Friday, November 30, 2012

City Life’s giant penthouse four times as big as a 5BR HDB causes storm of controversy


Seriously, tax payers are paying for this over $2M luxurious property?

CityLife at Tampines, which bills itself as Singapore’s first luxury hotel-style executive condominium developed by Tampines EC – a consortium comprising Amara Holdings, Kay Lim Holdings and SingXpress Land is offering a Penthouse Suite with a sprawling size of over 4,000 sft.

Market observers note that assuming the penthouse costs $500 price per square foot, similar with the other units, the total cost of the unit is estimated to be above $2M well above the typical $1M price for executive condo.

Tampines EC bills that the giant penthouse at City Life is likely to be the largest of its kind for ECs in Singapore.

Some industry observers said that the developer defeats the purpose of executive condo which targeted young couple with combined $12,000 monthly income.

Some of the comments generated include:

“I think income ceiling for this kind of EC should be raised as how can a young couple with combined income of 12K a month comfortably pay for the mortgage? Come to think of it.


“ The policy should be amended. I suggest individuals buying EC above certain quantum which exceeds the $12K income limit should be denied any grants,”


“Putting affordability aside, what on earth does a young couple need such a big house?”

Singapore Business Review meanwhile received a letter from a market observer which requested anonymity defending the property.

The market observer notes of 6 points as follows:

1) Contrary to what most people think, EC developers do not design big penthouses based on profit motive. This is because, typically, penthouse per square foot price is drastically lower than the average psf price of an EC project, due to the bigger floor areas, and also a relatively large terrace space. This is a common practice. In fact, if a EC developer seeks to maximise profitability, he should build loft units at the top floor, as smaller units typically command a higher psf pricing. Therefore, developers do not design big penthouses for profitability, in fact, such big penthouse units drag the average psf price of the project down. Most developers build bigger penthouses to up the ante in public housing design, and to provide a different option for buyers.

2) Buyers of such big penthouse units are not necessarily young couples. More often than not, they could HDB upgraders or big families, or families anticipating a growing family size. With rising HDB resale prices over the years, most HDB dwellers sell their home and encashed a big sum of money. As such, they could use that gain from the sale of their HDB flat to lessen borrowed amount when they buy a big EC penthouse. This would address the profitability issue. Please note that it not uncommon for HDB dwellers to make a couple of hundred thousands, which is a handy sum for downpayment.

3) It is not uncommon for an extended family to be dwelling in a penthouse, and not just a young couple. As a matter of fact, most EC penthouses are purchased by mult-generational families and upgraders. Not sure why the perception that big penthouses are popular with young couples. If I am not wrong, the Heron Bay penthouse was reported to be purchased by a young couple, but that does not mean all EC penthouses are only popular with childless, young couples?

4) All EC projects and pricing are to be approved by authorities before they go on sale. Developers build what the market forces dictate. There must be a demand for big penthouses, otherwise why would they build such penthouses. As to whether it is too big, or right for the government to be subsidising these purchases, these are issues best addressed by authorities rather.

A spokesperson of the developer said that City Life will be officially launched on December 29.


Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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Bishan residential site attracts 9 bids


SINGAPORE : A residential site at Bishan Street 14 has attracted nine bids.

The top bid of S$505.1 million came from Allamanda Residential Development, a wholly-owned subsidiary of property developer CapitaLand.

That is about 3.1 per cent higher than the second bid jointly placed by Singland Homes, UOL Venture Investments, and ORIX Investment and Management.

Analysts had expected CapitaLand to submit a strong bid for the site, which is located adjacent to a plot where its Sky Habitat project is being built.

Donald Han, special advisor at HSR, said: "They would not want a competitor to get the site and undercut its pricing. It is about CapitaLand protecting its turf and protecting the pricing in the area.

"With this site, they will also be able to amalgamate different concepts with Sky Habitat."

The top bid for the 99-year leasehold site works out to S$853 per square foot per plot ratio.

Analysts said this is almost 2 per cent lower than what CapitaLand paid for the Sky Habitat site in February 2011.

The Bishan Street 14 site spans 11,227.8 square metres and could potentially yield 645 residential units

Lee Sze Teck, senior manager of training, research and consultancy at DWG, said: "The estimated breakeven price could be between S$1,350 and S$1,400 psf and the probable selling price could be between S$1,650 and S$1,700 psf, which is similar to Sky Habitat's selling prices."

The site is located near the Bishan MRT station and Bishan bus interchange, as well as a range of amenities, including schools and shopping malls.


Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

| www.marshe.sg | www.marsheproperties.com.sg | www.hudcsg.blogspot.com |
| www.hausatserangoon.sg | www.8riversuites.com | www.newagents.sg |

2013 year of digestion for offices: CIMB


6 reasons why 2013 could be “not so bad”.

The Street is still largely negative on the office sector in 2013. Consensus is of the view that a slew of primary and secondary office supply could intensify the pressure on rents. But while CIMB do not see office rents improving in 2013, It retains its view that a bottoming could be in sight.

Here’s why:

1) Slower pace of headline declines. Indicators in 3Q12 had started to improve. Consultant estimates show that vacancy growth rates have decelerated with rental declines also moderating.

2) Backfilling gathering momentum. Agreed, a large part of the headline improvements is due to pre-commitments for newer premises which have resulted in the double counting of office space to be vacated. We estimate that the true vacancy rate island-wide is closer to 8% (vs. 6.5-7.5% estimated by consultants) if secondary office space due to be vacated is included, and about 10% in the core CBD. However, landlords have generally been proactive in backfilling and have been enjoying moderate success. Nearly 90% of the 129k sf space vacated by Citibank at Centennial Tower is reportedly filled, while the latest results by CCT and FCOT indicate that vacated space at One George Street and China Square is also being taken up. Most office REITs have guided that demand comprises a mix of new-to-market tenants and tenant relocations, with many of them taking up more space than before. We expect vacancy rates to remain stable and peak in 2013.

3) Redevelopments and removal of older inventory. Supply in the office sector is dynamic and cannot be viewed in a vacuum. Older inventories that cannot compete are typically removed and redeveloped.

Since 2009, we estimate that an average of 0.5m sf commercial space has been removed from the system for redevelopment. We are seeing this happening in the old CBD area (Shenton Way/Robinson Road). In 2009-10, many older buildings were converted into residential apartments. CBRE expects another 3.4k residential units to be built by 2018, on top of the 3k-3.5k units currently. Outside the CBD, private
developers have equally been taking advantage of low interest rates to snap up older commercial buildings for redevelopment. Recall the recent sale of NOL Building to The Fragrance Group which could deplete 207k sf of office space. We expect more redevelopment to alleviate supply pressures in 2013.

4) Strong initial interest for The Metropolis; Asia Square 2 the only new Grade-A offering in 2013. Commitments for 2012 supply have reached a steady state, at around 83%. In 2013, The Metropolis (decentralised) and Asia Square 2 (New downtown) will add 1.8m sf of new office space, forming the bulk of the 2.4m sf new supply. While The Metropolis has yet to receive formal pre-commitments, media reports suggest that take-up could be strong with potential demand from Shell (>110k sf), NOL (>100k sf), GlaxoSmithKline (>60k sf), Singapore Exchange (back office) and Proctor & Gamble (>200k sf). We believe many of these tenants could end up taking up more space than what they will be giving up. Interestingly, CBRE noted in its 3Q12 report that companies were starting to take advantage of lower occupancy costs to consolidate or incrementally expand their operations. Asia Square 2 will be the only new Grade-A offering in 2013 and we remain optimistic that take-up will be better than expected. Older Grade-B/decentralised office space, on the other hand, could succumb to further demand and rental
pressure on tenant migration.

5) Demand drivers to evolve. Legal, commodity, manufacturing, shipping and IT are some of the non-financial services sectors driving office demand currently. Proximity to ASEAN countries, a tax-friendly
regime and strong soft/hard infrastructure remain Singapore’s biggest attractions. Office demand in 2013 looks set to stem from a more diversified group of takers.

In particular, more law firms are expected to set up shop in Singapore, as part of the government’s efforts to promote Singapore as a legal hub. The Ministry of Law recently threw open the doors for a second round of licences to be issued under its Qualifying Foreign Law Practice (QFLP) scheme. As at 31 Aug, 23 foreign law firms had applied, including London-based Watson, Farley & Williams LLP, DLA Piper and Jones Day. If all the applicants are successful, we estimate that 350k-450k sf of incremental office demand could be generated. Office demand from European and US financial services firms has stalled. But we note that regional outfits have been expanding to gain market share as foreign incumbents in Singapore scale back on their operations. In Jul 12, the MTI announced that two eligible financial institutions will act as clearing banks for the Rmb in Singapore. This follows MAS statements that its QFB programme will be modified to encourage foreign banks to deepen their roots in Singapore, potentially
giving some QFBs an additional 25 new places of business.

6) Stable job creation. Singapore remains a full-employment economy. Despite slower growth, its economy created sufficient jobs to nudge its seasonally-adjusted unemployment rate to 1.9% in 3Q12 (average 2.0% for the past six quarters). This came amid tighter foreign manpower controls that are gradually being implemented. Service-sector employment will likely slow to 65k this year, the least in three years, accounting for 55% of all new employment in 2012 (81% in 2011 and 99% in 2010). Assuming an unchanged resident-labour participation rate and about 2% growth in the foreign workforce, our Singapore economist estimates that another 125k new jobs can be created in 2013, with the service sector accounting for roughly 80K or 65%. Hudson’s latest survey shows a modest increase in hiring expectations in 4Q12 with 35.9% of the respondents planning to increase headcount, up from 34.7% in 3Q12. Interestingly, hiring expectations by banks and financial-service companies rose from a low of 23.1% to 31.1%.


Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

| www.marshe.sg | www.marsheproperties.com.sg | www.hudcsg.blogspot.com |
| www.hausatserangoon.sg | www.8riversuites.com | www.newagents.sg |

Here’s how costly office rentals are in Singapore compared with Asian peers


Rental values are almost equal to ShangHai’s.

According to Jones Lang LaSalle, Average net effective rents in Raffles Place fell marginally by 1.2% q-o-q to US$700 or SGD 930 per sqm per annum in 3Q12, similar to the rate in the previous quarter. Again, there was more downward pressure on rents in buildings with higher vacancies.

“While strata-title office sales remained healthy, en bloc activity was rather quiet in 3Q12. The only known major transaction was 78 Shenton Way, located in Tanjong Pagar district, which involved the sale of a 50% stake for SGD 608 million or SGD 18,148 per sqm on an NLA basis. Strata-title capital values continued to provide some support for en-bloc capital values even as a gap remains between the expectations of buyers and sellers. En-bloc capital values thus remained stable for another quarter in 3Q12 and, as a result, yields continued to compress. In Raffles Place, market yields compressed marginally by four bps to 3.6%, on the back of softening rents,” it said.




Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

| www.marshe.sg | www.marsheproperties.com.sg | www.hudcsg.blogspot.com |
| www.hausatserangoon.sg | www.8riversuites.com | www.newagents.sg |

CapitaLand outbids UOL, SingLand for Bishan St 14 site


The $505.1m bid beat 9 other bidders.

According to Nomura, post market close on 29 Nov 2012, the land tender for a 99-yr LH site (GFA 592,189sqft, c.645 units) along Bishan St 14 closed with a total of 9 bidders, whose bids had ranged from S$368-505mn.

Here's more from Nomura:

CapitaLand’s bid of $505.1mn or S$852.9psfppr was the highest, 3.1% higher than the second highest bid of S$490.1mn submitted by a JV which had consisted of UOL, Sing Land and Orix Investment.

The above-mentioned site is adjacent to CAPL’s project Sky Habitat  (99-yr LH, 509 units, 28% sold) and of which the developer had bought earlier in 2011 for S$550.1mn / S$869.4psfppr.

When the site was first launched, consultants had predicted 10-15 bidders to participate and a top bid of S$750-850psfppr. CAPL’s bid thus appears to be towards the upper end of the range. On the whole, we consider CAPL’s bid to be fair, taking into account two existing market conditions.

Based on the land cost of S$852.9psfppr, we estimate a break-even price of S$1,234-1,299psfppr which translates into a pre-tax margin of 23-30%, assuming an average selling price (ASP) of S$1,600psf, which is in line with the ASP of Sky Habitat based on data lodged in Realis.

Protection of Sky Habitat’s selling price vs heightened inventory risk?
The site if awarded would allow CAPL to protect the selling prices of its existing project (Sky Habitat), which still has about c.72% unsold inventory as of end Oct 2012.

On the flip side, the site would also mean that the developer will have more inventories to sell within the area, which could translate into heightened inventory risks should buyer’s sentiments turn and physical demand weakens.

We expect the market’s reaction to be mixed on account of the above- mentioned factors. Investors are likely to be keeping a close watch on Sky Habitat sales in the next few months as a gauge for the success of CAPL’s upcoming project, assuming the site is awarded to the developer.


Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

| www.marshe.sg | www.marsheproperties.com.sg | www.hudcsg.blogspot.com |
| www.hausatserangoon.sg | www.8riversuites.com | www.newagents.sg |