the main criteria are that they are Singapore PRs and that they make an adequate economic contribution. Typically it takes LDAU about four weeks to process an application.

Foreigners buying landed homes on Sentosa Cove have traditionally enjoyed a 48-hour expedited approval channel from LDAU for their applications. While this is still available, SLA said: 'Some applications may require more time, especially where more information is needed for assessment.'

Bartley site draws top bid of $620.61 psf ppr

A PARTNERSHIP between Hong Leong Holdings, City Developments and TID yesterday emerged as the top bidder for a 99-year leasehold private condo site next to Bartley MRT Station.

Its bid of $413.27 million, or $620.61 per square foot of potential gross floor area, was just 0.8 per cent higher than the next highest bid, from Keppel Land.

The tender drew eight bids. The lowest bid from Plan Achieve Limited was $391.95 per square foot per plot ratio (psf ppr).

The top bid was the second highest for a residential plot on the Government Land Sale Programme since the property market recovered in 2009, after the plot near Bishan MRT Station that CapitaLand clinched in February for $869 psf ppr, says SLP International executive director Nicholas Mak. The Bishan plot drew 19 bids.

Market watchers also noted that the Bartley plot's top bid was close to the $607 psf ppr that Qingdao Construction paid for a site next to Potong Pasir MRT Station in June last year. That site is now being developed into Nin Residence, which was launched in December at $1,250 psf on average. To date the 219-unit project is about half sold.

'We expect units in the new Bartley residential project to fetch prices at about the same level,' said CBRE Research executive director Li Hiaw Ho. He estimates Hong Leong's breakeven cost could be around $1,000-$1,050 psf.

Analysts noted that the new project will be just an MRT stop away from nex mall.

It is also within two kilometres of popular schools, such as Maris Stella High and Maris Stella Primary, and Paya Lebar Methodist Girls' Primary School, which will boost the development's draw for families with school-going children, says Mr Mak.

Others who bid at yesterday's tender include Exclusive Partners (whose shareholders include Ho Lee Group) which bid $580 psf ppr; a Far East Organization-Frasers Centrepoint tie-up which offered $576.66 psf ppr; MCL Land ($530.10 psf ppr); Sim Lian Land ($465.53 psf ppr); and Allgreen Properties ($429.61 psf ppr).

Credo Real Estate executive director Ong Teck Hui summed up the outcome as 'a mix of confident and cautious bidding'.

'The top few bidders reflect confidence on market outlook and selling price while the lower bidders were obviously more cautious.'

All eyes are now on the April 7 closing for a state tender of a 99-year private condo site near Boon Keng MRT Station at the fringe of the city.

Hong Leong Group said yesterday evening that Hong Leong Holdings, CDL and TID plan to develop a condo with about 700 units on the Bartley Road site aimed at young families, professionals and upgraders.

'The Circle Line strategically connects this site to a host of shopping malls and schools such as nex mall, Junction 8, Australian International School and Nanyang Junior College among others,' the group said.

Separately, the Urban Redevelopment Authority yesterday launched the tender for a 'white' site next to Jurong East MRT Station. The tender will close on May 25.

The site has been triggered from the reserve list following a successful application by an unnamed developer which has agreed to bid at least $510 million or about $532.49 psf ppr.

The 99-year leasehold site can be developed into a project with a maximum gross floor area of 957,772 sq ft, of which at least 40 per cent has to be for office use.

The rest can be for any mix of commercial (such as retail and entertainment), hotel or residential use.

Wednesday, March 30, 2011

Ang Mo Kio industrial site draws strong bids

A 60-YEAR leasehold industrial site at Ang Mo Kio Street 62 attracted strong demand when its tender closed yesterday.

As many as 13 developers competed for the site, with Sim Lian Development Pte Ltd coming out on top with the highest bid of $128.1 million or $170 per square foot per plot ratio (psf ppr). Its offer is just 1.9 per cent above that of Qinghe Pte Ltd and Qingdao Construction (Singapore) Pte Ltd, at $125.8 million or $167 psf ppr.

Fragrance Group's unit took third spot. Other developers that participated in the tender include Ascendas Real Estate Investment Trust, Mapletree Investments and Soilbuild Group. 'It is a very hot site,' said Colliers International industrial director Tan Boon Leong, pointing out that even the lowest bid was above $100 psf ppr.

The 2.8 hectare Business 1 site has a maximum permissible gross floor area of around 752,200 sq ft and is within five minutes' walk to Yio Chu Kang MRT station.

The site's proximity to the MRT station was one reason behind Sim Lian Development's interest, the company's executive director Ken Kuik told BT.

There are no concrete plans for the site yet. The company may develop strata-titled units for sale but that will depend on market conditions, he said.

Investor interest in industrial space has been gaining momentum.

CBRE Research executive director Li Hiaw Ho noted that Northstar @ AMK, a 60-year leasehold strata-titled development at Ang Mo Kio Avenue 5, has been selling well. 'In Q1 2011, 10 upper floor units fetched an average of $308 psf, reflecting an increase of 9.2 per cent compared to the transactions that took place in 2010,' he said.

Colliers' Mr Tan also said that capital values for industrial space have gone up since the start of the year.

Govt offers three 99-year residential sites for sale

THE government has put three residential sites, which can together yield some 1,500 homes, up for tender.

All three are on the confirmed list, have a 99-year lease, and are next to state land parcels that were sold last year.

Predictions of developer demand were mixed - consultants' takes ranged from the mildly upbeat to the slightly sceptical. Interest in the sites should be 'overall positive', said Cushman & Wakefield senior manager for Asia Pacific research Ong Kah Seng.

But Credo Real Estate executive director Ong Teck Hui thought that the latest plots are 'more mediocre', with less attractive locations compared with those put up for sale earlier. 'The current sites are not very near MRT stations so I'd expect (fewer tenders) and lower tender bids for them,' he said.

The Urban Redevelopment Authority (URA) yesterday rolled out a plot at the junction of Jalan Loyang Besar and Pasir Ris Drive 4. It has a maximum permissible gross floor area (GFA) of around 610,000 square feet and can accommodate some 580 units.

The site is near Pasir Ris Park, but is some distance from Pasir Ris MRT station. It is adjacent to a plot that Frasers Centrepoint and Far East Organization bought in October last year for $335 per square foot per plot ratio (psf ppr).

The tender closes on May 10. Analysts expect the top bid to come in at $336-$430 psf ppr.

CBRE Research executive director Li Hiaw Ho said that units at NV Residences nearby are marketed at $820-$880 psf. Based on these price levels, the latest site should fetch $336-$377 psf ppr, he said.

URA also launched a plot at the junction of Sembawang Road and Jalan Sendudok. It has a maximum permissible GFA of around 416,900 sq ft and can be developed into a condominium or a strata landed housing project. A developer that opts for the former can potentially build 390 units.

The site is next to Sembawang Shopping Centre and the recently launched Canberra Residences. MCC Land had won the tender for the condominium site last year for $387 psf ppr.

The tender for the latest site closes on May 26. Consultants predict a top bid of $340-$410 psf ppr.

The Housing and Development Board is putting the third land parcel at Buangkok Drive/Sengkang East Drive up for tender starting today. It has a maximum GFA of around 631,300 sq ft and can yield an estimated 550 units.

The site is beside Austville Residences, developed by a tie-up between United Engineers and Lee Metal Group. They won the tender for the executive condominium site last year for $321 psf ppr.

The tender for this site closes on June 2. Consultants expect the top bid to be in the range of $320-$450 psf ppr.

Tuesday, March 29, 2011

Home sale volumes down in Q1

(SINGAPORE) Developers have sold about 3,200- 3,400 private homes (excluding executive condos) this quarter, down 20-25 per cent from the preceding quarter. CB Richard Ellis, which gave this estimate yesterday, also said that home prices remained stable in Q1 at end-2010 levels as the property cooling measures announced on Jan 13 'rationalised the residential market'.

CBRE executive director (residential) Joseph Tan predicts new home sales volumes will come in at around 3,000-3,500 units in Q2 2011, with 'no significant fluctuations in home prices'.

Last year, developers sold 16,292 private homes and Urban Redevelopment Authority's benchmark private home price index rose 17.6 per cent.

Some of the new projects expected to be launched in Q2 include Hedges Park at Flora Drive, The Boutiq at Killiney Road, a condo at Upper Thomson Road and Phase 5 of the Luxus Hills landed housing project.

CBRE said that the projects that were able to attract buyers in Q1 2011 were those in locations earmarked as future growth areas such as Tanjong Pagar as well as those near existing or future MRT stations. Small-format units have continued to be popular among home buyers this quarter. However, activity in the high-end segment has been subdued as players await the right opportunity to enter.

Analysts do not expect interest in property to wane any time soon.

As DTZ's head of South East Asia Research Chua Chor Hoon says: 'Real estate remains an asset class which people feel secure to park their finances with in the current high-inflation environment.'

'Nevertheless we expect the pace of increase in prices to slow down and plateau. There is more uncertainty this year, not just from the possibility of further cooling measures but also from recent events in the Middle East and Japan, the full impact of which is still not known,' she added.

According to DTZ, the increase in landed home prices in Q1 outpaced that of non-landed homes, buoyed by owner-occupation demand. Nevertheless, the pace of price increase has slowed in the January-March 2011 period. Prices of resale freehold landed homes in the prime districts 9, 10 and 11 rose 2.2 per cent quarter on quarter to $1,730 per square foot on average in Q1, compared with a 5.1 per cent hike in Q4 last year.

In suburban locations, the average capital value of freehold resale landed homes grew 2.3 per cent quarter on quarter to $1,015 psf in Q1, again a slower rise than the 4.3 per cent increase in Q4 2010.

Knight Frank said prices of non-landed private homes stabilised in Q1, changing around -2 to +2 per cent from the preceding quarter, 'which invariably meets the government's goal of a sustainable and stable property market'.

The first three months of this year have also seen a slower pace of rental increases for non-landed private homes. Rentals in the high-end, mid-end and mass market posted respective quarter-on-quarter gains of 0.4 per cent, 3 per cent and 0.8 per cent in Q1 respectively. These rates compare with the gains of 5.6 per cent, 2.6 per cent and 4 per cent respectively in Q4 2010, according to Knight Frank.

Demand for rental apartments/condos has softened due to stricter criteria for foreigners working in Singapore and shrinking housing allowances for expats. In addition, supply from newly completed homes has added downward pressure on rents.

'For 2011, we expect prices of mass-market private homes to decrease by about 5 per cent. Arising from new completions and an enlarged rental housing stock, residential rents are also expected to come under further pressure and could ease 2-3 per cent in the next quarter,' said Knight Frank head of consultancy and research Png Poh Soon.

CBRE said that with the return of launches for executive condos - a hybrid of public and private housing with initial buyer eligibility conditions and resale restrictions - in October last year after a five-year hiatus, some 1,580 ECs have been sold, making up nearly 72 per cent of the total supply of 2,199 EC units launched over the period.

Monday, March 28, 2011

From hot spot to chilly cove

ONLY eight non-landed homes have been sold in the once property hot spot of Sentosa Cove in the first two months of the year.

This is down from 17 transactions in the last three months of last year and well under the second quarter of last year when the 71 sales were recorded. Then, the launch of City Developments' The Residences at W Singapore accounted for 19 of the total sales.

Property watchers keep an eye on the Sentosa Cove transactions as the area is regarded as an exclusive segment of the local property market, where buyers opt for the unique lifestyle.

Agents reckon that prices of the condos there - all leasehold - some of which have sold for more than $2,000 psf have not moved much, with investors turning their attention to other parts of Singapore.

That may be one reason why sales seem to have dried up. In comparison, new home sales for January and February came to more than 1,000 units each month.

Other factors could be the lack of new launches and a large number of unsold units remaining. One property agent said: 'It is a buyers' market.'

The eight sales recorded until March 8 this year totalled $44 million and included new homes and subsale and resale transactions. Some sales occurred in the Seascape and Marina Collection estates, according to caveats lodged with the Urban Redevelopment Authority (URA).

However, while the appeal of condos seems to be fading with fewer people asking for viewings, landed homes sales on Sentosa Cove appear to be holding up.

Experts said that a segmented market might be emerging on Sentosa. The reasons for the sales slump likely include the lack of new launches and marketing activity and the big supply of condos - some already completed - that remains unsold.

Mr Tan Kok Keong, OrangeTee's head of research and consultancy, said: 'Enquiries have slowed a little but that's also a function of a lack of marketing activities since there haven't been many ads recently... Once a new launch takes place, it creates a buzz and will bring about transactions in neighbouring projects as well,' he added.

Developers have had a bumper year with healthy cash flow and so have strong holding power, and seem to be biding their time.

There is certainly not a shortage of stock.

As at Feb 28, at least 481 homes from five projects have yet to find buyers.

Ho Bee's Turquoise has 48 completed flats sitting unsold but 41 units have not been launched and are officially not on sale.

CDL executive chairman Kwek Leng Beng told the firm's results briefing last month that it does not plan to launch any more units at The Residences at W Singapore in Sentosa Cove.

It has sold only 21 of the 56 units released in the 228-unit project.

Mr Kwek said of the project: 'I can sell it very cheap because my land cost is cheap but I am not prepared to sell it. I have holding power, I will keep it and make it an investment, and later when there is good demand I will release and move on.'

Experts said condo home prices will likely hold steady as there is almost no land left for sale and developers are confident that once construction around Sentosa Cove is complete, buyers will stream back.

Bungalows seem to be bucking the trend of slower sales, with agents continuing to get good responses from their listings.

Newsman Realty managing director K. H. Tan said that after a slightly slower fourth quarter, interest is picking up again with his firm holding up to 20 viewings a week. Genuine offers have also been tabled, he added.

Caveats show that only two bungalows have been sold this year to March 8.

But Mr Tan said his firm has closed four other landed transactions whose caveats have yet to be lodged. A few others are in negotiation.

Sentosa Cove is the only place where foreigners without permanent resident status can buy landed homes.

The chief executive of Global Property Strategic Alliance, Mr Jeffrey Hong, said bungalows can also be customised for buyers.

But condos involve shared facilities and compete with prime apartments on the mainland, so that may deter the well-heeled.

'Developers are probably also waiting to see how the January measures affect the market... Condo prices will probably hold stable or if it moves up, it'll be by less than 3 per cent,' added Mr Hong.

Time to directly allocate EC sites again?

A TENDER for an executive condominium (EC) site at Choa Chu Kang Drive last week fetched a top bid which was a record $320.86 per square foot per plot ratio (psf ppr).

It was a record by just by a whisker - only 28 cents psf ppr higher than the previous high for an EC site, set in May last year. However, the outcome may be cause for some concern.

ECs are a hybrid of public and private housing with initial buyer eligibility and resale restrictions that are completely lifted 10 years after the completion of the project.

This housing type was created by the government in the mid-1990s to cater to the sandwich class of buyers who find private housing too expensive but who earn more than the $8,000 monthly household income ceiling and are thus ineligible for direct purchases of public flats from the Housing & Development Board.

ECs have control mechanisms to prevent developers from pricing them too high. There is the $10,000 monthly household income cap for those buying ECs from a developer. And developers must set aside at least 95 per cent of units in the first month of launch for first-time home buyers. These requirements should serve as a check against developers pricing their projects too high and hence bidding too aggressively for land.

Some property consultants reckon there is a market for a new EC project if it is priced at about 20-25 per cent below a 99-year private condo in an equivalent location.

And it seems that in the current climate, some developers are optimistic that the 99-year private residential market would remain firm or even strengthen. If so, there will be that sandwich class of buyers for ECs to cater to - even at higher price levels.

Bid study

If the aim, however, is to rein in private home prices at the entry-level segment, should the authorities consider directly allocating some EC sites again, with guide launch prices for the projects to be built on them?
Let's study the bid for the Choa Chu Kang site.

Some property consultants estimate that the top bidder - a joint venture between City Developments Ltd (CDL) and TID - will have a breakeven cost of about $650 psf. Next door, units at Mi Casa, a 99-year-leasehold private condo, have been sold at about $800 psf in the first two months of this year.

Going by some recent views within property circles of a 20-25 per cent price gap between a new EC project and a 99-year private condo, the project by CDL and TID should be priced at $600-$640 psf on average. But this would be below their estimated breakeven cost of $650 psf. And as commercial developers, they will aim to sell at a higher price to make a profit - probably at least $700 psf, some analysts suggest.

Indeed, CDL may need to attain this sort of price benchmark to defend its earlier bid in December 2010 for an EC plot about 2km away, near Segar LRT Station and facing Kranji Expressway (a location seen as inferior to the latest Choa Chu Kang site). CDL bid $270.51 psf ppr for the Segar Road site and its breakeven cost could be around $620 psf.

Buoyant prices

If the current positive sentiment among developers continues, they are likely to continue making bullish bids for EC sites, which in turn will lead to buoyant launch prices for new EC projects. Then even this hybrid housing type may increasingly slip out of reach of the sandwich class, as buyers may be forced to fork out a bigger cash sum for their purchases, if EC prices spiral upwards.
One way to address this situation would be for the authorities to, at least temporarily, start allocating directly a few EC sites as was the practice during the early days of ECs. Back then, EC sites were directly assigned to non-listed government-linked companies (Pidemco Land and Singapore Technologies Properties) as well as co-operative NTUC Choice Homes, at prices set by the government.

Pidemco Land merged with DBS Land in 2000 to form CapitaLand, which is listed and now functions entirely as a commercial entity.

But NTUC Choice Homes - as a co-operative with the mission of delivering quality housing at affordable prices to help more Singaporeans meet their aspirations to own private property - could be called upon to perform its social mission by helping to rein in the rise in EC prices.

The authorities could tender out EC sites in parallel with direct allocations. This may help prevent EC land bids from becoming too bullish, translating later to high EC prices. Such an arrangement can be temporary - once the current bullish property market stabilises, the authorities could stop directly allocating EC plots and sell them entirely through tender.

Developers would no doubt see any direct allocation as an intervention in the market, but then ECs are not a free-market product either, with all the income eligibility and other restrictions.

Saturday, March 26, 2011

Homing in on high-end property

GOOD-CLASS bungalows are rare in Singapore, but even less common is the tale of Mr George Lim, who almost by chance has become a leading niche developer of these ultra-posh homes.

Since 2006, Mr Lim, 59, has redeveloped and sold at least seven of these bungalows, worth a total of $145 million.

He made headlines recently after paying a jaw-dropping record $61.4 million for a 41,852 sq ft site in Leedon Park. In his usual style, he plans to tear down the bungalow and redevelop the site with two good-class bungalows.

The unassuming Mr Lim says his foray into property was not planned, but 'happened along the way' after he sold his engineering firm for about $12 million. This helped him buy an $18 million good-class bungalow in Belmont Road. He lived there for three years before subdividing the 48,000 sq ft plot and building three homes - which sold for $33 million in total in 2006.

In an interview with The Straits Times, Mr Lim says his confidence in the value of homes here is based on land scarcity.

'My father bought our first house in Kembangan for $12,000, improved on it, and sold it for more than $60,000 after 10 years... I look at this and see that property investment has fantastic growth. There's no way you can put money into a savings account and get those kind of returns.'

He goes with a certain gut feeling - a 'feel-good' instinct - that allows him to be comfortable with every land purchase.

He holds a site for two to three years, tears down the old house, then a new, uniquely designed bungalow is built - and sold.

'Never alter a house, because it will never be as good as a new product and it will cost you almost the same,' he says, adding he will not rent out the homes.

Mr Lim has three other good-class bungalows on hand - in Binjai Park, Leedon Park and Second Avenue. All three are set to get a green mark rating, as he looks to build homes with environmentally friendly features like solar panels - another facet in his quest to build better homes.

The two bungalows in Binjai Park and Leedon Park are set to be ready by June. He hopes to sell them for more than $40 million each - a new unit price record of about $2,500 per sq ft - if successful.

But his success also comes with risks. Mr Lim admits that he is 50 per cent leveraged based on the cost of the properties.

Recent measures such as higher sellers' stamp duties are not an issue in this market, he says. He is confident that demand will continue to grow in tandem with the growing ranks of rich folks here.

'I will put a price there, and if somebody thinks it's worth buying, then I will sell it... My intention is to hold it as an investment for the long term... But the moment I sell it, I will look for another plot to buy, so that I stay in touch with the property market,' Mr Lim adds.

Good-class bungalows are the highest-end homes here. There are only about 2,400 of such homes in 39 gazetted areas such as Nassim, Dalvey and Tanglin.

Friday, March 25, 2011

$36m Sentosa home sale still valid

RUMOURS that a buyer walked away from his $500,000 deposit for a posh bungalow after he got cold feet over the $36 million price tag appear unfounded.

The title deed shows that Mr Shen Bin - a Chinese national and a Singapore permanent resident - remains the owner of the 14,983 sq ft plot on Paradise Island in the northern part of Sentosa Cove.

There was a great deal of media coverage when Mr Shen was reported to have offered $2,403 per sq ft (psf) for the home last May. This far outstripped market prices and set a benchmark price for the area.

The average psf price for the 10 detached homes sold in Sentosa Cove last April and May was $1,976.

Rumours arose in December that Mr Shen had baulked at the deal after learning that his offer far exceeded prevailing market rates. He was said to have forfeited more than $500,000 - including the deposit, commission, lawyers' fees and administrative charges - when he backed out of the deal.

However, a property title information search by The Straits Times found that Mr Shen remains the owner of the 99-year leasehold bungalow.

He is believed to be the son of billionaire entrepreneur Shen Wenrong, chairman of China-based steel manufacturer Shagang Group. China's Hurun Wealth Report ranked the elder Mr Shen as the 13th richest individual in China last year.

The 2-1/2 storey bungalow faces a waterway, with a berth for a yacht. It also has a private pool and a total built-up area of about 17,000 sq ft.

The house was first sold by developer Ho Bee in April 2007 for $18.1 million, and resold for $20.18 million in September 2009. It received a temporary occupation permit in May 2009.

Interest in landed homes in Sentosa remains strong, with property agents saying there has been a healthy number of viewing requests with genuine offers being tabled.

Prices have also continued to inch upwards, with the sale of a bungalow in Ocean Drive in October fetching a record $2,988 psf - or $28.2 million - on its land area of 9,436 sq ft.

Sentosa Cove is a gated community comprising more than 2,000 homes, of which 400 are landed. The rest are condominium units. The landed houses in Sentosa Cove appeal to a wider market, as foreigners who do not have permanent resident status are allowed to buy them.

Paradise Island is in the northern part of the cove.

Frasers still on track for Middle East growth

FRASERS Hospitality's plans for expansion in the Middle East in places such as Doha and Oman remain on track despite the turmoil in the Arab world, said chief executive Choe Peng Sum yesterday.

The impression that some might get is that the whole region is in trouble but that is not necessarily true, Mr Choe said.

While the occupancy rate for its property in Bahrain has fallen to about 40 per cent from 90 per cent owing to the unrest, its property in Dubai has full occupancy - some a spillover from the unrest.

'(We're) spread out and not just in one place in the Middle East... We're not in areas like Libya and Syria... I will definitely still continue to go in the Middle East. (The unrest in Bahrain) doesn't deter me from expanding,' he said.

Mr Choe, who was speaking on the sidelines of the official opening of Fraser Residence Orchard near Paragon Shopping Centre, also spoke about the group's aggressive expansion plans, which will see a strong focus on Asia.

It plans to manage a further 4,300 units over the next two years, bringing the total to 10,600 units at 64 properties across 37 cities and allowing the firm to spread its risk.

A dozen properties are planned for this year in cities such as Istanbul, New Delhi and Budapest while another 13 are expected to open next year. Frasers currently manages about 6,000 units in 40 properties in 22 cities.

The 72-unit Fraser Residence Orchard, its fourth property here, was upgraded and refurbished at a cost of $6.5 million. It has attained 80 per cent occupancy since opening two months ago.

Mr Choe said operating the Orchard Road property provided 'a very viable business', with average rates of about $11,000 to $12,000 a month. In general, rates of properties here have also risen by an average of 20 per cent from a year ago, he said.

Corporate guests from Fortune 500 companies in industries like oil and gas and shipping tend to make up a large proportion of its clientele, Mr Choe added.

Fraser & Neave (F&N) chairman Lee Hsien Yang said that Singapore will remain key on its growth agenda.

'We will open more properties in Singapore... We believe Singapore is home and even as we grow our significant footprint and network abroad, we will not neglect our home market,' he said.

Frasers will open Modena Changi City next year, bringing its local portfolio to about 900 units - about 25 per cent of the serviced residence market share.

Home price updates 'could affect market'

PROPERTY insiders are warning that proposals to give buyers the latest prices of new home sales more quickly could cause exaggerated price rises and falls.

But with that caveat, they are broadly in favour of the proposals unveiled by the Urban Redevelopment Authority (URA) last week.

The moves include requiring developers to release the price list of a new project two days before it is launched.

Developers would also have to give weekly updates on the URA website of the prices of new homes that have been sold. Currently, such prices are updated once a month.

Property insiders caution that the prompt release of such information could heat up prices in a fast-rising market.

'In that kind of a market where prices are high, seeing those prices climbing might prompt people to buy in case they get priced out,' said Knight Frank's head of consultancy and research, Mr Png Poh Soon.

Jones Lang LaSalle's head of research, Dr Chua Yang Liang, agreed.

'It works both ways. If the market is feeling negative, it might lead to a further downward spiral of prices as more people hold back on buying property,' he said.

But ultimately, analysts gave the proposed revisions the thumbs-up.

The URA is seeking public feedback on the proposals until April 18.

The changes, if implemented, would allow buyers to gain a more complete perspective of what they are buying into, which would empower them to make more informed decisions.

Mr Png said: 'Rather than going down to the showflat and feeling pressured by agents, buyers can sit down and gather the information in a cool-headed manner.'

Mr Jason Huang, 24, is a potential home buyer who works in the property management sector. He said the release of such pricing details would help to address many of the questions he would face when considering whether to buy an apartment.

'We can't rely solely on agents to give us all the information, (buyers) also have a responsibility to find out if they are getting a good deal. Making the prices readily available within such a short time makes it easier for us,' he said.

Dennis Wee Group director Chris Koh backed the thinking that the proposed changes would give buyers more confidence in marketing agents, especially since withholding pricing details can sometimes result in accusations of mis-selling.

'(Our agency) once received a complaint after a buyer found out the neighbouring unit was sold for less. He was upset because he thought he could have obtained a better deal and we had to explain that factors like a better view and layout affected the price,' said Mr Koh.

'Confidentiality prevents us from disclosing the full list of prices but the situation could have been avoided if there were figures to show right from the start.

Thursday, March 24, 2011

Grade A office capital value up 11.2% in Q1

THE average capital value of Grade A office space in the Raffles Place/New Downtown area has increased about 11.2 per cent quarter on quarter to $2,322 per square foot in Q1 this year, according to Colliers International.

The property consultancy predicts the full year increase will come in at about 25 per cent to about $2,600 psf.

John Stinson, Cushman & Wakefield's managing director of capital markets (Asia Pacific), who recently brokered the $889 million sale of Capital Square, forecasts that capital values of Grade A office space in Singapore could reach $2,500-2,700 psf by the end of this year from about $2,300-2,400 psf currently.

'There's increasing demand from a new wave of international capital focusing on Singapore and a lack of supply of institutional grade office investment properties in the Singapore market,' he said.

Capital Square's $889 million works out to $2,300 psf on net lettable area.

Colliers International's prediction of a 25 per cent increase this year in the average capital value for Grade A offices in Raffles Place/New Downtown is higher than its forecast for a 15-20 per cent increase in average rental value for the same type of space over the same period.

'Cap values will move at a faster clip than rents this year as they've been lagging behind rental growth over the past year,' says Colliers' director (research and advisory) Tay Huey Ying.

The $2,322 psf average cap value for Q1 2011 reflects a 33.5 per cent increase over the same year-ago period. However the latest figure is still about 17.5 per cent shy of its previous peak of $2,814 psf in Q1-Q3 2008.

Ms Tay said the property consultancy's estimate of cap value this quarter took into account the recent transactions at Capital Square, One Finlayson Green ($2,520 psf) as well as four floors of Prudential Tower at $2,430 psf (excluding rental support).

She said the firm's Q4 2010 cap value figure of $2,088 psf, which reflected an 8 per cent quarter-on-quarter increase, did take into account K-Reit Asia's and Suntec Reit's respective acquisitions of one-third stakes in Marina Bay Financial Centre's first phase (both deals were at about $2,400 psf excluding income support).

'However, MBFC is one of the newer buildings in our Grade A basket and our average figure for Q4 took into account some of the older buildings in this basket as well,' Ms Tay added.

Housing Board does have buffer stock of flats

MS JESSICA Cheam (''Ghost towns' vs fewer homes'; Monday) suggested that the Housing Board could consider permanently maintaining a 10 per cent to 20 per cent buffer of new flats each year. This is indeed being done, as the Minister for National Development had explained in Parliament in response to Madam Cynthia Phua's suggestion.

There is a buffer of flats over and above the build-to-order (BTO) supply, accumulated each year through unsold BTO flats and balance Selective En Bloc Redevelopment Scheme replacement flats. With this buffer, HDB offered about 10 per cent to 20 per cent extra new flats in 2009 and last year, as Ms Cheam suggested.

The tightness in the market over the past year is, therefore, not simply due to the lack of a buffer stock. The surge in housing demand was more than the buffer stock, due to the strong economic recovery, accompanied by low interest rates and bullish market sentiments.

It is inappropriate to compare HDB flats to staple food such as rice. First, a flat purchase is also an investment. Home buyers can advance or defer their purchases, depending on the economic outlook and market sentiments. Second, first-time home buyers are generally able to meet their housing needs under the BTO system, within a reasonable waiting period.

We disagree that oversupply is simply a 'hyper-local problem that affects only certain new towns'. Depressed flat prices due to oversupply will affect all home owners. Those in mortgage arrears may be in debt even after selling their flats.

The interests of flat owners are no less important than those of flat buyers. The holding cost of excess supply of new flats is ultimately borne by taxpayers. A depressed property market has significant ramifications for our economy and society.

HDB will continue to seek the 'sweet spot' in housing supply to meet volatile demand. This will involve trade-offs - balancing the interests of flat buyers and flat owners as well as between more housing subsidies and cost to taxpayers.

At the same time, HDB will increase the supply of new flats if demand remains strong. With a planned supply of 22,000 BTO flats this year, supplemented with flats under the Design, Build and Sell Scheme and executive condominiums, Singaporeans will have ample affordable housing options.

Tight fit as homebuyers think small

(SINGAPORE) The last two sets of government measures to cool the property market may have pushed more homebuyers to opt for smaller and cheaper private homes, new research shows.

Analysts attributed the trend to the tighter loan-to-value (LTV) ratio for buyers with existing mortgages. The LTV ratio was slashed from 80 per cent to 70 per cent in August 2010 and then again to 60 per cent in January this year. This means that the buyers have to fork out more cash upfront.

An analysis of some 14,000 caveats lodged for private homes sold by developers from January 2010 to February 2011 found that a greater proportion of homebuyers chose smaller units - under 861 sq ft - after each round of the last two sets of government measures.

And more and more homeowners also opted for units that cost less than $800,000, according to the analysis done by property firm International Property Advisor (IPA).

From Jan 1 to Aug 30 last year, some 30 per cent of homebuyers opted for small format units smaller than 861 sq ft. The proportion rose to 42 per cent after new anti-speculation measures were announced on Aug 30, 2010, and climbed further to 46 per cent after a fresh set of cooling measures were unveiled on Jan 13, 2011.

Similarly, the proportion of homebuyers who chose units priced under $800,000 rose from 22 per cent to 28 per cent to 30 per cent over the three time periods tracked. Most entry-level private homes are priced at under $800,000.

Each round of cooling measures has clearly driven more investors to purchase smaller sized, lower budget units and located in the outskirts, noted IPA chief executive Ku Swee Yong.

'Today, investors are forced to think smaller due to the higher cash downpayment required and the lower 60 per cent LTV ratio for mortgages,' he said.

'The impact of the upfront cash requirement and the reduced borrowing limit has herded more investors towards smaller units and towards projects in the outskirts of Singapore.'

According to official data, 67 per cent of all private homes sold by developers in February 2011 were located in the outside central region, which is a proxy for cheaper suburban mass market locations. This is the highest level since April 2008 - the previous peak of the market when speculators steered away from luxury products in search of more affordable investments.

But the growing demand for smaller units has created one unwanted problem: prices in this segment of the market are rising.

According to data compiled by CB Richard Ellis, the average price of units smaller than 861 sq ft stood at $1,420 per square foot (psf) between Feb 20 and Aug 30 last year, which was the time between the announcements of two rounds of measures to cool the market.

This rose to $1,441 for the period between Aug 31, 2010 and Jan 13, 2011; and $1,559 for the period between Jan 14, 2011 and Feb 28, 2011.

Analysts have blamed shoebox units, which can have psf prices of up to 20 per cent more than other homes in the vicinity, for distorting the official Urban Redevelopment Authority's private property price index.

'The small units are the ones that are setting the record high psf prices,' said a market veteran.

Looking ahead, developers are set to roll out projects with a higher proportion of smaller units to maintain selling prices that are below $800,000 for the most part.

At EL Development's Skysuites 17 off Balestier Road - which will be launched next week - 84 out of the 105 units in total are one-bedroom and two-bedroom units between 355 sq ft and 678 sq ft in size. The company's managing director Lim Yew Soon said that demand for shoebox units is growing.

'When it comes to the fringe of town, smaller units are usually taken up well due to their affordability,' he said.

Oxley Holdings chief executive Ching Chiat Kwong said that demand for shoebox units, which his firm specialises in, have picked up over the last year in part due to government measures.

But the measures, which include a seller's stamp duty of up to 16 per cent for private homes, have created 'genuine' demand for smaller units, he said.

'Because of the recent government measures, speculation has almost stopped,' Mr Ching said. 'People - singles and newly-married owner-occupiers as well as investors - are buying with the intent of holding onto their units.'

Oxley will continue to build projects with mainly small format and shoebox units, he added.

Property firms see bright outlook for office market

THE outlook for the office market seems bright despite a rash of new supply coming onstream this year.

CB Richard Ellis said yesterday that Singapore would account for 3 per cent of worldwide new office supply this year. Some three million square feet of offices will be completed in 2011.

Moray Armstrong, executive director of offices services in Singapore, said: 'Notwithstanding the high volume of space, the fact that 54 per cent of the new office space is already committed is testament to the strength of the office market here.

'We're not at all concerned about Singapore's ability to absorb supply. On the contrary, we believe Singapore's office position right now looks particularly favourable and offers multinationals a great opportunity to secure quality space.'

In all, about seven million sq ft of office space is targeted for completion between Q2 2011 and 2015, of which 54 per cent is classified as Grade A.

'This will likely moderate rental growth in the short to medium term although we foresee Singapore rents still trending upwards over a three- to four-year horizon,' Mr Armstrong added.

Separately, Jones Lang LaSalle (JLL) and Colliers International yesterday released figures that showed 7-8 per cent quarter-on-quarter increases in average Grade A office rents in the Raffles Place/Marina Bay area in Q1 2011.

JLL's data showed that the average monthly rental value for CBD Prime Grade A office space (which covers Raffles Place and Marina Bay) rose 7 per cent quarter on quarter to $10 per square foot (psf) in Q1 2011. The latest data reflects a 29 per cent appreciation over the same year-ago period.

Head of markets Chris Archibold said: 'The market continues to show strong interest in upcoming quality buildings. Increases in tenant commitments for OUE Bayfront, One Raffles Place Tower 2, Ocean Financial Centre and Asia Square Tower 1 have led the increase in rents with double-digit growth quarter on quarter. Monthly rents for these buildings are hovering around the $11-13 psf range; a year ago, they were around the $8 psf mark.'

The group's preliminary data suggests that the vacancy rate in the CBD core area - which covers the Marina Bay, Raffles Place, Cecil Street, Robinson Road, Shenton Way and Anson Road locations - rose from 5.4 per cent at end-Q4 2010 to 6.3 per cent at end-Q1 2011. JLL attributed the increase largely to previously scheduled relocations of major tenants as well as new supply coming into the market.

'We estimate that the vacancy figure could further increase to 10-11 per cent by end-2011 as more supply is completed and some of the second-hand space is returned to the market. However, vacancy is expected to reduce in 2012 and 2013 when there will be less new supply,' Mr Archibold said.

Despite the increase in vacancy this year, the market is seeing a healthy level of absorption, which coupled with the ongoing trend of redevelopment of some older buildings into residential use, will offset much of the supply pressure, he reckoned. 'We expect the take-up for the new developments and the better quality buildings that have current or future pockets of vacancy to pick up pace as they become available.'

JLL predicts a 17.6-23 per cent rise in the CBD Prime Grade A average monthly rental for the whole of this year to around $11 to $11.50 psf. A 23 per cent increase would be in the order of the rental gain seen in 2005, Mr Archibold noted.

Meanwhile, Colliers' data showed that the average monthly rental of Grade A offices in the Raffles Place/New Downtown area rose 8 per cent quarter on quarter to $9.72 psf in Q1 2011. The group forecasts a full-year increase of around 15-20 per cent, a slower rise than last year's 31.4 per cent.

Colliers executive director (office services) Calvin Yeo said that the Q1 rental increase, especially in the Raffles Place/New Downtown area, was 'partly spurred by robust occupier demand for new and upcoming office developments, as firms rushed onboard the flight to quality before affordability tapers off'. The average occupancy rate of Grade A offices in the Raffles Place/New Downtown location fell for the first time in six quarters, from 98.1 per cent in Q4 2010 to 95.7 per cent in Q1 2011, according to the property consultancy.

Tuesday, March 22, 2011

Couple sue developer over home defects

A COUPLE have sued a unit of property developer Kheng Leong, claiming the apartment the firm delivered to them was unfit for occupation.

Mr Benson Tan and his wife Amelia, who bought a unit at Oasis Garden condominium, have sued Peak Homes Development, seeking compensation for various costs, such as the rental for another house while the unit was being repaired and the moving charges involved.

They are claiming $12,146.73 in direct losses, plus interest as well as unspecified damages for being sold a unit unfit for habitation at the time of delivery, including for the alleged distress and inconvenience they suffered.

The case got under way in the Subordinate Courts yesterday.

In the suit, the couple claimed they found several defects when the apartment was first inspected after the keys were collected from the developer.

The couple bought the 1,519 sq ft three-bedroom unit for $1.08 million in October 2007.

The Tans, represented by lawyer P. Padman of KSCGP Juris, told the court yesterday that when the ground-floor unit was handed over in November 2009, it was in an 'uninhabitable' state.

According to court documents, substantial defects were present throughout the apartment, including plumbing, flooring and carpentry problems.

Mr Tan said the couple were forced to rent another home for six months while extensive repair work was carried out by Peak Homes' contractors.

The apartment, currently occupied by Mr Tan and his wife, is among 134 units at Oasis Garden, located in Jalan Bunga Rampai, off Upper Paya Lebar Road.

Peak Homes, through its lawyer Melvin Lum of WongPartnership, responded in a court-filed document, claiming the couple were unrealistic in their demands.

The couple's expectations, it said, far exceeded the industry standards laid out in the Building and Construction Authority's guidelines.

Peak Homes has argued that most of the defects set out by the couple were minor ones, consisting mostly of stains. They said these would not have rendered the unit unsafe or impossible to occupy.

The firm argued that it had carried out the work to rectify the defects and covered the costs.

It added that on top of these rectifications, the couple had asked Peak Homes' main contractor to carry out more renovation and upgrading work on their unit.

This is not the first time a developer has been sued by residents. Last month, residents of Emery Point, a project in Tanjong Katong, sued City Developments, the main contractor, five sub-contractors and the architect over numerous building defects.

The case was ultimately resolved amicably out of court.

The Kheng Leong group has real estate developments across the region in Singapore, Hong Kong, Shanghai and Australia.

Its projects here include the 1,145-unit The Minton in Lorong Ah Soo.

The hearing is expected to continue on May 11.

More foreigners buy resale exec condos

INCREASING numbers of foreigners are snapping up executive condominiums in the resale market and helping to push prices to record levels.

Foreigners, including permanent residents (PRs), bought 321 ECs or 33 per cent of all resale homes last year, said Savills research and consultancy, with Indian nationals by far the biggest segment.

This is up from 18 per cent in 2004, when PRs were first eligible to buy exec condos, the poshest form of public housing.

The foreign market presence was even higher in the first two months of the year with foreigners comprising 45 per cent of transactions in the exec condo resale sector.

Foreigners made up 34 per cent of buyers in the private mass-market resale segment in the same period, indicating the increased appeal of exec condos.

This interest, coupled with the booming property sector, is also affecting values. The average price of a resale exec condo unit hit $634 per sq ft (psf) in the first two months of the year - up 31 per cent on the previous peak in the third quarter of 2008.

Exec condos, like other Housing Board (HDB) flats, are subject to a minimum occupation period of five years. After that, they can be sold only to Singaporeans and permanent residents. They become private property after 10 years and can then be sold to foreigners.

PRs can have their pick from about 9,494 exec condo units while non-PR foreigners have about 6,318 units open to them, Savills said.

Some of these units are in Bishan Loft, The Eden in Tampines and Simei Green condominium.

Foreign interest in resale exec condos is also expected to remain strong as many cannot buy an HDB resale home under the new property rulings, added Ms Christine Sun, senior manager at Savills research and consultancy.

The rules introduced last year require that those who buy an HDB resale flat on or after Aug 30 must dispose of their private property - including any overseas - within six months of the purchase.

Savills also said sales data showed Indian nationals have bought 296 resale exec condos since 2004, making them the biggest group of foreign buyers.

Malaysians were next with 276 units while buyers from China accounted for 222 units.

Woodsvale in Woodlands is the most popular estate with 138 transactions since 2004. Northoaks - also in Woodlands - and Simei Green condominium are slightly behind.

But Bishan Loft holds the price record with a 1,991 sq ft unit selling for $944 psf last October.

Price gains have been moderating lately with values inching up just 1 per cent in the first two months of the year compared with the last quarter, Savills said.

This could be down to the recent property measures, price resistance and an increased mass-market home supply from the bumper release of state land, the firm added.

Experts noted that exec condos are often value-for-money purchases as they can be up to 25 per cent cheaper than private mass-market homes.

'New mass-market home prices have surged to record highs in recent quarters... Resale ECs that are more affordable than mass-market homes offer good alternatives for most of these buyers,' Ms Sun said.

PropNex chief executive Mohamed Ismail said exec condos are also often relatively new and in reasonably good condition as most are less than 10 years old.

'Most foreigners might have been relocated here and would buy exec condos for owner-occupation, often with a mid- to long-term perspective,' he added.

Global Property Strategic Alliance chief executive Jeffrey Hong added that exec condos are more popular when the gap between public and private housing widens, as has been the case over the past year.

He expects interest from foreigners to continue increasing as more exec condos reach their 10-year mark and become eligible for purchase by foreigners.

Mr Marc Grange, a Singapore PR who works in the electronics sector and rents a flat in Bishan, said he would consider purchasing an exec condo unit as prices at new condos are out of reach for him and his fiancee.

'Exec condos are a good middle ground. But their limited numbers mean finding a suitable place that's in a good location is the hard bit,' he said. ?